On August 24, 2023 Celyad Oncology SA ("Celyad" or the "Company") reported that it has obtained commitments from an affiliate of Fortress Investment Group (such affiliate, "Fortress"), Tolefi SA ("Tolefi"), and other historical shareholders to subscribe to a capital increase of approximately EUR 9,800,000 (Press release, Celyad, AUG 24, 2023, https://celyad.com/2023/08/24/celyad-oncology-receives-approximately-eur-9-8m-in-private-placement-commitments-from-historical-shareholders/ [SID1234634677]). The capital increase will take place at a subscription price of EUR 0.52 per share, which represents a 5% discount to the 30-day volume weighted average price (VWAP) of the shares on 23 August 2023.

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The Company intends to use the net proceeds from the private placement to fund research and development expenses, to advance the current pipeline of preclinical CAR-T candidates, to discover and develop additional preclinical product candidates using its proprietary non-gene edited short hairpin RNA (shRNA) technology platform, as well as for working capital, other general corporate purposes, and the enhancement of the Company’s intellectual property.

Georges Rawadi, CEO of Celyad, declared: "I am extremely grateful for the unwavering support of our historical shareholders, who have once again demonstrated their commitment to our vision and the transformative potential of our CAR-T cell approach. We believe this private placement will provide us with the necessary financial resources to advance our innovative targets and proprietary CAR-T engineering platform. We believe we are well positioned to continue pioneering groundbreaking therapies that hold immense promise for patients in need."

On or around 4 September 2023, subject to satisfaction of customary closing conditions, 3,930,770 new shares will be issued for a total amount of EUR 2,044,000 within the framework of the company’s authorized capital with cancellation of the preferential subscription rights of the other existing shareholders in favour of Fortress, Tolefi and other historical shareholders, and the board of directors will co-opt an affiliate of Fortress, represented by Michel Lussier, to replace Mel Management, represented by Michel Lussier, as member of the board of directors. Fortress has committed to subscribe for an amount of EUR 756,500 and Tolefi has committed to subscribe for an amount of approximately EUR 1,000,000 in this first capital increase. As a result of such subscriptions and the concurrent subscriptions by other historical shareholders, Fortress will hold 29.99% of the Company’s share capital and Tolefi will hold approximately 16% of the Company’s share capital.
Subsequently, the board of directors will convene an extraordinary shareholders’ meeting before year end to resolve to issue an additional 14,903,846 new shares for a total amount of EUR 7,750,000, with cancellation of the preferential subscription rights of the other existing shareholders in favour of Fortress.

Fortress has committed to subscribe for an additional amount of EUR 7,750,000 in this second capital increase, subject to approval by the extraordinary shareholders’ meeting by a majority of at least 75% of the votes cast (whereby Fortress cannot participate in the voting) at a meeting where at least 50% of the Company’s share capital (excluding shares held by Fortress) is present or represented. Following and subject to the extraordinary shareholders’ meeting approving the cancellation of preferential subscription rights and the issue of shares to these shareholders, Fortress is expected to hold approximately 55% of the Company’s shares. Pursuant to article 52 of the Royal Decree of 27 April 2007 on takeover bids, Fortress will be exempted from the obligation to launch a mandatory takeover bid for the remainder of the company’s shares, notwithstanding its crossing of the 30% threshold, since the acquisition of voting securities will be made within the context of subscribing to a capital increase of a company facing difficulties within the meaning of article 7:228 of the BCCA ("alarm bell procedure"), as determined by the shareholders’ meeting. For more information, reference is made to the board report and auditor report that will be published shortly, together with the convocation of the extraordinary shareholders’ meeting in accordance with article 7:179, 7:191 and 7:193 of the Belgian Code of Companies and Associations (BCCA).

The Company believes that following the close of the private placement and subject to approval by the extraordinary shareholders’ meeting of the second tranche subscribed by Fortress, its existing cash and cash equivalents should be sufficient, based on the current scope of activities, to fund its anticipated operating expenses and capital expenditure requirements until end of Q4 2024.

In the framework of this investment, Fortress and the Company have entered into a subscription agreement and will enter into an amended and restated shareholders’ rights agreement, which amends and restates the existing shareholders’ rights agreement dated 2 December 2021. Pursuant to the amended and restated shareholders’ rights agreement, Fortress will be subject to a customary lock-up obligation for 45 days. Furthermore, Fortress will benefit from a right of first offer on any new indebtedness to be incurred by Celyad and, as long as Fortress holds at least 10% of the shares of the Company, a right to purchase its pro rata portion of any new equity securities to be issued by the Company. Further, pursuant to the shareholders’ rights agreement, for so long as Fortress holds a majority of the Company’s shares, it will have the right to nominate a number of directors representing a majority of Celyad’s board of directors. As long as Fortress holds at least 30% of the Company’s shares, it will have the right to nominate a number of candidates to Celyad’s board of directors equal to the greater of (i) four and (ii) a percentage of the board members equal to its ownership percentage rounded up to the nearest whole number (but not a majority). As long as Fortress holds at least 10% of the Company’s shares, it will have the right to nominate three directors to Celyad’s board of directors. In addition, as long as Fortress holds 10% or more of the Company’s shares, certain intellectual property transactions and certain amendments to the Company’s articles of association or other transactions affecting Fortress’ rights will be subject to its approval. Pursuant to the subscription agreement, Fortress will benefit from certain representations and warranties of the Company.

As part of Tolefi’s investment, Tolefi and the Company have entered into a subscription agreement and will enter into a shareholders’ rights agreement. Pursuant to the shareholders’ rights agreement, Tolefi will be subject to a customary lock-up obligation for 45 days. Pursuant to the shareholders’ rights agreement, for so long as Tolefi holds at least 5% of the Company’s shares, it will benefit from a right to participate with respect to its pro rata portion of any new indebtedness to be incurred by Celyad from Fortress and a right to purchase its pro rata portion of any new equity securities to be issued by Celyad. As long as Tolefi holds at least 5% of the shares, it will have the right to nominate one director to Celyad’s board of directors. In addition, for a period of up to seven years, as long as Tolefi holds 5% or more of the Company’s shares, Tolefi may request that certain board decisions (such as the use of authorized capital, certain intellectual property transactions, certain indebtedness or off balance sheet transactions and certain acquisitions) be subject to a 72.5% board majority for approval. Pursuant to the subscription agreement, Tolefi will benefit from certain representations and warranties of the Company.

The Company considers that both Fortress and Tolefi qualify, separately, as a related party of the Company in accordance with IAS 24.9. In this context, the board of directors applied Article 7:97 of the BCCA, which requires, among other things, the intervention of a committee of independent directors to give an opinion to the board of directors. The conclusions of the committee’s opinion is as follows: "The Committee has assessed the envisaged Transaction in light of the criteria included in article 7:97 of the BCCA and concluded, in view of the Company’s financial situation and cash flow requirements, after considering and examining alternative funding options and taking into account the interest of all stakeholders, that the expected advantages of the Transaction outweigh the expected disadvantages thereof, which leads to the conclusion that the Transaction is to the advantage and in the interest of the Company. The Transaction is in line with the Company’s strategic policy and is not manifestly unreasonable and the Committee affirms its positive advice in relation to the Transaction". The directors concerned by the transaction did not participate in the deliberations or votes. In light of the Company’s limited cash runway, the board of directors believes that the envisaged capital increase is in the best interests of the Company and its stakeholders because, if completed, the capital increase will enable the Company to strengthen its balance sheet, improve its cash position in the very short term and support the continuation of the activities of the Company. In accordance with article 7:97 of the BCCA, the Company’s auditor has issued a report on the accounting and financial information contained in the committee’s opinion and the board minutes approving the related party transaction. The auditor’s conclusion in this respect is as follows: "Based on our assessment, nothing has come to our attention that causes us to believe that the accounting and financial information – included in the advice of the committee of independent directors dated August 24, 2023 and in the minutes of the Board of Directors dated August 24, 2023 justifying the proposed transactions – is not fair and sufficient in all material respects with regard to the information available to us within the scope of our mission. Our mission was carried out solely within the framework of the requirements of article 7:97 BCCA and our report cannot be used for any other purposes."