STOCK PURCHASE AGREEMENT

Exhibit 2.1

 

 

STOCK PURCHASE AGREEMENT

 

between:

 

X CYTE T HERAPIES , I NC .,

a Delaware corporation;

 

and

 

C YCLACEL G ROUP PLC,

a public limited company organized under the laws of England and Wales.

 

 

Dated as of December 15, 2005

 

 

T ABLE O F C ONTENTS

 

 

i

T ABLE O F C ONTENTS

 

(CONTINUED)

 

 

ii

T ABLE O F C ONTENTS

 

(CONTINUED)

 

 

iii

T ABLE O F C ONTENTS

 

(CONTINUED)

 

 

iv

T ABLE O F C ONTENTS

 

(CONTINUED)

 

 

v

STOCK PURCHASE AGREEMENT

 

T HIS S TOCK P URCHASE A GREEMENT (this “ Agreement ”) is made and entered into as of December 15, 2005, by and between X CYTE T HERAPIES , I NC ., a Delaware corporation (“ Xcyte ”), and C YCLACEL G ROUP PLC , a public limited company organized under the laws of England and Wales with registered number 5090795 (“ Seller ”). Certain capitalized terms used in this Agreement are defined in Exhibit A .

 

R ECITALS

 

A. Seller desires to sell to Xcyte and Xcyte desires to purchase from Seller all of the issued and outstanding share capital of Cyclacel Ltd., a limited company organized under the laws of England and Wales with registered number 3237549 and a wholly-owned subsidiary of Seller (“ Cyclacel ”), on the terms and subject to the conditions set forth in this Agreement (the “ Stock Purchase ”).

 

B. Immediately following the completion of the Stock Purchase, Seller desires to effect a members voluntary dissolution liquidation (the “ Liquidation ,” and together with the Stock Purchase and the Charter Amendments (as defined below), the “ Transactions ”). Upon the Liquidation, it is intended that all of the assets of Seller (including shares of Xcyte Common Stock acquired pursuant to the terms of this Agreement) will be distributed to Seller’s shareholders and that Seller will be dissolved.

 

C. The board of directors of Seller believes it is in the best interests of Seller and its stockholders to engage in the Stock Purchase and the Liquidation and, in furtherance thereof, the board of directors of Seller has approved this Agreement, the Stock Purchase and the Liquidation.

 

D. The board of directors of Xcyte believes it is in the best interests of Xcyte and its stockholders to engage in the Stock Purchase and to amend Xcyte’s Certificate of Incorporation pursuant to the Charter Amendments and, in furtherance thereof, the board of directors of Xcyte has approved this Agreement, the Stock Purchase and the Charter Amendments.

 

E. In order to induce Xcyte to enter into this Agreement and to cause the Stock Purchase and Charter Amendments to be consummated, certain stockholders of Seller are executing irrevocable voting undertakings in favor of Xcyte concurrently with the execution and delivery of this Agreement in substantially the form attached hereto as Exhibit B (the “ Seller Stockholder Voting Agreements ”).

 

F. In order to induce Seller to enter into this Agreement and to cause the Stock Purchase and the Liquidation to be consummated, certain stockholders of Xcyte are executing voting agreements in favor of Seller concurrently with the execution and delivery of this Agreement in substantially the form attached hereto as Exhibit C (the “ Xcyte Stockholder Voting Agreements ”).

A GREEMENT

 

The parties to this Agreement, intending to be legally bound, agree as follows:

 

Section 1. D ESCRIPTION OF T RANSACTIONS

 

1.1 The Stock Purchase . (a)  On the terms and subject to the conditions of this Agreement, at the Closing, (i) Seller shall sell, assign, transfer and deliver to Xcyte and Xcyte shall purchase from Seller all right, title and interest in and to all of the Cyclacel Shares free and clear of all Encumbrances and representing all of the share capital and other securities of Cyclacel and (ii) Xcyte shall issue and deliver to Seller a number of validly issued, fully paid and nonassessable shares of Xcyte Common Stock equal to the Xcyte Share Amount. For purposes of this Agreement, the “ Xcyte Share Amount ” shall mean a number of shares of Xcyte Common Stock (rounded to the nearest whole share) equal to the product of (A) the number of shares of Xcyte Common Stock issued and outstanding immediately prior to the Closing plus the Closing Share Number multiplied by (B) the Consideration Multiple.

 

(b) For purposes of this Agreement:

 

(i) The “ Consideration Multiple ” shall mean the quotient (rounded to the fourth decimal point) of (A) one minus the Cash Amount divided by (B) the Cash Amount.

 

(ii) The “ Cash Amount ” shall mean the quotient of (A) the Cash held by Xcyte immediately prior to Closing divided by (B) the sum of (x) the Cash held by Xcyte immediately prior to Closing plus (y) 80 million; provided , however , that if (I) the Closing occurs after March 31, 2006 and on or before April 30, 2006, the amount of Cash held by Xcyte immediately prior to Closing shall be deemed to be the amount actually held plus $500,000 and (II) if the Closing occurs after April 30, 2006, the amount of Cash held by Xcyte immediately prior to Closing shall be deemed to be the amount actually held plus $1,000,000.

 

(iii) “ Cash ” shall mean cash, cash equivalents and the market value of short-term investments.

 

1.2 The Liquidation . Prior to the Stock Purchase, Seller shall take the actions set forth in Section 5.2 as well as all other actions within its control that may be necessary or advisable in order to cause the Liquidation to occur as soon as reasonably practicable following the Stock Purchase. Immediately following the Closing (as defined in Section 1.4), Seller shall (a) appoint a liquidator to distribute Seller’s assets and (b) instruct the liquidator to distribute the shares of Xcyte Common Stock to the Seller’s shareholders. As soon as reasonably possible following the Stock Purchase, Seller shall consummate the Liquidation.

 

1.3 Charter Amendments . Subject to the conditions set forth in this Agreement, in connection with the Stock Purchase, effective as of the Closing, Xcyte shall cause its Certificate of Incorporation to be amended substantially as set forth on Exhibit D (the “ Charter Amendments ”).

 

1.4 Closing . (a)  Unless this Agreement is earlier terminated pursuant to the provisions of Section 9.1, and subject to the satisfaction or waiver of the conditions set forth in

 

2.

Sections 6, 7 and 8, the consummation of the Stock Purchase (the “ Closing ”) shall take place at the offices of Wilson Sonsini Goodrich & Rosati, Professional Corporation, 701 Fifth Avenue, Seattle, Washington, as promptly as reasonably practicable (but in no event later than the fifth Business Day following the satisfaction or waiver of the last to be satisfied or waived of the conditions set forth in Sections 6, 7 and 8 (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of each of such conditions) or at such other time, date and place as Xcyte and Seller may mutually agree in writing. The date on which the Closing actually takes place is referred to as the “ Closing Date .” The Charter Amendments shall be filed on the Closing Date and become effective at the time of the filing of the Certificate of Amendment to Xcyte’s Certificate of Incorporation with the Secretary of State of the State of Delaware (the “ Certificate of Amendment ”).

 

(b) On the Closing Date, the Seller shall deliver to Xcyte share certificates and duly executed stock transfer forms in respect of all of the issued and outstanding Cyclacel Shares.

 

(c) On the Closing Date, Xcyte shall deliver to Seller a certificate or certificates, registered in Seller’s name, representing the number of shares of Xcyte Common Stock equal to the Xcyte Share Amount.

 

Section 2. Representations and Warranties of Seller

 

Seller represents and warrants to Xcyte as follows, except as set forth in the written disclosure schedule delivered by Seller to Xcyte (the “ Seller Disclosure Schedule ”). The Seller Disclosure Schedule shall be arranged in sections corresponding to the numbered sections contained in this Section 2. The disclosures in any section of the Seller Disclosure Schedule shall qualify other sections in this Section 2 to the extent it is reasonably clear from a reading of the disclosure that such disclosure is applicable to such other sections. The inclusion of any information in the Seller Disclosure Schedule (or any update thereto) shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms of this Agreement to be disclosed, is material, has resulted in or would reasonably be expected to result in a Cyclacel Material Adverse Effect, or is within or outside the ordinary course of business.

 

2.1 Subsidiaries; Due Organization; Etc.

 

(a) Seller does not have and has never had any Subsidiaries other than Cyclacel and Cyclacel Nominees Limited. Neither Cyclacel nor Cyclacel Nominees Limited has or has ever had any Subsidiaries. Other than Seller’s ownership of the Cyclacel Shares, none of Seller, Cyclacel or Cyclacel Nominees Limited own any capital stock of, or any equity interest of any nature in, any Entity. Cyclacel has not agreed nor is it obligated to make, nor is it bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. Cyclacel has not, at any time, been a general partner of, or otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.

 

(b) Cyclacel is a limited company duly incorporated and validly existing under the laws of England and Wales and has all necessary power and authority: (i) to conduct its business in all material respects in the manner in which its business is currently being conducted; (ii) to own, lease and use its assets in all material respects in the manner in which its assets are

 

3.

currently owned, leased and used; and (iii) to perform in all material respects its obligations under all Contracts by which it is bound.

 

(c) Cyclacel is qualified to do business as a foreign corporation, and, to the extent applicable, is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification, other than such failures to be so qualified as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect.

 

(d) Each of Cyclacel and Seller has made available to counsel for Xcyte copies of its minute books, which such minute books (i) are the only minute books of Cyclacel and Seller, and (ii) accurately reflect all meetings of directors (or committees thereof) and stockholders or actions by written consent of the board of directors or stockholders of Cyclacel and Seller.

 

2.2 Certificate of Incorporation; Memorandum and Articles of Association. Seller has delivered to Xcyte accurate and complete copies of Cyclacel’s certificate of incorporation and memorandum and articles of association, including all amendments thereto. Each such document is in full force and effect. Cyclacel is not in violation of any of the provisions of its certificate of incorporation or memorandum and articles of association.

 

2.3 Capitalization, Etc.

 

(a) The authorized share capital of Cyclacel consists of 19,837,045 Cyclacel Shares, of which 1,871,210 ordinary shares of 0.1 pence each, 17,965,835 preferred D shares of 0.1 pence each and zero deferred shares of 0.1 pence each, have been issued and are outstanding as of the date of this Agreement. Cyclacel does not hold any shares of its capital stock in its treasury. All of the outstanding Cyclacel Shares have been duly authorized and validly issued, and are fully paid and nonassessable. None of the outstanding Cyclacel Shares is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right. None of the outstanding Cyclacel Shares is subject to any right of first refusal in favor of Cyclacel. Except as contemplated herein, there is no Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, transferring, pledging or otherwise disposing of (or granting any option or similar right with respect to), any Cyclacel Shares. Cyclacel is not under any obligation, nor is it bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding Cyclacel Shares or other securities. Cyclacel does not hold any repurchase rights with respect to Cyclacel Shares. There is no share capital, interest or other security of Cyclacel, other than the Cyclacel Shares all of which are described in the first sentence of this Section 2.3(a). Seller is the registered and beneficial owner of all of the Cyclacel Shares, free and clear of all Encumbrances. No legend or other reference to any purported Encumbrance appears upon any certificate representing equity securities of Cyclacel. Upon consummation of the Stock Purchase, (i) Xcyte will acquire good title to all of the issued and outstanding Cyclacel Shares, free and clear of all Encumbrances and (ii) Cyclacel will become a wholly-owned subsidiary of Xcyte.

 

(b) Cyclacel does not have any stock option plan or any other plan, program, agreement or arrangement providing for any equity or equity-based compensation for any Person.

 

4.

(c) There is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any share capital, interests or other securities of Cyclacel; (ii) outstanding security, instrument or obligation (written or oral) that is or may become convertible into or exchangeable for any share capital stock, interests or other securities of Cyclacel; (iii) stockholder rights plan (or similar plan commonly referred to as a “poison pill”) or Contract under which Seller or Cyclacel is or may become obligated to sell or otherwise issue any share capital, interests or any other securities; (iv) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any share capital, interests or other securities of Cyclacel. There are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to Cyclacel.

 

(d) All outstanding Cyclacel Shares have been issued and granted in compliance with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all material requirements set forth in any applicable Cyclacel Contract.

 

(e) The register of members and statutory books of Cyclacel contain accurate records of its members and all the other information which is required to be contained in such register and books under the Companies Act. All returns, particulars, resolutions and other documents required to be delivered by Cyclacel to the Registrar of Companies have been duly delivered and no fines or penalties are outstanding. Cyclacel has not received any notice of any intended application for the rectification of the register of members of Cyclacel. Cyclacel has not provided any financial assistance as defined in Section 152(1) of the Companies Act directly or indirectly for the purpose of acquiring its own shares or those of any of its holding companies or reducing or discharging any liability so incurred.

 

(f) Cyclacel has not redeemed or purchased or agreed to redeem or purchase any of its share capital or passed any resolutions authorizing any such redemption or purchase or entered into or agreed to enter into any contingent purchase contracts (as defined in section 165(1) of the Companies Act) or passed any resolutions approving any such contract or made any capitalization or reserves.

 

(g) No share in the capital of Cyclacel has been issued or transferred except in accordance with its memorandum and articles of association.

 

2.4 Financial Statements.

 

(a) Section 2.4(a) of the Seller Disclosure Schedule includes true and complete copies of (i) Cyclacel’s audited balance sheets at December 31, 2004 and 2003 and the consolidated statements of income, cash flow and shareholders’ equity for the year ended December 31, 2004, 2003 and 2002 and (ii) Cyclacel’s unaudited balance sheet at September 30, 2005 and the related unaudited statements of income, cash flow and shareholders’ equity for the nine-month period then ended (collectively, the “ Cyclacel Financials ”). The Cyclacel Financials (A) were prepared in accordance with U.K. generally accepted accounting principle (“ UK GAAP ”) (except that unaudited financial statements do not have notes thereto and other presentation items that may be required by UK GAAP) applied on a consistent basis throughout the periods indicated

 

5.

and (B) fairly present the financial condition and operating results of Cyclacel as of the dates and for the periods indicated therein.

 

(b) Section 2.4(b) of the Seller Disclosure Schedule includes true and complete copies of (i) Seller’s audited consolidated balance sheets at December 31, 2003 and the consolidated statements of income, cash flow and shareholders’ equity for the years ended December 31, 2003 and 2002 (the “ Seller US GAAP Financials ”), (ii) Seller’s audited consolidated balance sheet at December 31, 2004 and the consolidated statement of income, cash flow and shareholders’ equity for the year then ended and (iii) Seller’s unaudited consolidated balance sheet at September 30, 2005 and the related unaudited statements of income, cash flow and shareholders’ equity for the nine-month period then ended (the financial statements described in clauses (ii) and (iii), collectively, the “ Seller UK GAAP Financials ”). The Seller US GAAP Financials (A) were prepared in accordance with United States generally accepted accounting principle (“ US GAAP ”) (except that unaudited financial statements do not have notes thereto and other presentation items that may be required by US GAAP) applied on a consistent basis throughout the periods indicated and (B) fairly present the financial condition and operating results of Seller as of the dates and for the periods indicated therein. The Seller UK GAAP Financials (x) were prepared in accordance with UK GAAP (except that unaudited financial statements do not have notes thereto and other presentation items that may be required by UK GAAP) applied on a consistent basis throughout the periods indicated and (y) fairly present the financial condition and operating results of Cyclacel as of the dates and for the periods indicated therein.

 

(c) Cyclacel maintains a system of internal accounting controls designed to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Cyclacel maintains internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with United States generally accepted accounting purposes.

 

(d) The Cyclacel Financials and Seller Financials make provisions for, reserve for or disclose, as appropriate: (i) all liabilities, whether actual, contingent, unquantified or disputed; (ii) all capital commitments, whether actual or contingent; (iii) all bad or doubtful debts; (iv) all exceptional items; (v) all changes in accounting policies; and (vi) all transactions with any of Cyclacel, Seller, Cyclacel’s Associate, Seller’s Associate, director or associate of a director of Seller or Cyclacel, as at their applicable dates.

 

(e) All the accounts, books and ledgers and financial and other records of Cyclacel (including all invoices) have been properly kept (in accordance with sections 221 and 222 of the Companies Act where relevant) and are within Cyclacel’s possession and control and all transactions relating to its business have been duly and correctly recorded in them. The original documents of title relating to the assets of Cyclacel and the original of all written agreements, deeds and other instruments entered into by Cyclacel are in its possession and control. Cyclacel’s records, systems, controls, data or information, are not recorded, stored, maintained, operated or otherwise wholly or partly dependent on or held by any means including any electronic, mechanical or

 

6.

photographic process (whether computerized or not) which (including all means of access) are not under the exclusive ownership and direct control of Cyclacel.

 

2.5 Absence of Changes. Since the date of the Cyclacel Unaudited Interim Balance Sheet:

 

(a) there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the assets or business of Cyclacel (whether or not covered by insurance);

 

(b) Cyclacel has not: (i) declared, accrued, set aside or paid any dividend or made any distribution in respect of any share capital, interests or other securities; or (ii) repurchased, redeemed or otherwise reacquired any share capital, interests or other securities;

 

(c) Cyclacel has not sold, issued or granted, or authorized the issuance of: (i) any share capital or other security; (ii) any option, warrant or right to acquire any share capital or any other security; or (iii) any instrument convertible into or exchangeable for any share capital or other security;

 

(d) Cyclacel has not amended or waived any of its rights under, or permitted the acceleration of vesting under any provision of: (i) any restricted stock purchase agreement; or (ii) any other Contract evidencing or relating to any equity award (whether payable in cash or stock);

 

(e) there has been no amendment to the certificate of incorporation or memorandum and articles of association of Cyclacel, and Cyclacel has not effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

 

(f) Cyclacel has not formed any Subsidiary or acquired any equity interest or other interest in any other Entity;

 

(g) Cyclacel has not: (i) lent money to any Person; (ii) incurred or guaranteed any material indebtedness; (iii) issued or sold any debt securities or options, warrants, calls or other rights to acquire any debt securities; (iv) guaranteed any debt securities of others; (v) created any security interest in Cyclacel’s material assets or properties; or (vi) made any capital expenditure or commitment in excess of $250,000;

 

(h) Cyclacel has not: (i) adopted, established or entered into any Cyclacel Employee Plan; or (ii) caused or permitted any Cyclacel Employee Plan to be amended other than as required by law so as to increase benefits accruing or payable thereunder;

 

(i) Cyclacel has not changed any of its methods of accounting or accounting practices;

 

(j) Cyclacel has not made any material Tax election;

 

(k) Cyclacel has not commenced or settled any Legal Proceeding, nor has Cyclacel received any notice or threat of any Legal Proceeding;

 

7.

(l) Cyclacel has not entered into any material transaction or taken any other material action outside the ordinary course of business or inconsistent with past practices;

 

(m) other than in the ordinary course of business consistent with past practices, Cyclacel has not revalued any of its material assets, or sold, leased, licensed or otherwise disposed of any of its material assets or properties, nor has any security interest been created in such material assets or properties;

 

(n) there has been no amendment or termination of any material Contract to which Cyclacel is a party or by which it is bound other than the expiration of any such Contract in accordance with its terms as the result of the passage of time which would not result in a Cyclacel Material Adverse Effect;

 

(o) Cyclacel has not received notice of any material claim or potential claim of ownership by a third party of the Cyclacel IP Rights or of infringement by Cyclacel of any third party’s Intellectual Property;

 

(p) there has been no change royalties set or charged by Cyclacel to its customers or licensees or in royalties set or charged by Persons who have licensed Intellectual Property to Cyclacel;

 

(q) there has been no event or condition of any character that has resulted in or would reasonably be expected to result in a Cyclacel Material Adverse Effect;

 

(r) Cyclacel has not waived or released any of its rights or claims, including any write-off, or other compromise of any account receivable in excess of $50,000 individually or $100,000 in the aggregate;

 

(s) other than in the ordinary course of business consistent with past practices, Cyclacel has not increased the wages, salary, fringe benefits or other compensation payable or to become payable to its officers, directors, employees or advisors or the declaration, payment or commitment or obligation of any kind for the payment by such corporation of a bonus or other additional salary or compensation to any such person;

 

(t) Cyclacel has not negotiated, agreed or committed to take any of the actions referred to in clauses “(b)” through “(s)” above (other than negotiations between the Parties to enter into this Agreement).

 

2.6 Title to Assets .

 

(a) Cyclacel owns, and has, and immediately following the Closing will own and have, good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all material tangible properties or assets and equipment used or held for use in its business or operations or purported to be owned by it, including: (i) all assets reflected on the Cyclacel Unaudited Interim Balance Sheet (except for inventory sold or otherwise disposed of in the ordinary course of business since the date of the Cyclacel Unaudited Interim Balance Sheet); and (ii) all other assets reflected in the books and records of Cyclacel as being owned by Cyclacel. All of said assets are owned by Cyclacel free and clear of any Encumbrances, except for: (i) any lien for

 

8.

current taxes not yet due and payable; and (ii) liens that do not materially detract from the value of the assets subject thereto or materially impair the operations of Cyclacel.

 

(b) Seller does not own any assets other than the Cyclacel Shares, which are not material in amount or material to the business or operations of Cyclacel. Cyclacel Nominees Limited does not own any assets. Neither Seller nor Cyclacel Nominees Limited is a party to any Cyclacel Contract. Cyclacel owns all assets that are required in order to carry on its business in all material respects in the manner, extent and places it has been carried on in the two years preceding this Agreement. Seller is not insolvent, as determined pursuant to the Insolvency Act of 1986.

 

2.7 Real Property; Leasehold . Cyclacel does not own real property, nor has it ever owned any real property. Schedule 2.7(a) of the Seller Disclosure Schedule sets forth a list of all real property currently leased by Cyclacel. All such current leases are in full force and effect, are valid and effective against Cyclacel, and, to the Knowledge of Seller, each other party thereto, in accordance with their respective terms, and there is not, under any of such leases, any existing default by Cyclacel (or event which with notice or lapse of time, or both, would constitute a default).

 

2.8 Intellectual Property .

 

(a) Cyclacel owns, or has the right to use, sell or license, and has the right to bring actions for the infringement of, all material Cyclacel IP Rights.

 

(b) Section 2.8(b) of the Seller Disclosure Schedule sets forth an accurate, true and complete listing of all material Cyclacel IP Rights. There is no Intellectual Property necessary or used in Cyclacel’s business as presently conducted and as proposed to be conducted, in each case, in all material respects, other than that set forth on Section 2.8(b) of the Seller Disclosure Schedule.

 

(c) Cyclacel holds in each case the sole, exclusive, valid, unrestricted, unencumbered and lawful title to any and all of the material Cyclacel IP Rights, other than as set forth in Section 2.8(c)(1) of the Seller Disclosure Schedule, and has not granted any liens, mortgages, encumbrances, security interests, licenses, sublicenses, or other agreements to any of such Cyclacel IP Rights, other than those set out in Section 2.8(c)(2) of the Seller Disclosure Schedule.

 

(d) Except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, the Cyclacel IP Rights are valid and enforceable, in whole and in part (and, to the Knowledge of Seller, all patent applications included in the Cyclacel IP Rights would be valid and enforceable if issued as patents), and Cyclacel has not undertaken or omitted to undertake any acts, and to the Knowledge of Seller, no circumstances or grounds exist, that would invalidate, reduce or eliminate (excluding any such reductions or eliminations that occur in the ordinary course of patent prosecution), in whole or in part, the enforceability or scope of, or its entitlement to exclusively exploit, such rights, or otherwise impair the conduct of Cyclacel’s business as conducted or as proposed to be conducted with respect to such rights.

 

(e) Except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, the practice of (i) the business, products and activities of Cyclacel as currently conducted and as proposed to be

 

9.

conducted, and (ii) the Cyclacel IP Rights, do not infringe upon, may not infringe upon, interfere with, misappropriate, or otherwise breach the rights of any third party. No third party has claimed the invalidity or unenforceability of any of the material Cyclacel IP Rights and, to the Knowledge of Seller, there are no circumstances according to which any third party would reasonably be expected to claim the invalidity or unenforceability of any of the material Cyclacel IP Rights. As pertains to the business of Cyclacel and against them or any employees thereof, (i) there are no patent infringement or other intellectual property suits on the date of this Agreement; (ii) there have been no such suits in the preceding five (5) years, and (iii) there have been no asserted patent infringement or other intellectual property claims.

 

(f) (i) Neither the validity of any of the Cyclacel IP Rights nor Cyclacel’s rights in the material Cyclacel IP Rights (a) are subject to any current, pending or, to the Knowledge of Seller, threatened, challenge, claim or proceeding including, but not limited to, litigation, opposition proceeding in any patent or other public or governmental office, or interference, (b) and have not been during the preceding five (5) years; (ii) except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, all steps which are necessary to maintain the Cyclacel IP Rights have been taken, including the payment of any public, annuity and maintenance fees.

 

(g) Cyclacel is not obliged to make material payments to any of its employees or any other parties, e.g. a third party inventor, with regard to the Cyclacel IP Rights.

 

(h) Section 2.8(h)(i) of the Seller Disclosure Schedules sets forth an accurate, true and complete listing of all Cyclacel IP Agreements (copies of which have been disclosed to Xcyte). Except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, (A) Cyclacel has the sole, exclusive, valid and unencumbered title to the Cyclacel IP Rights Agreements, (B) the Cyclacel IP Rights Agreements are valid, binding, enforceable and in full force and effect and have not been terminated, (C) Cyclacel has not granted any liens, mortgages, security interests, sub-licenses or other encumbrances in relation to the Cyclacel IP Rights Agreements, (D) Cyclacel has not received any notice of termination or cancellation under any of the Cyclacel IP Rights Agreements, or received any notice of breach or default under such agreement and (E) neither Cyclacel nor, to the Knowledge of Seller, any other party to such agreement, is in breach or default under any Cyclacel IP Rights Agreement.

 

(i) The execution, delivery and performance of this Agreement and the consummation of the Stock Purchase and the Liquidation will not constitute a breach of any material Cyclacel IP Rights Agreement, will not cause the forfeiture, cancellation or termination or give rise to a right of forfeiture, cancellation or termination of any material Cyclacel IP Rights or impair, in any material respect, the right of Cyclacel or Xcyte (following the Closing) to use, sell, license or otherwise exploit any material Cyclacel IP Rights or portion thereof.

 

(j) Cyclacel is not obligated to pay a royalty, grant a license or provide other consideration to any Person in connection with the material Cyclacel IP Rights.

 

(k) Except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, neither the manufacture, marketing, license, use, sale, offer for sale or intended use of any product or technology

 

10.

currently licensed or sold or under development by Cyclacel violates any license or agreement between Cyclacel and any third party or infringes or is in conflict with any intellectual property right of any other Person, including those which are the subject of any patent application known to Cyclacel. To the Knowledge of Seller, no third party is infringing upon, or violating any license or agreement with Cyclacel relating to any Cyclacel IP Rights.

 

(l) There is no pending or, to the Knowledge of Seller, threatened, action, suit, proceeding, claim or litigation contesting or challenging the validity, ownership or right to use, sell, license, exploit or dispose of any Cyclacel IP Rights, and Cyclacel is unaware of any facts that form a reasonable basis for such claim. Cyclacel has not received any notice asserting, nor to the Knowledge of Seller is there any claim or allegation, that any Cyclacel IP Rights or the proposed use, sale, license or disposition thereof conflicts or will conflict with the rights of any other party.

 

(m) Cyclacel has used commercially reasonable efforts to keep its trade secrets and proprietary information in confidence, and commercially reasonable protections are in place to keep such information confidential, including entering into licenses and contracts that generally require licensees, contractors and other third persons with access to such trade secrets to keep such trade secrets confidential.

 

2.9 Agreements, Contracts and Commitments . Neither Cyclacel, nor Seller in respect of the business or operations of Cyclacel, is a party to or bound by:

 

(a) any material bonus, deferred compensation, incentive compensation, pension, profit-sharing or retirement plans, or any other employee benefit plans or arrangements (including any agreements that contain severance pay);

 

(b) any employment, severance, change of control or consulting agreement, contract or commitment with any employee or individual consultant or salesperson or any consulting or sales agreement, contract or commitment under which any firm or other organization provides services to Cyclacel, not terminable by Cyclacel on ninety (90) days notice without liability, except to the extent general principles of wrongful termination law may limit Cyclacel’s ability to terminate employees at will;

 

(c) any agreement or plan, including any stock option plan, stock appreciation right plan or stock purchase plan or other equity-based plan, any of the benefits of which will be increased, or the vesting of benefits of which will be accelerated, by the occurrence of either the Stock Purchase or the Liquidation or the value of any of the benefits of which will be calculated on the basis of either of Stock Purchase or the Liquidation;

 

(d) any agreement of indemnification or guaranty other than indemnification agreements between Cyclacel and any of its officers or directors;

 

(e) any agreement, contract or commitment containing any covenant limiting the freedom of Cyclacel to engage in any line of business or compete with any Person;

 

11.

(f) any agreement, contract or commitment relating to capital expenditures and involving future obligations in excess of $100,000 and not cancelable without penalty;

 

(g) any agreement, contract or commitment currently in force relating to the disposition or acquisition of assets not in the ordinary course of business or any ownership interest in any corporation, partnership, joint venture or other business enterprise;

 

(h) any mortgages, indentures, loans, notes or credit agreements, security agreements or other agreements or instruments relating to the borrowing of money or extension of credit in excess of $100,000;

 

(i) any joint marketing or development agreement;

 

(j) (i) any distribution agreement (identifying any that contain exclusivity provisions); (ii) any dealer, distributor, joint marketing, alliance, joint venture, shareholder, cooperation, development or other agreement currently in force under which Cyclacel has continuing material obligations to jointly market any product, technology or service, or any material agreement pursuant to which Cyclacel has continuing material obligations to jointly develop any Intellectual Property that will not be owned, in whole or in part, by Cyclacel; (iii) any material agreement, contract or commitment currently in force to license any third party to manufacture or reproduce any Cyclacel product, service or technology or any material agreement, contract or commitment currently in force to sell or distribute any Cyclacel products or service except agreements with distributors or sales representative in the normal course of business cancelable without penalty upon notice of ninety (90) days or less and substantially in the form previously provided to Cyclacel; or (iv) licenses or other agreements, including amendments to such licenses, for patents, trademarks, trade secrets, domain names or other intellectual property rights;

 

(k) any collective bargaining agreements;

 

(l) any purchase order or contract for the purchase of raw materials involving $250,000 or more;

 

(m) any construction contract;

 

(n) any fidelity or surety bond or completion bond; or

 

(o) any other agreement, contract or commitment that is material to the business or operations of Cyclacel; or

 

(p) any other agreement, contract or commitment which was entered into otherwise than at arm’s length.

Neither Seller nor Cyclacel has, nor to the Knowledge of Seller has any other party to a Cyclacel Material Contract (as defined below), breached, violated or defaulted under, or received notice that it has breached, violated or defaulted under, any of the terms or conditions of any of the agreements, contracts or commitments to which Seller or Cyclacel is a party or by which either of them is bound of the type described in clauses (a) through (p) above (any such agreement, contract or commitment, a “ Cyclacel Material Contract ”) in such manner as would permit any other party to cancel or

 

12.

terminate any such Cyclacel Material Contract, or would permit any other party to seek damages which, individually or in the aggregate, have resulted in or would reasonably be expected to result in a Cyclacel Material Adverse Effect. Each Cyclacel Material Contract is valid, binding, enforceable against Cyclacel, and to the Knowledge of Seller, each other party thereto and is in full force and effect, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies.

 

2.10 Liabilities . Cyclacel has no liability, indebtedness, obligation, expense, claim, deficiency, guaranty or endorsement of any kind, whether accrued, absolute, contingent, matured, unmatured or other (whether or not required to be reflected in the financial statements in accordance with UK GAAP) (each a “ Liability ”), individually or in the aggregate, except for: (a) liabilities identified as such in the “liabilities” column of the Cyclacel Unaudited Interim Balance Sheet; (b) normal and recurring current liabilities that have been incurred by Cyclacel since the date of the Cyclacel Unaudited Interim Balance Sheet in the ordinary course of business consistent with past practices; and (c) liabilities that are not, individually or in the aggregate, material to Cyclacel either in amount or in consequence.

 

2.11 Compliance; Permits; Restrictions .

 

(a) Cyclacel is not in conflict with, or in default or violation of, and neither Seller nor Cyclacel has received any written notice of violations with respect to (i) any material Legal Requirement applicable to Cyclacel or by which its business or properties is bound or affected, or (ii) any material note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation to which Cyclacel is a party or by which Cyclacel or its business or property is bound or affected. No material investigation or review by any Governmental Body or authority is pending or, to the Knowledge of Seller, threatened against Cyclacel, nor has any Governmental Body or authority indicated to Cyclacel an intention to conduct the same. There is no agreement, judgment, injunction, order or decree binding upon Cyclacel which has or could reasonably be expected to have the effect of prohibiting or impairing any material business practice of Cyclacel, any acquisition of material property by Cyclacel or the conduct of business by Cyclacel as currently conducted or presently proposed to be conducted in all material respects. The corporate reorganization and share exchange conducted pursuant to the Reorganization and Share Exchange Agreement dated June 30, 2004 (the “ Reorganization ” ) and the Share Buy Back Agreement dated June 30, 2004 (the “ Share Agreement ”) complied in all material respects with all applicable Legal Requirements.

 

(b) Cyclacel holds all Governmental Authorizations that are material to the operation of its business, taken as a whole (collectively, the “ Cyclacel Permits ”). Cyclacel is in compliance in all material respects with the terms of the Cyclacel Permits. No action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending or, to the Knowledge of Seller, threatened, which seeks to revoke or materially limit any Cyclacel Permit. The rights and benefits of each material Cyclacel Permit will be available to Xcyte immediately after the Closing on terms identical in all material respects to those enjoyed by Cyclacel as of the date of this Agreement and immediately prior to the Closing.

 

(c) Neither Cyclacel nor any of its Representatives nor, to the Knowledge of Seller, any of its licensees or assigns of Cyclacel IP Rights has received any written notice that the

 

13.

Food and Drug Administration (“ FDA ”), the European Medicines Evaluation Agency (“ EMEA ”) or any other similar Governmental Body has initiated, or threatened to initiate, any action to suspend any clinical trial, suspend or terminate any Investigational New Drug Application (or foreign counterpart thereto) sponsored by Cyclacel or otherwise restrict the preclinical research on or clinical study of any Cyclacel Pharmaceutical Product or any biological or drug product being developed by any licensee or assignee of Cyclacel IP Rights based on such intellectual property, or to recall, suspend or otherwise restrict the manufacture of any Cyclacel Pharmaceutical Product.

 

(d) Each of Seller and Cyclacel has delivered to Xcyte copies of any and all written notices of inspectional observations, establishment inspection reports and any other documents received from the FDA and EMEA, that indicate or suggest lack of compliance with the regulatory requirements of the FDA or EMEA. Cyclacel has made available to Xcyte for review all correspondence to or from the FDA and EMEA, minutes of meetings, written reports of phone conversations, visits or other contact with the FDA and EMEA, notices of inspectional observations, establishment inspection reports, and all other documents concerning communications to or from the FDA and EMEA, or prepared by the FDA or EMEA or which bear in any way on Cyclacel’s compliance with regulatory requirements of the FDA or EMEA, or on the likelihood of timing of approval of any Cyclacel Pharmaceutical Products.

 

(e) To the Knowledge of Seller, there are no proceedings pending with respect to a violation by Cyclacel of the Federal Food, Drug, and Cosmetic Act (“ FDCA ”), FDA regulations adopted thereunder, the Controlled Substance Act or any other similar legislation or regulation promulgated by any other United States Governmental Body.

 

(f) To the knowledge of Cyclacel, Cyclacel has not made any false statements on, or omissions from, the applications, approvals, reports and other submissions to the FDA or Foreign Regulatory Authorities or in or from any other records and documentation prepared or maintained to comply with the requirements of the FDA or Foreign Regulatory Authorities relating to any Cyclacel Pharmaceutical Product that would, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect.

 

(g) Neither Cyclacel, nor to the knowledge of Cyclacel any officer, key employee or agent of Cyclacel has been convicted of any crime or engaged in any conduct that would reasonably be expected to result in debarment under 21 U.S.C. Section 335a or any similar state law or regulation.

 

(h) The clinical, preclinical, safety and other studies or tests conducted by or on behalf of or sponsored, by Cyclacel or in which Cyclacel’s Products or Product candidates under development have participated, were and, if still pending, are being conducted in material compliance with standard medical and scientific procedures. Cyclacel has operated within, and currently is in material compliance with, all applicable rules, regulations and policies of the FDA and Foreign Regulatory Authorities for such studies. Cyclacel has not received any notices or other correspondence from the FDA or Foreign Regulatory Authority requiring the termination, suspension, or modifications of any clinical, preclinical, safety or other studies or tests.

 

14.

2.12 Tax Matters.

 

(a) Each of Seller and Cyclacel has filed all material Tax Returns that it was required to file under applicable Legal Requirements. All such Tax Returns were correct and complete in all material respects and have been prepared in substantial compliance with all applicable Legal Requirements. All Taxes due and owing by Seller and Cyclacel (whether or not shown on any Tax Return) have been paid or adequately provided for. Neither Seller nor Cyclacel is currently the beneficiary of any extension of time within which to file any Tax Return. No claim has ever been made by an authority in a jurisdiction where Seller or Cyclacel does not file Tax Returns that any of them is or may be subject to taxation by that jurisdiction. There are no liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of Seller or Cyclacel.

 

(b) Cyclacel has withheld and paid all material Taxes required to have been withheld and paid in connection with any amounts paid or owing to any employee, independent contractor, creditor, stockholder, or other third party.

 

(c) Neither Seller nor Cyclacel has received from any Governmental Body any (i) notice indicating an intent to open an audit or other review, (ii) request for information related to Tax matters, or (iii) material notice of deficiency or proposed adjustment of or any amount of Tax proposed, asserted, or assessed by any Governmental Body against Cyclacel.

 

(d) Neither Seller nor Cyclacel has waived any statute of limitations in respect of Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

 

(e) Cyclacel has not filed a consent under section 341(f) of the Code concerning collapsible corporations. Cyclacel is not a party to any Contract that has resulted or would reasonably be expected to result, separately or in the aggregate, in the payment of (i) any “excess parachute payment” within the meaning of section 280G of the Code (or any corresponding provisions of state, local or foreign Tax law) and (ii) any amount that will not be fully deductible as a result of section 162(m) of the Code (or any corresponding provisions of state, local or foreign Tax law). Cyclacel has not been a United States real property holding corporation within the meaning of section 897(c)(2) of the Code during the applicable period specified in section 897(c)(1)(A)(ii) of the Code. Cyclacel is not a party to or bound by any Tax allocation or sharing agreement. Cyclacel has (A) not been a member of an affiliated group (as defined in Section 1504(a) of the Code) filing a consolidated federal income Tax Return (other than a group the common parent of which was Cyclacel) or (B) no Liability for the Taxes of any Person (other than Cyclacel) under regulation 1.1502-6 of the Code (or any similar provision of state, local, or foreign law), as a transferee or successor, by contract, or otherwise.

 

(f) The unpaid Taxes of Cyclacel (i) did not, as of the date of the Cyclacel Unaudited Interim Balance Sheet, exceed the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Cyclacel Unaudited Interim Balance Sheet, and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of Cyclacel in filing its Tax Returns.

 

15.

2.13 Employee and Labor Matters; Benefit Plans .

 

(a) Section 2.13(a) of the Seller Disclosure Schedule accurately sets forth, with respect to the nine most highly compensated employees of the Cyclacel:

 

(i) the name of such employee;

 

(ii) such employee’s title; and

 

(iii) such employee’s annualized compensation as of the date of this Agreement.

 

(b) Cyclacel has made available to Xcyte accurate and complete copies of all material employee manuals and handbooks, disclosure materials, policy statements and other materials relating to the employment of Cyclacel Associates to the extent currently effective and material.

 

(c) To the Knowledge of Seller, no officer of Cyclacel intends to terminate his employment with Cyclacel, nor has any such employee threatened or expressed any intention to do so.

 

(d) Cyclacel is not a party to, nor bound by, nor has a duty to bargain under, any collective bargaining agreement or other Contract with a labor organization representing any of its employees, and there are no labor organizations representing, purporting to represent or, to the Knowledge of Seller, seeking to represent any employees of Cyclacel.

 

(e) There are no, nor, to the Knowledge of Seller, has there been any threat of, any strike, slowdown, work stoppage, lockout, job action, union, organizing activity, question concerning representation or any similar activity or dispute, affecting Cyclacel or any of its employees. No event has occurred, and, to the Knowledge of Seller, no condition or circumstance exists, that might directly or indirectly be likely to give rise to or provide a basis for the commencement of any such strike, slowdown, work stoppage, lockout, job action, union organizing activity, question concerning representation or any similar activity or dispute.

 

(f) There is no Legal Proceeding, claim, labor dispute or grievance pending or, to the Knowledge of Seller, threatened or reasonably anticipated relating to any employment contract, privacy right, labor dispute, wages and hours, leave of absence, plant closing notification, workers’ compensation policy, long-term disability policy, harassment, retaliation, immigration, employment statute or regulation, safety or discrimination matter involving any Cyclacel Associate, including charges of unfair labor practices or discrimination complaints, except for routine claims and disputes in the ordinary course of business.

 

(g) Section 2.13(g) of the Seller Disclosure Schedule lists all material written and describes all non-written employee benefit plans (as defined in section 3(3) of ERISA) and all bonus, equity-based, incentive, deferred compensation, retirement or supplemental retirement, profit sharing, severance, golden parachute, vacation, cafeteria, dependent care, medical care, employee assistance program, education or tuition assistance programs and other similar fringe or employee benefit plans, programs or arrangements, including any employment or executive

 

16.

compensation or severance agreements, written or otherwise, which are currently in effect relating to any present or former employee or director of Cyclacel (or any trade or business (whether or not incorporated) which is a member of a controlled group or which is under common control with Cyclacel within the meaning of section 414 of the Code (an “ ERISA Affiliate ”)), or which may result in a material liability for Cyclacel (collectively, the “ Cyclacel Employee Plans ”).

 

(h) With respect to each Cyclacel Employee Plan, Cyclacel has delivered to Xcyte a true and complete copy of such Cyclacel Employee Plan.

 

2.14 Environmental Matters .

 

(a) Except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, Cyclacel: (i) is and has been in compliance with, and has not been and is not in violation of or subject to any liability under, any applicable Environmental Requirements (as defined in Section 2.14(e)); and (ii) possesses all Environmental Authorizations (as defined in Section 2.14(e)) required to conduct its business as currently conducted, and is and has been in compliance with the terms and conditions thereof.

 

(b) Except as, individually or in the aggregate, has not resulted in and would not reasonably be expected to result in a Cyclacel Material Adverse Effect, Cyclacel is not conducting or required to conduct, and has not undertaken or completed, any action to (i) investigate, clean up, remove, treat or handle in any other way Materials of Environmental Concern (as defined in Section 2.14(e)); (ii) restore or reclaim the environment or natural resources; (iii) prevent the Release or threatened Release of Materials of Environmental Concern; or (iv) perform remedial investigations, feasibility studies, corrective actions, closures and post-remedial or post-closure studies, investigations, operations, maintenance and monitoring relating to any presence, Release, or threatened Release, of Materials of Environmental Concern or otherwise relating to Environmental Requirements at any property that is leased to, controlled by or used by Cyclacel or at any other site or location, or otherwise in connection with the current or past operations of Cyclacel.

 

(c) There are no underground storage tanks in which Materials of Environmental Concern are being treated, stored or disposed of on any property that is or was leased to, controlled by or used by Cyclacel. There is no friable asbestos-containing material that requires abatement or encapsulation pursuant to any applicable Environmental Requirement at any property that is or was leased to, controlled by or used by Cyclacel.

 

(d) To the Knowledge of Seller, there are no facts, circumstances or conditions which could reasonably be expected to form the basis for a Legal Proceeding against or affecting Cyclacel under any Environmental Requirement which have resulted in or would reasonably be expected to result in a Cyclacel Material Adverse Effect.

 

(e) For purposes of this Agreement: (i) “ Environmental Requirement ” means any federal, state, local or foreign Legal Requirement, order, writ, injunction, directive, authorization, judgment, decree, or other governmental restriction and requirement, whether judicial or administrative, relating to pollution or protection of human health and safety, natural resources or the environment (including ambient air, surface water, ground water, land surface or subsurface strata), including any Legal Requirement relating to emissions, discharges, Releases or threatened Releases of Materials of Environmental Concern, or otherwise relating to the manufacture,

 

17.

processing, distribution, use, treatment, storage, disposal, transport or handling of Materials of Environmental Concern; (ii) “ Environmental Authorization ” means any Governmental Authorization required under applicable Environmental Requirements; (iii) “ Materials of Environmental Concern ” include chemicals, pollutants, contaminants, wastes, toxic substances, asbestos-containing materials, urea formaldehyde foam insulation, petroleum and petroleum products and any other substance that is now or hereafter regulated under any Environmental Requirement or that is otherwise capable of causing damage harm or disruption to health, reproduction or the environment; and (iv)  “Release ” means any spilling, migrating, leaking, emitting, discharging, depositing, escaping, leaching, dumping or other releasing into the environment or within any building, structure, facility or fixture, whether intentional or unintentional.

 

2.15 Insurance . Cyclacel has delivered to Xcyte accurate and complete copies of all material insurance policies and all material self insurance programs and arrangements relating to the business, assets, liabilities and operations of Cyclacel. Each of such insurance policies is in full force and effect and Cyclacel are in compliance with the terms thereof. Since January 1, 2004, Cyclacel has not received any notice or other communication regarding any actual or possible: (a) cancellation or invalidation of any insurance policy; (b) refusal or denial of any coverage, reservation of rights or rejection of any material claim under any insurance policy; or (c) material adjustment in the amount of the premiums payable with respect to any insurance policy. There is no pending workers’ compensation or other claim under or based upon any insurance policy of Cyclacel. All information provided to insurance carriers (in applications and otherwise) on behalf of Cyclacel is accurate and complete in all material respects. Cyclacel has provided timely written notice to the appropriate insurance carrier(s) of each Legal Proceeding pending or threatened against Cyclacel, and no such carrier has issued a denial of coverage or a reservation of rights with respect to any such Legal Proceeding, or informed Cyclacel of its intent to do so.

 

2.16 Affiliates . Section 2.16 of the Seller Disclosure Schedule identifies each Person who is (or who may be deemed to be) an “affiliate” (as that term is used in Rule 145 under the Securities Act) of Cyclacel as of the date of this Agreement. Since January 1, 2005, there have been no transactions, and there are no agreements, commitments, or obligations currently in effect, between Cyclacel and any Person who is an affiliate of Cyclacel.

 

2.17 Legal Proceedings; Orders .

 

(a) There is no pending Legal Proceeding, and, to the Knowledge of Seller, no Person has threatened to commence any Legal Proceeding: (i) that involves Cyclacel, any Cyclacel Associates (in his or her capacity as such) or any of the material assets owned or used by Cyclacel; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, the Stock Purchase or the Liquidation. To the Knowledge of Seller, no event has occurred, and no claim, dispute or other condition or circumstance exists, that could reasonably be expected to give rise to or serve as a basis for the commencement of any such Legal Proceeding.

 

(b) There is no order, writ, injunction, judgment or decree to which Cyclacel, or any of the assets owned or used by Cyclacel, is subject. To the Knowledge of Seller, no officer or other key employee of Cyclacel is subject to any order, writ, injunction, judgment or decree that prohibits such officer or other employee from engaging in or continuing any conduct, activity or practice relating to the business of Cyclacel. To the Knowledge of Seller, no Governmental Body

 

18.

has at any time challenged or questioned the legal right of Cyclacel to manufacture, offer, or sell any of its products or conduct its operations as presently conducted or previously conducted.

 

2.18 Authority; Binding Nature of Agreement . Seller has the right, power and authority to enter into and to perform its obligations under this Agreement and to consummate the Stock Purchase and the Liquidation. The board of directors of Seller (at a meeting duly called and held) has unanimously: (a) determined that this Agreement and the Stock Purchase and the Liquidation are advisable and fair to and in the best interests of Seller and its stockholders; (b) authorized and approved by all necessary corporate action, the execution, delivery and performance of this Agreement; (c) recommended the approval of the Stock Purchase and the Liquidation by Seller’s stockholders and directed that such matters be submitted for consideration by Seller’s stockholders at the Seller Stockholders’ Meeting (as defined in Section 5.2). This Agreement has been duly executed and delivered by Seller and assuming the due authorization, execution and delivery by Xcyte, constitutes the legal, valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, subject to: (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors; and (ii) rules of law governing specific performance, injunctive relief and other equitable remedies. To the Knowledge of Seller, (i) the Seller Stockholder Voting Agreements (A) have been duly executed and delivered by the stockholders of Seller that are party thereto, (B) constitute the legal, valid and binding obligations of such stockholders, enforceable against such stockholders in accordance with their terms and (ii) the stockholders of Seller that are party to the Seller Stockholder Voting Agreements hold a sufficient number of shares required to approve the Stock Purchase and the Liquidation by the Required Seller Stockholder Vote.

 

2.19 Vote Required . The vote of (a) 51% of Seller’s outstanding capital stock plus 51% of Seller’s preferred stock voting as a separate class for the Stock Purchase and (b) 75% of Seller’s outstanding capital stock plus 75% of Seller’s preferred stock voting as a separate class for the Liquidation (the “ Required Seller Stockholder Votes ”) are the only votes of the holders of any class or series of Seller’s share capital necessary to adopt or approve this Agreement and approve the Stock Purchase and the Liquidation. No further vote, authorization or approval of the shareholders or board of directors of Seller (and no vote, authorization or approval of the shareholders or board of directors of Cyclacel) is required to approve, authorize or make effective the Stock Purchase or the Liquidation (other than the registration of Xcyte as the registered owner of the Cyclacel Shares).

 

2.20 Non-Contravention; Consents . Neither (x) the execution, delivery or performance of this Agreement by Seller, nor (y) the consummation of the Stock Purchase or the Liquidation, will directly or indirectly (with or without notice or lapse of time):

 

(a) contravene, conflict with or result in a violation of (i) any of the provisions of the certificate of incorporation or memorandum and articles of association of Seller or Cyclacel, or (ii) any resolution adopted by the stockholders, the board of directors or any committee of the board of directors of Seller or Cyclacel;

 

(b) subject to compliance with the HSR Act (if applicable) and any applicable foreign antitrust Legal Requirement, contravene, conflict with or result in a violation of, or give any Governmental Body or other Person the right to challenge the Stock Purchase or the Liquidation s or to exercise any remedy or obtain any relief under, any Legal Requirement or any order, writ, injunction, judgment or decree to which Cyclacel, or any of Cyclacel’s material assets or any other material assets used by Cyclacel, is subject;

 

19.

(c) contravene, conflict with or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate or modify, any material Governmental Authorization that is held by Cyclacel or that is otherwise material to the business of Cyclacel or to any of Cyclacel’s material assets or properties or any other material assets used by Cyclacel;

 

(d) contravene, conflict with or result in a violation or breach of, or result in a default under, any provision of any Cyclacel Contract, or give any Person the right to: (i) declare a default or exercise any remedy under any Cyclacel Contract; (ii) a rebate, chargeback, penalty or change in delivery schedule under any such Cyclacel Contract; (iii) accelerate the maturity or performance of any Cyclacel Contract; or (iv) cancel, terminate or modify any term of any Cyclacel Contract, except, in each case, (A) as relates to any Cyclacel Contract that is a Cyclacel Material Contract, any non-material breach, default, penalty or modification and, (B) as relates to all other Cyclacel Contracts, any breach, default, penalty or modification as, individually or in the aggregate, would not reasonably be expected to result in a Cyclacel Material Adverse Effect;

 

(e) result in the imposition or creation of any material Encumbrance upon or with respect to any of Cyclacel’s material properties or assets or any other material assets used by Cyclacel; or

 

(f) result in, or increase the likelihood of, the transfer of any material asset owned or used by Cyclacel to any Person.

 

Except (i) for any Consent set forth on Section 2.20 of the Seller Disclosure Schedule under any Cyclacel Contract, (ii) such filings under the HSR Act (if applicable) any applicable foreign antitrust Legal Requirement and (iii) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, neither Seller nor Cyclacel was, is, or will be required to make any filing with or give any notice to, or to obtain any Consent from, any Person in connection with (A) the execution, delivery or performance of this Agreement, or (B) the consummation of the Stock Purchase or the Liquidation.

 

2.21 No Financial Advisor . No broker, finder or investment banker is entitled to any brokerage fee, finder’s fee, opinion fee, success fee, transaction fee or other fee or commission in connection with the Stock Purchase or the Liquidation based upon arrangements made by or on behalf of Seller.

 

Section 3. R EPRESENTATIONS AND W ARRANTIES OF X CYTE

 

Xcyte represents and warrants to Seller as follows, except as set forth in the written disclosure schedule delivered by Xcyte to Seller (the “ Xcyte Disclosure Schedule ”). The Xcyte Disclosure Schedule shall be arranged in sections corresponding to the numbered sections contained in this Section 3. The disclosures in any section of the Xcyte Disclosure Schedule shall qualify other sections in this Section 3 to the extent it is reasonably clear from a reading of the disclosure that such disclosure is applicable to such other sections. The inclusion of any information in the Xcyte Disclosure Schedule (or any update thereto) shall not be deemed to be an admission or acknowledgment, in and of itself, that such information is required by the terms of this Agreement to be disclosed, is material, has resulted in or would result in a Xcyte Material Adverse Effect, or is within or outside the ordinary course of business.

 

20.

3.1 Subsidiaries; Due Organization; Etc.

 

(a) Xcyte has no Subsidiaries. Xcyte does not own any capital stock of, or any equity interest of any nature in, any other Entity. Xcyte has neither agreed nor is obligated to make, or is bound by any Contract under which it may become obligated to make, any future investment in or capital contribution to any other Entity. Xcyte has not, at any time, been a general partner of, or has otherwise been liable for any of the debts or other obligations of, any general partnership, limited partnership or other Entity.

 

(b) Xcyte is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all necessary power and authority: (i) to conduct its business in all material respects in the manner in which its business is currently being conducted; (ii) to own, lease and use its assets in all material respects in the manner in which its assets are currently owned, leased and used; and (iii) to perform in all material respects its obligations under all Contracts by which it is bound.

 

(c) Xcyte is qualified to do business as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the nature of its business requires such qualification other than such failures to be so qualified as, individually or in the aggregate, has not resulted in and would not be reasonably expected to result in a Xcyte Material Adverse Effect.

 

(d) Xcyte has made available to counsel for Seller copies of its minute books and those of its Subsidiaries, which such minute books (a) are the only minute books of Xcyte and its Subsidiaries, and (b) accurately reflect all meetings of directors (or committees thereof) and stockholders or actions by written consent of the board of directors or stockholders of Xcyte and its Subsidiaries.

 

3.2 Certificate of Incorporation; Bylaws; Charters and Codes of Conduct . Xcyte has delivered to Seller accurate and complete copies of its certificate of incorporation and bylaws, including all amendments thereto. Section 3.2 of the Xcyte Disclosure Schedule lists, and Xcyte has delivered to Seller, accurate and complete copies of: (a) the charters of all committees of Xcyte’s board of directors; and (b) any code of conduct or similar policy adopted by Xcyte or by the board of directors, or any committee of the board of directors, of Xcyte. Each such document is in full force and effect. Xcyte is not in violation of any of the provisions of its certificate of incorporation or bylaws.

 

3.3 Capitalization, Etc.

 

(a) The authorized capital stock of Xcyte consists of: (i) 100,000,000 shares of Xcyte Common Stock, par value $0.001 per share, of which 19,672,393 shares have been issued and are outstanding as of the date of this Agreement; and (ii) 5,000,000 shares of Xcyte Preferred Stock, $0.001 par value per share, of which 2,046,813 shares have been issued and are outstanding as of the date of this Agreement. Xcyte does not hold any shares of its capital stock in its treasury. All of the outstanding shares of Xcyte Common Stock and Xcyte Preferred Stock have been duly authorized and validly issued, and are fully paid and nonassessable. None of the outstanding shares of Xcyte Common Stock or Xcyte Preferred Stock is entitled or subject to any preemptive right, right of participation, right of maintenance or any similar right. None of the outstanding shares of Xcyte Common Stock or Xcyte Preferred Stock is subject to any right of first

 

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refusal in favor of Xcyte. Except as contemplated herein, there is no Xcyte Contract relating to the voting or registration of, or restricting any Person from purchasing, selling, pledging or otherwise disposing of (or granting any option or similar right with respect to), any shares of Xcyte Common Stock or Xcyte Preferred Stock. Xcyte is not under any obligation, nor is bound by any Contract pursuant to which it may become obligated, to repurchase, redeem or otherwise acquire any outstanding shares of Xcyte Common Stock, Xcyte Preferred Stock or other securities. There are no repurchase rights held by Xcyte with respect to shares of Xcyte Common Stock (including shares issued pursuant to the exercise of stock options) and Xcyte Preferred Stock. Other than as will result from the Charter Amendments, the Stock Purchase will not result in any adjustments to the conversion price of the Xcyte Preferred Stock, which will remain at $2.35 per share of Xcyte Common Stock (pursuant to which each share of Xcyte Preferred Stock may be converted into 4.2553 shares of Xcyte Common Stock).

 

(b) Except for the Amended and Restated 1996 Stock Option Plan (the “ 1996 Plan ”), the 2003 Stock Option Plan (the “ 2003 Plan ”), the Amended and Restated 2003 Directors’ Stock Option Plan (the “ 2003 Directors’ Plan ”), and the 2003 Employee Stock Purchase Plan (the “ 2003 Employee Plan ” and together with the 1996 Plan, the 2003 Plan and the 2003 Director’s Plan, the “ Xcyte Equity Plans ”) Xcyte does not have any stock option plan or any other plan, program, agreement or arrangement providing for any equity or equity-based compensation for any Person. As of the date of this Agreement: under the 1996 Plan (i) 430,010 shares of Xcyte Common Stock are subject to issuance pursuant to stock options granted and outstanding, (ii) 523,781 shares of Xcyte Common Stock are reserved for future issuance pursuant to stock options not yet granted under the 1996 Plan. Under the 2003 Plan, (i) 409,299 shares of Xcyte Common Stock are subject to issuance pursuant to stock options granted and outstanding, (ii) 936,154 shares of Xcyte Common Stock are reserved for future issuance pursuant to stock options not yet granted under the 2003 Plan. Under the 2003 Directors’ Plan, (i) 95,000 shares of Xcyte Common Stock are subject to issuance pursuant to stock options granted and outstanding; (ii) 345,909 shares of Xcyte Common Stock are reserved for future issuance pursuant to stock options not yet granted under the 2003 Directors’ Plan. Under the 2003 Employee Plan, 151,031 shares of Xcyte Common Stock are reserved for future issuance pursuant to equity awards not yet granted under the 2003 Employee Plan. There are 11,244 shares of Xcyte Common Stock reserved for future issuance pursuant to warrants to purchase Xcyte Common Stock (“ Xcyte Warrants ”). Options to purchase shares of Xcyte Common Stock are referred to in this Agreement as “ Xcyte Options .” Section 3.3(b) of the Xcyte Disclosure Schedule sets forth the following information with respect to each Xcyte Option outstanding as of the date of this Agreement: (A) the name of the optionee; (B) the number of shares of Xcyte Common Stock subject to such Xcyte Option; (C) the exercise price of such Xcyte Option; (D) the date on which such Xcyte Option was granted; (E) the applicable vesting schedule, and the extent to which such Xcyte Option is vested and exercisable as of the date of this Agreement; (F) the date on which such Xcyte Option expires; (G) whether such Xcyte Option is an “incentive stock option” (as defined in the Code) or a non-qualified stock option; and (H) the period of continued exercisability of each vested Xcyte Option following termination of employment. Xcyte has delivered to Seller accurate and complete copies of all stock option plans pursuant to which Xcyte has ever granted stock options, and the forms of all stock option agreements evidencing such options, copies of resolutions of the board of directors approving option grants and copies of stockholder resolutions approving all stock option plans pursuant to which Xcyte has ever granted stock options. Xcyte has delivered to Seller accurate and complete copies of all Xcyte Warrants.

 

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(c) Except for the outstanding Xcyte Warrants, Xcyte Options and Xcyte Preferred Stock, there is no: (i) outstanding subscription, option, call, warrant or right (whether or not currently exercisable) to acquire any shares of the capital stock or other securities of Xcyte; (ii) outstanding security, instrument or obligation (written or oral) that is or may become convertible into or exchangeable for any shares of the capital stock or other securities of Xcyte; (iii) stockholder rights plan (or similar plan commonly referred to as a “poison pill”) or Contract under which Xcyte is or may become obligated to sell or otherwise issue any shares of its capital stock or any other securities; or (iv) condition or circumstance that may give rise to or provide a basis for the assertion of a claim by any Person to the effect that such Person is entitled to acquire or receive any shares of capital stock or other securities of Xcyte. There are not outstanding or authorized stock appreciation, phantom stock, profit participating or other similar rights with respect to Xcyte.

 

(d) All outstanding shares of Xcyte Common Stock, Xcyte Preferred Stock, options, warrants and other securities of Xcyte have been issued and granted in compliance with (i) all applicable securities laws and other applicable Legal Requirements, and (ii) all requirements set forth in any applicable Xcyte Contract.

 

3.4 SEC Filings; Financial Statements .

 

(a) Xcyte has delivered to Seller accurate and complete copies of all registration statements, proxy statements, Certifications (as defined below) and other statements, reports, schedules, forms and other documents filed by Xcyte with the SEC since October 10, 2003 (the “ Xcyte SEC Documents ”), other than such documents that can be obtained on the SEC’s website at www.sec.gov. None of Xcyte’s Subsidiaries is required to file any documents with the SEC. As of the time it was filed with the SEC (or, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing): (i) each of the Xcyte SEC Documents were prepared in all material respects in accordance with the applicable requirements of the Securities Act or the Exchange Act (as the case may be) and the rules and regulations thereunder; and (ii) none of the Xcyte SEC Documents contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The certifications and statements required by (A) Rule 13a-14 under the Exchange Act and (B) 18 U.S.C. §1350 (Section 906 of the Sarbanes-Oxley Act) relating to the Xcyte SEC Documents (collectively, the “ Certifications ”) are accurate and complete and comply as to form and content with all applicable Legal Requirements.

 

(b) Xcyte maintains disclosure controls and procedures that are designed to satisfy the requirements of Rule 13a-15 under the Exchange Act. Such disclosure controls and procedures are designed to ensure that all material information concerning Xcyte is made known on a timely basis to the individuals responsible for the preparation of Xcyte’s filings with the SEC and other public disclosure documents. Section 3.4(b) of the Xcyte Disclosure Schedule lists, and Xcyte has delivered to Seller accurate and complete copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such disclosure controls and procedures. Xcyte is in compliance with the applicable listing and other rules and regulations of the NASDAQ National Market and has not since October 10, 2003 received any notice from the NASDAQ National Market asserting any non-compliance with such rules and regulations.

 

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(c) The financial statements (including any related notes) contained or incorporated by reference in the Xcyte SEC Documents: (i) complied as to form in all material respects with the published rules and regulations of the SEC applicable thereto; (ii) were prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods covered (except as may be indicated in the notes to such financial statements or, in the case of unaudited financial statements, as permitted by Form 10-Q of the SEC, and except that the unaudited financial statements may not contain footnotes and are subject to normal and recurring year-end adjustments that are not reasonably expected to be material in amount); and (iii) fairly present the consolidated financial position of Xcyte and its consolidated subsidiaries as of the respective dates thereof and the consolidated results of operations and cash flows of Xcyte and its consolidated subsidiaries for the periods covered thereby.

 

(d) Xcyte maintains a system of internal accounting controls designed to provide reasonable assurance that: (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Section 3.4(d) of the Xcyte Disclosure Schedule lists, and Xcyte has delivered to Seller accurate and complete copies of, all written descriptions of, and all policies, manuals and other documents promulgating, such internal accounting controls. Xcyte maintains internal control over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting purposes.

 

(e) Section 3.4(e) of the Xcyte Disclosure Schedule lists, and Xcyte has delivered to Seller accurate and complete copies of the documentation creating or governing, all securitization transactions and “off-balance sheet arrangements” (as defined in Item 303(c) of Regulation S-K under the Exchange Act) effected by Xcyte since January 1, 2004.

 

3.5 Absence of Changes . Since the date of the Xcyte Unaudited Interim Balance Sheet:

 

(a) there has not been any material loss, damage or destruction to, or any material interruption in the use of, any of the assets or business of Xcyte (whether or not covered by insurance);

 

(b) Xcyte has not: (i) declared, accrued, set aside or paid any dividend or made any other distribution in respect of any shares of capital stock, except for the Xcyte Quarterly Dividend Payment; or (ii) repurchased, redeemed or otherwise reacquired any shares of capital stock or other securities;

 

(c) Xcyte has not sold, issued or granted, or authorized the issuance of: (i) any capital stock or other security (except for Xcyte Common Stock issued upon the valid exercise of outstanding Xcyte Options or Xcyte Common Stock issued upon the conversion of outstanding shares of Xcyte Preferred Stock); (ii) any option, warrant or right to acquire any capital stock or any other security (except for Xcyte Options identified in Section 3.3(b) of the Xcyte Disclosure Schedule); or (iii) any instrument convertible into or exchangeable for any capital stock or other security;

 

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(d) Xcyte has not amended or waived any of its rights under, or permitted the acceleration of vesting under any provision of: (i) any of Xcyte’s stock option plans; (ii) any Xcyte Option or any Contract evidencing or relating to any Xcyte Option; (iii) any restricted stock purchase agreement; or (iv) any other Contract evidencing or relating to any equity award (whether payable in cash or stock);

 

(e) there has been no amendment to the certificate of incorporation, bylaws or other charter or organizational documents of Xcyte, and Xcyte has not effected or been a party to any merger, consolidation, share exchange, business combination, recapitalization, reclassification of shares, stock split, reverse stock split or similar transaction;

 

(f) Xcyte has not formed any Subsidiary or acquired any equity interest or other interest in any other Entity;

 

(g) Xcyte has not: (i) lent money to any Person; or (ii) incurred or guaranteed any indebtedness for borrowed money; or (iii) issued or sold any debt securities or options, warrants, calls or other rights to acquire any debt securities; or (iv) guaranteed any debt securities of others; or (v) created any security interest in its assets or properties; or (vi) made any capital expenditure or commitment in excess or $250,000.

 

(h) Xcyte has not: (i) adopted, established or entered into any Xcyte Employee Plan; (ii) caused or permitted any Xcyte Employee Plan to be amended other than as required by law; or (iii) paid any bonus or made any profit-sharing or similar payment to, or increased the amount of the wages, salary, commissions, fringe benefits or other compensation or remuneration payable to, any of its directors, officers or other employees;

 

(i) Xcyte has not changed any of its methods of accounting or accounting practices;

 

(j) Xcyte has not made any material Tax election;

 

(k) Xcyte has not commenced or settled any Legal Proceeding, nor has it received any notice or threat of any Legal Proceeding;

 

(l) Xcyte has not entered into any material transaction or taken any other material action outside the ordinary course of business or inconsistent with past practices;

 

(m) Xcyte has not revalued any of its assets, sold, leased, licensed nor otherwise disposed of any of its assets or properties, nor has any security interest been created in such assets or properties, except in the ordinary course of business consistent with past practices;

 

(n) there has been no amendment or termination of any material Contract to which Xcyte is a party or by which it is bound, other than the expiration of any such Contract in accordance with its terms as the result of the passage of time which would not result in a Xcyte Material Adverse Effect;

 

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(o) Xcyte has not received notice of any claim or potential claim of ownership by a third party of the Xcyte IP Rights or of infringement by Xcyte of any third party’s Intellectual Property;

 

(p) there has been no change in pricing or royalties set or charged by Xcyte to its customers or licensees or in pricing or royalties set or charged by persons who have licensed Intellectual Property to Xcyte;

 

(q) there has been no event or condition of any character that has resulted in or would reasonably be