<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 14, 1997
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
APOLLON, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
PENNSYLVANIA 23-2681961
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
</TABLE>
------------------------
ONE GREAT VALLEY PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 647-9452
(Address, including zip code and telephone number, including
area code, of registrant's principal executive offices)
VINCENT R. ZURAWSKI, JR., PH.D.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
APOLLON, INC.
ONE GREAT VALLEY PARKWAY
MALVERN, PENNSYLVANIA 19355
(610) 647-9452
(Name, address, including zip code and telephone number, including
area code, of agent for service)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MORRIS CHESTON, JR., ESQUIRE DONALD J. MURRAY, ESQUIRE
Ballard Spahr Andrews & Ingersoll Dewey Ballantine LLP
1735 Market Street, 51st Floor 1301 Avenue of the Americas
Philadelphia, Pennsylvania 19103 New York, NY 10019
(215) 665-8500 (212) 259-8000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of this prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share 2,875,000 shares $13.00 $37,375,000 $11,326
</TABLE>
(1) Includes 375,000 shares subject to an over-allotment option granted to the
Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 14, 1997
PROSPECTUS
2,500,000 SHARES
[LOGO]
APOLLON, INC.
COMMON STOCK
---------
All of the shares of Common Stock (the "Common Stock") offered hereby (the
"Offering") are being sold by Apollon, Inc. ("Apollon" or the "Company"). Prior
to this Offering, there has been no public market for the Common Stock of the
Company. It is currently estimated that the initial public offering price will
be between $11.00 and $13.00 per share. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering price.
Application will be made to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol "APLN".
In October 1997, A.H. Investments Ltd., an affiliate of American Home
Products Corporation, invested $3.0 million in the Company in exchange for a
convertible promissory note in the principal amount of $3.0 million and a
warrant to purchase 68,910 shares of the Company's Common Stock at a price equal
to 115% of the initial public offering price. The promissory note will be
converted into shares of Common Stock upon the closing of the Offering at a
conversion price equal to the initial public offering price.
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 7.
-------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $ .
(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock on the same terms as set forth
above solely to cover over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and $ ,
respectively. See "Underwriting."
--------------
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery on or about
, 1997 at the offices of Smith Barney Inc., 333 West 34th Street, New
York, New York 10001.
--------------
SMITH BARNEY INC.
GENESIS MERCHANT GROUP
SECURITIES
CRUTTENDEN ROTH
INCORPORATED
, 1997
<PAGE>
[Four groups of photos including: five photos of scientists working in
laboratories; three photos of vialed/ encapsulated products; five photos of
close ups of laboratory work; two photos of microscope images; and one photo of
vaccine administration. One graph of product development time lines.]
- ------------------------
APOLLON-REGISTERED TRADEMARK-, THE APOLLON LOGO,
GENEVAX-REGISTERED TRADEMARK- AND GENEVAX-HIV-REGISTERED TRADEMARK- ARE
REGISTERED TRADEMARKS OF APOLLON, INC. GENEVAX-HSV-TM-, GENEVAX-HBV-TM-,
GENEVAX-TCR-TM-, GENEVAX-HPV-TM-, GENEVAX-HCV-TM- AND GENEVAX-MTB-TM- ARE
TRADEMARKS OF APOLLON, INC. ALL OTHER BRAND NAMES OR TRADEMARKS APPEARING IN
THIS PROSPECTUS ARE THE PROPERTY OF THEIR RESPECTIVE OWNERS. ALL REFERENCES IN
THIS PROSPECTUS TO HIV REFER TO HIV-1 AND THE TERM AIDS INCLUDES ALL HIV-INDUCED
DISEASE.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK
INCLUDING BY OVER-ALLOTMENT, ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE FINANCIAL STATEMENTS AND
NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S
ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED UNDER "RISK FACTORS."
THE COMPANY
Apollon, Inc. ("Apollon" or the "Company") is a leader in the development of
non-viral DNA-based vaccines and other DNA-based gene therapy products for the
prevention and treatment of infectious and autoimmune diseases. Apollon's
vaccine product candidates, which utilize its proprietary facilitated DNA
delivery technology, are designed to stimulate an immune response by causing
cells to express specific encoded antigenic proteins. The Company believes that
its GENEVAX vaccine product candidates may have several positive attributes,
including the ability to: (i) stimulate both humoral (antibody) and cellular
(cytotoxic T-cell) immune responses; (ii) target different strains of the same
pathogen, as well as multiple pathogens, with a single vaccine; (iii) be
conveniently administered using conventional methods; (iv) demonstrate increased
safety relative to live virus vaccines; and (v) be manufactured with relative
ease. The Company believes that its technology represents a new paradigm for the
development of preventive and therapeutic vaccines directed against a range of
infectious diseases, including genital and oral/labial herpes, viral hepatitis,
AIDS, genital warts and tuberculosis, as well as autoimmune diseases and cancer.
In order to develop DNA-based vaccine products successfully, the Company is
focusing a significant proportion of its resources on the advancement of its
vaccine product candidates into human clinical trials, including both clinical
trials of preventive product candidates in healthy adults and clinical trials of
therapeutic product candidates in patients afflicted with a target disease.
Using its facilitated DNA-based vaccine technology, the Company has demonstrated
that its vaccines can stimulate humoral and cellular immune responses that have
provided preventive and therapeutic outcomes in preclinical studies. Based on
the results of these preclinical studies, Apollon has advanced multiple product
candidates into human clinical trials.
The Company believes that it initiated the first ever clinical trial of a
therapeutic DNA-based vaccine in adults infected with human immunodeficiency
virus ("HIV") in June 1995 and the first ever clinical trial of a preventive
DNA-based vaccine for HIV in healthy adults in March 1996. Apollon believes that
it also commenced the first ever clinical trial in healthy adults of a DNA-based
preventive vaccine for herpes simplex virus ("HSV") in September 1996 and the
first ever clinical trial of a DNA-based therapeutic vaccine in HSV-infected,
genital herpes patients in March 1997. The Company also initiated a clinical
trial in healthy adults of its DNA-based vaccine for treatment of individuals
persistently infected with hepatitis B virus ("HBV") in July 1997. In addition,
the Company initiated a clinical trial in December 1995 with a T cell
receptor-directed, therapeutic DNA vaccine for cutaneous T-cell lymphoma
("CTCL"), which is a part of the first phase of the Company's program to develop
therapeutic vaccines for autoimmune diseases such as psoriasis.
Apollon is currently conducting eight Phase I and Phase I/II clinical trials
of its GENEVAX vaccine product candidates for the prevention or treatment of
infection by HSV, HBV and HIV, as well as the treatment of CTCL. As of September
30, 1997, 163 people have been enrolled in these clinical trials. To date,
Apollon's vaccine product candidates have been safe and well tolerated in its
clinical trials. In addition to evaluating safety, an objective of the ongoing
clinical trials is to evaluate the ability of Apollon's DNA-based vaccine
product candidates to stimulate immune responses. The Company is currently
reviewing the results of its June 1995 HIV clinical trial, and has observed
increases in immune responses in HIV-infected patients. Subject to favorable
clinical results, the Company expects to initiate Phase II clinical trials of
its therapeutic HSV-, HBV- and HIV-directed vaccine product candidates within
the next 15 months.
3
<PAGE>
The Company's goal is to develop and commercialize a portfolio of DNA-based
vaccine and gene therapy products aimed at the prevention and treatment of
infectious and autoimmune diseases and intends to achieve this goal by pursuing
the following strategy: (i) developing a diversified product pipeline; (ii)
expanding its DNA delivery technology platform; (iii) leveraging its corporate,
governmental and academic collaborations; and (iv) enhancing its manufacturing
capabilities.
Apollon has entered into collaborative agreements with two corporate
partners, Wyeth-Lederle Vaccines and Pediatrics ("Wyeth-Lederle"), a business
unit of the Wyeth-Ayerst Division of American Home Products Corporation ("AHP"),
and Centocor, Inc. ("Centocor"), a publicly-traded biopharmaceutical company.
The collaborative agreements with Wyeth-Lederle, executed in July 1995, provide
for the joint development, manufacture and marketing of preventive and
therapeutic GENEVAX products directed against HSV, HIV and human papillomavirus
("HPV"). Pursuant to the agreements, Wyeth-Lederle has made a number of payments
to Apollon to fund development of the GENEVAX product candidates directed
against the three viruses and is required to make additional payments subject to
the achievement of certain milestones in connection with clinical trials.
Apollon is primarily responsible for product development and clinical testing
expenses through the completion of Phase II clinical trials and Wyeth-Lederle
will assume all Phase III clinical trial expenses. As of September 30, 1997, the
Company has received $15.1 million from Wyeth-Lederle pursuant to the
agreements. Apollon has granted Wyeth-Lederle worldwide rights to market and
sell these vaccine product candidates and has retained exclusive worldwide
manufacturing rights.
In October 1997, A.H. Investments Ltd., an affiliate of AHP, invested $3.0
million in the Company in exchange for a convertible promissory note in the
principal amount of $3.0 million and a warrant to purchase 68,910 shares of the
Company's Common Stock at a price equal to 115% of the initial public offering
price. The promissory note will be converted into shares of Common Stock upon
the closing of the Offering at a conversion price equal to the initial public
offering price.
Apollon's agreement with Centocor, executed in March 1995, grants Centocor
exclusive worldwide rights to use the Company's facilitated DNA-based technology
to develop products directed at most cancers. Under the terms of this agreement,
Centocor is required to provide research funding, to make additional payments
upon the achievement of specified milestones by Centocor and to pay royalties to
Apollon on any sales of these products. In June 1997, Centocor initiated a Phase
I/II clinical trial in colorectal cancer patients using the Company's GENEVAX
technology.
The Company is currently prosecuting 37 U.S. patent applications. A majority
of these patent applications have foreign counterparts. These patent
applications include specifications and claims regarding methods of facilitated
DNA delivery and expression by target cells IN VIVO, methods of patient
treatment and routes of administration, methods of discovery of novel vaccines
and pharmaceutical agents, molecular targets and methods of utilizing these
targets and compositions of matter for vaccines and pharmaceutical products.
Apollon holds exclusive rights to a method patent which was issued to inventors
at the University of Pennsylvania and The Wistar Institute of Anatomy and
Biology (the "Wistar Institute") in January 1997. This patent describes an
important portion of the Company's core technology using bupivacaine-facilitated
DNA-based immunization.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock being offered.................. 2,500,000 shares (1)
Common Stock to be outstanding after the
Offering.................................. 8,145,568 shares(1) (2)
Use of proceeds............................. To fund research and development, including
preclinical and clinical studies and for
working capital. See "Use of Proceeds."
Proposed Nasdaq National Market symbol...... APLN
</TABLE>
- ------------------------
(1) Excludes 375,000 shares of Common Stock that may be sold by the Company
pursuant to the Underwriters' over-allotment option. See "Underwriting."
(2) Based on the number of shares of Common Stock outstanding as of September
30, 1997. Includes 4,748,021 shares of Common Stock issuable upon the
automatic conversion of all outstanding shares of the Company's Class A
Convertible Preferred Stock, Class B Convertible Preferred Stock and Class C
Convertible Preferred Stock (collectively, the "Convertible Preferred
Stock"), upon completion of the Offering (the "Conversion") and 250,000
shares of Common Stock (assuming an initial public offering price of $12.00
per share) issuable upon the automatic conversion of the $3.0 million
convertible promissory note issued to A.H. Investments Ltd. (the "AHP
Financing"). Excludes 457,171 and 416,428 shares of Common Stock issuable
upon the exercise of options and warrants, respectively, outstanding as of
September 30, 1997, with a weighted average exercise price of $1.87 and
$6.40, respectively.
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 31, 1992 SIX MONTHS ENDED
(DATE OF INCEPTION) YEAR ENDED DECEMBER 31, JUNE 30,
TO ------------------------------------------ --------------------
DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997
------------------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Research, development and contract
revenues............................... $ -- $ -- $ -- $ 7,825 $ 8,249 $ 1,300 $ 161
Operating costs and expenses:
Research and development........... 1,213 3,440 6,179 5,253 7,310 3,249 4,930
General and administrative......... 529 947 1,538 2,193 3,050 1,429 1,829
------- --------- --------- --------- --------- --------- ---------
Total operating costs and expenses..... 1,742 4,387 7,717 7,446 10,360 4,678 6,759
(Loss) income from operations.......... (1,742) (4,387) (7,717) 379 (2,111) (3,378) (6,598)
Interest income........................ 100 94 54 110 373 96 201
Interest expense....................... (6) (35) (89) (415) (123) (109) (15)
------- --------- --------- --------- --------- --------- ---------
Net (loss) income........................ $ (1,648) $ (4,328) $ (7,752) $ 74 $ (1,861) $ (3,391) $ (6,412)
------- --------- --------- --------- --------- --------- ---------
------- --------- --------- --------- --------- --------- ---------
Pro forma net loss per share
(unaudited)(1)......................... $(.33) $(1.13)
Shares used in computing pro forma net
loss per share (unaudited)(1).......... 5,610,496 5,687,884
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------------
ACTUAL AS ADJUSTED(2)
----------- --------------
<S> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and investments available for sale............................ $ 4,002 $ 34,302
Redeemable cumulative convertible preferred stock.................................... 30,101 --
Accumulated deficit.................................................................. (24,922) (24,922)
Total shareholders' (deficit) equity................................................. (24,916) 35,485
</TABLE>
- ------------------------
(1) Reflects the Conversion and the AHP Financing. See Note 2 of Notes to
Financial Statements for discussion of the calculation of pro forma net loss
per share.
(2) Gives effect to (i) the sale of 2,500,000 shares of Common Stock offered by
the Company hereby at an assumed initial public offering price of $12.00 per
share after deduction of estimated underwriting discounts, commissions and
offering expenses; (ii) the AHP Financing; and (iii) the Conversion.
------------------------
UNLESS OTHERWISE INDICATED, ALL INFORMATION IN THIS PROSPECTUS (I) ASSUMES
THE UNDERWRITERS' OVER-ALLOTMENT OPTION WILL NOT BE EXERCISED; (II) HAS BEEN
RETROACTIVELY ADJUSTED TO GIVE EFFECT TO A 0.4594-FOR-ONE REVERSE STOCK SPLIT
(THE "REVERSE STOCK SPLIT") OF THE COMMON STOCK THAT WILL OCCUR PRIOR TO THIS
OFFERING; AND (III) REFLECTS THE CONVERSION AND THE AHP FINANCING WHICH WILL
AUTOMATICALLY OCCUR UPON COMPLETION OF THE OFFERING. UPON COMPLETION OF THE
OFFERING, THE CONVERTIBLE PREFERRED STOCK OUTSTANDING WILL CONVERT TO COMMON
STOCK SUCH THAT EACH SHARE OF CONVERTIBLE PREFERRED STOCK WILL BE CONVERTED INTO
0.4594 SHARES OF COMMON STOCK.
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN APOLLON INVOLVES A HIGH DEGREE OF RISK AND SHOULD NOT BE
UNDERTAKEN UNLESS THE INVESTOR CAN SUFFER A COMPLETE LOSS OF THE INVESTMENT. THE
FOLLOWING RISK FACTORS, IN ADDITION TO OTHER INFORMATION IN THIS PROSPECTUS,
SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING THE SHARES OF COMMON STOCK OFFERED HEREBY.
EARLY STAGE OF PRODUCT DEVELOPMENT; TECHNOLOGICAL UNCERTAINTY
DNA-based vaccination and gene therapy are new and rapidly evolving
technologies. While many approaches to gene therapy are being pursued by
pharmaceutical and biotechnology companies and academic institutions, there are
currently no marketed DNA-based vaccine or gene therapy products and existing
clinical data on the safety and efficacy of potential products is limited.
Preclinical and clinical data relating to the Company's specific DNA-based
vaccine and other gene therapy approaches is also limited. There can be no
assurance that the Company will ultimately develop and commercialize safe and
effective products.
Each of the Company's potential products under development are either in
research, preclinical development or early stage clinical trials. Potential
products currently under development by the Company will require significant
additional research and development efforts, including extensive preclinical and
clinical testing and the receipt of regulatory approval, prior to commercial
use. There can be no assurance that the Company's research and development
efforts will be successful, that any of the potential products developed by the
Company will prove to be safe and effective in clinical trials or that any
commercially successful products utilizing the Company's technology will be
developed by the Company or its collaborators. Even if successfully developed,
these potential products may not receive regulatory approval, be successfully
marketed at prices that would permit the Company to operate profitably or be
accepted by the market. For these reasons, revenues from the sale of any
products being developed by the Company may not be realized for the foreseeable
future, if at all.
UNCERTAINTIES RELATED TO CLINICAL TRIALS
Before obtaining regulatory approvals for the commercial sale of any of its
product candidates, the Company must undertake extensive, lengthy and costly
preclinical studies and clinical trials to demonstrate that such product
candidates, as biological drugs, are safe, potent, pure and efficacious.
Existing preclinical and clinical data relating to the Company's specific
DNA-based vaccine and other gene therapy approaches is limited. Further, results
of preclinical studies do not predict safety or efficacy in humans and results
from such tests or studies are not necessarily indicative of results that will
be obtained in human clinical trials. Nor are results from early stage clinical
trials necessarily indicative of results that will be obtained in subsequent
clinical trials. Currently, Apollon is conducting Phase I and Phase I/II
clinical trials of GENEVAX-HIV, GENEVAX-HBV, GENEVAX-HSV and GENEVAX-TCR. These
clinical trials are being conducted in healthy volunteers or patients with
disease, or both. A number of companies in the biotechnology and pharmaceutical
industries have suffered significant setbacks in advanced clinical trials, even
after obtaining promising results in earlier clinical trials, including clinical
trials involving diseases targeted by the Company's products which are currently
in clinical trials. Further, there can be no assurance that the Company will be
permitted by regulatory authorities to undertake additional clinical trials for
its vaccines under development or currently in Phase I and Phase I/II clinical
trials or to commence clinical trials for any of the Company's potential
products currently in research or preclinical studies, either in the United
States or elsewhere. If the Company is permitted to undertake further clinical
trials or commence new clinical trials, there can be no assurance that its
product candidates will not be toxic or not have undesirable side effects or
other characteristics that prevent or limit further clinical studies or their
commercial use or that results from such clinical trials will demonstrate the
safety and efficacy of any product candidates necessary to permit further
clinical studies or obtain regulatory approval. The failure to adequately
demonstrate the safety, purity, potency and efficacy of a biological
7
<PAGE>
product candidate would delay or prevent regulatory approval of such product
candidate and could have a material adverse effect on the Company. Even if the
results of subsequent clinical trials are positive, products, if any, resulting
from the Company's research and development programs are not likely to be
commercially available for several years. Even if approved by the United States
Food and Drug Administration (the "FDA") or foreign regulatory authorities,
products may later exhibit adverse effects that prevent their widespread use or
necessitate their withdrawal from the market.
The rates of completion of the Company's human clinical trials, if permitted
to continue, will be dependent upon, among other factors, the rate of accrual of
patients entering into the clinical trials, which can in turn be dependent upon
the nature of the protocol, the availability of alternative treatments, the
proximity to clinical sites, the eligibility criteria for the study and the
existence of competitive clinical trials. Delays in planned patient enrollment
might result in increased costs and delays, which could have a material adverse
effect on the Company.
VARIABLE REVENUES; NO REVENUES FROM PRODUCT SALES; ACCUMULATED DEFICIT
To date, the Company's revenues have been derived almost entirely from
payments under its collaborative agreements with corporate partners. Such
payments are made upon the Company's achievement of certain product development
milestones and thus are recognized at irregular intervals. Prior to 1995, the
Company had no revenues. In 1996, the Company's revenues were $8.2 million,
approximately $6.9 million of which were earned in the second half of the year.
In the six months ended June 30, 1997, the Company's revenues were $161,000 and
the Company expects to have revenues of less than $1.0 million in the remainder
of 1997.
Apollon has generated no revenues from product sales and will not generate
sales revenues for the foreseeable future, if at all. At June 30, 1997, the
Company had an accumulated deficit of approximately $24.9 million. These losses
have resulted from expenses incurred in the Company's research and development
programs and, to a lesser extent, from general and administrative expenses. The
Company expects to incur substantial additional losses for the foreseeable
future and expects that these losses will increase as the Company's research and
development programs progress. The Company's ability to achieve profitability
depends, in part, on its ability to successfully complete development of its
proposed products, obtain regulatory approvals and manufacture and market its
product candidates directly or through collaborative partners. There can be no
assurance that the Company will ever generate revenues from product sales or
achieve profitability.
FUTURE CAPITAL REQUIREMENTS; UNCERTAINTY OF ADDITIONAL FUNDING
The amount and timing of the Company's expenditures and funding requirements
will depend upon the progress of its research and development, results of
preclinical studies and clinical trials, the cost and timing of regulatory
approvals, general market conditions, relationships with current and potential
collaborators, changes in the focus and direction of the Company's research and
development programs, competitive and technological advances, cost of
manufacturing scale-up and other factors. The Company anticipates that its
existing capital resources in combination with the net proceeds of the Offering
and interest thereon, plus payments under existing collaborative agreements will
enable the Company to fund its operations until mid-1999. In order to receive
most of the anticipated funds from corporate collaborators, the Company must
meet certain milestones in the development of its product candidates, and there
can be no assurance that the Company will meet such milestones in a timely
manner, if at all. The Company will require substantial additional capital to
fund continued product development, conduct clinical trials and seek regulatory
approvals, as well as establish manufacturing and marketing capabilities, prior
to the commercialization of its first product.
The Company currently has no committed sources of capital. The Company
intends to seek additional funding through public or private equity or debt
financing, when market conditions allow, and through
8
<PAGE>
arrangements with corporate collaborators and other sources. If additional funds
are raised by issuing equity securities, dilution to existing shareholders may
result. There can be no assurance that additional financing will be available on
terms acceptable to the Company, if at all. Any shortfall in funding could
require the Company to delay, scale back or eliminate some or all of its
development programs and could have a material adverse effect on the Company.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation -- Liquidity and Capital Resources."
DEPENDENCE ON THIRD PARTIES
The Company's strategy for the research, development and commercialization
of its products requires entering into various arrangements with academic
collaborators and corporate partners, licensors, licensees and others and is
dependent upon the subsequent success of these parties in performing their
responsibilities. The Company's most significant collaborative arrangement is
with Wyeth-Lederle, for the development of DNA-based vaccines for the prevention
and treatment of diseases caused by HSV, HIV and HPV. Wyeth-Lederle has the
right to terminate the agreements with the Company unilaterally and without
cause in their entirety or as to any specific product. In the event that
Wyeth-Lederle were to terminate the agreements as a result of a change in
control of the Company, the options and licenses granted to Wyeth-Lederle would
vest or be retained, as appropriate and Apollon would be required to assign all
governmental approvals. There can be no assurance that Wyeth-Lederle will not
terminate the collaborative arrangement and any such termination would have a
material adverse effect on the Company. See "Business -- Strategic Alliances and
Collaborations -- Corporate Collaborations."
In addition, Apollon has several collaborative arrangements with other
corporate partners, academic institutions and government entities. Internal time
tables and policies of the Company's collaborators and the amount and timing of
resources to be devoted to collaborative activities may not be within the
control of the Company. There can be no assurance that the Company's
collaborative partners will perform their obligations as expected or that the
Company will derive any revenue from such arrangements. In addition, certain of
the Company's collaborators may be pursuing alternative competing technologies
as a means for developing treatments for the diseases targeted by these
collaborative programs. Moreover, disputes could develop between Apollon and its
collaborative partners, or its corporate collaborative partners could terminate
the agreements with the Company. Such disputes or termination of the
collaborative arrangements could have a material adverse effect on the Company.
Certain of the clinical trials of the Company's HIV-related product
candidates are sponsored by government funding. There can be no assurance, in
the event such funding is withdrawn, that the Company could fund or otherwise
maintain all of such research programs.
Apollon intends to seek additional collaborative arrangements to develop and
commercialize other product candidates in the future. There can be no assurance
that the Company will be able to negotiate acceptable collaborative arrangements
in the future or that its current or future collaborative arrangements will be
successful.
PATENTS AND PROPRIETARY RIGHTS; ACCESS TO PROPRIETARY GENES AND PROTEINS
The Company's success will depend, in part, on its ability to obtain patent
protection for its future products, technology and processes both in the United
States and other countries. The patent positions of biotechnology and
pharmaceutical companies can be highly uncertain and involve complex legal and
factual questions, and therefore, the breadth of claims allowed in biotechnology
and pharmaceutical patents cannot be predicted. The Company has filed or
participated as licensee in the filing of a number of patent applications in the
United States relating to the Company's technology, as well as foreign
counterparts of certain of these applications in many countries. Apollon and its
collaborators are actively prosecuting 37 U.S. patent applications. A majority
of these patent applications have foreign counterparts. In the United States,
two such patents have issued and notices of allowance have been received on sets
of
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<PAGE>
claims enumerated in four other patent applications. There can be no assurance
that patents will issue from any of the other applications or, if patents do
issue, that claims allowed will be sufficient to protect the Company's
technology. In addition, there can be no assurance that any patents issued to
the Company or to licensors of the Company's technology will not be challenged,
invalidated or circumvented, or that the rights granted thereunder will provide
proprietary protection or commercial advantage to the Company. Moreover, the
Company believes that obtaining foreign patents in certain countries may be more
difficult than obtaining domestic patents because of differences in patent laws
and, accordingly, its patent position may be stronger in the United States than
abroad. The Company intends to continue to file applications as appropriate for
patents covering both its technology and processes.
The commercial success of the Company will also depend in part on the
Company not infringing patents issued to competitors and not breaching the
technology licenses that might cover technology used in the Company's products.
It is uncertain whether any third-party patents will require the Company to
alter products it develops or processes, obtain licenses or cease certain
activities. The Company is aware that other companies have filed patent
applications covering technology used by or relating to the Company's technology
and in the area of gene therapy, and if any such patents issue, the Company may
be required to obtain licenses under such patents in order to test, use or
market its potential products. There can be no assurance that the Company will
be able to obtain any of such licenses or any further required licenses on
commercially favorable terms, if at all. If such licenses are not obtained by
the Company, it will not be able to commercialize the products requiring such
licenses. Failure by the Company to obtain a license to any technology that it
may require to test, use, manufacture or market its product candidates may have
a material adverse effect on the Company. Further, if any such patents are
issued to other companies with broad applications in the area, there could be a
material adverse effect on the Company.
Vical, Incorporated ("Vical"), controls Patent no. 5,580,589 - Delivery of
Exogenous DNA Sequences in a Mammal ("Patent A") and Patent no. 5,589,466 -
Induction of a Protective Immune Response in a Mammal By Injecting a DNA
Sequence ("Patent B" and, with Patent A, the "Vical patents"). Patent A claims a
method of delivering a physiologically active protein or peptide by injecting a
DNA sequence into the muscle of a mammal, where the DNA sequence is free from
association with transfection-facilitating proteins, viral particles, liposomal
formulations, charged lipids and calcium phosphate precipitating agents. Patent
B claims a method of inducing a protective immune response in a mammal by
injecting into muscle or skin a DNA sequence encoding an immunogen linked to a
promoter sequence in an amount sufficient to induce the protective immune
response where the DNA sequence is free from transfection-facilitating proteins,
viral particles, liposomal formulations or charged lipids. Vical has filed
similar patent applications in Europe and Japan, although to the Company's
knowledge no patents have yet been issued. Vical has licensed certain rights to
these patents to Merck & Co., Inc. ("Merck") and to Pasteur-Merieux Serums &
Vaccins ("PMC"). While the Company believes, after consultation with its
scientists, consultants, advisors and patent counsel, that its potential
products do not infringe any claim of the Vical patents, there can be no
assurance that Vical, Merck or PMC, separately or in combination, will not
assert a claim against the Company. There can be no assurance that if Vical sues
on these patents, a court will not reach an unfavorable decision,
notwithstanding the Company's belief. Furthermore, there can be no assurance
that the Company will not become subject to any other patent infringement claims
or litigation arising out of the above noted patents or pending applications,
should they issue, including the Vical applications described above or
interference proceedings declared by the United States Patent and Trademark
Office to determine the priority of inventions.
In addition, a number of the DNA sequences or proteins encoded by certain of
the sequences that the Company is currently investigating in its preclinical
studies and clinical trials or may use in the future are or may become patented
by others. As a result, the Company will or may require licenses under such
patents in order to test, use, manufacture or market products that contain
proprietary DNA sequences or encode proprietary proteins. The Company has
obtained, or has the right to obtain, certain licenses including rights received
from Wyeth-Lederle to the gene for HSV-2 glycoprotein D, and is currently
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<PAGE>
negotiating certain other licenses, including a license to hepatitis B genes.
There can be no assurance that the Company will be able to obtain any of such
licenses or any further required licenses on commercially favorable terms, if at
all. If such licenses are not obtained by the Company, it will not be able to
commercialize the products requiring such licenses. Failure by the Company to
obtain a license to any DNA sequences that it may require to test, use,
manufacture or market its product candidates could have a material adverse
effect on the Company.
Litigation, which could result in substantial cost to the Company, may also
be necessary to enforce any patents issued to the Company or to determine the
scope and validity of third-party patents. Should any of its competitors have
prepared and filed patent applications in the United States which claim
technology also invented by the Company, the Company may have to participate in
interference proceedings declared by the United States Patent and Trademark
Office in order to determine priority of invention and, thus, the right to a
patent for the technology in the United States, all of which could result in
substantial cost to the Company to determine its rights. The Company also relies
on protecting its proprietary technology in part through confidentiality
agreements with its corporate collaborators, employees, consultants and certain
contractors. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known or be independently
discovered by its competitors. Failure of the Company to protect its technology
from use by other parties would have a material adverse effect on the Company.
See "Business -- Patents and Proprietary Rights."
GOVERNMENT REGULATION; NO ASSURANCE OF FDA APPROVAL
The FDA and comparable foreign regulatory authorities impose substantial
requirements on the introduction of pharmaceutical products through detailed
laboratory, preclinical and clinical testing and other costly and time-consuming
procedures. Satisfaction of these requirements typically takes many years,
varies substantially based upon the type, complexity and novelty of the
pharmaceutical products and is subject to significant uncertainty. Government
regulation also affects the manufacture and marketing of pharmaceutical
products. In addition, as DNA-based vaccine and other gene therapy products are
being developed using new technologies and have not been extensively tested in
patients, the regulatory requirements governing such potential products and
related clinical procedures are uncertain. Preclinical studies of the Company's
product development candidates are subject to Good Laboratory Practices ("GLP")
requirements and the manufacture of any products developed by the Company will
be subject to Good Manufacturing Practices ("GMP") requirements prescribed by
the FDA.
The Company believes that its potential vaccine products will be regulated
by the FDA and comparable foreign regulatory bodies as biological drug products
and that any newly developed facilitating agents will be regulated as
non-biological new drugs. Biological drugs generally are regulated more
stringently than non-biological drugs. For example, traditionally, biologics are
subject to separate product and manufacturing facility licensing requirements
and to lot-by-lot release requirements. Although new requirements have been
adopted for biologics that are well characterized, no assurances exist that any
of the Company's biologics will be subject to these new procedures. Each product
containing a particular gene will likely be regulated either as a biologic drug
or non-biological drug depending on a variety of factors, including its precise
nature and source and evolving FDA policy. The Company believes that its
facilitating agents, which can be used to enhance DNA delivery and protein
expression or can be used directly to augment the immune process, will be
regulated as non-biological new drugs. The use of such facilitating agents in
conjunction with the Company's vaccine products may result in their regulation
as combination products that are subject both to the new drug or biologics
approval processes. The Company may need to, under FDA regulations, file a
designation request in such cases to seek clarification of whether the FDA's
Center for Drug Evaluation and Research ("CDER") or its Center for Biologics
Evaluation and Research ("CBER") will have primary jurisdiction for the
regulation of such combination drug products. Moreover, the use of facilitating
agents to help augment the immune process in conjunction
11
<PAGE>
with the Company's DNA-based vaccine products may require the design of clinical
trials to demonstrate that both the facilitating agent and DNA-based vaccine
each contribute to the efficacy of the product, and that neither adversely
affects the safety of the product. The treatment of the Company's vaccine
products containing facilitating agents as combination products can
substantially increase the time and costs associated with obtaining regulatory
approvals.
In order to commercialize any drug products, the Company must file an
Investigational New Drug ("IND") application for each proposed product, which
must become effective before clinical studies can begin to demonstrate the
safety, purity, efficacy and potency that are necessary to obtain FDA approval
of any biological drug product. The FDA regulatory process, which includes
preclinical studies, clinical trials and post-marketing testing of each product
candidate takes many years and requires the expenditure of substantial
resources. Delays may also be encountered and substantial costs incurred in
obtaining approval to market the Company's products in foreign countries. Data
obtained from preclinical and clinical activities are subject to varying
interpretations which could delay, limit or prevent regulatory approval by the
FDA or other regulatory agencies. The Company, an independent Institutional
Review Board organized by an institution conducting a clinical trial, the FDA or
other regulatory agency may suspend clinical trials at any time if participants
in such clinical trials are being exposed to unacceptable health risks. Product
approvals, if granted, may contain significant limitations on the indicated uses
for which products may be marketed. There can be no assurance that, even after
passage of many years and expenditure of significant resources, FDA or other
comparable regulatory approval will be obtained for any drug products developed
by the Company, in a timely manner, if at all. The Prescription Drug User Fee
Act ("PDUFA"), which imposes certain fees on the drug industry, has helped
reduce the time necessary to obtain FDA approval, including FDA marketing
application review times. PDUFA has expired and legislation to reauthorize PDUFA
has been passed separately by the House and Senate. It must now be reconciled in
a House-Senate conference and signed by the President to become law. The failure
to extend PDUFA, or the failure to obtain regulatory approval, or the occurrence
of any significant delays in obtaining such approval for one or more of the
Company's products currently under development, would all have a material
adverse effect on the Company.
Failure to comply with applicable regulatory requirements can, among other
things, result in fines, suspension of regulatory approvals, product recalls,
seizure of products, operating restrictions and criminal prosecutions. FDA
policy may change and additional government regulations may be established that
could prevent or delay regulatory approval of the Company's potential products.
In addition, a marketed drug and its manufacturer are subject to continual
review and subsequent discovery of previously unknown problems with a product or
manufacturer may result in restrictions on such product or manufacturer,
including withdrawal of the product from the market and withdrawal of the right
to manufacture the product. In addition, many academic institutions and
companies doing research in the gene therapy field are using a variety of
approaches and technologies similar to the Company's technology. Any adverse
results obtained by such researchers in preclinical studies or clinical trials
could adversely affect the regulatory environment for gene therapy products in
general, possibly leading to delays in the approval process for the Company's
potential products. All of the foregoing regulatory matters also will be
applicable to development, manufacturing and marketing undertaken by any
collaborative partners or licensees of the Company. See "Business -- Government
Regulation."
COMPETITION; RAPID TECHNOLOGICAL CHANGE
Competitors of the Company in the United States and other countries are
numerous and include, among others, pharmaceutical and chemical companies,
biotechnology firms, universities and other research institutions. These
competitors are engaged in developing products for human prophylactic and
therapeutic applications of DNA-based vaccines, other gene therapies,
traditional drugs and viral vaccines, which are competitive with the Company's
technologies and product candidates. Some of these competitors have potential
products in clinical trials. Many of the Company's competitors have
substantially
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<PAGE>
greater financial, technical and human resources than the Company and
significantly greater experience in pharmaceutical products and obtaining FDA
and other regulatory approvals for such products. Accordingly, the Company's
competitors may succeed in obtaining FDA or other regulatory approvals for
products or in commercializing such products more rapidly than the Company. In
addition, there are currently commercially available products for the treatment
of certain of the diseases targeted by the Company. Furthermore, if the Company
is permitted to commence commercial sales of its products, it may compete with
respect to manufacturing efficiency and marketing capabilities, areas in which
the Company has limited or no experience. See "Business -- Competition."
The Company believes that industry-wide interest in investigating the
potential of DNA-based vaccine and other gene therapy technologies will continue
and will accelerate as techniques which permit design and development of drugs
based on such technologies become more widely understood. There can be no
assurance that the Company's competitors will not succeed in developing products
based on technologies similar to its own technologies, which are more effective
than any that are being developed by the Company, or which would render
Apollon's product candidates obsolete and noncompetitive. The development of
such products could have a material adverse effect on the Company.
DEPENDENCE ON KEY PERSONNEL AND CONSULTANTS
Apollon is highly dependent on the principal members of its scientific staff
and management. In addition, the Company relies on consultants and advisors to
assist in formulating its research and development strategy. Attracting and
retaining qualified scientists, personnel, consultants and advisors will be
critical to the Company's success. Further, in order to pursue its product
development and marketing plans, the Company will be required to hire additional
qualified scientific personnel to perform research and development as well as
personnel with expertise in clinical testing, government regulation,
manufacturing, sales and marketing. Expansion in product development will also
require the addition of management personnel and the development of additional
expertise by current management. The Company faces intense competition for
qualified individuals in these areas from numerous pharmaceutical and
biotechnology companies, universities and other research institutions. There can
be no assurance that the Company will be able to attract and retain such
individuals on acceptable terms, if at all. The Company's inability to attract
and retain such individuals on acceptable terms would have a material adverse
effect on the Company.
The lack of continued involvement by the principal members of the Company's
management and scientific staff, including, but not limited to Vincent R.
Zurawski, Jr., Ph.D., the Company's President and Chief Executive Officer, in
the development of the Company's proposed products, would have a material
adverse effect on the Company.
LIMITED MANUFACTURING EXPERIENCE; NO SALES OR MARKETING CAPABILITIES
The Company's product candidates are currently manufactured by Apollon
employees in facilities owned by third parties. While the Company believes these
facilities meet its standards of quality and availability, there can be no
assurance that such facilities will continue to meet the Company's requirements
of quality, availability and timeliness or that, if necessary, Apollon would be
able to find alternative facilities on a timely basis or on acceptable terms.
The Company plans to construct its own central manufacturing facilities to
manufacture products on a scale sufficient for advanced clinical trials and
commercialization. The establishment of manufacturing facilities requires
substantial additional funds and personnel and compliance with extensive
regulations applicable to such facilities. If the Company is unable to develop
its own facilities on a timely basis, or at all, the Company will be required to
contract for manufacturing facilities. There can be no assurance that the
Company will be able to construct its own facilities or, alternatively, contract
for such facilities on commercially acceptable terms, if at all. The inability
of the Company to manufacture or provide for the manufacture of its products on
a cost-effective basis would have a material adverse effect on the Company. See
"Business -- Manufacturing."
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<PAGE>
The Company has no experience in selling, marketing or distributing
pharmaceutical products. In order to market its DNA-based vaccine and other gene
therapy products, the Company must develop a sales and marketing capability or
maintain or enter into collaborations with other parties. There can be no
assurance that the Company will be able to maintain or enter into any
arrangements for the marketing of its product candidates, that such arrangements
will be successful or that the Company will be able to obtain additional capital
and expertise to conduct such activities independently.
UNCERTAINTY OF HEALTHCARE REIMBURSEMENT AND RELATED MATTERS
Apollon's success may depend in part on the extent to which reimbursement
for the costs of its potential products will be available from third party
payors, such as government entities, managed care organizations and private
insurers. There can be no assurance that third party payor coverage will be
adequate for the Company to establish and maintain price levels sufficient for
realization of an appropriate return on its investment. In addition, the
Company's revenue and profitability may be affected by the continuing efforts of
governmental and other third party payors to contain or reduce the cost of
health care through various means. If purchasers or users of the Company's
products are not entitled to adequate reimbursement, they may forego or reduce
use of such products. Significant uncertainty exists as to the reimbursement
status of newly approved healthcare products and there can be no assurance that
adequate third party coverage will be available. There can be no assurance that
healthcare reforms or limited third party payor coverage will not have a
material adverse effect on the Company.
PRODUCT LIABILITY
The use of the Company's product candidates in clinical trials and the
commercial sale of any products may expose the Company to liability claims.
These claims might be made directly by consumers, healthcare providers or by
pharmaceutical and biotechnology companies or others selling such products. In
addition, the Company is obligated to indemnify certain of its licensors against
product liability claims brought against them arising out of products developed
by the Company under these licenses. Apollon has limited product liability
insurance coverage and such coverage is subject to various deductibles. Such
coverage is becoming increasingly expensive and no assurance can be given that
the Company will be able to maintain or obtain such insurance at reasonable cost
or in sufficient amounts to protect the Company against losses due to liability
claims that could have a material adverse effect on the Company. An inability to
obtain product liability insurance at acceptable cost or to otherwise protect
against potential product liability claims could prevent or inhibit the
commercialization of products developed by the Company. Product liability claims
could have a material adverse effect on the Company.
HAZARDOUS MATERIALS; ENVIRONMENTAL MATTERS
Apollon's research and development activities involve the use of hazardous
materials, such as chemicals, human bodily fluids, viruses, various radioactive
compounds and microorganisms that can cause human disease (e.g. pathogenic
viruses). The Company is subject to federal, state and local laws governing the
use, manufacture, storage, handling and disposal of such materials and certain
waste products. Although the Company believes that its safety procedures for
handling and disposing of such materials comply with the standards prescribed by
such laws and regulations, the risk of accidental contamination or injury from
these materials cannot be completely eliminated. In the event of such an
accident, the Company could be held liable for any damages that result and any
such liability could exceed the resources of the Company. The Company may be
required to incur significant costs to comply with environmental laws and
regulations in the future. The Company's operations, business or assets may be
materially adversely affected by current or future environmental laws or
regulations.
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<PAGE>
ABSENCE OF PUBLIC MARKET; DIVIDEND POLICY
Prior to the Offering, there has been no public market for the shares of
Common Stock offered hereby and there can be no assurance that an active trading
market will develop or be sustained subsequent to the Offering. The initial
public offering price of the Common Stock will be determined in negotiations
among the Company and the representatives of the Underwriters and may not be
indicative of the prices that may prevail in the public market. There can be no
assurance that the market price of the Common Stock will not decline below the
initial public offering price. Additionally, the Company does not anticipate
paying dividends on its Common Stock for the foreseeable future. See
"Underwriting" and "Dividend Policy."
ANTI-TAKEOVER PROVISIONS
The Company's Articles of Incorporation, as amended, employment agreements
with certain executive officers and the Pennsylvania Business Corporation Law of
1988, as amended (the "1988 BCL"), contain certain provisions which could delay
or impede the removal of incumbent directors and could make more difficult a
merger, tender offer or proxy contest involving the Company, even if such
transaction would be beneficial to the interests of the shareholders, or could
discourage a third party from attempting to acquire control of the Company. In
particular, the Company has authorized 10,000,000 shares of undesignated capital
stock, all of which will be unissued after consummation of the Offering, which
the Company could issue without further shareholder approval and upon such terms
and conditions and having such rights privileges and preferences, as the Board
of Directors may determine. The Company has no current plans to issue any such
capital stock. In addition, the collaborative agreements between Apollon and
Wyeth-Lederle contain termination provisions in the event of a change in control
of the Company, which could discourage a change in control. See "Description of
Capital Stock -- Anti-Takeover Provisions."
PRICE VOLATILITY
The market price of the Common Stock is likely to be highly volatile and
could be subject to significant fluctuations in response to results of
preclinical studies and clinical trials of the Company or its competitors,
technological set-backs of the Company or technological advancements of
competitors, governmental regulatory actions, developments concerning patent or
other proprietary rights of the Company or its competitors, including
litigation, market conditions for life science stocks in general, other factors
or for no identifiable reason. From time to time in recent years, the securities
markets have experienced significant price and volume fluctuations that have
often been unrelated or disproportionate to the operating performance of
particular companies. These broad fluctuations may adversely affect the market
price of the Common Stock.
CONCENTRATION OF OWNERSHIP
Upon completion of the Offering, the Company's directors and their
affiliates will beneficially own approximately 48.8% of the Company's
outstanding Common Stock. The Chairman of the Board of Centocor, which will hold
23.6% of the Company's outstanding Common Stock upon completion of the Offering,
is Co-Chairman of the Executive Committee of the general partner of Technology
Leaders, L.P. and Technology Leaders Offshore C.V., which will hold an aggregate
of 9.1% of the Company's outstanding Common Stock upon completion of the
Offering, assuming an initial public offering price of $12.00 per share. As a
result, these shareholders, if acting together, will have the ability to
influence significantly the outcome of corporate actions requiring shareholder
approval. This concentration of ownership may have the effect of causing,
delaying or preventing a change in control of the Company. See "Management" and
"Principal Shareholders."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 8,145,568
shares of Common Stock. Of these shares, the Common Stock sold in the Offering
will be freely tradable without restriction or limitation under the Securities
Act, unless purchased by "affiliates" of the Company, as that term is defined in
Rule 144 under the Securities Act ("Rule 144"). In addition, of the 5,645,568
shares of Common Stock previously issued by the Company, including shares of
Common Stock issued in the Conversion and the AHP Financing (assuming an initial
public offering price of $12.00 per share), 5,252,898 shares ( shares of
which are subject to the lock-up agreements described below) will be eligible
for sale in the public market, pursuant to Rule 144, beginning 90 days after the
Offering, subject to the manner of sale, volume and other restrictions of Rule
144 and 48,876 shares ( shares of which are subject to the lock-up
agreements described below) will be eligible for sale in the public market
immediately after the Offering pursuant to Rule 144(k) and without the
restrictions of Rule 144. The remaining shares of Common Stock will become
eligible for sale under Rule 144 at various times, and subject to certain
limitations, and could be sold earlier by certain shareholders if they exercise
their registration rights. The Company, its officers, directors and certain
shareholders, have agreed that, for a period of 180 days from the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of, any shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, shares of Common Stock, subject to certain exceptions. The sale of a
substantial number of shares of Common Stock in the public market following the
Offering, or the perception that such sales could occur, could adversely affect
the market price of the Common Stock and/ or impair the Company's ability in the
future to raise additional capital through the sale of its equity securities.
See "Description of Capital Stock -- Registration Rights."
DILUTION
Investors in the Offering will experience immediate and substantial dilution
in the net tangible book value of the shares of Common Stock purchased in the
Offering of $7.75 per share (based on an assumed initial public offering price
of $12.00 per share). See "Dilution."
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<PAGE>
USE OF PROCEEDS
The net proceeds to Apollon from the sale of the shares of Common Stock
offered hereby (at an assumed initial public offering price of $12.00 per share)
are estimated to be approximately $27,300,000 ($31,485,000 if the Underwriters'
over-allotment option is exercised in full), after deducting underwriting
discounts and commissions and offering expenses payable by the Company.
The Company currently anticipates using substantially all of the net
proceeds of the Offering to fund research and development, including preclinical
and clinical studies of its product candidates. The cost, timing and amount of
funds required for such uses by the Company cannot be precisely determined at
this time and will be based on competitive developments, the rate of the
Company's progress in research and development, results of preclinical studies
and clinical trials, timing of regulatory approvals, payments under
collaborative agreements and availability of alternate methods of financing. The
Board of Directors has broad discretion in determining how the net proceeds of
the Offering will be applied. Pending such uses, the Company intends to invest
the net proceeds of the Offering in short-term, interest-bearing obligations of
investment grade. The Company anticipates that its existing resources, including
net proceeds of the Offering, will enable the Company to fund its operations
until mid-1999. The Company's capital requirements may vary, however, depending
upon numerous factors, including those described above. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its capital
stock. The Company currently intends to retain any future earnings to fund its
operations and, therefore, does not anticipate paying any cash dividends in the
foreseeable future.
THE COMPANY
Apollon was founded in January 1992. The Company's executive offices are
located at One Great Valley Parkway, Malvern, Pennsylvania 19355 and its
telephone number is (610) 647-9452.
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CAPITALIZATION
The following table sets forth (i) the capitalization of the Company at June
30, 1997, and (ii) the capitalization of the Company on a pro forma as adjusted
basis after giving effect to the Conversion, the AHP Financing and the sale by
the Company of the shares of Common Stock offered hereby (at an assumed initial
public offering price of $12.00 per share) and the application of the net
proceeds therefrom, as if such transactions had occurred as of June 30, 1997.
This table should be read in conjunction with the Company's financial statements
and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
(IN THOUSANDS)
Cash, cash equivalents and investments available for sale................................ $ 4,002 $ 34,302
---------- -----------
---------- -----------
Redeemable convertible preferred stock:
Series A Convertible Preferred Stock, $.01 par value;
3,900,000 shares authorized;
3,900,000 shares issued and outstanding, actual; and
no shares issued or outstanding, pro forma as adjusted............................... $ 8,923 --
Series B Convertible Preferred Stock, $.01 par value;
6,000,000 shares authorized;
4,000,000 shares issued and outstanding, actual; and
no shares issued or outstanding, pro forma as adjusted............................... 11,307 --
Series C Convertible Preferred Stock, $.01 par value;
3,000,000 shares authorized;
2,435,286 shares issued and outstanding, actual; and
no shares issued or outstanding, pro forma as adjusted............................... 9,871 --
Common shareholders' (deficit) equity:
Common Stock, $.01 par value,
50,000,000 shares authorized,
647,260 shares issued and outstanding, actual;
8,145,281 shares issued and outstanding,
pro forma as adjusted(1)(2).......................................................... 6 81
Additional paid-in capital............................................................... -- 60,326
Accumulated deficit...................................................................... (24,922) (24,922)
---------- -----------
Total shareholders' (deficit) equity................................................. (24,916) 35,485
---------- -----------
Total capitalization............................................................... $ 5,185 $ 35,485
---------- -----------
---------- -----------
</TABLE>
- ------------------------
(1) Includes 45,940 shares of Common Stock issued to the University of
Pennsylvania on July 17, 1997.
(2) Excludes 459,983 and 416,428 shares of Common Stock issuable upon the
exercise of options and warrants, respectively, outstanding as of June 30,
1997, with a weighted average exercise price of $1.87 and $6.40,
respectively.
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1997 was
$7,312,000, or $1.30 per share. Pro forma net tangible book value per share is
determined by dividing the net tangible book value of the Company (total assets
less intangible assets and total liabilities) by the number of shares
outstanding, after giving effect to the conversion of all outstanding shares of
Convertible Preferred Stock into 4,748,021 shares of Common Stock and the sale
and subsequent conversion of the $3.0 million convertible note held by A.H.
Investments Ltd. into 250,000 shares of Common Stock (assuming an initial public
offering price of $12.00 per share). Without taking into account any changes in
pro forma net tangible book value after June 30, 1997, other than to give effect
to the sale of the shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $12.00 per share and after deducting
estimated underwriting discounts, commissions and offering expenses), the
adjusted pro forma net tangible book value of the Company as of June 30, 1997
would have been approximately $34,612,000, or $4.25 per share. This represents
an immediate increase in pro forma net tangible book value of $2.95 per share to
existing shareholders and an immediate dilution of $7.75 per share to new
shareholders. The following table illustrates this per share dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $ 12.00
Pro forma net tangible book value per share as of June 30, 1997....... $ 1.30
Increase per share attributable to new investors...................... 2.95
---------
Adjusted pro forma net tangible book value after the Offering............... 4.25
---------
Dilution per share to new investors......................................... $ 7.75
---------
---------
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1997
(after giving effect to the conversion of all outstanding shares of Convertible
Preferred Stock into 4,748,021 shares of Common Stock and the conversion of the
$3.0 million convertible note held by A.H. Investments Ltd. into 250,000 shares
of Common Stock, assuming an initial public offering price of $12.00 per share),
the number of shares purchased from the Company, the total consideration paid
and the average price per share paid by existing shareholders and new investors
(based upon, in the case of new investors, an assumed initial public offering
price of $12.00 per share and before deduction of estimated underwriting
discounts, commissions and offering expenses).
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
----------------------- -------------------------- AVERAGE PRICE
AMOUNT PERCENT AMOUNT PERCENT PER SHARE
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Current shareholders................................ 5,645,281 69.3% $ 29,930,000 49.9% $ 5.30
New investors....................................... 2,500,000 30.7 30,000,000 50.1 12.00
---------- ----- ------------- -----
Total........................................... 8,145,281 100.0% $ 59,930,000 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>
The foregoing tables assume no exercise of options or warrants outstanding
as of June 30, 1997. At such date, there were outstanding options to purchase
459,983 shares at a weighted average exercise price of $1.87 per share and
warrants to purchase 416,428 shares at a weighted average exercise price of
$6.40 per share. To the extent that any of these options or warrants are
exercised, there will be further dilution to new investors. See "Management --
Executive Compensation and Note 11 of Notes to Financial Statements of the
Company."
19
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The selected financial data set forth below with respect to the Company's
statements of operations for each of the three years in the period ended
December 31, 1996 and, with respect to the balance sheets at December 31, 1995
and 1996, are derived from the financial statements that have been audited by
Coopers & Lybrand L.L.P., independent accountants, which are included elsewhere
in this Prospectus and are qualified by reference to such financial statements.
The report on this audit includes an explanatory paragraph on the Company's
ability to continue as a going concern. The statement of operations for the
period from January 31, 1992 (date of inception) to December 31, 1992 and for
the year ended December 31, 1993 and the balance sheet data at December 31,
1992, 1993 and 1994 are derived from financial statements that have been audited
by Coopers & Lybrand L.L.P. but are not included in this Prospectus. Financial
data for the six months ended June 30, 1996 and June 30, 1997 are unaudited and,
in the opinion of the Company's management, contain all adjustments (consisting
only of normal recurring adjustments) necessary for a fair presentation thereof.
Results for the six months ended June 30, 1997 are not necessarily indicative of
the results that may be expected for the full 1997 fiscal year. The Company
anticipates that its existing resources, including net proceeds of the Offering,
will enable the Company to fund its operations until mid-1999. The Company's
capital requirements may vary, however, depending upon numerous factors,
including those described elsewhere in this Prospectus. The data set forth below
should be read in conjunction with the financial statements and related notes
included elsewhere in this Prospectus and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 31, 1992 SIX MONTHS
(DATE OF INCEPTION) YEAR ENDED DECEMBER 31, ENDED JUNE 30,
TO ------------------------------------------ ----------------------
DECEMBER 31, 1992 1993 1994 1995 1996 1996 1997
------------------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
STATEMENT OF OPERATIONS DATA:
Research, development and contract
revenues............................... $ -- $ -- $ -- $ 7,825 $ 8,249 $ 1,300 $ 161
Operating costs and expenses:
Research and development............... 1,213 3,440 6,179 5,253 7,310 3,249 4,930
General and administrative............. 529 947 1,538 2,193 3,050 1,429 1,829
------- --------- --------- --------- --------- --------- -----------
Total operating costs and expenses..... 1,742 4,387 7,717 7,446 10,360 4,678 6,759
(Loss) income from operations.......... (1,742) (4,387) (7,717) 379 (2,111) (3,378) (6,598)
Interest income........................ 100 94 54 110 373 96 201
Interest expense....................... (6) (35) (89) (415) (123) (109) (15)
------- --------- --------- --------- --------- --------- -----------
Net (loss) income........................ $ (1,648) $ (4,328) $ (7,752) $ 74 $ (1,861) $ (3,391) $ (6,412)
------- --------- --------- --------- --------- --------- -----------
------- --------- --------- --------- --------- --------- -----------
Accretion of redemption value
attributable to redeemable cumulative
convertible preferred stock............ 260 609 999 1,517 587 811
--------- --------- --------- --------- --------- -----------
Net loss allocable to common
shareholders........................... $ (4,588) $ (8,361) $ (925) $ (3,378) $ (3,978) $ (7,223)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Pro forma net loss per share (unaudited)
(1).................................... $(.33) $(1.13)
Shares used in computing pro forma net
loss per share (unaudited) (1)......... 5,610,496 5,687,884
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996 1997
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
BALANCE SHEET DATA:
Cash, cash equivalents and investments available for
sale................................................... $ 5,044 $ 4,961 $ 1,120 $ 2,456 $ 9,720 $ 4,002
Total assets............................................. 6,334 7,449 3,828 5,983 13,601 7,155
Total liabilities........................................ 1,033 1,476 5,608 6,686 2,090 1,970
Redeemable cumulative convertible preferred stock........ 6,500 11,760 12,369 14,368 29,290 30,101
Accumulated deficit...................................... (1,648) (5,976) (14,154) (15,077) (17,785) (24,922)
Total shareholders' (deficit)............................ (1,199) (5,787) (14,148) (15,071) (17,779) (24,916)
</TABLE>
- ------------------------
(1) Reflects the Conversion, the AHP Financing and the Reverse Stock Split. See
Note 2 of Notes to Financial Statements for discussion of the calculation of
pro forma net loss per share.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Apollon was incorporated in 1992 and has devoted substantially all of its
resources to the development of DNA-based vaccine and other DNA-based gene
therapy product candidates for the prevention and treatment of infectious and
autoimmune diseases. The Company has financed its operations primarily through
the sale of Common Stock and Convertible Preferred Stock, the issuance of demand
notes and through funds received under research and development agreements. To
date, all of the Company's revenues have resulted from research funding provided
by its collaborative partners. As of June 30, 1997, the Company had an
accumulated deficit of $24.9 million.
The Company incurred operating losses in each year from inception through
1994. In 1995, the Company generated operating income of $379,000. In 1996 and
for the six months ended June 30, 1997, the Company had losses from operations
of $2.1 million and $6.6 million, respectively. The Company's losses have
resulted principally from research and development and, to a lesser extent,
general and administrative costs. These costs have exceeded the Company's
revenues and interest income. The Company expects to incur substantial operating
losses for the foreseeable future as a result of increases in its expenses for
research and product development and expects that these losses will increase as
the Company's research and development programs progress.
COLLABORATIVE AGREEMENTS
In July 1995, the Company entered into research and development and supply
agreements with Wyeth-Lederle for development of certain GENEVAX product
candidates (the "Wyeth-Lederle Agreements"). Under the terms of these
agreements, the Company has granted to Wyeth-Lederle worldwide rights to market
and sell HSV, HIV and HPV products. In exchange for these rights, Wyeth Lederle
has made a number of payments to Apollon to fund development of the GENEVAX
product candidates directed against the three viruses and is required to make
additional payments subject to the achievement of certain milestones in
connection with clinical trials. The Company has retained exclusive worldwide
manufacturing rights with respect to these products.
In March 1995, the Company entered into a license and option agreement with
Centocor (the "Centocor License and Option Agreement"). This agreement grants to
Centocor exclusive worldwide rights to develop, use, market and sell GENEVAX
products directed against most cancers. This agreement also grants Centocor the
right to sublicense any of these rights with the prior written consent of
Apollon. Under the terms of this agreement, Centocor is required to provide
research funding, to make additional payments upon the achievement of specified
milestones and to pay royalties on any sales of products.
In August 1995, the Company entered into a manufacturing agreement with
Centocor (the "Centocor Manufacturing Agreement"). Pursuant to this agreement,
the Company assisted Centocor in the manufacture of a human carcinoembryonic
antigen and hepatitis B surface antigen plasmid (the "Centocor Plasmid") for use
in DNA-based vaccines and transferred to Centocor the know-how required to
manufacture the Centocor Plasmid and similar plasmids.
The Company receives research and development support payments under certain
grants from various government agencies, including the Division of AIDS,
National Institute of Allergy and Infectious Disease, and university-supported
programs.
The majority of these research and development payments are based upon the
achievement of certain milestones. There can be no assurance that the Company
will achieve these milestones in a timely manner, if at all. In any event,
payments received under these agreements will not be adequate to support the
research and development and operating expenses of the Company for the
foreseeable future. See
21
<PAGE>
"Business -- Strategic Alliances and Collaborations" and "Risk Factors --
Variable Revenues; No Revenues from Product Sales; Accumulated Deficit," "--
Future Capital Requirements; Uncertainty of Additional Funding," "-- Government
Regulation; No Assurance of FDA Approval."
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Revenues for the six months ended June 30, 1997 decreased to $161,000 from
$1.3 million for the six months ended June 30, 1996. During the period ended
June 30, 1997, the Company received $75,000 under the terms of the Centocor
License and Option Agreement and $86,000 under a government sponsored research
program. During the period ended June 30, 1996, the Company received $1.2
million under the terms of the Wyeth-Lederle Agreements and received $50,000
under the terms of the Centocor License and Option Agreement.
Research and development expenses for the six months ended June 30, 1997
increased to $4.9 million from $3.2 million during the same period in 1996. This
increase was due to increases in license payments to third parties and increases
in expenses for clinical trials and for contracted research services.
General and administrative expenses for the six months ended June 30, 1997
increased to $1.8 million from $1.4 million for the same period in 1996. This
increase was due primarily to increases in legal and consulting expenses.
Interest income for the six months ended June 30, 1997 increased to $201,000
from $96,000 for the same period in 1996. The increase was due primarily to
increased average cash and cash equivalents in 1997.
Interest expense for the six months ended June 30, 1997 decreased to $15,000
from $109,000 for the same period in 1996. This decrease was due to the
conversion of certain demand notes to Convertible Preferred Stock in March 1996.
The net loss for the six months ended June 30, 1997 was $6.4 million
compared to the net loss of $3.4 million for the same period in 1996.
FISCAL YEARS ENDED DECEMBER 31, 1996 AND 1995
Revenues for the year ended December 31, 1996 increased to $8.2 million from
$7.8 million for the year ended December 31, 1995. In 1996, the Company received
$7.8 million under the terms of the Wyeth-Lederle Agreements. In 1996, the
Company also received $50,000 under the terms of the Centocor License and Option
Agreement and $399,000 under a government sponsored research program.
In 1995, the Company received $6.7 million under the terms of the
Wyeth-Lederle Agreements. These payments were for milestones achieved in advance
of the execution of the Wyeth-Lederle Agreements and also included $2.5 million
in research funding and $500,000 in option payments. In 1995, the Company also
received an aggregate of $750,000 under the terms of the Centocor License and
Option Agreement and $275,000 under a government sponsored research program.
Research and development expenses for the year ended December 31, 1996
increased to $7.3 million from $5.3 million during the same period in 1995. The
increase was due to an increase in staffing related to implementation of the
research and development agreement with Wyeth-Lederle, as well as increases in
expenses related to licenses with third parties.
General and administrative expenses for the year ended December 31, 1996
increased to $3.1 million from $2.2 million for the same period in 1995. The
increase was due primarily to increases in staffing as well as costs related to
the sale of the Series C Convertible Preferred Stock in 1996.
22
<PAGE>
Interest income for the year ended December 31, 1996 increased to $373,000
from $110,000 for the same period in 1995. The increase was due primarily to
increased average cash and cash equivalents in 1996.
Interest expense for the year ended December 31, 1996 decreased to $123,000
from $415,000 for the same period in 1995. The reduction was due to the
conversion of certain demand notes to Convertible Preferred Stock as of March
1995 which reduced the number of days outstanding for the demand notes.
The net loss for the year ended December 31, 1996 was $1.9 million compared
to net income of $74,000 for the same period in 1995.
FISCAL YEARS ENDED DECEMBER 31, 1995 AND 1994
Revenues for the year ended December 31, 1995 increased to $7.8 million from
zero for the year ended December 31, 1994. This increase was due to the
commencement in 1995 of research funding and other payments from Wyeth-Lederle
and Centocor.
Research and development expenses for the year ended December 31, 1995
decreased to $5.3 million from $6.2 million during the same period in 1994. This
decrease was attributable primarily to a reduction in contracted laboratory
expenses.
General and administrative expenses for the year ended December 31, 1995
increased to $2.2 million from $1.5 million during the same period in 1994. The
increase was attributable to increased facility costs, professional services and
corporate development and staffing activities.
Interest income for the year ended December 31, 1995 increased to $110,000
from $54,000 during the same period in 1994. The increase was attributable to
increased cash balances from the increase in the principal amount of demand
notes outstanding and the receipt of payments under the terms of the Wyeth-
Lederle Agreements, the Centocor License and Option Agreement and the Centocor
Manufacturing Agreement in 1995.
Interest expense for the year ended December 31, 1995 increased to $415,000
from $89,000 during the same period in 1994 due to the increase in the principal
amount of demand notes outstanding during 1994 from zero at January 1, 1994 to
$2.8 million at December 31, 1994 and up to $4.0 million by December 31, 1995.
The net income for the year ended December 31, 1995 was $74,000 compared to
the net loss of $7.8 million for the same period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1997, the Company had cash, cash equivalents and investments
available for sale of $4.0 million.
Since inception, the Company has financed its operations through the sale of
Common Stock and Convertible Preferred Stock, the issuance of demand notes and
through funds received under research and development agreements. Through June
30, 1997, the Company had raised $24,000 through the sale of Common Stock, $21.2
million from the sale of Convertible Preferred Stock and $4.0 million from the
issuance of demand notes. In addition, the Company has received $16.1 million
from research and development agreements from inception to September 30, 1997,
including $15.1 million under the terms of the Wyeth-Lederle Agreements.
In October 1997, A.H. Investments Ltd., an affiliate of AHP, invested $3.0
million in the Company in exchange for a convertible promissory note in the
principal amount of $3.0 million and a warrant to purchase 68,910 shares of
Common Stock at a price equal to 115% of the initial public offering price. The
23
<PAGE>
promissory note will be converted into shares of Common Stock upon the closing
of the Offering at a conversion price equal to the initial public offering
price.
In April 1996, $4.0 million of convertible demand notes was converted into
1,600,000 shares of Series B Convertible Preferred Stock and $511,000 in accrued
interest on the notes was waived. In May 1996, the Company completed the sale of
2,435,286 shares of its Series C Convertible Preferred Stock for net proceeds to
the Company of $9.4 million after deducting placement fees and expenses of the
placement agent.
Certain of the clinical trials of the Company's HIV-related product
candidates are sponsored by government funding. Although the Company has no
reason to believe such funding will be withdrawn, in the event it is withdrawn
the Company would need to fund such clinical trials using internal or external
sources.
Since inception, the Company has invested $4.8 million in property and
equipment, including purchases totalling $118,000 in the first six months of
1997, $1.1 million in 1996, $557,000 in 1995, $554,000 in 1994 and $1.3 million
in 1993. The Company intends to increase its expenditures substantially over the
next several years to enhance its technologies and to develop its DNA-based
vaccine and other gene therapy product candidates. The Company expects to incur
additional expenses, resulting in significant losses, as it continues and
expands its research and development activities and undertakes additional
preclinical studies and clinical trials. The Company also expects to incur
substantial administrative and manufacturing expenditures in the future as it
seeks FDA approval for its products and establishes its manufacturing capability
under GMP and substantial expenses related to the filing, prosecution,
maintenance, defense and enforcement of patent and other intellectual property
claims. The Company believes that its existing capital resources, together with
the net proceeds from the Offering, will be sufficient to support its current
and projected funding requirements until mid-1999. The Company's capital
requirements may vary as a result of a number of factors, including the progress
of its product development programs, competitive and technological developments,
the continuation of its existing collaborative agreements, establishment of
additional development agreements and progress of development efforts of the
Company's corporate partners.
The Company expects that it will require significant additional financing in
the future, which it may seek to raise through public or private equity or debt
financings, when market conditions allow and through arrangements with corporate
collaborators and other sources. No assurance can be given that such additional
financing will be available when needed or that, if available, such financing
will be obtained on terms favorable to the Company. If adequate funds are not
available, the Company will be required to delay, scale back or eliminate one or
more of its research and development programs or attempt to obtain funds through
arrangements with collaborative partners or others that may require the Company
to relinquish some or all of its rights to certain of its intellectual property
product candidates or products. To the extent that additional capital is raised
through the sale of equity or convertible debt securities, the issuance of such
securities could result in dilution to the Company's shareholders. See "Risk
Factors-- Future Capital Requirements; Uncertainty of Additional Funding."
At December 31, 1996, the Company had tax net operating loss carryforwards
of approximately $12.0 million which expire through 2011 as well as research and
development tax credit carryforwards of approximately $710,000 which expire
between 2007 and 2011. The Company's ability to utilize such net operating loss
and research and development credit carryforwards may be subject to certain
limitations due to ownership changes as defined by rules enacted with the Tax
Reform Act of 1986.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128"). This
statement establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock. This
24
<PAGE>
statement is effective for financial statements issued for periods ending after
December 15, 1997 and earlier application is not permitted. This statement
requires restatement of all prior period EPS data presented. The Company will
adopt SFAS 128 in the fourth quarter of the fiscal year ending December 31,
1997. The adoption of this accounting standard is not expected to have a
material impact on the financial statements.
During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 129, DISCLOSURE OF INFORMATION
ABOUT CAPITAL STRUCTURE ("SFAS 129"). SFAS 129 requires entities to explain, in
summary form within their financial statements, the pertinent rights and
privileges of the various securities outstanding. Information that shall be
disclosed should include dividend and liquidation preferences, participation
rights, call prices and dates, conversion or exercise prices or rates and
pertinent dates, sinking fund requirements, unusual voting rights, and
significant terms of contracts to issue additional shares. SFAS 129 is effective
for periods ending after December 15, 1997. The adoption of this accounting
standard is not expected to have a material impact on the financial statements.
During June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
130"). SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997 and reclassification of financial statements for earlier
periods provided for comparative purposes is required. The adoption of this
accounting standard is not expected to have a material impact on the financial
statements.
25
<PAGE>
BUSINESS
OVERVIEW
Apollon is a leader in the development of non-viral DNA-based vaccines and
other DNA-based gene therapy products for the prevention and treatment of
infectious and autoimmune diseases. Apollon's vaccine product candidates, which
utilize its proprietary facilitated DNA delivery technology, are designed to
stimulate an immune response by causing cells to express specific encoded
antigenic proteins. The Company believes that its GENEVAX vaccine product
candidates may have several positive attributes, including the ability to: (i)
stimulate both humoral (antibody) and cellular (cytotoxic T-cell) immune
responses; (ii) target different strains of the same pathogen, as well as
multiple pathogens, with a single vaccine; (iii) be conveniently administered
using conventional methods; (iv) demonstrate increased safety relative to live
virus vaccines; and (v) be manufactured with relative ease. The Company believes
that its technology represents a new paradigm for the development of preventive
and therapeutic vaccines directed against a range of infectious diseases,
including genital and oral/labial herpes, viral hepatitis, AIDS, genital warts
and tuberculosis, as well as autoimmune diseases and cancer.
In order to develop DNA-based vaccine products successfully, the Company is
focusing a significant proportion of its resources on the advancement of its
vaccine product candidates into human clinical trials, including both clinical
trials of preventive product candidates in healthy adults and clinical trials of
therapeutic product candidates in patients affected with a target disease. Using
its facilitated, DNA-based vaccine technology, the Company has demonstrated that
its vaccines can stimulate humoral and cellular immune responses that have
provided preventive and therapeutic outcomes in preclinical studies. Based on
the results of these preclinical studies, Apollon has advanced multiple product
candidates into human clinical trials.
The Company believes that it initiated the first ever clinical trial of a
therapeutic DNA-based vaccine in adults infected with human immunodeficiency
virus ("HIV") in June 1995 and the first ever clinical trial of a preventive
DNA-based vaccine for HIV in healthy adults in March 1996. Apollon believes that
it also commenced the first ever clinical trial in healthy adults of a DNA-based
preventive vaccine for herpes simplex virus ("HSV") in September 1996 and the
first ever clinical trial of a DNA-based therapeutic vaccine in HSV-infected,
genital herpes patients in March 1997. The Company also initiated a clinical
trial in healthy adults of its DNA-based vaccine for treatment of individuals
persistently infected with hepatitis B virus ("HBV") in July 1997. In addition,
the Company initiated a clinical trial in December 1995 with a T cell
receptor-directed, therapeutic DNA vaccine for cutaneous T-cell lymphoma
("CTCL"), which is a part of the first phase of the Company's program to develop
therapeutic vaccines for autoimmune diseases such as psoriasis.
Apollon is currently conducting eight Phase I and Phase I/II clinical trials
of its GENEVAX vaccine product candidates for the prevention or treatment of
infection by HSV, HBV and HIV, as well as the treatment of CTCL. As of September
30, 1997, 163 people have been enrolled in these clinical trials. To date,
Apollon's vaccine product candidates have been safe and well tolerated in its
clinical trials. In addition to evaluating safety, an objective of the ongoing
clinical trials is to evaluate the ability of Apollon's DNA-based vaccine
product candidates to stimulate immune responses. The Company is currently
reviewing the results of its June 1995 HIV clinical trial, and has observed
increases in immune responses in HIV-infected patients. Subject to favorable
clinical results, the Company expects to initiate Phase II clinical trials of
its therapeutic HSV-, HBV- and HIV-directed vaccine product candidates within
the next 15 months.
Apollon has entered into collaborative agreements with two corporate
partners, Wyeth-Lederle and Centocor. The collaborative agreements with
Wyeth-Lederle, executed in July 1995, provide for the joint development,
manufacture and marketing of preventive and therapeutic GENEVAX products
directed against HSV, HIV and human papillomavirus ("HPV"). Pursuant to the
agreements, Wyeth-Lederle has made a number of payments to Apollon to fund
development of the GENEVAX product candidates directed against the three viruses
and is required to make additional payments subject to the achievement of
certain milestones in connection with clinical trials. Apollon is primarily
responsible for product
26
<PAGE>
development and clinical testing expenses through the completion of Phase II
clinical trials and Wyeth-Lederle will assume all Phase III clinical trial
expenses. As of September 30, 1997, the Company has received $15.1 million from
Wyeth-Lederle pursuant to the agreements. Apollon has granted Wyeth-Lederle
worldwide rights to market and sell these vaccine product candidates and has
retained exclusive worldwide manufacturing rights.
Apollon's agreement with Centocor, executed in March 1995, grants Centocor
exclusive worldwide rights to develop GENEVAX vaccine product candidates
directed at most cancers. Under the terms of this agreement, Centocor is
required to provide research funding, to make additional payments upon the
achievement of specified milestones and to pay royalties on any sales of
products. In June 1997, Centocor initiated a Phase I/II clinical trial in
colorectal cancer patients using the Company's GENEVAX technology.
The Company is currently prosecuting 37 U.S. patent applications. A majority
of these patent applications have foreign counterparts. These patent
applications include specifications and claims regarding methods of facilitated
DNA delivery and expression by target cells IN VIVO, methods of patient
treatment and routes of administration, methods of discovery of novel vaccines
and pharmaceutical agents, molecular targets and methods of utilizing these
targets and compositions of matter for vaccines and pharmaceutical products.
Apollon holds exclusive rights to a method patent which was issued to inventors
at the University of Pennsylvania and The Wistar Institute in January 1997. This
patent describes an important portion of the Company's core technology using
bupivacaine-facilitated DNA-based immunization.
THE IMMUNE SYSTEM AND VACCINES
THE IMMUNE SYSTEM
The human body's immune system fights both invading microorganisms, such as
viruses, and cells that have been altered by malignant disease processes. The
system has two dominant disease-fighting arms, the humoral arm and the cellular
arm. The humoral arm fights disease by producing circulating antibodies that are
directed against antigens, which are molecular structures the body perceives to
be foreign. These antibodies are effective at specifically binding to
free-floating antigenic proteins, particles or microbes, thereby targeting them
for destruction by cells of the immune system. These antibodies, however, are
less effective at targeting infected or abnormal cells. The cellular arm fights
disease through the activation of specialized white blood cells known as
cytotoxic T cells. These cytotoxic T cells destroy cells that display fragments
of target antigenic proteins on their cell surface. A cytotoxic T-cell response
is important in overcoming viral infection because viruses replicate inside host
cells, where they are protected from a humoral immune response. Cytotoxic T
cells are also thought to be important in the destruction of tumor cells.
TRADITIONAL ANTIVIRAL VACCINES
Historically, vaccines have been used to prevent infectious disease by
stimulating an immune response to disease-causing microorganisms prior to
infection. Such an immune response provides the vaccinee with the means to kill
off and eliminate invading microorganisms thereby preventing disease. Currently,
there are three basic types of antiviral vaccines: live attenuated virus
vaccines, such as the oral polio or measles vaccine; killed virus vaccines, such
as the injected polio or rabies vaccine; and protein-based vaccines, such as the
HBV vaccine. Although these vaccine types have proven effective for PREVENTION
of certain diseases such as smallpox, polio and measles, they have been
generally ineffective for TREATMENT of other diseases including genital herpes,
hepatitis and AIDS. Total annual revenues from the sale of vaccines worldwide
have been projected to be approximately $2.7 billion for 1997.
Several of the most effective antiviral vaccines have been live attenuated
virus vaccines. These vaccines contain a weakened form of virus which replicates
slowly and is designed to be nonpathogenic. Live attenuated virus vaccines
stimulate both humoral and cellular immune responses directed at all
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antigenic proteins of the virus. However, because these vaccines contain live
virus, they have the potential to infect a vaccinee persistently or to revert to
a pathogenic form. Moreover, because the vaccines must be prepared in living
tissue or cell culture, certain residual tissue components in the vaccine can
cause allergic reactions.
Killed virus vaccines are comprised of whole, chemically treated virus
particles that are not infectious. These vaccines can stimulate a strong humoral
immune response directed against several structural proteins of the virus;
however, these vaccines are relatively poor stimulators of a cellular immune
response. Moreover, the inactivation process used to make a killed virus vaccine
may alter the structure of viral proteins. These altered proteins may stimulate
an immune response directed against clinically irrelevant antigenic structures,
thereby diminishing desired immune responses. As with live attenuated virus
vaccines, allergic reactions to killed virus vaccines can also be a problem.
Consequently, vaccination using killed virus vaccines may have limited
application and have the potential to leave a vaccinee vulnerable to certain
virus infections.
Protein-based vaccines are comprised of one or two individual viral
proteins, often mixed with an adjuvant that helps stimulate a strong immune
response. These vaccines can stimulate a strong humoral immune response directed
against the immunizing proteins. Like killed virus vaccines, protein-based
vaccines are relatively poor stimulators of a cellular immune response. They
also have the same potential to stimulate, in part, an immune response directed
against clinically irrelevant antigenic structures and, because of surface
protein mutation, may fail to stimulate some or all of a desired immune
response.
DNA-BASED VACCINES
DNA-based vaccines have been developed to address some of the limitations
associated with current vaccines and other therapies. DNA-based vaccines are
formulated with DNA which contains genes that encode antigens. Following
administration, DNA is taken up by cells of the vaccinee, which then synthesize
antigenic proteins encoded by DNA. Fragments of these antigenic proteins are
presented on the surface of the DNA-containing cells thereby stimulating an
immune response characterized by both humoral and cytotoxic T cell components.
Figure 1. Cellular and humoral immune responses stimulated by DNA
following facilitated DNA delivery. Cells that contain DNA encoding
antigenic proteins present fragments of these proteins called antigenic
peptides (represented by the yellow beads) to CD8(+) T cells, the
precursors of cytotoxic T cells. The body's cells can also release intact
antigenic proteins or large protein fragments into the surrounding
environment where they are taken up by antigen presenting cells that
fragment the proteins and present them to helper T cells. With the aid of
these helper T cells, B cells that are also directly stimulated by
antigenic protein go on to form plasma cells that release into the
circulation large quantities of antibody specific for the antigenic
protein. In addition, the CD8(+) T cells, with aid from helper T cells, go
on to form cytotoxic T cells.
DNA-based vaccines have the potential to stimulate a broader immune response
than several other vaccine types because a single vaccine can be designed to
stimulate an immune response directed against different strains of the same
pathogen or against multiple antigenic protein targets. DNA-based vaccines may
stimulate both antibody and cytotoxic T-cell immune responses thereby
potentially producing a more effective immune response than either the killed
virus vaccines or the protein-based vaccines. The Company believes that a
clinically effective immune response requires only transient residence of the
injected DNA in cells of the vaccinee. The injected DNA is designed in a way
that prevents its replication
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and integration into existing human DNA contained within the cells, which may
give DNA-based vaccines a better safety profile than live attenuated or killed
virus vaccines. These attributes make it less likely that the target pathogen
could escape an immune response by mutating and changing antigenic structures.
Additionally, proteins produced IN VIVO inside cells of the vaccinee mimic
exactly the structure of native proteins, thereby avoiding stimulation of
irrelevant immune responses. DNA-based vaccines can also be designed to
stimulate immune responses directed against the same proteins that are
non-identical in structure in multiple strains of a virus.
APOLLON'S TECHNOLOGY
Apollon's vaccine product candidates have been developed utilizing its
proprietary facilitated DNA delivery technology. Apollon's facilitated DNA-based
vaccines are formulated with DNA which contains genes that encode antigens and
facilitating agents that enhance uptake of the DNA into cells. The Company's
technology enables these vaccines to be administered to various sites by any of
several delivery methods. DNA vaccines are produced in a process involving
bacterial fermentation and chromatographic purification. The Company believes
that this production method is both efficient and scalable, and will be cost
competitive with other vaccine technologies.
Apollon's product candidates are formulated with DNA in the form of
plasmids, which are small, double-stranded, closed loops of DNA that contain the
genes encoding antigens. The Company has designed and constructed proprietary
plasmids that provide the machinery necessary for genes of interest to be
transcribed efficiently and expressed as proteins. These DNA plasmids are also
designed in a way that prevents their replication in cells of the body and their
integration into existing DNA in these cells and do not introduce clinically
irrelevant proteins as do other vaccines. Furthermore, this technology obviates
the need for virus-based gene transfer methods, such as retroviral, adenoviral
or other viral vector gene delivery systems, thereby eliminating safety concerns
associated with such viral-based transfer methods. A plasmid can also carry
several different genes simultaneously. Consequently, each plasmid can carry
genes that encode several antigenic proteins of single or multiple pathogens.
Moreover, multiple plasmids may be incorporated into a product formulation
thereby expanding the potential targets of a single product. Apollon is
currently prosecuting a number of patent applications which incorporate its
plasmid technology. See "-- Patents and Proprietary Rights."
Apollon's technology also employs biomolecular and chemical agents which
facilitate uptake of DNA into cells of the body. Adequate uptake of DNA into
cells is required for expression of sufficient protein to stimulate a clinical
effect. Biomolecular facilitating agents are often protein or lipid based.
Chemical facilitating agents may be synthetic lipids or other organic
substances. Apollon and its collaborators have identified several facilitating
agents, including local anesthetics such as bupivacaine. Apollon believes its
use of bupivacaine may enhance its ability to advance the Company's first
facilitated product candidates through the regulatory approval process rapidly
because it is an approved, readily available local anesthetic. Altogether,
Apollon is evaluating the use of at least six classes of facilitating agents,
including some proprietary synthetic lipids designed and synthesized by
Apollon's chemists. Delivery of a vaccine to a specified site in the body may be
enhanced by one or more classes of facilitating agents. For example, a
facilitator that is useful for intramuscular or intradermal delivery may or may
not be useful for oral delivery and vice versa. Some facilitating agents, in
addition to enhancing DNA delivery and protein expression, may directly augment
the immune response. Therefore, one or more facilitating agents may be selected
for use in each vaccine. Apollon is currently prosecuting a number of patent
applications related directly to its facilitation technology. See "-- Patents
and Proprietary Rights."
Apollon has also demonstrated in preclinical studies that its DNA-based
vaccines stimulate an immune response when administered orally, intranasally,
intrarectally or intravaginally and when injected into different tissues of the
body, including muscle, skin and subcutaneous tissue, using both needle and
needleless injection methods.
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Figure 2. Facilitated delivery of DNA to cells using bupivacaine. DNA,
which carries the genes of interest and is contained inside membranous
liposomal structures formed by facilitating agents such as bupivacaine,
interact with cell membranes. The DNA is taken up by cells and transported
to the cell nucleus where it supports gene expression and protein
production. In this illustration, the blue spheres represent the liposomal
structures. Cut-a-way versions show the internal DNA in yellow.
BUSINESS STRATEGY
Apollon's goal is to develop and commercialize a substantial portfolio of
DNA-based vaccine and gene therapy products aimed at the prevention and
treatment of infectious and autoimmune diseases. In order to develop DNA-based
vaccine products successfully, the Company is focusing a significant proportion
of its resources on the advancement of its vaccine product candidates into human
clinical trials including both clinical trials of preventive product candidates
in healthy adults and clinical trials of therapeutic product candidates in
infected patients. The Company's GENEVAX products incorporate its proprietary
facilitated DNA delivery technology which the Company believes represents a new
paradigm for the development of preventive and therapeutic vaccines directed
against a wide range of diseases. The key elements of the Company's strategy are
as follows:
DEVELOP A DIVERSIFIED PRODUCT PIPELINE. Apollon is utilizing its technology
to develop a portfolio of vaccine and gene therapy products that target a range
of infectious diseases including genital and oral/ labial herpes, viral
hepatitis, AIDS, genital warts and tuberculosis, as well as autoimmune diseases
and cancer. By targeting multiple disease categories, the Company seeks to
reduce its reliance on any single product development program. Apollon is
focusing its vaccine development program on infectious disease targets and, in
particular, on the prevention and treatment of viral infection by HSV, HBV, HIV
and HPV, with research programs targeting bacterial infections, autoimmune
diseases and gene therapy products.
CONTINUE TO EXPAND ITS FACILITATED DNA DELIVERY TECHNOLOGY
PLATFORM. Apollon's proprietary facilitated DNA technology provides the Company
with the ability to deliver DNA into cells efficiently. The Company's current
product candidates use bupivacaine as a facilitating agent. The Company will
continue to focus its resources on developing additional facilitating agents and
determining the most efficacious routes of administration for each product
candidate. The Company intends to continue to seek patent protection for each of
its proprietary discoveries.
LEVERAGE CORPORATE, GOVERNMENTAL AND ACADEMIC COLLABORATIONS. Apollon has
established corporate partnerships with pharmaceutical and vaccine companies to
help fund its research and development activities, reduce development risks
associated with commercialization and provide for future marketing, sales and
distribution capabilities. Existing partnerships include a commercial
partnership with Wyeth-Lederle for DNA-based vaccines directed against HSV, HIV
and HPV and a license arrangement with Centocor for DNA-based vaccines directed
against most cancers. The Company intends to continue working with government
agencies in order to reduce its financial risk and gain access to additional
research and clinical trial program opportunities. Apollon also intends to build
upon its existing partnerships and seek to enter into new partnerships in order
to leverage the infrastructure of its collaborative partners, while it continues
to enhance its internal manufacturing and commercial capabilities. In addition,
Apollon intends to continue to form collaborations with academic researchers in
order to obtain know-how
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regarding specific genes, disease targets and DNA delivery and gene expression
technologies that supplement the Company's internal expertise.
CONTINUE TO ENHANCE MANUFACTURING CAPABILITIES. The Company is producing a
variety of DNA-based vaccines using a single manufacturing process. The Company
is refining its proprietary scalable manufacturing methods for the production of
DNA-based vaccines of high purity and stability. By retaining control of its
manufacturing processes, Apollon believes it will be able to maintain and
enhance its leadership position in the development of DNA-based products and
prepare for production at a scale required for commercialization. The Company's
DNA-based vaccine products are currently manufactured by Apollon employees in
two facilities owned by third parties.
PRODUCTS UNDER DEVELOPMENT
Apollon believes that its DNA-based vaccine product candidates may be used
to prevent or treat a variety of infectious diseases, autoimmune diseases and
certain cancers. The Company is currently conducting eight Phase I and Phase
I/II clinical trials of its GENEVAX vaccine product candidates for the
prevention and treatment of infection by HSV, HBV and HIV, as well as treatment
of CTCL. The Company's current strategy is to focus a significant proportion of
its internal resources on its HSV, HBV and HPV product development programs
while continuing to leverage its corporate and governmental collaborations to
advance its HIV product development program. The Company has established a
proprietary portfolio of patent applications and licenses to DNA sequences or
proteins encoded by DNA sequences with respect to its product candidates. In
connection with its product development programs, the Company will be required
to seek licenses to additional DNA sequences or proteins encoded by DNA
sequences. If such licenses are not obtained by the Company, it will not be able
to commercialize the products requiring such licenses. See "-- Patents and
Proprietary Rights."
SELECTED PRODUCT DEVELOPMENT PROGRAMS
<TABLE>
<CAPTION>
CURRENT FIRST CLINICAL
PRODUCT COMMERCIAL DEVELOPMENT TRIAL
CANDIDATES DISEASE TARGETS PARTNER (1) STATUS (2) INITIATED
- ----------------- ---------------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
GENEVAX-HSV Genital herpes Wyeth-Lederle Phase September 1996
I/II(3)
Oral/labial herpes Wyeth-Lederle Research --
GENEVAX-HBV Viral hepatitis B -- Phase I/II July 1997
GENEVAX-HIV HIV infection and AIDS Wyeth-Lederle Phase June 1995
I/II(3)
GENEVAX-TCR CTCL -- Phase December 1995
I/II(4)
Psoriasis and other -- Research --
autoimmune diseases
GENEVAX-HPV HPV infection, genital Wyeth-Lederle Research --
warts and cervical
cancer
GENEVAX-HCV Viral hepatitis C -- Research --
GENEVAX-MTB Tuberculosis -- Research --
</TABLE>
--------------------------
(1) For a description of the Company's collaboration with Wyeth-Lederle, see
"-- Strategic Alliances and Collaborations -- Corporate Collaborations."
(2) For each product candidate, the Company is testing one or more plasmids
containing one or more genes. Final products may include one or more of
the genes being tested. For the GENEVAX-HIV vaccine product candidate, the
Company is testing both an envelope-directed plasmid and a core-directed
plasmid. See "-- HIV Infection and AIDS."
(3) Both preventive and therapeutic clinical trials are being conducted
related to this disease target.
(4) A therapeutic clinical trial is being conducted related to CTCL as a part
of the first phase of the Company's program to develop therapeutic
vaccines for autoimmune diseases such as psoriasis.
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GENITAL AND ORAL/LABIAL HERPES
It has been estimated that there are 30 million people in the United States
infected for life with HSV as a result of sexually transmitted genital or
anogenital herpes. Type 2 HSV is the dominant cause of genital herpes. In
contrast, type 1 HSV is responsible for more than 90% of oral/labial HSV
infections. There may be as many as 150 million people in the United States
infected for life with the type 1 virus. It has been estimated that in the
United States there are 500,000 new genital herpes infections each year and
between five million and 20 million recurrent episodes of genital herpes.
Antiviral drug treatment has been helpful in controlling recurrent disease, but
it is expensive, not completely effective and drug resistant forms of HSV have
begun to emerge.
Apollon is developing both preventive and therapeutic DNA-based,
HSV-directed vaccines. These vaccines carry the gene encoding a type 2 HSV
envelope protein (glycoprotein D), but the Company believes the vaccines may
have the potential to be effective against both type 1 and type 2 HSV. The
Company has also identified and isolated additional HSV genes that may be used
in later generation or multiple component vaccines.
In September 1996, Apollon initiated a blinded, controlled Phase I/II
clinical trial of the Company's HSV-directed vaccine in healthy, uninfected
individuals using the intramuscular delivery method. As of September 30, 1997,
the Company has enrolled 37 people in this 40-person clinical trial, which is
being conducted at the Virology Research Clinic of the University of Washington
in Seattle and is designed to test for both safety and immune responses. In
February 1997, the Company initiated a second clinical trial at the University
of Washington in patients with recurrent genital herpes. As of September 30,
1997, the Company has enrolled 31 people in this 36-person blinded, controlled
Phase I/II clinical trial that will evaluate primarily safety and immune
responses. To date, the Company's HSV-directed vaccine has been safe and well
tolerated in both of these clinical trials.
The GENEVAX-HSV program is being conducted in partnership with
Wyeth-Lederle. Under the terms of this partnership, Wyeth-Lederle has been
granted worldwide marketing and sales rights for GENEVAX-HSV product candidates
and Apollon retains all manufacturing and supply rights.
VIRAL HEPATITIS B
Despite the availability of effective preventive vaccine products, it has
been estimated that up to 300 million individuals worldwide are persistently
infected with HBV and as many as 20 million new HBV infections are diagnosed
each year. In the United States, it is estimated that there are approximately
one million individuals persistently infected with HBV. Adults exposed to the
virus usually develop acute hepatitis and in 90-95% of cases recover completely
from the infection because their immune systems are generally able to limit the
course of disease and prevent the virus from infecting them persistently.
Persistently infected individuals can develop chronic hepatitis and have a
substantially higher than normal risk of developing primary hepatocellular
carcinoma, a fatal form of liver cancer. HBV infection in numerous countries in
Asia is endemic. In these populations, IN UTERO or perinatal vertical infection
is common. The risk for persistent HBV infection is 70% to 90% for infants who
acquire the disease during the perinatal period.
Because persistent HBV infection can lead to chronic active hepatitis and
liver cirrhosis, therapy for persistent infection is needed. Immunotherapy for
persistent HBV infection using alpha interferon is only effective in a minority
of patients. Moreover, this therapy can lead to side effects including those
which may require discontinuation of therapy. The Company believes facilitated
DNA-based vaccination could represent an effective immunotherapy for individuals
persistently infected with HBV, because such individuals typically have poor or
absent cytotoxic T-cell responses to the virus and this method of vaccination
can stimulate a strong cytotoxic T-cell response which has the potential to
eradicate HBV-infected cells from the vaccinee.
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Apollon is developing HBV-directed vaccines that contain genes encoding
HBsAg and HBcAg. The Company has demonstrated in research and preclinical
studies that these vaccines stimulate both humoral and cytotoxic T-cell
responses directed against both of these HBV proteins. A discussion of this work
was recently published in the April 1997 issue of GASTROENTEROLOGY.
In July 1997, a blinded, controlled Phase I/II clinical trial of the
Company's HBV-directed DNA-based vaccine containing the gene that encodes HBsAg
was initiated in uninfected adult volunteers at the University of Cincinnati,
Children's Hospital Medical Center. This clinical trial will evaluate both
safety and immune responses stimulated by the vaccine. As of September 30, 1997,
the Company has enrolled 16 people in this 24-person clinical trial. To date,
the Company's HBV-directed vaccine has been safe and well tolerated.
Apollon is in various stages of discussion with several potential commercial
partners for its HBV-directed product candidates.
HIV INFECTION AND AIDS
In the United States, there are estimated to be as many as one million
individuals infected with HIV, with an estimated 40,000 new infections each
year. Worldwide, it is estimated that more than 22 million people are infected
with HIV. Although new combination drug therapy has been effective in
temporarily improving the outlook for many individuals, most experts agree that
this burdensome and expensive approach to treatment is not a final answer, nor
is it a cure. Therefore, an effective preventive vaccine directed against HIV is
needed. Moreover, an efficacious immunotherapeutic vaccine directed against HIV
could augment or possibly replace drug treatment regimens to prolong
disease-free survival in infected individuals.
Apollon believes its HIV-directed vaccines will have advantages when
compared with other HIV vaccines being tested. Most importantly, Apollon's
vaccines are designed to target several HIV proteins simultaneously and produce
cytotoxic T-cell and antibody responses that will be directed against cells
infected with HIV. Apollon believes that because HIV is spread by both free
virus and virus-infected cells, the Company's DNA-based vaccine methodology may
provide a means to develop both safe and efficacious preventive and therapeutic
vaccines for HIV.
The Company is developing both preventive and therapeutic GENEVAX-HIV
vaccine product candidates. The preventive vaccine product candidate is
currently designed to have two components. The first component carries the genes
for the envelope protein of HIV (the "envelope-directed" component). The second
component carries the genes encoding the core protein (p24), several other HIV
structural proteins and inactivated viral enzymes (the "core-directed"
component). The therapeutic vaccine could include either the envelope-directed
or core-directed components, or both. The Company is also evaluating the use of
additional accessory genes which may be included in a final preventive or
therapeutic vaccine. Apollon is testing these individual components separately
before combining them into a final vaccine formulation.
In June 1995, Apollon commenced a Phase I/II clinical trial of the
envelope-directed component of GENEVAX-HIV in HIV-infected individuals at the
University of Pennsylvania Medical Center. The Company believes that this
clinical trial was the first human clinical trial of a DNA-based vaccine. The
clinical trial was designed to evaluate both safety and immune responses.
Enrollment is complete in this clinical trial with 20 people enrolled. The
Company is currently reviewing the results of this clinical trial, and has
observed increases in immune responses in patients in this clinical trial.
Circulating virus levels did not change after 36 weeks of follow-up. The Company
also conducted a related four-person clinical trial in Zurich, Switzerland.
Immune response analysis from this clinical trial is currently being conducted
at the University of Pennsylvania Medical Center. To date, the Company's
HIV-directed vaccine has been safe and well tolerated in both clinical trials.
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<PAGE>
In March 1996, the Company commenced enrollment into a blinded, controlled
Phase I/II clinical trial of its envelope-directed vaccine component in
uninfected individuals. This clinical trial is the first human clinical trial of
a DNA-based vaccine in healthy volunteers and is being conducted at the National
Institutes of Health ("NIH") Clinical Center in Bethesda, Maryland. As of
September 30, 1997, the Company has enrolled 16 people in this 24-person
clinical trial. It is designed to establish the safety and evaluate the immune
responses stimulated by the vaccine. In February 1997, the Company also
initiated a related unblinded Phase I/II clinical trial of its envelope-directed
vaccine component in uninfected individuals using a needleless injection system.
The clinical trial is being conducted at the University of Pennsylvania Medical
Center. As of September 30, 1997, seven people have been enrolled in this
12-person clinical trial. To date, the Company's HIV-directed vaccine has been
safe and well tolerated in both clinical trials.
In July 1997, the Company began a Phase I clinical trial in collaboration
with the NIH-supported AIDS Vaccine Evaluation Group ("AVEG") of the
core-directed component of GENEVAX-HIV. This clinical trial of uninfected
volunteers is being conducted by AVEG at four sites in the United States and is
designed to test for both safety and immune responses. As of September 30, 1997,
the Company has enrolled 27 people in this 40-person clinical trial. To date,
the Company's HIV-directed vaccine has been safe and well tolerated in this
clinical trial.
The Company expects to initiate additional Phase I/II clinical trials of
both the envelope-directed and core-directed components of GENEVAX-HIV by the
end of 1997.
In separate preclinical studies, Apollon's investigators have vaccinated two
HIV-infected and three uninfected chimpanzees. Both infected animals receiving
the envelope-directed vaccine experienced an increase in immune response and a
reduction in circulating virus levels. In one animal the levels became
undetectable and have remained undetectable for more than two years. Apollon's
investigators also vaccinated three uninfected chimpanzees. Two of these three
were subsequently challenged intravenously with a high dose of HIV. Both
resisted the challenge and appear to have been protected. At six months these
protected animals had negative lymph nodes and nearly 24 months after the
challenge, these protected animals do not have detectable circulating HIV in
their blood plasma. In contrast, an unvaccinated control animal in the study was
clearly infected with HIV. The results of the uninfected chimpanzee study were
published in the May 1997 issue of NATURE MEDICINE.
The HIV program is being conducted in partnership with Wyeth-Lederle. Under
the terms of this partnership, Wyeth-Lederle has been granted worldwide
marketing and sales rights for GENEVAX-HIV product candidates and Apollon
retains all manufacturing and supply rights.
PSORIASIS AND OTHER AUTOIMMUNE DISEASES AND CTCL
It is estimated that between five percent and ten percent of the U.S.
population is afflicted with an autoimmune disease such as psoriasis, rheumatoid
arthritis or multiple sclerosis, and inadequate therapies make this a major area
of unmet medical need. The objective of Apollon's GENEVAX-TCR program is to
develop DNA-based vaccines for treatment of autoimmune diseases. The Company
believes that certain autoimmune diseases are caused by abnormal activation of
specific families or types of T cells. These T-cell families are defined in part
by a protein on their surface called the T-cell receptor ("TCR"), and also by a
protein chain of the TCR known as the variable region beta chain ("V-beta"). The
Company's GENEVAX-TCR vaccines are being developed to target specific T cells
through the V-beta chain. Apollon's strategy is first to evaluate its
GENEVAX-TCR vaccine approach in patients with a rare T cell cancer known as CTCL
in which the cancerous T cells develop with a specific V-beta subset. If the
Company is successful in its clinical trials for CTCL, it intends to pursue a
clinical program using this approach in people suffering from the autoimmune
disease psoriasis vulgaris ("psoriasis"). As the Company proceeds with its
psoriasis clinical program, it may be required to seek licenses under patents to
DNA sequences or proteins encoded by
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<PAGE>
certain of the DNA sequences related to psoriasis. If such licenses cannot be
obtained by the Company, it will not be able to commercialize the products
requiring such licenses.
Approximately 6.4 million people in the United States suffer from the
chronic dermatologic disease psoriasis. Individuals with moderate to severe
psoriasis require lifelong therapy. Standard treatments such as phototherapy or
drug therapies (such as retinoids or methotrexate) can be effective but are
associated with a high risk for unacceptable complications. An improved
psoriasis treatment would moderate or eliminate the underlying pathogenic
process which is believed to include the activation of certain T-cell subsets or
families. Recent published reports indicate that the V-beta-3 or V-beta-13.1
subsets are involved in the pathogenesis of psoriasis, although additional
V-beta subsets of T cells might be involved. The Company believes that its
TCR-directed DNA-based vaccines, which are designed to target T cells with a
specific V-beta protein chain, may be effective in eliminating these activated T
cells or altering their influence in the skin.
In December 1995, Apollon commenced the first Phase I/II clinical trial of
its T cell receptor-directed DNA-based vaccine program at the University of
Pennsylvania Medical Center in a study of patients with CTCL. The objectives of
the clinical trial are to evaluate the safety and tolerability of the
GENEVAX-TCR vaccine and the clinical and immunological responses to the vaccine
in CTCL patients. As of September 30, 1997, five patients have been enrolled in
this clinical trial, and the vaccine has been safe and well tolerated. Two
patients had clinical responses involving clearing of cutaneous lesions. One of
these patients had a clinical response resulting in nearly complete clearance of
the skin. This patient also responded to additional injections and his disease
was controlled for over six months with vaccine therapy alone until relapse
occurred. The other patient's clinical response was transient and involved 10%
clearance of the skin. Apollon has obtained Orphan Drug status for this vaccine
product candidate indication. For a description of Orphan Drug status, see "--
Government Regulation."
Apollon has retained the commercial rights to its GENEVAX TCR-directed
vaccines.
HPV INFECTION, GENITAL WARTS AND CERVICAL CANCER
The annual incidence of anogenital warts caused by certain strains of HPV in
the U.S. has been estimated at 1.5 million and prevalent cases at four million.
Other strains of HPV are the likely cause of laryngeal and cervical cancers.
Cervical cancer is the second most common cancer among women worldwide. HPV is
believed to be the cause of essentially all cervical cancer. Recent studies have
demonstrated that at least 93% of cervical cancers and high-grade cervical
lesions contain one or more cancer-causing types of HPV.
No specific antiviral treatments are available for HPV infection, although
topical creams have been used to treat warts at various sites. Typically,
anogenital warts are treated with some combination of topical drug and surgery
or with laser ablation therapy. Intralesional treatment with alpha interferon
has also been somewhat effective in treating venereal warts. Recurrence of warts
following local treatment is common. If detected in the precancerous stage,
virtually all cases of cervical cancer are preventable. The treatment of
cervical cancer after it reaches the invasive stage may require chemotherapy,
radiation treatment or surgery, including hysterectomy. These treatments are
expensive and often unsuccessful. To date, no preventive or therapeutic vaccines
for HPV have been approved for clinical use.
Apollon is developing both preventive and therapeutic DNA-based vaccines
directed against HPV, which have been shown to stimulate immune responses in
animals. Because cervical cancer is associated with HPV, an effective vaccine
directed against the virus may help to reduce the risk of cervical cancer.
Preclinical testing of the Company's HPV-directed vaccine product candidates is
expected to begin by the end of 1997.
The GENEVAX-HPV program is being conducted in partnership with
Wyeth-Lederle. Under the terms of this partnership, Wyeth-Lederle has been
granted worldwide marketing and sales rights for GENEVAX-HPV product candidates
and Apollon retains all manufacturing and supply rights.
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VIRAL HEPATITIS C
Worldwide, more than 100 million people are persistently infected with HCV.
It has been estimated that up to 2.5 million in the United States and up to 3.4
million people in Europe are persistently infected with HCV. The virus is
endemic in many parts of Asia. In Japan, for example, it has been estimated that
two to three percent of the population is infected. Similar levels of infection
have been reported in Taiwan, Korea and China. Alpha interferon, the only
currently approved treatment for HCV in the United States, has been effective in
only a minority of patients with chronic HCV infections.
The Company believes that augmentation of the virus-specific immune response
to HCV, especially the cytotoxic T-cell response, in HCV-infected individuals is
a therapeutic strategy that provides a reasonable likelihood of success for the
following reasons: (i) immunotherapy with alpha interferon has been successful
in some infected patients; (ii) circulating virus levels in infected individuals
are generally low and the proportion of liver cells infected is generally low,
possibly leading to suboptimal cytotoxic T-cell responses in infected
individuals which, if augmented, might lead to more effective killing of
infected cells; and (iii) in the 50% of patients who appear to clear acute HCV
infections completely, cytotoxic T cells directed against various viral proteins
have been identified.
Apollon believes that treatment with a therapeutic DNA-based vaccine
directed against HCV provides the best opportunity for augmenting HCV-directed
cytotoxic T-cell responses in infected patients. Apollon and its collaborators
have demonstrated that DNA-based vaccine constructs containing the gene encoding
the HCV core antigen can stimulate cytotoxic T-cell responses in animals.
Moreover, Apollon's collaborators have cloned additional HCV viral genes that
are now being tested, including genes encoding some of the non-structural
proteins of the virus. All these genes have now been incorporated into Apollon's
clinical plasmids and are being readied for clinical testing. As the Company
proceeds with its HCV clinical program, it will be required to seek licenses
under patents to DNA sequences or proteins encoded by certain of the DNA
sequences related to the HCV core antigen. If such licenses cannot be obtained
by the Company, it will not be able to commercialize the products requiring such
licenses.
Apollon has retained the commercial rights to its HCV-directed vaccines.
Apollon is currently in discussions with potential commercial partners for these
product candidates.
TUBERCULOSIS
It is estimated that one third of the world's population or approximately
two billion people are infected with MYCOBACTERIUM TUBERCULOSIS ("MTB"), the
bacteria that causes tuberculosis. Annually, MTB causes two to three million
deaths, making it the pathogen responsible for the highest incidence of death
and disease worldwide. In the United States, the annual incidence of
tuberculosis cases increased about 20% from the period 1985 to 1992, and the
population currently at risk for MTB infection includes the poor, the elderly,
immuno-compromised patients and health care workers exposed to these
individuals. Although MTB infection is effectively controlled with drugs such as
isoniazid and rifampin, there has been an increased incidence of tuberculosis in
AIDS patients and outbreaks of multidrug-resistant MTB strains.
Due to the large number of individuals infected and the steady annual
incidence of infections worldwide, control of MTB is unlikely to occur until an
effective vaccine becomes available. The tuberculosis vaccine used for the past
75 years, known as bacillus Calmette Guerin ("BCG"), is a live-attenuated
bacteria (M. BOVIS) related to MTB. The reported efficacy of this vaccine is
less than 50% in controlled human studies.
Apollon believes that a DNA-based vaccine for prevention of MTB infection
might offer greater efficacy and increased safety in comparison to the
live-attenuated BCG vaccine. The Company's current research program has produced
prototype vaccine vectors containing genes isolated from the MTB bacteria. These
vaccine vectors are designed to produce MTB-specific immune responses.
Furthermore, the Company's MTB DNA-based vaccines are being designed to
stimulate a strong, cell mediated immune
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response against MTB. This is important because the pathogenesis of MTB involves
the establishment of infection within the lung and replication within alveolar
macrophages. Since MTB replicates within human cells, it is a particularly
attractive target for DNA vaccine technology, which is capable of inducing a
strong, cell-mediated immune response to eradicate infected cells. In studies
published by other researchers, DNA-based vaccines expressing MTB genes have
induced cytotoxic T-cell responses and have protected mice from challenge with
live MTB.
Apollon has retained the commercial rights to its MTB-directed vaccines.
GENE THERAPY APPLICATIONS
Gene therapy is the use of gene-containing products for prevention or
treatment of inherited or acquired diseases. Gene therapy products encode
biologically active molecules or proteins that interfere with replication of
viruses or alter or augment a particular biological function and may be useful
for replacing an inherited defective protein in order to prevent or treat
inherited or acquired diseases such as cystic fibrosis or hemophilia. Using its
facilitated DNA delivery technology platform as a foundation, Apollon is
pursuing a research program in gene therapy. While Apollon's focus has been, and
continues to be, on its DNA-based vaccine programs, the Company has also begun
development of other gene therapy products that utilize the Company's
proprietary facilitated DNA delivery technology. The Company is developing
proprietary tissue-targeted facilitators, which are being designed to target
injected DNA to specific cell types within the body. The direct facilitated
delivery of DNA-based products could provide the physician with a
straightforward approach to gene therapy that does not require the use of live
viral vectors or treatment of cells outside the body.
Apollon initially expects to develop gene therapy product candidates that
will modify immune responses generated by existing GENEVAX vaccine product
candidates. For example, some of these potential products may stimulate enhanced
cytotoxic T-cell responses directed against antigenic proteins targeted by the
Company's GENEVAX vaccine product candidates. The Company has active research
programs evaluating DNA-based prototype products that encode various cytokines
such as IL2, IL4 and IL12 and co-stimulatory molecules such as B7-1 and B7-2.
STRATEGIC ALLIANCES AND COLLABORATIONS
CORPORATE COLLABORATIONS
WYETH-LEDERLE. Apollon's corporate collaboration with Wyeth-Lederle is
based on a Research and Development and License Agreement (the "R&D Agreement")
and a Supply Agreement entered into in July 1995. The agreements provide that
Apollon and Wyeth-Lederle will jointly develop, manufacture and market
preventive and therapeutic GENEVAX products directed against HSV, HIV and HPV.
Pursuant to the R&D Agreement, Wyeth-Lederle has made a number of payments
to Apollon to fund the development of the preventive and therapeutic GENEVAX
vaccine product candidates directed at the three viruses. The R&D Agreement
provides for significant additional payments subject to the achievement of
certain milestones in connection with clinical trials. Apollon is primarily
responsible for product development and clinical testing expenses through the
completion of Phase II clinical trials and Wyeth-Lederle will assume all Phase
III clinical trial expenses. As of September 30, 1997, the Company has received
$15.1 million from Wyeth-Lederle pursuant to the R&D Agreement. In return,
Apollon has granted to Wyeth-Lederle worldwide rights to market and sell
products directed at the three viruses. The R&D Agreement also provides
Wyeth-Lederle an option to obtain sublicenses to technology that is covered by
license agreements Apollon has with third parties. The R&D Agreement also
provides Wyeth-Lederle a three-year option, in exchange for certain option
payments, to obtain exclusive commercialization rights to develop DNA-based
vaccines for other microorganisms. If the option is exercised, Wyeth-Lederle
will make research and development and milestone payments to the Company under
substantially
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similar terms as for other products developed under this collaboration. The R&D
program is managed by a Steering Committee and an R&D Management Committee, each
with equal representation from both companies.
Apollon has retained the exclusive right to manufacture and supply GENEVAX
products to Wyeth-Lederle under the terms of the Supply Agreement, which
requires Apollon to sell such products exclusively to Wyeth-Lederle or its
designated affiliates at a price based upon a percentage of Wyeth-Lederle's
selling price.
Both agreements will terminate as to any product upon the later of (a) the
expiration date of the last patent covering that product and (b) the date that
is ten years following the first commercial sale of that product. Wyeth-Lederle
has the right to terminate both agreements in their entireties or as to any
specific product unilaterally and without cause. In the event of termination
unilaterally without cause by Wyeth-Lederle, exclusive rights to the products
and co-exclusive rights to the supporting technology will revert or vest to
Apollon as appropriate and Wyeth-Lederle will be entitled to receive payments on
sales of products commercialized by Apollon under the Supply Agreement based
upon Wyeth-Lederle's contribution to the development costs of the respective
product. In the event Wyeth-Lederle terminates because of a breach by, or change
in control of, Apollon, the options and licenses granted to Wyeth-Lederle vest
or are retained, as appropriate, any licenses granted to Apollon by
Wyeth-Lederle terminate and Apollon is required to assign all governmental
approvals. Apollon has similar rights if Apollon terminates because of a breach
by, or change in control of, Wyeth-Lederle.
CENTOCOR. Apollon and Centocor entered into the License and Option
Agreement in March 1995, whereby Centocor obtained the rights to use the
Company's facilitated DNA-based technology to develop, market and sell GENEVAX
products directed at most cancers. The agreement gives Centocor the right to
sublicense technology from Apollon which is licensed by the Company from certain
third parties. This agreement excludes TCR-directed GENEVAX vaccine product
candidates and any potential GENEVAX products which utilize antigen genes
derived from viruses and other microorganisms. Subject to Centocor achieving
various milestones, this agreement requires certain payments to be made to
Apollon and establishes a royalty to be paid to Apollon based upon Centocor's
product sales under certain circumstances, subject to an offset of the
development payments previously made to Apollon by Centocor. Centocor has agreed
to share any improvements it makes to facilitated DNA-based vaccine delivery
technology with Apollon during the first three years of this collaboration,
solely for application by Apollon outside of the fields in which Centocor
acquired rights under the agreement. In June 1997, Centocor initiated a Phase
I/II clinical trial in colorectal cancer patients using the Company's GENEVAX
technology.
The Company and Centocor entered into the Centocor Manufacturing Agreement
in August 1995, whereby the Company assisted Centocor in the manufacture of the
Centocor Plasmid for use in DNA-based vaccines and transferred to Centocor the
know-how required to manufacture the Centocor Plasmid and similar plasmids.
GOVERNMENTAL COLLABORATIONS
Apollon has entered into collaborative arrangements with government agencies
to supplement its internal product development and business capabilities. These
include an agreement with the Division of AIDS, National Institute of Allergy
and Infectious Disease ("NIAID") to collaborate in the preclinical evaluation of
the pharmacological and toxicological properties of GENEVAX-HIV as well as the
evaluation of the vaccine product candidate in certain animal models. The
Company believes that this cooperative endeavor will provide an opportunity to
accelerate the development of GENEVAX-HIV vaccine product candidates.
Upon joint application, beginning in August 1994, the University of
Pennsylvania and the Company have received a $4.2 million four-year grant from
NIAID to support the Company's HIV-directed
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therapeutic vaccine research and development efforts. This grant was among the
first awarded by NIAID in connection with its Strategic Program for Innovative
Research in AIDS Treatment ("SPIRAT"). The University of Pennsylvania receives
direct funding, portions of which are distributed to Apollon.
The Company's HIV-directed vaccines are also being tested in a Phase I
clinical trial being conducted by AVEG at four sites in the United States.
ACADEMIC COLLABORATIONS
Apollon works closely with its academic collaborators in the research,
development and clinical testing of its vaccine product candidates and,
connected with such collaboration, funds continuing research efforts in
laboratories at the University of Pennsylvania, the Massachusetts General
Hospital, Loyola University (Chicago) and the University of Washington in
Seattle.
Apollon's academic collaborators include: Dr. David Weiner of the University
of Pennsylvania on research and development projects developing basic gene
delivery technology and HIV-directed vaccines; Dr. Lawrence Corey at the
University of Washington on immunological and clinical research regarding
development of the Company's HSV-directed vaccines; Dr. Jack Wands at the
Massachusetts General Hospital on the development of DNA-based vaccines and gene
therapy products directed against viral hepatitis and methods of DNA delivery;
Dr. Martin Kast at Loyola University on the development of vaccines directed
against HPV; and Dr. Harvey Rubin at the University of Pennsylvania, on the
development of Apollon's vaccines directed against MTB.
MANUFACTURING
The Company is producing a variety of DNA-based vaccines using the same
manufacturing process and is refining proprietary scalable manufacturing methods
for the production of DNA-based vaccines of high purity and stability. The
Company manufactures plasmids using common bacterial fermentation methods and
proprietary purification techniques. The Company believes that it has already
developed production methods that are adequate to accommodate the
commercialization of certain of its GENEVAX product candidates in therapeutic
markets and intends to construct a manufacturing facility meeting Good
Manufacturing Practices (GMP) requirements to implement these methods. The
Company believes its manufacturing processes may also be used to manufacture
DNA-based gene therapy products other than vaccines.
The Company's DNA-based vaccine product candidates are currently
manufactured by Apollon employees in two facilities owned by third parties, at a
scale sufficient to support its current and future Phase I and Phase I/II
clinical trials and projected Phase II and Phase III clinical trials. One
facility, owned by Centocor, is dedicated to Apollon through August 1998 with
automatic year-to-year renewals unless terminated by either party. In addition,
Apollon is party to a Cooperative Research Agreement with Walter Reed Medical
Center that provides the Company with availability, at designated intervals, to
a GMP environment to perform microbial fermentation. The Company's current
manufacturing capability includes an experienced internal staff of
bioengineering, microbial fermentation and quality control scientists and
manufacturing development scientists and operators. In addition, the Company has
contracted with third parties for facilities in which the Company may
manufacture bulk products in a GMP environment. Apollon conducts quality testing
of its manufactured product candidates according to Good Laboratory Practices
(GLP) requirements using proprietary assays developed by the Company. Currently,
the Company is manufacturing product candidates using a second generation
process that allows for production of up to fifty thousand doses in each lot.
The Company contracts with a third party manufacturer to perform the final
sterilization, packaging and fill of its product candidates. The Company
believes that, in the event of termination of its current arrangement, it will
be able to negotiate an arrangement with another third party manufacturer
without significant delay.
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SALES AND MARKETING
The Company's strategy is to market products directly, through its corporate
collaborators or through licensing arrangements with large pharmaceutical or
biotechnology companies. Implementation will depend, in large part, on the
market potential of any products the Company develops, as well as on the
Company's financial resources. The Company does not expect to establish a direct
sales capability for at least the next several years. Centocor and Wyeth-Lederle
each have the right to market worldwide future products, if any, resulting from
their respective collaborations.
PATENTS AND PROPRIETARY RIGHTS
Patents and other proprietary rights are important to the Company's
business. The Company's policy is to file patent applications to protect
technology, inventions and improvements to its inventions that are considered
important to the development of its business. The Company also relies upon trade
secrets, know-how, continuing technological innovations and licensing
opportunities to develop and maintain its competitive position. To date, Apollon
has established a proprietary portfolio of patent applications and has an
exclusive royalty bearing license from the Trustees of the University of
Pennsylvania, the Institute of Biotechnology and Advanced Molecular Medicine,
Inc. and The Wistar Institute to make, sell and use products developed using the
technology that is the subject matter of certain patent applications covered by
the license. These patent applications include, among other things,
specifications and claims regarding methods of facilitated DNA delivery and
expression by target cells IN VIVO, methods of patient treatment and routes of
administration, methods of discovery of novel vaccines and pharmaceutical
agents, molecular targets and methods of utilizing these targets and
compositions of matter for vaccines and pharmaceutical products. Apollon and its
collaborators are actively prosecuting 37 U.S. patent applications, about half
of which specifically support the Company's DNA injection and delivery
technology and DNA-based vaccine program. Several such applications are pending
in the United States and corresponding foreign applications have been filed. In
the United States, two such patents have issued and notices of allowance have
been received on sets of claims enumerated in several other patent applications.
No assurance can be given that claims of the remaining applications will issue
in their present form, if at all. See "Risk Factors -- Patents and Proprietary
Rights; Access to Proprietary Genes and Proteins."
The patent positions of pharmaceutical and biotechnology firms, including
those of the Company, are uncertain and involve complex legal and factual
questions for which important legal principles are largely unresolved. In
addition, the coverage claimed in a patent application can be significantly
reduced before a patent is issued. Consequently, the Company does not know
whether any of its unissued patent applications will result in the issuance of
patents or, if any patents are issued, whether they will provide significant
proprietary protection or will be circumvented or invalidated. Because patent
applications in the United States are maintained in secrecy until patents issue
or foreign counterparts, if any, publish and since publication of discoveries in
the scientific or patent literature often lag behind actual discoveries, the
Company cannot be certain that it or any licensor was the first creator of
inventions covered by pending patent applications or that it or such licensor
was the first to file patent applications for such inventions. Moreover, the
Company might have to participate in interference proceedings commenced by the
United States Patent and Trademark Office to determine priority of invention,
which could result in substantial cost to the Company, even if the eventual
outcome were favorable to the Company. There can be no assurance that the
Company's patents, if issued, would be held valid or enforceable by a court or
that a competitor's technology or product would be found to infringe such
patents. See "Risk Factors -- Patents and Proprietary Rights; Access to
Proprietary Genes and Proteins."
A number of pharmaceutical and biotechnology companies and research and
academic institutions have developed technologies, filed patent applications or
received patents on various technologies that may be related to the Company's
business. Some of these technologies, applications or patents may conflict with
the Company's technologies or patent applications. Such conflict could limit the
scope of the patents, if any, that the Company may be able to obtain or result
in the denial of the Company's patent
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applications. In addition, if patents that cover the Company's activities are
issued to other companies, there can be no assurance that the Company would be
able to obtain licenses to these patents at a reasonable cost or be able to
develop or obtain alternative technology. The Company is aware of two patents
controlled by Vical with claims relating to aspects of DNA-based vaccine
technology. While the Company believes that its technology does not infringe the
Vical patents, there can be no assurance that a claim will not be asserted
against the Company. See "Risk Factors -- Patents and Proprietary Rights; Access
to Proprietary Genes and Proteins." A number of the DNA sequences or proteins
encoded by certain of these sequences that the Company is currently
investigating in its preclinical studies and clinical trials or may use in other
of its DNA-based product candidates are or may become patented by others. As a
result, the Company will and may be required to obtain licenses under such
patents in order to test, use or market products that contain proprietary DNA
sequences or encode proprietary proteins. If such licenses are not obtained by
the Company, it will not be able to commercialize the products requiring such
licenses. The Company has obtained, or has the right to obtain, certain licenses
to DNA sequences or encoded proteins and is currently negotiating certain other
licenses. There can be no assurance that the Company will be able to obtain any
of such licenses or any further required licenses on commercially favorable
terms, if at all.
In addition to patent protection, the Company also relies upon trade secret
protection for its confidential and proprietary information. There can be no
assurance that others will not independently develop substantially equivalent
proprietary information and techniques or otherwise gain access to the Company's
trade secrets or disclose such technology or that the Company can meaningfully
protect its trade secrets.
It is the Company's policy to require its employees, officers, consultants
and collaborative partners to execute confidentiality agreements upon the
commencement of employment or consulting relationships or a collaboration with
the Company. These agreements provide that all confidential information
developed or made known during the course of the relationship with the Company
is to be kept confidential and not disclosed to third parties except in specific
circumstances. In the case of employees, the agreements provide that all
invention resulting from work performed for the Company, utilizing property of
the Company or relating to the Company's business and conceived or completed by
the individual during employment, shall be the exclusive property of the Company
to the extent permitted by applicable law. There can be no assurance, however,
that these agreements will provide meaningful protection of the Company's trade
secrets or adequate remedies in the event of unauthorized use or disclosure of
such information.
GOVERNMENT REGULATION
Any drug products developed by the Company will require regulatory
authorization prior to clinical trials and additional regulatory clearances
prior to commercialization. New human DNA-based vaccine and other gene therapy
product candidates are expected to be subject to extensive regulation by the FDA
as biological drugs and comparable agencies in other countries. The precise
regulatory requirements with which the Company must comply are uncertain at this
time due to the novelty of the human gene products, vaccines and therapies
currently under development. The Company believes that its potential vaccine
products will be regulated as biological drugs and that any newly developed
facilitating agents will be regulated as non-biological new drugs. New drugs are
subject to regulation under the Federal Food, Drug and Cosmetic Act, and
biological drug products, in addition to being subject to certain provisions of
that act, are regulated under the Public Health Service Act. Both statutes and
the regulations promulgated thereunder govern, among other things, the testing,
manufacturing, safety, efficacy, labeling, storage, record keeping, advertising
and other promotional practices involving biologics or non-biological new drugs,
as the case may be. FDA authorization must be obtained before clinical testing
and approval must be obtained before manufacturing and marketing of biologics or
new drugs. At the FDA, CBER is responsible for the regulation of biological
drugs and CDER is responsible for the regulation of non-
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biological new drugs. Biological drugs generally are regulated more stringently
than non-biological drugs. Drugs that contain biological and non-biological
components that both contribute to the efficacy of a product may be regulated
more onerously as combination products. The use of facilitating agents in the
Company's vaccine or other DNA-based products could result in combination drug
status. See "Risk Factors -- Government Regulation: No Assurance of FDA
Approval."
Obtaining FDA approval of a drug has historically been a costly and time
consuming process. Generally, in order to gain FDA premarket approval, a
developer first must conduct preclinical studies in the laboratory and in animal
models in accordance with GLP requirements to gain preliminary information about
the potential efficacy of a product candidate and to identify any major safety
concerns. The results of these studies are submitted as a part of an
Investigational New Drug ("IND") application, which must become effective before
human clinical trials of an investigational drug can start. The IND also
includes a detailed description of the clinical investigations to be undertaken.
See "Risk Factors -- Government Regulation; No Assurance of FDA Approval."
The Company must file an IND for each product candidate and for each
preventive or therapeutic vaccine indication it intends to study in the clinic.
Clinical studies must usually be conducted in accordance with FDA informed
conduct and institutional review board requirements. The Company is responsible
for initiating and overseeing the clinical studies to demonstrate the safety,
purity, efficacy and potency that are necessary to obtain FDA approval of any
such product candidates as biological drugs. Clinical trials are normally done
in three phases. In Phase I, clinical trials are conducted with a small number
of either healthy volunteers or patients afflicted with the target disease to
determine the safety profile and immunogenicity of the product candidate. In
Phase II, clinical trials are conducted with a larger group of either healthy
volunteers or patients afflicted with the target disease in order to determine
preliminary efficacy, optimal dosages and vaccination schedule and expanded
evidence of safety. In Phase III, large-scale, multi-center, comparative
clinical trials are conducted with either healthy volunteers or patients
afflicted with the target disease in order to provide enough data for the
statistical proof of safety and efficacy required by the FDA and other
regulatory authorities. In the case of DNA-based products, the initial human
testing is generally done to assess both safety and immune responses, as well as
preliminary efficacy issues either in healthy volunteers or patients afflicted
with the target disease. Such clinical trials are referred to herein as Phase
I/II clinical trials.
The FDA receives reports on the progress of each phase of clinical testing,
and it may require the modification, suspension or termination of clinical
trials if an unwarranted risk is presented to patients or healthy volunteers.
DNA-based vaccine and other gene therapy products are a new category of
potential preventive and therapeutic products. There can be no assurance as to
the length of the clinical trial period or the number of patients or healthy
volunteers the FDA will require to be enrolled in the clinical trials in order
to establish to its satisfaction the safety, purity, efficacy and potency of
DNA-based vaccine and other gene therapy products as biological drugs. See "Risk
Factors -- Government Regulation; No Assurance of FDA Approval."
After successful completion of clinical trials of a new product candidate,
FDA marketing approval must be obtained. The Company expects that its vaccine
and gene therapy products will be regulated as biological drugs. All drugs
regulated as biologics must be proven to be safe, pure, potent and efficacious.
Currently, there are three alternative possible application processes that may
apply to the Company's product candidates. First, traditionally, approval by
CBER of both a Product License Application ("PLA") and an Establishment License
Application ("ELA") is required before commercial marketing of a biologic can
occur. Further requirements traditionally applicable to biologics include
release of each lot of a biologic and specific biological GMP standards in
addition to those applicable to other drugs. Second, only a single Biologics
License Application ("BLA") may be required for certain biologics the FDA
considers to be well characterized. The ELA requirement has been eliminated for
certain specified biotechnology and synthetic biological products, including
therapeutic DNA plasmids. Lot release requirements have also been eliminated for
certain of these well characterized biologics. Thus, if the Company were to
reach the
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license stage for a therapeutic DNA plasmid product candidate, under current
regulations only a single license application, a BLA may be required. However,
if the Company were to reach the license stage for a preventive DNA-based
vaccine, under current regulations both a PLA and ELA would be required. Third,
if the product candidate is classified as a non-biological new drug, the Company
must file a New Drug Application ("NDA") with CDER and receive approval before
commercially marketing the drug. New drugs must be shown by substantial evidence
to be safe and effective. Generally, in order to obtain approval of
non-biological drugs, the FDA requires at least two properly conducted, adequate
and well controlled clinical studies demonstrating safety and efficacy with
sufficient levels of statistical assurance. In case of approval of a biological
drug, one properly conducted, adequate and well controlled study may suffice.
The NDA, BLA or PLA/ELA must include results of product development
activities, preclinical studies and clinical trials in addition to detailed
manufacturing information. The review and approval processes require substantial
time and effort and there can be no assurance that any approval will be granted
on a timely basis, if at all. If questions arise during the FDA review process,
approval can take longer. Notwithstanding the submission of relevant data, the
FDA may ultimately decide that the NDA, BLA or PLA/ELA does not satisfy its
regulatory criteria for approval and require additional clinical studies. Even
if FDA regulatory clearances are obtained, a marketed product is subject to
continual review and later discovery of previously unknown problems or failure
to comply with the applicable regulatory requirements may result in restrictions
on the marketing of a product or withdrawal of the product from the market as
well as possible civil or criminal sanctions. In addition, after marketing
clearance is secured, the FDA may require additional clinical testing to confirm
safety and efficacy (Phase IV studies) and the manufacturing facility for the
Company's products will be subject to periodic inspections for GMP compliance by
FDA inspectors.
Since 1992, non-biological and biological drugs have been subject to the
Prescription Drug User Fee Act ("PDUFA"). PDUFA requires, among other things,
companies that submit marketing applications for such products to pay fees in
connection with review of such prescription drug applications. In return, the
FDA has committed to reviewing a certain percentage of the marketing
applications within certain time frames. In Fiscal Year 1997, the FDA has
committed to reaching approval, disapproval or additional-data-required
decisions on 90% of non-priority PLAs, BLAs and NDAs within 12 months of
application submission. PDUFA expired on September 30, 1997. Although the
Congress has passed legislation to extend PDUFA for an additional period of
time, there can be no assurance that the extension will be signed by the
President in a timely manner, if at all. Failure of Congress to extend PDUFA
would have a significant adverse effect on the FDA's time frames for reviewing
drug product marketing applications and on the Company's drug applications. See
"Risk Factors -- Government Regulation; No Assurance of FDA Approval."
The Orphan Drug Act of 1983, as amended, generally provides tax and market
exclusivity incentives to manufacturers to undertake development and marketing
of products to treat diseases having a prevalence of no more than 200,000 people
in the United States at the time of application for Orphan Drug designation. In
addition to GENEVAX-TCR, which has received Orphan Drug designation for use in
CTCL, Apollon may pursue Orphan Drug designation, where appropriate, with
respect to other products. A drug that receives Orphan Drug designation by the
FDA and is the first product to receive FDA marketing approval is entitled to a
seven-year exclusive marketing period in the United States for the approved
indication. However, a drug that is considered by the FDA to be different in
chemical structure or use from or that is clinically superior to an approved
Orphan Drug is not barred from receiving FDA approval for marketing during such
seven-year period. Therefore, it is possible, for example, that even if a
DNA-based vaccine or other gene therapy product receives exclusive marketing
approval for a particular indication, a second gene therapy product utilizing
different technology (e.g., viral-based vs. non-viral-based) or a product using
similar technology that is clinically superior can nonetheless be approved by
the FDA at any time. In addition, Congress has considered restrictions on the
designation of Orphan Drugs
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and the benefits available under the Orphan Drug Act for manufacturers of these
drugs. No assurances exist that Orphan Drug status (other than for the CTCL
products) or benefits will be available for any of the Company's drugs.
In addition to the FDA requirements, the NIH has established guidelines for
research involving recombinant DNA molecules, which are utilized by the Company
and certain of its collaborators in their research. These guidelines apply to
all recombinant DNA research which is conducted at or supported by the NIH or
most other governmental entities.
In both domestic and foreign markets, sales of the Company's products, if
any, will be dependent in part on the availability of reimbursements from third
party payors, such as government and private insurance plans. Third party payors
are increasingly challenging the prices charged for medical products and
services. If the Company succeeds in bringing one or more products to market,
there can be no assurance that these products will be considered cost-effective,
that reimbursement will be available or, if available, that the payor's
reimbursement policies will not adversely affect the Company's ability to sell
its products on a profitable basis. See "Risk Factors -- Government Regulation;
No Assurance of FDA Approval."
The Company is also subject to various federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals and the use and
disposal of hazardous or potentially hazardous substances, including radioactive
compounds and infectious disease agents, used in connection with the Company's
research work. The extent of government regulation which might result from any
future legislation or administrative action cannot be accurately predicted.
COMPETITION
Gene delivery and DNA-based therapy are relatively new, rapidly evolving
areas of science in which significant and unexpected technological advances are
likely. Rapid technological development could result in the Company's products
or technologies becoming obsolete before the Company recovers a significant
portion of its related research, development and capital expenditures. The
Company is aware of several development stage and established enterprises,
including major pharmaceutical and biotechnology firms, which are exploring the
field of human gene therapy or are actively engaged in research and development
in areas similar or related to the Company's technology. The Company may also
experience competition from companies that have acquired or may acquire
technology from companies, universities and other research institutions.
Additionally, there are products currently approved by the United States and
other government regulatory agencies that are being sold for the treatment or
prevention of diseases targeted by the Company.
Most of the Company's competitors and potential competitors have
substantially greater product development capabilities and financial,
scientific, marketing and human resources than the Company. Other companies may
succeed in developing products earlier than the Company, completing clinical
trials and obtaining FDA approvals for such products more rapidly than the
Company, or developing products that are more effective, reliable, available or
cost-effective than the Company's product candidates and other potential
products. There can be no assurance that research and development by others will
not render the Company's technology or products obsolete or non-competitive or
result in treatments or cures superior to any therapy or vaccine developed by
the Company or that any therapy or vaccine developed by the Company will be
preferred to any existing or newly developed technologies.
FACILITIES
Apollon leases 46,125 square feet of space in a one-story 60,880 square foot
building in the Great Valley Corporate Center in Malvern, Pennsylvania. The
lease expires September 30, 2003, subject to the
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Company's option to renew for an additional five years. The Company has improved
about 23,700 square feet of its leased space with offices, laboratories and
associated utilities.
Apollon expects this building to serve its needs for the foreseeable future.
Apollon may consider the construction of a manufacturing facility to support the
commercialization of the Company's first GENEVAX product candidate and may
require additional manufacturing space if multiple products approach
commercialization.
EMPLOYEES
As of September 30, 1997, the Company had 56 full-time and four part-time
employees, 17 of which hold a Ph.D. or M.D. degree. Of the Company's employees,
47 are engaged directly in full-time or part-time research and product
development efforts. None of the Company's employees is covered by a collective
bargaining agreement. Apollon believes that it maintains good relations with its
employees.
LEGAL PROCEEDINGS
The Company is not presently involved in any material legal proceedings
outside of the ordinary course of business. The Company may in the future be
named as a defendant in lawsuits involving product defects, breach of warranty
or other actions relating to products which it manufactures or distributes.
45
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth information regarding the executive officers
and directors of the Company as of June 30, 1997:
<TABLE>
<CAPTION>
AGE POSITION
--- ----------------------------------------------------
<S> <C> <C>
Morton Collins, Ph.D.(1)............................ 61 Chairman of the Board
Vincent R. Zurawski, Jr., Ph.D...................... 51 President, Chief Executive Officer and Director
Richard A. Carrano, Ph.D............................ 56 Vice President, Technology Development and
Regulatory Affairs
Richard B. Ciccarelli, Ph.D......................... 40 Vice President, Research and Development
Richard S. Ginsberg, M.D............................ 45 Vice President, Clinical Research
James G. Murphy..................................... 41 Vice President, Finance and Administration, Chief
Financial Officer and Treasurer
Thomas S. Edgington, M.D............................ 65 Director
Christopher Moller, Ph.D.(1)........................ 43 Director
Hubert J.P. Schoemaker, Ph.D........................ 47 Director
</TABLE>
- ------------------------
(1) Member of the Compensation Committee
DR. COLLINS has been Chairman of the Board of Apollon since June 1992. Since
1968, Dr. Collins has been a general partner of DSV Partners III and DSV
Management, Ltd., the general partner of DSV Partners IV, an affiliate of the
Company. Dr. Collins is a director of Kopin Corporation, The Liposome Company,
Pressure Systems, Inc., Tandem Computers, Incorporated and Thermotrex
Corporation. He received his MS and Ph.D. degrees in engineering from Princeton
University.
DR. ZURAWSKI founded Apollon in January 1992. He has been President and
Chief Executive Officer and a director of the Company since its inception. Prior
to January 1992, Dr. Zurawski was Senior Vice President and Chief Scientific
Officer at Centocor, Inc., which he co-founded in 1979. Dr. Zurawski received
his Ph.D. in Chemistry from Purdue University. Prior to founding Apollon, Dr.
Zurawski was a Research Fellow at the Massachusetts General Hospital, a Faculty
Member at Harvard Medical School and a Visiting Professor at the Karolinska
Hospital, Stockholm, Sweden.
DR. CARRANO joined Apollon at its inception in January 1992 as Vice
President, Administration and Business Development and has held the position of
Vice President, Technology Development and Regulatory Affairs since June 1995.
Prior to joining Apollon, Dr. Carrano held positions at ICI America, Adria
Laboratories, Centocor, Inc. and Unimed Inc. from 1966 to 1991. Dr. Carrano
received his Ph.D. in Pharmacology and Biochemistry from the University of
Connecticut.
DR. CICCARELLI joined Apollon in December 1994 as Director, Applied Research
and Development, held the position of Associate Vice President, Research and
Development from February 1995 to January 1996, held the position of Vice
President, Biologics and Pharmaceutics Research from January 1996 to January
1997 and was appointed Vice President, Research and Development in January 1997.
Prior to joining Apollon, Dr. Ciccarelli was Assistant Director of Molecular and
Cellular Biology in the Sterling Winthrop Pharmaceuticals Division of Eastman
Kodak, which he joined as a senior research scientist in 1985.
46
<PAGE>
Dr. Ciccarelli received his Ph.D. in Biological Chemistry from Dartmouth College
and was a Damon Runyon-Walter Winchell Cancer Fund postdoctoral fellow at M.I.T.
until 1985.
DR. GINSBERG joined Apollon in October 1995 as Vice President, Clinical
Research. Prior to joining Apollon, Dr. Ginsberg worked for LabCorp, Inc. as
Vice President, Clinical Trials from 1994 to 1995 and for Hoffmann-LaRoche Inc.
as Associate Clinical Director from 1989 to 1994. Previously, Dr. Ginsberg was
Director of Clinical Research of The Liposome Company. Dr. Ginsberg received his
M.D. from Eastern Virginia Medical School.
MR. MURPHY joined Apollon in March 1996 as Vice President, Finance and
Administration, Chief Financial Officer and Treasurer. From January 1995 to
March 1996, Mr. Murphy was Chief Financial Officer and Treasurer of ATX Telecom
Systems, Inc., a wholly owned subsidiary of Amoco Corporation. From March 1989
to December 1994, Mr. Murphy was Chief Financial Officer and a Director of
Infopage, Inc. Mr. Murphy received his B.S. degree from Villanova University and
is a Certified Public Accountant.
DR. EDGINGTON has been a director of Apollon since September 1993. He has
been a Professor in the Departments of Immunology and Vascular Biology at The
Scripps Research Institute since 1965. He is also Adjunct Professor of Pathology
at the University of California, San Diego and was a founder of Corvas
International, Inc., a biopharmaceutical firm with headquarters in San Diego. He
received his undergraduate, graduate education and M.D. at Stanford University.
DR. MOLLER has been a director of Apollon since July 1995. Dr. Moller has
served as Managing Director of Technology Leaders III since January 1994 and as
Managing Director and general partner of Technology Leaders II Management, L.P.,
since January 1994 and in various capacities with its predecessors since January
1990. He is a director of five biotechnology companies including ViroPharma,
Inc. and ChromaVision, Inc. Dr. Moller serves on the medical advisory board of
the Lankenau Research Institute. He received his Ph.D. degree in immunology from
the University of Pennsylvania.
DR. SCHOEMAKER has been a director of Apollon since its inception in January
1992. He was a co-founder of Centocor, Inc., where he has served as Chairman of
the Board since 1980. Dr. Schoemaker is also Co-Chairman of the Board of the
Eastern Technology Council, Co-Chairman of the Executive Committee of Technology
Leaders, L.P. and a director of Safeguard Scientifics, Inc. He received his
Ph.D. in biochemistry from the Massachusetts Institute of Technology ("M.I.T.").
All directors hold office until the next annual meeting of shareholders of
the Company and until their successors have been elected and qualified. The
officers of the Company are appointed annually and serve at the discretion of
the Board of Directors.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth a summary of the compensation paid by the
Company during the fiscal year ended December 31, 1996 to the Company's Chief
Executive Officer and to each other person who was an executive officer at the
end of the fiscal year ended December 31, 1996 and whose total annual salary and
bonus exceeded $100,000 during such fiscal year (the "Named Executive
Officers").
47
<PAGE>
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------
<S> <C> <C> <C> <C> <C>
NAME AND OPTIONS/ ALL OTHER
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) SARS (#) COMPENSATION ($)
- --------------------------------- --------- ----------- ------------- ------------- -----------------
Vincent R. Zurawski, Jr.,........ 1996 199,039 -- -- 5,600(1)
Ph.D., President and
Chief Executive Officer
Richard A. Carrano, Ph.D.,....... 1996 145,885 3,000 -- --
Vice President, Technology
Development and
Regulatory Affairs
Richard B. Ciccarelli, Ph.D.,.... 1996 123,933 4,000 12,863 --
Vice President,
Research and Development
Richard S. Ginsberg, M.D.,....... 1996 155,000 5,000 -- 2,863(2)
M.S., Vice President,
Clinical Research
</TABLE>
- ------------------------
(1) Represents certain tax preparation fees paid by the Company.
(2) Represents certain insurance premiums paid by the Company.
EMPLOYMENT AGREEMENTS
In February 1992, Richard A. Carrano entered into an employment agreement
with the Company. The agreement provided for an initial annual base salary of
$120,000, to be reviewed and adjusted periodically, along with participation in
bonus programs and other customary employee benefits. The agreement provided Dr.
Carrano the opportunity to purchase 5,742 shares of Common Stock at fair market
value at the time of purchase, which shares were purchased in June 1992. The
agreement also provides for compensation for Dr. Carrano in the event of his
termination, other than for specified causes. Under the terms of the agreement,
Dr. Carrano has entered into a non-disclosure of inventions and confidentiality
agreement with the Company.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth a summary of the options granted by the
Company during its last fiscal year to the Named Executive Officers during the
fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK PRICE
OPTIONS EXERCISE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERMS ($)
GRANTED EMPLOYEES IN PRICE EXPIRATION --------------------------
NAME (#)(1) FISCAL YEAR ($/SH) DATE 5% 10%
- --------------------------------------- ----------- ----------------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard B. Ciccarelli, Ph.D............ 12,863 8.7 1.6326 4/24/06 13,207 33,468
</TABLE>
- ------------------------
(1) No SARs were granted in the last fiscal year.
48
<PAGE>
NUMBER/VALUE OF UNEXERCISED OPTIONS
The following table sets forth the number of shares acquired upon exercise
of options exercised by the Named Executive Officers during the last fiscal
year, the value realized upon the exercise of such options, the number of shares
issuable on exercise of unexercised options held by such persons as of December
31, 1996 and the value of such unexercised options as of such date.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
UNEXERCISED OPTIONS/ LSARS VALUE OF UNEXERCISED IN-THE-MONEY
FY-END OPTIONS/LSARS AT FY-END (1)
SHARES ACQUIRED VALUE -------------------------- -----------------------------------
NAME ON EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------------- ------------- ----------- ------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Vincent R. Zurawski, Jr.,
Ph.D. ...................... 0 0 22,970 68,910 $ 62,499 $ 187,497
Richard A. Carrano, Ph.D. .... 13,322 52,648 2,756 8,728 8,298 26,348
Richard B. Ciccarelli,
Ph.D. ...................... 0 0 7,695 29,056 23,688 84,307
Richard S. Ginsberg,
M.D., M.S. ................. 0 0 5,743 17,227 15,626 46,873
</TABLE>
- --------------------------
(1) Value is measured by the difference between the fair market value of the
Company's Common Stock on December 31, 1995 ($4.35 per share as determined
by the Board of Directors) and the exercise price of the option.
CHANGE OF CONTROL AGREEMENTS
In July 1996, the Company and its executive officers entered into agreements
regarding severance payments in the event of termination in connection with a
change in control of the Company. The Company entered into substantially similar
agreements with Richard A. Carrano, Vice President, Technology Development and
Regulatory Affairs, Richard B. Ciccarelli, Vice President, Research and
Development, Richard S. Ginsberg, Vice President, Clinical Research, James G.
Murphy, Vice President, Finance and Administration and Chief Financial Officer
and Anthony Marcucci, Controller. These agreements provide that the Company or
its successor shall pay severance equal to six months base salary of the
executive if the executive is terminated in connection with a change in control
of the Company. The Company or its successor shall also be obligated to purchase
the securities of the Company owned by the executive, and to pay a sum equal to
the difference between the exercise price of all outstanding, but not yet
exercisable, options granted to the executive and the price paid to effect the
change in control. The Company entered into a similar agreement with Vincent R.
Zurawski, Jr., President and Chief Executive Officer. However, Dr. Zurawski's
agreement provides for a severance payment equal to 24 months of his base
salary, as compared to six months for the other executive officers.
COMPENSATION OF DIRECTORS
Directors do not receive compensation for services on the Board of Directors
or any committee thereof. All of the directors, however, are reimbursed for
their expenses for each Board and committee meeting attended.
During the last fiscal year, the Company paid no consulting fees to any
directors. During the 1993 and 1994 fiscal years, the Company accrued $30,000
for consulting fees payable to Thomas Edgington, which were paid in 1996. Such
consulting fees accrued at the rate of $2,500 per month from October 1, 1993
until September 30, 1994. The Company believes that the terms of its consulting
arrangement with Dr. Edgington were no less favorable than those the Company
could have received from an independent
49
<PAGE>
third party. On June 26, 1997, the Company issued to Dr. Edgington options to
purchase 6,891 shares of Common Stock at an exercise price of $4.35 per share
for services rendered as a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last fiscal year, the Compensation Committee of the Board of
Directors consisted of Morton Collins and Christopher Moller. Dr. Moller
replaced Thomas Edgington in March 1996. During the 1993 and 1994 fiscal years,
the Company accrued $30,000 for consulting fees payable to Dr. Edgington, which
were paid in 1996. Morton Collins, a director and Chairman of the Board of the
Company, is a general partner of DSV Management. Ltd. and the general partner of
DSV Partners IV, a principal shareholder of the Company.
1992 OMNIBUS STOCK OPTION PLAN
The Company's 1992 Omnibus Stock Option Plan (the "1992 Stock Option Plan")
was approved by the Board of Directors on June 15, 1992 and by the shareholders
on June 14, 1993. The 1992 Stock Option Plan provides for the grant of both
incentive stock options intended to qualify as such under Section 422 of the
Internal Revenue Code of 1986, as amended and non-qualified stock options. Under
the 1992 Stock Option Plan, the Company is authorized to grant a maximum of
459,400 shares of Common Stock to employees, officers, directors and consultants
of the Company (Eligible Persons). The maximum term is five years for incentive
stock options granted to an Eligible Person who owns, on the date of the grant,
more than 10% of the total combined voting power of all classes of stock of the
Company and ten years for all other options granted under the 1992 Stock Option
Plan. The 1992 Stock Option Plan will terminate on June 15, 2002, unless sooner
terminated by the Board of Directors. The 1992 Stock Option Plan is administered
by the Board, unless the Board delegates administration to a committee of
disinterested directors. As of September 30, 1997, options to purchase 422,379
shares of Common Stock were outstanding under the 1992 Stock Option Plan,
181,252 of which are immediately exercisable.
The 1992 Stock Option Plan provides for the granting of limited stock
appreciation rights ("LSARs") to officers and directors under the 1992 Stock
Option Plan at the discretion of the Board of Directors. Those options with
respect to which a LSAR has been granted are exercisable only during the period
commencing on the first day following the occurrence of a "Triggering Event" as
defined in the 1992 Stock Option Plan and terminate no later than the expiration
of the underlying option. Upon the occurrence of any Triggering Event, the
optionee shall receive from the Company an amount in cash equal to the excess of
the fair market value per share of the Common Stock on the date the Triggering
Event occurs over the related exercise price per share. No LSARs have been
granted as of September 30, 1997.
1997 NON-QUALIFIED STOCK OPTION PLAN
The Company's 1997 Non-Qualified Stock Option Plan (the "1997 Stock Option
Plan") was approved by the Board of Directors on April 16, 1997. The 1997 Stock
Option Plan provides for the grant of non-qualified stock options. Under the
1997 Stock Option Plan, the Company is authorized to grant a maximum of 91,880
shares of Common Stock to employees, officers, directors and consultants of the
Company (Eligible Persons). The maximum term is ten years for all options
granted under the 1997 Stock Option Plan. The 1997 Stock Option Plan will
terminate on April 16, 2007, unless sooner terminated by the Board of Directors.
The 1997 Stock Option Plan is administered by the Board, unless the Board
delegates administration to the Compensation Committee. As of September 30,
1997, options to purchase 34,792 shares of Common Stock were outstanding under
the 1997 Stock Option Plan, none of which are immediately exercisable.
50
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of September 30, 1997, Centocor owned approximately 31% of the equity
shares of the Company on a fully diluted basis. Hubert J.P. Schoemaker, a
director of the Company, is Chairman of the Board of Centocor. Prior to 1994,
Vincent R. Zurawski, Jr., a director and President and Chief Executive Officer
of the Company, served as a consultant to Centocor.
On September 20, 1994, the Company entered into an agreement with Centocor
(the "Facilities Use Agreement"), whereby the Company leases certain
manufacturing space from Centocor. On the same date, the Company issued to
Centocor 200,000 shares of Series B Convertible Preferred Stock pursuant to the
Facilities Use Agreement. The Company issued an additional 200,000 shares of
Series B Convertible Preferred Stock to Centocor on November 22, 1995 pursuant
to the Facilities Use Agreement. Such Convertible Preferred Stock was issued in
lieu of an aggregate $1.0 million owed under this agreement.
In 1994 and 1995, the Company borrowed an aggregate principal amount of $1.0
million from Centocor, which amount was converted into 400,000 shares of Series
B Convertible Preferred Stock and all interest was waived on April 23, 1996. As
further consideration for these loans, the Company issued warrants to Centocor,
giving it the right to purchase a total of 73,504 shares of Common Stock at an
exercise price of $5.44 per share.
On March 6, 1995, the Company and Centocor entered into the Centocor License
and Option Agreement. Pursuant to this agreement, Centocor waived its rights to
certain technology and patents and obtained certain rights to other technology,
in exchange for which it agreed to pay the Company certain milestone payments
and royalties. Centocor also paid to the Company an aggregate of $750,000 under
the Centocor License and Option Agreement as further consideration for the
license and option rights it obtained. The Company received an additional
$75,000 in 1997 under this agreement. See "Business -- Strategic Alliances and
Collaborations -- Corporate Collaborations."
In 1994 and 1995, the Company borrowed an aggregate principal amount of $1.5
million from DSV Partners IV, which amount was converted into 600,000 shares of
Series B Convertible Preferred Stock and all interest was waived on April 23,
1996. As further consideration for these loans, the Company issued warrants to
DSV Partners IV, giving it the right to purchase a total of 110,256 shares of
Common Stock at an exercise price of $5.44 per share. Morton Collins, a director
and Chairman of the Board of the Company, is a general partner of DSV
Management, Ltd., the general partner of DSV Partners IV.
In 1994 and 1995, the Company borrowed an aggregate principal amount of $1.5
million from Technology Leaders Offshore C.V. and Technology Leaders, L.P.,
which amount was converted into 600,000 shares of Series B Convertible Preferred
Stock and all interest was waived on April 23, 1996. As further consideration
for these loans, the Company issued warrants to Technology Leaders Offshore C.V.
and Technology Leaders, L.P. giving them the right to purchase a total of 58,776
and 51,472 shares of Common Stock, respectively, at an exercise price of $5.44
per share. Christopher Moller, a director of the Company, is Managing Director
of the general partner of Technology Leaders, L.P. and Technology Leaders
Offshore C.V. Dr. Schoemaker is Co-Chairman of the Executive Committee of the
general partner of Technology Leaders, L.P. and Technology Leaders Offshore C.V.
In March 1996, pursuant to an agreement between the Company and the
preferred shareholders, $511,000 of interest accrued from the date of issuance
on $4.0 million aggregate principal amount promissory notes was waived, of which
$418,000 was accrued at December 31, 1995. The $511,000 of interest that was
waived was credited to the Company's additional paid-in capital account in 1996.
In April 1996, the preferred shareholders converted the principal amount of
these notes into 1,600,000 shares of the Series B Convertible Preferred Stock as
described above.
During 1996, the Company issued 2,435,286 shares of Series C Convertible
Preferred Stock for $9.7 million ($4.00 per share). Centocor purchased 769,786
shares of the Series C Convertible Preferred Stock for $4.00 per share. The
Company received net proceeds of $9.4 million net of placement fees.
51
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of September 30, 1997, the record and
beneficial ownership of the Company's Common Stock, assuming conversion of the
Convertible Preferred Stock and the AHP Financing (at an assumed initial public
offering price of $12.00 per share), by (i) each person who is known by the
Company to own beneficially more than 5% of the issued and outstanding shares of
Common Stock assuming Conversion, (ii) each of the Company's directors, (iii)
each of the Named Executive Officers, and (iv) all directors and executive
officers as a group.
<TABLE>
<CAPTION>
PERCENTAGE OWNED
--------------------------
<S> <C> <C> <C>
NUMBER OF
SHARES
NAMES AND ADDRESSES BENEFICIALLY BEFORE THE AFTER THE
OF BENEFICIAL OWNERS (1) OWNED (2) OFFERING OFFERING
- ------------------------------------------------------------------------ ----------------- ------------- -----------
5% SHAREHOLDERS
Centocor, Inc.(3)....................................................... 1,943,163 34.0% 23.6%
200 Great Valley Parkway
Malvern, PA 19355
DSV Partners IV(4)...................................................... 1,258,756 21.9 15.2
221 Nassau Street
Princeton, NJ 08542
Chancellor Capital Management, Inc.(5).................................. 689,100 12.2 8.5
153 East 53rd Street
25th Floor
New York, NY 10022
Technology Leaders Offshore C.V.(6)..................................... 401,644 7.0 4.9
800 Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Technology Leaders, L.P.(7)............................................. 351,763 6.2 4.3
800 Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
DIRECTORS AND NAMED EXECUTIVE OFFICERS
Hubert J.P. Schoemaker, Ph.D.(8)........................................ 2,712,649 46.4 32.5
Centocor, Inc.
200 Great Valley Parkway
Malvern, PA 19355
Morton Collins, Ph.D.(9)................................................ 1,258,756 21.9 15.2
DSV Management, Ltd.
221 Nassau Street
Princeton, NJ 02021
Christopher Moller, Ph.D.(10)........................................... 753,407 13.1 9.1
Safeguard Scientifics, Inc.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Vincent R. Zurawski, Jr., Ph.D.(11)..................................... 155,277 2.7 1.9
Richard A. Carrano, Ph.D.(12)........................................... 31,239 * *
</TABLE>
52
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OWNED
--------------------------
NUMBER OF
SHARES
NAMES AND ADDRESSES BENEFICIALLY BEFORE THE AFTER THE
OF BENEFICIAL OWNERS (1) OWNED (2) OFFERING OFFERING
- ------------------------------------------------------------------------ ----------------- ------------- -----------
<S> <C> <C> <C>
Thomas S. Edgington, M.D.(13)........................................... 19,525 * *
Molecular Biology
Consultants
2362 Avenida de la Playa
La Jolla, CA 92037
Richard B. Ciccarelli, Ph.D.(14)........................................ 13,783 * *
Richard S. Ginsberg, M.D., M.S.(15)..................................... 5,743 * *
All directors and executive officers as a group
(10 persons)(16)...................................................... 4,215,461 69.9% 49.4%
</TABLE>
- ------------------------
* Less than 1%.
(1) Unless otherwise indicated, the business address is in care of the Company.
(2) Except as otherwise indicated in the footnotes to this table, the persons
named in this table have sole voting and investment power with respect to
all shares of stock owned.
(3) Includes 73,504 shares of Common Stock issuable upon the exercise of
warrants.
(4) Includes 110,256 shares of Common Stock issuable upon the exercise of
warrants.
(5) Chancellor Capital Management, Inc. holds these shares in its capacity as
investment manager for an aggregate of four institutions and disclaims
beneficial ownership of such shares.
(6) Includes 58,776 shares of Common Stock issuable upon the exercise of
warrants.
(7) Includes 51,472 shares of Common Stock issuable upon the exercise of
warrants.
(8) Includes 16,079 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of September 30,
1997. Also includes 1,943,163 shares of Common Stock beneficially owned by
Centocor. Dr. Schoemaker is Chairman of the Board of Centocor and disclaims
beneficial ownership of the 1,943,163 shares beneficially owned by Centocor.
Also includes 51,472 and 58,776 shares of Common Stock issuable upon the
exercise of warrants and 300,291 and 342,868 shares of Common Stock held by
Technology Leaders, L.P. and Technology Leaders Offshore C.V., respectively.
Dr. Schoemaker is Co-Chairman of the Executive Committee of the general
partner of Technology Leaders, L.P. and Technology Leaders Offshore C.V. and
disclaims beneficial ownership of all such shares.
(9) Includes 110,256 shares of Common Stock issuable upon the exercise of
warrants and 1,148,500 shares of Common Stock held by DSV Partners IV. Dr.
Collins is a general partner of DSV Management, Ltd., the general partner of
DSV Partners IV. Dr. Collins disclaims beneficial ownership of the shares
held or exercisable by DSV Partners IV.
(10) Includes 51,472 and 58,776 shares of Common Stock issuable upon the
exercise of warrants held by Technology Leaders, L.P. and Technology Leaders
Offshore C.V., respectively. Also includes 300,291 and 342,868 shares of
Common Stock owned by Technology Leaders, L.P. and Technology Leaders
Offshore C.V., respectively. Dr. Moller is Managing Director of the general
partner of each of Technology Leaders, L.P. and Technology Leaders Offshore
C.V. Dr. Moller disclaims beneficial ownership of all such shares.
(11) Includes 105,662 shares of Common Stock held by Argus Investment Partners,
L.P., of which Dr. Zurawski is the general partner. Also includes 22,970
shares of Common Stock subject to options which are exercisable or which
will become exercisable within 60 days of September 30, 1997.
(12) Includes 3,905 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of September 30,
1997.
(13) Consists of 10,337 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of September 30,
1997; and 9,188 shares of Common Stock held by the Thomas S. & Joanne R.
Edgington Trust.
(14) Includes 13,783 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of September 30,
1997.
(15) Includes 5,743 shares of Common Stock subject to options which are
exercisable or which will become exercisable within 60 days of September 30,
1997.
(16) Includes 88,550 shares of Common Stock subject to options which have been
granted to certain individuals and which are exercisable or which will
become exercisable within 60 days of September 30, 1997. Also includes
105,662 shares of Common Stock beneficially owned by Argus Investment
Partners, L.P., of which Dr. Zurawski is the general partner. See (11)
above. Also includes the shares of Common Stock beneficially owned by
Centocor, DSV Partners IV, Technology Leaders, L.P. and Technology Leaders
Offshore C.V. See (8), (9) and (10) above.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this Offering, the authorized capital stock of the
Company will consist of 60,000,000 shares, $.01 par value per share of which
50,000,000 shares will be designated as Common Stock, par value $.01 per share.
As of September 30, 1997, there were 647,547 shares of Common Stock, par value
$.01 per share issued and outstanding, held of record by 29 shareholders and a
total of 10,335,286 shares of Convertible Preferred Stock issued and outstanding
and convertible into Common Stock (at a conversion rate adjusted for the Reverse
Stock Split), held of record by 43 shareholders.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the shareholders. Subject to
preferences that may be applicable to any outstanding Convertible Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preferences of any
outstanding shares of Convertible Preferred Stock. Holders of Common Stock have
no preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
Common Stock.
OTHER CAPITAL STOCK
Upon completion of this Offering, the Board will have the authority, without
further action by the shareholders, to issue from time to time up to an
additional 10,000,000 shares of capital stock in one or more classes or series
including, but not limited to, shares of Common Stock and to fix the voting
rights, preferences, limitations and special rights, if any, of such capital
stock. The Board, without shareholder approval, can from time to time issue such
capital stock with voting, conversion and other rights which would adversely
affect the voting power and other rights of the holders of Common Stock. Such
capital stock could thus be issued quickly with terms calculated to delay or
prevent a change in control of the Company or to make removal of management more
difficult. Such issuance could have the effect of delaying, deterring or
preventing a change in control of the Company without any further action by the
shareholders. While the Company many consider from time to time the issuance of
such capital stock in connection with corporate collaborations or other
transactions, the Company has no present plans to issue shares of such capital
stock.
WARRANTS
As of September 30, 1997, there were warrants to purchase 294,008 shares of
Common Stock at an exercise price of $5.44 per share outstanding, held by four
holders and a warrant to purchase 122,420 shares of Common Stock at an exercise
price of $8.71 per share held by one holder. On October 3, 1997, the Company
issued a warrant to purchase 68,910 shares of Common Stock at an exercise price
equal to 115% of the initial public offering price to A.H. Investments Ltd. The
exercise price of all warrants is subject to adjustment upon certain stock
dividends, distributions, subdivisions, combinations or reclassifications, or
upon a below market issuance or distribution to all holders of Common Stock. The
warrantholders may elect to receive shares equal to the value of the warrant
without payment of any additional consideration. The warrants may be exercised
in whole or in any part at any time after the date of issuance or exercisability
as applicable until five years after issuance or exercisability as applicable.
The exercise periods for the warrants will expire at varying times beginning on
August 19, 1999 and ending on October 3, 2003. The warrants may be transferred
and assigned at the option of the warrantholder. Upon a
54
<PAGE>
reorganization event of the Company, warrantholders are entitled to protections
so that they will receive the aggregate amount and kind of stock they would have
received prior to the reorganization.
REGISTRATION RIGHTS
After the Offering, holders of 45,940 shares of Common Stock, 4,748,021
shares of Common Stock to be issued upon the Conversion, 485,338 shares of
Common Stock issuable upon exercise of warrants and 250,000 shares of Common
Stock (assuming an initial public offering price of $12.00 per share) to be
issued upon the conversion of a convertible promissory note, (collectively the
"Registerable Shares"), are entitled to certain rights with respect to the
registration of such shares under the Securities Act.
Under agreements with the Company, the holders of these shares have the
right, on not more than two occasions, to require the Company to register such
shares of Common Stock under the Securities Act (a "demand" registration),
provided that the Company is required to effect a demand registration only upon
the request of holders of at least a majority of a series of the Registerable
Shares and only if the shares of Common Stock to be registered exceed 20% of the
shares of Common Stock then held by the holders of the series of the
Registerable Shares. Holders also are entitled to include their shares of Common
Stock in a registered offering of securities by the Company for its own account
or for the account of selling securityholders (a "piggyback" registration). The
holders have waived their right to include their shares of Common Stock in the
Offering. In addition to these demand and piggyback registration rights, these
holders may require the Company to file an unlimited number of registration
statements on Form S-3 under the Securities Act, when available. The Company is
required to bear all registration and selling expenses, other than underwriting
discounts, selling commissions and applicable stock transfer taxes, in
connection with the registration of shares of Common Stock in all demand,
piggyback and Form S-3 registrations.
ANTI-TAKEOVER PROVISIONS
Directors may be removed without cause with the approval of a majority of
the voting power of the stock entitled to vote in the election of Directors. Any
Director elected to fill a vacancy, however created, serves for the remainder of
the term of the Director which he or she is replacing. Shareholders do not have
cumulative voting rights in the election of Directors.
The 1988 BCL includes certain shareholder protection provisions, which will
apply to the Company following the Offering. The Company has decided not to opt
out the various protections of the 1988 BCL. The following is a description of
those provisions of the 1988 BCL that will apply to the Company and that may
have an anti-takeover effect. This description of the 1988 BCL is only a summary
thereof, does not purport to be complete and is qualified in its entirety by
reference to the full text of the 1988 BCL.
(i) Upon a control-share acquisition (acquiring person acquires or
proposes to acquire 20%, 33 1/3% or 50% or more of the voting power of the
Common Stock of the Company) the 1988 BCL operates to suspend the voting
rights of the control shares (the newly acquired shares upon such an
acquisition, plus any shares acquired within 180 days of exceeding a
threshold) of an acquiring person upon a control share acquisition. The
acquiring person can regain his right to vote such control shares upon the
approval of a majority of the outstanding disinterested shares and a
majority of all Common Stock.
(ii) The disgorgement provisions require a controlling person (a person
who acquired, offered to acquire or publicly disclosed the intention of
acquiring at least 20% of the voting power of the Company) to disgorge
"greenmail" profits, or profits realized from the disposition of the
Company's securities within 18 months after becoming a controlling person
and the security was acquired by the controlling person within 24 months
before or 18 months after becoming a controlling person.
55
<PAGE>
(iii) The Control Transaction provisions allow holders of voting shares
of a corporation to "put" their stock to an acquiror for fair value in the
event of a control transaction (the acquisition of 20% of voting power over
the Common Stock of the Company). Fair value is defined as not less than the
highest price paid by the acquiror during a certain 90 day period.
(iv) An interested shareholder (the beneficial owner of 20% of the
voting stock either of a corporation or of an affiliate of the corporation
who was at any time within the five-year period immediately prior to the
date in question the beneficial owner of 20% of the voting stock of the
corporation) cannot engage in a business combination with the corporation
for a period of five years unless: (a) the board approves the business
combination prior to the Interested Shareholder becoming such or the
acquisition of shares in advance or (b) if the interested shareholder owns
80% of such stock, the business combination is approved by a majority of the
disinterested shareholders and the transaction satisfies certain "fair
price" provisions. After the five-year period, the same restrictions apply,
unless the transaction either is approved (a) by a majority of the
disinterested shareholders and satisfies the fair price provisions or (b) by
all shareholders.
(v) Corporations may adopt shareholders' rights plans with
discriminatory provisions (sometimes referred to as poison pills) whereby
options to acquire shares or corporate assets are created and issued which
contain terms that limit persons owning or offering to acquire a specified
percentage of outstanding shares from exercising, converting, transferring
or receiving options and allows the exercise of options to be limited to
shareholders or triggered based upon control transactions. Such poison pills
take effect only in the event of a control transaction. Pursuant to the 1988
BCL, such poison pills may be adopted by the Board without shareholder
approval.
(vi) Shareholders of a corporation would no longer have a statutory
right to call special meetings of shareholders or to propose amendments to
the articles under the provisions of the 1988 BCL.
(vii) In discharging the duties of their respective positions, the board
of directors, committees of the board and individual directors may, in
considering the best interests of the corporation, consider to the extent
they deem appropriate, (i) the effects of any action upon shareholders,
employees, suppliers, customers and creditors of the corporation are
located, (ii) the short-term and long-term interests of the corporation,
including benefits that may accrue to the corporation from its long-term
plans and the possibility that these interests may be best served by the
continued independence of the corporation, (iii) the resources, intent and
conduct (past, stated and potential) of any person seeking to acquire
control of the corporation, (iv) and all other pertinent factors. Further,
the board of directors, committees of the board and individual directors are
not required, in considering the best interests of the corporation or the
effects of any action, to regard any corporate interest or the interests of
any particular group affected by such action as a dominant or controlling
interest or factor. The consideration of the foregoing factors shall not
constitute a violation of the applicable standard of care.
The foregoing provisions may discourage certain types of transactions that
involve a change of control of the Company and ensure a measure of continuity in
the management of the business and affairs of the Company. While the Company
does not currently have a shareholder rights plan or poison pill, the effect of
the above-described provisions may be to deter hostile takeovers at a price
higher than the prevailing market price for the Common Stock and to permit
current management to remain in control of the Company. In some circumstances
certain shareholders may consider these anti-takeover provisions to have
disadvantageous effects. Tender offers or other non-open market acquisitions of
stock are frequently made at prices above the prevailing market price of a
Company's stock. In addition, acquisitions of stock by persons attempting to
acquire control through market purchases may cause the market price of the stock
to reach levels that are higher than would otherwise be the case. These
anti-takeover provisions may discourage any or all such acquisitions,
particularly those of less than all of the Company's shares and may
56
<PAGE>
thereby deprive certain holders of the Company's Common Stock of any opportunity
to sell their stock at a temporarily higher market price.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Co.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offering, the Company will have outstanding 8,145,568
shares of Common Stock. The 2,500,000 shares sold in the Offering (plus any
additional shares sold upon exercise of the Underwriters' over-allotment option)
will be freely tradeable without restriction unless acquired by affiliates of
the Company. None of the remaining 5,645,568 outstanding shares of Common Stock
have been registered under the Securities Act, which means that they may be
resold publicly only upon registration under the Securities Act or in compliance
with an exemption from the registration requirements of the Securities Act,
including the exemption provided by Rule 144 thereunder.
In general, under Rule 144 as currently in effect, if one year have elapsed
since the later of the date of the acquisition of restricted shares of Common
Stock from either the Company or an affiliate of the Company, the acquiror or
subsequent holder thereof may sell, within any three month period commencing 90
days after the date of this Prospectus, a number of shares that does not exceed
the greater of 1% of the then outstanding shares of Common Stock (81,455 shares
upon completion of the Offering) or the average weekly trading volume of the
Common Stock on the Nasdaq National Market during the four calendar weeks
preceding the date on which notice of the proposed sale is sent to the
Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. If two years have elapsed since the later of the
date of the acquisition of restricted shares of Common Stock from the Company or
any affiliate of the Company, a person who is not deemed to have been an
affiliate of the Company at any time for 90 days preceding a sale would be
entitled to sell such shares under Rule 144 without regard to the volume
limitations, manner of sale provisions or notice requirements.
In addition, of the 5,645,568 shares of Common Stock previously issued by
the Company, including shares of Common Stock issued in the Conversion and the
AHP Financing (assuming an initial public offering price of $12.00 per share),
5,252,898 shares ( shares of which are subject to the lock-up agreements
described below) will be eligible for sale in the public market, pursuant to
Rule 144, beginning 90 days after the Offering, subject to the manner of sale,
volume and other restrictions of Rule 144 and 48,876 shares ( shares of
which are subject to the lock-up agreements described below) will be eligible
for sale in the public market immediately after the Offering pursuant to Rule
144(k) and without the restrictions of Rule 144.
The Company and its officers, directors and certain shareholders have agreed
not to offer, sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into, or exercisable or exchangeable
for, shares of Common Stock, for a period of 180 days after the date of this
Prospectus without the prior written consent of Smith Barney Inc., except that
the Company may issue Common Stock in connection with its 1992 Stock Option Plan
and the 1997 Stock Option Plan. See "Underwriting."
Prior to the Offering, there has been no public market for the Common Stock
and no prediction can be made as to the effect, if any, that the sale of shares
or the availability of shares for sale will have on the market price for the
Common Stock prevailing from time to time. Nevertheless, sales, or the
availability for sale of, substantial amounts of the Common Stock in the public
market could adversely affect prevailing market prices and the ability of the
Company to raise equity capital in the future.
57
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in the Underwriting
Agreement dated the date hereof, each Underwriter named below has severally
agreed to purchase, and the Company has agreed to sell to such Underwriter,
shares of Common Stock which equal the number of shares set forth opposite the
name of such Underwriter below.
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Smith Barney Inc.................................................................
Genesis Merchant Group Securities LLC............................................
Cruttenden Roth Incorporated.....................................................
----------
Total............................................................................ 2,500,000
----------
----------
</TABLE>
The Underwriters are obligated to take and pay for all shares of Common
Stock offered hereby (other than those covered by the over-allotment option
described below) if any such shares are taken.
The Underwriters, for whom Smith Barney Inc., Genesis Merchant Group
Securities LLC and Cruttenden Roth Incorporated are acting as the
representatives (the "Representatives"), propose initially to offer part of the
shares of Common Stock directly to the public at the public offering price set
forth on the cover page hereof and part to certain dealers at a price that
represents a concession not in excess of $ per share under the public
offering price. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to other Underwriters or to certain
other dealers. After the initial public offering, the public offering price and
such concessions may be changed by the Underwriters. The Representatives have
informed the Company that the Underwriters do not intend to confirm sales to
accounts over which they exercise discretionary authority.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to an aggregate of 375,000
additional shares of Common Stock at the public offering price set forth on the
cover page hereof less underwriting discounts and commissions. The Underwriters
may exercise such option to purchase additional shares solely for the purpose of
covering over-allotments, if any, incurred in connection with the sale of the
shares offered hereby. To the extent such option is exercised, each Underwriter
will become obligated, subject to certain conditions, to purchase approximately
the same percentage of such additional shares as the number set forth next to
such Underwriter's name in the preceding table bears to the total number of
shares in such table.
The Company and the Underwriters have agreed to indemnify each other against
certain liabilities, including liabilities under the Securities Act.
In connection with this Offering and in compliance with applicable law, the
Underwriters may overallot (i.e., sell more shares of Common Stock than the
total amount shown on the list of Underwriters and participations which appear
above) and may effect transactions which stabilize, maintain or otherwise affect
the market price of the shares of Common Stock at levels above those which might
otherwise prevail in the open market. Such transactions may include placing bids
for the shares of Common Stock or effecting purchases of the shares of Common
Stock for the purpose of pegging, fixing or maintaining the price of the shares
of Common Stock or for the purpose of reducing a syndicate short position
created in connection with the Offering. A syndicate short position may be
covered by exercise of the option described above in lieu of or in addition to
open market purchases. In addition, the contractual arrangements among the
Underwriters include a provision whereby, if the Underwriters purchase shares of
58
<PAGE>
Common Stock in the open market for the account of the underwriting syndicate
and the securities purchased can be traced to a particular Underwriter or member
of the selling group, the underwriting syndicate may require the Underwriter or
selling group member in question to purchase the shares of Common Stock in
question at the cost price to the syndicate or may recover from (or decline to
pay to) the Underwriter or selling group member in question the selling
concession applicable to the securities in question. The Underwriters are not
required to engage in any of these activities and any such activities, if any of
the activities, may be discontinued at any time.
The Company, its executive officers and directors, and certain shareholders
of the Company have agreed that, for a period of 180 days after the date of this
Prospectus, they will not, without the prior written consent of Smith Barney
Inc., offer, sell, contract to sell or otherwise dispose of any shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
Common Stock except, in the case of the Company, in certain limited
circumstances.
Prior to the Offering, there has been no public market for the shares of
Common Stock. Consequently, the initial public offering price for the shares of
Common Stock has been determined by negotiations between the Company and the
Representatives. Among the factors considered in determining the initial public
offering price were the history of, and the prospects for, the Company's
business and the industry in which it competes, an assessment of the Company's
management, its past and present operations, its past and present earnings and
the trend of such earnings, the prospects for earnings of the Company, the
present state of the Company's development, the general condition of the
securities market at the time of the Offering and the market prices and earnings
of similar securities of comparable companies at the time of the Offering.
Genesis Merchant Group Securities LLC, an underwriter of the Offering, acted
as placement agent in connection with the sale by the Company of 2,435,286
shares of Series C Convertible Preferred Stock in May 1996 for which the Company
received $9.4 million in net proceeds. For its services, Genesis Merchant Group
Securities LLC received customary compensation and reimbursement of its related
expenses, a portion of which was paid in the form of a warrant to purchase
122,420 shares of Common Stock at an exercise price of $8.71 per share. In
addition, pursuant to a financial advisory agreement, the Company paid $35,000
to Genesis Merchant Group Securities LLC in February 1997.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus will be passed upon for the Company by Ballard Spahr Andrews &
Ingersoll, Philadelphia, Pennsylvania. Certain legal matters with respect to
patent matters are passed upon for the Company by Woodcock Washburn Kurtz
Mackiewicz & Norris LLP, Philadelphia, Pennsylvania. Certain legal matters
related to the Offering will be passed upon for the Underwriters by Dewey
Ballantine LLP, New York, New York.
EXPERTS
The balance sheets as of December 31, 1995 and 1996 and the statements of
operations, redeemable preferred stock and stockholders' deficit and cash flows
for each of the three years in the period ended December 31, 1996, included in
this Prospectus, have been included herein in reliance on the report, which
includes an explanatory paragraph which refers to the Company's ability to
continue as a going concern, of Coopers & Lybrand L.L.P., independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The Company's belief that its potential products do not infringe any claim
of the specific issued U.S. patents of Vical, as set forth under "Risk Factors
- -- Patents and Proprietary Rights; Access to Proprietary Genes and Proteins"
have been included in this Prospectus in reliance upon the written opinion of
Ratner & Prestia, Berwyn, Pennsylvania, special patent counsel for the Company,
as experts in such matters.
59
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 under the Securities Act with
respect to the Common Stock offered hereby (including all amendments and
supplements thereto, the "Registration Statement"). As permitted by the rules
and regulations of the Commission, this Prospectus, which constitutes part of
the Registration Statement, omits certain information, exhibits and undertakings
contained in the Registration Statement. For further information with respect to
the Company and the Common Stock offered hereby, reference is made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other documents are not necessarily complete and in
each instance reference is made to the copy of such contract or other document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Commission. The
Registration Statement (and the exhibits and schedules thereto), as well as such
reports and other information filed by the Company with the Commission, may be
inspected and copied at the Public Reference Section of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at Room 1400, 75 Park Place, New
York, New York 10007 and Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such materials may be
obtained from the Public Reference Section of the Commission, Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Such information
can also be reviewed through the Commission's Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system which is publicly available through the
Commission's web site on the Internet (http://www.sec.gov).
60
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
APOLLON, INC.
Report of Independent Accountants.......................................................................... F-2
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unaudited).............................. F-3
Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1996 and 1997 (unaudited)............................................................................ F-4
Statements of Redeemable Preferred Stock and Stockholders' Deficit for the years ended December 31, 1994,
1995 and 1996 and the six months ended June 30, 1997 (unaudited)......................................... F-5
Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and the six months ended June
30, 1996 and 1997 (unaudited)............................................................................ F-6
Notes to Financial Statements.............................................................................. F-7
</TABLE>
F-1
<PAGE>
After consummation of the proposed reverse stock split, as described in Note 17,
Coopers & Lybrand L.L.P. will be in a position to render the following report.
Coopers & Lybrand L.L.P.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Apollon, Inc.
Malvern, Pennsylvania
We have audited the accompanying balance sheets of Apollon, Inc. as of December
31, 1995 and 1996, and the related statements of operations, redeemable
preferred stock and stockholders' deficit and cash flows for each of the three
years in the period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Apollon, Inc. as of December
31, 1995 and 1996 and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 2 to the financial
statements, the Company has negative net worth, suffered recurring losses and
generated net cash outflows from operating activities that raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 28, 1997, except as to the information presented in Note 17
for which the date is September 29, 1997
F-2
<PAGE>
APOLLON, INC.
BALANCE SHEETS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------- JUNE 30, JUNE 30,
1995 1996 1997 1997
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents........................................ $ 1,832 $ 9,132 $ 3,832 $ 6,832
Investments available for sale................................... 624 588 170 170
Interest and other receivables................................... 18 172 116 116
Other current assets............................................. 140 143 166 166
--------- --------- ----------- -----------
Total current assets....................................... 2,614 10,035 4,284 7,284
Property and equipment, net........................................ 2,104 2,340 1,998 1,998
Intangible and other assets........................................ 1,265 1,226 873 873
--------- --------- ----------- -----------
Total assets............................................... $ 5,983 $ 13,601 $ 7,155 $ 10,155
--------- --------- ----------- -----------
--------- --------- ----------- -----------
LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable................................................. $ 522 $ 696 $ 626 $ 626
Accounts payable to stockholder.................................. 282 -- -- --
Accrued expenses................................................. 1,035 815 901 901
Accrued interest payable to preferred stockholders............... 418 -- -- --
Capital lease obligations, current portion....................... 116 139 141 141
Convertible demand notes payable to preferred stockholders....... 4,000 -- -- --
--------- --------- ----------- -----------
Total current liabilities.................................. 6,373 1,650 1,668 1,668
Other liabilities.................................................. 152 348 199 199
Capital lease obligations.......................................... 161 92 103 103
--------- --------- ----------- -----------
Total liabilities.......................................... 6,686 2,090 1,970 1,970
Commitments and contingencies
Redeemable cumulative convertible preferred stocks: Liquidation
preference: $14,368, $29,290 and $30,101 at December 31, 1995 and
1996 and June 30, 1997, respectively............................. 14,368 29,290 30,101 --
--------- --------- ----------- -----------
Stockholders' (deficit) equity:
Common stock $.01 par value; authorized 50,000,000 shares; issued
and outstanding 555,135, 619,237, 647,260, and 5,645,281 shares
at December 31, 1995 and 1996, June 30, 1997, and pro forma
June 30, 1997, respectively.................................... 6 6 6 56
Additional paid-in capital......................................... -- -- -- 33,051
Accumulated deficit................................................ (15,077) (17,785) (24,922) (24,922)
--------- --------- ----------- -----------
Total stockholders' (deficit) equity....................... (15,071) (17,779) (24,916) 8,185
--------- --------- ----------- -----------
Total liabilities, redeemable preferred stock and
stockholders' (deficit) equity........................... $ 5,983 $ 13,601 $ 7,155 $ 10,155
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
APOLLON, INC.
STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- ---------- ----------- ------------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Contracts........................................... -- $ 6,750 $ 7,800 $ 1,300 $ 75
Other............................................... -- 1,075 449 -- 86
--------- --------- ---------- ----------- ------------
Total revenues.................................... -- 7,825 8,249 1,300 161
--------- --------- ---------- ----------- ------------
Costs and expenses:
Research and development............................ $ 6,179 5,253 7,310 3,249 4,930
General and administrative.......................... 1,538 2,193 3,050 1,429 1,829
--------- --------- ---------- ----------- ------------
Total operating costs and expenses................ 7,717 7,446 10,360 4,678 6,759
--------- --------- ---------- ----------- ------------
(Loss) income from operations......................... (7,717) 379 (2,111) (3,378) (6,598)
Interest income....................................... 54 110 373 96 201
Interest expense...................................... (89) (415) (123) (109) (15)
--------- --------- ---------- ----------- ------------
Net (loss) income................................. $ (7,752) $ 74 $ (1,861) $ (3,391) $ (6,412)
--------- --------- ---------- ----------- ------------
--------- --------- ---------- ----------- ------------
Accretion of redemption value attributable to
redeemable cumulative convertible preferred stock... 609 999 $ 1,517 587 $ 811
--------- --------- ---------- ----------- ------------
Net loss allocable to common stockholders............. $ (8,361) $ (925) $ (3,378) $ (3,978) $ (7,223)
--------- --------- ---------- ----------- ------------
--------- --------- ---------- ----------- ------------
Pro forma net loss per share (unaudited).............. $ (.33) $ (1.13)
---------- ------------
---------- ------------
<CAPTION>
Shares used in computing pro forma net loss per share
(unaudited)......................................... 5,610,496 5,687,884
---------- ------------
---------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
APOLLON, INC.
STATEMENTS OF REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' DEFICIT
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
COMMON STOCK
PAR VALUE, $.01 ADDITIONAL
------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994............................................. 578,266 $ 6 $ 183 $ (5,976)
Shares issued pursuant to exercise of stock options.................. 1,493 -- --
Shares retired....................................................... (22,970) -- --
Shares repurchased................................................... (2,756) -- --
Accreted dividends on Series A and Series B preferred stock.......... (183) (426)
Net loss............................................................. (7,752)
----------- --- ----- -------------
Balance, December 31, 1994........................................... 554,033 6 -- (14,154)
Shares issued pursuant to exercise of stock options.................. 3,352 -- 2
Shares retired....................................................... (2,250) -- --
Issuance of 400,000 shares of Series B redeemable cumulative
convertible preferred stock ($2.50 per share)......................
Accreted dividends on Series A and Series B preferred stock.......... (2) (997)
Net income........................................................... 74
----------- --- ----- -------------
Balance, December 31, 1995........................................... 555,135 6 -- (15,077)
Shares issued pursuant to exercise of stock options.................. 18,162 -- 9
Issuance of 1,600,000 shares of Series B redeemable cumulative
convertible preferred stock ($2.50 per share) upon conversion of
demand notes.......................................................
Waiver of interest expense upon conversion of demand notes........... 511
Issuance of 2,435,286 shares of Series C redeemable cumulative
convertible preferred stock ($4.00 per share), net.................
Increase in carrying value of Series C preferred stock............... (336)
Shares issued for payment of license fees............................ 45,940 -- 150
Accreted dividends on Series A and Series B preferred stock.......... (334) (847)
Net loss............................................................. (1,861)
----------- --- ----- -------------
Balance, December 31, 1996........................................... 619,237 6 -- (17,785)
Shares issued pursuant to exercise of stock options.................. 3,445 -- 4
Shares issued for payment of license fees and other.................. 24,578 -- 82
Accreted dividends on Series A, Series B and Series C preferred
stock.............................................................. (86) (725)
Net loss............................................................. (6,412)
----------- --- ----- -------------
Balance, June 30, 1997 (unaudited)................................... 647,260 $ 6 $ -- $ (24,922)
----------- --- ----- -------------
----------- --- ----- -------------
<CAPTION>
REDEEMABLE REDEEMABLE
CUMULATIVE CUMULATIVE
TOTAL COMMON CONVERTIBLE CONVERTIBLE
STOCKHOLDERS' PREFERRED STOCK PREFERRED STOCK
DEFICIT SERIES A SERIES B
------------- --------------- ---------------
<S> <C> <C>
Balance, January 1, 1994............................................. $ (5,787) $ 6,760 $ 5,000
Shares issued pursuant to exercise of stock options.................. --
Shares retired....................................................... --
Shares repurchased................................................... --
Accreted dividends on Series A and Series B preferred stock.......... (609) 541 68
Net loss............................................................. (7,752)
------------- ------ -------
Balance, December 31, 1994........................................... (14,148) 7,301 5,068
Shares issued pursuant to exercise of stock options.................. 2
Shares retired....................................................... --
Issuance of 400,000 shares of Series B redeemable cumulative
convertible preferred stock ($2.50 per share)...................... 1,000
Accreted dividends on Series A and Series B preferred stock.......... (999) 584 415
Net income........................................................... 74
------------- ------ -------
Balance, December 31, 1995........................................... (15,071) 7,885 6,483
Shares issued pursuant to exercise of stock options.................. 9
Issuance of 1,600,000 shares of Series B redeemable cumulative
convertible preferred stock ($2.50 per share) upon conversion of
demand notes....................................................... 4,000
Waiver of interest expense upon conversion of demand notes........... 511
Issuance of 2,435,286 shares of Series C redeemable cumulative
convertible preferred stock ($4.00 per share), net.................
Increase in carrying value of Series C preferred stock............... (336)
Shares issued for payment of license fees............................ 150
Accreted dividends on Series A and Series B preferred stock.......... (1,181) 692 489
Net loss............................................................. (1,861)
------------- ------ -------
Balance, December 31, 1996........................................... (17,779) 8,577 10,972
Shares issued pursuant to exercise of stock options.................. 4
Shares issued for payment of license fees and other.................. 82
Accreted dividends on Series A, Series B and Series C preferred
stock.............................................................. (811) 346 335
Net loss............................................................. (6,412)
------------- ------ -------
Balance, June 30, 1997 (unaudited)................................... $ (24,916) $ 8,923 $ 11,307
------------- ------ -------
------------- ------ -------
<CAPTION>
REDEEMABLE TOTAL
CUMULATIVE REDEEMABLE
CONVERTIBLE CUMULATIVE
PREFERRED STOCK CONVERTIBLE
SERIES C PREFERRED STOCK
--------------- ---------------
Balance, January 1, 1994............................................. $ -- $ 11,760
Shares issued pursuant to exercise of stock options..................
Shares retired.......................................................
Shares repurchased...................................................
Accreted dividends on Series A and Series B preferred stock.......... -- 609
Net loss.............................................................
------ -------
Balance, December 31, 1994........................................... -- 12,369
Shares issued pursuant to exercise of stock options..................
Shares retired.......................................................
Issuance of 400,000 shares of Series B redeemable cumulative
convertible preferred stock ($2.50 per share)...................... 1,000
Accreted dividends on Series A and Series B preferred stock.......... 999
Net income...........................................................
------ -------
Balance, December 31, 1995........................................... -- 14,368
Shares issued pursuant to exercise of stock options..................
Issuance of 1,600,000 shares of Series B redeemable cumulative
convertible preferred stock ($2.50 per share) upon conversion of
demand notes....................................................... 4,000
Waiver of interest expense upon conversion of demand notes...........
Issuance of 2,435,286 shares of Series C redeemable cumulative
convertible preferred stock ($4.00 per share), net................. 9,405 9,405
Increase in carrying value of Series C preferred stock............... 336 336
Shares issued for payment of license fees............................
Accreted dividends on Series A and Series B preferred stock.......... 1,181
Net loss.............................................................
------ -------
Balance, December 31, 1996........................................... 9,741 29,290
Shares issued pursuant to exercise of stock options..................
Shares issued for payment of license fees and other..................
Accreted dividends on Series A, Series B and Series C preferred
stock.............................................................. 130 811
Net loss.............................................................
------ -------
Balance, June 30, 1997 (unaudited)................................... $ 9,871 $ 30,101
------ -------
------ -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
APOLLON, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996 1996 1997
--------- --------- --------- ----------- -----------
<CAPTION>
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income............................................... $ (7,752) $ 74 $ (1,861) $ (3,391) $ (6,412)
Adjustments to reconcile net (loss) income to net cash (used
for) provided by operating activities:
Depreciation and amortization................................. 536 785 987 455 813
Common stock issued for payment of license fees and other..... -- -- -- -- 82
Deferred compensation......................................... -- -- 227 -- (149)
Changes in assets and liabilities:
Interest and other receivables................................ 8 (15) (154) 6 56
Other assets.................................................. (205) (27) (107) 1 --
Accounts payable.............................................. 335 (504) 174 602 (72)
Accounts payable to stockholder............................... 205 27 (282) (256) --
Accrued expenses and interest................................. 695 407 (70) (312) 86
Other liabilities............................................. 54 27 (31) 238 --
Other, net.................................................... (6) (5) 90 60 (23)
--------- --------- --------- ----------- -----------
Net cash (used for) provided by operating activities...... (6,130) 769 (1,027) (2,597) (5,619)
--------- --------- --------- ----------- -----------
Cash flows from investing activities:
Short-term investments, net..................................... 3,351 (130) 36 (377) 418
Purchases of property and equipment, net of capital leases...... (291) (355) (1,005) (100) (22)
--------- --------- --------- ----------- -----------
Net cash provided by (used for) investing activities...... 3,060 (485) (969) (477) 396
--------- --------- --------- ----------- -----------
Cash flows from financing activities:
Proceeds from issuance of loan.................................. -- 250 -- -- --
Payment of loan................................................. -- (250) -- -- --
Payment of capital lease obligations, net....................... (170) (331) (118) (49) (81)
Proceeds from issuance of demand notes.......................... 2,750 1,940 -- -- --
Payments of demand notes........................................ -- (690) -- --
Proceeds from issuance of preferred stock, net.................. -- -- 9,405 9,138 --
Proceeds from issuance of common stock.......................... 1 2 9 7 4
--------- --------- --------- ----------- -----------
Net cash provided by (used for) financing activities...... 2,581 921 9,296 9,096 (77)
--------- --------- --------- ----------- -----------
Net (decrease) increase in cash and cash equivalents.............. (489) 1,205 7,300 6,022 (5,300)
Cash and cash equivalents, beginning of period.................... 1,116 627 1,832 1,832 9,132
--------- --------- --------- ----------- -----------
Cash and cash equivalents, end of period.......................... $ 627 $ 1,832 $ 9,132 $ 7,854 $ 3,832
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Supplemental disclosure of cash flow information:
Cash paid for interest...................................... $ 42 $ 44 $ 30 $ 17 $ 16
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Non-cash transactions:
Capital lease additions..................................... $ 205 $ 202 $ 98 $ 98 $ 96
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Preferred stock issued for facilities usage................. $ -- $ 1,000 $ -- -- --
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Conversion of demand notes.................................. $ -- $ -- $ 4,000 $ 4,000 --
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Waiver of interest on demand notes.......................... $ -- $ -- $ 511 $ 511 --
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
Common stock issued for payment of license fees and other... $ -- $ -- $ 150 -- $ 82
--------- --------- --------- ----------- -----------
--------- --------- --------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
1. ORGANIZATION:
Apollon, Inc. (the "Company") is engaged in the business of developing
DNA-based vaccines and other DNA-based gene therapy products for the prevention
and treatment of infectious and autoimmune diseases. Apollon has developed
non-viral, facilitated DNA delivery technology that enhances the uptake of
genetic material into cells and the subsequent expression of encoded proteins.
The Company has focused its initial product development efforts on its
GENEVAX-Registered Trademark- DNA-based vaccines which are directed against
various infectious and autoimmune diseases. The Company was incorporated and
commenced operation on January 31, 1992. The Company was considered a
development stage company for the period from January 31, 1992 (inception date)
to December 31, 1994.
The Company has limited revenues to date and is subject to a number of risks
including the uncertainty of product development, the need to obtain adequate
additional financing to fund the development of its products, competition from
substitute products and larger companies, patent and/or license protection for
its products, processes and technology and the dependence on key personnel and
consultants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION:
The accompanying financial statements have been prepared on the basis of
accounting principles applicable to a going concern, and accordingly, they do
not give effect to adjustments that may be required should the Company be unable
to continue business operations in its current form and, therefore, be required
to realize its assets and settle its liabilities and contingencies in other than
the normal course of business. The Company had a negative net worth as of
December 31, 1996 and did not generate cash from operating activities during the
year then ended. To fund its operating expenses based on current levels of
expenditures, the Company will rely on its ability to earn revenues by meeting
certain milestones and obtain financing from outside sources. In order to ensure
that the Company will have sufficient capital available to meet anticipated
expenditures, management plans to (1) seek additional financing from outside
sources, (2) continue to focus development efforts to achieve milestones, and
(3) look to eliminate certain recurring expenses in order to reduce current
expenditure levels. There can be no assurances that management will be
successful in carrying out its plans.
CASH, CASH EQUIVALENTS AND INVESTMENTS AVAILABLE FOR SALE:
The Company classifies investments with original maturities of three months
or less as cash equivalents.
Investments available for sale consist of commercial paper and certificates
of deposits, bearing interest at rates which vary from 3.4% to 5.75% with
original maturities of three months to one year and are recorded at fair value.
Unrealized gains and losses, if any, are recorded as a component of
stockholders' equity. There were no unrealized gains and losses at December 31,
1995 and 1996 and June 30, 1997, respectively.
The Company places its cash, cash equivalents and short-term investments
with high credit quality financial institutions. To date, the Company has not
incurred any losses related to these investments.
F-7
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Leased equipment is recorded at
the lesser of cost or the present value of the minimum lease payments.
Depreciation and amortization are recorded using the straight-line method.
Assets are depreciated over their estimated useful lives or over the remaining
terms of the leases, whichever is shorter. Leasehold improvements are amortized
over the lease term or the life of the improvements, whichever is shorter. Asset
depreciable lives are as follows:
<TABLE>
<S> <C>
Computer and laboratory equipment................................. 1-6 years
Furniture and fixtures............................................ 6 years
Leasehold improvements............................................ 5 years
</TABLE>
PATENTS:
Patent expenses are capitalized and recorded at cost and, upon notification
of a patent allowance or related favorable event, are amortized on a
straight-line basis over the estimated useful life of the patent. These
capitalized costs are periodically reviewed by the Company and impairments are
charged to operations when the expected future operating cash flows derived from
such patents are less than their carrying value.
REVENUE RECOGNITION:
For contracts and agreements in which the Company receives non-refundable
fees or milestone payments, revenues are recognized when they are earned in
accordance with the applicable performance requirements and contractual terms.
For contracts and grants under which the Company is reimbursed for expenses,
revenue is recognized as the related expenses are incurred.
RESEARCH AND DEVELOPMENT:
Research and development costs are charged to operations in the period
incurred.
INCOME TAXES:
Income taxes are determined using the asset and liability method. Deferred
taxes are recognized for the tax consequences of temporary differences between
the tax bases of assets and liabilities and their carrying amounts for financial
reporting purposes, by applying the enacted tax rates in effect for the year in
which the differences are expected to reverse. A valuation allowance is
established to reduce the deferred income tax asset to the level at which it is
"more likely than not" that the tax benefits will not be realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of the Company's short-term financial instruments
approximate their fair values, based on the short-term maturities of these
instruments. As of December 31, 1995 and 1996 and June 30, 1997, the fair value
of the Company's redeemable cumulative convertible preferred stock approximates
its carrying amount, using rates currently available to the Company for such
financial instruments with similar terms and remaining maturities.
F-8
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
STOCK BASED COMPENSATION:
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR STOCK
BASED COMPENSATION ("SFAS 123") encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to continue to account for stock-based
compensation to employees using the intrinsic value method as prescribed by
Accounting Principles Board Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES, and related interpretations. Accordingly, compensation cost for stock
options issued to employees is measured as the excess, if any, of the quoted
market price of the Company's stock at the date of grant over the amount an
employee must pay for the stock. Compensation cost related to stock options of
non-employees is recorded at fair value.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRO FORMA NET LOSS PER SHARE (UNAUDITED):
Pro forma net loss per share is computed using the weighted average number
of common shares and common equivalent shares (using the treasury stock method)
outstanding and gives effect to certain adjustments described below. Common
equivalent shares from stock options and warrants are excluded from the
computation as their effect is antidilutive, except that, pursuant to Securities
and Exchange Commission (SEC) Staff Accounting Bulletins and SEC staff policy,
common and common equivalent shares issued during the 12-month period prior to
the proposed initial public offering (the "Offering"--see Note 18) at prices
below the anticipated initial public offering price are presumed to have been
issued in contemplation of the Offering and have been included in the
calculation as if they were outstanding for all periods presented (using the
treasury stock method and an assumed initial public offering price of $12).
Pursuant to the policy of the SEC staff, the calculation of shares used in
computing pro forma net loss per share also includes all series of redeemable
cumulative convertible preferred stock that will automatically convert into
shares of common stock upon completion of the Offering (using the if-converted
method) for all periods presented. Shares issued upon conversion of the
convertible promissory note (see Note 18) have also been included in the
calculation as if they were outstanding for all periods presented using an
assumed initial public offering price of $12.
In addition, the weighted average number of shares used in the calculation
has been adjusted to reflect the Reverse Stock Split (see Note 17) effective
prior to proposed Offering (see Note 18).
F-9
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The following table sets forth the calculation of total number of shares
used in the computation of pro forma net loss per common share:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
Weighted average common shares outstanding............................................ 565,611 642,999
Incremental shares assumed to be outstanding related to common stock, stock options
and warrants granted based on the treasury stock method............................. 46,864 46,864
Redeemable cumulative convertible preferred stock..................................... 4,748,021 4,748,021
Convertible promissory note........................................................... 250,000 250,000
------------ -----------
Weighted average common and common equivalent shares used in computation of pro forma
net loss per share.................................................................. 5,610,496 5,687,884
------------ -----------
------------ -----------
</TABLE>
PRO FORMA BALANCE SHEET (UNAUDITED):
Upon the closing of the Offering, all of the outstanding shares of Series A,
B and C redeemable cumulative convertible preferred stock and the convertible
promissory note (assuming an initial public offering price of $12.00 per share)
will automatically convert into 4,998,021 shares of common stock. The unaudited
pro forma presentation of the June 30, 1997 balance sheet has been prepared
assuming the conversion of the redeemable cumulative convertible preferred stock
into common stock as of June 30, 1997, the most recent balance sheet included in
the accompanying financial statements.
INTERIM FINANCIAL STATEMENTS (UNAUDITED):
The balance sheet at June 30, 1997, the statements of operations and
statements of cash flows for the six months ended June 30, 1996 and 1997 and the
statement of redeemable preferred stock and stockholders' deficit for the six
months ended June 30, 1997 are unaudited. In the opinion of management of the
Company, such unaudited financial statements include all adjustments (consisting
of normal accruals) necessary for a fair presentation of financial results for
the interim periods. The results of operations for the six months ended June 30,
1997 are not necessarily indicative of results to be expected for the entire
year.
NEW ACCOUNTING PRONOUNCEMENTS:
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, EARNINGS PER SHARE ("SFAS 128"). This
statement establishes standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock. This statement
is effective for financial statements issued for periods ending after December
15, 1997 and earlier application is not permitted. This statement requires
restatement of all prior period EPS data presented. The Company will adopt SFAS
128 in the fourth quarter of the fiscal year ending December 31, 1997. The
adoption of this accounting standard is not expected to have a material impact
on the financial statements.
F-10
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
During February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 129, DISCLOSURE OF INFORMATION
ABOUT CAPITAL STRUCTURE ("SFAS 129"). SFAS 129 requires entities to explain, in
summary form within their financial statements, the pertinent rights and
privileges of the various securities outstanding. Information that shall be
disclosed should include dividend and liquidation preferences, participation
rights, call prices and dates, conversion or exercise prices or rates and
pertinent dates, sinking fund requirements, unusual voting rights, and
significant terms of contracts to issue additional shares. SFAS 129 is effective
for periods ending after December 15, 1997. The adoption of this accounting
standard is not expected to have a material impact on the financial statements.
During June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, REPORTING COMPREHENSIVE INCOME ("SFAS
130"). SFAS 130 establishes standards for the reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements. SFAS 130 is effective for fiscal years beginning after
December 15, 1997 and reclassification of financial statements for earlier
periods provided for comparative purposes is required. The adoption of this
accounting standard is not expected to have a material impact on the financial
statements.
3. INVESTMENTS AVAILABLE FOR SALE:
Securities classified as available for sale at December 31, 1995 and 1996
and June 30, 1997 are summarized below:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------
JUNE 30, 1997
1995 1996 (UNAUDITED)
---------------------- ---------------------- ----------------------
CARRYING CARRYING CARRYING
COST VALUE COST VALUE COST VALUE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Investments available for sale:
Commercial paper...................... $ 492 $ 492 $ 490 $ 490 $ -- $ --
Certificate of deposit................ 132 132 98 98 170 170
--------- ----- --------- ----- --------- -----
$ 624 $ 624 $ 588 $ 588 $ 170 $ 170
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
At December 31, 1995 and 1996, respectively, the certificates of deposit
were pledged as collateral until October 31, 1996 and October 31, 1997,
respectively, by the Company for payment obligations under a capitalized lease
agreement for machinery and equipment.
F-11
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
4. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at December 31, 1995 and
1996 and June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Computer and laboratory equipment........................... $ 1,903 $ 2,256 $ 2,374
Furniture and fixtures...................................... 110 177 177
Leasehold improvements...................................... 1,571 2,228 2,228
--------- --------- -----------
3,584 4,661 4,779
Less accumulated depreciation and amortization.............. (1,480) (2,321) (2,781)
--------- --------- -----------
$ 2,104 $ 2,340 $ 1,998
--------- --------- -----------
--------- --------- -----------
</TABLE>
Depreciation and amortization expense related to property and equipment for
the years ended December 31, 1994, 1995 and 1996 was $514, $700 and $841,
respectively and $388 and $460 for the six months ended June 30, 1996 and 1997,
respectively. As of December 31, 1995 and 1996 and June 30, 1997, accounts
payable included $19, $66 and $0, respectively, related to purchases of property
and equipment.
Computer and laboratory equipment at December 31, 1995 and 1996 and June 30,
1997 includes approximately $919, $1,017 and $1,113 of equipment under
capitalized leases, respectively. Accumulated depreciation for this equipment
was $486, $734 and $858 at December 31, 1995 and 1996 and June 30, 1997,
respectively.
5. INTANGIBLE AND OTHER ASSETS:
Intangible and other assets, net of accumulated amortization of $131, $278
and $350, consist of the following at December 31, 1995 and 1996 and June 30,
1997:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Patents...................................................... $ 398 $ 488 $ 238
Prepaid facilities cost, net................................. 813 688 625
Other........................................................ 54 50 10
--------- --------- -----
$ 1,265 $ 1,226 $ 873
--------- --------- -----
--------- --------- -----
</TABLE>
F-12
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
6. ACCRUED EXPENSES:
Accrued expenses consist of the following at December 31, 1995 and 1996 and
June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Research....................................................... $ 404 $ 252 $ 232
Legal.......................................................... 164 199 250
Compensation................................................... 59 169 74
License fees................................................... 258 108 108
Other.......................................................... 150 87 237
--------- --------- -----
$ 1,035 $ 815 $ 901
--------- --------- -----
--------- --------- -----
</TABLE>
7. OTHER LIABILITIES:
Other liabilities consist of the following at December 31, 1995 and 1996 and
June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -------------
<S> <C> <C> <C>
(UNAUDITED)
Deferred compensation............................................ -- $ 227 $ 78
Deferred rent.................................................... $ 152 121 121
--------- --------- -----
$ 152 $ 348 $ 199
--------- --------- -----
--------- --------- -----
</TABLE>
F-13
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS
(In thousands, except share and per share amounts)
8. DEBT:
During 1994 and 1995, the Company issued a series of promissory notes
payable to the preferred and common stockholders totaling $2,750 and $1,940,
respectively, bearing interest at a rate of 1% above the prime commercial rate
being charged by PNC Bank, N.A. The proceeds received from these notes was used
to fund operations.
These promissory notes, together with any related accrued interest, were
payable on demand and were convertible into shares of the next series of
convertible preferred stock issued by the Company. During 1995, the Company paid
on demand $690 of these notes plus accrued interest.
In addition, as additional consideration, the Company issued warrants to the
preferred stockholders to purchase 165,381 and 128,627 shares of the Company's
common stock in 1994 and 1995, respectively. The warrants are exercisable at
$5.44 per share, subject to adjustment, and expire on November 9, 1999.
In March 1996, pursuant to a Waiver of Interest agreement between the
Company and the preferred stockholders, $511 of interest accrued from the date
of issuance on the $4,000 promissory notes was waived, of which $418 was accrued
at December 31, 1995. The $511 of interest that was waived was credited to the
Company's additional paid-in capital account in 1996.
In April 1996, the preferred stockholders converted the principal amount of
these notes into 1,600,000 shares of the $2.50 Series B redeemable 8% cumulative
preferred stock, $.01 par value (see Note 9).
9. REDEEMABLE PREFERRED STOCK:
Redeemable cumulative convertible preferred stock consists of the following
at December 31, 1995 and 1996 and June 30, 1997:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------- JUNE 30,
1995 1996 1997
--------- --------- -----------
<S> <C> <C> <C>
(UNAUDITED)
Series A 8% redeemable cumulative convertible preferred stock, $.01 par value;
issued and outstanding 3,900,000 shares at December 31, 1995 and 1996 and
June 30, 1997 (liquidation preference of $7,885, $8,577 and $8,923 at
December 31, 1995 and 1996 and June 30, 1997, respectively).................. $ 7,885 $ 8,577 $ 8,923
Series B 8% redeemable cumulative convertible preferred stock, $.01 par value;
issued and outstanding 2,400,000, 4,000,000, and 4,000,000 shares at December
31, 1995 and 1996 and June 30, 1997, respectively (liquidation preference of
$6,483, $10,972 and $11,307 at December 31, 1995 and 1996 and June 30, 1997,
respectively)................................................................ 6,483 10,972 11,307
Series C 8% redeemable cumulative convertible preferred stock, $.01 par value;
issued and outstanding 2,435,286 shares at December 31, 1996 and June 30,
1997 (liquidation preference of $9,741 and $9,871 at December 31, 1996 and
June 30, 1997, respectively)................................................. -- 9,741 9,871
--------- --------- -----------
$ 14,368 $ 29,290 $ 30,101
--------- --------- -----------
--------- --------- -----------
</TABLE>
F-14
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
9. REDEEMABLE PREFERRED STOCK: (CONTINUED)
As of December 31, 1996 and June 30, 1997, the Company has authorized
12,900,000 shares of its preferred stock, $.01 par value.
During 1995, the Company issued an additional 400,000 shares of Series B
redeemable 8% cumulative convertible preferred stock, $.01 par value (Series B)
as consideration for $1,000 ($2.50 per share) of services to be rendered by a
significant stockholder pursuant to a Facilities Use Agreement dated September
20, 1994 between the Company and the significant stockholder (see Note 10).
During 1996, the Company issued 1,600,000 shares of Series B redeemable 8%
cumulative convertible preferred stock, $.01 par value, upon the conversion of
the $4,000 promissory notes ($2.50 per share) by the preferred stockholders (see
Note 8).
During 1996, the Company issued 2,435,286 shares of Series C redeemable 8%
cumulative convertible preferred stock, $.01 par value (Series C) for $9,741
($4.00 per share). The Company received net proceeds of $9,405 after placement
fees. In addition, the placement agent purchased warrants to acquire 122,420
shares of the Company's common stock. The warrants are exercisable at $8.71 per
share, subject to adjustment, and expire on May 1, 2001.
The Series A, Series B and Series C are redeemable at the option of the
preferred stockholder on specified redemption dates as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF PREFERRED
REDEMPTION DATE SHARES REDEEMABLE
- ----------------------------------------------------------------------- -----------------------
<S> <C>
April 30, 1998......................................................... 33-1/3%
April 30, 1999......................................................... 66-2/3%
April 30, 2000......................................................... 100%
</TABLE>
The redemption price for each redeemed preferred share shall be the sum of
the greater of the liquidation price or the fair market value per share plus all
accrued and unpaid preferred dividends to date, whether or not declared, on the
redemption date.
Holders of the Series A, Series B and Series C can convert such shares into
common stock at any time at a conversion ratio of 0.4594-for-one. In addition,
the preferred stock converts automatically into common stock upon the completion
of an initial public offering at a price per share not less than $5.00 and for
total proceeds of at least $15,000. No preferred shares were converted during
1994, 1995, 1996 or through June 30, 1997.
In the event of a liquidation, Series A, Series B and Series C stockholders
are entitled to $1.67 per share, $2.50 per share, and $4.00 per share,
respectively, plus any accrued dividends and any other dividends declared but
unpaid. After the payment of the aforementioned amounts, the remaining assets or
property distributable upon such liquidation shall be divided pro rata among
holders of the Common Stock, Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock.
Dividends on the Series A and the Series C cumulate at the rate of 8% of the
purchase price commencing one year from the date of issuance. Dividends on the
Series B cumulate at the rate of 8% of the purchase price commencing one year
from the date of issuance, except for the initial 2,000,000 shares of Series B
issued during 1993, on which dividends began cumulating on October 30, 1994. As
of June 30,
F-15
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
9. REDEEMABLE PREFERRED STOCK: (CONTINUED)
1997, the Company has accrued $2,423 of dividends related to the Series A
preferred stock, $1,307 related to the Series B preferred stock and $130 related
to the Series C preferred stock. Series A, Series B and Series C stockholders
have voting rights equivalent to those of common stockholders.
10. RELATED PARTY TRANSACTIONS:
On June 25, 1992, the Company and a significant stockholder entered into a
marketing and development agreement. Under this agreement, the stockholder has
the option to provide funding for the research, experimentation and development
of certain products by the Company and to acquire a royalty-bearing license to
market these products.
In early 1995, this marketing and development agreement was amended such
that the significant stockholder waived its existing funding and
commercialization rights in exchange for an exclusive royalty bearing license to
certain technologies and patents, and an option for a similar license agreement
related to other technologies. In addition, the Company transferred all of its
rights to certain compounds to this stockholder, and was granted a nonexclusive
royalty fee license to any improvements owned by the stockholder related to
certain compounds. In consideration, the Company received $750 upon execution of
this agreement, which is classified as other revenues in the 1995 statement of
operations. Should the Company achieve specific developmental and approval
milestones as defined in the agreement, the stockholder is required to make
certain additional payments to the Company. In April 1997, the Company received
an additional $75 under this agreement.
On September 20, 1994, the Company and a significant stockholder entered
into a facilities use agreement such that the significant stockholder granted to
the Company and its employees an irrevocable license (the "License") to use and
occupy a portion of the significant stockholder's facilities for the development
and manufacture of nucleic acid-based product candidates, genetic vaccine
product candidates and related uses. In consideration for the grant of this
License, the Company, during 1995, issued to the significant stockholder 400,000
shares of $2.50 Series B redeemable 8% cumulative convertible preferred stock,
$.01 par value. The initial term of this agreement commenced on July 1, 1995 and
expires two years following the date that the Company successfully develops and
manufactures in this facility its first genetic vaccine product candidate for
use in connection with human clinical trials. Thereafter, in the absence of
termination notices given by the Company or the significant stockholder, this
agreement renews automatically on a yearly basis with the same terms and
conditions except there shall be no additional consideration payable by the
Company. The cost associated with this agreement ($1,000) has been accounted for
as a prepaid asset and is being amortized over a period of eight years, the term
of the agreement. Amortization expense related to this asset was $62 and $125
for the years ended December 31, 1995 and December 31, 1996, respectively and
$63 for the six months ended June 30, 1996 and 1997, respectively.
In 1995, the Company and a significant stockholder entered into a contract
manufacturing agreement such that the Company shall manufacture certain plasmids
for use in genetic vaccines. In consideration, the Company received $50 in 1995
and $50 in 1996. These amounts are included in other revenues in the 1995 and
1996 statements of operations.
In 1994 and 1995, the Company issued a series of promissory notes payable to
certain preferred and common stockholders. Pursuant to an agreement between the
Company and the preferred stockholders,
F-16
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
10. RELATED PARTY TRANSACTIONS: (CONTINUED)
interest accrued of $511 at March 31, 1996 on the remaining promissory notes was
waived and the notes were converted into Series B convertible preferred stock.
These transactions are more fully described in Note 8 and Note 9.
In June 1995, a significant stockholder agreed to loan the Company $250,
bearing interest at the rate of 1% above the prime commercial rate being charged
by PNC Bank, N.A. This loan was repaid, including interest, in August 1995.
During 1994 and 1995, a significant stockholder managed the medical
insurance program for the Company, for which no fee was charged. As of December
31, 1995, the Company's net amount due to this stockholder was $282. This amount
was paid in full in 1996.
11. STOCK OPTION PLAN:
In 1992, the Company established a stock option plan ("the 1992 Plan") and
authorized a total of 459,400 incentive stock options ("ISOs") and non-qualified
stock options ("NQSOs") which may be issued to employees, officers, directors
and consultants of the Company. Upon the approval of the Company's Board of
Directors, the ISOs and NQSOs may be granted at a price not less than 100% of
the fair market value on the date of the grant. The options become exercisable
one to ten years following the grant, and expire five or ten years from the date
of the grant.
The 1992 Plan provides for the granting of limited stock appreciation rights
(LSARs) at the discretion of the Company's Board of Directors to holders of
options under the 1992 Plan. Those options with respect to which an LSAR has
been granted are exercisable only during the period commencing on the first day
following the occurrence of a "Triggering Event" as defined in the 1992 Plan and
terminate no later than the expiration of the underlying option. Upon the
occurrence of any Triggering Event, the optionee shall receive from the Company
an amount in cash equal to the excess of the fair market value per share of the
Company's common stock on the date the Triggering Event occurs over the related
exercise price per share. No LSARs have been granted as of June 30, 1997.
F-17
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
11. STOCK OPTION PLAN: (CONTINUED)
Activity under the 1992 Plan and the 1997 Plan (see Note 18) during the
years ended December 31, 1995 and 1996 and for the six months ended June 30,
1997 is as follows:
<TABLE>
<CAPTION>
JUNE 30, 1997
1995 1996 (UNAUDITED)
------------------------ ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding, beginning of period............... 177,066 $ .97 310,244 $ 1.26 427,751 $ 1.65
Granted...................................... 150,218 1.58 147,953 2.30 37,547 4.35
Exercised.................................... (3,352) .68 (18,162) .56 (3,445) 1.20
Expired...................................... (13,688) 1.07 (12,284) 1.56 (1,870) 1.82
----------- ----------- ----------- ----------- ----------- -----------
Outstanding, end of period..................... 310,244 $ 1.26 427,751 $ 1.65 459,983 $ 1.87
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
Options exercisable at period-end.............. 72,755 135,199 174,824
----------- ----------- -----------
----------- ----------- -----------
Option price range at end of period............ $ .04-$1.63 $ .04-$4.35 $ .04-$4.35
----------- ----------- -----------
----------- ----------- -----------
Weighted-average fair value of options granted
during year.................................. $.78 $1.22
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------- OPTIONS EXERCISABLE
WEIGHTED- ------------------------
AVERAGE WEIGHTED- WEIGHTED-
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
EXERCISE PRICE AT 12/31/96 LIFE PRICE AT 12/31/96 PRICE
- --------------------------------------------------- ----------- --------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$.04............................................... 22,966 5.50 $ .04 22,966 $ .04
$1.20-$1.63........................................ 368,456 8.39 1.48 112,233 1.34
$4.35.............................................. 36,329 9.79 4.35 -- --
----------- --- ----- ----------- -----------
427,751 8.35 $ 1.65 135,199 $ 1.12
----------- --- ----- ----------- -----------
----------- --- ----- ----------- -----------
</TABLE>
As of December 31, 1995 and 1996 and June 30, 1997, 140,982, 5,313 and
61,516 shares of common stock, respectively, were available for the granting of
additional options.
The Company has adopted the disclosure only provisions of FAS No. 123
"Accounting for Stock-based Compensation." Accordingly, no compensation cost has
been recognized for the Company's 1992 Plan and 1997 Plan. Had compensation cost
for the Company's 1992 Plan and 1997 Plan been determined based on
F-18
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
11. STOCK OPTION PLAN: (CONTINUED)
the fair value at the grant date for awards in 1995 and 1996 consistent with the
provisions of FAS No. 123, the Company's net income (loss) would have been
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1995 1996
----- ---------
<S> <C> <C>
Net income (loss)--as reported................................................ 74 (1,861)
Net income (loss)--pro forma.................................................. 70 (1,912)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1995 and 1996: dividend yield of 0.00%; expected
volatility of .63%; risk free interest rate of 6.29%; and expected lives based
on actual terms of options granted.
WARRANTS:
In connection with the issuance of Series C redeemable preferred stock, the
Company issued warrants to the placement agent to purchase 122,420 shares of
common stock. The warrants are exercisable upon issuance and expire on May 1,
2001.
12. INCOME TAXES:
The Company utilized net operating loss carryforwards of approximately $1.4
million in 1995 to offset its tax expense for the year.
The principal differences between the carrying value of assets and
liabilities for financial reporting and tax reporting purposes relate to
depreciation and start-up costs.
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1995 and 1996 are shown below. The net deferred tax asset has
been fully reserved with a valuation allowance as of December 31, 1995 and 1996
due to the Company's limited earnings history.
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................................... $ 3,313 $ 4,105
Capitalized research and development costs........................... 609 710
Capitalized start-up costs and other................................. 1,113 985
--------- ---------
Total deferred tax assets................................................ 5,035 5,800
Valuation allowance...................................................... (5,035) (5,800)
--------- ---------
Total deferred tax assets.......................................... $ -- $ --
--------- ---------
--------- ---------
</TABLE>
F-19
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
12. INCOME TAXES: (CONTINUED)
At December 31, 1996, the Company has U.S. Federal operating loss
carryforwards of approximately $12,000 which expire through 2011 and which may
be applied against future taxable income. At December 31, 1996, the Company also
has research and development tax credit carryforwards of approximately $710
available to offset future federal income taxes, which expire between 2007 and
2011. At December 31, 1996, the Company has state operating loss carryforwards
of approximately $750, which expire through 1999, and which may be applied
against future taxable income. The Company's ability to utilize such net
operating loss and research and development credit carryforwards may be subject
to certain limitations due to ownership charges as defined by rules enacted with
the Tax Reform Act of 1986.
13. COMMITMENTS AND CONTINGENCIES:
OPERATING AND CAPITALIZED LEASES:
The Company has a noncancelable operating lease for its plant and office
facility. This lease includes scheduled base rent increases over the term of the
lease.
The future minimum rental commitments under all capitalized and
noncancelable operating leases as of December 31, 1996 are as follows:
<TABLE>
<CAPTION>
OPERATING CAPITALIZED
FISCAL YEAR LEASES LEASES
- -------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
1997...................................................................... $ 305 $ 159
1998...................................................................... 238 98
1999...................................................................... 33 3
2000...................................................................... 32 --
2001...................................................................... 19 --
----- -----
Minimum lease payments.................................................... $ 627 $ 260
-----
-----
Less imputed interest..................................................... 29
-----
Present value of minimum lease payments................................... $ 231
-----
-----
</TABLE>
Total rent expense for operating leases for the years ended December 31,
1994, 1995 and 1996 and the six month periods ended June 30, 1996 and 1997
amounted to $154, $107, $142, $125 and $139, respectively, net of sublease
payments of $55, $102, $67, $39 and $5, respectively.
RESEARCH AND CONSULTING AGREEMENTS:
The Company has research and consulting agreements with various educational
and medical institutions, scientists and other professionals to support research
and development activities relating to oligonucleotide, hepatitis, allergy and
other nucleic acid based agents. The terms of these agreements expire at various
dates in 1997 and 1998 and most are cancelable at Apollon's option if sufficient
progress is not made on the projects as defined in the agreements. The minimum
payments under these agreements as of December 31, 1996 is $931 and $150 payable
during 1997 and 1998, respectively.
F-20
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
14. PROFIT SHARING PLAN:
Employees participate in a defined contribution profit sharing plan covering
all employees with more than three months service. Under the "401(k)" salary
reduction provisions of the plan, employees may elect to defer up to 15% of
their compensation, subject to statutory limitations, and have the Company
contribute deferred amounts, subject to the approval of the Board of Directors.
A provision of $10 was made for the year ended December 31, 1995 and $0 for the
year ended December 31, 1996 and the six months ended June 30, 1997.
15. CONTRACT REVENUES:
In July 1995, the Company entered into a research and development agreement
and a manufacturing and supply agreement with Lederle-Praxis Biologics ("LPB"),
a division of American Cyanamid Company, which is a wholly-owned subsidiary of
American Home Products Corporation, for the development of
GENEVAX-Registered Trademark- DNA-based genetic vaccines directed against human
immunodeficiency virus ("HIV"), herpes simplex virus ("HSV"), and human
papilloma virus ("HPV"). Under the terms of these agreements, Apollon has
granted LPB worldwide rights to commercialize the HIV, HSV, and HPV products,
and has retained exclusive worldwide manufacturing rights with respect to these
products. Under the terms of the research and development agreement, LPB will
make certain guaranteed and milestone-related payments to the Company. Under the
terms of the manufacturing and supply agreement, the Company will receive from
LPB a percentage of final retail product sales. In the years ended December 31,
1995 and 1996 and the six month periods ended June 30, 1996 and 1997, the
Company received guaranteed and milestone-related payments totaling $6,750,
$7,800, $1,250 and $0, respectively.
16. LICENSE AGREEMENTS--UNIVERSITY OF PENNSYLVANIA AND THE WISTAR INSTITUTE:
The University of Pennsylvania ("Penn") and The Wistar Institute ("Wistar")
are joint owners of certain technology including the United States Patent
"Genetic Immunization" and other patent applications, jointly the "Technology".
This Technology has been licensed exclusively, on a worldwide basis, to the
Company. The Technology relates to the Company's genetic immunization research.
The Company has entered into separate License Agreements with Penn and
Wistar. The Penn License Agreement was completed on December 1, 1994 and extends
in perpetuity, except under certain circumstances such as, but not limited to, a
bankruptcy of the Company.
In consideration for the Penn License Agreement, the Company has agreed to
make royalty payments to Penn based upon the sales of products developed using
the Technology. To date, the Company has not made any commercial sales of
products and has made no royalty payments to Penn. The Company recorded a $150
license expense in 1995 and issued 45,940 shares of common stock to Penn in 1996
in lieu of cash payment.
The Company entered into a separate License Agreement with Wistar on January
2, 1997. The Wistar Agreement provides the Company with an exclusive, worldwide
license to the Technology owned by Wistar jointly with Penn. In consideration
for the Wistar License Agreement, the Company has agreed to make license
initiation fee payments and royalty fee payments to Wistar.
In addition, the Company agreed to issue to Wistar 22,970 shares of common
stock of the Company as further consideration for the grant of the license. The
Wistar Agreement extends in perpetuity, except under certain circumstances such
as, but not limited to, a bankruptcy of the Company.
F-21
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
17. REVERSE STOCK SPLIT:
On September 29, 1997, the Company's stockholders approved a 0.4594-for-one
reverse stock split (the "Reverse Stock Split") of the Company's outstanding
common stock to be effected prior to the Company's Offering. All references to
shares of common stock have been retroactively adjusted to reflect the Reverse
Stock Split as of January 1, 1994.
18. SUBSEQUENT EVENTS (UNAUDITED):
1997 STOCK OPTION PLAN:
In April 1997 the Company established a second stock option plan ("the 1997
Plan") and authorized a total of 91,880 NQSOs which may be issued to employees,
officers, directors and consultants of the Company. Upon the approval of the
Company's Board of Directors, the NQSOs may be granted at a price not less than
100% of the fair market value on the date of the grant. The options become
exercisable one to ten years following the grant, and expire ten years from the
date of the grant. Activity under the 1997 Plan has been included in Note 11.
INITIAL PUBLIC OFFERING:
In September 1997, the company's board of directors authorized the filing of
a registration statement with the Securities and Exchange Commission for the
Company's initial public offering of its common stock (the "Offering"). Upon
closing of the Offering, all shares of Series A, Series B and Series C
redeemable cumulative convertible preferred stock outstanding will be
automatically converted into shares of common stock on a 0.4594-for-one basis.
In addition, the convertible promissory note, described below, will be converted
as of the closing date of the Offering. Such conversions are reflected in the
unaudited pro forma stockholders equity at June 30, 1997 in the balance sheet
contained herein. The Company's board of directors authorized and the
stockholders approved an amendment to the Articles of Incorporation, to become
effective upon completion of the Offering, whereby the Company shall have the
authority to issue 60,000,000 shares of stock, par value of $.01 per share, of
which 50,000,000 is designated as common stock.
F-22
<PAGE>
APOLLON, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(In thousands, except share and per share amounts)
18. SUBSEQUENT EVENTS (UNAUDITED): (CONTINUED)
CONVERTIBLE PROMISSORY NOTE:
On October 2, 1997, the Company issued a $3 million convertible promissory
note payable to A.H. Investments Ltd., an affiliate of American Home Products
Corporation, bearing interest at a rate of 2% above the prime commercial rate
being charged by PNC Bank, N.A. The promissory note, together with any unpaid
accrued interest, will be payable on demand at any time on or after April 3,
1999, or will be automatically converted into shares of the company's common
stock upon the closing of the Offering at a conversion price equal to the
initial public offering price. The proceeds received from this note will be used
to fund operations.
In addition, as additional consideration, the Company issued a warrant to
A.H. Investments Ltd. to purchase 68,910 shares of the Company's common stock.
This warrant is exercisable six months after the closing of the Offering at a
price equal to 115% of the initial public offering price, subject to adjustment,
and expires five years after becoming exercisable.
F-23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER OF ANY SECURITIES OTHER THAN THOSE TO WHICH IT RELATES OR AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THOSE TO WHICH IT RELATES
IN ANY STATE TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE SUCH OFFER IN SUCH
STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary..................................... 3
Risk Factors........................................... 7
Use of Proceeds........................................ 17
Dividend Policy........................................ 17
The Company............................................ 17
Capitalization......................................... 18
Dilution............................................... 19
Selected Financial Data................................ 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations.................. 21
Business............................................... 26
Management............................................. 46
Certain Relationships and Related Transactions......... 51
Principal Shareholders................................. 52
Description of Capital Stock........................... 54
Shares Eligible for Future Sale........................ 57
Underwriting........................................... 58
Legal Matters.......................................... 59
Experts................................................ 59
Available Information.................................. 60
Financial Statements................................... F-1
</TABLE>
--------------
UNTIL , 1997 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
2,500,000 Shares
APOLLON, INC.
Common Stock
[LOGO]
-------------
PROSPECTUS
, 1997
-----------------
Smith Barney Inc.
Genesis Merchant Group
Securities
Cruttenden Roth
Incorporated
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II--INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated amount of various expenses in
connection with the sale and distribution of the securities being registered:
<TABLE>
<S> <C>
SEC Registration fee............................................ $ 11,326
NASD filing fee................................................. 4,238
Nasdaq National Market filing fee............................... 37,864
Printing and engraving expenses................................. 250,000
Legal fees and expenses......................................... 175,000
(including blue sky fees and expenses)
Accounting fees and expenses.................................... 100,000
Transfer agent fees............................................. 2,500
Miscellaneous................................................... 19,072
---------
Total........................................................... $ 600,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Pennsylvania Business Corporation Law of 1988 authorizes the Company to
grant indemnities to directors and officers in terms sufficiently broad to
permit indemnification of such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933.
Article 5 of the Company's By-Laws provides as follows:
5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS. The
Corporation shall indemnify any director, officer, employee or agent of the
Corporation or any of its subsidiaries who was or is an "authorized
representative" of the Corporation (which shall mean, for the purpose of
this Article, a director or officer of the Corporation or a person serving
at the request of the Corporation as a director, officer, partner, fiduciary
or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) and who was or is a "party"
(which shall include for purposes of this Article the giving of testimony or
similar involvement) or is threatened to be made a party to any "proceeding"
(which shall mean for purposes of this Article any threatened, pending or
completed action, suit, appeal or other proceeding of any nature, whether
civil, criminal, administrative or investigative, whether formal or informal
and whether brought by or in the right of the Corporation, its shareholders
or otherwise) by reason of the fact that such person was or is an authorized
representative of the Corporation to the fullest extent permitted by law,
including without limitation indemnification against expenses (which shall
include for purposes of this Article attorneys' fees and disbursements),
damages, punitive damages, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by such person in connection
with such proceeding unless the act or failure to act giving rise to the
claim is finally determined by a court to have constituted willful
misconduct or recklessness. If an authorized representative is not entitled
to indemnification in respect of a portion of any liabilities to which such
person may be subject, the Corporation shall nonetheless indemnify such
person to the maximum extent for the remaining portion of the liabilities.
5.2 ADVANCEMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) actually and reasonably
incurred in defending a proceeding on behalf of any person entitled to
indemnification under Section 5.1 in advance of the final disposition of
such proceeding upon receipt of an undertaking by or on behalf of such
person to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article and may pay such expenses in advance on behalf of any
II-1
<PAGE>
employee or agent on receipt of a similar undertaking. The financial ability
of such authorized representative to make such repayment shall not be
prerequisite to the making of an advance.
5.3 EMPLOYEE BENEFIT PLANS. For purposes of this Article, the
Corporation shall be deemed to have requested an officer, director, employee
or agent to serve as fiduciary with respect to an employee benefit plan
where the performance by such person of duties to the Corporation also
imposes duties on, or otherwise involves services by, such person as a
fiduciary with respect to the plan; excise taxes assessed on an authorized
representative with respect to any transaction with an employee benefit plan
shall be deemed "fines"; and action taken or omitted by such person with
respect to an employee benefit plan in the performance of duties for a
purpose reasonably believed to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Corporation.
5.4 SECURITY FOR INDEMNIFICATION OBLIGATIONS. To further effect, satisfy
or secure the indemnification obligations provided herein or otherwise, the
Corporation may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or other fund
or account, enter into indemnification agreements, pledge or grant a
security interest in any assets or properties of the Corporation or use any
other mechanism or arrangement whatsoever in such amounts, at such costs and
upon such other terms and conditions as the Board of Directors shall deem
appropriate.
5.5 RELIANCE UPON PROVISIONS. Each person who shall act as an authorized
representative of the Corporation shall be deemed to be doing so in reliance
upon the rights of indemnification provided by this Article.
5.6 AMENDMENT OR REPEAL. All rights of indemnification under this
Article shall be deemed a contract between the Corporation and the person
entitled to indemnification under this Article pursuant to which the
Corporation and each such person intend to be legally bound. Any repeal,
amendment or modification hereof shall be prospective only and shall not
limit, but may expand, any rights or obligations in respect of any
proceeding whether commenced prior to or after such change to the extent
such proceeding pertains to actions or failures to act occurring prior to
such change.
5.7 SCOPE OF ARTICLE. The indemnification, as authorized by this
Article, shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in any
other capacity while holding such office. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article
shall continue as to a person who has ceased to be an officer, director,
employee or agent in respect of matters arising prior to such time and shall
inure to the benefit of the heirs, executors and administrators of such
person.
The By-laws of the Company provide that, subject to certain limitations, no
director shall be personally liable to the Company or its shareholders for
monetary damages for any breach of fiduciary duty by such director as a
director.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since August 1, 1994, the Registrant has issued and sold the following
unregistered securities:
1. From August 1994 through April 1995, the Company sold a total of 28
convertible demand notes in the aggregate principal amount of $4.0 million,
together with 28 warrants to purchase an aggregate of 294,008 shares of the
Company's Common Stock at an exercise price of $5.44 per share, to four private
investors. On April 23, 1996, the convertible demand notes were converted into
1,600,000 shares of the Company's Series B Convertible Preferred Stock.
II-2
<PAGE>
2. From June 1995 to August 1995, the Company sold a total of ten demand
notes in the aggregate principal amount of $940,000 to five private investors.
These demand notes were paid in full on August 14, 1995.
3. On September 20, 1994 and November 22, 1995, the Company issued a total
of 400,000 shares of Series B Convertible Preferred Stock in lieu of a $1.0
million cash payment for a license and certain services provided to the Company
under a Facilities Use Agreement between the Company and Centocor, Inc.
4. Through September 30, 1997, the Company granted options to acquire an
aggregate of 392,025 shares of Common Stock at exercise prices ranging from
$1.20 to $4.35 to various directors, officers, employees and consultants.
5. Through September 30, 1997, the Company issued 25,591 shares of Common
Stock upon exercise of options.
6. Through September 30, 1997, options to purchase 33,237 shares of Common
Stock previously granted to former employees and a former director of the
Company expired.
7. In May 1996, the Company sold a total of 2,435,286 shares of its Series C
Convertible Preferred Stock for an aggregate price of $9.7 million, or $4.00 per
share, to private investors.
8. On May 1, 1996, the Company sold a warrant to purchase 122,420 shares of
its Common Stock at an exercise price of $8.71 per share for an aggregate price
of $266,480 pursuant to a Financial Advisory Agreement between the Company and
Genesis Merchant Group Securities LLC.
9. On October 2, 1997, the Company issued a convertible promissory note in
the principal amount of $3.0 million and sold a warrant to purchase 68,910
shares of Common Stock at an exercise price equal to 115% of the initial
offering price in the Offering to one private investor.
The Company believes that the transactions described above were exempt from
registration under Sections 3(a)(9), 3(b) or 4(2) of the Securities Act because
the subject securities were, respectively, either (i) exchanged by the issuer
with its existing security holders exclusively, with no commission or other
remuneration being paid or given directly or indirectly for soliciting such
exchange; (ii) issued pursuant to a compensatory benefit plan pursuant to Rule
701 under the Securities Act; or (iii) sold to a limited group of persons, each
of whom was believed to have been a sophisticated investor or had a pre-existing
business or personal relationship with the Company or its management and was
purchasing for investment without a view to further distribution. Restrictive
legends were placed on stock certificates evidencing the shares and/or
agreements relating to the right to purchase such shares described above.
II-3
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement.**
3.1 Articles of Incorporation of the Registrant, as amended.
3.2 Bylaws of the Registrant.
4.1 Form of certificate evidencing Common Stock of the Registrant.
4.2 Stock Purchase Agreement, dated as of June 25, 1992, by and among the Registrant and the investors
listed in Exhibit 1(a) thereto.
4.2(a) Amendment to Stock Purchase Agreement, dated November 15, 1993, among the Registrant and the
Investors.
4.2(b) Amendment to Stock Purchase Agreement, dated September 20, 1994, among the Registrant and the
Investors.
4.2(c) Amendment to Stock Purchase Agreement, dated May 1, 1996, among the Registrant and the Investors.
4.2(d) Amendment to Stock Purchase Agreement, dated September 26, 1997, among the Registrant and the
Investors.
4.3 Stock Purchase Agreement, dated as of November 15, 1993, by and among the Registrant and the
investors listed on Exhibit 1.1 thereto.
4.3(a) Amendment to Stock Purchase Agreement dated September 20, 1994, among the Registrant and the
Investors.
4.3(b) Amendment to Stock Purchase Agreement, dated May 1, 1996, among the Registrant and the Investors.
4.3(c) Amendment to Stock Purchase Agreement dated September 26, 1997, among the Registrant and the
Investors.
4.4 Stock Purchase Agreement, dated September 20, 1994, between the Registrant and Centocor, Inc.
4.5 Stock Purchase Agreement, dated as of May 1, 1996, by and among the Registrant and the investors
listed on Schedule 1.1 attached thereto.
4.5(a) Amendment No. 1 to Stock Purchase Agreement, dated September 26, 1997, among the Registrant and the
Investors.
4.6 Warrant, dated as of May 1, 1996, issued to Genesis Merchant Group Securities.
4.7 Form of Common Stock Warrant.
4.8 License Agreement, dated as of January 2, 1997, by and between The Wistar Institute of Anatomy and
Biology and the Registrant (included in Exhibit 10.9).*
4.9 Stock Purchase Agreement dated as of July 17, 1997, between the Registrant and the Trustees of the
University of Pennsylvania.
4.10 Securities Purchase Agreement, dated September 19, 1997, between the Registrant and A.H. Investments
Ltd.
4.11 Common Stock Warrant, dated October 3, 1997, issued to A.H. Investments Ltd.
4.12 Convertible Promissory Note dated October 3, 1997, issued to A.H. Investments Ltd.
5 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality of securities being registered.**
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.1 1992 Omnibus Stock Option Plan.+
10.2 1997 Non-Qualified Stock Option Plan.+
10.3 Research and Development and License Agreement, dated July 19, 1995, between the Registrant and
American Cyanamid Company.*
10.3(a) Amendment No. 1 to the Research and Development and License Agreement, dated October 3, 1997, between
the Registrant and American Cyanamid Company.*
10.4 Supply Agreement, dated July 19, 1995, between the Registrant and American Cyanamid Company.*
10.4(a) Amendment No. 1 to the Supply Agreement, dated October 3, 1997, between the Registrant and American
Cyanamid Company.*
10.5 License and Option Agreement, dated March 6, 1995, between the Registrant and Centocor, Inc.*
10.5(a) Amendment to License and Option Agreement, dated May 31, 1995, between the Registrant and Centocor,
Inc.
10.6 License Agreement, dated December 1, 1994 between the Registrant and the Trustees of the University
of Pennsylvania.*
10.6(a) Amendment to License Agreement, dated July 17, 1997, between the Registrant and the Trustees of the
University of Pennsylvania.
10.7 License Agreement, dated December 1, 1994, between the Registrant and the Institute of Biotechnology
and Advanced Molecular Medicine, Inc.*
10.8 Agreement between the Registrant and the University of Iowa, effective December 3, 1992.*
10.9 License Agreement, dated as of January 2, 1997, by and between The Wistar Institute of Anatomy and
Biology and the Registrant.*
10.10 Agreement, dated as of July 24, 1996, between the Registrant and Vincent R. Zurawski, Jr.+
10.11 Agreement, dated as of July 17, 1996, between the Registrant and Richard Ginsberg.+
10.12 Agreement, dated as of July 17, 1996, between the Registrant and Richard Ciccarelli.+
10.13 Agreement, dated as of July 17, 1996, between the Registrant and James Murphy.+
10.14 Agreement, dated as of July 17, 1996, between the Registrant and Anthony Marcucci.+
10.15 Agreement, dated as of July 17, 1996, between the Registrant and Richard Carrano.+
10.16 Facilities Use Agreement, dated September 20, 1994, between the Registrant and Centocor, Inc.*
10.17 Flex Lease, dated July 8, 1992, between Nairn Great Valley, Inc. and the Registrant.
10.17(a) First Amendment to Flex Lease, dated January 11, 1993 by and between Nairn Great Valley, Inc. and the
Registrant.
10.17(b) Second Amendment to Flex Lease, dated November 19, 1993 by and between Nairn Great Valley, Inc. and
the Registrant.
10.17(c) Third Amendment to Agreement of Lease, dated September 23, 1997 by and between Liberty Property
Limited Partnership and the Registrant.
10.18 Exclusive License Agreement, dated as of July 9, 1997, by and among the Registrant, [ ] and
[ ].*
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5).
23.3 Consent of Ratner & Prestia.
23.4 Consent of Woodcock Washburn Kurtz Mackiewicz & Norris LLP.
24 Power of Attorney (included in signature page).
27 Financial Data Schedule.
</TABLE>
- ------------------------
+ Constitutes a management contract or compensatory plan.
* Confidential treatment has been requested for certain portions thereof. Such
portions have been filed separately with the Commission.
** To be filed by amendment.
ITEM 17. UNDERTAKINGS.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act of
1933, each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering such securities at that time shall be deemed to be the
initial bona fide offering thereof.
The Registrant hereby undertakes to provide to the underwriter at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names required by the underwriter to permit
prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Malvern, Pennsylvania, on October 14,
1997.
APOLLON, INC.
By: /s/ VINCENT R. ZURAWSKI, JR.
-----------------------------------------
Vincent R. Zurawski, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Each person whose signature appears below in so signing also makes,
constitutes and appoints Vincent R. Zurawski, Jr. and James G. Murphy and each
of them, his true and lawful attorney-in-fact, with full power of substitution,
for him in any and all capacities, to execute and cause to be filed with the
Securities and Exchange Commission any and all amendments and post-effective
amendments to this Registration Statement, with exhibits thereto and other
documents in connection therewith and hereby ratifies and confirms all that said
attorney-in-fact or his substitute or substitutes may do or cause to be done by
virtue hereof.
President, Chief Executive
/s/ VINCENT R. ZURAWSKI, JR. Officer and Director
- ------------------------------ (principal executive October 14, 1997
Vincent R. Zurawski, Jr. officer)
Vice President, Finance
and Administration,
/s/ JAMES G. MURPHY Chief Financial Officer
- ------------------------------ and Treasurer (principal October 14, 1997
James G. Murphy financial and accounting
officer)
/s/ MORTON COLLINS
- ------------------------------ Director October 14, 1997
Morton Collins
/s/ THOMAS S. EDGINGTON
- ------------------------------ Director October 14, 1997
Thomas S. Edgington
/s/ CHRISTOPHER MOLLER
- ------------------------------ Director October 14, 1997
Christopher Moller
/s/ HUBERT J. P. SCHOEMAKER
- ------------------------------ Director October 14, 1997
Hubert J. P. Schoemaker
II-7
<PAGE>
APOLLON, INC.
REGISTRATION STATEMENT ON FORM S-1
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
3.1 Articles of Incorporation of the Registrant, as amended.
3.2 Bylaws of the Registrant.
4.1 Form of certificate evidencing Common Stock of the Registrant.
4.2 Stock Purchase Agreement, dated as of June 25, 1992, by and among the Registrant and the investors
listed in Exhibit 1(a) thereto.
4.2(a) Amendment to Stock Purchase Agreement, dated November 15, 1993, among the Registrant and the
Investors.
4.2(b) Amendment to Stock Purchase Agreement, dated September 20, 1994, among the Registrant and the
Investors.
4.2(c) Amendment to Stock Purchase Agreement, dated May 1, 1996, among the Registrant and the Investors.
4.2(d) Amendment to Stock Purchase Agreement, dated September 26, 1997, among the Registrant and the
Investors.
4.3 Stock Purchase Agreement, dated as of November 15, 1993, by and among the Registrant and the
investors listed on Exhibit 1.1 thereto.
4.3(a) Amendment to Stock Purchase Agreement dated September 20, 1994, among the Registrant and the
Investors.
4.3(b) Amendment to Stock Purchase Agreement, dated May 1, 1996, among the Registrant and the Investors.
4.3(c) Amendment to Stock Purchase Agreement dated September 26, 1997, among the Registrant and the
Investors.
4.4 Stock Purchase Agreement, dated September 20, 1994, between the Registrant and Centocor, Inc.
4.5 Stock Purchase Agreement, dated as of May 1, 1996, by and among the Registrant and the investors
listed on Schedule 1.1 attached thereto.
4.5(a) Amendment No. 1 to Stock Purchase Agreement, dated September 26, 1997, among the Registrant and the
Investors.
4.6 Warrant, dated as of May 1, 1996, issued to Genesis Merchant Group Securities.
4.7 Form of Common Stock Warrant.
4.8 License Agreement, dated as of January 2, 1997, by and between The Wistar Institute of Anatomy and
Biology and the Registrant (included in Exhibit 10.10).*
4.9 Stock Purchase Agreement, dated as of July 17, 1997, between the Registrant and the Trustees of the
University of Pennsylvania.
4.10 Securities Purchase Agreement, dated September 19, 1997, between the Registrant and A.H. Investments
Ltd.
4.11 Common Stock Warrant, dated October 3, 1997, issued to A.H. Investments Ltd.
4.12 Convertible Promissory Note, dated October 3, 1997, issued to A.H. Investments Ltd.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.1 1992 Omnibus Stock Option Plan.+
10.2 1997 Non-Qualified Stock Option Plan.+
10.3 Research and Development and License Agreement, dated July 19, 1995, between the Registrant and
American Cyanamid Company.*
10.3(a) Amendment No. 1 to the Research and Development and License Agreement, dated October 3, 1997, between
the Registrant and American Cyanamid Company.*
10.4 Supply Agreement, dated July 19, 1995, between the Registrant and American Cyanamid Company.*
10.4(a) Amendment No. 1 to the Supply Agreement, dated October 3, 1997, between the Registrant and American
Cyanamid Company.*
10.5 License and Option Agreement, dated March 6, 1995, between the Registrant and Centocor, Inc.*
10.5(a) Amendment to License and Option Agreement, dated May 31, 1995, between the Registrant and Centocor,
Inc.
10.6 License Agreement, dated December 1, 1994 between the Registrant and the Trustees of the University
of Pennsylvania.*
10.6(a) Amendment to License Agreement, dated July 17, 1997, between the Registrant and the Trustees of the
University of Pennsylvania.
10.7 License Agreement, dated December 1, 1994, between the Registrant and the Institute of Biotechnology
and Advanced Molecular Medicine, Inc.*
10.8 Agreement between the Registrant and the University of Iowa, effective December 3, 1992.*
10.9 License Agreement, dated as of January 2, 1997, by and between The Wistar Institute of Anatomy and
Biology and the Registrant.*
10.10 Agreement, dated as of July 24, 1996, between the Registrant and Vincent R. Zurawski, Jr.+
10.11 Agreement, dated as of July 17, 1996, between the Registrant and Richard Ginsberg.+
10.12 Agreement, dated as of July 17, 1996, between the Registrant and Richard Ciccarelli.+
10.13 Agreement, dated as of July 17, 1996, between the Registrant and James Murphy.+
10.14 Agreement, dated as of July 17, 1996, between the Registrant and Anthony Marcucci.+
10.15 Agreement, dated as of July 17, 1996, between the Registrant and Richard Carrano.+
10.16 Facilities Use Agreement, dated September 20, 1994, between the Registrant and Centocor, Inc.*
10.17 Flex Lease, dated July 8, 1992, between Nairn Great Valley, Inc. and the Registrant.
10.17(a) First Amendment to Flex Lease, dated January 11, 1993, between Nairn Great Valley, Inc. and the
Registrant.
10.17(b) Second Amendment to Flex Lease, dated November 19, 1993, between Nairn Great Valley, Inc. and the
Registrant.
10.17(c) Third Amendment to Flex Lease, dated September 23, 1997, between Liberty Property Limited Partnership
and the Registrant.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.18 Exclusive License Agreement, dated as of July 9, 1997, by and among the Registrant, [ ] and
[ ].*
21 Subsidiaries of the Registrant.
23.1 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Ratner & Prestia.
23.4 Consent of Woodcock Washburn Kurtz Mackiewicz & Norris LLP.
24 Power of Attorney (included in signature page).
27 Financial Data Schedule.
</TABLE>
- ------------------------
+ Constitutes a management contract or compensatory plan.
* Confidential treatment has been requested for certain portions thereof. Such
portions have been filed separately with the Commission.
<PAGE>
Microfilm No. Filed with the Department
------------ of State on FEB 06 1992
-----------
Entity No. 2075611 [Illegible]
-------- ------------------------------
Acting Secretary of the Commonwealth
ARTICLES OF INCORPORATION
OF
APOLLON, INC.
In compliance with the requirements of 15 Pa.C.S. Section 1306 (relating
to articles of incorporation), the undersigned, desiring to incorporate a
business-stock corporation, hereby states that:
1. The name of the corporation is:
Apollon, Inc.
2. The address of the corporation's initial registered office in this
Commonwealth and the county of venue is:
c/o Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Philadelphia County
3. The corporation is incorporated under the provisions of the Business
Corporation Law of 1988, as amended.
4. The purpose of the corporation is and it shall have unlimited power to
engage in and to do any lawful act concerning any or all lawful business
for which corporations may be incorporated under the Pennsylvania Business
Corporation Law of 1988, as amended.
5. The term for which the corporation is to exist is perpetual.
6. The aggregate number of shares which the corporation shall have
authority to issue is 1,000 shares of Common Stock, par value $.01 per
share.
7. The shareholders of the corporation shall not have the right to cumulate
their votes for the election of directors of the corporation.
8. The board of directors shall have the full authority permitted by law to
divide the authorized and unissued
<PAGE>
shares into classes or series, or both, and to determine for any such
class or series its designation and the number of shares of the class or
series and the voting rights, preferences, limitations and special
rights, if any, of the shares of the class or series.
9. These articles of incorporation may be amended in the manner now or
hereafter prescribed by statute, and all rights conferred upon shareholders
herein are granted subject to this reservation.
10. The name and address of the incorporator is:
Vincent R. Zurawski, Jr.
200 Great Valley Parkway
Malvern, PA 19355
IN TESTIMONY WHEREOF, the incorporator has signed these Articles of
Incorporation this 31st day of January, 1992.
/s/ Vincent R. Zurawski
-----------------------
Vincent R. Zurawski
<PAGE>
Microfilm Number Filed with the Department
------------ of State on JUN 15 1992
-----------
Entity Number 2075611 [Illegible]
------- -----------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Apollon, Inc.
------------------------------------------
--------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct
the following information to conform to the records of the Department):
c/o Ballard Spahr Andrews & Ingersoll
(a) 1735 Market Street, 51st Floor, Philadelphia, PA 19103-7599
----------------------------------------------------------------------
Number and Street City State Zip
Philadelphia
----------------------------------------------------------------------
County
(b) c/o:
-----------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is:
Business Corporation Law of 1988, as amended
--------------------------------------------------------------------------
4. The date of its incorporation is: February 6, 1992
----------------------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
The amendment shall be effective on: at
--- ----------------- -----------
Date Hour
6. (Check one of the following):
The amendment was adopted by the shareholders (or members) pursuant
--- to 15 Pa.C.S. Section 1914(a) and (b).
X The amendment was adopted by the board of directors pursuant to 15
--- Pa.C.S. Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as
--- follows:
X The amendment adopted by the corporation as set forth in full in
--- Exhibit A attached hereto and made a part hereof.
<PAGE>
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original
--- Articles and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
12th day of June, 1992.
- ---- ----- ----
APOLLON, INC.
---------------------------------------
(Name of Corporation)
BY: /s/Vincent R. Zurawski, Jr.
-----------------------------------
(Signature)
TITLE: President and C.E.O.
--------------------------------
<PAGE>
APOLLON, INC.
EXHIBIT A
TO
ARTICLES OF AMENDMENT
RESOLVED, that Article 6 of the Articles of Incorporation of
the Corporation is hereby amended and restated, to read in full as
follows:
"6. The aggregate number of shares which the corporation shall have
the authority to issue is 13,900,000 shares, to be divided into
two classes consisting of (a) 10,000,000 shares of Common Stock,
par value $.01 per share; and (b) 3,900,000 shares of Preferred
Stock, par value $.01 per share.
The following is a description of each class of capital
stock and a statement of the voting rights, designations,
preferences, qualifications, privileges, limitations,
options, conversion rights and other special rights granted
to or imposed upon the shares of each class:
A. PREFERRED STOCK
1. Issuance of Preferred Stock in Series. The shares
of Preferred Stock may be divided into and issued in series.
Each series shall be so designated as to distinguish the
shares thereof from the shares of all other series. To the
extent that these Articles do not establish series of
Preferred Stock and fix and determine the variations in the
relative rights and preferences as between series, the Board
of Directors is hereby expressly vested with authority, by
resolution, to divide the Preferred Stock into such series
and, within the limitations prescribed by law and by these
Articles, to fix and determine at the time of the
establishment of any series the relative rights and
preferences, including voting rights, designations,
preferences, qualifications, privileges, limitations,
restrictions, options, conversion rights, and other special
or relative rights of any series so established. If the
Board provides
<PAGE>
that shares of any series may be converted into Common Stock, the
terms and conditions fixed and determined by the Board on which such
conversion may be made may include, without limitation thereof,
provisions for the protection of the conversion right against dilution
because of the issue by the Corporation of additional Common Stock and
against dilution in any other manner whatsoever, and provision as to
the effect upon the conversion right of any merger or consolidation of
the Corporation into or with any other corporation.
2. Voting Rights of Holders of Preferred Stock.
Except as required by law or as otherwise specifically
provided in these Articles or in any resolution of the Board
of Directors establishing one or more series of Preferred
Stock, the holders of Preferred Stock (to the extent such
holders have voting rights) and the holders of Common Stock
shall vote together as one class.
B. COMMON STOCK
1. Voting Rights of Holders of Common Stock. Each holder
of record of Common Stock shall have the right to one vote for
each share of Common Stock standing in his name on the books of
the Corporation.
2. Dividend Rights of Holders of Common Stock. The
holders of shares of Common Stock shall be entitled to
receive dividends when and as declared by the Board of
Directors, but only out of funds legally available
therefor."
RESOLVED, that Article 8 of the Articles of Incorporation of
the Corporation is hereby deleted in its entirety, and that Articles 9
and 10 of the Articles of Incorporation are hereby redesignated as
Articles 8 and 9, respectively.
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Microfilm Number Filed with the Department
------------ of State on JUN 25 1992
-----------
Entity Number 2075611 [Illegible]
------- -----------------------------
Secretary of the Commonwealth
STATEMENT WITH RESPECT TO SHARES--DOMESTIC BUSINESS CORPORATION
DSCB:15-1522 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1522(b) (relating
to statement with respect to shares), the undersigned corporation, desiring to
state the designation and voting rights, preferences, limitations, and special
rights, if any, of a class or series of its shares, hereby states that:
1. The name of the corporation is: Apollon, Inc.
------------------------------------------
--------------------------------------------------------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S. Section 1522(b)
--- relating to divisions and determinations by the board) set forth in
full, is as follows:
X The resolution amending the Articles under 15 Pa.C.S. Section 1522(b)
--- is set forth in full in Exhibit A attached hereto and made a part
hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any,
filed under 15 Pa.C.S. Section 1522 or corresponding provisions of prior
law with respect thereto, and (c) another provision of the Article
is 3,900,000 shares.
---------
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: June 24, 1992
-------------
5. (Check, and if appropriate complete, one of the following):
X The resolution shall be effective upon the filing this statement with
--- respect to shares in the Department of State.
The resolution shall be effective on: at
--- ----------------- ----------
Date Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
statement to be signed by a duly authorized officer thereof this 24th day of
June, 1992. ----
- ---- ----
APOLLON, INC.
---------------------------------------
(Name of Corporation)
BY: /s/Vincent R. Zurawski, Jr.
-----------------------------------
(Signature)
TITLE: President
--------------------------------
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APOLLON, INC.
Exhibit A To Statement With Respect To Shares
RESOLUTION ESTABLISHING SERIES A CONVERTIBLE PREFERRED STOCK
RESOLVED, that in accordance with the Articles of Incorporation, as
amended, of the Corporation, there is hereby established a series of
Preferred Stock, designated Series A Convertible Preferred Stock consisting
of 3,900,000 shares with the following voting rights, preferences,
qualifications, privileges, limitations, options, conversion rights and
other special rights:
(a) Dividend Rights. (i) The holder of each share of Series A
Convertible Preferred Stock shall be entitled to receive, before any dividends
shall be declared and paid upon or set aside for any shares of Common Stock in
any such year, out of funds legally available for that purpose, dividends at the
rate of 8% of the Series A Purchase Price (as such term is defined in Paragraph
(g) hereof) per annum, and no more.
(ii) Such dividends shall cumulate commencing one year from
the date of issuance of each share of Series A Convertible Preferred Stock and
shall be payable quarterly in arrears commencing on September 30, 1993 and on
each December 30, March 30, June 30 and September 30 thereafter (each
hereinafter called a "Dividend Accrual Date" and each of the quarterly periods,
or portions thereof, ending on the 29th day of such month, respectively, being
hereinafter called a "Dividend Period") and shall be paid in cash only (A) when
and as declared by the Board of Directors of the Corporation out of funds
legally available for that purpose with the first payment due on September 30,
1993 unless sooner declared by the Board of Directors, or (B) upon liquidation
as provided in Paragraph (b) hereof or redemption as provided in Paragraph (c)
hereof. The declaration and payment of such dividends to the holders of Series
A Convertible Preferred Stock shall be paid to the extent funds are legally
available for such purpose and the Board of Directors of the Corporation votes
to make payment thereof.
(iii) Dividends on shares of Series A Convertible Preferred
Stock shall be cumulative (whether or not there shall be net profits or net
assets of the Corporation legally available for the payment of such dividends),
so that, if at any time Full Cumulative Dividends (as defined in Paragraph (g)
hereof) upon the Series A Convertible Preferred Stock to the
<PAGE>
end of the last completed Dividend Period shall not have been paid or declared
and a sum sufficient for payment thereof set apart, then the amount of the
deficiency in such dividends shall be fully paid (but without interest), or such
dividends in such amount shall be declared on the shares of the Series A
Convertible Preferred Stock and a sum sufficient for the payment thereof shall
be set apart for such payment, before any dividend shall be declared or paid or
any other distribution ordered or made upon any class of stock ranking as to
dividends or upon liquidation junior to the Series A Convertible Preferred Stock
(other than a dividend payable in such junior stock) and before any sum or sums
shall be set aside for or applied to the purchase or redemption of any shares of
any class of stock ranking as to dividends or upon liquidation junior to the
Series A Convertible Preferred Stock (with respect to rights to dividends and on
liquidation, the Series A Convertible Preferred Stock shall rank prior to the
Common Stock); provided, that no dividends shall be declared or paid and no sum
sufficient for the payment thereof shall be set apart for such payment in
respect of the shares of Common Stock (other than a dividend payable in shares
of Common Stock) while any shares of the Series A Convertible Preferred Stock
are outstanding without the approval of the holders of record of a majority of
the shares of Series A Convertible Preferred Stock outstanding as of a record
date between 10 and 90 days prior to the declaration of such dividend; further
provided, that no Accrued Dividends (as such term is defined in Paragraph (g)
hereof) shall be payable upon conversion of the Series A Convertible Preferred
Stock or at any time thereafter.
(b) Liquidation Rights. (i) In the event of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
holders of shares of Series A Convertible Preferred Stock shall be entitled to
receive, out of the assets of the Corporation legally available therefor, an
amount equal to $1.6667 per share (the "Liquidation Price"), and a further
amount equal to the Accrued Dividends plus any other dividends declared but
unpaid, if any, on or with respect to such shares of Series A Convertible
Preferred Stock, before any payment shall be made or any assets distributed to
the holders of shares of Common Stock; provided that, except in the event of any
voluntary or involuntary liquidation, dissolution or winding up, the requirement
for payment of such a preferential amount on liquidation to the holders of
Series A Convertible Preferred Stock shall not impose any restriction on the use
of the surplus of the Corporation. If, upon liquidation, dissolution, or
winding up, whether voluntary or involuntary, the assets thus distributed among
the holders of Series A Convertible Preferred Stock shall be insufficient to
permit payment to such holders of the full preferential amounts provided in the
first sentence of this Paragraph (b) and to the holders of any other series of
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Preferred Stock or any other class of stock of the Corporation ranking on a
parity with the shares of Series A Convertible Preferred Stock in any
distribution of assets, then the entire assets of this Corporation to be
distributed shall be distributed ratably among the holders of Series A
Convertible Preferred Stock and the holders of any other series of Preferred
Stock or any other class of stock of the Corporation ranking on a parity with
the shares of Series A Convertible Preferred Stock in any distribution of
assets. After payment has been made to the holders of Series A Convertible
Preferred Stock of the full amounts to which they are entitled pursuant to this
Paragraph (b), the holders of shares of Common Stock shall be entitled to
receive, out of the assets of the Corporation legally available therefor, an
amount per share of Common Stock equal to $.02 and a further amount equal to
dividends and distributions, if any, then declared and unpaid on the Common
Stock. Upon receipt by holders of Common Stock of such amounts, the remaining
assets of the Corporation shall be distributed in such amounts per share to the
holders of Series A Convertible Preferred Stock, to the holders of any other
series of Preferred Stock or any other class of stock of the Corporation ranking
on a parity with the shares of Series A Convertible Preferred Stock in any
distribution of assets and to the holders of Common Stock so that the amount
distributed per share of Series A Convertible Preferred Stock shall equal the
amount distributed per share of Common Stock multiplied by the Conversion Rate
then in effect.
(ii) A consolidation or merger of the Corporation with or
into any other corporation or corporations in a transaction in which the
shareholders of the Corporation receive cash in exchange for the shares of
capital stock of the Corporation then held by them, or the sale of all or
substantially all of the assets of the Corporation for cash, shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for the purposes
of this Paragraph (b).
(c) Redemption Rights. (i) Subject to Subparagraph (vii) below,
on each of April 30, 1998, April 30, 1999 and April 30, 2000 (such dates being
hereinafter referred to as the "Redemption Dates"), and so long as any shares of
Series A Convertible Preferred Stock shall be outstanding, the Corporation shall
(unless otherwise prevented by law) redeem, at the option and upon the written
notice of any holder or holders of Series A Convertible Preferred Stock (the
"Redemption Notice") (which Redemption Notice shall state such holder's
intention to exercise the redemption option set forth herein and the number of
shares of Series A Convertible Preferred Stock sought to be redeemed (up to the
maximum number of shares owned by such holder which are entitled to be redeemed
on such Redemption Date as hereinafter provided)), delivered at least 30 but not
more than 60 days prior
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<PAGE>
to the Redemption Date, the following respective percentages of shares of Series
A Convertible Preferred Stock initially outstanding and owned by such holder (or
his predecessor who purchased such shares on the Original Issuance Date as shown
by the stock records of the Corporation):
April 30, 1998 33-1/3%
April 30, 1999 66-2/3%
April 30, 2000 100%
provided however, that if on any Redemption Date subsequent to April 30, 1998 a
holder of shares of Series A Convertible Preferred Stock who held shares on a
previous Redemption Date had not theretofore exercised in full a redemption
option, then such holder shall, in addition to the shares which can be redeemed
on the then current Redemption Date, have the right to have redeemed such
additional shares of Series A Convertible Preferred Stock which would cause such
holder to have redeemed as of the then current Redemption Date the maximum
number of shares of Series A Convertible Preferred Stock which could have been
redeemed through such date had all redemption options existing on or prior to
such date been exercised in full.
(ii) The amount per share of Series A Convertible Preferred
Stock at which the shares of Series A Convertible Preferred Stock are to be
redeemed pursuant to Subparagraph (i) on any Redemption Date shall be an amount
equal to Accrued Dividends and any other dividends declared but unpaid, if any,
on or with respect to such shares of Series A Convertible Preferred Stock up to
and including the applicable Redemption Date, plus the greater of (A) the
Liquidation Price and (B) the fair market value per share (as determined by
agreement between the Corporation and the holders of 66-2/3% of the Series A
Convertible Preferred Stock or, in the absence of such agreement, by an
independent firm of investment bankers, appraisers or accountants selected by
the Corporation and the holders of 66-2/3% of the Series A Convertible Preferred
Stock, or, in the absence of agreement as to the identity of such independent
firm, by three independent firms of investment bankers, appraisers or
accountants, one of which shall be selected by the Corporation, one by holders
of 66-2/3% of the Series A Convertible Preferred Stock, and the third by the
preceding two firms so selected, or in such other manner as may be agreed
between the Corporation and the holders of 66-2/3% of the Series A Convertible
Preferred Stock). The total sum payable per share of Series A Convertible
Preferred Stock on any Redemption Date is hereinafter referred to as the "Series
A Redemption Price", and any payment to be made is hereinafter referred to as
the "Series A Redemption Payment."
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<PAGE>
(iii) On or after each Redemption Date, each holder of shares
of Series A Convertible Preferred Stock to be redeemed shall surrender a
certificate or certificates (duly endorsed in blank or accompanied by proper
instruments of assignment and transfer thereof duly endorsed in blank)
evidencing such holder's shares of Series A Convertible Preferred Stock to be
redeemed on such date to the Corporation at the place designated in such notice,
and shall thereupon be entitled to receive payment of the Redemption Price, and
a new certificate shall be issued representing the unredeemed shares included in
such certificate or certificates, if any. The Corporation shall pay the Series
A Redemption Payment no later than the date that is one month following the
Redemption Date. On or prior to any Redemption Date the Corporation may
deposit, with any bank or trust company in Philadelphia or New York having
capital and surplus of at least $250,000,000, as a trust fund, a sum sufficient
to redeem on the Redemption Date, the shares of Series A Convertible Preferred
Stock scheduled for redemption, with irrevocable instructions and authority to
the bank or trust company to give notice of redemption thereof if such notice
shall not previously have been given by the Corporation or to complete the
giving of any notice if necessary, and to pay, on and after the Redemption Date,
the Redemption Price of the shares to their respective holders upon the
surrender of their share certificates. From and after the Redemption Date, (A)
if funds necessary for the redemption shall be available therefor, unless the
Corporation shall default in making payment of the Redemption Price upon
surrender of certificates as aforesaid, or (B) if funds necessary for the
redemption shall have been so deposited, the shares called for redemption or a
pro rata part of each share in cases of redemption pro rata shall cease to be
outstanding and the holders thereof shall cease to be shareholders with respect
to such shares or pro rata parts and shall have no interest in or claim against
the Corporation with respect to such shares or pro rata parts except the right
to receive from the Corporation or the bank or trust company with which such
deposit may have been made payment of the Redemption Price of the shares without
interest upon the surrender of their certificates therefor (duly endorsed in
blank or accompanied by proper instruments of assignment and transfer thereof
duly endorsed in blank). Any funds so deposited which shall not be required for
such redemption because of the exercise of conversion rights subsequent to the
date of deposit shall be returned to the Corporation. In case any holder of
shares of Series A Convertible Preferred Stock which have been called for
redemption shall not, within six (6) years after the date of such deposit, have
claimed the amount deposited with respect to the redemption thereof, such bank
or trust company, upon demand, shall pay over to the Corporation such unclaimed
amount and shall thereupon be relieved of all responsibility in respect thereof
to such holder,
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<PAGE>
and thereafter such holder shall look only to the Corporation for payment
thereof. Any interest which may accrue on funds so deposited shall be paid to
the Corporation from time to time.
(iv) The Corporation shall have the power to purchase or
otherwise acquire shares of Series A Convertible Preferred Stock from time to
time at such price or prices as may be agreed upon by the holder or holders
thereof and the Corporation, provided that unless dividends and distributions on
all outstanding shares of Series A Convertible Preferred Stock which have been
declared shall have been paid or a sum or assets sufficient for the payment
thereof set apart, the Corporation shall not purchase for value any shares of
Series A Convertible Preferred Stock except in accordance with an offer made in
writing or by publication (as determined by the Board of Directors of the
Corporation) to all holders of record of shares of Series A Convertible
Preferred Stock.
(v) If the funds of the Corporation available for
redemption of shares of Series A Convertible Preferred Stock on the Redemption
Date are insufficient to redeem the total number of shares of Series A
Convertible Preferred Stock to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably among the holders of such shares to be redeemed. The shares of
Series A Convertible Preferred Stock not redeemed shall remain outstanding and
entitled to all the rights and preferences provided herein. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series A Convertible Preferred Stock, such funds
will immediately be used to redeem the balance of the shares which the
Corporation has become obligated to redeem on any redemption date but which it
has not redeemed.
(vi) Notwithstanding the foregoing, holders of shares of
Series A Convertible Preferred Stock shall have no right to require redemption
under this Paragraph (c) if, prior to the exercise of their right to require
redemption as provided in Subparagraph (i) above, there shall have occurred a
closing or closings of a public sale or sales for the account of the Corporation
of the Common Stock of the Corporation or securities convertible into or
exchangeable for shares of Common Stock of the Corporation, where the aggregate
sales price of the securities included in such sale or sales (before deduction
of any underwriting commissions, discounts or concessions or expenses of sale)
is at least $12,500,000, and the price per share of such securities is at least
$3.33.
(vii) Anything contained in this Paragraph (c) to the
contrary notwithstanding, the holders of shares of Series
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A Convertible Preferred Stock requested by such holders as herein provided to be
redeemed pursuant to this Paragraph (c) shall have the right, exercisable at any
time up to the close of business on the Redemption Date (unless default shall be
made by the Corporation in the payment of the Redemption Price as herein
provided, in which event such right shall have been exercisable until such
default is cured), to convert all or any part of such shares to be redeemed as
herein provided into shares of Common Stock pursuant to Paragraph (d) hereof.
If, and to the extent, any shares of Series A Convertible Preferred Stock so
entitled to redemption are converted into shares of Common Stock by the holders
thereof prior to the close of business on the Redemption Date, the total number
of shares of Series A Convertible Preferred Stock otherwise to be redeemed on
such date shall be reduced by the number of shares of Series A Convertible
Preferred Stock so converted.
(viii) Shares of Series A Convertible Preferred Stock which
have been redeemed or reacquired in any manner by the Corporation or which have
been converted into shares of stock of another class or classes shall be
cancelled and may not be reissued.
(d) Conversion Rights. (i) Shares of Series A Convertible
Preferred Stock may, at the option of the holder, be converted into shares of
Common Stock of the Corporation (as such shares of Common Stock may be
constituted on the conversion date) at any time and from time to time at the
rate of one (1) share of Common Stock for each share of Series A Convertible
Preferred Stock, subject to adjustment as provided below (the "Conversion
Rate"); provided that, as to any shares of Series A Convertible Preferred Stock
which a holder has elected to have the Company redeem, the conversion right
shall terminate at the close of business on the Redemption Date (determined as
provided in Paragraph (c) hereof), unless default shall be made in the payment
of the applicable Redemption Price.
(ii) The holder of a share or shares of Series A Convertible
Preferred Stock may exercise the conversion right as to any thereof by
delivering to the Corporation during regular business hours, at the principal
executive offices of the Corporation or at the corporate trust office of any
transfer agent of the Corporation for the shares of this series or at such other
place as may be designated by the Corporation, the certificate or certificates
for the shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by written notice stating that the
holder elects to convert such shares and stating the name or names (with
address) in which the certificate or certificates for Common Stock are to be
issued and by payment of any tax which may be
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payable in respect of any transfer involved in the issuance and delivery of
shares in any name other than that of the holder of record on the books of the
Corporation of the shares of Series A Convertible Preferred Stock converted.
Conversion shall be deemed to have been effected on the date such delivery is
made, and such date is referred to herein as the "conversion date". If the
conversion right is exercised in connection with an underwritten offer of
securities registered pursuant to the Securities Act of 1933, the conversion
may, at the option of any holder tendering shares of Series A Convertible
Preferred Stock for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which event
the person(s) entitled to receive shares of Common Stock issuable upon such
conversion of shares of Series A Convertible Preferred Stock shall not be deemed
to have converted such Series A Convertible Preferred Stock until the closing of
such sale of securities. As promptly as practicable thereafter the Corporation
shall issue and deliver to or upon the written order of such holder, at such
office or other place designated by the Corporation, a certificate or
certificates for the number of full shares of Common Stock to which he is
entitled and a check, cash, scrip certificate or other adjustment in respect of
any fraction of a share as provided below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a shareholder of record on the conversion date unless the transfer
books of the Corporation are closed on that date, in which event he shall be
deemed to have become a shareholder of record on the next succeeding date on
which the transfer books are open, but the conversion rate shall be that in
effect on the conversion date. No payment or adjustment shall be made upon any
conversion on account of any dividends declared but unpaid on the shares of
Series A Convertible Preferred Stock surrendered for conversion or on account of
any dividends on the shares of Common Stock issued upon such conversion.
(iii) All outstanding shares of Series A Convertible
Preferred Stock shall be deemed automatically converted into shares of Common
Stock at the Conversion Rate upon the occurrence of a closing of a public sale
for the account of the Corporation of the Common Stock of the Corporation or
securities convertible into or exchangeable for shares of Common stock of the
Corporation, where the aggregate sales price of securities included in such sale
and in all other public sales for the account of the Corporation of the Common
Stock of the Corporation or securities convertible into or exchangeable for
shares of Common Stock of the Corporation closed prior thereto (before deduction
of any underwriting commissions, discounts or concessions or expenses of sale)
is at least $12,500,000 and the price per share of such securities is at least
$3.33. On or
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after the date of the closing of such sale, and in any event within ten days
after receipt of notice, by mail, postage prepaid from the Corporation of the
occurrence thereof, each holder of shares of Series A Convertible Preferred
Stock shall surrender such holder's certificates evidencing such shares at the
principal executive offices of the Corporation or at the corporate trust office
of any transfer agent for the shares of this series or at such other place as
may be designated by the Corporation, and shall thereupon be entitled to receive
certificates evidencing the number of shares of Common Stock into which such
shares of Series A Convertible Preferred Stock shall have been converted. On
the date of the closing of such sale, each holder of shares of Series A
Convertible Preferred Stock shall be deemed to be a holder of record of the
shares of Common Stock issuable upon such conversion, notwithstanding that the
certificates representing such shares of Series A Convertible Preferred Stock
shall not have been surrendered as provided above, that notice from the
Corporation shall not have been received by any holder of shares of Series A
Convertible Preferred Stock, or that the certificates evidencing such shares of
Common Stock shall not then be actually delivered to such person.
(iv) The Corporation shall not be required to issue any
fraction of a share upon conversion of any share or shares of Series A
Convertible Preferred Stock. If more than one share of Series A Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the total number of shares of Series A
Convertible Preferred Stock so surrendered. If any fractional interest in a
share of Common Stock would be deliverable upon conversion, the Corporation
shall make an adjustment therefor in cash unless its Board of Directors shall
have determined to adjust fractional interests by issuance of scrip certificates
or in some other manner. Adjustment in cash shall be made on the basis of the
current market price of one share of Common Stock on the conversion date. A
determination of the current market price made in good faith by the Board of
Directors for the purposes of this Subparagraph (d)(iv) shall be conclusive and
binding upon all the shareholders of the Corporation.
(v) From and after the date of the first issuance of shares
of Series A Convertible Preferred Stock, the Conversion Rate provided for above
shall be subject to the following adjustments, which shall be made to the
nearest one-tenth of a share of Common Stock or, if none, to the next lower
one-tenth:
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(A) If the Corporation shall pay to all of the holders
of its Common Stock or any other class or series of its capital stock which
is not on a parity with or senior to the Series A Convertible Preferred
Stock, a dividend in shares of Common Stock or in securities convertible
into its Common Stock (the "Convertible Securities"), the Conversion Rate
in effect immediately prior to the record date fixed for the determination
of the holders of Common Stock entitled to such dividend shall be
increased, effective at the opening of business on the full business day
next following such record date, by multiplying such Conversion Rate by a
fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding on such record date plus the number of shares of
Common Stock issued, or issuable upon conversion of Convertible Securities
issued, in payment of such dividend and the denominator of which is the
number of shares of Common Stock issued and outstanding on such record
date.
(B) If the Corporation shall split the outstanding
shares of its Common Stock into a greater number of shares or combine the
outstanding shares of its Common Stock into a smaller number of shares, the
Conversion Rate in effect immediately prior to such action shall be
increased in the case of a split or decreased in the case of a combination,
effective at the opening of business on the full business day next
following the day such action becomes effective, so that the holders of
shares of Series A Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock which such holders would have been entitled to receive as a result of
such split or combination if such shares of Series A Convertible Preferred
Stock had been converted immediately prior to the date such split or
combination, as the case may be, became effective.
(C) If the Corporation shall issue or sell to all
holders of its Common Stock options, warrants or rights to subscribe for or
purchase shares of its Common Stock, other than Permitted Shares (as
hereinafter defined), at a price per share (plus the consideration per
share of Common Stock, if any, received for such options, warrants or
rights) less than $1.6667 divided by the Conversion Rate in effect
immediately prior to such issuance or sale (the "Adjustment Price") or to
subscribe for or purchase any Convertible Securities at a price per share
(plus the consideration per share of Convertible Securities, if any,
received for such options, warrants or rights) which when divided by the
conversion rate applicable to those Convertible Securities is less than the
Adjustment Price,
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the Conversion Rate in effect immediately prior to such issuance or sale
shall be increased, effective at the opening of business on the first full
business day next following such issuance or sale, to an amount determined
by multiplying such Conversion Rate by a fraction the numerator of which is
the number of shares of Common Stock of the Corporation outstanding
immediately prior to said date plus the number of shares of Common Stock
issuable on exercise of such options, warrants or rights (or in the case of
Convertible Securities the number of shares of Common Stock into which the
Convertible Securities issuable on exercise of such options, warrants or
rights would then be convertible) and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to said date
plus the number of shares of Common Stock of the Corporation which the
aggregate subscription or purchase price for the total number of such
shares issuable on exercise of such options, warrants or rights (including
the consideration, if any, received by the Corporation for such options,
warrants or rights) would purchase at the Adjustment Price. On the
expiration of such options, warrants or rights the Conversion Rate
applicable to any then outstanding shares of Series A Convertible Preferred
Stock shall forthwith be readjusted to the Conversion Rate which would
have obtained at the time of such expiration if the adjustment made at the
time such options, warrants or rights were issued or sold had been made
upon the basis of the issuance of only the number of shares of Common Stock
or Convertible Securities actually issued upon the exercise of such
options, warrants or rights, but such readjustment shall not affect any
conversion theretofore made. Permitted Shares shall include (w) 450,000
shares of Common Stock issued after the date of the first sale of shares of
Series A Convertible Preferred Stock, including but not limited to any
shares of Common Stock or Convertible Securities issued or issuable to
officers, directors or employees of, or consultants to, or to persons who
were to become officers, directors or employees of, or consultants to, the
Corporation pursuant to awards or grants made after the date of the first
sale of shares of Series A Convertible Preferred Stock under stock option,
stock incentive, stock appreciation, stock bonus, stock award or
compensation rights plans or arrangements or employment letters or any
other employee benefit plans presently in effect or which may hereafter be
adopted or entered into by the Corporation, (x) any shares of Common Stock
or Convertible Securities issued or issuable upon conversion of any
Convertible Securities and (y) any shares of Common Stock issued or
issuable upon conversion of shares of Series A Convertible Preferred Stock;
provided that each such sale or issuance
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<PAGE>
shall have been approved by the Board of Directors of the Corporation.
(D) If the Corporation shall distribute to all of the
holders of its Common Stock any evidences of its indebtedness, or any
options, warrants or rights to subscribe for any security other than its
Common Stock or Convertible Securities, or any other assets (excluding
dividends and distributions in cash to the extent permitted by law), the
Conversion Rate in effect immediately prior to the record date fixed for
the determination of the holders of Common Stock entitled to such
distribution shall be increased, effective at the opening of business on
the next following full business day, to an amount determined by
multiplying such Conversion Rate by a fraction the numerator of which is
the Adjustment Price (as defined in clause (C) above) and the denominator
of which is such Adjustment Price less the fair market value (as determined
by an independent appraiser selected with the approval of at least
sixty-six and two-thirds percent (66 2/3%) of the members of the Board of
Directors of the Corporation then in office, whose determination, in the
absence of fraud, shall be conclusive) of the amount of evidences of
indebtedness, options, rights, warrants or other assets (excluding cash
dividends and distributions as aforesaid) so distributed which is
applicable to one share of Common Stock.
(E) If the Corporation shall issue shares of its
Common Stock or Convertible Securities other than Permitted Shares and
other than pursuant to a transaction described in clauses (A)-(D) hereof,
at a price per share of less than the Adjustment Price (as defined in
clause (C) above) or in the case of Convertible Securities at a price per
share which when divided by the conversion rate applicable thereto is less
than the Adjustment Price), the Conversion Rate in effect immediately prior
to such issuance shall be increased, effective at the opening of business
on the next following full business day, to an amount determined by
multiplying the Conversion Rate by a fraction the numerator of which is the
number of shares of Common Stock of the Corporation outstanding immediately
prior to such issuance plus the number of additional shares of Common Stock
to be so issued (or in the case of Convertible Securities the number of
additional shares of Common Stock into which the Convertible Securities to
be so issued would be convertible) and the denominator of which is the
number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock of the Corporation which
the aggregate purchase price for the total number of additional shares of
Common Stock or
12
<PAGE>
Convertible Securities to be so issued would purchase at the Adjustment
Price.
No adjustment of the Conversion Rate as provided in this Subparagraph (d)(v)
shall be made by reason of the issuance of shares of Common Stock or Convertible
Securities of the Corporation, or options, warrants or rights to subscribe
therefor, for cash, property or services, except as provided in clauses (C) and
(E) of this Subparagraph (d)(v). To the extent that any shares of Common Stock
or Convertible Securities of the Corporation, or options, warrants or rights to
subscribe therefor, shall be issued for a cash consideration, the consideration
received by the Corporation therefor shall be deemed to be the amount of the
cash received by the Corporation therefor without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or concessions paid
or allowed by the Corporation in connection therewith. In the case of the
issuance of Common Stock or Convertible Securities, or options, warrants or
rights to subscribe therefor, for a consideration all or part of which shall be
property received or services performed, the value of such property or services
for the purposes of clauses (C) and (E) of this Subparagraph (d)(v) shall be
determined, irrespective of the accounting treatment thereof and without
deduction therefrom of any reasonable expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Corporation in
connection therewith, by at least sixty-six and two-thirds percent (66 2/3%) of
the members of the Board of Directors of the Corporation then in office, whose
determination, in the absence of fraud, shall be conclusive. Whenever the
Conversion Rate is adjusted pursuant to this Subparagraph (d)(v) the Corporation
shall (x) promptly place on file at its principal executive offices or corporate
trust office of its transfer agent or agents for the shares of Series A
Convertible Preferred Stock a statement signed by the President or a Vice
President of the Corporation and by its Treasurer, an Assistant Treasurer or
other financial officer showing in reasonable detail the facts requiring such
adjustment and the Conversion Rate after such adjustment, and shall make such
statement available for inspection by shareholders of the Corporation, and (y)
mail to holders of record of shares of Series A Convertible Preferred Stock a
notice stating that such adjustment has been made and the adjusted Conversion
Rate.
(vi) If the Corporation shall pay to the holders of its
Common Stock a dividend in shares of Common Stock or Convertible Securities or
if it shall split or combine the outstanding shares of its Common Stock, the
Adjustment Price referred to in clauses (C), (D) and (E) of Subparagraph (d)(v)
(as theretofore decreased or increased) shall forthwith be decreased in the case
of a stock dividend or split or increased
13
<PAGE>
in the case of a combination by multiplying the Adjustment Price by a fraction,
the numerator of which is the number of shares of Common Stock issued and
outstanding on the record date fixed for any such stock dividend or immediately
before any such split or combination becomes effective and the denominator of
which is the number of shares of Common Stock issued and outstanding on such
record date or immediately before such split or combination becomes effective
plus, with respect to a stock dividend, the number of shares of Common Stock
issued, or issuable upon conversion of Convertible Securities issued, in payment
of such dividend or, with respect to a stock split, the number of shares of
Common Stock issued as a result of such split or minus, with respect to a stock
combination, the difference between the number of shares of Common Stock issued
and outstanding immediately before such combination becomes effective and the
number of shares of Common Stock issued and outstanding immediately after such
combination becomes effective.
(vii) In case of any reclassification or change of the
outstanding shares of Common Stock of the Corporation (except a split or
combination of shares) or in case of any consolidation or merger to which the
Corporation is a party (except a merger in which the Corporation is the
surviving corporation and which does not result in any reclassification of or
change in the outstanding Common Stock of the Corporation, except a split or
combination of shares as to which clause (B) of Subparagraph (d)(v) is
applicable) or in case of any sale or conveyance to another corporation of all
or substantially all of the property of the Corporation, effective provision
shall be made by the Corporation or by the successor or purchasing corporation
so that (A) the holder of each share of Series A Convertible Preferred Stock
then outstanding shall thereafter have the right to convert such share into the
kind and amount of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock of the Corporation into which such share
of Series A Convertible Preferred Stock might have been converted immediately
prior thereto, and (B) there shall be subsequent adjustments of the Conversion
Rate which shall be equivalent, as nearly as practicable, to the adjustments
provided for in Subparagraph (d)(v). The provisions of this Subparagraph
(d)(vii) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, sales or conveyances.
(viii) If a state of facts shall occur which, without being
specifically controlled by the provisions of this Paragraph (d), would not
fairly protect the conversion rights of the Series A Convertible Preferred Stock
in accordance with the essential intent and principles of such provisions, then
the
14
<PAGE>
Board of Directors of the Corporation shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.
(ix) The issuance of shares of Common Stock of the
Corporation on conversion of shares of Series A Convertible Preferred Stock
shall be without charge to the converting holder of shares of Series A
Convertible Preferred Stock for any tax in respect of the issuance thereof, but
the Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of shares in any
name other than that of the holder of record on the books of the Corporation of
the shares of Series A Convertible Preferred Stock converted, and the
Corporation shall not be required to issue or deliver any certificate for shares
of Common Stock unless and until the person requesting issuance thereof shall
have paid to the Corporation the amount of such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
(x) Shares of Common Stock issued on conversion of shares
of Series A Convertible Preferred Stock shall be issued as fully paid shares and
shall be non-assessable by the Corporation. The Corporation shall at all times
reserve and keep available for the purpose of effecting the conversion of shares
of Series A Convertible Preferred Stock such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of all
outstanding shares of this Series, and to the extent necessary in order to
reserve a sufficient number of such shares, the Corporation shall, subject to
appropriate shareholder action, amend its Articles of Incorporation to increase
the number of duly authorized but unissued shares of its Common Stock.
(xi) Shares of Series A Convertible Preferred Stock
converted as provided herein shall not be reissued and the Board of Directors
shall take appropriate action from time to time to effect reductions in the
number of shares of Preferred Stock which the Corporation is authorized to
issue.
(e) Voting Rights. (i) So long as any shares of Series A
Convertible Preferred Stock are outstanding, the Corporation shall not, without
the affirmative vote at a meeting called for that purpose or the written consent
of holders of at least a majority of the total number of shares of Series A
Convertible Preferred Stock then outstanding, voting as a separate class, in any
manner, whether by amendment to the Articles of Incorporation of the Corporation
or otherwise:
15
<PAGE>
(A) Amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action
would alter or change the designations, relative rights, preferences or
limitations of, or the restrictions provided for the benefit of, the Series
A Convertible Preferred Stock so as to affect the Series A Convertible
Preferred Stock adversely;
(B) Authorize or create any additional shares of
Series A Convertible Preferred Stock, or authorize or create shares of any
class or series of stock having any preference or priority as to dividends
or assets superior or equal to any such preference or priority of the
Series A Convertible Preferred Stock, or authorize or create shares of any
class or series or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having optional rights to
purchase, any shares of the Corporation having any such preference; or
(C) Reclassify the shares of Common Stock or any other
shares of stock hereafter created junior to the Series A Convertible
Preferred Stock as to dividends or assets into shares of Series A
Convertible Preferred Stock or into shares having any preference or
priority as to dividends or assets superior or equal to that of the Series
A Convertible Preferred Stock.
(ii) The votes or consent required in Subparagraph (e)(i)
above shall be in addition to any approval of shareholders of the Corporation
which may be required by law or pursuant to any provision of the Corporation's
Articles of Incorporation, which approval shall be obtained by vote of the
shareholders of the Corporation in the manner provided in Subparagraph (e)(iii)
below.
(iii) The holder of each share of Series A Convertible
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares of Series A Convertible Preferred
Stock could be converted on the applicable record date fixed for determining the
holders entitled to vote, and the holders of Common Stock and Series A
Convertible Preferred Stock shall vote together as a single class on all matters
as to which the Common Stock is entitled to vote, except as specifically
provided by law or by Subparagraph (e)(i) above.
(f) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash
16
<PAGE>
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, the Corporation shall mail to each
holder of Series A Convertible Preferred Stock, at least 5 days prior to the
date specified therein, a notice specifying the date on which any such record is
to be taken for the purpose of such dividend, distribution or right, and the
amount and character of such dividend, distribution or right.
(g) Definitions.
(i) The term "Accrued Dividends" shall mean Full Cumulative
Dividends to the date as of which Accrued Dividends are to be computed, less the
amount of all dividends paid upon the relevant shares of stock.
(ii) The term "Full Cumulative Dividends" shall mean
(whether or not in any Dividend Period, or any part thereof, in respect of which
such term is used there shall have been net profits or net assets of the
Corporation legally available for the payment of such dividends) that amount
which shall be equal to dividends at the full rate fixed for the Series A
Convertible Preferred Stock as provided herein for the period of time elapsed
from June 30, 1992, to the date as of which Full Cumulative Dividends are to be
computed.
(iii) The term "Original Issuance Date" shall mean the date
of original issuance of the first share of Series A Convertible Preferred Stock.
(iv) The term "Series A Purchase Price" shall mean $1.6667
per share.
17
<PAGE>
Microfilm Number Filed with the Department
----------- of State on Nov 15 1993
------------
Entity Number 2075611 /s/ [Illegible]
--------------- -----------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Apollon, Inc.
-------------------------------------------
- -------------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
c/o Ballard Spahr Andrews & Ingersoll
(a) 1735 Market Street, 51st Floor Philadelphia PA 19103-7599 Philadelphia
----------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
----------------------------------------------------------------------
Name of Commercial Registered Office Provider
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: Business
--------------------
Corporation Law of 1988, as amended
--------------------------------------------------------------------------
4. The date of its incorporation is: February 6, 1992
-----------------------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
The amendment shall be effective on: at
--- ------------- --------------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to
--- 15 Pa.C.S. Section 1914(a) and (b).
The amendment was adopted by the board of directors pursuant to 15
--- Pa.C.S. Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as
--- follows:
X The amendment adopted by the corporation as set forth in full in
--- Exhibit A attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)-2
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles
--- and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
15th day of November , 1993.
- ------- ---------- -----
Apollon, Inc.
----------------------------------------
(Name of Corporation)
BY: /s/Vincent R. Zurawski, Jr.
-------------------------------------
(Signature)
TITLE: President
----------------------------------
<PAGE>
EXHIBIT A
RESOLVED, that the first paragraph of Article 6 of the Articles of
Incorporation of the Corporation, as amended, of the Corporation is hereby
amended and restated, to read in full as follows:
6. The aggregate number of shares which the Corporation shall
have the authority to issue is 25,900,000 shares, to be divided into two
classes consisting of (a) 16,000,000 of Common Stock, par value $.01 per
share and (b) 9,900,000 shares of Preferred Stock, par value $.01 per
share.
RESOLVED, that the voting rights, preferences, qualifications,
privileges, limitations, options, conversion rights and other special rights of
the Corporation's Series A Convertible Preferred Stock (the "Terms"), are hereby
amended in the following respects:
1. The following language shall be inserted after the word
"ratably" in the 26th line of paragraph (b)(i) of the Terms:
"in proportion to their respective full preferential amounts"
2. The seventh and eighth lines of Section (c)(v) of the Terms
are hereby amended to read in full as follows:
"such shares ratably in proportion to their respective redemption
prices among the holders of such shares to be redeemed and the holders
of any other Series of Preferred Stock ranking on a parity with the
shares of Series A Convertible Preferred Stock in any distribution of
assets."
3. The Terms are hereby amended to add Section (d) to read in
full as follows:
"(d) Rank. The Series A Convertible Preferred Stock shall rank as to
dividends and assets on a parity with the Corporation's Series B
Convertible Preferred Stock."
4. Section (d) of the Terms is hereby amended to be Section (e)
of the Terms and all references to Section (d) in the Terms are hereby
amended to be Section (e).
<PAGE>
5. Section (e) of the Terms is hereby amended to be Section (f)
of the Terms and all references to Section (e) in the Terms are hereby
amended to be Section (f).
6. Section (f) of the Terms is hereby amended to be Section (g)
of the Terms and all references to Section (f) in the Terms are hereby
amended to be Section (g).
2
<PAGE>
Microfilm Number 9375-631 Filed with the Department of State on Nov 15, 1993
--------- ------------
Entity Number 2075611 /s/ [Signature Illegible]
--------------- -------------------------------------
Secretary of the Commonwealth
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
D3CB:15-1522(Rev 90)
In compliance with the requirements of 15 Pa.C.S. Section 1522(b)
(relating to statement with respect to shares), the undersigned corporation,
desiring to state the designation and voting rights, preferences,
limitations, and special rights, if any, of a class or series of its shares,
hereby states that:
1. The name of the corporation is: Apollon, Inc.
--------------------------------------------
---------------------------------------------------------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S. Section 1522(b)
--- (relating to divisions and determinations by the board) set forth in
full, is as follows:
X The resolution amending the Articles under 15 Pa.C.S. Section 1522(b)
--- is set forth in full in Exhibit A attached hereto and made a part
hereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements. If any,
filed under 15 Pa.C.S. Section 1522 or corresponding provisions of prior
law with respect thereto, and (c) an other provision of the Article is
2,000,000
------------------- shares.
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: November 4, 1993
----------------
5. (Check and if appropriate complete, one of the following):
X The resolution shall be effective upon the filing this statement with
--- respect to shares in the Department of State.
The resolution shall be effective on at
--- ----------------------
Date
---------------------.
Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
statement to be signed by a duly authorized officer thereof this 15th
day of November , 1993. -----------
----------- -----
Apollon, Inc.
-----------------------------------
(Name of Corporation)
BY: /s/Vincent R. Zurawski, Jr.
--------------------------------
Signature
TITLE: President
-----------------------------
<PAGE>
APOLLON, INC.
Exhibit A to Statement With Respect to Shares
RESOLUTION ESTABLISHING SERIES B CONVERTIBLE PREFERRED STOCK
RESOLVED, that in accordance with the Articles of Incorporation, as
amended, of the Corporation, there is hereby established a series of
Preferred Stock, designated Series B Convertible Preferred Stock consisting
of 6,000,000 shares with the following voting rights, preferences,
qualifications, privileges, limitations, options, conversion rights and
other special rights:
(a) Dividend Rights. (i) The holder of each share of Series B
Convertible Preferred Stock shall be entitled to receive, before any dividends
shall be declared and paid upon or set aside for any shares of Common Stock in
any such year, out of funds legally available for that purpose, dividends at the
rate of 8% of the Series B Purchase Price (as such term is defined in Paragraph
(h) hereof) per annum, and no more.
(ii) Such dividends shall cumulate commencing October 30,
1994 and shall be payable quarterly in arrears commencing on January 30, 1995
and on each April 30, July 30, October 30 and January 30 thereafter (each
hereinafter called a "Dividend Accrual Date" and each of the quarterly periods,
or portions thereof, ending on the 29th day of such month, respectively, being
hereinafter called a "Dividend Period") and shall be paid in cash only (A) when
and as declared by the Board of Directors of the Corporation out of funds
legally available for that purpose with the first payment due on January 30,
1995 unless sooner declared by the Board of Directors, or (B) upon liquidation
as provided in Paragraph (b) hereof or redemption as provided in Paragraph (c)
hereof. The declaration and payment of such dividends to the holders of Series
B Convertible Preferred Stock shall be paid to the extent funds are legally
available for such purpose and the Board of Directors of the Corporation votes
to make payment thereof.
(iii) Dividends on shares of Series B Convertible Preferred
Stock shall be cumulative (whether or not there shall be net profits or net
assets of the Corporation legally available for the payment of such dividends),
so that, if at any time Full Cumulative Dividends (as defined in Paragraph (h)
hereof) upon the Series B Convertible Preferred Stock to the end of the last
completed Dividend Period shall not have been paid or declared and a sum
sufficient for payment thereof set apart, then the amount of the deficiency in
such dividends shall
<PAGE>
be fully paid (but without interest), or such dividends in such amount shall be
declared on the shares of the Series B Convertible Preferred Stock and a sum
sufficient for the payment thereof shall be set apart for such payment, before
any dividend shall be declared or paid or any other distribution ordered or made
upon any class of stock ranking as to dividends or upon liquidation junior to
the Series B Convertible Preferred Stock (other than a dividend payable in such
junior stock) and before any sum or sums shall be set aside for or applied to
the purchase or redemption of any shares of any class of stock ranking as to
dividends or upon liquidation junior to the Series B Convertible Preferred Stock
(with respect to rights to dividends and on liquidation, the Series B
Convertible Preferred Stock shall rank prior to the Common Stock and on a parity
with the Series A Convertible Preferred Stock of the Corporation); provided,
that no dividends shall be declared or paid and no sum sufficient for the
payment thereof shall be set apart for such payment in respect of the shares of
Common Stock (other than a dividend payable in shares of Common Stock) while any
shares of the Series B Convertible Preferred Stock are outstanding without the
approval of the holders of record of a majority of the shares of Series B
Convertible Preferred Stock outstanding as of a record date between 10 and 90
days prior to the declaration of such dividend; further provided, that no
Accrued Dividends (as such term is defined in Paragraph (h) hereof) shall be
payable upon conversion of the Series B Convertible Preferred Stock or at any
time thereafter.
(b) Liquidation Rights. (i) In the event of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
holders of shares of Series B Convertible Preferred Stock shall be entitled to
receive, out of the assets of the Corporation legally available therefor, an
amount equal to $2.50 per share (the "Liquidation Price"), and a further amount
equal to the Accrued Dividends plus any other dividends declared but unpaid, if
any, on or with respect to such shares of Series B Convertible Preferred Stock,
before any payment shall be made or any assets distributed to the holders of
shares of Common Stock; provided that, except in the event of any voluntary or
involuntary liquidation, dissolution or winding up, the requirement for payment
of such a preferential amount on liquidation to the holders of Series B
Convertible Preferred Stock shall not impose any restriction on the use of the
surplus of the Corporation. If, upon liquidation, dissolution, or winding up,
whether voluntary or involuntary, the assets thus distributed among the holders
of Series B Convertible Preferred Stock shall be insufficient to permit payment
to such holders of the full preferential amounts provided in the first sentence
of this Paragraph (b) and to the holders of any other series of Preferred Stock
or any other class of stock of the Corporation
2
<PAGE>
ranking on a parity with the shares of Series B Convertible Preferred Stock in
any distribution of assets, then the entire assets of this Corporation to be
distributed shall be distributed ratably in proportion to their respective full
preferential amounts among the holders of Series B Convertible Preferred Stock
and the holders of any other series of Preferred Stock or any other class of
stock of the Corporation ranking on a parity with the shares of Series B
Convertible Preferred Stock in any distribution of assets. After payment has
been made to the holders of Series B Convertible Preferred Stock of the full
amounts to which they are entitled pursuant to this Paragraph (b), the remaining
assets of the Corporation shall be distributed ratably in such amounts per share
to the holders of Series B Convertible Preferred Stock, to the holders of any
other series of Preferred Stock or any other class of stock of the Corporation
and to the holders of Common Stock so that the amount distributed per share of
Series B Convertible Preferred Stock shall equal the amount distributed per
share of Common Stock multiplied by the Conversion Rate then in effect.
(ii) A consolidation or merger of the Corporation with or
into any other corporation or corporations in a transaction in which the
shareholders of the Corporation receive cash in exchange for the shares of
capital stock of the Corporation then held by them, or the sale of all or
substantially all of the assets of the Corporation for cash, shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for the purposes
of this Paragraph (b).
(c) Redemption Rights. (i) Subject to Subparagraph (vii) below,
on each of December 31, 1998, December 31, 1999 and December 31, 2000 (such
dates being hereinafter referred to as the "Redemption Dates"), and so long as
any shares of Series B Convertible Preferred Stock shall be outstanding, the
Corporation shall (unless otherwise prevented by law) redeem, at the option and
upon the written notice of any holder or holders of Series B Convertible
Preferred Stock (the "Redemption Notice") (which Redemption Notice shall state
such holder's intention to exercise the redemption option set forth herein and
the number of shares of Series B Convertible Preferred Stock sought to be
redeemed (up to the maximum number of shares owned by such holder which are
entitled to be redeemed on such Redemption Date as hereinafter provided)),
delivered at least 30 but not more than 60 days prior to the Redemption Date,
the following respective percentages of shares of Series B Convertible Preferred
Stock outstanding and owned by such holder (or his predecessor who purchased
such shares on original issuance from the Corporation as shown by the stock
records of the Corporation):
3
<PAGE>
December 31, 1998 33-1/3%
December 31, 1999 66-2/3%
December 31, 2000 100%
provided however, that if on any Redemption Date subsequent to December 31, 1998
a holder of shares of Series B Convertible Preferred Stock who held shares on a
previous Redemption Date had not theretofore exercised in full a redemption
option, then such holder shall, in addition to the shares which can be redeemed
on the then current Redemption Date, have the right to have redeemed such
additional shares of Series B Convertible Preferred Stock which would cause such
holder to have redeemed as of the then current Redemption Date the maximum
number of shares of Series B Convertible Preferred Stock which could have been
redeemed through such date had all redemption options existing on or prior to
such date been exercised in full.
(ii) The amount per share of Series B Convertible Preferred
Stock at which the shares of Series B Convertible Preferred Stock are to be
redeemed pursuant to Subparagraph (i) on any Redemption Date shall be an amount
equal to Accrued Dividends and any other dividends declared but unpaid, if any,
on or with respect to such shares of Series B Convertible Preferred Stock up to
and including the applicable Redemption Date, plus the greater of (A) the
Liquidation Price and (B) the fair market value per share (as determined by
agreement between the Corporation and the holders of 66-2/3% of the Series B
Convertible Preferred Stock or, in the absence of such agreement, by an
independent firm of investment bankers, appraisers or accountants selected by
the Corporation and the holders of 66-2/3% of the Series B Convertible Preferred
Stock, or, in the absence of agreement as to the identity of such independent
firm, by three independent firms of investment bankers, appraisers or
accountants, one of which shall be selected by the Corporation, one by holders
of 66-2/3% of the Series B Convertible Preferred Stock, and the third by the
preceding two firms so selected, or in such other manner as may be agreed
between the Corporation and the holders of 66-2/3% of the Series B Convertible
Preferred Stock). The total sum payable per share of Series B Convertible
Preferred Stock on any Redemption Date is hereinafter referred to as the "Series
B Redemption Price", and any payment to be made is hereinafter referred to as
the "Series B Redemption Payment."
(iii) On or after each Redemption Date, each holder of shares
of Series B Convertible Preferred Stock to be redeemed shall surrender a
certificate or certificates (duly endorsed in blank or accompanied by proper
instruments of assignment and transfer thereof duly endorsed in blank)
4
<PAGE>
evidencing such holder's shares of Series B Convertible Preferred Stock to be
redeemed on such date to the Corporation at the place designated in such notice,
and shall thereupon be entitled to receive payment of the Redemption Price, and
a new certificate shall be issued representing the unredeemed shares included in
such certificate or certificates, if any. The Corporation shall pay the Series
B Redemption Payment no later than the date that is one month following the
Redemption Date. On or prior to any Redemption Date the Corporation may
deposit, with any bank or trust company in Philadelphia or New York having
capital and surplus of at least $250,000,000, as a trust fund, a sum sufficient
to redeem on the Redemption Date, the shares of Series B Convertible Preferred
Stock scheduled for redemption, with irrevocable instructions and authority to
the bank or trust company to give notice of redemption thereof if such notice
shall not previously have been given by the Corporation or to complete the
giving of any notice if necessary, and to pay, on and after the Redemption Date,
the Redemption Price of the shares to their respective holders upon the
surrender of their share certificates. From and after the Redemption Date, (A)
if funds necessary for the redemption shall be available therefor, unless the
Corporation shall default in making payment of the Redemption Price upon
surrender of certificates as aforesaid, or (B) if funds necessary for the
redemption shall have been so deposited, the shares called for redemption or a
pro rata part of each share in cases of redemption pro rata shall cease to be
outstanding and the holders thereof shall cease to be shareholders with respect
to such shares or pro rata parts and shall have no interest in or claim against
the Corporation with respect to such shares or pro rata parts except the right
to receive from the Corporation or the bank or trust company with which such
deposit may have been made payment of the Redemption Price of the shares without
interest upon the surrender of their certificates therefor (duly endorsed in
blank or accompanied by proper instruments of assignment and transfer thereof
duly endorsed in blank). Any funds so deposited which shall not be required for
such redemption because of the exercise of conversion rights subsequent to the
date of deposit shall be returned to the Corporation. In case any holder of
shares of Series B Convertible Preferred Stock which have been called for
redemption shall not, within six (6) years after the date of such deposit, have
claimed the amount deposited with respect to the redemption thereof, such bank
or trust company, upon demand, shall pay over to the Corporation such unclaimed
amount and shall thereupon be relieved of all responsibility in respect thereof
to such holder, and thereafter such holder shall look only to the Corporation
for payment thereof. Any interest which may accrue on funds so deposited shall
be paid to the Corporation from time to time.
5
<PAGE>
(iv) The Corporation shall have the power to purchase or
otherwise acquire shares of Series B Convertible Preferred Stock from time to
time at such price or prices as may be agreed upon by the holder or holders
thereof and the Corporation, provided that unless dividends and distributions on
all outstanding shares of Series B Convertible Preferred Stock which have been
declared shall have been paid or a sum or assets sufficient for the payment
thereof set apart, the Corporation shall not purchase for value any shares of
Series B Convertible Preferred Stock except in accordance with an offer made in
writing or by publication (as determined by the Board of Directors of the
Corporation) to all holders of record of shares of Series B Convertible
Preferred Stock.
(v) If the funds of the Corporation available for
redemption of shares of Series B Convertible Preferred Stock on the Redemption
Date are insufficient to redeem the total number of shares of Series B
Convertible Preferred Stock to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably in proportion to their respective redemption prices among the
holders of such shares to be redeemed and the holders of any other Series of
Preferred Stock ranking on a parity with the shares of Series B Convertible
Preferred Stock in any distribution of assets among the holders of such shares
to be redeemed. The shares of Series B Convertible Preferred Stock not redeemed
shall remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series B Convertible Preferred
Stock, such funds will immediately be used to redeem the balance of the shares
which the Corporation has become obligated to redeem on any redemption date but
which it has not redeemed.
(vi) Notwithstanding the foregoing, holders of shares of
Series B Convertible Preferred Stock shall have no right to require redemption
under this Paragraph (c) if, prior to the exercise of their right to require
redemption as provided in Subparagraph (i) above, there shall have occurred a
closing or closings of a public sale or sales for the account of the Corporation
of the Common Stock of the Corporation or securities convertible into or
exchangeable for shares of Common Stock of the Corporation, where the aggregate
sales price of the securities included in such sale or sales (before deduction
of any underwriting commissions, discounts or concessions or expenses of sale)
is at least $12,500,000, and the price per share of such securities is at least
$3.33.
(vii) Anything contained in this Paragraph (c) to the
contrary notwithstanding, the holders of shares of Series
6
<PAGE>
B Convertible Preferred Stock requested by such holders as herein provided to be
redeemed pursuant to this Paragraph (c) shall have the right, exercisable at any
time up to the close of business on the Redemption Date (unless default shall be
made by the Corporation in the payment of the Redemption Price as herein
provided, in which event such right shall have been exercisable until such
default is cured), to convert all or any part of such shares to be redeemed as
herein provided into shares of Common Stock pursuant to Paragraph (d) hereof.
If, and to the extent, any shares of Series B Convertible Preferred Stock so
entitled to redemption are converted into shares of Common Stock by the holders
thereof prior to the close of business on the Redemption Date, the total number
of shares of Series B Convertible Preferred Stock otherwise to be redeemed on
such date shall be reduced by the number of shares of Series B Convertible
Preferred Stock so converted.
(viii) Shares of Series B Convertible Preferred Stock which
have been redeemed or reacquired in any manner by the Corporation or which have
been converted into shares of stock of another class or classes shall be
cancelled and may not be reissued.
(d) Rank. The Series B Convertible Preferred Stock shall rank
as to dividends and assets on a parity with the Corporation's Series A
Convertible Preferred Stock.
(e) Conversion Rights. (i) Shares of Series B Convertible
Preferred Stock may, at the option of the holder, be converted into shares of
Common Stock of the Corporation (as such shares of Common Stock may be
constituted on the conversion date) at any time and from time to time at the
rate of one (1) share of Common Stock for each share of Series B Convertible
Preferred Stock, subject to adjustment as provided below (the "Conversion
Rate"); provided that, as to any shares of Series B Convertible Preferred Stock
which a holder has elected to have the Company redeem, the conversion right
shall terminate at the close of business on the Redemption Date (determined as
provided in Paragraph (c) hereof), unless default shall be made in the payment
of the applicable Redemption Price.
(ii) The holder of a share or shares of Series B Convertible
Preferred Stock may exercise the conversion right as to any thereof by
delivering to the Corporation during regular business hours, at the principal
executive offices of the Corporation or at the corporate trust office of any
transfer agent of the Corporation for the shares of this series or at such other
place as may be designated by the Corporation, the certificate or certificates
for the shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required
7
<PAGE>
by it), accompanied by written notice stating that the holder elects to convert
such shares and stating the name or names (with address) in which the
certificate or certificates for Common Stock are to be issued and by payment of
any tax which may be payable in respect of any transfer involved in the issuance
and delivery of shares in any name other than that of the holder of record on
the books of the Corporation of the shares of Series B Convertible Preferred
Stock converted. Conversion shall be deemed to have been effected on the date
such delivery is made, and such date is referred to herein as the "conversion
date". If the conversion right is exercised in connection with an underwritten
offer of securities registered pursuant to the Securities Act of 1933, the
conversion may, at the option of any holder tendering shares of Series B
Convertible Preferred Stock for conversion, be conditioned upon the closing with
the underwriter of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive shares of Common Stock issuable upon
such conversion of shares of Series B Convertible Preferred Stock shall not be
deemed to have converted such Series B Convertible Preferred Stock until the
closing of such sale of securities. As promptly as practicable thereafter the
Corporation shall issue and deliver to or upon the written order of such holder,
at such office or other place designated by the Corporation, a certificate or
certificates for the number of full shares of Common Stock to which he is
entitled and a check, cash, scrip certificate or other adjustment in respect of
any fraction of a share as provided below. The person in whose name the
certificate or certificates for Common Stock are to be issued shall be deemed to
have become a shareholder of record on the conversion date unless the transfer
books of the Corporation are closed on that date, in which event he shall be
deemed to have become a shareholder of record on the next succeeding date on
which the transfer books are open, but the conversion rate shall be that in
effect on the conversion date. No payment or adjustment shall be made upon any
conversion on account of any dividends declared but unpaid on the shares of
Series B Convertible Preferred Stock surrendered for conversion or on account of
any dividends on the shares of Common Stock issued upon such conversion.
(iii) All outstanding shares of Series B Convertible
Preferred Stock shall be deemed automatically converted into shares of Common
Stock at the Conversion Rate upon the occurrence of a closing of a public sale
for the account of the Corporation of the Common Stock of the Corporation or
securities convertible into or exchangeable for shares of Common stock of the
Corporation, where the aggregate sales price of securities included in such sale
and in all other public sales for the account of the Corporation of the Common
Stock of the Corporation or securities convertible into or exchangeable for
8
<PAGE>
shares of Common Stock of the Corporation closed prior thereto (before deduction
of any underwriting commissions, discounts or concessions or expenses of sale)
is at least $12,500,000 and the price per share of such securities is at least
$3.33. On or after the date of the closing of such sale, and in any event
within ten days after receipt of notice, by mail, postage prepaid from the
Corporation of the occurrence thereof, each holder of shares of Series B
Convertible Preferred Stock shall surrender such holder's certificates
evidencing such shares at the principal executive offices of the Corporation or
at the corporate trust office of any transfer agent for the shares of this
series or at such other place as may be designated by the Corporation, and shall
thereupon be entitled to receive certificates evidencing the number of shares of
Common Stock into which such shares of Series B Convertible Preferred Stock
shall have been converted. On the date of the closing of such sale, each holder
of shares of Series B Convertible Preferred Stock shall be deemed to be a holder
of record of the shares of Common Stock issuable upon such conversion,
notwithstanding that the certificates representing such shares of Series B
Convertible Preferred Stock shall not have been surrendered as provided above,
that notice from the Corporation shall not have been received by any holder of
shares of Series B Convertible Preferred Stock, or that the certificates
evidencing such shares of Common Stock shall not then be actually delivered to
such person.
(iv) The Corporation shall not be required to issue any
fraction of a share upon conversion of any share or shares of Series B
Convertible Preferred Stock. If more than one share of Series B Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the total number of shares of Series B
Convertible Preferred Stock so surrendered. If any fractional interest in a
share of Common Stock would be deliverable upon conversion, the Corporation
shall make an adjustment therefor in cash unless its Board of Directors shall
have determined to adjust fractional interests by issuance of scrip certificates
or in some other manner. Adjustment in cash shall be made on the basis of the
current market price of one share of Common Stock on the conversion date. A
determination of the current market price made in good faith by the Board of
Directors for the purposes of this Subparagraph (e)(iv) shall be conclusive and
binding upon all the shareholders of the Corporation.
(v) From and after the date of the first issuance of shares
of Series B Convertible Preferred Stock, the Conversion Rate provided for above
shall be subject to the
9
<PAGE>
following adjustments, which shall be made to the nearest one-tenth of a share
of Common Stock or, if none, to the next lower one-tenth:
(A) If the Corporation shall pay to all of the holders
of its Common Stock or any other class or series of its capital stock which
is not on a parity with or senior to the Series B Convertible Preferred
Stock, a dividend in shares of Common Stock or in securities convertible
into its Common Stock (the "Convertible Securities"), the Conversion Rate
in effect immediately prior to the record date fixed for the determination
of the holders of Common Stock entitled to such dividend shall be
increased, effective at the opening of business on the full business day
next following such record date, by multiplying such Conversion Rate by a
fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding on such record date plus the number of shares of
Common Stock issued, or issuable upon conversion of Convertible Securities
issued, in payment of such dividend and the denominator of which is the
number of shares of Common Stock issued and outstanding on such record
date.
(B) If the Corporation shall split the outstanding
shares of its Common Stock into a greater number of shares or combine the
outstanding shares of its Common Stock into a smaller number of shares, the
Conversion Rate in effect immediately prior to such action shall be
increased in the case of a split or decreased in the case of a combination,
effective at the opening of business on the full business day next
following the day such action becomes effective, so that the holders of
shares of Series B Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock which such holders would have been entitled to receive as a result of
such split or combination if such shares of Series B Convertible Preferred
Stock had been converted immediately prior to the date such split or
combination, as the case may be, became effective.
(C) If the Corporation shall issue or sell to all
holders of its Common Stock options, warrants or rights to subscribe for or
purchase shares of its Common Stock, other than Permitted Shares (as
hereinafter defined), at a price per share (plus the consideration per
share of Common Stock, if any, received for such options, warrants or
rights) less than $2.50 divided by the Conversion Rate in effect
immediately prior to such issuance or sale (the "Adjustment Price") or to
subscribe for or purchase any Convertible Securities at a price per share
(plus the
10
<PAGE>
consideration per share of Convertible Securities, if any, received for
such options, warrants or rights) which when divided by the conversion rate
applicable to those Convertible Securities is less than the Adjustment
Price, the Conversion Rate in effect immediately prior to such issuance or
sale shall be increased, effective at the opening of business on the first
full business day next following such issuance or sale, to an amount
determined by multiplying such Conversion Rate by a fraction the numerator
of which is the number of shares of Common Stock of the Corporation
outstanding immediately prior to said date plus the number of shares of
Common Stock issuable on exercise of such options, warrants or rights (or
in the case of Convertible Securities the number of shares of Common Stock
into which the Convertible Securities issuable on exercise of such options,
warrants or rights would then be convertible) and the denominator of which
is the number of shares of Common Stock outstanding immediately prior to
said date plus the number of shares of Common Stock of the Corporation
which the aggregate subscription or purchase price for the total number of
such shares issuable on exercise of such options, warrants or rights
(including the consideration, if any, received by the Corporation for such
options, warrants or rights) would purchase at the Adjustment Price. On
the expiration of such options, warrants or rights the Conversion Rate
applicable to any then outstanding shares of Series B Convertible Preferred
Stock shall forthwith be readjusted to the Conversion Rate which would
have obtained at the time of such expiration if the adjustment made at the
time such options, warrants or rights were issued or sold had been made
upon the basis of the issuance of only the number of shares of Common Stock
or Convertible Securities actually issued upon the exercise of such
options, warrants or rights, but such readjustment shall not affect any
conversion theretofore made. Permitted Shares shall include (w) 750,000
shares of Common Stock issued after the date of the first sale of shares of
Series B Convertible Preferred Stock, including but not limited to any
shares of Common Stock or Convertible Securities issued or issuable to
officers, directors or employees of, or consultants to, or to persons who
were to become officers, directors or employees of, or consultants to, the
Corporation pursuant to awards or grants made after the date of the first
sale of shares of Series B Convertible Preferred Stock under stock option,
stock incentive, stock appreciation, stock bonus, stock award or
compensation rights plans or arrangements or employment letters or any
other employee benefit plans presently in effect or which may hereafter be
adopted or entered into by the Corporation, (x) any shares of Common Stock
or Convertible Securities
11
<PAGE>
issued or issuable upon conversion of any Convertible Securities and (y)
any shares of Common Stock issued or issuable upon conversion of shares of
Series B Convertible Preferred Stock; provided that each such sale or
issuance shall have been approved by the Board of Directors of the
Corporation or a committee thereof.
(D) If the Corporation shall distribute to all of the
holders of its Common Stock any evidences of its indebtedness, or any
options, warrants or rights to subscribe for any security other than its
Common Stock or Convertible Securities, or any other assets (excluding
dividends and distributions in cash to the extent permitted by law), the
Conversion Rate in effect immediately prior to the record date fixed for
the determination of the holders of Common Stock entitled to such
distribution shall be increased, effective at the opening of business on
the next following full business day, to an amount determined by
multiplying such Conversion Rate by a fraction the numerator of which is
the Adjustment Price (as defined in clause (C) above) and the denominator
of which is such Adjustment Price less the fair market value (as determined
by an independent appraiser selected with the approval of at least
sixty-six and two-thirds percent (66 2/3%) of the members of the Board of
Directors of the Corporation then in office, whose determination, in the
absence of fraud, shall be conclusive) of the amount of evidences of
indebtedness, options, rights, warrants or other assets (excluding cash
dividends and distributions as aforesaid) so distributed which is
applicable to one share of Common Stock.
(E) If the Corporation shall issue shares of its
Common Stock or Convertible Securities other than Permitted Shares and
other than pursuant to a transaction described in clauses (A)-(D) hereof,
at a price per share of less than the Adjustment Price (as defined in
clause (C) above) or in the case of Convertible Securities at a price per
share which when divided by the conversion rate applicable thereto is less
than the Adjustment Price), the Conversion Rate in effect immediately prior
to such issuance shall be increased, effective at the opening of business
on the next following full business day, to an amount determined by
multiplying the Conversion Rate by a fraction the numerator of which is the
number of shares of Common Stock of the Corporation outstanding immediately
prior to such issuance plus the number of additional shares of Common Stock
to be so issued (or in the case of Convertible Securities the number of
additional shares of Common Stock into which the Convertible Securities to
be so issued would be convertible) and the denominator of which is
12
<PAGE>
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of shares of Common Stock of the Corporation which
the aggregate purchase price for the total number of additional shares of
Common Stock or Convertible Securities to be so issued would purchase at
the Adjustment Price.
No adjustment of the Conversion Rate as provided in this Subparagraph (e)(v)
shall be made by reason of the issuance of shares of Common Stock or Convertible
Securities of the Corporation, or options, warrants or rights to subscribe
therefor, for cash, property or services, except as provided in clauses (C) and
(E) of this Subparagraph (e)(v). To the extent that any shares of Common Stock
or Convertible Securities of the Corporation, or options, warrants or rights to
subscribe therefor, shall be issued for a cash consideration, the consideration
received by the Corporation therefor shall be deemed to be the amount of the
cash received by the Corporation therefor without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or concessions paid
or allowed by the Corporation in connection therewith. In the case of the
issuance of Common Stock or Convertible Securities, or options, warrants or
rights to subscribe therefor, for a consideration all or part of which shall be
property received or services performed, the value of such property or services
for the purposes of clauses (C) and (E) of this Subparagraph (e)(v) shall be
determined, irrespective of the accounting treatment thereof and without
deduction therefrom of any reasonable expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Corporation in
connection therewith, by at least sixty-six and two-thirds percent (66 2/3%) of
the members of the Board of Directors of the Corporation then in office, whose
determination, in the absence of fraud, shall be conclusive. Whenever the
Conversion Rate is adjusted pursuant to this Subparagraph (e)(v) the Corporation
shall (x) promptly place on file at its principal executive offices or corporate
trust office of its transfer agent or agents for the shares of Series B
Convertible Preferred Stock a statement signed by the President or a Vice
President of the Corporation and by its Treasurer, an Assistant Treasurer or
other financial officer showing in reasonable detail the facts requiring such
adjustment and the Conversion Rate after such adjustment, and shall make such
statement available for inspection by shareholders of the Corporation, and (y)
mail to holders of record of shares of Series B Convertible Preferred Stock a
notice stating that such adjustment has been made and the adjusted Conversion
Rate.
(vi) If the Corporation shall pay to the holders of its
Common Stock a dividend in shares of Common Stock or Convertible Securities or
if it shall split or combine the
13
<PAGE>
outstanding shares of its Common Stock, the Adjustment Price referred to in
clauses (C), (D) and (E) of Subparagraph (e)(v) (as theretofore decreased or
increased) shall forthwith be decreased in the case of a stock dividend or split
or increased in the case of a combination by multiplying the Adjustment Price by
a fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding on the record date fixed for any such stock dividend or
immediately before any such split or combination becomes effective and the
denominator of which is the number of shares of Common Stock issued and
outstanding on such record date or immediately before such split or combination
becomes effective plus, with respect to a stock dividend, the number of shares
of Common Stock issued, or issuable upon conversion of Convertible Securities
issued, in payment of such dividend or, with respect to a stock split, the
number of shares of Common Stock issued as a result of such split or minus, with
respect to a stock combination, the difference between the number of shares of
Common Stock issued and outstanding immediately before such combination becomes
effective and the number of shares of Common Stock issued and outstanding
immediately after such combination becomes effective.
(vii) In case of any reclassification or change of the
outstanding shares of Common Stock of the Corporation (except a split or
combination of shares) or in case of any consolidation or merger to which the
Corporation is a party (except a merger in which the Corporation is the
surviving corporation and which does not result in any reclassification of or
change in the outstanding Common Stock of the Corporation, except a split or
combination of shares as to which clause (B) of Subparagraph (e)(v) is
applicable) or in case of any sale or conveyance to another corporation of all
or substantially all of the property of the Corporation, effective provision
shall be made by the Corporation or by the successor or purchasing corporation
so that (A) the holder of each share of Series B Convertible Preferred Stock
then outstanding shall thereafter have the right to convert such share into the
kind and amount of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock of the Corporation into which such share
of Series B Convertible Preferred Stock might have been converted immediately
prior thereto, and (B) there shall be subsequent adjustments of the Conversion
Rate which shall be equivalent, as nearly as practicable, to the adjustments
provided for in Subparagraph (e)(v). The provisions of this Subparagraph
(e)(vii) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, sales or conveyances.
14
<PAGE>
(viii) If a state of facts shall occur which, without being
specifically controlled by the provisions of this Paragraph (e), would not
fairly protect the conversion rights of the Series B Convertible Preferred Stock
in accordance with the essential intent and principles of such provisions, then
the Board of Directors of the Corporation shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such conversion rights.
(ix) The issuance of shares of Common Stock of the
Corporation on conversion of shares of Series B Convertible Preferred Stock
shall be without charge to the converting holder of shares of Series B
Convertible Preferred Stock for any tax in respect of the issuance thereof, but
the Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of shares in any
name other than that of the holder of record on the books of the Corporation of
the shares of Series B Convertible Preferred Stock converted, and the
Corporation shall not be required to issue or deliver any certificate for shares
of Common Stock unless and until the person requesting issuance thereof shall
have paid to the Corporation the amount of such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
(x) Shares of Common Stock issued on conversion of shares
of Series B Convertible Preferred Stock shall be issued as fully paid shares and
shall be non-assessable by the Corporation. The Corporation shall at all times
reserve and keep available for the purpose of effecting the conversion of shares
of Series B Convertible Preferred Stock such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of all
outstanding shares of this Series, and to the extent necessary in order to
reserve a sufficient number of such shares, the Corporation shall, subject to
appropriate shareholder action, amend its Articles of Incorporation to increase
the number of duly authorized but unissued shares of its Common Stock.
(xi) Shares of Series B Convertible Preferred Stock
converted as provided herein shall not be reissued and the Board of Directors
shall take appropriate action from time to time to effect reductions in the
number of shares of Preferred Stock which the Corporation is authorized to
issue.
(f) Voting Rights. (i) So long as any shares of Series B
Convertible Preferred Stock are outstanding, the Corporation shall not, without
the affirmative vote at a meeting called for that purpose or the written consent
of holders of at
15
<PAGE>
least a majority of the total number of shares of Series B Convertible Preferred
Stock then outstanding, voting as a separate class, in any manner, whether by
amendment to the Articles of Incorporation of the Corporation or otherwise:
(A) Amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action
would alter or change the designations, relative rights, preferences or
limitations of, or the restrictions provided for the benefit of, the Series
B Convertible Preferred Stock so as to affect the Series B Convertible
Preferred Stock adversely;
(B) Authorize or create any additional shares of
Series B Convertible Preferred Stock, or authorize or create shares of any
class or series of stock having any preference or priority as to dividends
or assets superior or equal to any such preference or priority of the
Series B Convertible Preferred Stock, or authorize or create shares of any
class or series or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having optional rights to
purchase, any shares of the Corporation having any such preference; or
(C) Reclassify the shares of Common Stock or any other
shares of stock hereafter created junior to the Series B Convertible
Preferred Stock as to dividends or assets into shares of Series B
Convertible Preferred Stock or into shares having any preference or
priority as to dividends or assets superior or equal to that of the Series
B Convertible Preferred Stock.
(ii) The votes or consent required in Subparagraph (f)(i)
above shall be in addition to any approval of shareholders of the Corporation
which may be required by law or pursuant to any provision of the Corporation's
Articles of Incorporation, which approval shall be obtained by vote of the
shareholders of the Corporation in the manner provided in Subparagraph (f)(iii)
below.
(iii) The holder of each share of Series B Convertible
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares of Series B Convertible Preferred
Stock could be converted on the applicable record date fixed for determining the
holders entitled to vote, and the holders of Common Stock and Series B
Convertible Preferred Stock shall vote together as a single class on all matters
as to which the Common Stock is entitled to vote, except as specifically
provided by law or by Subparagraph (f)(i) above.
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<PAGE>
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series B Convertible Preferred Stock, at least 5
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
(h) Definitions.
(i) The term "Accrued Dividends" shall mean Full Cumulative
Dividends to the date as of which Accrued Dividends are to be computed, less the
amount of all dividends paid upon the relevant shares of stock.
(ii) The term "Full Cumulative Dividends" shall mean
(whether or not in any Dividend Period, or any part thereof, in respect of which
such term is used there shall have been net profits or net assets of the
Corporation legally available for the payment of such dividends) that amount
which shall be equal to dividends at the full rate fixed for the Series B
Convertible Preferred Stock as provided herein for the period of time elapsed
from October 30, 1994, to the date as of which Full Cumulative Dividends are to
be computed.
(iii) The term "Series B Purchase Price" shall mean $2.50 per
share.
17
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Microfilm Number Filed with the Department of State on Aug 11 1994
------------ -----------
Entity Number 2075611 /s/ Robert M. Grant
---------------- -------------------------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1915 (Rev. 90)
In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating
to articles of amendment), the undersigned business corporation, desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Apollon, Inc.
-------------------------------------------
- -------------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
c/o Ballard Spahr Andrews & Ingersoll
(a) 1735 Market Street, 51st Floor Philadelphia PA 19103-7599 Philadelphia
-----------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
------------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider,
the county in (b) shall be deemed the county in which the corporation is
located for venue and official publication purposes.
3. The statute by or under which it was incorporated is: Business
----------------------
Corporation Law of 1988, as amended
----------------------------------------------------------------------------
4. The date of its incorporation is: February 6, 1992
-------------------------------------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
The amendment shall be effective on: at
--- --------------- ------------------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant to
--- 15 Pa.C.S. Section 1914(a) and (b).
The amendment was adopted by the board of directors pursuant to 15
--- Pa.C.S. Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as
--- follows:
X The amendment adopted by the corporation as set forth in full in
--- Exhibit A attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)2
8. (Check if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles
--- and all amendments thereto.
IN TESTIMONY WHEREOF the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
18th day of July , 1994 .
- -------- ----------- -----
Apollon, Inc.
----------------------------------------
(Name of Corporation)
BY: /s/ Vincent R. Zurawski, Jr.
-------------------------------------
(Signature)
Vincent R. Zurawski, Jr.
TITLE: President
----------------------------------
<PAGE>
EXHIBIT A
RESOLVED, that the voting rights, preferences, qualifications,
privileges, limitations, options, conversion rights and other special rights of
the Corporation's Series A Convertible Preferred Stock (the "Terms") are hereby
amended in the following respects:
1. Section (b)(i) of the Terms is hereby amended to read in
full as follows:
"(b) Liquidation Rights. (i) In the event of a voluntary of
involuntary liquidation, dissolution, or winding up of the
Corporation, the holders of shares of Series A Convertible Preferred
Stock shall be entitled to receive, out of the assets of the
Corporation legally available therefor, an amount equal to $1.6667 per
share (the "Liquidation Price"), and a further amount equal to the
accrued Dividends plus any other dividends declared but unpaid, if
any, on or with respect to such shares of Series A Convertible
Preferred Stock, before any payment shall be made or any assets
distributed to the holders of shares of Common Stock; provided that,
except in the event of any voluntary or involuntary liquidation,
dissolution or winding up, the requirement for payment of such a
preferential amount on liquidation to the holders of Series A
Convertible Preferred Stock shall not impose any restriction on the
use of the surplus of the Corporation. If, upon liquidation,
dissolution, or winding up, whether voluntary or involuntary, the
assets thus distributed among the holders of Series A Convertible
Preferred Stock shall be insufficient to permit payment to such
holders of the full preferential amounts provided in the first
sentence of this Paragraph (b) and to the holders of any other series
of Preferred Stock or any other class of stock of the Corporation
ranking on a parity with the shares of Series A Convertible Preferred
Stock in any distribution of assets, then the entire assets of this
Corporation to be distributed shall be distributed ratably in
proportion to their respective full preferential amounts among the
holders of Series A Convertible Preferred Stock and the holders of any
other series of Preferred Stock or any other class of stock of the
Corporation ranking on a parity with the shares of Series A
Convertible Preferred Stock in any distribution of assets. After
payment has been made to the holders of Series A Convertible Preferred
Stock of the full amounts to which they are entitled pursuant to this
Paragraph (b), the remaining assets of the Corporation shall be
distributed in such amounts per
<PAGE>
share to the holders of Series A Convertible Preferred Stock, to the
holders of any other series of Preferred Stock or any other class of
stock of the Corporation ranking on a parity with the shares of Series
A Convertible Preferred Stock in any distribution of assets and to the
holders of Common Stock so that the amount distributed per share of
Series A Convertible Preferred Stock shall equal the amount
distributed per share of Common Stock multiplied by the Conversion
Rate then in effect."
<PAGE>
Microfilm Number Filed with the Department of State on May 6 1996
-------------- ------
Entity Number /s/ [Signature Illegible]
----------------- --------------------------------------------
Secretary of the Commonwealth
STATEMENT WITH RESPECT TO SHARES-DOMESTIC BUSINESS CORPORATION
DSCB: 15-1522 (Rev. )
In compliance with the requirements of 15 Pa.C.S. 1522(b) (relating to
statements with respect to shares) of undersigned corporation, desiring to
state the designation and voting rights, preferences, limitations, and special
rights, if any, of a class or series of its shares, hereby states that:
1. The name of the corporation is: Apollon, Inc.
------------------------------------------
--------------------------------------------------------------------------
2. (Check and complete one of the following):
The resolution amending the Articles under 15 Pa.C.S. 1522(b) (relating
--- to divisions and determinations by the board) set forth in full, is as
follows:
X The resolution amending the Articles under 15 Pa.C.S. Section 1522(b)
--- is set forth in full in Exhibit A attached hereto and made a part
thereof.
3. The aggregate number of shares of such class or series established and
designated by (a) such resolution, (b) all prior statements, if any,
filed under 15 Pa.C.S. Section 1522 or corresponding provisions of prior
law with respect thereto, and (c) any other provision of the Articles is
3,000,000 shares.
---------
4. The resolution was adopted by the Board of Directors or an authorized
committee thereof on: 4/25/96
-------
5. (Check, and if appropriate complete, one of the following):
X The resolution shall be effective upon the filing this statement with
--- respect to shares in the Department of State.
The resolution shall be effective on: at:
--- ------------- --------------
Date Hour
IN TESTIMONY WHEREOF, the undersigned corporation has caused this
statement to be signed by a duly authorized officer thereof this 6th day of
May 1996 ---
- --- ----
APOLLON, INC.
----------------------------------------------
(Name of Corporation)
By: /s/Vincent R. Zurawski, Jr.
------------------------------------------
(Signature)
Title: President and CEO
---------------------------------------
<PAGE>
APOLLON, INC.
Exhibit A to Statement With Respect to Shares
RESOLUTION ESTABLISHING SERIES C CONVERTIBLE PREFERRED STOCK
RESOLVED, that in accordance with the Articles of Incorporation, as
amended, of the Corporation, there is hereby established a series of
Preferred Stock, designated Series C Convertible Preferred Stock consisting
of 3,000,000 shares with the following voting rights, preferences,
qualifications, privileges, limitations, options, conversion rights and
other special rights:
(a) Dividend Rights. (i) The holder of each share of Series C
Convertible Preferred Stock shall be entitled to receive, before any dividends
shall be declared and paid upon or set aside for any shares of Common Stock in
any such year, out of funds legally available for that purpose, dividends at the
rate of 8% of the Series C Purchase Price (as such term is defined in Paragraph
(h) hereof) per annum, and no more.
(ii) Such dividends shall cumulate commencing April 30,
1997, and shall be payable quarterly in arrears commencing on July 30, 1997 and
on each October 30, January 30, April 30 and July 30 thereafter (each
hereinafter called a "Dividend Accrual Date" and each of the quarterly periods,
or portions thereof, ending on the 29th day of such month, respectively, being
hereinafter called a "Dividend Period") and shall be paid in cash only (A) when
and as declared by the Board of Directors of the Corporation out of funds
legally available for that purpose with the first payment due on July 30, 1997
unless sooner declared by the Board of Directors, or (B) upon liquidation as
provided in Paragraph (b) hereof or redemption as provided in Paragraph (c)
hereof. The declaration and payment of such dividends to the holders of Series
C Convertible Preferred Stock shall be paid to the extent funds are legally
available for such purpose and the Board of Directors of the Corporation votes
to make payment thereof.
(iii) Dividends on shares of Series C Convertible Preferred
Stock shall be cumulative (whether or not there shall be net profits or net
assets of the Corporation legally available for the payment of such dividends),
so that, if at any time Full Cumulative Dividends (as defined in Paragraph (h)
hereof) upon the Series C Convertible Preferred Stock to the end of the last
completed Dividend Period shall not have been paid or declared and a sum
sufficient for payment thereof set apart, then the amount of the deficiency in
such dividends shall be fully paid (but without interest), or such dividends in
such amount shall be declared on the shares of the Series C
<PAGE>
Convertible Preferred Stock and a sum sufficient for the payment thereof shall
be set apart for such payment, before any dividend shall be declared or paid or
any other distribution ordered or made upon any class of stock ranking as to
dividends or upon liquidation junior to the Series C Convertible Preferred Stock
(other than a dividend payable in such junior stock) and before any sum or sums
shall be set aside for or applied to the purchase or redemption of any shares of
any class of stock ranking as to dividends or upon liquidation junior to the
Series C Convertible Preferred Stock (with respect to rights to dividends and on
liquidation, the Series C Convertible Preferred Stock shall rank prior to the
Common Stock and on a parity with the Series A Convertible Preferred Stock and
the Series B Convertible Preferred Stock of the Corporation); provided, that no
dividends shall be declared or paid and no sum sufficient for the payment
thereof shall be set apart for such payment in respect of the shares of Common
Stock (other than a dividend payable in shares of Common Stock) while any shares
of the Series C Convertible Preferred Stock are outstanding without the approval
of the holders of record of a majority of the shares of Series C Convertible
Preferred Stock outstanding as of a record date between 10 and 90 days prior to
the declaration of such dividend; further provided, that no Accrued Dividends
(as such term is defined in Paragraph (h) hereof) shall be payable upon
conversion of the Series C Convertible Preferred Stock or at any time
thereafter.
(b) Liquidation Rights. (i) In the event of a voluntary or
involuntary liquidation, dissolution, or winding up of the Corporation, the
holders of shares of Series C Convertible Preferred Stock shall be entitled to
receive, out of the assets of the Corporation legally available therefor, an
amount equal to $4.00 per share (the "Liquidation Price"), and a further amount
equal to the Accrued Dividends plus any other dividends declared but unpaid, if
any, on or with respect to such shares of Series C Convertible Preferred Stock,
before any payment shall be made or any assets distributed to the holders of
shares of Common Stock; provided that, except in the event of any voluntary or
involuntary liquidation, dissolution or winding up, the requirement for payment
of such a preferential amount on liquidation to the holders of Series C
Convertible Preferred Stock shall not impose any restriction on the use of the
surplus of the Corporation. If, upon liquidation, dissolution, or winding up,
whether voluntary or involuntary, the assets thus distributed among the holders
of Series C Convertible Preferred Stock shall be insufficient to permit payment
to such holders of the full preferential amounts provided in the first sentence
of this Paragraph (b) and to the holders of any other series of Preferred Stock
or any other class of stock of the Corporation ranking on a parity with the
shares of Series C Convertible Preferred Stock in any distribution of assets,
then the entire
-2-
<PAGE>
assets of this Corporation to be distributed shall be distributed ratably in
proportion to their respective full preferential amounts among the holders of
Series C Convertible Preferred Stock and the holders of any other series of
Preferred Stock or any other class of stock of the Corporation ranking on a
parity with the shares of Series C Convertible Preferred Stock in any
distribution of assets. After payment has been made to the holders of Series C
Convertible Preferred Stock of the full amounts to which they are entitled
pursuant to this Paragraph (b), the remaining assets of the Corporation shall be
distributed ratably in such amounts per share to the holders of Series C
Convertible Preferred Stock, to the holders of any other series of Preferred
Stock or any other class of stock of the Corporation and to the holders of
Common Stock so that the amount distributed per share of Series C Convertible
Preferred Stock shall equal the amount distributed per share of Common Stock
multiplied by the Conversion Rate then in effect.
(ii) A consolidation or merger of the Corporation with or
into any other corporation or corporations in a transaction in which the
shareholders of the Corporation receive cash in exchange for the shares of
capital stock of the Corporation then held by them, or the sale of all or
substantially all of the assets of the Corporation for cash, shall be deemed to
be a liquidation, dissolution or winding up of the Corporation for the purposes
of this Paragraph (b).
(c) Redemption Rights. (i) Subject to Subparagraph (vii) below,
on each of April 30, 1998, April 30, 1999 and April 30, 2000 (such dates being
hereinafter referred to as the "Redemption Dates"), and so long as any shares of
Series C Convertible Preferred Stock shall be outstanding, the Corporation shall
(unless otherwise prevented by law) redeem, at the option and upon the written
notice of any holder or holders of Series C Convertible Preferred Stock (the
"Redemption Notice") (which Redemption Notice shall state such holder's
intention to exercise the redemption option set forth herein and the number of
shares of Series C Convertible Preferred Stock sought to be redeemed (up to the
maximum number of shares owned by such holder which are entitled to be redeemed
on such Redemption Date as hereinafter provided)), delivered at least 30 but not
more than 60 days prior to the Redemption Date, the following respective
percentages of shares of Series C Convertible Preferred Stock outstanding and
owned by such holder (or his predecessor who purchased such shares on original
issuance from the Corporation as shown by the stock records of the Corporation):
April 30, 1998 33-1/3%
April 30, 1999 66-2/3%
-3-
<PAGE>
April 30, 2000 100%
provided however, that if on any Redemption Date subsequent to April 30, 1998 a
holder of shares of Series C Convertible Preferred Stock who held shares on a
previous Redemption Date had not theretofore exercised in full a redemption
option, then such holder shall, in addition to the shares which can be redeemed
on the then current Redemption Date, have the right to have redeemed such
additional shares of Series C Convertible Preferred Stock which would cause such
holder to have redeemed as of the then current Redemption Date the maximum
number of shares of Series C Convertible Preferred Stock which could have been
redeemed through such date had all redemption options existing on or prior to
such date been exercised in full.
(ii) The amount per share of Series C Convertible Preferred
Stock at which the shares of Series C Convertible Preferred Stock are to be
redeemed pursuant to Subparagraph (i) on any Redemption Date shall be an amount
equal to Accrued Dividends and any other dividends declared but unpaid, if any,
on or with respect to such shares of Series C Convertible Preferred Stock up to
and including the applicable Redemption Date, plus the greater of (A) the
Liquidation Price and (B) the fair market value per share (as determined by
agreement between the Corporation and the holders of 66-2/3% of the Series C
Convertible Preferred Stock or, in the absence of such agreement, by an
independent firm of investment bankers, appraisers or accountants selected by
the Corporation and the holders of 66-2/3% of the Series C Convertible Preferred
Stock, or, in the absence of agreement as to the identity of such independent
firm, by three independent firms of investment bankers, appraisers or
accountants, one of which shall be selected by the Corporation, one by holders
of 66-2/3% of the Series C Convertible Preferred Stock, and the third by the
preceding two firms so selected, or in such other manner as may be agreed
between the Corporation and the holders of 66-2/3% of the Series C Convertible
Preferred Stock). The total sum payable per share of Series C Convertible
Preferred Stock on any Redemption Date is hereinafter referred to as the "Series
C Redemption Price", and any payment to be made is hereinafter referred to as
the "Series C Redemption Payment."
(iii) On or after each Redemption Date, each holder of shares
of Series C Convertible Preferred Stock to be redeemed shall surrender a
certificate or certificates (duly endorsed in blank or accompanied by proper
instruments of assignment and transfer thereof duly endorsed in blank)
evidencing such holder's shares of Series C Convertible Preferred Stock to be
redeemed on such date to the Corporation at the place designated in such notice,
and shall thereupon be entitled to receive payment of the Redemption Price, and
a new certificate shall be issued representing the unredeemed shares included in
-4-
<PAGE>
such certificate or certificates, if any. The Corporation shall pay the Series
C Redemption Payment no later than the date that is one month following the
Redemption Date. On or prior to any Redemption Date the Corporation may
deposit, with any bank or trust company in Philadelphia or New York having
capital and surplus of at least $250,000,000, as a trust fund, a sum sufficient
to redeem on the Redemption Date, the shares of Series C Convertible Preferred
Stock scheduled for redemption, with irrevocable instructions and authority to
the bank or trust company to give notice of redemption thereof if such notice
shall not previously have been given by the Corporation or to complete the
giving of any notice if necessary, and to pay, on and after the Redemption Date,
the Redemption Price of the shares to their respective holders upon the
surrender of their share certificates. From and after the Redemption Date, (A)
if funds necessary for the redemption shall be available therefor, unless the
Corporation shall default in making payment of the Redemption Price upon
surrender of certificates as aforesaid, or (B) if funds necessary for the
redemption shall have been so deposited, the shares called for redemption or a
pro rata part of each share in cases of redemption pro rata shall cease to be
outstanding and the holders thereof shall cease to be shareholders with respect
to such shares or pro rata parts and shall have no interest in or claim against
the Corporation with respect to such shares or pro rata parts except the right
to receive from the Corporation or the bank or trust company with which such
deposit may have been made payment of the Redemption Price of the shares without
interest upon the surrender of their certificates therefor (duly endorsed in
blank or accompanied by proper instruments of assignment and transfer thereof
duly endorsed in blank). Any funds so deposited which shall not be required for
such redemption because of the exercise of conversion rights subsequent to the
date of deposit shall be returned to the Corporation. In case any holder of
shares of Series C Convertible Preferred Stock which have been called for
redemption shall not, within six (6) years after the date of such deposit, have
claimed the amount deposited with respect to the redemption thereof, such bank
or trust company, upon demand, shall pay over to the Corporation such unclaimed
amount and shall thereupon be relieved of all responsibility in respect thereof
to such holder, and thereafter such holder shall look only to the Corporation
for payment thereof. Any interest which may accrue on funds so deposited shall
be paid to the Corporation from time to time.
(iv) The Corporation shall have the power to purchase or
otherwise acquire shares of Series C Convertible Preferred Stock from time to
time at such price or prices as may be agreed upon by the holder or holders
thereof and the Corporation, provided that unless dividends and distributions on
all outstanding shares of Series C Convertible Preferred Stock which have been
declared shall have been paid or a sum or assets
-5-
<PAGE>
sufficient for the payment thereof set apart, the Corporation shall not purchase
for value any shares of Series C Convertible Preferred Stock except in
accordance with an offer made in writing or by publication (as determined by the
Board of Directors of the Corporation) to all holders of record of shares of
Series C Convertible Preferred Stock.
(v) If the funds of the Corporation available for
redemption of shares of Series C Convertible Preferred Stock on the Redemption
Date are insufficient to redeem the total number of shares of Series C
Convertible Preferred Stock to be redeemed on such date, those funds which are
legally available will be used to redeem the maximum possible number of such
shares ratably in proportion to their respective redemption prices among the
holders of such shares to be redeemed and the holders of any other series of
Preferred Stock ranking on a parity with the shares of Series C Convertible
Preferred Stock in any distribution of assets among the holders of such shares
to be redeemed. The shares of Series C Convertible Preferred Stock not redeemed
shall remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series C Convertible Preferred
Stock, such funds will immediately be used to redeem the balance of the shares
which the Corporation has become obligated to redeem on any redemption date but
which it has not redeemed.
(vi) Notwithstanding the foregoing, holders of shares of
Series C Convertible Preferred Stock shall have no right to require redemption
under this Paragraph (c) if, prior to the exercise of their right to require
redemption as provided in Subparagraph (i) above, there shall have occurred a
closing or closings of a public sale or sales for the account of the Corporation
of the Common Stock of the Corporation or securities convertible into or
exchangeable for shares of Common Stock of the Corporation, where the aggregate
sales price of the securities included in such sale or sales (before deduction
of any underwriting commissions, discounts or concessions or expenses of sale)
is at least $15,000,000.00 and the price per share of such securities is at
least $5.00.
(vii) Anything contained in this Paragraph (c) to the
contrary notwithstanding, the holders of shares of Series C Convertible
Preferred Stock requested by such holders as herein provided to be redeemed
pursuant to this Paragraph (c) shall have the right, exercisable at any time up
to the close of business on the Redemption Date (unless default shall be made by
the Corporation in the payment of the Redemption Price as herein provided, in
which event such right shall have been exercisable until such default is cured),
to convert all or any part of such shares to be redeemed as herein provided into
shares of Common
-6-
<PAGE>
Stock pursuant to Paragraph (d) hereof. If, and to the extent, any shares of
Series C Convertible Preferred Stock so entitled to redemption are converted
into shares of Common Stock by the holders thereof prior to the close of
business on the Redemption Date, the total number of shares of Series C
Convertible Preferred Stock otherwise to be redeemed on such date shall be
reduced by the number of shares of Series C Convertible Preferred Stock so
converted.
(viii) Shares of Series C Convertible Preferred Stock which
have been redeemed or reacquired in any manner by the Corporation or which have
been converted into shares of stock of another class or classes shall be
cancelled and may not be reissued.
(d) Rank. The Series C Convertible Preferred Stock shall rank
as to dividends and assets on a parity with the Corporation's Series A
Convertible Preferred Stock and Series B Convertible Preferred Stock.
(e) Conversion Rights. (i) Shares of Series C Convertible
Preferred Stock may, at the option of the holder, be converted into shares of
Common Stock of the Corporation (as such shares of Common Stock may be
constituted on the conversion date) at any time and from time to time at the
rate of one (1) share of Common Stock for each share of Series C Convertible
Preferred Stock, subject to adjustment as provided below (the "Conversion
Rate"); provided that, as to any shares of Series C Convertible Preferred Stock
which a holder has elected to have the Company redeem, the conversion right
shall terminate at the close of business on the Redemption Date (determined as
provided in Paragraph (c) hereof), unless default shall be made in the payment
of the applicable Redemption Price.
(ii) The holder of a share or shares of Series C Convertible
Preferred Stock may exercise the conversion right as to any thereof by
delivering to the Corporation during regular business hours, at the principal
executive offices of the Corporation or at the corporate trust office of any
transfer agent of the Corporation for the shares of this series or at such other
place as may be designated by the Corporation, the certificate or certificates
for the shares to be converted, duly endorsed or assigned in blank or to the
Corporation (if required by it), accompanied by written notice stating that the
holder elects to convert such shares and stating the name or names (with
address) in which the certificate or certificates for Common Stock are to be
issued and by payment of any tax which may be payable in respect of any transfer
involved in the issuance and delivery of shares in any name other than that of
the holder of record on the books of the Corporation of the shares of Series C
Convertible Preferred Stock converted. Conversion shall be
-7-
<PAGE>
deemed to have been effected on the date such delivery is made, and such date is
referred to herein as the "conversion date." If the conversion right is
exercised in connection with an underwritten offer of securities registered
pursuant to the Securities Act of 1933, the conversion may, at the option of any
holder tendering shares of Series C Convertible Preferred Stock for conversion,
be conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, in which event the person(s) entitled to receive
shares of Common Stock issuable upon such conversion of shares of Series C
Convertible Preferred Stock shall not be deemed to have converted such Series C
Convertible Preferred Stock until the closing of such sale of securities. As
promptly as practicable thereafter, the Corporation shall issue and deliver to
or upon the written order of such holder, at such office or other place
designated by the Corporation, a certificate or certificates for the number of
full shares of Common Stock to which he is entitled and a check, cash, scrip
certificate or other adjustment in respect of any fraction of a share as
provided below. The person in whose name the certificate or certificates for
Common Stock are to be issued shall be deemed to have become a shareholder of
record on the conversion date unless the transfer books of the Corporation are
closed on that date, in which event he shall be deemed to have become a
shareholder of record on the next succeeding date on which the transfer books
are open, but the Conversion Rate shall be that in effect on the conversion
date. No payment or adjustment shall be made upon any conversion on account of
any dividends declared but unpaid on the shares of Series C Convertible
Preferred Stock surrendered for conversion or on account of any dividends on the
shares of Common Stock issued upon such conversion.
(iii) All outstanding shares of Series C Convertible
Preferred Stock shall be deemed automatically converted into shares of Common
Stock at the Conversion Rate upon the occurrence of a closing of a public sale
for the account of the Corporation of the Common Stock of the Corporation or
securities convertible into or exchangeable for shares of Common Stock of the
Corporation, where the aggregate sales price of securities included in such sale
and in all other public sales for the account of the Corporation of the Common
Stock of the Corporation or securities convertible into or exchangeable for
shares of Common Stock of the Corporation closed prior thereto (before deduction
of any underwriting commissions, discounts or concessions or expenses of sale)
is at least $15,000,000.00 and the price per share of such securities is at
least $5.00. On or after the date of the closing of such sale, and in any event
within ten days after receipt of notice, by mail, postage prepaid from the
Corporation of the occurrence thereof, each holder of shares of Series C
Convertible Preferred Stock shall surrender such holder's certificates
evidencing such shares at the
-8-
<PAGE>
principal executive offices of the Corporation or at the corporate trust office
of any transfer agent for the shares of this series or at such other place as
may be designated by the Corporation, and shall thereupon be entitled to receive
certificates evidencing the number of shares of Common Stock into which such
shares of Series C Convertible Preferred Stock shall have been converted. On
the date of the closing of such sale, each holder of shares of Series C
Convertible Preferred Stock shall be deemed to be a holder of record of the
shares of Common Stock issuable upon such conversion, notwithstanding that the
certificates representing such shares of Series C Convertible Preferred Stock
shall not have been surrendered as provided above, that notice from the
Corporation shall not have been received by any holder of shares of Series C
Convertible Preferred Stock, or that the certificates evidencing such shares of
Common Stock shall not then be actually delivered to such person.
(iv) The Corporation shall not be required to issue any
fraction of a share upon conversion of any share or shares of Series C
Convertible Preferred Stock. If more than one share of Series C Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the total number of shares of Series C
Convertible Preferred Stock so surrendered. If any fractional interest in a
share of Common Stock would be deliverable upon conversion, the Corporation
shall make an adjustment therefor in cash unless its Board of Directors shall
have determined to adjust fractional interests by issuance of scrip certificates
or in some other manner. Adjustment in cash shall be made on the basis of the
current market price of one share of Common Stock on the conversion date. A
determination of the current market price made in good faith by the Board of
Directors for the purposes of this Subparagraph (e)(iv) shall be conclusive and
binding upon all the shareholders of the Corporation.
(v) From and after the date of the first issuance of shares
of Series C Convertible Preferred Stock, the Conversion Rate provided for above
shall be subject to the following adjustments, which shall be made to the
nearest one-tenth of a share of Common Stock or, if none, to the next lower
one-tenth:
(A) If the Corporation shall pay to all of the holders
of its Common Stock or any other class or series of its capital stock which
is not on a parity with or senior to the Series C Convertible Preferred
Stock, a dividend in shares of Common Stock or in securities convertible
into its Common Stock (the "Convertible
-9-
<PAGE>
Securities"), the Conversion Rate in effect immediately prior to the record
date fixed for the determination of the holders of Common Stock entitled to
such dividend shall be increased, effective at the opening of business on
the full business day next following such record date, by multiplying such
Conversion Rate by a fraction, the numerator of which is the number of
shares of Common Stock issued and outstanding on such record date plus the
number of shares of Common Stock issued, or issuable upon conversion of
Convertible Securities issued, in payment of such dividend and the
denominator of which is the number of shares of Common Stock issued and
outstanding on such record date.
(B) If the Corporation shall split the outstanding
shares of its Common Stock into a greater number of shares or combine the
outstanding shares of its Common Stock into a smaller number of shares, the
Conversion Rate in effect immediately prior to such action shall be
increased in the case of a split or decreased in the case of a combination,
effective at the opening of business on the full business day next
following the day such action becomes effective, so that the holders of
shares of Series C Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock which such holders would have been entitled to receive as a result of
such split or combination if such shares of Series C Convertible Preferred
Stock had been converted immediately prior to the date such split or
combination, as the case may be, became effective.
(C) If the Corporation shall issue or sell to all
holders of its Common Stock options, warrants or rights to subscribe for or
purchase shares of its Common Stock, other than Permitted Shares (as
hereinafter defined), at a price per share (plus the consideration per
share of Common Stock, if any, received for such options, warrants or
rights) less than $4.00 divided by the Conversion Rate in effect
immediately prior to such issuance or sale (the "Adjustment Price") or to
subscribe for or purchase any Convertible Securities at a price per share
(plus the consideration per share of Convertible Securities, if any,
received for such options, warrants or rights) which when divided by the
conversion rate applicable to those Convertible Securities is less than the
Adjustment Price, the Conversion Rate in effect immediately prior to such
issuance or sale shall be increased, effective at the opening of business
on the first full business day next following such issuance or sale, to an
amount determined by multiplying such Conversion Rate by a fraction the
numerator of which is the number of shares of Common Stock of the
Corporation outstanding immediately prior to said date plus
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<PAGE>
the number of shares of Common Stock issuable on exercise of such options,
warrants or rights (or in the case of Convertible Securities the number of
shares of Common Stock into which the Convertible Securities issuable on
exercise of such options, warrants or rights would then be convertible) and
the denominator of which is the number of shares of Common Stock
outstanding immediately prior to said date plus the number of shares of
Common Stock of the Corporation which the aggregate subscription or
purchase price for the total number of such shares issuable on exercise of
such options, warrants or rights (including the consideration, if any,
received by the Corporation for such options, warrants or rights) would
purchase at the Adjustment Price. On the expiration of such options,
warrants or rights, the Conversion Rate applicable to any then outstanding
shares of Series C Convertible Preferred Stock shall forthwith be
readjusted to the Conversion Rate which would have obtained at the time of
such expiration if the adjustment made at the time such options, warrants
or rights were issued or sold had been made upon the basis of the issuance
of only the number of shares of Common Stock or Convertible Securities
actually issued upon the exercise of such options, warrants or rights, but
such readjustment shall not affect any conversion theretofore made.
Permitted Shares shall include (v) any shares of Common Stock or
Convertible Securities issued or issuable, after the date of the first sale
of shares of Series C Convertible Preferred Stock, to officers, directors
or employees of, or consultants to, or to persons who were to become
officers, directors or employees of, or consultants to, the Corporation
pursuant to awards or grants made prior to the date of the first sale of
shares of Series C Convertible Preferred Stock, (w) 500,000 shares of
Common Stock issued after the date of the first sale of shares of Series C
Convertible Preferred Stock, including but not limited to any shares of
Common Stock or Convertible Securities issued or issuable to officers,
directors or employees of, or consultants to, or to persons who were to
become officers, directors or employees of, or consultants to, the
Corporation pursuant to awards or grants made after the date of the first
sale of shares of Series C Convertible Preferred Stock under stock option,
stock incentive, stock appreciation, stock bonus, stock award or
compensation plans or arrangements or employment letters or any other
employee benefit plans presently in effect or which may hereafter be
adopted or entered into by the Corporation, (x) any shares of Common Stock
or Convertible Securities issued or issuable upon conversion of any
Convertible Securities, and (y) any shares of Common Stock issued or
issuable upon conversion of shares of Series C Convertible Preferred Stock;
provided that each such sale or issuance shall have been approved by
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<PAGE>
the Board of Directors of the Corporation or a committee thereof.
(D) If the Corporation shall distribute to all of the
holders of its Common Stock any evidences of its indebtedness, or any
options, warrants or rights to subscribe for any security other than its
Common Stock or Convertible Securities, or any other assets (excluding
dividends and distributions in cash to the extent permitted by law), the
Conversion Rate in effect immediately prior to the record date fixed for
the determination of the holders of Common Stock entitled to such
distribution shall be increased, effective at the opening of business on
the next following full business day, to an amount determined by
multiplying such Conversion Rate by a fraction, the numerator of which is
the Adjustment Price (as defined in clause (C) above) and the denominator
of which is such Adjustment Price less the fair market value (as determined
by an independent appraiser selected with the approval of at least
sixty-six and two-thirds percent (66 2/3%) of the members of the Board of
Directors of the Corporation then in office, whose determination, in the
absence of fraud, shall be conclusive) of the amount of evidences of
indebtedness, options, rights, warrants or other assets (excluding cash
dividends and distributions as aforesaid) so distributed which is
applicable to one share of Common Stock.
(E) If the Corporation shall issue shares of its
Common Stock or Convertible Securities other than Permitted Shares and
other than pursuant to a transaction described in clauses (A)-(D) hereof,
at a price per share of less than the Adjustment Price (as defined in
clause (C) above) or in the case of Convertible Securities at a price per
share which when divided by the conversion rate applicable thereto is less
than the Adjustment Price), the Conversion Rate in effect immediately prior
to such issuance shall be increased, effective at the opening of business
on the next following full business day, to an amount determined by
multiplying the Conversion Rate by a fraction, the numerator of which is
the number of shares of Common Stock of the Corporation outstanding
immediately prior to such issuance plus the number of additional shares of
Common Stock to be so issued (or, in the case of Convertible Securities,
the number of additional shares of Common Stock into which the Convertible
Securities to be so issued would be convertible) and the denominator of
which is the number of shares of Common Stock outstanding immediately prior
to such issuance plus the number of shares of Common Stock of the
Corporation which the aggregate purchase price for the total number of
additional shares of Common Stock or
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<PAGE>
Convertible Securities to be so issued would purchase at the Adjustment
Price.
No adjustment of the Conversion Rate as provided in this Subparagraph (e)(v)
shall be made by reason of the issuance of shares of Common Stock or Convertible
Securities of the Corporation, or options, warrants or rights to subscribe
therefor, for cash, property or services, except as provided in clauses (C) and
(E) of this Subparagraph (e)(v). To the extent that any shares of Common Stock
or Convertible Securities of the Corporation, or options, warrants or rights to
subscribe therefor, shall be issued for a cash consideration, the consideration
received by the Corporation therefor shall be deemed to be the amount of the
cash received by the Corporation therefor without deduction therefrom of any
expenses incurred or any underwriting commissions, discounts or concessions paid
or allowed by the Corporation in connection therewith. In the case of the
issuance of Common Stock or Convertible Securities, or options, warrants or
rights to subscribe therefor, for a consideration all or part of which shall be
property received or services performed, the value of such property or services
for the purposes of clauses (C) and (E) of this Subparagraph (e)(v) shall be
determined, irrespective of the accounting treatment thereof and without
deduction therefrom of any reasonable expenses incurred or any underwriting
commissions, discounts or concessions paid or allowed by the Corporation in
connection therewith, by at least sixty-six and two-thirds percent (66 2/3%) of
the members of the Board of Directors of the Corporation then in office, whose
determination, in the absence of fraud, shall be conclusive. Whenever the
Conversion Rate is adjusted pursuant to this Subparagraph (e)(v), the
Corporation shall (x) promptly place on file at its principal executive offices
or corporate trust office of its transfer agent or agents for the shares of
Series C Convertible Preferred Stock a statement signed by the President or a
Vice President of the Corporation and by its Treasurer, an Assistant Treasurer
or other financial officer showing in reasonable detail the facts requiring such
adjustment and the Conversion Rate after such adjustment, and shall make such
statement available for inspection by shareholders of the Corporation, and (y)
mail to holders of record of shares of Series C Convertible Preferred Stock a
notice stating that such adjustment has been made and the adjusted Conversion
Rate.
(vi) If the Corporation shall pay to the holders of its
Common Stock a dividend in shares of Common Stock or Convertible Securities or
if it shall split or combine the outstanding shares of its Common Stock, the
Adjustment Price referred to in clauses (C), (D) and (E) of Subparagraph (e)(v)
(as theretofore decreased or increased) shall forthwith be decreased in the case
of a stock dividend or split or increased in the case of a combination by
multiplying the Adjustment Price
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<PAGE>
by a fraction, the numerator of which is the number of shares of Common Stock
issued and outstanding on the record date fixed for any such stock dividend or
immediately before any such split or combination becomes effective and the
denominator of which is the number of shares of Common Stock issued and
outstanding on such record date or immediately before such split or combination
becomes effective plus, with respect to a stock dividend, the number of shares
of Common Stock issued, or issuable upon conversion of Convertible Securities
issued, in payment of such dividend or, with respect to a stock split, the
number of shares of Common Stock issued as a result of such split or minus or,
with respect to a stock combination, the difference between the number of shares
of Common Stock issued and outstanding immediately before such combination
becomes effective and the number of shares of Common Stock issued and
outstanding immediately after such combination becomes effective.
(vii) In case of any reclassification or change of the
outstanding shares of Common Stock of the Corporation (except a split or
combination of shares) or in case of any consolidation or merger to which the
Corporation is a party (except a merger in which the Corporation is the
surviving corporation and which does not result in any reclassification of or
change in the outstanding Common Stock of the Corporation, except a split or
combination of shares as to which clause (B) of Subparagraph (e)(v) is
applicable) or in case of any sale or conveyance to another corporation of all
or substantially all of the property of the Corporation, effective provision
shall be made by the Corporation or by the successor or purchasing corporation
so that (A) the holder of each share of Series C Convertible Preferred Stock
then outstanding shall thereafter have the right to convert such share into the
kind and amount of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance by a holder
of the number of shares of Common Stock of the Corporation into which such share
of Series C Convertible Preferred Stock might have been converted immediately
prior thereto, and (B) there shall be subsequent adjustments of the Conversion
Rate which shall be equivalent, as nearly as practicable, to the adjustments
provided for in Subparagraph (e)(v). The provisions of this Subparagraph
(e)(vii) shall similarly apply to successive reclassifications, changes,
consolidations, mergers, sales or conveyances.
(viii) If a state of facts shall occur which, without being
specifically controlled by the provisions of this Paragraph (e), would not
fairly protect the conversion rights of the Series C Convertible Preferred Stock
in accordance with the essential intent and principles of such provisions, then
the Board of Directors of the Corporation shall make an adjustment in the
application of such provisions, in accordance with such
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<PAGE>
essential intent and principles, so as to protect such conversion rights.
(ix) The issuance of shares of Common Stock of the
Corporation on conversion of shares of Series C Convertible Preferred Stock
shall be without charge to the converting holder of shares of Series C
Convertible Preferred Stock for any tax in respect of the issuance thereof, but
the Corporation shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of shares in any
name other than that of the holder of record on the books of the Corporation of
the shares of Series C Convertible Preferred Stock converted, and the
Corporation shall not be required to issue or deliver any certificate for shares
of Common Stock unless and until the person requesting issuance thereof shall
have paid to the Corporation the amount of such tax or shall have established to
the satisfaction of the Corporation that such tax has been paid.
(x) Shares of Common Stock issued on conversion of shares
of Series C Convertible Preferred Stock shall be issued as fully paid shares and
shall be non-assessable by the Corporation. The Corporation shall at all times
reserve and keep available for the purpose of effecting the conversion of shares
of Series C Convertible Preferred Stock such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the conversion of all
outstanding shares of this Series, and to the extent necessary in order to
reserve a sufficient number of such shares, the Corporation shall, subject to
appropriate shareholder action, amend its Articles of Incorporation to increase
the number of duly authorized but unissued shares of its Common Stock.
(xi) Shares of Series C Convertible Preferred Stock
converted as provided herein shall not be reissued and the Board of Directors
shall take appropriate action from time to time to effect reductions in the
number of shares of Preferred Stock which the Corporation is authorized to
issue.
(f) Voting Rights. (i) So long as any shares of Series C
Convertible Preferred Stock are outstanding, the Corporation shall not, without
the affirmative vote at a meeting called for that purpose or the written consent
of holders of at least a majority of the total number of shares of Series C
Convertible Preferred Stock then outstanding, voting as a separate class, in any
manner, whether by amendment to the Articles of Incorporation of the Corporation
or otherwise:
(A) Amend or repeal any provision of, or add any
provision to, the Corporation's Articles of Incorporation if such action
would alter or change the
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<PAGE>
designations, relative rights, preferences or limitations of, or the
restrictions provided for the benefit of, the Series C Convertible
Preferred Stock so as to affect the Series C Convertible Preferred Stock
adversely;
(B) Authorize or create any additional shares of
Series C Convertible Preferred Stock, or authorize or create shares of any
class or series of stock having any preference or priority as to dividends
or assets superior or equal to any such preference or priority of the
Series C Convertible Preferred Stock, or authorize or create shares of any
class or series or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having optional rights to
purchase, any shares of the Corporation having any such preference; or
(C) Reclassify the shares of Common Stock or any other
shares of stock hereafter created junior to the Series C Convertible
Preferred Stock as to dividends or assets into shares of Series C
Convertible Preferred Stock or into shares having any preference or
priority as to dividends or assets superior or equal to that of the Series
C Convertible Preferred Stock.
(ii) The votes or consent required in Subparagraph (f)(i)
above shall be in addition to any approval of shareholders of the Corporation
which may be required by law or pursuant to any provision of the Corporation's
Articles of Incorporation, which approval shall be obtained by vote of the
shareholders of the Corporation in the manner provided in Subparagraph (f)(iii)
below.
(iii) The holder of each share of Series C Convertible
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares of Series C Convertible Preferred
Stock could be converted on the applicable record date fixed for determining the
holders entitled to vote, and the holders of Common Stock and Series C
Convertible Preferred Stock shall vote together as a single class on all matters
as to which the Common Stock is entitled to vote, except as specifically
provided by law or by Subparagraph (f)(i) above.
(g) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series C Convertible
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<PAGE>
Preferred Stock, at least 5 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right.
(h) Definitions.
(i) The term "Accrued Dividends" shall mean Full Cumulative
Dividends to the date as of which Accrued Dividends are to be computed, less the
amount of all dividends paid upon the relevant shares of stock.
(ii) The term "Full Cumulative Dividends" shall mean
(whether or not in any Dividend Period, or any part thereof, in respect of which
such term is used there shall have been net profits or net assets of the
Corporation legally available for the payment of such dividends) that amount
which shall be equal to dividends at the full rate fixed for the Series C
Convertible Preferred Stock as provided herein for the period of time elapsed
from April 30, 1997, to the date as of which Full Cumulative Dividends are to be
computed.
(iii) The term "Series C Purchase Price" shall mean $4.00 per
share.
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<PAGE>
Microfilm Number 9677-1510 Filed with the Department of State on Nov 27 1996
---------- -----------
Entity Number 2075611
-------------- /s/ [Illegible]
---------------------------------------------
Secretary of the Commonwealth
ARTICLES OF AMENDMENT-DOMESTIC BUSINESS CORPORATION
DSCB:15-1515 (Rev. 90)
In compliance with the requirements of 15 Pa.C.S. Section 1915 (relating to
articles of amendment), the undersigned business corporation desiring to
amend its Articles, hereby states that:
1. The name of the corporation is: Apollon, Inc.
--------------------------------------------
- -------------------------------------------------------------------------------
2. The (a) address of this corporation's current registered office in this
Commonwealth or (b) name of its commercial registered office provider and
the county of venue is (the Department is hereby authorized to correct the
following information to conform to the records of the Department):
c/o Ballard Spahr Andrews & Ingersoll
(a) 1735 Market Street, Philadelphia, Pennsylvania 19103-7599 Philadelphia
------------------------------------------------------------------------
Number and Street City State Zip County
(b) c/o:
------------------------------------------------------------------
Name of Commercial Registered Office Provider County
For a corporation represented by a commercial registered office provider, the
county in (b) shall be deemed the county in which the corporation is located
for venue and official publication purposes.
3. The statute by or under which it was Incorporated is: PA Business
------------
Corporation Law of 1988, as amended
- -----------------------------------
4. The date of its incorporation is: February 6, 1992
----------------
5. (Check, and if appropriate complete, one of the following):
X The amendment shall be effective upon filing these Articles of
--- Amendment in the Department of State.
The amendment shall be effective on: at
--- ----------------- ----------------
Date Hour
6. (Check one of the following):
X The amendment was adopted by the shareholders (or members) pursuant
--- to 15 Pa.C.S. Section 1914(a) and (b).
--- The amendment was adopted by the board of directors pursuant to 15
Pa.C.S. Section 1914(c).
7. (Check, and if appropriate complete, one of the following):
The amendment adopted by the corporation, set forth in full, is as
--- follows:
X The amendment adopted by the corporation as set forth in full in
--- Exhibit A attached hereto and made a part hereof.
<PAGE>
DSCB:15-1915 (Rev 90)-2
B. (Check, if the amendment restates the Articles):
The restated Articles of Incorporation supersede the original Articles
--- and all amendments thereto.
IN TESTIMONY WHEREOF, the undersigned corporation has caused these
Articles of Amendment to be signed by a duly authorized officer thereof this
26th day of November 1996.
- ---- -------- --
APOLLON, INC.
---------------------------------------------
(Name of Corporation)
BY: /s/ Morris Cheston
------------------------------------------
(Signature)
TITLE: Morris Cheston, Jr., Secretary
---------------------------------------
<PAGE>
EXHIBIT A
TO
ARTICLES OF AMENDMENT
OF
APOLLON, INC.
RESOLVED, that the first paragraph of Article 6 of the Articles of
Incorporation of the Corporation, as amended, is hereby amended and
restated to read in full as follows:
"6. The aggregate number of shares which the Corporation shall
have the authority to issue is 62,900,000 shares, to be divided into
two classes consisting of (a) 50,000,000 of Common Stock, $.01 par
value per share, and (b) 12,900,000 shares of Preferred Stock, $.01
par value per share."
RESOLVED, that the voting rights, preferences, qualifications,
privileges, limitations, options, conversion rights and other special
rights of the Company's Series A Convertible Preferred Stock as set forth
in the Company's Articles of Incorporation, as amended (the "Series A
Terms"), be amended in the following respects:
The Series A Terms shall be amended and restated so that
Section (d) reads in full as follows:
"(d) Rank. The Series A Convertible Preferred Stock shall
rank as to dividends and assets on the parity with the
Corporation's Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock."
RESOLVED, that the voting rights, preferences, qualifications,
privileges, limitations, options, conversion rights and other special
rights of the Company's Series B Convertible Preferred Stock as set forth
in the Company's Articles of Incorporation, as amended (the "Series B
Terms"), be amended in the following respects:
The Series B Terms shall be amended and restated so that
Section (d) reads in full as follows:
"(d) Rank. The Series B Convertible Preferred Stock shall
rank as to dividends and assets on the parity with the
Corporation's Series
<PAGE>
A Convertible Preferred Stock and Series C Convertible Preferred
Stock."
RESOLVED, that the Articles of Incorporation be further amended by
amending the first clause of Section (a)(ii) of the Series B Terms to read
as follows:
"(ii) Such dividends shall accumulate commencing October 30,
1994 with regard to shares of Series B Convertible Preferred
Stock issued prior to January 1, 1994 and commencing one year
after the date of issuance of shares of Series B Convertible
Preferred Stock issued on or after January 1, 1994, and shall be
payable...."
2
<PAGE>
BYLAWS OF
APOLLON, INC.
(a Pennsylvania corporation)
SHAREHOLDERS' MEETINGS
1.1 PLACE. Meetings of shareholders shall be held at the principal
office of the Corporation or at such other place within or without the
Commonwealth of Pennsylvania as may be fixed by the Board of Directors.
1.2 ANNUAL MEETING. An annual meeting of shareholders for the
election of directors and the transaction of such other business as may properly
come before the meeting shall be held in each calendar year. The Board of
Directors shall, by resolution, set the date, time and place of the annual
meeting. If no date, time and place is set by the Board of Directors, the annual
meeting shall be held on the first day of May in each year, if not a legal
holiday under the laws of Pennsylvania, and, if a legal holiday, then on the
next succeeding business day at 10:00 A.M.
1.3 SPECIAL MEETINGS. Special meetings of shareholders may be called
at any time by the Board of Directors, by shareholders entitled to cast at least
20% of the votes that all shareholders are entitled to cast at the meeting, or
by the President, any Vice President, the Secretary or the Treasurer of the
Corporation. At any time, upon written request of any person who has called a
special meeting, it shall be the duty of the
<PAGE>
Secretary of the Corporation to fix the time of the meeting which, if the
meeting is called by the Board of Directors or by shareholders entitled to cast
at least 20% of the votes that all shareholders are entitled to cast at the
meeting, shall be held not more than 60 days after the receipt of the request.
If the Secretary neglects or refuses to fix the time of the meeting, the person
or persons calling the meeting may do so.
1.4 NOTICE. Written notice, stating the place, day and hour of each
meeting of shareholders and, in the case of a special meeting, the general
nature of the business to be transacted, shall be given by, or at the direction
of, the Secretary of the Corporation to each shareholder of record entitled to
vote at the meeting at least five days prior to the day named for the meeting,
or ten days in the case of a meeting called to consider a fundamental change
under Chapter 19 of the Business Corporation Law of 1988, as amended. If the
Secretary neglects or refuses to give notice of a meeting, the person or persons
calling the meeting may do so.
1.5 QUORUM AND ADJOURNMENT. The presence, in person or by proxy, of
shareholders entitled to cast at least a majority of the votes that all
shareholders are entitled to cast on a particular matter to be acted upon at the
meeting shall constitute a quorum for the purposes of consideration and action
on the matter. Any regular or special meeting may be adjourned for such period
and to such place as the shareholders present and entitled to vote shall direct,
but any meeting at which directors
2
<PAGE>
are to be elected shall be adjourned only from day to day, or for such longer
periods not exceeding 15 days each as the shareholders present and entitled to
vote shall direct, until the directors have been elected. The shareholders
present at a duly organized meeting can continue to do business until
adjournment notwithstanding the withdrawal of enough shareholders to leave less
than a quorum. If a meeting cannot be organized because a quorum has not
attended, those present may adjourn the meeting to such time and place as they
may determine. Notwithstanding the foregoing, (i) those shareholders entitled to
vote who attend a meeting called for the election of directors that has been
previously adjourned for lack of a quorum, although less than a quorum as fixed
in this section, shall nevertheless constitute a quorum for the purpose of
electing directors and (ii) those shareholders entitled to vote who attend a
meeting that has been previously adjourned for one or more periods aggregating
at least 15 days because of an absence of a quorum, although less than a quorum
as fixed in this section, shall nevertheless constitute a quorum for the purpose
of acting upon any matter set forth in the notice of the meeting if the notice
states that those shareholders who attend the adjourned meeting shall
nevertheless constitute a quorum for the purpose of acting upon the matter.
1.6 TELEPHONE MEETINGS. Shareholders may participate in any
shareholders' meeting by conference telephone or similar communications
equipment by means of which all persons
3
<PAGE>
participating in the meeting can hear each other. Shareholders
so participating will be deemed present at the meeting.
1.7 ACTION BY SHAREHOLDERS. Except as may be otherwise required by
law or specified in the Articles of Incorporation or in a bylaw adopted by the
shareholders, whenever any corporate action is to be taken by a vote of the
shareholders, it shall be authorized by a majority of the votes cast at a duly
organized meeting of shareholders by the holders of shares entitled to vote
thereon.
1.8 WRITTEN CONSENT. Any action required or permitted to be taken at
a meeting of the shareholders or of a class of shareholders may be taken without
a meeting upon the written consent of shareholders who would have been entitled
to cast the minimum number of votes that would be necessary to authorize the
action at a meeting at which all shareholders entitled to vote thereon were
present and voting. The consents shall be filed with the secretary of the
Corporation. The action shall not become effective until after at least ten
days' written notice of the action has been given to each shareholder entitled
to vote thereon who has not consented thereto.
1.9 SHAREHOLDERS LIST. The officer or agent having charge of the
transfer books for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each
such shareholder. The list shall be produced and kept open at the
4
<PAGE>
time and place of each meeting of shareholders and shall be subject to the
inspection of any shareholder during the meeting for the purposes thereof.
1.10 RECORD DATE. The Board of Directors may fix a time prior to the
date of any meeting of shareholders as a record date for the determination of
the shareholders entitled to notice of, or to vote at, the meeting, which time,
except in the case of an adjourned meeting, shall be not more than 90 days prior
to the date of the meeting of shareholders. Only shareholders of record on the
date fixed shall be so entitled notwithstanding any transfer of shares on the
books of the Corporation after any record date fixed as provided in this
section. The Board of Directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board of Directors fixes a new record date for
the adjourned meeting.
DIRECTORS
2.1 BOARD OF DIRECTORS. Unless otherwise provided by law, all powers
of the Corporation shall be exercised by or under the authority of, and the
business and affairs of the Corporation shall be managed under the direction of,
a Board of Directors.
5
<PAGE>
The number of directors of the Corporation shall be set by resolution of the
Board.
2.2 ELECTION AND TERM OF OFFICE. Except as provided in these bylaws,
directors shall be elected by the shareholders. Each director shall be a natural
person of full age who need not be a resident of Pennsylvania or a shareholder
of the Corporation. Directors shall hold office for one year and until their
successors have been selected and qualified, or until their earlier death,
resignation or removal.
2.3 VACANCIES. Vacancies in the Board of Directors, including
vacancies resulting from an increase in the number of directors, shall be filled
by a majority of the remaining directors though less than a quorum, or by a sole
remaining director. A director selected to fill a vacancy shall serve for the
balance of the unexpired term.
2.4 ANNUAL MEETING. An annual meeting of the Board of Directors
shall be held each year as soon as practicable after the annual meeting of
shareholders, at the place where such meeting of shareholders was held or at
such other place as the Board of Directors may determine, for the purpose of
organization of the Board, election of officers and the transaction of any other
business as may properly be brought before the meeting. No notice of any kind of
the annual meeting of the Board of Directors need be given to either old or new
directors.
2.5 REGULAR MEETINGS. Regular meetings of the Board of Directors may
be held at such times and at such places as the
6
<PAGE>
directors may determine from time to time. Notice of regular
meetings need not be given.
2.6 SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the President or by a majority of the directors then in office.
Notice of every special meeting shall be given to each director not later than
the second day immediately preceding the day of such meeting in the case of
notice by mail or courier service, and not later than during the day immediately
preceding the day of such meeting in the case of notice delivered personally or
by telephone, telex, TWX or telecopier. Such notice shall state the time and
place of the meeting, but neither the business to be transacted at, nor the
purpose of, the meeting need be specified in the notice of such meeting.
2.7 TELEPHONE MEETINGS. The Board of Directors may participate in
meetings of the Board by conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Directors so participating will be deemed present at the meeting.
2.8 QUORUM. A majority of the directors in office shall be necessary
to constitute a quorum for the transaction of business, and the acts of a
majority of the directors entitled to vote shall be the acts of the Board of
Directors.
2.9 UNANIMOUS CONSENT. Any action required or permitted to be taken
at a meeting of the directors may be taken without a meeting if, prior or
subsequent to the action, a
7
<PAGE>
consent or consents in writing setting forth the action so taken shall be signed
by all the directors in office and shall be filed with the secretary of the
Corporation.
2.10 PAYMENTS TO DIRECTORS. The directors may be reimbursed for the
expenses of attending Board meetings and committee meetings and may be paid a
fixed sum for attendance at each meeting or such other compensation for their
services as may, from time to time, be fixed by the Board of Directors. No such
payment shall preclude any director from serving the Corporation in any other
capacity and receiving compensation therefor.
2.11 SALARIES. The salaries and other compensation of officers and
assistants shall be fixed by the Board of Directors.
2.12 DISTRIBUTIONS. The directors may, to the extent permitted by
law, authorize and the Corporation may make distributions from time to time.
2.13 LIABILITY OF DIRECTORS. A director of the Corporation shall not
be personally liable for monetary damages for any action taken, or any failure
to take any action, unless the director has breached or failed to perform the
duties of his office as provided for under Section 1713 of the Pennsylvania
Business Corporation Law of 1988, as amended, and the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. Any
repeal, amendment, or modification of this Section shall be prospective only and
shall not increase, but may
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decrease a director's liability with respect to actions or failures to act
occurring prior to such change.
COMMITTEES
3.1 ESTABLISHMENT AND POWERS. The Board of Directors may, by
resolution adopted by a majority of the directors in office, establish one or
more committees to serve at the pleasure of the Board, consisting in each case
of one or more directors, and may designate one or more directors as alternate
members of such a committee. Any committee, to the extent provided in the
resolution by which it is established, shall have and may exercise all of the
powers and authority of the Board of Directors except that a committee shall not
have any power or authority as to the following:
(a) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law of 1988, as
amended;
(b) The creation or filling of vacancies in the Board of
Directors;
(c) The adoption, amendment or repeal of these bylaws;
(d) The amendment or repeal of any resolution of the Board of
Directors that by its terms is amendable or repealable only by the Board
of Directors; and
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(e) Action on matters committed by a resolution of the Board
of Directors to another committee of the Board of Directors.
In the absence or disqualification of a member and alternate member or members
of a committee, the member or members of the committee present at any meeting
and not disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another director to act at the meeting in place of the
absent or disqualified member.
3.2 QUORUM. A majority of the directors appointed to a committee
shall constitute a quorum for the transaction of business, and the acts of a
majority of the directors appointed to a committee shall be the acts of the
committee.
3.3 MEETINGS AND NOTICES. A committee may, by resolution, fix
regular meeting dates of which no notice need be given to members of the
committee. Special meetings of a committee may be held at the call of the
chairman of the committee upon such notice as is provided in these bylaws for
special meetings of the Board of Directors. Any action required or permitted to
be taken at a meeting of the members of a committee may be taken without a
meeting if, prior or subsequent to the action, a consent or consents in writing
setting forth the action so taken shall be signed by all the members of the
committee and shall be filed with the secretary of the Corporation.
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3.4 BOARD SUBMISSION. All action taken by the committees shall be
reported to the Board not later than the next succeeding regular meeting of the
Board.
OFFICERS
4.1 NUMBER. The officers of the Corporation shall be a President, a
Secretary, and a Treasurer, or persons who shall act as such, regardless of the
name or title by which they may be designated, elected or appointed, and, in
addition, the Corporation may have one or more Vice Presidents and such other
officers and assistant officers as the Board of Directors may elect. All
officers shall be natural persons of full age. Any number of offices may be held
by the same person. Officers may but need not be shareholders or members of the
Board of Directors.
4.2 ELECTION. The officers and assistant officers shall be elected
or appointed by the Board of Directors at its annual meeting, or as soon
thereafter as possible, and shall hold office for a term of one year and until
their successors are selected and qualified or until their earlier death,
resignation or removal by the Board of Directors.
4.3 VACANCIES. A vacancy by reason of death, resignation or removal
of any officer or assistant officer or by reason of the creation of a new office
may be filled by the Board of Directors.
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4.4 GENERAL DUTIES. All officers and assistant officers, as between
themselves and the Corporation, shall have such authority and perform such
duties in the management of the Corporation as may be provided in these bylaws
and as may be determined by resolution of the Board of Directors not
inconsistent with these bylaws.
4.5 PRESIDENT. The President shall be the chief executive officer of
the Corporation and shall have active executive management of its operations,
subject, however to the control of the Board of Directors. The President shall,
in general, perform all duties incident to the office of President and such
other duties as may be assigned by the Board of Directors. The President shall
preside at all meetings of the shareholders and of the Board of Directors.
4.6 VICE PRESIDENTS. The Vice President, or if there shall be more
than one, the Vice Presidents in the order determined by the Board of Directors,
shall, in the absence or disability of the President, perform the duties and
exercise the powers of the President and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
4.7 SECRETARY. The Secretary shall be custodian of the books and
records of the Corporation other than those in the custody of the Treasurer. The
Secretary shall be custodian of the seal and is hereby authorized to affix the
seal to all documents, the execution and delivery of which are duly
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authorized. The Secretary shall record the minutes of all meetings of
shareholders and of the Board of Directors and shall be responsible for the
giving of all notices of such meetings in accordance with these bylaws. The
Secretary shall, in general, perform such other duties as are incident to the
office of Secretary and as may be assigned by the Board of Directors or by the
President.
4.8 TREASURER. The Treasurer shall be the financial officer of the
Corporation. The Treasurer shall have charge and custody of, and be responsible
for, all funds of the Corporation and the books and records relating to the
same, and shall deposit all such funds in the name of the Corporation in
depositories selected by the Board of Directors. The Treasurer shall render to
the President and the Board of Directors, upon request, an account of all
transactions taken as Treasurer and of the financial condition of the
Corporation. The Treasurer shall, in general, perform such other duties as are
incident to the office of Treasurer and as may be assigned by the Board of
Directors or by the President. The Treasurer shall, if required to do so by the
Board of Directors, furnish bond in such form and amount and to cover such risks
as the Board of Directors may determine.
INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHER PERSONS
5.1 INDEMNIFICATION OF DIRECTORS, OFFICERS, AND OTHER PERSONS. The
Corporation shall indemnify any director, officer,
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employee or agent of the Corporation or any of its subsidiaries who was or is an
"authorized representative" of the Corporation (which shall mean, for the
purpose of this Article, a director or officer of the Corporation, or a person
serving at the request of the Corporation as a director, officer, partner,
fiduciary or trustee of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise) and who was or is a "party" (which
shall include for purposes of this Article the giving of testimony or similar
involvement) or is threatened to be made a party to any "proceeding" (which
shall mean for purposes of this Article any threatened, pending or completed
action, suit, appeal or other proceeding of any nature, whether civil, criminal,
administrative or investigative, whether formal or informal, and whether brought
by or in the right of the Corporation, its shareholders or otherwise) by reason
of the fact that such person was or is an authorized representative of the
Corporation to the fullest extent permitted by law, including without limitation
indemnification against expenses (which shall include for purposes of this
Article attorneys' fees and disbursements), damages, punitive damages,
judgments, penalties, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such proceeding unless the
act or failure to act giving rise to the claim is finally determined by a court
to have constituted willful misconduct or recklessness. If an authorized
representative is not entitled to indemnification in respect of a portion of any
liabilities to
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which such person may be subject, the Corporation shall nonetheless indemnify
such person to the maximum extent for the remaining portion of the liabilities.
5.2 ADVANCEMENT OF EXPENSES. The Corporation shall pay the expenses
(including attorneys' fees and disbursements) actually and reasonably incurred
in defending a proceeding on behalf of any person entitled to indemnification
under Section 5.1 in advance of the final disposition of such proceeding upon
receipt of an undertaking by or on behalf of such person to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the Corporation as authorized in this Article and may pay such
expenses in advance on behalf of any employee or agent on receipt of a similar
undertaking. The financial ability of such authorized representative to make
such repayment shall not be prerequisite to the making of an advance.
5.3 EMPLOYEE BENEFIT PLANS. For purposes of this Article, the
Corporation shall be deemed to have requested an officer, director, employee or
agent to serve as fiduciary with respect to an employee benefit plan where the
performance by such person of duties to the Corporation also imposes duties on,
or otherwise involves services by, such person as a fiduciary with respect to
the plan; excise taxes assessed on an authorized representative with respect to
any transaction with an employee benefit plan shall be deemed "fines"; and
action taken or omitted by such person with respect to an employee benefit plan
in the
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performance of duties for a purpose reasonably believed to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the Corporation.
5.4 SECURITY FOR INDEMNIFICATION OBLIGATIONS. To further effect,
satisfy or secure the indemnification obligations provided herein or otherwise,
the Corporation may maintain insurance, obtain a letter of credit, act as
self-insurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the Corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate.
5.5 RELIANCE UPON PROVISIONS. Each person who shall act as an
authorized representative of the Corporation shall be deemed to be doing so in
reliance upon the rights of indemnification provided by this Article.
5.6 AMENDMENT OR REPEAL. All rights of indemnification under this
Article shall be deemed a contract between the Corporation and the person
entitled to indemnification under this Article pursuant to which the Corporation
and each such person intend to be legally bound. Any repeal, amendment or
modification hereof shall be prospective only and shall not limit, but may
expand, any rights or obligations in respect of any proceeding whether commenced
prior
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to or after such change to the extent such proceeding pertains to actions or
failures to act occurring prior to such change.
5.7 SCOPE OF ARTICLE. The indemnification, as authorized by this
Article, shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
statute, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in any
other capacity while holding such office. The indemnification and advancement of
expenses provided by, or granted pursuant to, this Article shall continue as to
a person who has ceased to be an officer, director, employee or agent in respect
of matters arising prior to such time, and shall inure to the benefit of the
heirs, executors and administrators of such person.
FINANCIAL STATEMENTS TO SHAREHOLDERS
6.1 Unless otherwise agreed between the Corporation and a
shareholder, the Corporation shall furnish to the shareholders annual financial
statements, including at least a balance sheet as of the end of each fiscal year
and a statement of income and expenses for the fiscal year. The financial
statements shall be prepared on the basis of generally accepted accounting
principles, if the Corporation prepares financial statements for the fiscal year
on that basis for any purpose, and
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may be consolidated statements of the Corporation and one or more
subsidiaries.
STOCK CERTIFICATES
7.1 ISSUANCE. Stock certificates shall be issued to all
shareholders. Stock certificates shall be executed, by facsimile or otherwise,
by the President or any Vice President and the Secretary or Assistant Secretary
or the Treasurer or Assistant Treasurer, or by such other officers as the Board
of Directors may direct. The fact that an officer whose signature, manual or in
facsimile, appears on any stock certificate shall cease to be an officer of the
Corporation, either before or after such certificate is issued, shall not
invalidate such certificate.
7.2 LOSS OR DESTRUCTION OF STOCK CERTIFICATES. In case of loss or
destruction of a stock certificate, no new certificate shall be issued in lieu
thereof except upon satisfactory proof to the Board of Directors of such loss or
destruction and, in the discretion of the Board of Directors, upon the posting
of a bond or other indemnity in an amount satisfactory to the Board.
NOTICES
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8.1 Whenever written notice is required to be given to any person by
law, the Articles of Incorporation or these bylaws, it may be given to such
person either personally or by sending a copy thereof by first class or express
mail, postage prepaid, or by telegram (with messenger service specified), telex
or TWX (with answerback received) or courier service, charges prepaid, or by
telecopier, to the address (or the telex, TWX, telecopier or telephone number)
appearing on the books of the Corporation or, in the case of a director, to the
address supplied by the director to the Corporation for the purpose of notice.
If the notice is sent by mail, telegraph or courier service, it shall be deemed
to have been given to the person entitled thereto when deposited in the United
States mail or with a telegraph office or courier service for delivery to that
person or, in the case of telex or TWX, when dispatched or, in the case of
telecopier, when received. A notice of meeting shall specify the place, day and
hour of the meeting and, in the case of a special meeting of shareholders, the
general nature of the business to be transacted.
8.2 Whenever any written notice is required to be given under law,
the Articles of Incorporation or these bylaws, a waiver thereof in writing,
signed by the person or persons entitled to the notice, whether before or after
the time stated therein, shall be deemed equivalent to the giving of the notice.
Neither the business to be transacted at, nor the purpose of, a meeting need be
specified in the waiver of notice of the meeting.
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Attendance of a person at any meeting shall constitute a waiver of notice of the
meeting except where a person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting was not lawfully called or convened.
MISCELLANEOUS PROVISIONS
9.1 Any note, mortgage, evidence of indebtedness, contract or other
document, or any assignment or endorsement thereof, executed or entered into
between the Corporation and any other person, when signed by the President or
any Vice President or the Secretary or the Treasurer of the Corporation, or by
such other officer or officers as the Board of Directors may from time to time
designate, shall be deemed to be properly executed for and in behalf of the
Corporation.
9.2 The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors.
AMENDMENTS
10.1 These bylaws may be altered, amended or repealed and new bylaws
may be adopted by (i) a majority of the votes cast at a duly organized meeting
of shareholders or (ii) with respect to those matters that are not by statute
committed expressly to the shareholders, by the vote of a majority of the
directors of
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the Corporation present and voting at any duly organized meeting of directors.
In the case of a meeting of shareholders, written notice shall be given to each
shareholder that the purpose, or one of the purposes, of the meeting is to
consider the adoption, amendment or repeal of the bylaws, and a copy of the
proposed amendment or a summary of the changes to be effected thereby shall be
included in, or enclosed with, the notice. No alteration, amendment or repeal of
these bylaws that limits indemnification rights, increases the liability of
directors or changes the manner or vote required to make such alteration,
amendment or repeal, shall be made except by the affirmative vote of the
shareholders entitled to cast at least a majority of the votes which all
shareholders are entitled to cast thereon.
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NUMBER SHARES
APOLLON, INC.
INCORPORATED UNDER THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA
10,000,000 SHARES COMMON STOCK
Par Value $.01 Per Share
THIS CERTIFIES THAT___________________________________________________ is the
owner of__________________________________________shares of the COMMON STOCK
of APOLLON, INC., fully paid and non-assessable, transferable only on the
books of the Corporation in person or by Attorney upon surrender of this
Certificate properly endorsed.
The Corporation will furnish to any shareholder upon request and without
charge, a full or summary statement of the designations, voting rights,
preferences, limitations and special rights of the shares of each class or
series authorized to be issued so far as they have been fixed and determined
and the authority of the board of directors to fix and determine the
designations, voting rights, preferences, limitations and special rights of
the classes and series of shares of the corporation.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to
be signed by its duly authorized officers and its Corporate Seal to be
hereunto affixed this _______________________ day of ___________________
A.D.19____.
______________________________ ______________________________
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM--as tenants in common UNIF GIFT MIN ACT-- ... Custodian ... under
TEN ENT--as tenants by the entireties (Cust) (Minor)
JT TEN--as joint tenants with right Uniform Cites to Minors Act ...
of survivorship and not as (State)
tenants in common
Additional abbreviations may also be used though not in the above list.
For Value Received--hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________________________________________________
_______________________________________________________________________________
Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint ______________________________ Attorney to transfer
the said Shares on the books of the within named Corporation with full power
of substitution in the premises.
Dated __________________________ 19____
In presence of
______________________________________
______________________________-
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
A3808.A(BF)
STOCK PURCHASE AGREEMENT
(SERIES A CONVERTIBLE PREFERRED STOCK)
Stock Purchase Agreement ("Agreement") made and entered into as of
the 25th day of June, 1992 between and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the parties listed in Exhibit 1(a) to this
Agreement (hereinafter sometimes referred to individually as an "Investor"
and collectively as the "Investors").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and the
Investors desire to purchase from the Company in the aggregate 3,900,000
shares of the Company's Series A Convertible Preferred Stock (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, as well as the expression of intention by the
parties hereto to be legally bound by this, a written agreement, subject to
the terms and conditions hereof and in reliance upon the representations,
warranties and covenants contained herein, it is agreed as follows:
Section 1. PURCHASE OF SHARES.
(a) PURCHASE AND SALE. The Company shall sell, and each
Investor shall purchase, the Shares in the number and for the consideration
set forth opposite such Investor's name on Exhibit 1(a) annexed hereto.
(b) CLOSING. The closing ("Closing") of the purchase by the
Investors of the Shares shall be held at the offices of Ballard Spahr Andrews
& Ingersoll, 1735 Market Street, Philadelphia, Pennsylvania, 19103 on June
25, 1992 commencing at 10:00 a.m., or at such other time, date or place as
may be mutually agreed upon (the "Closing Date").
(c) DELIVERY OF CERTIFICATES. At Closing, the Company shall
deliver to each Investor a certificate or certificates evidencing the Shares
to be issued and delivered to each such Investor at Closing in accordance
with Exhibit 1(a) annexed hereto.
(d) PAYMENT. The Investors shall pay the purchase price to be
paid at Closing by delivery to the Company
<PAGE>
at Closing of a check or checks or by wire transfer in immediately
available funds in the amounts set forth on Exhibit 1(a) annexed hereto.
Section 2. CONDITIONS TO THE OBLIGATIONS OF THE
INVESTORS AT CLOSING.
The obligation of each of the Investors to purchase and pay for the
Series A Convertible Preferred Stock to be purchased by such Investor at
Closing is subject to the satisfaction on or prior to the date of Closing of
the following conditions, any of which may be waived by such Investor:
(a) OPINION OF COUNSEL TO THE COMPANY. The Investors shall
have received from Ballard Spahr Andrews & Ingersoll, counsel for the
Company, their opinion dated the date of the Closing substantially in the
form of Exhibit 2(a) hereto.
(b) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects at and as of the date of
Closing with the same effect as if made on the date of Closing, except to the
extent of changes contemplated hereby or caused by the transactions
contemplated hereby.
(c) PERFORMANCE OF COVENANTS. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the date of Closing shall have been performed in a
manner reasonably satisfactory in all respects to the Investors and their
counsel.
(d) AMENDED ARTICLES OF INCORPORATION. The Company's Articles
of Incorporation shall have been duly amended substantially as set forth on
Exhibit 2(d)(i) annexed hereto (the "Amended Articles"), and the Company
shall have filed with the Department of State of the Commonwealth of
Pennsylvania (the "Department") a Statement Affecting Class or Series of
Shares (the "Statement") establishing the Series A Convertible Preferred
Stock in the form of Exhibit 2(d)(ii) annexed hereto.
(e) BOARD REPRESENTATION. The maximum number of directors of
the Company shall have been increased to four, Michael A. Wall shall have
resigned as a director of the Company and Morton Collins shall have been
elected as Chairman of the Company's Board of Directors.
(f) LEGAL ACTION. No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or any of the
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transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the financial condition or
operations of the Company.
(g) CONSENTS. All consents required to enable the Company to
observe and comply with all of its obligations under this Agreement and in
connection with the transactions contemplated hereby shall have been obtained
and all "blue sky" filings necessary in connection with the issuance and sale
of the Shares shall have been made.
(h) CLOSING DOCUMENTS. The Company shall have delivered to the
Investors (i) an officer's certificate dated the date of Closing (A) stating
that the conditions in paragraphs (b) through (g) of this Section 2 have been
satisfied, and (B) attaching the Company's Articles of Incorporation, Bylaws,
all resolutions of the Board of Directors relating to the issuance and sale of
the Shares and a good standing certificate issued by the Commonwealth of
Pennsylvania, and (ii) such certificates, other documents and instruments as the
Investors may reasonably request in connection with, and to effect, the
transactions contemplated by this Agreement.
(i) PROCEEDINGS. All corporate, shareholder and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby to be consummated at Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Investors
and their counsel.
(j) PURCHASE OF COMMON STOCK. The individuals listed on Exhibit
2(j) annexed hereto shall have purchased the number of shares of Common Stock
for the consideration set forth on Exhibit 2(j).
(k) SHAREHOLDERS' AGREEMENT. The individuals listed on
Exhibit 2(j) annexed hereto shall have entered into a Shareholders' Agreement
in substantially the form of Exhibit 2(k) annexed hereto.
(l) PURCHASE OF COMMON STOCK BY CENTOCOR. Centocor, Inc.
("Centocor") shall have purchased the number of shares of Common Stock and for
the consideration set forth on Exhibit 2(l) annexed hereto.
(m) MARKETING AGREEMENT. The Company and Centocor shall have
entered into a Marketing and Development Agreement (the "Marketing Agreement")
in substantially the form of Exhibit 2(m) annexed hereto.
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(n) FACILITIES USE AGREEMENT. The Company and Centocor shall
have entered into a Facilities Use Agreement (the "Use Agreement") in
substantially the form of Exhibit 2(n) annexed hereto.
(o) SHAREHOLDER PURCHASE AGREEMENT. The Company, Vincent R.
Zurawski, Jr., Ph.D. and the Investors shall have entered into the
Shareholder Purchase Agreement in substantially the form of Exhibit 2(o)
annexed hereto.
Section 3. CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AT CLOSING.
The obligation of the Company to issue and deliver the Series A
Convertible Preferred Stock to be purchased by each Investor at Closing is
subject to the satisfaction on or prior to the date of Closing of the
following conditions, any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. All of the
representations and warranties of the Investors contained in this Agreement
shall be true and correct in all material respects at and as of the date of
Closing with the same effect as if made on the date of Closing, except to the
extent of changes contemplated hereby or caused by the transactions
contemplated hereby.
(b) DELIVERY OF CONSIDERATION. The Investors shall have
delivered, in accordance with Paragraph 1(d), the consideration for the
Shares set forth opposite such Investor's name on Exhibit 1(a) attached
hereto.
(c) LEGAL ACTION. No action or proceeding before any court or
governmental body shall be threatened or pending wherein an unfavorable
judgment, decree or order would or could prevent the carrying out of this
Agreement or any of the transactions contemplated by this Agreement or cause
such transactions to be rescinded.
(d) CLOSING DOCUMENTS. The Investors shall have delivered to
the Company such certificates, other documents and instruments as the Company
may reasonably request in connection with, and to effect, the transactions
contemplated by this Agreement.
(e) PROCEEDINGS. All corporate proceedings taken by Centocor
or to be taken by Centocor in connection with the transactions contemplated
hereby to be consummated at the Closing and all documents incident thereto
shall be reasonably satisfactory in form and substance to the Company and its
counsel. True and complete copies of all resolutions relevant to
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the transactions contemplated by this Agreement shall have been delivered by
Centocor to the Company at or prior to Closing, and such resolutions shall not
have been amended or repealed.
(f) MARKETING AGREEMENT. The Company and Centocor, Inc. shall
have entered into the Marketing Agreement in substantially the form of
Exhibit 2(m) annexed hereto.
(g) USE AGREEMENT. The Company and Centocor shall have
entered into the Use Agreement in substantially the form of Exhibit 2(n)
annexed hereto.
Section 4. REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.
The Company represents and warrants to each Investor as follows:
(a) ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the Commonwealth of Pennsylvania and has all
requisite corporate power and authority to carry on its business as currently
conducted and as proposed to be conducted, to own its properties, and to
enter into and perform this Agreement. The Company is not qualified as a
foreign corporation in any jurisdiction and the Company's conduct of its
business or its ownership or leasing of property does not make any such
qualification necessary, except where the failure to so qualify would not
have a material adverse effect on the financial condition or results of
operations of the Company.
(b) CAPITAL STOCK. The authorized capital stock, and the
outstanding capital stock, of the Company consists in each case solely of the
shares indicated on Exhibit 4(b)(i) annexed hereto. All of the outstanding
shares have been duly authorized and are fully paid and non-assessable. An
accurate list of the Company's shareholders and their holdings is set forth
in Exhibit 4(b)(ii) annexed hereto. No person or entity is entitled to
preemptive or similar statutory or contractual rights with respect to any
securities of the Company. Except as described on Exhibit 4(b)(iii) annexed
hereto, there are no outstanding warrants, options, convertible securities or
other agreements or arrangements of any character under which the Company is
or may be obligated to issue any equity securities of any kind, or to
transfer any equity securities of any kind owned by it, and the Company is
not obligated to issue any equity securities of any kind, or to transfer any
equity securities of any kind owned by it. Except as listed on Exhibit
4(b)(iii) annexed hereto, the Company does not know of any voting
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agreements, buy-sell agreements, option or right of first purchase agreements
or other agreements of any kind among any of the security holders of the
Company relating to the securities held by them. The Company has not agreed,
and has no present intention, to register any of its securities under the
Securities Act (as hereinafter defined). The voting rights, designations,
preferences, limitations and special rights of the Shares when issued, shall
be as fully set forth in the Amended Articles and the Statement. When issued,
delivered and paid for pursuant to this Agreement, the Shares will be validly
issued, fully paid and non-assessable.
(c) SUBSIDIARIES. The Company does not own any shares of
stock, partnership interest, joint venture interest or any other security or
interest in any other corporation or other organization or entity.
(d) CORPORATE PROCEEDINGS. The execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
on the part of the officers, directors and shareholders of the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors' rights. The
Shares, when issued pursuant hereto, will be free and clear of all encumbrances
and restrictions except for restrictions on transfer imposed by applicable
securities laws or by this Agreement. The Company has reserved a sufficient
number of shares of its Common Stock (as hereinafter defined) for issuance upon
the conversion of the Shares and such shares of Common Stock, when issued in
accordance with the terms of the Shares, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws or by this Agreement.
(e) LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the knowledge of the Company
or any officer, director or key employee of the Company, threatened against
or affecting the Company, or against the assets or business of the Company,
or against any key employee, officer, director or shareholder of the Company
in his capacity as such person or relating to any of his activities with the
Company, at law or in equity or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality.
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(f) TAX MATTERS. The Company has not filed and has not been
required to file under any applicable laws any Federal, state or local
income, profits, franchise, sales, use, occupation, property, excise,
payroll, withholding or other taxes through May 31, 1992. The Company has
not paid or been required to pay any amounts in connection with any such
taxes from its formation through May 31, 1992. Any of such taxes accrued by
the Company from June 1, 1992 to the date hereof have been fully paid or are
adequately provided for. There exist no tax assessments or deficiencies
assessed against or payable by the Company. The Company has not made any
election or filed any consent pursuant to Section 341(f) of the Internal
Revenue Code of 1986, as amended, relating to collapsible corporations.
(g) COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Neither the
execution, delivery or performance of this Agreement, nor the offer,
issuance, sale or delivery of the Shares to the Investors, nor the issuance
of shares of Common Stock upon conversion of the Shares, with or without the
giving of notice or passage of time, or both, will (i) violate, or result in
any breach of, or constitute a default under, or result in the imposition of
any encumbrance upon any asset of the Company pursuant to, any provision of
its Articles of Incorporation or Amended Articles, as the case may be, or
By-laws or any contract, law, rule, regulation, judgment, decree or other
document or instrument to which the Company is a party or by which it is
bound or (ii) cause the Company to lose the benefit of any right or privilege
it presently enjoys, except as contemplated by this Agreement.
(h) GOVERNMENTAL CONSENTS; OFFERING OF SHARES. Except as set
forth on Exhibit 4(h)(i) annexed hereto, no consent, authorization, approval,
permit or order of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery
and performance of this Agreement or the offer, issuance, sale or delivery of
the Shares. Neither the Company nor any agent acting on its behalf has,
directly or indirectly, sold or offered for sale, or solicited any offers to
buy, any securities, or otherwise approached or negotiated with any person or
persons, so as to subject the offer or sale of the Shares to the Investors to
the provisions of Section 5 of the Securities Act, and the Company agrees
that neither it nor any agent acting on its behalf will take any action that
would subject the offer or sale of the Shares to those provisions. Except as
set forth on Exhibit 4(h)(ii) hereto, neither the Company nor anyone acting
on its behalf has directly or indirectly offered the Series A Convertible
Preferred Stock or any part thereof or any similar security of the Company
(or any other securities convertible or exchangeable for the Series A
Convertible Preferred Stock or any
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similar security), for sale to, or solicited any offer to buy the same from,
anyone other than the Investors. Assuming the accuracy of the
representations and warranties of the Investors made herein, the offering,
sale and issuance of the Series A Convertible Preferred Stock and the Common
Stock issuable upon conversion of the Series A Convertible Preferred Stock do
not and will not require registration under the Securities Act.
(i) PRIOR ISSUANCE OF SECURITIES. All securities of the
Company heretofore sold and issued by it were sold and issued in compliance
with all applicable federal and state securities laws.
(j) ENCUMBRANCES. The Company owns, or has a valid leasehold
interest in, or valid license for, all of its property and assets, real,
personal or fixed, tangible or intangible, subject to no mortgages, liens,
security interests, pledges, charges or other encumbrances of any kind.
(k) BUSINESS PLAN. The Company has previously presented and
delivered to the Investors the Business Plan, which Business Plan has been
material to the Investors in their decision to enter into this Agreement and
to purchase the Series A Preferred Stock hereunder. The description of the
business, operations (as presently conducted and as proposed to be
conducted), properties and assets of the Company contained in the Business
Plan, as well as all other factual statements contained therein, are true,
correct and do not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading as of the date of such description or
statement. The financial projections and other estimates contained in the
Business Plan are based on the best estimates of the Company derived from
reasonable expectations at the time such projections and estimates were made.
Neither the projections nor the assumptions on which the projections are
based have been prepared, reviewed or approved by the Company's counsel or
accountants. The projections are subject to change inasmuch as all material
events and circumstances cannot be predicted and unanticipated events and
circumstances are likely to occur. Accordingly, it is likely that there will
be differences between the projected results and the Company's actual
results. These differences may be material. Therefore, no representation or
warranty as to the accuracy of these projections can be or is being made by
the Company or any of their principals or affiliates and no assurance can be
given that the projected results will actually be achieved.
(l) COMPLIANCE. The Company has complied with its Articles of
Incorporation or Amended Articles, as the case
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may be, and its Bylaws, and has complied in all material respects with all
federal, state, local and foreign laws, ordinances, regulations and orders
applicable to its business or the ownership of its assets and all decrees,
orders or judgments of any court of competent jurisdiction. The Company has
all federal, state, local and foreign governmental licenses and permits
material to and necessary in the conduct of its business; such licenses and
permits are in full force and effect, no violations have been recorded in
respect of any such licenses or permits, and no proceeding is pending or
threatened to revoke or limit any thereof. None of the aforesaid licenses
and permits shall be affected in any material respect by this Agreement or
the Shareholders' Agreement.
(m) INSURANCE. All policies of liability, property, casualty,
workmen's compensation, health and other forms of insurance held by the
Company or by Centocor on behalf of the Company are, to the best of the
Company's knowledge, valid and enforceable policies and are outstanding and
duly in force and all premiums with respect thereto are paid to date. The
amounts of coverage under such policies of insurance for the assets and
properties of the Company are adequate against risks usually insured against
by persons operating similar businesses and operating similar properties.
The Company does not carry professional liability or indemnification of
directors and officers insurance. The Company is using its best efforts to
obtain a key-man life insurance on Vincent Zurawski, Jr., Ph.D in an amount
not less than $1,000,000 and shall be the named beneficiary of such key-man
insurance policy.
(n) RELATED TRANSACTIONS. Except as set forth on Exhibit 4(n)
hereof, no current or former shareholder, director, officer or employee of
the Company (other than the Investors) nor any "associate" (as defined in the
rules and regulations promulgated under the Exchange Act) of any such person,
is presently, directly or indirectly through his or its affiliation with any
other person or entity, a party to any transactions with the Company
providing for the furnishing of services (other than employment of such
individuals by the Company) by or to, or rental of real or personal property
from or to, or otherwise requiring cash payments to or by, any such person in
excess of $15,000. For purposes of this Agreement, a transaction of the type
described in this Paragraph 4(n) is sometimes herein referred to as a
"Related Transaction".
(o) REGISTRATION RIGHTS. Except as contemplated by this
Agreement, no person has any right to cause the Company to effect the
registration under the Securities Act of any shares of Common Stock or any
other securities (including debt securities) of the Corporation.
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(p) COMPLIANCE WITH ERISA; BENEFIT PLANS. The Company does
not sponsor, maintain and is not required, either by law or by contract, to
contribute to any employee welfare benefit plan, within the meaning of
section 3(1) of ERISA, nor to any employee pension benefit plan, within the
meaning of section 3(2) of ERISA. The Company has not contributed to and is
not required to contribute to any multiemployer plan within the meaning of
section 3(37) of ERISA.
(q) INVESTMENT COMPANY ACT. The Company is not an "investment
company" as that term is defined in, and is not otherwise subject to
regulation under, the Investment Company Act of 1940, as amended.
(r) PATENTS, TRADEMARKS, ETC. The Company owns or possesses
the patents, trademarks, service marks, trade names, copyrights, licenses,
applications for patents, inventions, trade secrets, know-how, proprietary
processes and formulae, and other intellectual property rights listed on
Exhibit 4(r)(i) annexed hereto (collectively, the "Intellectual Property"),
without any known conflict with the rights of others. Except as provided in
Exhibit 4(r)(ii) annexed hereto, the Company knows of no additional
Intellectual Property required to conduct its business as now conducted
without conflict with the rights or claimed rights of others. The Company
has not received notice of any alleged infringement by it, nor is the Company
aware of any infringement or any basis for an alleged infringement by it, of
any third-party patent, trademark, service mark, trade name, copyright or
license. The Company has confidentiality agreements with all of its
employees substantially in the form of Exhibit 4(r)(iii) annexed hereto.
Except as set forth on Exhibit 4(r)(iv) annexed hereto, to the best knowledge
of the Company after due inquiry, none of the Company's employees are subject
to confidentiality or similar types of agreements which would hinder or
prevent them from fully and lawfully performing their responsibilities as
employees.
(s) NO DEFAULTS. The Company has in all material respects
performed all obligations required to be performed by it, and is not in
default in any material respect, under any material contract, commitment or
instrument, and no event or condition has occurred which, with the giving of
notice or passage of time, or both, would constitute such a default. To the
best knowledge of the Company, all parties having material contracts or
commitments with the Company are in compliance therewith in all material
respects. Exhibit 4(s) annexed hereto contains an accurate list of all
material contracts or commitments as of the date of this Agreement, oral or
written.
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(t) EMPLOYEE MATTERS. Exhibit 4(t) annexed hereto sets
forth a true and correct list of all officers and employees of the Company,
together with a statement describing any agreement or arrangement any such
person has with the Company with respect to such person's employment or
otherwise.
(u) BROKERS AND FINDERS. No person or firm has, or will have,
any right, interest or valid claim against the Company or any Investor, for
any commission, fee or other compensation as a finder or broker or in any
similar capacity as a result of any act or omission by the Company or anyone
acting on behalf of the Company in connection with any transaction
contemplated by this Agreement.
(v) DISCLOSURE. Neither the representations and warranties
made by the Company in this Agreement nor the Exhibits annexed hereto nor any
writing furnished to any Investor pursuant to this Agreement or in connection
with this Agreement by the Company or anyone acting on its behalf contains
any untrue statement of a material fact or omits to state any material fact
required to make the statements herein or therein not misleading in the light
of the circumstances under which those statements were made. There exists no
fact or circumstance which, to the knowledge of the Company or any officer or
director of the Company, materially adversely affects or could reasonably be
anticipated to have a materially adverse effect on, the existing or expected
financial condition, operating results, assets or business prospects of the
Company.
(w) FDA APPROVAL. The Company has no reason to believe that
the U.S. Food and Drug Administration will ultimately prohibit the marketing,
sale, license or use in the United States of any product currently under
research and development by the Company.
Section 5. REPRESENTATIONS AND WARRANTIES
OF INVESTORS.
Each Investor severally represents and warrants to the Company as
follows:
(a) ORGANIZATION; CAPACITY. If such Investor is not an
individual, it is a partnership or corporation organized under the laws of
the jurisdiction as indicated under its name on the signature page of this
Agreement, with full authority (corporate or otherwise) to make and perform
its obligations under this Agreement. If such Investor is an individual,
such Investor is SUI JURIS and of full capacity to make and perform his or
her obligations under this Agreement.
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(b) AUTHORIZATION; NO BREACH. The execution, delivery and
performance by such Investor of this Agreement has been duly authorized and
will not violate any partnership agreement or articles of incorporation of
such Investor or constitute a breach of or default under any instrument to
which such Investor is a party or by which any of its, his or her properties
are bound.
(c) BINDING OBLIGATION. This Agreement constitutes a valid
and binding obligation of such Investor enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws of general application
relating to or affecting the enforcement of creditors' rights.
(d) NO BROKER. No person or firm has, or will have, any
right, interest or valid claim against the Company or any other Investor, for
any commission, fee or other compensation as a finder or broker or in any
similar capacity as a result of any act or omission by such Investor or
anyone acting on behalf of such Investor in connection with any transaction
contemplated by this Agreement.
(e) PURCHASE FOR INVESTMENT. Such Investor is purchasing the
Shares for its, his or her own account and not with a view to or for sale in
connection with any distribution of the Shares.
(f) SUITABILITY. (i) Such Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating
the risks and the merits of an investment in the Company; (ii) such Investor
can bear the economic risk of its, his or her investment in the amount set
forth opposite its, his or her name on Exhibit 1(a) annexed hereto (i.e., at
the time of the investment such Investor can afford a complete loss of the
investment and can afford to hold the investment for an indefinite period of
time), and (iii) such Investor is an "Accredited Investor" as that term is
defined in Regulation D under the Securities Act or to the extent such
Investor is not an "Accredited Investor," such Investor is fully capable of
making all of the representations and warranties in this Section 5, including
(i) and (ii) above, and by its, his or her execution hereof does so affirm.
(g) REGISTRATION OR SALES. (i) Such Investor understands that
the Securities are not registered under the Securities Act nor any regulatory
authority of any state and must be held indefinitely unless they are
subsequently registered under the Securities Act and any applicable state law
or an exemption from such registration is available; (ii) such Investor
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is aware that any routine sales of the Shares or any shares received upon
conversion of the Shares made under Rule 144 of the Commission (as
hereinafter defined) under the Securities Act may only be made in limited
amounts and in accordance with the terms and conditions of that Rule and that
in cases where that Rule is not applicable, compliance with Regulation A or
some other disclosure exemption will be required; and (iii) such Investor
understands that, except as otherwise provided herein, the Company is under
no obligation whatsoever and has no intention to register the Shares or any
shares that might be received upon conversion of the Shares under the
Securities Act, to comply with any such Rule or exemption, or to supply such
Investor with any information necessary to enable such Investor to make
routine sales of the Shares, or any shares received upon conversion of the
Shares, under Rule 144.
(h) LEGENDED CERTIFICATES. Such Investor understands that the
certificates evidencing the Shares, and any other shares or equity securities
distributed on or in respect of or in substitution for or upon conversion of
such Shares (other than Shares that shall have been transferred pursuant to
an effective registration statement), will bear a legend substantially in the
following form until the Company's counsel determines that the legend is no
longer advisable:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT")
AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144 PROMULGATED
UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE OR OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE ACT; (II) IN
COMPLIANCE WITH RULE 144; OR (III) AFTER RECEIPT OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR COMPLIANCE IS NOT
REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION."
and that appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Shares so legended.
(i) CONFIDENTIALITY. Such Investor shall hold in confidence
any confidential information about the Company that such Investor has
received or hereafter receives pursuant to any provision of this Agreement
under circumstances indicating the confidentiality of such information until
the Company shall have publicly disclosed such information, except
information that otherwise comes into the public domain or is disclosed by a
third party having the right to disclose it to the Investor without breach of
this Agreement or any other agreement by which the disclosing party is bound.
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(j) LOCK UP. Such Investor shall not, with respect to any
public offering of the Company's securities which occurs following the
Closing Date, effect any public sale or distribution of the Securities (as
hereinafter defined) during such period of time, if any, not to exceed 120
days, as any underwriter shall reasonably require in connection with such
public offering.
(k) INVESTMENT COMPANY STATUS. Such Investor is not an
"investment company" within the meaning of the Investment Company Act of 1940.
Section 6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Investors as follows:
(a) USE OF PROCEEDS. The cash proceeds of the sale of the
Shares to the Investors will be used for working capital and general
corporate purposes.
(b) BOOKS AND ACCOUNTS. The Company will (i) make and keep
books, records and accounts, which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets; and (ii)
devise and maintain a system of internal accounting controls sufficient to
provide reasonable assurances that (A) transactions are executed in
accordance with management's general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and in
accordance with the Company's past practices or any other criteria applicable
to such statements, and to maintain accountability for assets, (C) access to
assets is permitted only in accordance with management's general or specific
authorization, and (D) the recorded accountability for assets is compared
with the existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(c) PERIODIC REPORTS; BUDGETS.
(i) The Company will furnish to each member of the
Company's Board of Directors (a "Director") as soon as practicable, and in
any event within 90 days after the end of each fiscal year of the Company,
an annual report of the Company, including a balance sheet as at the end of
such fiscal year and statements of operations, shareholders' equity and
cash flows for such fiscal year, together with the related notes thereto,
setting forth in each case in comparative form corresponding figures for
the preceding
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fiscal year, all of which will present fairly the financial position
of the Company and the results of its operations and changes in its
financial position as of the time and for the period then ended. The
financial statements shall be accompanied by an unqualified report, in form
and substance reasonably satisfactory to 66 2/3% of the members of the
Company's Board of Directors then in office, of independent public
accountants of recognized national standing reasonably satisfactory to 66
2/3% of the members of the Company's Board of Directors then in office to
the effect that such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with prior years (except as otherwise specified in such report), and
present fairly the financial position of the Company and the results of
its operations and changes in its financial position as of the time and
for the period then ended. The Company will conduct its business so that
such report of the independent public accountants will not contain any
qualifications as to the scope of the audit, the continuance of the
Company, or with respect to the Company's compliance with generally
accepted accounting principles, except for changes in methods of accounting
in which such accountants concur.
(ii) The Company will furnish to each Director as soon as
practicable, and in any event within 45 days after the end of each fiscal
quarter of the Company, a report of the Company consisting of an unaudited
balance sheet as of the end of such quarter, and unaudited statements of
operations, shareholders' equity and cash flows for such quarter, and for
the fiscal year-to-date, setting forth in each case in comparative form the
corresponding figures for the preceding year. All such reports shall be
certified by the Treasurer of the Company to present fairly the financial
position of the Company and the results of its operations and changes in
its financial position as of the time and for the period then ended and to
have been prepared in accordance with generally accepted accounting
principles, subject to normal year-end adjustments, which shall not be
material in nature or amount.
(iii) The Company will furnish to each Director as soon as
practicable, and in any event within 30 days after the end of each of the
first two calendar months in each fiscal quarter, a report of the Company
consisting of an unaudited balance sheet as of the end of such month, and
unaudited statements of operations, shareholders' equity and cash flows for
such month, and for the fiscal year to date, setting forth in each case in
comparative form the
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corresponding figures for the preceding year. All such reports shall be
certified by the Treasurer of the Company to present fairly the financial
position of the Company and the results of its operations and changes in
its financial position as of the time and for the period then ended and to
have been prepared in accordance with generally accepted accounting
principles, subject to normal year-end adjustments which shall not be
material in nature or amount.
(iv) The Company will furnish to each Director as soon as
practicable and in any event at least 30 days prior to the end of each
fiscal year of the Company, an annual operating budget for the Company for
(A) the first succeeding fiscal year containing statements of operations,
cash flows and ending balance sheets for each month of such fiscal year and
(B) the second succeeding fiscal year containing statements of operations
and cash flows and ending balance sheets for each quarter of such fiscal
year. Promptly upon preparation thereof, the Company will furnish to each
Director any other budgets that the Company may prepare and any revisions
of such previously furnished budgets.
(d) OTHER REPORTS AND INSPECTION. The Company will furnish to
each Director (i) as soon as practicable after issuance, copies of any
financial statements or reports prepared by the Company for, or otherwise
furnished to, its shareholders or the Commission and (ii) promptly, such
other documents, reports and financial data as such Director may reasonably
request. In addition the Company will, upon reasonable prior notice, make
available during regular business hours to each Director or his
representatives or designees (i) all assets, properties and business records
of the Company for inspection and copying and (ii) the officers and employees
of the Company for interviews concerning the business, affairs and finances
of the Company.
(e) RETENTION OF AUDITORS. The Company shall select as auditors
independent public accountants of recognized national standing, subject to the
approval of the Company's Board of Directors.
(f) FEES OF INVESTORS' COUNSEL. The Company shall pay the
reasonable fees, not to exceed $20,000, and reasonable out-of-pocket
disbursements, of the Investors' special counsel, Dechert Price & Rhoads, in
connection with the negotiation and preparation of this Agreement and the sale
of the Shares to the Investors.
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(g) MERGER; SALE OF ASSETS; DISSOLUTION. So long as shares of
Series A Convertible Preferred Stock issued hereunder are outstanding, the
Company will not become a party to any merger or consolidation, or sell, lease
or otherwise dispose of substantially all of its assets, other than sales and
leases of assets in the ordinary course of business, or dissolve or liquidate
its assets without the prior approval of holders of record of a majority of the
shares of Series A Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction, except
that (i) any subsequently formed Subsidiary may merge or consolidate with the
Company so long as the Company is the surviving entity of such merger or
consolidation, and (ii) any subsequently formed Subsidiary may lease, sell,
transfer or otherwise dispose of all or any part of its properties and assets to
the Company.
(h) ACQUISITION. So long as shares of Series A Convertible
Preferred Stock issued hereunder are outstanding, the Company will not
acquire any interest in any business from any person, firm or entity (whether
by a purchase of assets, purchase of stock, merger or otherwise) in which the
consideration to be paid, as of the date as of which any such agreement with
respect to such acquisition is entered into, represents more than 25% of the
total assets of the Company without the prior approval of holders of record
of a majority of the shares of Series A Convertible Preferred Stock
outstanding as of a record date between 10 and 90 days prior to the
consummation of any such transaction, except as otherwise specifically
permitted pursuant to the provisions of this Agreement.
(i) DIVIDENDS; REPURCHASES. So long as shares of Series A
Convertible Preferred Stock issued hereunder are outstanding, the Company shall
not declare or pay any dividends on, and shall not purchase, redeem, retire or
otherwise acquire, any shares of its capital stock (other than the shares of
Series A Convertible Preferred Stock), whether now or hereafter outstanding,
without obtaining the prior approval of holders of record of a majority of the
shares of Series A Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the declaration date or the date of consummation
of any such transaction, as applicable.
(j) CONSENTS. Prior to Closing the Company shall obtain all
consents and shareholder approvals needed to enable it to perform all of its
obligations under this Agreement and the transactions contemplated hereby.
(k) ISSUANCE OF ADDITIONAL SECURITIES. Except for the Common
Stock issued on conversion of the Series A
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Convertible Preferred Stock and except for Common Stock or convertible
securities (including Common Stock issuable on conversion thereof) issued or
issuable to officers, directors, employees or consultants or to prospective
officers, directors, employees or consultants, pursuant to stock option,
stock incentive, stock appreciation, stock bonus, stock award or compensation
rights plans or arrangements or employment letters presently in effect or
hereafter adopted or entered into by the Company, the Company will not issue
or sell, or enter into any agreement providing for the issuance or sale of,
any equity or debt securities or options, warrants or other rights to
purchase or acquire any equity or debt securities, or any security
convertible into or exchangeable for any equity or debt security, without
obtaining the prior approval of holders of record of a majority of the shares
of Series A Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction,
which approval will not be unreasonably withheld.
(l) TAXES AND LIENS. The Company will duly pay and discharge,
when payable, all taxes, assessments and governmental charges imposed upon or
against the Company or its properties, or any part thereof or upon the income
or profits therefrom, in each case before the same become delinquent and
before penalties accrue thereon, as well as all claims for labor, materials
or supplies which if unpaid might by law become a lien upon any of its
property, unless and to the extent that the same are being contested in good
faith and by appropriate proceedings and the Company has set aside on its
books adequate reserves with respect thereto.
(m) RESTRICTIVE AGREEMENT. Subsequent to Closing, the Company
will not be a party to any agreement or instrument which by its terms would
restrict the Company's performance of its obligations pursuant to this Agreement
or the terms of the Shares including any redemption or conversion thereof.
(n) NOTIFICATION OF REGISTRATION UNDER THE EXCHANGE ACT. The
Company will give each holder of record of the Shares prompt written notice
of the effectiveness of any registration statement filed pursuant to the
requirements of Section 12 of the Exchange Act (as hereinafter defined) or
pursuant to any equivalent provision of any similar federal law then in force
(a "1934 Act Registration Statement") relating to the Common Stock of the
Company, and the number of shares of such class of equity securities
outstanding at the time such registration statement becomes effective. If
the Company has filed a 1934 Act Registration Statement or a registration
statement on any Form other than Form S-8 (or any successor form)
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pursuant to the requirements of the Securities Act, the Company further
covenants that it will file all reports required to be filed by it under the
Securities Act or the Exchange Act and the rules and regulations adopted by
the Commission thereunder or, if the Company is not required to file such
reports, it will, upon the request of a holder of Shares, make publicly
available such information as will enable such holder to sell such Shares
without a registration statement (as described below), and will take such
further action as such holder may request, all to the extent required from
time to time to enable such holder to sell such Shares, without registration
within the limitations of the exemptions provided by (i) Rule 144 and Rule
144A adopted by the Commission under the Securities Act, as such rules may be
amended from time to time, or (ii) any similar rule or regulation hereafter
adopted by the Commission.
(o) SALE OR TRANSFER OF RESTRICTED SECURITIES. An opinion of
counsel will not be necessary for a transfer by an Investor which is a
partnership to a partner of such partnership or to a retired partner of such
partnership who retires after the date hereof, or to the estate of any
partner or retired partner, or to a trust for the benefit of an Investor or
an Investor's family members or the transfer by gift, will or intestate
succession of any partner to his spouse or lineal descendants or ancestors,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Investor hereunder.
(p) RIGHT OF FIRST OFFER.
(i) Except in the case of Excluded Securities (as
hereinafter defined) the Company shall not issue, call or exchange, agree
to issue, sell or exchange, or reserve or set aside for issuance, sale or
exchange, any (A) shares of Common Stock, (B) any other equity security of
the Company, (C) any debt security of the Company which, by its terms, is
convertible into or exchangeable for any equity security of the Company,
(D) any security of the Company that is a combination of debt and equity or
(E) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any equity security or any such debt security of the
Company, unless in each case the Company shall have first offered to sell
to the Investors such securities (the "Offered Securities"), at a price and
on such other terms as shall have been specified by the Company in writing
delivered to each of the Investors (the "Offer"), which Offer by its terms
shall remain open and irrevocable for a period of thirty (30) days from the
date it is delivered by the Company to the Investors.
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(ii) Each of the Investors shall have the right to purchase
up to its pro rata share (as defined below) of the Offered Securities. For
the purposes of this subparagraph (ii), each Investor's "pro rata share"
shall be that amount of the Offered Securities which would result in such
Investor owning the same percentage of the Company's issued and outstanding
Common Stock after the issuance of Offered Securities as such Investors
owned immediately prior to the issuance (assuming in each case the issuance
of all Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock and of all shares issuable upon the conversion of the
Offered Securities).
(iii) Notice of an Investor's intention to accept, in whole
or in part, an Offer shall be evidenced by a writing signed by an Investor
and delivered to the Company prior to the end of the 30-day period of such
Offer, setting forth such portion of the Offered Securities as the Investor
elects to purchase (the "Notice of Acceptance").
(iv) In the event that the Investors do not elect to
purchase all of the Offered Securities, the Company shall within 5 days of
the earlier of (A) the receipt of all of the Notices of Acceptances from
the Investors or (B) the expiration of the 30-day period provided in
subparagraph 6(p)(i) provide each of the Investors who have delivered a
Notice of Acceptance with written notice of the number of Offered
Securities which have not been accepted by the Investors (the "Refused
Shares"), and each such Investor shall have 10 days to inform the Company
in writing of its intention to purchase its pro rata share of such Refused
Shares. For the purposes of this subparagraph (iv), "pro rata share" shall
mean the percentage obtained by dividing Securities and other shares of
Common Stock owned and to be purchased by an Investor who has delivered a
Notice of Acceptance pursuant to subparagraph (iii) above by the total
number of Securities or other shares of Common Stock owned and to be
purchased by Investors who have delivered Notices of Acceptance pursuant to
subparagraph (iii) above. Upon the expiration of such ten-day period, the
Company shall have 90 days to sell all or any part of such Refused Shares
as to which the Company has not received a notice from the Investors
pursuant to subparagraph 6(p)(iii) or this subparagraph (iv) to any other
person or persons, but only upon terms and conditions in all material
respects, including, without limitation, unit price and interest rates (but
excluding payment of legal fees of counsel of the purchaser), which are no
more favorable, in the aggregate, to such other person or persons or less
favorable to the Company that those set forth in the Offer. Upon the
closing
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of the sale to such other person or persons of all the Refused
Securities, which shall include payment of the purchase price to the
Company in accordance with the terms of the Offer, the Investors shall
purchase from the Company, and the Company shall sell to the Investors, the
Offered Securities in respect of which a Notice of Acceptance was delivered
to the Company by an Investor, at the terms specified in the Offer. The
purchase by an Investor of any Offered Securities is subject in all cases
to the preparation, execution and delivery by the Company and the Investor
of a purchase agreement relating to such Offered Securities satisfactory in
form and substance to the Investor and its counsel.
(v) In each case, any Offered Securities not purchased by
the Investors or other person or persons in accordance with subparagraphs
6(p)(ii), (iii) and (iv) hereof may not be sold or otherwise disposed of
until they are again offered to the Investors under the procedures
specified in subparagraphs 6(p)(i), (ii), (iii) and (iv).
(vi) The rights of the Investors under this paragraph (p)
shall not apply to the following securities (the "Excluded Securities"):
(A) Common Stock issued to officers, employees or
directors of, or consultants to, the Company, pursuant to any
agreement, plan or arrangement approved by the Board of Directors of
the Company, or options to purchase or rights to subscribe for such
Common Stock, securities by their terms convertible into or
exchangeable for such Common Stock, or options to purchase or rights
to subscribe for such convertible or exchangeable securities;
(B) Common Stock issued as a stock dividend or upon
any stock split or other subdivision or combination of shares of
Common Stock;
(C) Common Stock issued upon conversion of any of the
Series A Preferred Stock;
(D) Common Stock issued upon conversion of any other
shares of convertible stock of the Company;
(E) securities issued in connection with any
acquisition by the Company if the issuance of such securities has been
approved by at least 66 2/3% of the Directors;
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(F) securities issued by the Company in connection
with the redemption of the Series A Convertible Preferred Stock as
provided in the Articles of Incorporation; and
(G) securities issued by the Company in connection
with any public offering of any securities of the Company pursuant to
a registration statement filed by the Company under the Securities Act
on any Form other than Form S-8.
(vii) Notwithstanding the provisions of paragraph 9(c)
hereof, the rights under this paragraph (p) shall not be assignable except
(A) to a partner of any of the Investors or retired partner of any of the
Investors who retires after the date hereof or the estate of any such
partner or retired partner, or (B) to an Affiliate (as such term is defined
in Rule 501(b) of the Securities Act) of an Investor. An Investor shall
provide the Company with notice of any assignment under this subparagraph
(vii) within 10 days after its occurrence.
(q) DEBT. Without the prior approval of not less than 66 2/3%
of the Directors then in office, the Company shall not enter into any
commitments to incur or guarantee any debt for borrowed money (which for
purposes hereof shall include leases which are capitalized or financed) or
incur any indebtedness which by its terms is convertible into equity or
issued in connection with any options or warrants of the Company in the
aggregate in excess of $100,000.
(r) BOARD REPRESENTATION. The Company shall use its best
efforts to limit the number of persons constituting the Board of Directors to
four and to fill the vacancy on the Board of Directors existing as of the
Closing with a nominee named by DSV Partners. So long as each of Centocor
Delaware, Inc., the Chancellor Investors (as hereinafter defined) and DSV
Partners shall own at least 20% of the issued and outstanding Common Stock
and Securities, each shall have the right to nominate one person to the
Company's Board of Directors.
(s) INSURANCE. The Company shall obtain key-man life
insurance on Vincent J. Zurawski, Jr., Ph.D. in an amount not less than
$1,000,000 not more than 30 days after the date hereof. The Company shall
keep its insurable properties insured at all times to such extent and against
such risks, including fire, business interruption, and other risks insured
against by extended coverage, as is customary with companies of comparable
size and financial condition in the same or similar businesses; maintain in
full force and effect product liability insurance and
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public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of
any properties owned, occupied or controlled by the Company, in such amount
as the Company shall reasonably deem necessary; and maintain workers'
compensation insurance, key-man life insurance on Vincent R. Zurawski, Jr.,
Ph.D in an amount not less than $1,000,000 and such other insurance as may be
required by law.
(t) OFFICER COMPENSATION. All compensation paid to the
president, treasurer, controller, secretary and all vice-presidents of the
Company, whether as salary, fringe benefits, stock bonuses or otherwise, as
currently in effect is hereby approved by the Investors. After the Closing
Date, all such compensation shall be determined by the Compensation Committee
of the Board of Directors, the members of which Committee shall initially be
Vincent R. Zurawski, Jr. and Morton Collins. Upon the election of an
additional director to the Board of Directors of the Company who is not
affiliated with the Company, such person shall also be appointed to the
Compensation Committee.
(u) NON-DISCLOSURE AND PATENT AND INVENTION ASSIGNMENT
AGREEMENTS. The Company shall request each current employee of the Company,
within 30 days of the date hereof, and shall cause each person who becomes an
employee of the Company subsequent to the date hereof, and who shall have or
be proposed to have access to confidential or proprietary information of the
Company, to execute an agreement relating to matters of non-disclosure,
proprietary information and patent assignment substantially in the form
attached hereto as Exhibit 4(r)(iii) (which reflects the current Apollon form
of Agreement relating thereto) and such executed agreements shall not be
modified or amended in any respect without the prior written consent of a
majority of the holders of Shares.
(v) MEETINGS OF THE BOARD OF DIRECTORS. The Company shall
call, and use its best efforts to have, regular meetings of the Board of
Directors not less often than quarterly. The Company shall pay all
reasonable travel expenses and other out-of-pocket disbursements incurred by
a Director in connection with his attending such meeting. In addition, so
long as the Chancellor Investors shall own at least 20% of the issued and
outstanding Securities, the Company shall give notice of all meetings of the
Board of Directors to a designee of Chancellor Capital Management, Inc. at
the same time it gives such notice to the members of its Board of Directors
and shall allow such designee to attend all meetings of its Board of
Directors in a non-voting observer capacity and shall give such designee all
materials provided to its directors at such meetings; provided, however, that
such designee shall agree to hold in confidence and
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trust and to act in a fiduciary manner with respect to all information so
provided and sign a non-disclosure agreement if so requested (except that
such designee may disclose such information to agents of Chancellor Capital
Management, Inc. who agree in writing to be bound by the non-disclosure
obligations hereof). Such designee may be changed at any time upon notice to
the Company by Chancellor Capital Management, Inc. All reasonable travel and
other out-of-pocket disbursements incurred by such designee in attending such
meetings shall be borne by the Company.
(w) REGISTRATION RIGHTS. In the event the Company makes an
offering of its securities subsequent to the Closing, it shall not grant
registration rights that are senior in any respect to the registration rights
granted to the Investors pursuant to Section 7 hereof; provided, however,
that the Company shall have the right to grant registration rights on a PARI
PASSU basis to the registration rights granted in Section 7 hereof.
(x) ADDITIONAL NEGATIVE COVENANTS. Without the approval by
majority vote of the Directors, the Company will not directly or indirectly:
(i) RELATED TRANSACTIONS. Except for employment
arrangements with its officers, enter into any agreement or understanding,
whether written or oral, with an officer, director or shareholder of the
Company or any entity in which such officer, director or shareholder has a
ten percent (10%) ownership interest or is otherwise deemed to be an
affiliate pursuant to Rule 501(b) of the Securities Act for the provision
of services or the purchase of products. All such Related Transactions
shall be conducted only on an arm's length basis and on terms no less
favorable to the Company than could be obtained from non-related persons.
(ii) AMENDMENTS TO ARTICLES OF INCORPORATION. Take any
action or to cause any amendment, alteration or repeal of any provisions of
the Amended Articles or Bylaws.
(iii) DISSOLUTION OR LIQUIDATION. Voluntarily dissolve,
liquidate or wind-up or carry out any partial liquidation or distribution.
Section 7. REGISTRATION OF COMMON STOCK.
(a) DEMAND REGISTRATION. Upon the written request of one or
more record holders of Securities, which request will state the intended method
of disposition by such
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holders and will request that the Company effect the registration under the
Securities Act of all or part of the Registerable Common Stock (as
hereinafter defined) of such holders, the Company will, within 10 days after
receipt of such request, give written notice of such requested registration
to all registered holders of Securities, and thereupon (except as expressly
provided herein) will use its best efforts to effect the registration
("Demand Registration") under the Securities Act of (x) the shares of
Registerable Common Stock included in the initial request for registration
(for disposition in accordance with the intended method of disposition stated
in such request) and (y) all other shares of Registerable Common Stock the
holders of which have made written request to the Company for registration
thereof within 30 days after the receipt of such written notice from the
Company, provided that:
(i) the Company shall be required to effect only two Demand
Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Securities outstanding at
the time of the request; PROVIDED that the Company shall not be required to
effect more than one registration during any one year period pursuant to
this paragraph 7(a) (except that, upon request of any holder of Securities
(regardless of the number of Securities held by such holder), the Company,
if it is then qualified to do so, shall be required to effect up to four
registrations on Form S-3, or a similar short form registration statement,
which registrations (hereinafter referred to as "Short Form Registrations")
shall not be counted for purposes of this subparagraph 7(a)(i) as the
Demand Registration which the Company is required to effect);
(ii) if the holders of Registerable Common Stock who
initiated the request for registration intend to sell their Registerable
Common Stock by means of an underwriting (whether on a "best efforts" or a
"firm commitment" basis), they shall so advise the Company as part of their
request, and the Company shall include such information in the notice to
the other holders of Securities. In that event, the other holders of
Securities shall have the right to include their shares of Registerable
Common Stock in the underwriting (unless otherwise mutually agreed by a
majority in interest of the holders of the Securities). The managing
underwriter for such offering shall be selected by the Board of Directors
of the Company. Each such holder agrees, with respect to an underwritten
public offering which occurs following the Closing Date, by its acquisition
of Securities not to effect any public sale or distribution of such
Securities or Registerable Common
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Stock (other than as part of such underwritten public offering) during
such period, if any, not to exceed 120 days, as shall reasonably be
requested by any underwriter;
(iii) the Company shall not include and shall not permit
third parties to include additional securities in a Demand Registration
without the consent of the holders of a majority of the shares of
Registerable Common Stock included in such Demand Registration;
(iv) if a Demand Registration under this paragraph 7(a) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock requested to be included in such registration
exceeds the amount of such Registerable Common Stock which can be
successfully sold in such offering, the Company will nevertheless include
in such registration, prior to the inclusion of any securities which are
not Registerable Common Stock (notwithstanding any consent obtained in
accordance with subparagraph 7(a)(iii) hereof), the amount of Registerable
Common Stock requested to be included which in the opinion of such
underwriters can be sold, pro rata among the holders of Registerable Common
Stock requesting inclusion on the basis of the number of shares of
Registrable Common Stock of such holders; provided, however, that if the
holders of Registerable Common Stock are unable to include in such offering
at least fifty percent (50%) of the Registerable Common Stock sought to be
registered in a Demand Registration under this paragraph 7(a), the holders
of Securities will be entitled to an additional Demand Registration under
this paragraph;
(v) if the Company shall furnish to the holders requesting
a registration pursuant to this Section 7 a certificate signed by the
President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for a registration statement to be filed as requested, the Company
shall have the right to defer such filing for a period of not more than 120
days after receipt of the initial request for registration under this
paragraph 7(a); provided, however, that the Company may not utilize this
right more than once in any one-year period;
(vi) registrations under this paragraph 7(a) will be on a
form permitted by the rules and regulations of the Commission selected by
the underwriters if the Demand Registration is in connection with an
underwritten public offering or otherwise by the Company; and
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(vii) notwithstanding anything else contained herein the
Company will not be required to effect a Demand Registration pursuant to
this paragraph 7(a) unless the aggregate number of shares of Common Stock
to be registered exceeds 20% of the shares of Common Stock then held by the
holders of the Securities or issuable to such holders upon conversion of
the Shares.
(b) INCIDENTAL REGISTRATIONS.
(i) If the Company at any time proposes to register any of
its securities under the Securities Act (other than pursuant to paragraph
7(a) hereof), whether of its own accord or at the demand of any holder of
such securities pursuant to an agreement with respect to the registration
thereof (provided such agreement does not prohibit third parties from
including additional securities in such registration), and if the form of
registration statement proposed to be used may be used for the registration
of Registerable Common Stock, the Company will give notice to all holders
of record of Securities not less than 5 days nor more than 30 days prior to
the filing of such registration statement of its intention to proceed with
the proposed registration (the "Incidental Registration"), and, upon the
written request of any such holder made within 5 days after the receipt of
any such notice (which request will specify the Registerable Common Stock
intended to be disposed of by such holder and state the intended method of
disposition thereof), the Company will use its best efforts to cause all
Registerable Common Stock as to which registration has been requested to be
registered under the Securities Act, provided that if such registration is
in connection with an underwritten public offering, such holder's
Registerable Common Stock to be included in such registration shall be
offered upon the same terms and conditions as apply to any other securities
included in such registration. Notwithstanding anything contained in this
Section 7(b) to the contrary, the Company shall have no obligation to cause
Registerable Common Stock to be registered with respect to any Investor
whose Registerable Common Stock shall be eligible for resale under Rule
144(k) of the Securities Act.
(ii) If an Incidental Registration is a primary registration
on behalf of the Company and is in connection with an underwritten public
offering, and if the managing underwriters advise the Company in writing
that in their opinion the amount of securities requested to be included in
such registration (whether by the Company, the holders of registration
rights pursuant to subparagraph
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7(b)(i) or other holders of its securities pursuant to any other rights
granted by the Company to demand inclusion of any such securities in such
registration) exceeds the amount of such securities which can be
successfully sold in such offering, the Company will include in such
registration the amount of securities requested to be included which in
the opinion of such underwriters can be sold, in the following order (A)
first, all of the securities the Company proposes to sell, (B) second, all
of the Registerable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the
number of shares of Registrable Common Stock then owned by such holders,
and (C) third, any other securities requested to be included in such
registration, pro rata among the holders thereof on the basis of the
amount of such securities then owned by such holders.
(iii) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of securities requested to be included in such registration (whether by
such holders, by holders of registration rights pursuant to subparagraph
7(b)(i) or by holders of its securities pursuant to any other rights
granted by the Company to demand inclusion of securities in such
registration) exceeds the amount of such securities which can be sold in
such offering, the Company will include in such registration the amount of
securities requested to be included which in the opinion of such
underwriters can be sold, in the following order (A) first, all of the
securities requested to be included by holders demanding or requesting such
registration, (B) second, all of the Registerable Common Stock requested to
be included in such registration, pro rata among the holders thereof on the
basis of the number of shares of Registrable Common Stock then owned by
such holders, and (C) third, any other securities requested to be included
in such registration, pro rata among the holders thereof on the basis of
the amount of such securities then owned by such holders.
(c) REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registerable Common Stock under the Securities Act as provided in this
Section 7, the Company will, as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement with respect to such Registerable
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Common Stock and use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to cause such
registration statement to become effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than six months or such
shorter period in which the disposition of all securities in accordance
with the intended methods of disposition by the seller or sellers thereof
set forth in such registration statement shall be completed, and to comply
with the provisions of the Securities Act (to the extent applicable to the
Company) with respect to such dispositions;
(iii) furnish to each seller of such Registerable Common
Stock such number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request, in order to facilitate the disposition of
the Registerable Common Stock owned by such seller;
(iv) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or
qualify such Registerable Common Stock covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests, and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registerable Common Stock owned by such seller, except that the Company
will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not,
but for the requirements of this subparagraph 7(c)(iv) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(v) provide a transfer agent and registrar for all such
Registerable Common Stock covered by such registration statement not later
than the effective date of such registration statement;
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(vi) notify each seller of such Registerable Common Stock at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registerable Common
Stock, such prospectus will not contain an untrue statement of a material
fact or omit to state any fact required to be stated therein or necessary
to make the statements therein not misleading;
(vii) use its best efforts to cause all such Registerable
Common Stock to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(viii) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort
letters in such transactions;
(ix) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions
as reasonably required in order to expedite or facilitate the disposition
of such Registerable Common Stock; and
(x) make available for inspection by any seller of
Registerable Common Stock, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or
other agent retained by any such seller and/or representative of such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
(d) REGISTRATION AND SELLING EXPENSES.
(i) All expenses incurred by the Company in connection with
the Company's performance of or compliance with this Section 7, including,
without limitation (A) all
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registration and filing fees (including all expenses incident to filing
with the National Association of Securities Dealers, Inc.), (B) blue sky
fees and expenses, (C) all printing expenses and (D) all fees and
disbursements of counsel and accountants for the Company (including the
expenses of any audit of financial statements), retained by the Company
(all such expenses being herein called "Registration Expenses"), will be
paid by the Company except as otherwise expressly provided in this
paragraph 7(d).
(ii) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees
performing legal, accounting or other duties in connection therewith and
expenses of audits of year-end financial statements), and the expenses and
fees for listing the securities to be registered on one or more securities
exchanges on which similar securities issued by the Company are then
listed.
(iii) The Company shall bear the Registration Expenses of
each Demand Registration, each Incidental Registration and each Short Form
Registration hereunder.
(iv) Notwithstanding any of the foregoing, all underwriting
discounts, selling commissions and stock transfer taxes applicable to sales
of Registerable Common Stock in connection with any Demand Registration,
Incidental Registration or Short Form Registration shall be borne by all
persons who are selling Registerable Common Stock pursuant to such
Registration Statement in proportion to the dollar value of the securities
being sold by each such person.
(v) All fees and expenses required to be paid by the
holders of Registerable Common Stock pursuant to subparagraph 7(d)(iv) in
connection with any Incidental Registration hereunder shall be borne by
said holders in proportion to the dollar value of the securities of such
holder covered by such Incidental Registration.
(e) OTHER CONDITIONS RELATING TO REGISTRATIONS. The Company
shall not be required to furnish any audited financial statements at the
request of any holder of Registerable Common Stock other than those
statements customarily prepared at the end of its fiscal year, unless (i) the
requesting holder of Registerable Common Stock shall agree to reimburse the
Company for the out-of-pocket costs incurred by the Company in the
preparation of such other audited financial statements or (ii) such other
audited financial statements shall be required by the
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Commission as a condition to declaring a Demand Registration effective under
the Securities Act.
(f) OTHER PUBLIC SALES AND REGISTRATIONS. The Company agrees
(i) that if it has previously filed a registration statement with respect to
Registerable Common Stock in connection with a Demand Registration or
Incidental Registration hereunder, and if such previous registration has not
been withdrawn or abandoned, the Company will not file or cause to become
effective any other registration of any of its securities under the
Securities Act or otherwise effect a public sale or distribution of its
securities (except pursuant to registration on Form S-8 or any successor form
relating to a special offering to the employees or security holders of the
Company or any Subsidiary hereafter formed or acquired), whether on its own
behalf or at the request of any holder of such securities, until at least 60
days have elapsed after the effective date of such previous registration; and
(ii) to cause each holder of securities purchased from the Company any time
after the date of this Agreement (other than in a registered public offering)
to agree not to effect any such public sale or distribution during such 60
day period of any such securities or any securities issuable on the
conversion thereof or in redemption or exchange therefor. The foregoing
60-day limitation, however, shall not preclude the Company from proceeding
with a registration statement requested by a holder of securities with
"demand" registration rights who requests registration prior to the time a
registered holder of Securities requests a registration pursuant to paragraph
7(a).
(g) TRANSFEREES OF SECURITIES. Notwithstanding anything else
set forth in this Section 7, no person to whom Securities are transferred
shall have any rights under this Section 7 as a holder of such Securities
unless (i) such person (A) is a partner of any Investor which is a
partnership or a retired partner of such partnership who retires after the
date hereof, (B) is a family member of or trust for the benefit of any
Investor, or (C) acquires at least 100,000 shares of Registerable Common
Stock, (ii) such person agrees to be bound by the terms and conditions of
this Agreement and (iii) the Company is given prompt written notice of such
transfer.
(h) INDEMNIFICATION.
(i) The Company hereby agrees to indemnify, to the extent
permitted by law, each holder of Registerable Common Stock, its officers
and directors, if any, and each person, if any, who controls such holder
within the meaning of the Securities Act, against all losses, claims,
damages, liabilities and expenses under the Securities Act, applicable
state securities laws, common law or otherwise
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(including, as incurred, legal and other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim,
except to the extent limited by subparagraph 7(h)(iii) below) caused by
any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus (and as amended or
supplemented if the Company has furnished any amendments or supplements
thereto) or any preliminary prospectus, which registration statement,
prospectus or preliminary prospectus shall be prepared in connection with
a Demand Registration or Incidental Registration, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are caused
by any untrue statement or alleged untrue statement contained in or by any
omission or alleged omission from information furnished in writing to the
Company by such holder in connection with a Demand Registration or
Incidental Registration, provided the Company will not be liable pursuant
to this paragraph 7(h) if such losses, claims, damages, liabilities or
expenses have been caused by any selling security holder's failure to
deliver a copy of the registration statement or prospectus, or any
amendments or supplements thereto, after the Company has furnished such
holder with a sufficient amount of copies of the same.
(ii) In connection with any registration statement in which
a holder of Registerable Common Stock is participating, each such holder
shall furnish to the Company in writing such information as is reasonably
requested by the Company for use in any such registration statement or
prospectus and shall indemnify, to the extent permitted by law, the
Company, its directors and officers and each person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities and expenses under the Securities Act,
applicable state securities laws, common law or otherwise (including, as
incurred, legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by subparagraph 7(h)(iii) below) caused by any untrue statement or
alleged untrue statement of a material fact or any omission or alleged
omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the
extent such losses, claims, damages, liabilities or expenses are caused by
an untrue statement or alleged untrue statement contained in or by an
omission or alleged omission
33
<PAGE>
from information so furnished in writing by such holder in connection
with the Demand Registration or Incidental Registration. If the offering
pursuant to any such registration is made through underwriters, each such
holder agrees to enter into an underwriting agreement in customary form
with such underwriters and to indemnify such underwriters, their officers
and directors, if any, and each person who controls such underwriters
within the meaning of the Securities Act to the same extent as hereinabove
provided with respect to indemnification by such holder of the Company.
Notwithstanding the foregoing, no such holder of Registerable Common Stock
shall be liable under this subparagraph 7(h)(ii) for any amounts exceeding
the product of (A) the offering price per share of Registerable Common
Stock pursuant to the registration statement in which such holder is
participating (less any underwriting discounts or commissions which reduce
the amount such holder receives), multiplied by (B) the number of shares
of Registerable Common Stock being sold by such holder pursuant to such
registration statement.
(iii) Promptly after receipt by an indemnified party under
subparagraph 7(h)(i) or subparagraph 7(h)(ii) of notice of the commencement
of any action or proceeding, such indemnified party will, if a claim in
respect thereof is or is to be made against the indemnifying party under
such subparagraph, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise than under such subparagraph. In case any such action or
proceeding is brought against any indemnified party, and it notifies the
indemnifying party of the commencement thereof, the indemnifying party will
be entitled to participate therein, and, to the extent that it wishes,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified
party of its election so to assume the defense thereof, the indemnifying
party will not be liable to such indemnified party under such subparagraph
for any legal or any other expenses subsequently incurred by such
indemnified party in connection with the defense thereof (other than
reasonable costs of investigation) unless incurred at the written request
of the indemnifying party. Notwithstanding the above, the indemnified
party will have the right to employ counsel of its own choice in any such
action or proceeding if the indemnified party has reasonably concluded that
there may be defenses available to it which are different from or
34
<PAGE>
additional to those of the indemnifying party, or counsel to the
indemnified party is of the opinion that it would not be desirable for the
same counsel to represent both the indemnifying party and the indemnified
party because such representation might result in a conflict of interest
(in either of which cases the indemnifying party will not have the right to
assume the defense of any such action or proceeding on behalf of the
indemnified party or parties and such legal and other expenses will be
borne by the indemnifying party). An indemnifying party will not be liable
to any indemnified party for any settlement of any such action or
proceeding effected without the consent of such indemnifying party.
(iv) If the indemnification provided for in subparagraph
7(h)(i) or subparagraph 7(h)(ii) is unavailable under applicable law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the Company on the one hand and of the holders of
Registerable Common Stock on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, or liabilities,
as well as any other relevant equitable considerations. The relative fault
of the Company on the one hand and of the holders of Registerable Common
Stock on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Company or by the holders of Registerable Common Stock and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable
by a party as a result of the losses, claims, damages and liabilities
referred to above shall be deemed to include, subject to the limitations
set forth in subparagraph 7(h)(iii), any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or
defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) will be entitled to contribution from any person who is not guilty of
such fraudulent misrepresentation.
(v) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of
35
<PAGE>
any action or proceeding, such party will, if a claim for contribution in
respect thereof is to be made against another party (the "contributing
party"), notify the contributing party of the commencement thereof; but
the omission so to notify the contributing party will not relieve it from
any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit, or proceeding is
brought against any party, and such party notifies a contributing party of
the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing
party similarly notified. No party shall be liable for contribution with
regard to the settlement of any action or proceeding effected without its
consent.
(i) CONVERSION OF PREFERRED STOCK. Any request for a Demand
Registration or Incidental Registration with respect to Registerable Common
Stock issuable upon the conversion of Shares will provide in the intended
method of disposition accompanying such request that conversion of Shares
into Common Stock in accordance with the terms thereof will be undertaken
promptly after a registration statement has become effective or the sale
thereof to underwriters has been consummated so that no Shares will be
distributed to the public under such registration statement.
(j) AMENDMENT OF SECTION 7. Any provision of this Section 7
may be amended and the observance thereof may be waived (either generally or
in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and holders of record of a majority
of the Securities, voting as a class, outstanding as of a record date between
10 and 90 days prior to the effective date of such amendment or waiver. Any
amendment or waiver effected in accordance with this paragraph 7(j) shall be
binding upon each holder of Securities at the time outstanding (including
securities into which such Securities are convertible), each future holder of
all such Securities, and the Company.
Section 8. CERTAIN DEFINITIONS.
For the purposes of this Agreement the following terms have the
respective meanings set forth below:
(a) "BUSINESS PLAN" means the Business Plan of the Company
dated March 1992.
36
<PAGE>
(b) "CHANCELLOR INVESTORS" means those Investors set forth on
the second and third signature pages of this Agreement.
(c) "COMMISSION" means the Securities and Exchange Commission
and includes any governmental body or agency succeeding to the functions
thereof.
(d) "COMMON STOCK" means the Company's Common Stock, par value
$.01 per share.
(e) "ERISA" means, as of any given time, the Employee
Retirement Income Security Act of 1974, as amended.
(f) "EXCHANGE ACT" means, as of any given time, the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
(g) "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles, consistently applied; and any accounting
determination or calculation required to be made under this Agreement shall
be made (unless otherwise provided) in accordance with generally accepted
accounting principles, consistently applied.
(h) "REGISTERABLE COMMON STOCK" means any Common Stock issued
or issuable upon conversion of the Shares.
(i) "SECURITIES" means the Shares and any Common Stock issued
upon conversion thereof, whether at Closing or thereafter, but shall not
include any such Shares or Common Stock sold in any public offering or in any
sale pursuant to Rule 144 under the Securities Act. For purposes of
computing at any date any percentage of Securities required in connection
with any action taken or to be taken under this Agreement, the Shares shall
be deemed to equal the number of shares of Common Stock issuable at such date
upon conversion thereof.
(j) "SECURITIES ACT" means, as of any given time, the
Securities Act of 1933, as amended, or any similar federal law then in force.
(k) "SUBSIDIARY" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of
which are, at the time as of which any determination is being made, owned of
record or beneficially by the Company, directly or indirectly, through any
Subsidiary or otherwise.
(l) "TERMINATING PUBLIC OFFERING"
means an underwritten public offering (whether on a "best efforts" or a
37
<PAGE>
"firm commitment" basis) for the account of the Company of Common Stock or
securities convertible into or exchangeable for shares of Common Stock, where
the aggregate sales price of the securities included in such sale (after
deduction of any underwriting commissions, discounts and concessions) is at
least $12,500,000 and the price per share of such securities is at least
$3.33.
Section 9. MISCELLANEOUS.
(a) EXHIBITS. The Exhibits attached to this Agreement
constitute a part of this Agreement. They are incorporated herein by
reference and shall have the same force and effect as if set forth in full in
the main body of this Agreement.
(b) SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
All representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any
other writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the date of Closing and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Investors or on their behalf. Notwithstanding the
foregoing, all obligations of the Company under this Agreement (except for
the obligations of the Company under Section 7 hereof), including the
obligations of the Company under Section 6 hereof, will cease and be of no
further force and effect upon the closing of a Terminating Public Offering.
(c) ASSIGNS; PARTIES IN INTEREST. This Agreement shall bind
and inure to the benefit of the Company, the Investors, each other person who
shall become a registered holder of any certificate representing the
Securities and the respective successors and assigns of the Company, the
Investors and each such other person. The parties hereto understand and
agree that DSV Partners IV ("DSV") is a limited partnership formed under the
laws of the State of New Jersey and that the limited partners of DSV will not
be liable for any liabilities of DSV, nor will they be required to perform
any of the obligations of DSV, pursuant to the Agreement and that neither the
Company, nor the shareholders or officers of the Company, will seek to
enforce such liabilities and/or obligations or otherwise seek relief with
respect thereto against such limited partners.
(d) GOVERNING LAW. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
governed by and construed and enforced
38
<PAGE>
in accordance with the internal laws of said Commonwealth, and without giving
effect to conflicts of laws.
(e) INDEMNIFICATION. The Company shall, with respect to the
representations, warranties, covenants and agreements made by the Company
herein, and each Investor shall, with respect to the representations,
warranties, covenants and agreements made by such Investor, indemnify, defend
and hold the Investors or the Company, as the case may be, harmless against
all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including legal and accounting fees and expenses),
arising from the untruth, inaccuracy or breach of any such representations,
warranties, covenants or agreements of the Company or such Investor, as the
case may be. Without limiting the generality of the foregoing, the Investors
or the Company, as the case may be, shall be deemed to have suffered
liability, loss or damage as a result of the untruth, inaccuracy or breach of
any such representations, warranties, covenants or agreements if such
liability, loss or damage shall be suffered by the Company as a result of, or
in connection with, such untruth, inaccuracy or breach of any facts or
circumstances constituting such untruth, inaccuracy or breach.
(f) LIABILITY AND INDEMNIFICATION. The Company shall, to the
full extent permitted by Sections 1741 through 1750 of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as amended from
time to time, indemnify all persons whom it may indemnify thereunder. To the
fullest extent permitted by the Business Corporation Law of the Commonwealth
of Pennsylvania, as amended from time to time, a director of the Company
shall not be liable to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director.
(g) REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Company or an Investor, an Investor or the Company, as the case may be, may
proceed to protect and enforce its rights either by suit in equity and/or by
action at law, including, but not limited to, an action for damages as a
result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Agreement. An Investor or the
Company acting pursuant to this Paragraph 9(g) shall be indemnified against
all liability, loss or damage, together with all reasonable costs and
expenses related thereto (including legal and accounting fees and expenses)
in accordance with Paragraph 9(e).
(h) EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. Upon
surrender by an Investor to the Company of any certificate representing
shares of Series A Convertible
39
<PAGE>
Preferred Stock (or Common Stock issuable upon conversion thereof) purchased
or acquired hereunder, the Company at its expense will issue in exchange
therefor, and deliver to such Investor, a new certificate or certificates
representing such shares, in such denominations as may be requested by the
Investors. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate representing any
Securities purchased or acquired by the Investors hereunder, and in case of
such loss, theft or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Company at its expense
will issue and deliver to the Investors a new certificate for such Series A
Preferred Stock (or Common Stock issuable upon conversion thereof) of like
tenor, in lieu of such lost, stolen or mutilated certificate.
(i) NOTICES. All communications provided for in this
Agreement shall be in writing and shall be sent to each party as follows:
<TABLE>
<CAPTION>
TO THE COMPANY TO INVESTORS
-------------- -------------
<C> <S>
Vincent R. Zurawski, Jr., Ph.D. At the addresses set
Apollon, Inc. forth below their
200 Great Valley Parkway respective names on
Malvern, PA 19355 Exhibit 1(a) hereto.
FAX: (215) 889-4688
With a Copy To: With a copy to:
Morris Cheston, Jr. Esq. James J. Marino, Esq.
Ballard Spahr Andrews Dechert Price & Rhoads
& Ingersoll 214 Carnegie Center
1735 Market Street Suite 202
Philadelphia, PA 19103 Princeton, NJ 08540
FAX: (215) 864-8999 FAX: (609) 520-3259
and
David C. Toner, Esq.
Corporate Counsel and
Secretary
Centocor, Inc.
200 Great Valley Parkway
Malvern, PA 19355-1307
FAX: (215) 651-6331
</TABLE>
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (i) physical
40
<PAGE>
delivery, (ii) if given by facsimile transmission, when such facsimile is
transmitted to the telephone number specified in this Agreement and telephone
confirmation of receipt thereof is received, (iii) three days after mailing
by prepaid first class mail and (iv) two days after mailing by prepaid
overnight or express mail.
(j) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties regarding the transactions contemplated herein
and may not be modified or amended except by written agreement of all parties
hereto.
(k) HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the
interpretation of this Agreement.
(l) PRONOUNS. If any Investor is an individual, neuter
pronouns used in reference to Investors shall be deemed to refer to
individuals as well as corporations or partnerships.
(m) EFFECT OF STOCK SPLITS, ETC. Whenever any rights under
this Agreement are available only when at least a specified minimum number or
percentage of Shares or price per share is involved, such number shall be
appropriately adjusted to reflect any stock split, stock dividend,
combination of securities into a smaller number of securities or
reclassification of stock.
(n) AMENDMENTS. This Agreement may be amended only by an
instrument in writing, signed by the Company and by Investors holding, on the
date of such amendment, a majority of the Securities held of record on such
date by all of the Investors.
(o) SHARES HELD BY AFFILIATES. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares is involved, each Investor shall be deemed to own any
Securities that are owned by any of the partners of such Investor or any
retired partners of such Investor who retire after the date hereof or the
estate of any such partner or retired partner or the spouse, lineal
descendants, ancestors or any Affiliates of such Investor or any such partner
or retired partner.
(p) COUNTERPARTS. This Agreement may be executed in one or
more counterparts each of which shall be deemed to be one and the same
instrument.
(q) DISCLOSURES ELSEWHERE. No representation or warranty
contained in this Agreement or in any exhibit, schedule,
41
<PAGE>
certificate or other document delivered pursuant hereto shall be considered
to be breached due to the omission of matters required to be disclosed
pursuant to the terms of this Agreement if the matter or matters giving rise
to any such breach or omission is or are disclosed anywhere in this Agreement
or in any of the exhibits, schedules, certificates or other documents
delivered pursuant hereto.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /S/ VINCENT R. ZURAWSKI, JR.
----------------------------
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: ______________________
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
42
<PAGE>
CENTOCOR DELAWARE, INC.
By: /S/ H J P SCHOEMAKER
----------------------
Name: Hubert J.P. Schoemaker
Title: Chairman
Address: 1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Fax: c/o Centocor, Inc.
(215) 651-6331
HANK & CO FOR CHANCELLOR VENTURE CAPITAL,
L.P.
By:___________________________
Name:
Title:
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By:___________________________
Name:
Title:
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
43
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: ----------------------
Name
Title
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: /S/ MORTON COLLINS
---------------------
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR, INC.
By: ----------------------
Name:
Title:
Address: 200 Great Valley Parkway
Malvern, PA 19355
Attention:
Fax:
42
<PAGE>
HANK & CO FOR CHANCELLOR VENTURE
CAPITAL, L.P.
By: /S/ CRAIG J. FOLEY
-----------------------
Name: CRAIG J. FOLEY
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: ------------------------------
Name
Title:
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
FOCUS & CO
By: /S/ CRAIG J. FOLEY
-----------------------
Name: CRAIG J. FOLEY
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
<PAGE>
HANK & CO FOR CHANCELLOR VENTURE
CAPITAL, L.P.
By:--------------------------
Name: CRAIG J. FOLEY
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: /S/ [ILLEGIBLE SIGNATURE]
-------------------------
Name
Title: Vice President
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
FOCUS & CO
By: -----------------------
Name: CRAIG J. FOLEY
Title: MANAGING DIRECTOR
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
<PAGE>
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: /S/ [ILLEGIBLE SIGNATURE]
--------------------------
Name
Title: Vice President
Address: c/o Chancellor Capital
Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
<PAGE>
EXHIBITS
<TABLE>
<C> <C> <S>
Exhibit 1(a) - Investors, Shares to be Purchased and Consideration
Exhibit 2(a) - Form of Opinion of Ballard Spahr Andrews & Ingersoll
Exhibit 2(d)(i) - Amended Articles
Exhibit 2(d)(ii) - Statement Affecting Class or Series of Shares
Exhibit 2(j) - Purchasers of Common Stock
Exhibit 2(k) - Form of Shareholders' Agreement
Exhibit 2(l) - Number of Shares of Common Stock Purchased by Centocor
Exhibit 2(m) - Form of Marketing and Development Agreement
Exhibit 2(n) - Form of Facilities Use Agreement
Exhibit 2(o) - Shareholder Purchase Agreement
Exhibit 4(b)(i) - Authorized Capital Stock
Exhibit 4(b)(ii) - Shareholders of the Company
Exhibit 4(b)(iii) - Warrants, Options or Agreements
Exhibit 4(h)(i) - Consents
Exhibit 4(h)(ii) - Offers of Securities
Exhibit 4(n) - Related Transactions
Exhibit 4(r)(i) - Intellectual Property
Exhibit 4(r)(ii) - Additional Intellectual Property Required
Exhibit 4(r)(iii) - Form of Confidentiality Agreement
Exhibit 4(r)(iv) - Confidentiality Agreements Restricting Employees
Exhibit 4(s) - Material Contracts
Exhibit 4(t) - Officers and Employees; Compensation Matters
</TABLE>
<PAGE>
D105213.A(BF)
EXHIBIT 1(a)
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
NAME SHARES PURCHASED PURCHASE PRICE
- ---- ---------------- --------------
<S> <C> <C>
DSV Partners IV, L.P. 1,500,000 $2,500,050
221 Nassau Street
Princeton, NJ 08542
Centocor Delaware, Inc. 900,000 $1,500,030
1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Hank & Co. for Chancellor 1,140,000 $1,900,038
Venture Capital, L.P.
Continental Bank, National 120,000 $ 200,004
Association as Custodian
for Municipal Employees
Annuity & Benefit Fund
of Chicago (as Directed
by Chancellor Capital
Management, Inc.
Investment Manager)
Focus & Co. 120,000 $ 200,004
Continental Bank, National 120,000 $ 200,004
Association as Custodian
(at the Direction of
Chancellor Capital
Management, Inc., as
Investment Manager) for
the Policemen's Annuity
and Benefit Fund of
Chicago
</TABLE>
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment, made as of the 15th day of November, 1993, by and
among Apollon, Inc., a Pennsylvania corporation (the "Company"), and the
Investors listed in Exhibit A hereto (the "Investors");
WHEREAS, the Company and the Investors wish to amend the Stock
Purchase Agreement, dated as of June 25, 1992, by and among the Company and the
Investors listed in Exhibit A thereto (the "Agreement") as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants of the
Company and the Investors, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors, intending to be legally bound, hereby agree as follows:
1. Paragraph 6(c)(iii) is hereby deleted in its entirety.
2. Paragraph 6(c)(iv) is hereby amended to be Paragraph 6(c)(iii) of
the Agreement and all references to Paragraph 6(c)(iv) in the Agreement are
hereby amended to be Paragraph 6(c)(iii). In addition, Paragraph 6(c)(iii), as
so amended, is hereby amended to read in full as follows:
"The Company will furnish to each Director as soon as practicable
and in any event at least thirty (30) days prior to the end of each fiscal
year of the Company, an annual operating budget for the Company for the
first succeeding fiscal year containing statements of operations, cash
flows and ending balance sheets for each month of such fiscal year.
Promptly upon preparation thereof, the Company
<PAGE>
will furnish to each Director any other budgets that the Company may prepare
and any revisions of such previously furnished budgets."
3. The ninth line of Paragraph 6(g) of the Agreement is hereby amended
to read as follows:
"Preferred Stock and Series B Convertible Preferred Stock, voting as a
class, outstanding as of a record date between 10 and 90..."
4. The tenth line of Paragraph 6(h) of the Agreement is hereby amended
to read as follows:
"Convertible Preferred Stock and Series B Convertible Preferred Stock,
voting as a class, outstanding as of a record date..."
5. The sixth line of Paragraph 6(i) of the Agreement is hereby amended
to read as follows:
"A Convertible Preferred Stock or Series B Convertible Preferred Stock),
whether now or hereafter..."
6. The ninth line of Paragraph 6(i) of the Agreement is hereby amended
to read as follows:
"Preferred Stock and Series B Convertible Preferred Stock, voting as a
class, outstanding as of a record date between 10 and 90..."
7. The third line of Paragraph 6(k) of the Agreement is hereby amended
to read as follows:
"Convertible Preferred Stock or any other convertible securities of the
Company and except for Common Stock or..."
8. The seventeenth line of Paragraph 6(k) of the Agreement is hereby
amended to read as follows:
"majority of the shares of Series A Convertible Preferred Stock and Series
B Convertible Preferred Stock, voting as a class,..."
2
<PAGE>
9. The thirteenth line of Paragraph 6(p)(i) of the Agreement is hereby
amended to read as follows:
"shall have first offered to sell to the Investors and the Series B
Investors such..."
10. The sixteenth line of Paragraph 6(p)(i) of the Agreement is hereby
amended to read as follows:
"in writing delivered to each of the Investors and the Series B Investors
(the "Offer"),..."
11. The nineteenth line of Section 6(p)(i) is hereby amended to read
as follows:
"Investors and the Series B Investors."
12. The eleventh line of Paragraph 6(p)(ii) is hereby amended to read
as follows:
"Convertible Preferred Stock and Series B Convertible Preferred Stock and
of all shares issuable upon..."
13. Paragraph 6(p)(iv) of the Agreement is hereby amended to read in
full as follows:
"(iv) In the event that the Investors and the Series B
Investors do not elect to purchase all of the Offered Securities which they
are entitled to purchase under Paragraph 6(p)(ii) hereof and Section
6.15(b) of the Series B Agreement, the Company shall within 5 days of the
earlier of (A) the receipt of all of the Notices of Acceptances from the
Investors pursuant to subparagraph (iii) above and from the Series B
Investors pursuant to 6.15(c) of the Series B Agreement or (B) the
expiration of the 30-day period provided in subparagraph 6(p)(i) provide
each of the Investors who have delivered a Notice of Acceptance with
written notice of the number of Offered Securities which have not been
accepted by the Investors or the Series B Investors (the "Refused Shares"),
and each such Investor shall have 10 days to inform the Company in writing
of its intention to purchase its pro rata share of such Refused Shares.
For the purposes of this subparagraph (iv), "pro rata share" shall mean the
percentage obtained by dividing the number of Securities, Series B
Securities and other shares of Common Stock owned and to be purchased by an
3
<PAGE>
Investor who has delivered a Notice of Acceptance pursuant to subparagraph
(iii) above by the total number of Securities, Series B Securities or other
shares of Common Stock owned and to be purchased by Investors who have
delivered Notices of Acceptance pursuant to subparagraph (iii) above or by
Series B Investors who have delivered Notices of Acceptance pursuant to
Section 6.15(c) of the Series B Agreement. Upon the expiration of such
ten-day period, the Company shall have 90 days to sell all or any part of
such Refused Shares as to which the Company has not received a notice from
the Investors pursuant to subparagraph 6(p)(iii) or this subparagraph (iv)
or from the Series B Investors pursuant to Sections 6.15(c) or 6.15(d) of
the Series B Agreement to any other person or persons, but only upon terms
and conditions in all material respects, including, without limitation,
unit price and interest rates (but excluding payment of legal fees of
counsel of the purchaser), which are no more favorable, in the aggregate,
to such other person or persons or less favorable to the Company that those
set forth in the Offer. Upon the closing of the sale to such other person
or persons of all the Refused Securities, which shall include payment of
the purchase price to the Company in accordance with the terms of the
Offer, the Investors shall purchase from the Company, and the Company shall
sell to the Investors, the Offered Securities in respect of which a Notice
of Acceptance was delivered to the Company by an Investor, at the terms
specified in the Offer. The purchase by an Investor of any Offered
Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Investor of a purchase agreement relating
to such Offered Securities satisfactory in form and substance to the
Investor and its counsel."
14. The fourth through sixth lines of Paragraph 6(p)(v) of the
Agreement are hereby amended to read as follows:
"hereof or by the Series B Investors in accordance with Section 6.15 of the
Series B Agreement may not be sold or otherwise disposed of until they are
again offered to the Investors and Series B Investors under the procedures
specified in subparagraphs 6(p)(i), (ii), (iii) and (iv) hereof and
Subsections 6.15(a), (b), (c) and (d) of the Series B Agreement..."
15. The first line of Paragraph 6(p)(vi) of the Agreement is hereby
amended to read as follows:
4
<PAGE>
"(vi) The rights of the Investors and Series B Investors under this..."
16. The fourth line of Paragraph 6(p)(vi)(A) of the Agreement is
hereby amended to read as follows:
"approved by the Board of Directors of the Company or a committee thereof,
or ..."
17. The third line of Paragraph 6(p)(vi)(F) of the Agreement is hereby
amended to read as follows:
"Convertible Preferred Stock or any other shares of convertible stock of
the Company as provided in the Articles..."
18. Paragraph 6(r) of the Agreement is hereby amended to read as
follows:
"(r) Board Representation. The Company shall use its best
efforts to limit the number of persons constituting the Board of Directors
to nine. So long as each of Centocor Delaware, Inc., the Chancellor
Investors (as hereinafter defined) and DSV Partners shall own at least 20%
of the issued and outstanding Common Stock of the Company, assuming
conversion into Common Stock of all convertible securities of the Company,
then each shall have the right to nominate one person for election to the
Company's Board of Directors."
19. The first sentence of Paragraph 6(s) is hereby deleted in its
entirety.
20. The fifteenth through seventeenth lines of Paragraph 6(s) are
hereby amended to read as follows:
"insurance and such other insurance as may be required by law."
21. The ninth line of Paragraph 7(a) of the Agreement is hereby
amended to read as follows:
"holders of Securities and Series B Securities, and thereupon (except as
expressly..."
5
<PAGE>
22. The fifteenth line of Paragraph 7(a) of the Agreement is hereby
amended to read as follows:
"and (y) all other shares of Registerable Common Stock and Series B
Registerable Common Stock the holders..."
23. The seventh line of Section 7(a)(i) is hereby amended to read as
follows:
"pursuant to this paragraph 7(a) or Section 7.1 of the Series B Agreement
(except that, upon request..."
24. The eighth through twelfth lines of Paragraph 7(a)(ii) are hereby
amended to read as follows:
"Securities and Series B Securities. In that event, the other holders of
Securities and Series B Securities shall have the right to include their
shares of Registerable Common Stock and Series B Registerable Common Stock
in the underwriting (unless otherwise mutually agreed by a majority in
interest of the holders of the Securities and the Series B Securities).
The managing underwriter for such offering..."
25. The second line of Paragraph 7(a)(iii) is hereby amended to read
as follows:
"not permit third parties other than holders of Series B Securities to
include additional securities in..."
26. The third line of Paragraph 7(a)(iii) is hereby amended to read as
follows:
"a majority of the shares of Registerable Common Stock and Series B
Registerable Common Stock..."
27. Paragraph 7(a)(iv) is hereby amended to read as follows:
(iv) if a Demand Registration under this paragraph 7(a) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock and Series B Registerable Common Stock
requested to be included in such registration exceeds
6
<PAGE>
the amount of such Registerable Common Stock and Series B Registerable
Common Stock which can be successfully sold in such offering, the Company
will nevertheless include in such registration, prior to the inclusion of
any securities which are not Registerable Common Stock or Series B
Registerable Common Stock (notwithstanding any consent obtained in
accordance with subparagraph 7(a)(iii) hereof), the amount of Registerable
Common Stock and Series B Registerable Common Stock requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
holders of Registerable Common Stock and Series B Registerable Common Stock
requesting inclusion on the basis of the number of shares of Registerable
Common Stock and Series B Registerable Common Stock of such holders;
provided, however, that if the holders of Registerable Common Stock are
unable to include in such offering at least fifty percent (50%) of the
Registerable Common Stock sought to be registered in a Demand Registration
under this paragraph 7(a), the holders of Securities will be entitled to an
additional Demand Registration under this paragraph;
28. The third line of Paragraph 7(b)(i) is hereby amended to read as
follows:
"(other than pursuant to paragraph 7(a) hereof or Section 7.1 of the Series
B Agreement), whether of..."
29. The sixteenth through nineteenth lines of Paragraph 7(b)(ii) are
hereby amended to read as follows:
"to sell, (B) second, all of the Registerable Common Stock and Series B
Registerable Common Stock requested to be included in such registration,
pro rata among the holders thereof on the basis of the number of shares of
Registerable Common Stock and Series B Registerable Common Stock then owned
by such..."
30. The eighteenth through twentieth lines of Paragraph 7(b)(iii) are
hereby amended to read as follows:
"Registerable Common Stock and Series B Registerable Common Stock requested
to be included in such registration, pro rata among the holders thereof on
the basis of the number of shares of Registerable Common Stock and Series B
Registerable Common Stock..."
7
<PAGE>
31. The sixth line of Paragraph 7(j) is hereby amended to read as
follows:
"Securities and Series B Securities, voting as a class, outstanding as of a
record date..."
32. The tenth through twelfth lines of Paragraph 7(j) are hereby
amended to read as follows:
"holder of Securities and Series B Securities at the time outstanding
(including securities into which such Securities and Series B Securities
are convertible), each future holder of all such Securities and Series B
Securities and the Company."
33. The following definitions are hereby added to the Agreement as
Paragraphs 8(m), 8(n), 8(o) and 8(p) and 8(q):
"(m) "Series B Agreement" means the Stock Purchase Agreement
dated as of November 15, 1993 between the Company and the Investors listed
in Exhibit 1.1 thereto relating to the purchase of shares of the Company's
Series B Convertible Preferred Stock;
(n) "Series B Convertible Preferred Stock" means the shares of
Series B Convertible Preferred Stock issued pursuant to the Series B
Agreement;
(o) "Series B Investors" means Investors as defined in the
Series B Agreement;
(p) "Series B Registerable Common Stock" means Registerable
Common Stock as defined in the Series B Agreement;
(q) "Series B Securities" means Securities as defined in the
Series B Agreement."
8
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 1 all as of the day and year first above written.
APOLLON, INC.
By: /s/Vincent R. Zurawski, Jr.
______________________________
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: /s/Morton Collins
______________________
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR DELAWARE, INC.
By: /s/Hubert J.P. Schoemaker
____________________________
Name: Hubert J.P. Schoemaker
Title: Chairman
Address: 1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Fax: c/o Centocor, Inc.
(215) 651-6331
9
<PAGE>
MAC & Co.
MELLON BANK, N.A., NOMINEE FOR BACK OFFICE
SERVICES AGENT FOR CHANCELLOR TRUST COMPANY
AND CHANCELLOR CAPITAL MANAGEMENT, INC. AS
DIRECTED BY CHANCELLOR CAPITAL MANAGEMENT,
INC.
By: /s/Stephen A. Yodel
___________________________
Name:
Title:
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By:/s/William J. Uher
___________________________
Name:
Title: Vice President
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
10
<PAGE>
FOCUS & CO
By:/s/T. Pimendel
___________________________
Name:
Title: Assistant Secretary
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN, (AT THE DIRECTION OF CHANCELLOR
CAPITAL MANAGEMENT, INC., AS INVESTMENT
MANAGER) FOR THE POLICEMEN'S ANNUITY AND
BENEFIT FUND OF CHICAGO
By:/s/William J. Uher
___________________________
Name:
Title: Vice President
Address: c/o Chancellor
Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
11
<PAGE>
EXHIBIT A
NAME
- ----
DSV Partners IV, L.P.
221 Nassau Street
Princeton, NJ 08542
Centocor Delaware, Inc.
1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
MAC & Co.
Continental Bank, National
Association as Custodian
for Municipal Employees
Annuity & Benefit Fund
of Chicago (as Directed
by Chancellor Capital
Management, Inc.
Investment Manager)
Focus & Co.
Continental Bank, National
Association as Custodian
(at the Direction of
Chancellor Capital
Management, Inc., as
Investment Manager) for
the Policemen's Annuity
and Benefit Fund of
Chicago
12
<PAGE>
AMENDMENT NO. 2 TO SERIES A STOCK PURCHASE AGREEMENT
This Amendment, made as of the 10th day of September 1994, by and
among Apollon, Inc., a Pennsylvania corporation (the "Company"), and the
Investors listed in Exhibit A hereto (the "Investors");
WHEREAS, the Company and the Investors wish to amend the Stock
Purchase Agreement, dated as of June 25, 1992, by and among the Company and the
Investors listed in Exhibit 1(a) thereto, as amended by an Amendment to Stock
Purchase Agreement, dated as of November 15, 1993, by and among the Company and
the Investors listed on Exhibit A thereto (the "Agreement") as hereinafter
provided;
NOW, THEREFORE, in consideration of the mutual covenants of the
Company and the Investors, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors, intending to be legally bound, hereby agree as follows:
1. Paragraph 8(m) of the Agreement is hereby amended to read in full
as follows:
"(m) "Series B Agreement" means the Stock Purchase Agreement,
dated as of November 15, 1993, between the Company and the Investors listed
in Exhibit 1.1 thereto relating to the purchase of shares of the Company's
Series B Convertible Preferred Stock, as amended from time to time."
<PAGE>
2. Paragraph 8(n) of the Agreement is hereby amended to read in full
as follows:
"(n) "Series B Convertible Preferred Stock" means the shares of
Series B Convertible Preferred Stock issued pursuant to the Series B
Agreement and the Centocor Stock Purchase Agreement."
3. Paragraph 8(p) of the Agreement is hereby amended to read in full
as follows:
"(p) "Series B Registerable Common Stock" means Registerable
Common Stock as defined in the Series B (including the additional
securities contemplated by Section 9.19 of the Series B Agreement)."
4. Paragraph 8(q) of the Agreement is hereby amended to read in full
as follows"
"(q) "Series B Securities" means Securities as defined in
the Series B Agreement (including the additional securities
contemplated by Section 9.19 of the Series B Agreement)."
5. The following definition is hereby added to the Agreement as
Paragraphs 8(r):
"(r) "Centocor Stock Purchase Agreement" means the Stock Purchase
Agreement dated as of September 10, 1994 between the Company and Centocor,
Inc, as amended from time to time."
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 2 to Series A Stock Purchase Agreement all as of the day and year
first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski
------------------------------
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT
By: /s/ Morton Collins
----------------------
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR DELAWARE, INC.
By: /s/ David P. Holveck
----------------------------
Name: David P. Holveck
Title: President
Address: 1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Fax: c/o Centocor, Inc.
(215) 651-6331
3
<PAGE>
MELLON BANK, N.A. AS AGENT FOR CHANCELLOR
VENTURE CAPITAL, L.P. I (MAC & CO) AS DIRECTED
BY CHANCELLOR CAPITAL MANAGEMENT, INC
By: /s/ Stephen A. Yodel
---------------------------
Name: Stephen A. Yodel
Title: Assistant General Counsel
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN FOR MUNICIPAL EMPLOYEES ANNUITY &
BENEFIT FUND OF CHICAGO, (AS DIRECTED BY
CHANCELLOR CAPITAL MANAGEMENT, INC.
INVESTMENT MANAGER)
By: /s/ William J. Uher
---------------------------
Name: William J. Uher
Title: Vice President
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
4
<PAGE>
FOCUS & CO
By: /s/ T. Pimentel
---------------------------
Name: T. Pimentel
Title: Assistant Secretary
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
CONTINENTAL BANK, NATIONAL ASSOCIATION AS
CUSTODIAN, (AT THE DIRECTION OF CHANCELLOR
CAPITAL MANAGEMENT, INC., AS INVESTMENT
MANAGER) FOR THE POLICEMEN'S ANNUITY AND
BENEFIT FUND OF CHICAGO
By: /s/ William J. Uher
---------------------------
Name: William J. Uher
Title: Vice President
Address: c/o Chancellor
Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
5
<PAGE>
EXHIBIT A
NAME
DSV Partners IV, L.P.
221 Nassau Street
Princeton, NJ 08542
Centocor Delaware, Inc.
1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
MAC & Co.
Continental Bank, National
Association as Custodian
for Municipal Employees
Annuity & Benefit Fund
of Chicago (as Directed
by Chancellor Capital
Management, Inc.
Investment Manager)
Focus & Co.
Continental Bank, National
Association as Custodian
(at the Direction of
Chancellor Capital
Management, Inc., as
Investment Manager) for
the Policemen's Annuity
and Benefit Fund of
Chicago
6
<PAGE>
SECOND AMENDMENT TO SERIES A STOCK PURCHASE AGREEMENT
This Amendment, made as of the 1st day of May, 1996, by and among
Apollon, Inc., a Pennsylvania corporation (the "Company"), and the Investors
listed in Exhibit A hereto (the "Investors");
WHEREAS, the Company and the Investors wish to amend the Stock
Purchase Agreement, dated as of June 25, 1992, and amended as of November 15,
1993, by and among the Company and the Investors listed in Exhibit 1(a) thereto
(the "Agreement") as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants of the
Company and the Investors, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors, intending to be legally bound, hereby agree as follows:
1. The ninth line of Paragraph 6(g) of the Agreement is
hereby amended to read as follows:
"Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock, voting as a class, outstanding as of a record
date between 10 and 90..."
2. The tenth line of Paragraph 6(h) of the Agreement is hereby amended
to read as follows:
"Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock, voting as a class, outstanding as of
a record date..."
3. The sixth line of Paragraph 6(i) of the Agreement is hereby amended
to read as follows:
"A Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock), whether now or hereafter..."
<PAGE>
4. The ninth line of Paragraph 6(i) of the Agreement is hereby amended
to read as follows:
"Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock, voting as a class, outstanding as of a record
date between 10 and 90..."
5. The seventeenth line of Paragraph 6(k) of the Agreement is hereby
amended to read as follows:
"majority of the shares of Series A Convertible Preferred Stock, Series B
Convertible Preferred Stock and Series C Convertible Preferred Stock,
voting as a class,..."
6. The thirteenth line of Paragraph 6(p)(i) of the Agreement is hereby
amended to read as follows:
"shall have first offered to sell to the Investors, the Series B Investors
and the Series C Investors such..."
7. The sixteenth line of Paragraph 6(p)(i) of the Agreement is hereby
amended to read as follows:
"in writing delivered to each of the Investors, the Series B Investors and
the Series C Investors (the "Offer"),..."
8. The nineteenth line of Paragraph 6(p)(i) is hereby amended to read
as follows:
"delivered by the Company to the Investors, the Series B Investors and the
Series C Investors."
9. The eleventh line of Paragraph 6(p)(ii) is hereby amended to read
as follows:
"Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock and of all shares issuable upon..."
10. Paragraph 6(p)(iv) of the Agreement is hereby amended to read in
full as follows:
"(iv) In the event that the Investors, the Series B Investors
and the Series C Investors do not elect to purchase all of the Offered
Securities which they are entitled to purchase under Paragraph 6(p)(ii)
hereof, Section 6.15(b) of the Series B Agreement and Section 6.13(b) of
the Series C Agreement, the Company shall within 5 days of the earlier of
(A) the receipt of all of the Notices of Acceptances from the Investors
pursuant to subparagraph (iii) above, from the Series B Investors
2
<PAGE>
pursuant to Section 6.15(c) of the Series B Agreement and the Series C
Investors pursuant to Section 6.13(c) of the Series C Agreement or (B) the
expiration of the 30-day period provided in subparagraph 6(p)(i) provide
each of the Investors who have delivered a Notice of Acceptance with written
notice of the number of Offered Securities which have not been accepted by
the Investors, the Series B Investors or the Series C Investors (the
"Refused Shares"), and each such Investor shall have 10 days to inform the
Company in writing of its intention to purchase its pro rata share of such
Refused Shares. For the purposes of this subparagraph (iv), "pro rata
share" shall mean the percentage obtained by dividing the number of
Securities, Series B Securities, Series C Securities and other shares of
Common Stock owned and to be purchased by an Investor who has delivered a
Notice of Acceptance pursuant to subparagraph (iii) above by the total
number of Securities, Series B Securities, Series C Securities or other
shares of Common Stock owned and to be purchased by Investors who have
delivered Notices of Acceptance pursuant to subparagraph (iii) above, by
Series B Investors who have delivered Notices of Acceptance pursuant to
Section 6.13(c) of the Series B Agreement or by Series C Investors who have
delivered Notices of Acceptance pursuant to Section 6.15(c) of the Series C
Agreement. Upon the expiration of such ten-day period, the Company shall
have 90 days to sell all or any part of such Refused Shares as to which the
Company has not received a notice from the Investors pursuant to
subparagraph 6(p)(iii), this subparagraph (iv), from the Series B Investors
pursuant to Sections 6.15(c) or 6.15(d) of the Series B Agreement or from
the Series C Investors pursuant to Sections 6.13(c) or 6.13(d) of the Series
C Agreement to any other person or persons, but only upon terms and
conditions in all material respects, including, without limitation, unit
price and interest rates (but excluding payment of legal fees of counsel of
the purchaser), which are no more favorable, in the aggregate, to such other
person or persons or less favorable to the Company that those set forth in
the Offer. Upon the closing of the sale to such other person or persons
of all the Refused Securities, which shall include payment of the purchase
price to the Company in accordance with the terms of the Offer, the
Investors shall purchase from the Company, and the Company shall sell to the
Investors, the Offered Securities in respect of which a Notice of Acceptance
was delivered to the Company by an Investor, at the terms specified in the
Offer. The purchase by an Investor of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and the
Investor of a purchase agreement relating to such Offered
3
<PAGE>
Securities satisfactory in form and substance to the Investor and its
counsel."
11. The fourth through sixth lines of Paragraph 6(p)(v) of the
Agreement are hereby amended to read as follows:
"hereof, by the Series B Investors in accordance with Section 6.15 of the
Series B Agreement or by the Series C Investors in accordance with Section
6.13 of the Series C Agreement may not be sold or otherwise disposed of
until they are again offered to the Investors, the Series B Investors and
the Series C Investors under the procedures specified in subparagraphs
6(p)(i), (ii), (iii) and (iv) hereof, Subsections 6.15(a), (b), (c) and (d)
of the Series B Agreement and Subsections 6.13(a), (b), (c) and (d) of the
Series C Agreement."
12. The first through third lines of Paragraph 6(p)(vi) are hereby
amended to read as follows:
"The rights of the Investors, the Series B Investors and the Series C
Investors under this subparagraph 6(p) shall not apply to the following
securities (the "Excluded Securities"):"
13. Paragraph 6(p)(vi)(A) is hereby amended to read in full as
follows:
"(A) Common Stock, securities by their terms convertible into or
exchangeable for Common Stock (including Common Stock issuable on
conversion thereof) and options, warrants and other rights to subscribe
for, purchase or otherwise acquire Common Stock or securities by their
terms convertible into or exchangeable for Common Stock (including Common
Stock issuable on conversion thereof) issued, issuable, sold or granted to
existing or prospective officers, directors or employees of, or consultants
to, the Company, pursuant to any stock option, stock incentive, stock
appreciation, stock bonus, stock award, compensation plan or arrangement or
employment letter, or any other agreement, plan, arrangement or letter,
presently in effect or hereafter adopted or entered into by the Company;"
14. The ninth line of Paragraph 7(a) of the Agreement is hereby
amended to read as follows:
"holders of Securities, Series B Securities, Series C Securities and
Warrant Stock, and thereupon (except as expressly..."
4
<PAGE>
15.The fifteenth line of Paragraph 7(a) of the Agreement is hereby
amended to read as follows:
"and (y) all other shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock and shares of
Warrant Stock, the holders..."
16. The seventh line of Paragraph 7(a)(i) is hereby amended to read as
follows:
"pursuant to this subparagraph 7(a), Section 7.1 of the Series B Agreement
or Section 7.1 of the Series C Agreement (except that, upon request..."
17. The eighth through twelfth lines of Paragraph 7(a)(ii) are hereby
amended to read as follows:
"Securities, Series B Securities, Series C Securities and Warrant Stock.
In that event, the other holders of Securities, Series B Securities, Series
C Securities and Warrant Stock shall have the right to include their shares
of Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock in the underwriting (unless
otherwise mutually agreed by a majority in interest of the holders of the
Securities, the Series B Securities, Series C Securities and Warrant
Stock). The managing underwriter for such offering..."
18. The second line of Paragraph 7(a)(iii) is hereby amended to read
as follows:
"not permit third parties other than holders of Series B Securities, Series
C Securities and Warrant Stock to include additional securities in..."
19. The third line of Paragraph 7(a)(iii) is hereby amended to read as
follows:
"a majority of the shares of Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock..."
20. Paragraph 7(a)(iv) is hereby amended to read as follows:
(iv) if a Demand Registration under this paragraph 7(a) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock
5
<PAGE>
requested to be included in such registration exceeds the amount of such
Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock which can be successfully sold
in such offering, the Company will nevertheless include in such
registration, prior to the inclusion of any securities which are not
Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock or Warrant Stock (notwithstanding any consent
obtained in accordance with subparagraph 7(a)(iii) hereof), the amount of
Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock requested to be included which
in the opinion of such underwriters can be sold, pro rata among the holders
of Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock requesting inclusion on the
basis of the number of shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock and Warrant
Stock of such holders; provided, however, that if the holders of
Registerable Common Stock are unable to include in such offering at least
fifty percent (50%) of the Registerable Common Stock sought to be registered
in a Demand Registration under this paragraph 7(a), the holders of
Securities will be entitled to an additional Demand Registration under this
paragraph;
21. The third line of Paragraph 7(b)(i) is hereby amended to read as
follows:
"(other than pursuant to paragraph 7(a) hereof), whether of..."
22. The sixteenth through nineteenth lines of Paragraph 7(b)(ii) are
hereby amended to read as follows:
"to sell, (B) second, all of the Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock and Warrant
Stock requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of shares of Registerable Common
Stock, Series B Registerable Common Stock, Series C Registerable Common
Stock and Warrant Stock then owned by such..."
23. The eighteenth through twentieth lines of Paragraph 7(b)(iii) are
hereby amended to read as follows:
"Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock requested to be included in
such registration, pro rata among the holders thereof on the basis of the
number of shares of
6
<PAGE>
Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock..."
24. The sixth line of Paragraph 7(j) is hereby amended to read as
follows:
"Securities, Series B Securities and Series C Securities, voting as a
class, outstanding as of a record date..."
25. The tenth through twelfth lines of Paragraph 7(j) are hereby
amended to read as follows:
"holder of Securities, Series B Securities and Series C Securities at the
time outstanding (including securities into which such Securities, Series B
Securities and Series C Securities are convertible), each future holder of
all such Securities, Series B Securities and Series C Securities and the
Company."
26. The following definitions are hereby amended to read as follows:
"(m) "Series B Agreement" means the Stock Purchase Agreement,
dated as of November 15, 1993, by and among the Company and the Investors
listed on Exhibit 1.1 attached thereto relating to the purchase of shares
of the Company's Series B Convertible Preferred Stock, as amended.
"(n) "Series B Convertible Preferred Stock" means (a) the
2,000,000 shares of the Company's Series B Convertible Preferred Stock,
$.01 par value per share, issued pursuant to the Series B Agreement, (b)
the Note Shares and (c) except for purposes of Paragraph 6 of this
Agreement, the Centocor Shares. For purposes of Paragraph 6 of this
Agreement, "Series B Convertible Preferred Stock" specifically excludes the
Centocor Shares.
(o) "Series B Investors" means Investors as defined in the
Series B Agreement.
(p) "Series B Registerable Common Stock" means (a) Registerable
Common Stock as defined in the Series B Agreement, (b) any Common Stock
issued or issuable upon conversion of the Note Shares and (c) except for
purposes of Paragraph 6 of this Agreement, any Common Stock issued or
issuable upon conversion of the Centocor Shares. For purposes of Paragraph
6 of this Agreement, "Series B Registerable Common Stock" specifically
excludes the Centocor Shares.
7
<PAGE>
(q) "Series B Securities" means (a) Securities as defined in the
Series B Agreement, (b) the Note Shares and any Common Stock issued upon
conversion thereof, whether at Closing or thereafter, but shall not include
any such Note Shares or Common Stock sold in any public offering or in any
sale pursuant to Rule 144 under the Securities Act, and (c) except for
purposes of Paragraph 6 of this Agreement, the Centocor Shares and any
Common Stock issued upon conversion thereof, whether at Closing or
thereafter but shall not include any such Centocor Shares or Common Stock
sold in any public offering or in any sale pursuant to Rule 144 under the
Securities Act. For purposes of Paragraph 6 of this Agreement, "Series B
Securities" specifically excludes the Centocor Shares and any Common Stock
issued upon conversion thereof, whether at Closing or thereafter."
27. The following definitions are hereby added to the Agreement as
Paragraphs 8(r), 8(s), 8(t), 8(u), 8(v), 8(w), 8(x), 8(y), 8(z) and 8(aa):
"(r) "Centocor Agreement" means the Stock Purchase Agreement,
dated September 20, 1994, by and between the Company and Centocor, Inc.
(s) "Centocor Shares" means the 400,000 shares of the Company's
Series B Convertible Preferred Stock, $.01 par value per share, issued to
Centocor, Inc. pursuant to the Centocor Agreement.
(t) "Conversion Agreement" means the Conversion Agreement, dated
as of April 23, 1996, by and among the Company and the Series B Investors.
(u) "Investors" means (a) the parties listed on Exhibit 1(a)
attached hereto and (b) any successors and assigns of the parties listed on
Exhibit 1(a) hereto who (i) have executed the Shareholders' Agreement
attached hereto as Exhibit 2(k), and (ii) have complied with the terms of
Paragraph 9(c) of this Agreement; provided that any such successor or
assign shall not acquire any of the rights granted to Investors by
Paragraph 7 of this Agreement unless the transfer and the transferee of
Securities satisfy the requirements of Paragraph 7(g) of this Agreement.
(u) "Note Shares" means the 1,600,000 shares of the Company's
Series B Convertible Preferred Stock, $.01 par value per share, issued
pursuant to the Conversion Agreement.
(v) "Series C Agreement" means the Stock Purchase Agreement,
dated as of May 1, 1996, by and among the Company
8
<PAGE>
and the Investors listed on Schedule 1.1 attached thereto relating to the
purchase of shares of the Company's Series C Convertible Preferred Stock, as
it may be amended, from time to time.
(w) "Series C Convertible Preferred Stock" means the up to
3,000,000 shares of the Company's Series C Convertible Preferred Stock,
$.01 par value per share, issued pursuant to the Series C Agreement.
(x) "Series C Investors" means Investors as defined in the
Series C Agreement.
(y) "Series C Registerable Common Stock" means Series C
Registerable Common Stock as defined in the Series C Agreement.
(z) "Series C Securities" means Securities as defined in the
Series C Agreement.
(aa) "Warrant Stock" means Warrant Stock as defined in the Series
C Agreement."
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 2 all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr.
______________________________
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV, L.P.
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: /s/ Morton Collins
______________________
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
9
<PAGE>
CENTOCOR, INC.
By: /s/ David P. Holveck
____________________________
David P. Holveck
President and CEO
Address: 200 Great Valley Parkway
Malvern, PA 19355
Fax: (610) 651-6331
Mellon Bank, N.A., solely in its capacity as
Custodian for Chancellor Capital Management
Inc under agreement dated November 23, 1992
-- Chancellor Venture Capital L.P., (as
directed by Chancellor Capital Management,
Inc.), and not in its individual capacity
By: /s/ Michael Shivey
----------------------------- MAC & Co.
Name: Michael Shivey
Title: Officer
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
HARE & CO.
By: /s/ (Signature Illegible)
-----------------------------
Name:
Title: Executive Director
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
10
<PAGE>
FOCUS & CO
By:/s/ Focus & Co.
___________________________
Name: Antonio M. Pimentel, Jr.
Title: Assistant Vice President
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
BOOTH & CO.
By: /s/ Catherine B. Williams
-----------------------------
Name:
Title:
Address: c/o Chancellor
Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
11
<PAGE>
EXHIBIT A
NAME
- ----
DSV Partners IV, L.P.
Centocor, Inc.
MAC & Co.
Hare & Co.
Focus & Co.
Booth & Co.
<PAGE>
THIRD AMENDMENT TO SERIES A STOCK PURCHASE AGREEMENT
THIS AMENDMENT to the Agreement (as hereinafter defined), is made as of the
26th day of September, 1997, by and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the Investors signing the signature page hereto
(the "Investors").
WHEREAS, the Company and the Investors wish to amend the Stock Purchase
Agreement, dated as of June 25, 1992, and amended as of November 15, 1993 and as
of May 1, 1996, by and among the Company and the Investors listed in Exhibit
1(a) thereto (collectively, the "Agreement") as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants of the Company and
the Investors, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors,
intending to be legally bound, hereby agree as follows:
1. The ninth line of Paragraph 7(a) of the Agreement is hereby
amended to read as follows:
"holders of Securities, Series B Securities, Series C Securities, Warrant
Stock and AHP Stock, and thereupon (except as expressly..."
2. The fifteenth line of Paragraph 7(a) of the Agreement is hereby
amended to read as follows:
"and (y) all other shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock, shares of
Warrant Stock and shares of AHP Stock, the holders..."
3. The seventh line of Paragraph 7(a)(i) is hereby amended to read
as follows:
"pursuant to this subparagraph 7(a), Section 7.1 of the Series B Agreement,
Section 7.1 of the Series C Agreement or Section 6.1 of the AHP Agreement
(except that, upon request..."
4. The eighth through twelfth lines of Paragraph 7(a)(ii) are hereby
amended to read as follows:
"Securities, Series B Securities, Series C Securities, Warrant Stock and
AHP Stock. In that event, the other holders of Securities, Series B
Securities, Series C Securities, Warrant Stock and AHP Stock shall have the
right
<PAGE>
to include their shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock, Warrant
Stock and AHP Stock in the underwriting (unless otherwise mutually agreed
by a majority in interest of the holders of the Securities, the Series B
Securities, Series C Securities, Warrant Stock and AHP Stock). The
managing underwriter for such offering..."
5. The second line of Paragraph 7(a)(iii) is hereby amended to read
as follows:
"not permit third parties other than holders of Series B Securities, Series
C Securities, Warrant Stock and AHP Stock to include additional securities
in..."
6. The third line of Paragraph 7(a)(iii) is hereby amended to read
as follows:
"a majority of the shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock and AHP
Stock..."
7. Paragraph 7(a)(iv) is hereby amended to read as follows:
(iv) if a Demand Registration under this paragraph 7(a) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock requested to be
included in such registration exceeds the amount of such Registerable
Common Stock, Series B Registerable Common Stock, Series C Registerable
Common Stock, Warrant Stock and AHP Stock which can be successfully sold in
such offering, the Company will nevertheless include in such registration,
prior to the inclusion of any securities which are not Registerable Common
Stock, Series B Registerable Common Stock, Series C Registerable Common
Stock, Warrant Stock or AHP Stock (notwithstanding any consent obtained in
accordance with subparagraph 7(a)(iii) hereof), the amount of Registerable
Common Stock, Series B Registerable Common Stock, Series C Registerable
Common Stock, Warrant Stock and AHP Stock requested to be included which in
the opinion of such underwriters can be sold, pro rata among the holders of
Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock requesting inclusion
on the basis of the number of shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock, Warrant
Stock and AHP Stock then owned by such holders; provided, however, that if
the
-2-
<PAGE>
holders of Registerable Common Stock are unable to include in such
offering at least fifty percent (50%) of the Registerable Common Stock
sought to be registered in a Demand Registration under this paragraph 7(a),
the holders of Securities will be entitled to an additional Demand
Registration under this paragraph;"
8. The sixteenth through nineteenth lines of Paragraph 7(b)(ii) are
hereby amended to read as follows:
"to sell, (B) second, all of the Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock, Warrant
Stock and AHP Stock requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of
Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock then owned by
such..."
9. The eighteenth through twentieth lines of Paragraph 7(b)(iii) are
hereby amended to read as follows:
"Registerable Common Stock, Series B Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock requested to be
included in such registration, pro rata among the holders thereof on the
basis of the number of shares of Registerable Common Stock, Series B
Registerable Common Stock, Series C Registerable Common Stock, Warrant
Stock and AHP Stock..."
10. The fourth and fifth lines of Paragraph 9(n) are hereby amended
to read as follows:
"the Securities, the Series B Securities and the Series C Securities held
of record as of a record date between 10 and 90 days prior to such date,
voting as a class."
11. The following definitions are hereby added to the Agreement as
Paragraphs 8(bb) and 8(cc):
"(bb) "AHP Agreement" means the Securities Purchase Agreement, dated
September 19, 1997, by and between the Company and A.H. Investments Ltd."
"(cc) "AHP Stock" means the shares of Common Stock issued or issuable
upon conversion of a convertible note in the aggregate principal amount of
$3 million issued and sold by the Company to A.H. Investments Ltd. and the
shares of Common Stock issued or issuable upon exercise of a warrant to
purchase 150,000 shares of Common Stock sold by the Company to A.H.
Investments Ltd. pursuant to the AHP Agreement."
-3-
<PAGE>
12. Pursuant to Paragraphs 7(j) and 9(n) of the Agreement, this
Amendment shall be effective upon the written consent of the holders of a
majority of Securities, Series B Securities and Series C Securities, voting as a
class, outstanding as of September 17, 1997 and upon the written consent of the
holders of a majority of the Securities then outstanding and shall thereafter be
binding upon each holder of Securities, Series B Securities and Series C
Securities at the time outstanding (including securities into which such
Securities, Series B Securities and Series C Securities are convertible), each
future holder of all such securities and the Company. Such written consent
shall be evidenced by the signature of the Investors signing this Amendment.
13. All other terms of the Agreement shall remain in full force and
effect.
14. This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute together one and
the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 3 all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski
__________________________
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT LTD., a New
Jersey Limited Partnership
By: /s/ Morton Collins
______________________
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR, INC.
By: /s/ David P. Holveck
__________________________
David P. Holveck
President
Address: 200 Great Valley Parkway
Malvern, PA 19355
Fax: (610) 651-6331
-4-
<PAGE>
MAC & CO.
CHANCELLOR VENTURE CAPITAL LP
By:/s/ Howard Goldstein
___________________________
Name: Howard Goldstein
Title: Managing Director
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
HARE & CO.
MUNICIPAL EMPLOYEES ANNUITY & BENEFIT FUND
OF CHICAGO
By:/s/ Howard Goldstein
___________________________
Name: Howard Goldstein
Title: Managing Director
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
FOCUS & CO
STATE STREET BANK, AS TRUSTEE
By:/s/ David B. Wayne
___________________________
Name: David B. Wayne
Title: Assistant Vice President
Address: c/o Chancellor Capital Management,
Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
BOOTH & CO.
By:/s/ Carol Buitron
___________________________
Name:
Title:
Address: c/o Chancellor
Capital Management, Inc.
153 East 53rd Street
25th Floor
New York, NY 10022
Fax: (212) 891-6684
-5-
<PAGE>
STOCK PURCHASE AGREEMENT
(SERIES B CONVERTIBLE PREFERRED STOCK)
Stock Purchase Agreement ("Agreement") made and entered into as of the
15th day of November, 1993 by and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the parties listed in Exhibit 1.1 to this
Agreement (hereinafter sometimes referred to individually as an "Investor" and
collectively as the "Investors").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and the
Investors desire to purchase from the Company in the aggregate 2,000,000 shares
of the Company's Series B Convertible Preferred Stock (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, as well as the expression of intention by the parties hereto
to be legally bound by this, a written agreement, subject to the terms and
conditions hereof and in reliance upon the representations, warranties and
covenants contained herein, it is agreed as follows:
Section 1. PURCHASE OF SHARES.
1.1 PURCHASE AND SALE. The Company shall sell, and each
Investor shall purchase, the Shares in the number and for the consideration set
forth opposite such Investor's name on Exhibit 1.1 annexed hereto.
1.2 CLOSING. The closing ("Closing") of the purchase by the
Investors of the Shares shall be held at the offices of Ballard Spahr Andrews &
Ingersoll, 1735 Market Street, Philadelphia, Pennsylvania, 19103 on November 15,
1993 commencing at 2:00 p.m., or at such other time, date or place as may be
mutually agreed upon (the "Closing Date").
1.3 DELIVERY OF CERTIFICATES. At Closing, the Company shall
deliver to each Investor a certificate or certificates evidencing the Shares to
be issued and delivered to each such Investor at Closing in accordance with
Exhibit 1.1 annexed hereto.
1.4 PAYMENT. The Investors shall pay the purchase price to be
paid at Closing by delivery to the Company at Closing of a check or checks or by
wire transfer in
<PAGE>
immediately available funds in the amounts set forth on Exhibit 1.1 annexed
hereto.
Section 2. CONDITIONS TO THE OBLIGATIONS OF THE
INVESTORS AT CLOSING.
The obligation of each of the Investors to purchase and pay for the
Series B Convertible Preferred Stock to be purchased by such Investor at Closing
is subject to the satisfaction on or prior to the date of Closing of the
following conditions, any of which may be waived by such Investor:
2.1 OPINION OF COUNSEL TO THE COMPANY. The Investors shall have
received an opinion, dated the date of Closing, of Ballard Spahr Andrews &
Ingersoll, counsel for the Company, substantially in the form of Exhibit 2.1
hereto.
2.2 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Company contained in this Agreement shall be true and
correct in all material respects at and as of the date of Closing with the same
effect as if made on the date of Closing, except to the extent of changes
contemplated hereby or caused by the transactions contemplated hereby.
2.3 PERFORMANCE OF COVENANTS. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the date of Closing shall have been performed in a
manner reasonably satisfactory in all respects to the Investors and their
counsel.
2.4 AMENDED ARTICLES OF INCORPORATION. The Company's Articles
of Incorporation, as amended, shall have been duly amended substantially as set
forth on Exhibit 2.4(a) annexed hereto (the "Amended Articles"), and the Company
shall have filed with the Department of State of the Commonwealth of
Pennsylvania (the "Department") a Statement Affecting Class or Series of Shares
(the "Statement") establishing the Series B Convertible Preferred Stock in the
form of Exhibit 2.4(b) annexed hereto.
2.5 LEGAL ACTION. No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the financial condition or
operations of the Company.
2.6 CONSENTS. All consents required to enable the Company to
observe and comply with all of its obligations
2
<PAGE>
under this Agreement and in connection with the transactions contemplated hereby
shall have been obtained and all "blue sky" filings necessary in connection with
the issuance and sale of the Shares shall have been made.
2.7 SHAREHOLDERS' AGREEMENT. The Investors and the Company
shall have entered into a Shareholders' Agreement, dated the date of Closing,
substantially in the form of Exhibit 2.7 hereto (the "Shareholders' Agreement").
2.8 CLOSING DOCUMENTS. The Company shall have delivered to the
Investors (a) an officer's certificate dated the date of Closing (i) stating
that the conditions in Sections 2.2 through 2.7 have been satisfied, and
(ii) attaching the Company's Articles of Incorporation, as amended, Bylaws, all
resolutions of the Board of Directors relating to the issuance and sale of the
Shares and a good standing certificate issued by the Commonwealth of
Pennsylvania, and (b) such certificates, other documents and instruments as the
Investors may reasonably request in connection with, and to effect, the
transactions contemplated by this Agreement.
2.9 PROCEEDINGS. All corporate, shareholder and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby to be consummated at Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Investors
and their counsel.
Section 3. CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AT CLOSING.
The obligation of the Company to issue and deliver the Series B
Convertible Preferred Stock to be purchased by each Investor at Closing is
subject to the satisfaction on or prior to the date of Closing of the following
conditions, any of which may be waived by the Company:
3.1 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Investors contained in this Agreement shall be true and
correct in all material respects at and as of the date of Closing with the same
effect as if made on the date of Closing, except to the extent of changes
contemplated hereby or caused by the transactions contemplated hereby.
3.2 DELIVERY OF CONSIDERATION. The Investors shall have
delivered, in accordance with Section 1.4, the consideration for the Shares set
forth opposite such Investor's name on Exhibit 1.1 attached hereto.
3
<PAGE>
3.3 LEGAL ACTION. No action or proceeding before any court or
governmental body shall be threatened or pending wherein an unfavorable
judgment, decree or order would or could prevent the carrying out of this
Agreement or any of the transactions contemplated by this Agreement or cause
such transactions to be rescinded.
3.4 CLOSING DOCUMENTS. The Investors shall have delivered to
the Company such certificates, other documents and instruments as the Company
may reasonably request in connection with, and to effect, the transactions
contemplated by this Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.
The Company represents and warrants to each Investor as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized and validly subsisting under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to carry on its business as currently conducted and as proposed to be conducted,
to own its properties, and to enter into and perform this Agreement. The
Company is not qualified as a foreign corporation in any jurisdiction and the
Company's conduct of its business or its ownership or leasing of property does
not make any such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on the financial condition or
results of operations of the Company.
4.2 CAPITAL STOCK. The authorized capital stock, and the
outstanding capital stock, of the Company consists in each case solely of the
shares indicated on Exhibit 4.2(a) annexed hereto. All of the outstanding
shares have been duly authorized and are fully paid and non-assessable. An
accurate list of the Company's shareholders and their holdings is set forth in
Exhibit 4.2(b) annexed hereto. Except for the holders of Series A Convertible
Preferred Stock, no person or entity is entitled to preemptive or similar
statutory or contractual rights with respect to any securities of the Company.
Except as described on Exhibit 4.2(c) annexed hereto, there are no outstanding
warrants, options, convertible securities or other agreements or arrangements of
any character under which the Company is or may be obligated to issue any equity
securities of any kind, or to transfer any equity securities of any kind owned
by it, and the Company is not obligated to issue any equity securities of any
kind, or to transfer any equity securities of any kind owned by it. Except as
listed on Exhibit 4.2(c) annexed
4
<PAGE>
hereto, the Company does not know of any voting agreements, buy-sell agreements,
option or right of first purchase agreements or other agreements of any kind
among any of the security holders of the Company relating to the securities held
by them. The voting rights, designations, preferences, limitations and special
rights of the Shares, when issued, shall be as fully set forth in the Amended
Articles and the Statement. When issued, delivered and paid for pursuant to
this Agreement, the Shares will be validly issued, fully paid and
non-assessable.
4.3 SUBSIDIARIES. The Company does not own any shares of stock,
partnership interest, joint venture interest or any other security or interest
in any other corporation or other organization or entity.
4.4 CORPORATE PROCEEDINGS. The execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
on the part of the officers, directors and shareholders of the Company. This
Agreement constitutes a valid and binding obligation of the Company, enforceable
in accordance with its terms. The Shares, when issued pursuant hereto, will be
free and clear of all encumbrances and restrictions except for restrictions on
transfer imposed by applicable securities laws or by this Agreement. The
Company has reserved a sufficient number of shares of its Common Stock (as
hereinafter defined) for issuance upon the conversion of the Shares and such
shares of Common Stock, when issued in accordance with the terms of the Shares,
will be duly authorized, validly issued, fully paid, non-assessable and free and
clear of all encumbrances and restrictions, except for restrictions on transfer
imposed by applicable securities laws, by this Agreement or by the Shareholders'
Agreement.
4.5 LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the knowledge of the Company or
any officer, director or key employee of the Company, threatened against or
affecting the Company, or against the assets or business of the Company, or
against any key employee, officer, director or shareholder of the Company in his
capacity as such person or relating to any of his activities with the Company,
at law or in equity or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality.
4.6 TAX MATTERS. The Company has duly and timely filed, or
caused to be filed, all Federal, state and local tax returns required to be
filed by it and has paid all taxes shown to be due and payable on such returns,
as well as all deficiencies and assessments, notice of which has been received
by it.
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4.7 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Neither the
execution, delivery or performance of this Agreement, nor the offer, issuance,
sale or delivery of the Shares to the Investors, nor the issuance of shares of
Common Stock upon conversion of the Shares, with or without the giving of notice
or passage of time, or both, will (i) violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company pursuant to, any provision of its Articles of
Incorporation, as amended, or Amended Articles, as the case may be, or By-laws
or any contract, law, rule, regulation, judgment, decree or other document or
instrument to which the Company is a party or by which it is bound or (ii) cause
the Company to lose the benefit of any right or privilege it presently enjoys,
except as contemplated by this Agreement.
4.8 GOVERNMENTAL CONSENTS; OFFERING OF SHARES. Except as set
forth on Exhibit 4.8(a) annexed hereto, no consent, authorization, approval,
permit or order of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery and
performance of this Agreement or the offer, issuance, sale or delivery of the
Shares. Neither the Company nor any agent acting on its behalf has, directly or
indirectly, sold or offered for sale, or solicited any offers to buy, any
securities, or otherwise approached or negotiated with any person or persons, so
as to subject the offer or sale of the Shares to the Investors to the provisions
of Section 5 of the Securities Act, and the Company agrees that neither it nor
any agent acting on its behalf will take any action that would subject the offer
or sale of the Shares to those provisions. Except as set forth on Exhibit
4.8(b) hereto, neither the Company nor anyone acting on its behalf has directly
or indirectly offered the Series B Convertible Preferred Stock or any part
thereof or any similar security of the Company (or any other securities
convertible or exchangeable for the Series B Convertible Preferred Stock or any
similar security), for sale to, or solicited any offer to buy the same from,
anyone other than the Investors. Assuming the accuracy of the representations
and warranties of the Investors made herein, the offer, sale and issuance of the
Series B Convertible Preferred Stock and the Common Stock issuable upon
conversion of the Series B Convertible Preferred Stock do not and will not
require registration under the Securities Act.
4.9 PRIOR ISSUANCE OF SECURITIES. All securities of the Company
heretofore sold and issued by it were sold and issued in compliance with all
applicable federal and state securities laws.
4.10 ENCUMBRANCES. The Company owns, or has a valid leasehold
interest in, or valid license for, all of its
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property and assets, real, personal or fixed, tangible or intangible, subject
to no mortgages, liens, security interests, pledges, charges or other
encumbrances of any kind.
4.11 BUSINESS PLAN. The Company has previously presented and
delivered to the Investors the Business Plan, which Business Plan has been
material to the Investors in their decision to enter into this Agreement and to
purchase the Series B Preferred Stock hereunder. The description of the
business, operations (as presently conducted and as proposed to be conducted),
properties and assets of the Company contained in the Business Plan, as well as
all other factual statements contained therein, are true, correct and do not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading as of the date of such description or statement. The financial
projections and other estimates contained in the Business Plan are based on the
best estimates of the Company derived from reasonable expectations at the time
such projections and estimates were made. Neither the projections nor the
assumptions on which the projections are based have been prepared, reviewed or
approved by the Company's counsel or accountants. The projections are subject
to change inasmuch as all material events and circumstances cannot be predicted
and unanticipated events and circumstances are likely to occur. Accordingly, it
is likely that there will be differences between the projected results and the
Company's actual results. These differences may be material. Therefore, no
representation or warranty as to the accuracy of these projections can be or is
being made by the Company or any of their principals or affiliates and no
assurance can be given that the projected results will actually be achieved.
4.12 COMPLIANCE. The Company has complied with its Articles of
Incorporation, as amended, or Amended Articles, as the case may be, and its
Bylaws, and has complied in all material respects with all federal, state, local
and foreign laws, ordinances, regulations and orders applicable to its business
or the ownership of its assets and all decrees, orders or judgments of any court
of competent jurisdiction. The Company has all federal, state, local and
foreign governmental licenses and permits material to and necessary in the
conduct of its business; such licenses and permits are in full force and effect,
no violations have been recorded in respect of any such licenses or permits, and
no proceeding is pending or threatened to revoke or limit any thereof.
4.13 INSURANCE. All policies of liability, property, casualty,
workmen's compensation, health and other forms of insurance held by the
Company are, to the best of the Company's knowledge, valid and enforceable
policies and are
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outstanding and duly in force and all premiums with respect thereto are paid
to date. The amounts of coverage under such policies of insurance for the
assets and properties of the Company are adequate against risks usually
insured against by persons operating similar businesses and operating similar
properties. The Company does not carry professional liability or directors
and officers liability insurance.
4.14 RELATED TRANSACTIONS. Except as contemplated by this
Agreement and as set forth on Exhibit 4.14 hereof, no current or former
shareholder, director, officer or employee of the Company (other than the
Investors) nor any "associate" (as defined in the rules and regulations
promulgated under the Exchange Act) of any such person, is presently, directly
or indirectly through his or its affiliation with any other person or entity, a
party to any transaction with the Company providing for the furnishing of
services (other than employment of such individuals by the Company) by or to, or
rental of real or personal property from or to, or otherwise requiring cash
payments to or by, any such person in excess of $15,000. For purposes of this
Agreement, a transaction of the type described in this Section 4.14 is sometimes
herein referred to as a "Related Transaction".
4.15 REGISTRATION RIGHTS. Except as contemplated by this
Agreement or as described in Exhibit 4.15 hereof, no person has any right to
cause the Company to effect the registration under the Securities Act of any
shares of Common Stock or any other securities (including debt securities) of
the Company.
4.16 COMPLIANCE WITH ERISA; BENEFIT PLANS. Except as described
on Exhibit 4.16 hereof, the Company does not sponsor or maintain, and is not
required, either by law or by contract, to contribute to, any employee welfare
benefit plan, within the meaning of section 3(1) of ERISA, or any employee
pension benefit plan, within the meaning of section 3(2) of ERISA. The Company
has not contributed to and is not required to contribute to any multiemployer
plan within the meaning of section 3(37) of ERISA.
4.17 INVESTMENT COMPANY ACT. The Company is not an "investment
company" as that term is defined in, and is not otherwise subject to regulation
under, the Investment Company Act of 1940, as amended.
4.18 PATENTS, TRADEMARKS, ETC. The Company owns or possesses the
patents, trademarks, service marks, trade names, copyrights, licenses,
applications for patents, inventions, trade secrets, know-how, proprietary
processes and formulae, and other intellectual property rights listed on Exhibit
4.18(a) annexed hereto (collectively, the "Intellectual Property"), without any
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known conflict with the rights of others. Except as provided in Exhibit
4.18(b) annexed hereto, the Company knows of no additional Intellectual
Property required to conduct its business as now conducted without conflict
with the rights or claimed rights of others. The Company has not received
notice of any alleged infringement by it, nor is the Company aware of any
infringement or any basis for an alleged infringement by it, of any
third-party patent, trademark, service mark, trade name, copyright or
license. The Company has confidentiality agreements with all of its
employees substantially in the form of Exhibit 4.18(c) annexed hereto.
Except as set forth on Exhibit 4.18(d) annexed hereto, to the best knowledge
of the Company after due inquiry, none of the Company's employees are subject
to confidentiality or similar types of agreements which would hinder or
prevent them from fully and lawfully performing their responsibilities as
employees.
4.19 NO DEFAULTS. The Company has in all material respects
performed all obligations required to be performed by it, and is not in default
in any material respect, under any material contract, commitment or instrument,
and no event or condition has occurred which, with the giving of notice or
passage of time, or both, would constitute such a default. To the best
knowledge of the Company, all parties having material contracts or commitments
with the Company are in compliance therewith in all material respects. Exhibit
4.19 annexed hereto contains an accurate list of all material contracts or
commitments as of the date of this Agreement, oral or written.
4.20 EMPLOYEE MATTERS. Exhibit 4.20 annexed hereto sets forth a
true and correct list of all officers and key employees of the Company, together
with a statement describing any agreement or arrangement any such person has
with the Company with respect to such person's employment or otherwise.
4.21 BROKERS AND FINDERS. No person or firm has, or will have,
any right, interest or valid claim against the Company or any Investor for any
commission, fee or other compensation as a finder or broker or in any similar
capacity as a result of any act or omission by the Company or anyone acting on
behalf of the Company in connection with any transaction contemplated by this
Agreement.
4.22 DISCLOSURE. Neither the representations and warranties made
by the Company in this Agreement or the Exhibits annexed hereto nor any writing
furnished to any Investor pursuant to this Agreement or in connection with this
Agreement by the Company or anyone acting on its behalf contains any untrue
statement of a material fact or omits to state any material fact required to
make the statements herein or therein not misleading in the light of the
circumstances under which those statements
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were made. There exists no fact or circumstance which, to the knowledge of the
Company or any officer or director of the Company, materially adversely affects
or could reasonably be anticipated to have a materially adverse effect on, the
existing or expected financial condition, operating results, assets or business
prospects of the Company.
4.23 FDA APPROVAL. The Company has no reason to believe that the
U.S. Food and Drug Administration will ultimately prohibit the marketing, sale,
license or use in the United States of any product currently under research and
development by the Company.
Section 5. REPRESENTATIONS AND WARRANTIES
OF INVESTORS.
Each Investor severally represents and warrants to the Company as
follows:
5.1 ORGANIZATION; CAPACITY. If such Investor is not an
individual, it is a partnership or corporation organized under the laws of the
jurisdiction as indicated under its name on the signature page of this
Agreement, with full authority (corporate or otherwise) to make and perform its
obligations under this Agreement. If such Investor is an individual, such
Investor is SUI JURIS and of full capacity to make and perform his or her
obligations under this Agreement.
5.2 AUTHORIZATION; NO BREACH. The execution, delivery and
performance by such Investor of this Agreement has been duly authorized and will
not violate any partnership agreement or articles of incorporation of such
Investor or constitute a breach of or default under any instrument to which such
Investor is a party or by which any of its, his or her properties are bound.
5.3 BINDING OBLIGATION. This Agreement constitutes a valid and
binding obligation of such Investor enforceable in accordance with its terms.
5.4 NO BROKER. No person or firm has, or will have, any right,
interest or valid claim against the Company or any other Investor for any
commission, fee or other compensation as a finder or broker or in any similar
capacity as a result of any act or omission by such Investor or anyone acting on
behalf of such Investor in connection with any transaction contemplated by this
Agreement.
5.5 PURCHASE FOR INVESTMENT. Such Investor is purchasing the
Shares for its, his or her own account for
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investment and not with a view to or for sale in connection with any
distribution of the Shares.
5.6 SUITABILITY. (a) Such Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating the
risks and the merits of an investment in the Company; (b) such Investor can bear
the economic risk of its, his or her investment in the amount set forth opposite
its, his or her name on Exhibit 1.1 annexed hereto (i.e., at the time of the
investment such Investor can afford a complete loss of the investment and can
afford to hold the investment for an indefinite period of time), and (iii) such
Investor is an "Accredited Investor" as that term is defined in Regulation D
under the Securities Act or to the extent such Investor is not an "Accredited
Investor," such Investor is fully capable of making all of the representations
and warranties in this Section 5, including (a) and (b) above, and by its, his
or her execution hereof does so affirm.
5.7 REGISTRATION OR SALES. (a) Such Investor understands that
the Securities are not registered under the Securities Act nor any regulatory
authority of any state and must be held indefinitely unless they are
subsequently registered under the Securities Act and any applicable state law or
an exemption from such registration is available; (b) such Investor is aware
that any routine sales of the Shares or any shares received upon conversion of
the Shares made under Rule 144 of the Commission (as hereinafter defined) under
the Securities Act may only be made in limited amounts and in accordance with
the terms and conditions of that Rule and that in cases where that Rule is not
applicable, compliance with Regulation A or some other disclosure exemption will
be required; and (c) such Investor understands that, except as otherwise
provided herein, the Company is under no obligation whatsoever and has no
intention to register the Shares or any shares that might be received upon
conversion of the Shares under the Securities Act, to comply with any such Rule
or exemption, or to supply such Investor with any information necessary to
enable such Investor to make routine sales of the Shares, or any shares received
upon conversion of the Shares, under Rule 144.
5.8 LEGENDED CERTIFICATES. Such Investor understands that the
certificates evidencing the Shares, and any other shares or equity securities
distributed on or in respect of or in substitution for or upon conversion of
such Shares (other than Shares that shall have been transferred pursuant to an
effective registration statement), will bear a legend substantially in the
following form until the Company's counsel determines that the legend is no
longer advisable:
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"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933 (the "Act") and are "restricted
securities" as defined in Rule 144 promulgated under the Act. The
securities may not be sold or offered for sale or otherwise distributed
except (i) pursuant to an effective registration statement for the
securities under the Act; (ii) in compliance with Rule 144; or (iii) after
receipt of an opinion of counsel satisfactory to the company that such
registration or compliance is not required as to said sale, offer or
distribution."
and that appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Shares so legended.
5.9 CONFIDENTIALITY. Such Investor shall hold in confidence any
confidential information about the Company that such Investor has received or
hereafter receives pursuant to any provision of this Agreement under
circumstances indicating the confidentiality of such information until the
Company shall have publicly disclosed such information, except information that
otherwise comes into the public domain or is disclosed by a third party having
the right to disclose it to the Investor without breach of this Agreement or any
other agreement by which the disclosing party is bound.
5.10 LOCK UP. Such Investor shall not, with respect to any
public offering of the Company's securities which occurs following the Closing
Date, effect any public sale or distribution of the Securities (as hereinafter
defined) during such period of time, if any, not to exceed 120 days, as any
underwriter shall reasonably require in connection with such public offering.
5.11 INVESTMENT COMPANY STATUS. Such Investor is not an
"investment company" within the meaning of the Investment Company Act of 1940.
Section 6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Investors as follows:
6.1 USE OF PROCEEDS. The cash proceeds of the sale of the
Shares to the Investors will be used for working capital and general corporate
purposes.
6.2 BOOKS AND ACCOUNTS. The Company will (a) make and keep
books, records and accounts, which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets; and (b) devise and
maintain a system
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of internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorization, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and in accordance with the Company's past practices or
any other criteria applicable to such statements, and to maintain accountability
for assets, (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.
6.3 PERIODIC REPORTS; BUDGETS.
(a) The Company will furnish to each member of the
Company's Board of Directors (a "Director") as soon as practicable, and in
any event within 90 days after the end of each fiscal year of the Company,
an annual report of the Company, including a balance sheet as of the end of
such fiscal year and statements of operations, shareholders' equity and
cash flows for such fiscal year, together with the related notes thereto,
setting forth in each case in comparative form corresponding figures for
the preceding fiscal year, all of which will present fairly the financial
position of the Company and the results of its operations and changes in
its financial position as of the time and for the period then ended. The
financial statements shall be accompanied by an unqualified report, in form
and substance reasonably satisfactory to 66 2/3% of the members of the
Company's Board of Directors then in office, of independent public
accountants of recognized national standing reasonably satisfactory to 66
2/3% of the members of the Company's Board of Directors then in office to
the effect that such financial statements have been prepared in accordance
with generally accepted accounting principles applied on a basis consistent
with prior years (except as otherwise specified in such report), and
present fairly the financial position of the Company and the results of its
operations and changes in its financial position as of the time and for the
period then ended. The Company will conduct its business so that such
report of the independent public accountants will not contain any
qualifications as to the scope of the audit, the continuance of the
Company, or with respect to the Company's compliance with generally
accepted accounting principles, except for changes in methods of accounting
in which such accountants concur.
(b) The Company will furnish to each Director as soon as
practicable, and in any event within 45 days after the end of each fiscal
quarter of the Company, a
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report of the Company consisting of an unaudited balance sheet as of the
end of such quarter, and unaudited statements of operations, shareholders'
equity and cash flows for such quarter, and for the fiscal year-to-date,
setting forth in each case in comparative form the corresponding figures for
the preceding year. All such reports shall be certified by the Treasurer of
the Company to present fairly the financial position of the Company and the
results of its operations and changes in its financial position as of the
time and for the period then ended and to have been prepared in accordance
with generally accepted accounting principles, subject to normal year-end
adjustments, which shall not be material in nature or amount.
(c) The Company will furnish to each Director as soon as
practicable and in any event at least 30 days prior to the end of each
fiscal year of the Company, an annual operating budget for the Company for
the first succeeding fiscal year containing statements of operations, cash
flows and ending balance sheets for each quarter of such fiscal year.
Promptly upon preparation thereof, the Company will furnish to each
Director any other budgets that the Company may prepare and any revisions
of such previously furnished budgets.
6.4 OTHER REPORTS AND INSPECTION. The Company will furnish to
each Director (a) as soon as practicable after issuance, copies of any financial
statements or reports prepared by the Company for, or otherwise furnished to,
its shareholders or the Commission and (b) promptly, such other documents,
reports and financial data as such Director may reasonably request. In addition
the Company will, upon reasonable prior notice, make available during regular
business hours to each Director or his representatives or designees (c) all
assets, properties and business records of the Company for inspection and
copying and (d) the officers and employees of the Company for interviews
concerning the business, affairs and finances of the Company.
6.5 RETENTION OF AUDITORS. The Company shall select as auditors
independent public accountants of recognized national standing, subject to the
approval of the Company's Board of Directors.
6.6 MERGER; SALE OF ASSETS; DISSOLUTION. So long as shares of
Series B Convertible Preferred Stock issued hereunder are outstanding, the
Company will not become a party to any merger or consolidation, or sell, lease
or otherwise dispose of substantially all of its assets, other than sales and
leases of assets in the ordinary course of business, or dissolve or liquidate
its assets without the prior approval of holders of
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record of a majority of the shares of Series B Convertible Preferred Stock and
Series A Convertible Preferred Stock, voting as a class, outstanding as of a
record date between 10 and 90 days prior to the consummation of any such
transaction, except that (a) any subsequently formed Subsidiary may merge or
consolidate with the Company so long as the Company is the surviving entity of
such merger or consolidation, and (b) any subsequently formed Subsidiary may
lease, sell, transfer or otherwise dispose of all or any part of its properties
and assets to the Company.
6.7 ACQUISITION. So long as shares of Series B Convertible
Preferred Stock issued hereunder are outstanding, the Company will not acquire
any interest in any business from any person, firm or entity (whether by a
purchase of assets, purchase of stock, merger or otherwise) in which the
consideration to be paid, as of the date as of which any such agreement with
respect to such acquisition is entered into, represents more than 25% of the
total assets of the Company without the prior approval of holders of record of a
majority of the shares of Series B Convertible Preferred Stock and Series A
Convertible Preferred Stock, voting as a class, outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction, except
as otherwise specifically permitted pursuant to the provisions of this
Agreement.
6.8 DIVIDENDS; REPURCHASES. So long as shares of Series B
Convertible Preferred Stock issued hereunder are outstanding, the Company shall
not declare or pay any dividends on, and shall not purchase, redeem, retire or
otherwise acquire, any shares of its capital stock (other than the shares of
Series B Convertible Preferred Stock or Series A Convertible Preferred Stock),
whether now or hereafter outstanding, without obtaining the prior approval of
holders of record of a majority of the shares of Series B Convertible Preferred
Stock and Series A Convertible Preferred Stock, voting as a class, outstanding
as of a record date between 10 and 90 days prior to the declaration date or the
date of consummation of any such transaction, as applicable.
6.9 CONSENTS. Prior to Closing the Company shall obtain all
consents and shareholder approvals needed to enable it to perform all of its
obligations under this Agreement and the transactions contemplated hereby.
6.10 ISSUANCE OF ADDITIONAL SECURITIES. Except for the Common
Stock issued on conversion of the Series B Convertible Preferred Stock or any
other convertible securities of the Company and except for Common Stock or
convertible securities (including Common Stock issuable on conversion thereof)
issued or issuable to officers, directors, employees or
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consultants or to prospective officers, directors, employees or consultants,
pursuant to stock option, stock incentive, stock appreciation, stock bonus,
stock award or compensation rights plans or arrangements or employment letters
presently in effect or hereafter adopted or entered into by the Company, the
Company will not issue or sell, or enter into any agreement providing for the
issuance or sale of, any equity or debt securities or options, warrants or other
rights to purchase or acquire any equity or debt securities, or any security
convertible into or exchangeable for any equity or debt security, without
obtaining the prior approval of holders of record of a majority of the shares of
Series B Convertible Preferred Stock and Series A Convertible Preferred Stock,
voting as a class, outstanding as of a record date between 10 and 90 days prior
to the consummation of any such transaction, which approval will not be
unreasonably withheld; provided, however, that the provisions of this Paragraph
6.10 shall not apply to the issuance or sale or an agreement for the issuance or
sale of up to a maximum of 4,000,000 additional shares of Series B Convertible
Preferred Stock which may be issued by the Company subsequent to the date
hereof, as contemplated by Section 9.1 hereof.
6.11 TAXES AND LIENS. The Company will duly pay and discharge,
when payable, all taxes, assessments and governmental charges imposed upon or
against the Company or its properties, or any part thereof or upon the income or
profits therefrom, in each case before the same become delinquent and before
penalties accrue thereon, as well as all claims for labor, materials or supplies
which if unpaid might by law become a lien upon any of its property, unless and
to the extent that the same are being contested in good faith and by appropriate
proceedings and the Company has set aside on its books adequate reserves with
respect thereto.
6.12 RESTRICTIVE AGREEMENT. Subsequent to Closing, the Company
will not be a party to any agreement or instrument which by its terms would
restrict the Company's performance of its obligations pursuant to this Agreement
or the terms of the Shares including any redemption or conversion thereof.
6.13 NOTIFICATION OF REGISTRATION UNDER THE EXCHANGE ACT. THE
Company will give each holder of record of the Shares prompt written notice of
the effectiveness of any registration statement filed pursuant to the
requirements of Section 12 of the Exchange Act (as hereinafter defined) or
pursuant to any equivalent provision of any similar federal law then in force (a
"1934 Act Registration Statement") relating to the Common Stock of the Company,
and the number of shares of such class of equity securities outstanding at the
time such registration statement becomes effective. If the Company has
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filed a 1934 Act Registration Statement or a registration statement on any Form
other than Form S-8 (or any successor form) pursuant to the requirements of the
Securities Act, the Company further covenants that it will file all reports
required to be filed by it under the Securities Act or the Exchange Act and the
rules and regulations adopted by the Commission thereunder or, if the Company is
not required to file such reports, it will, upon the request of a holder of
Shares, make publicly available such information as will enable such holder to
sell such Shares without a registration statement (as described below), and will
take such further action as such holder may request, all to the extent required
from time to time to enable such holder to sell such Shares, without
registration within the limitations of the exemptions provided by (i) Rule 144
and Rule 144A adopted by the Commission under the Securities Act, as such rules
may be amended from time to time, or (ii) any similar rule or regulation
hereafter adopted by the Commission.
6.14 SALE OR TRANSFER OF RESTRICTED SECURITIES. An opinion of
counsel will not be necessary for a transfer by an Investor which is a
partnership to a partner of such partnership or to a retired partner of such
partnership who retires after the date hereof, or to the estate of any partner
or retired partner, or to a trust for the benefit of an Investor or an
Investor's family members or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
6.15 RIGHT OF FIRST OFFER.
(a) Except in the case of Excluded Securities (as hereinafter
defined) the Company shall not issue, sell or exchange, agree to issue, sell or
exchange, or reserve or set aside for issuance, sale or exchange, any (A) shares
of Common Stock, (B) any other equity security of the Company, (C) any debt
security of the Company which, by its terms, is convertible into or exchangeable
for any equity security of the Company, (D) any security of the Company that is
a combination of debt and equity or (E) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Company, unless in each case the Company shall have first
offered to sell to the Investors and the Series A Investors such securities (the
"Offered Securities"), at a price and on such other terms as shall have been
specified by the Company in writing delivered to each of the Investors and the
Series A Investors (the "Offer"), which Offer by its terms shall remain open and
irrevocable for a period of thirty (30) days from the date it is delivered by
the Company to the Investors and the Series A Investors.
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(b) Each of the Investors shall have the right to purchase up to its
pro rata share (as defined below) of the Offered Securities. For the purposes
of this Section (b), each Investor's "pro rata share" shall be that amount of
the Offered Securities which would result in such Investor owning the same
percentage of the Company's issued and outstanding Common Stock after the
issuance of Offered Securities as such Investor owned immediately prior to the
issuance (assuming in each case the issuance of all Common Stock issuable upon
conversion of the Series A Convertible Preferred Stock and Series B Convertible
Preferred Stock and of all shares issuable upon the conversion of the Offered
Securities).
(c) Notice of an Investor's intention to accept, in whole or in part,
an Offer shall be evidenced by a writing signed by the Investor and delivered to
the Company prior to the end of the 30-day period of such Offer, setting forth
such portion of the Offered Securities as the Investor elects to purchase (the
"Notice of Acceptance").
(d) In the event that the Investors and the Series A Investors do not
elect to purchase all of the Offered Securities which they are entitled to
purchase under Section 6.15(b) hereof and Paragraph 6(p)(ii) of the Series A
Agreement, the Company shall within 5 days of the earlier of (A) the receipt of
all of the Notices of Acceptances from the Investors pursuant to subsection (c)
above and from the Series A Investors pursuant to Section 6(p)(iii) of the
Series A Agreement or (B) the expiration of the 30-day period provided in
Section 6.15(a) provide each of the Investors who have delivered a Notice of
Acceptance with written notice of the number of Offered Securities which have
not been accepted by the Investors or the Series A Investors (the "Refused
Shares"), and each such Investor shall have 10 days to inform the Company in
writing of its intention to purchase its pro rata share of such Refused Shares.
For the purposes of this subsection (d), "pro rata share" shall mean the
percentage obtained by dividing the number of Securities, Series A Securities
and other shares of Common Stock owned and to be purchased by an Investor who
has delivered a Notice of Acceptance pursuant to subsection (c) above by the
total number of Securities, Series A Securities or other shares of Common Stock
owned and to be purchased by Investors who have delivered Notices of Acceptance
pursuant to subsection (c) above or by Series A Investors who have delivered
Notices of Acceptance pursuant to Paragraph 6(p)(iii) of the Series A
Agreement. Upon the expiration of such ten-day period, the Company shall have
90 days to sell all or any part of such Refused Shares as to which the Company
has not received a notice from the Investors pursuant to subsection 6.15(c) or
this subsection (d) or from the Series A Investors pursuant to Paragraphs
6(p)(iii) or 6(p)(iv) of the Series A Agreement to any other person or persons,
but only upon
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terms and conditions in all material respects, including, without limitation,
unit price and interest rates (but excluding payment of legal fees of counsel
of the purchaser), which are no more favorable, in the aggregate, to such other
person or persons or less favorable to the Company that those set forth in the
Offer. Upon the closing of the sale to such other person or persons of all the
Refused Securities, which shall include payment of the purchase price to the
Company in accordance with the terms of the Offer, the Investors shall purchase
from the Company, and the Company shall sell to the Investors, the Offered
Securities in respect of which a Notice of Acceptance was delivered to the
Company by an Investor, at the terms specified in the Offer. The purchase by an
Investor of any Offered Securities is subject in all cases to the preparation,
execution and delivery by the Company and the Investor of a purchase agreement
relating to such Offered Securities satisfactory in form and substance to the
Investor and its counsel.
(e) In each case, any Offered Securities not purchased by the
Investors or other person or persons in accordance with subsections 6.15(b), (c)
and (d) hereof or by the Series A Investors in accordance with Paragraph 6(p) of
the Series A Agreement may not be sold or otherwise disposed of until they are
again offered to the Investors and the Series A Investors under the procedures
specified in subsections 6.15(a), (b), (c) and (d) hereof and in Paragraph 6(p)
of the Series A Agreement.
(f) The rights of the Investors and the Series A Investors under this
Section 6.15 shall not apply to the following securities (the "Excluded
Securities"):
(A) Common Stock issued to officers, employees or
directors of, or consultants to, the Company, pursuant to any
agreement, plan or arrangement approved by the Board of Directors of
the Company or a committee thereof, or options to purchase or rights
to subscribe for such Common Stock, securities by their terms
convertible into or exchangeable for such Common Stock, or options to
purchase or rights to subscribe for such convertible or exchangeable
securities;
(B) Common Stock issued as a stock dividend or upon
any stock split or other subdivision or combination of shares of
Common Stock;
(C) Common Stock issued upon conversion of any of the
Series B Preferred Stock;
(D) Common Stock issued upon conversion of any other
shares of convertible stock of the Company;
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(E) securities issued in connection with any
acquisition by the Company if the issuance of such securities has been
approved by at least 66 2/3% of the Directors;
(F) securities issued by the Company in connection
with the redemption of the Series B Convertible Preferred Stock or any
other shares of convertible stock of the Company as provided in the
Articles of Incorporation, as amended, of the Company; and
(G) securities issued by the Company in connection
with any public offering of any securities of the Company pursuant to
a registration statement filed by the Company under the Securities Act
on any Form other than Form S-8.
(H) additional shares of Series B Convertible
Preferred Stock issued by the Company as contemplated by Section 9.1
hereof.
(g) Notwithstanding the provisions of Section 9.4 hereof, the rights
under this Section 6.15 shall not be assignable except (A) to a partner of any
of the Investors or retired partner of any of the Investors who retires after
the date hereof or the estate of any such partner or retired partner, or (B) to
an Affiliate (as such term is defined in Rule 501(b) of the Securities Act) of
an Investor. An Investor shall provide the Company with notice of any
assignment under this subsection (g) within 10 days after its occurrence.
6.16 DEBT. Without the prior approval of not less than 66 2/3%
of the Directors then in office, the Company shall not enter into any
commitments to incur or guarantee any debt for borrowed money (which for
purposes hereof shall include leases which are capitalized or financed) or incur
any indebtedness which by its terms is convertible into equity or issued in
connection with any options or warrants of the Company in the aggregate in
excess of $100,000.
6.17 BOARD REPRESENTATION. The Company shall use its best
efforts to limit the number of persons constituting the Board of Directors to
nine. So long as the Investors shall continue to own collectively at least 20%
of the issued and outstanding Common Stock, assuming conversion of all
outstanding convertible securities, they shall collectively have the right to
nominate one person to the Company's Board of Directors.
6.18 INSURANCE. The Company shall keep its insurable properties
insured at all times to such extent and
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against such risks, including fire, business interruption, and other risks
insured against by extended coverage, as is customary with companies of
comparable size and financial condition in the same or similar businesses;
maintain in full force and effect product liability insurance and public
liability insurance against claims for personal injury or death or property
damage occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by the Company, in such amount as the Company
shall reasonably deem necessary; and maintain workers' compensation insurance
and such other insurance as may be required by law.
6.19 OFFICER COMPENSATION. All compensation paid to the
president, treasurer, controller, secretary and all vice-presidents of the
Company, whether as salary, fringe benefits, stock bonuses or otherwise, as
currently in effect is hereby approved by the Investors. After the Closing
Date, all such compensation shall be determined by the Compensation Committee of
the Board of Directors.
6.20 NON-DISCLOSURE AND PATENT AND INVENTION ASSIGNMENT
AGREEMENTS. The Company shall cause each person who becomes an employee of the
Company subsequent to the date hereof, and who shall have or be proposed to have
access to confidential or proprietary information of the Company, to execute an
agreement relating to matters of non-disclosure, proprietary information and
patent assignment substantially in the form attached hereto as Exhibit 4.18(c)
(which reflects the current Apollon form of Agreement relating thereto) and such
executed agreements shall not be modified or amended in any respect without the
prior written consent of a majority of the holders of Shares.
6.21 MEETINGS OF THE BOARD OF DIRECTORS. The Company shall call,
and use its best efforts to have, regular meetings of the Board of Directors not
less often than quarterly. The Company shall pay all reasonable travel expenses
and other out-of-pocket disbursements incurred by a Director in connection with
his attending such meeting.
6.22 REGISTRATION RIGHTS. In the event the Company makes an
offering of its securities subsequent to the Closing, including any offering of
additional shares of Series B Convertible Preferred Stock as contemplated by
Section 9.1 hereof, it shall not grant registration rights that are senior in
any respect to the registration rights granted to the Investors pursuant to
Section 7 hereof; provided, however, that the Company shall have the right to
grant registration rights on a PARI PASSU basis to the registration rights
granted in Section 7 hereof.
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6.23 ADDITIONAL NEGATIVE COVENANTS. Without the approval by
majority vote of the Directors, the Company will not directly or indirectly:
(a) RELATED TRANSACTIONS. Except for employment
arrangements with its officers, enter into any agreement or understanding,
whether written or oral, with an officer, director or shareholder of the
Company or any entity in which such officer, director or shareholder has a
ten percent (10%) ownership interest or is otherwise deemed to be an
affiliate pursuant to Rule 501(b) of the Securities Act for the provision
of services or the purchase of products. All such Related Transactions
shall be conducted only on an arm's length basis and on terms no less
favorable to the Company than could be obtained from non-related persons.
(b) AMENDMENTS TO ARTICLES OF INCORPORATION. Take any
action or to cause any amendment, alteration or repeal of any provisions of
the Amended Articles or Bylaws.
(c) DISSOLUTION OR LIQUIDATION. Voluntarily dissolve,
liquidate or wind-up or carry out any partial liquidation or distribution.
Section 7. REGISTRATION OF COMMON STOCK.
7.1 DEMAND REGISTRATION. Upon the written request of one or
more record holders of Securities, which request will state the intended method
of disposition by such holders and will request that the Company effect the
registration under the Securities Act of all or part of the Registerable Common
Stock (as hereinafter defined) of such holders, the Company will, within 10 days
after receipt of such request, give written notice of such requested
registration to all registered holders of Securities and Series A Securities,
and thereupon (except as expressly provided herein) will use its best efforts to
effect the registration ("Demand Registration") under the Securities Act of (x)
the shares of Registerable Common Stock included in the initial request for
registration (for disposition in accordance with the intended method of
disposition stated in such request) and (y) all other shares of Registerable
Common Stock and shares of Series A Registerable Common Stock the holders of
which have made written request to the Company for registration thereof within
30 days after the receipt of such written notice from the Company, provided
that:
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(a) the Company shall be required to effect only two Demand
Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Securities outstanding at
the time of the request; PROVIDED that the Company shall not be required to
effect more than one registration during any one year period pursuant to
this Section 7.1 or paragraph 7(a) of the Series A Agreement (except that,
upon request of any holder of Securities (regardless of the number of
Securities held by such holder), the Company, if it is then qualified to do
so, shall be required to effect up to four registrations on Form S-3, or a
similar short form registration statement, which registrations (hereinafter
referred to as "Short Form Registrations") shall not be counted for
purposes of this Section 7.1(a) as the Demand Registration which the
Company is required to effect);
(b) if the holders of Registerable Common Stock who
initiated the request for registration intend to sell their Registerable
Common Stock by means of an underwriting (whether on a "best efforts" or a
"firm commitment" basis), they shall so advise the Company as part of their
request, and the Company shall include such information in the notice to
the other holders of Securities and Series A Securities. In that event,
the other holders of Securities and Series A Securities shall have the
right to include their shares of Registerable Common Stock or Series A
Registerable Common Stock in the underwriting (unless otherwise mutually
agreed by a majority in interest of the holders of the Securities and
Series A Securities). The managing underwriter for such offering shall be
selected by the Board of Directors of the Company. Each such holder
agrees, with respect to an underwritten public offering which occurs
following the Closing Date, by its acquisition of Securities not to effect
any public sale or distribution of such Securities or Registerable Common
Stock (other than as part of such underwritten public offering) during such
period, if any, not to exceed 120 days, as shall reasonably be requested by
any underwriter;
(c) the Company shall not include and shall not permit
third parties other than the holders of Series A Securities to include
additional securities in a Demand Registration without the consent of the
holders of a majority of the shares of Registerable Common Stock and Series
A Registerable Common Stock included in such Demand Registration;
(d) if a Demand Registration under this Section 7.1 is in
connection with an underwritten public offering, and if the managing
underwriters advise the
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Company in writing that in their opinion the amount of Registerable Common
Stock and Series A Registerable Common Stock requested to be included in
such registration exceeds the amount of such Registerable Common Stock and
Series A Registerable Common Stock which can be successfully sold in such
offering, the Company will nevertheless include in such registration, prior
to the inclusion of any securities which are not Registerable Common Stock
or Series A Registerable Common Stock (notwithstanding any consent obtained
in accordance with paragraph 7.1(c) hereof), the amount of Registerable
Common Stock and Series A Registerable Common Stock requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
holders of Registerable Common Stock and Series A Registerable Common Stock
requesting inclusion on the basis of the number of shares of Registrable
Common Stock and Series A Registerable Common Stock then owned by such
holders; provided, however, that if the holders of Registerable Common Stock
are unable to include in such offering at least fifty percent (50%) of the
Registerable Common Stock sought to be registered in a Demand Registration
under this Section 7.1, the holders of Securities will be entitled to an
additional Demand Registration under this paragraph;
(e) if the Company shall furnish to the holders requesting
a registration pursuant to this Section 7 a certificate signed by the
President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company for a registration statement to be filed as requested, the Company
shall have the right to defer such filing for a period of not more than 120
days after receipt of the initial request for registration under this
Section 7.1; provided, however, that the Company may not utilize this right
more than once in any one-year period;
(f) registrations under this Section 7.1 will be on a form
permitted by the rules and regulations of the Commission selected by the
underwriters if the Demand Registration is in connection with an
underwritten public offering or otherwise by the Company; and
(g) notwithstanding anything else contained herein, the
Company will not be required to effect a Demand Registration pursuant to
this Section 7.1 unless the aggregate number of shares of Common Stock to
be registered exceeds 20% of the shares of Common Stock then held by the
holders of the Securities or issuable to such holders upon conversion of
the Shares.
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7.2 INCIDENTAL REGISTRATIONS.
(a) If the Company at any time proposes to register any of
its securities under the Securities Act (other than pursuant to Section 7.1
hereof or Paragraph 7(a) of the Series A Agreement), whether of its own
accord or at the demand of any holder of such securities pursuant to an
agreement with respect to the registration thereof (provided such agreement
does not prohibit third parties from including additional securities in
such registration), and if the form of registration statement proposed to
be used may be used for the registration of Registerable Common Stock, the
Company will give notice to all holders of record of Securities not less
than 5 days nor more than 30 days prior to the filing of such registration
statement of its intention to proceed with the proposed registration (the
"Incidental Registration"), and, upon the written request of any such
holder made within 5 days after the receipt of any such notice (which
request will specify the Registerable Common Stock intended to be disposed
of by such holder and state the intended method of disposition thereof),
the Company will use its best efforts to cause all Registerable Common
Stock as to which registration has been requested to be registered under
the Securities Act, provided that if such registration is in connection
with an underwritten public offering, such holder's Registerable Common
Stock to be included in such registration shall be offered upon the same
terms and conditions as apply to any other securities included in such
registration. Notwithstanding anything contained in this Section 7.2 to
the contrary, the Company shall have no obligation to cause Registerable
Common Stock to be registered with respect to any Investor whose
Registerable Common Stock shall be eligible for resale under Rule 144(k) of
the Securities Act.
(b) If an Incidental Registration is a primary registration
on behalf of the Company and is in connection with an underwritten public
offering, and if the managing underwriters advise the Company in writing
that in their opinion the amount of securities requested to be included in
such registration (whether by the Company, the holders of registration
rights pursuant to Section 7.2(a) or other holders of its securities
pursuant to any other rights granted by the Company to demand inclusion of
any such securities in such registration) exceeds the amount of such
securities which can be successfully sold in such offering, the Company
will include in such registration the amount of securities requested to be
included which in the opinion of such underwriters can be sold, in the
following order (i) first, all of the securities the Company proposes to
sell, (ii) second, all of the Registerable Common Stock and
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Series A Registerable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the number
of shares of Registrable Common Stock or Series A Registerable Common Stock
then owned by such holders, and (iii) third, any other securities requested
to be included in such registration, pro rata among the holders thereof on
the basis of the amount of such securities then owned by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of securities requested to be included in such registration (whether by
such holders, by holders of registration rights pursuant to Section 7.2(a)
or by holders of its securities pursuant to any other rights granted by the
Company to demand inclusion of securities in such registration) exceeds the
amount of such securities which can be sold in such offering, the Company
will include in such registration the amount of securities requested to be
included which in the opinion of such underwriters can be sold, in the
following order (i) first, all of the securities requested to be included
by holders demanding or requesting such registration, (ii) second, all of
the Registerable Common Stock and Series A Registerable Common Stock
requested to be included in such registration, pro rata among the holders
thereof on the basis of the number of shares of Registrable Common Stock
and Series A Registerable Common Stock then owned by such holders, and
(iii) third, any other securities requested to be included in such
registration, pro rata among the holders thereof on the basis of the amount
of such securities then owned by such holders.
7.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registerable Common Stock under the Securities Act as provided in this
Section 7, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registerable Common Stock and use its best
efforts (which shall not, in any case, require the Company to incur any
unreasonable expense) to cause such registration statement to become
effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as
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may be necessary to keep such registration statement effective for a period
of not less than six months or such shorter period in which the disposition
of all securities in accordance with the intended methods of disposition by
the seller or sellers thereof set forth in such registration statement shall
be completed, and to comply with the provisions of the Securities Act (to
the extent applicable to the Company) with respect to such dispositions;
(c) furnish to each seller of such Registerable Common
Stock such number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits),
such number of copies of the prospectus included in such registration
statement (including each preliminary prospectus), in conformity with the
requirements of the Securities Act, and such other documents, as such
seller may reasonably request, in order to facilitate the disposition of
the Registerable Common Stock owned by such seller;
(d) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or
qualify such Registerable Common Stock covered by such registration
statement under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests, and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registerable Common Stock owned by such seller, except that the Company
will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not,
but for the requirements of this Section 7.3(d) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to
consent to general service of process in any such jurisdiction;
(e) provide a transfer agent and registrar for all such
Registerable Common Stock covered by such registration statement not later
than the effective date of such registration statement;
(f) notify each seller of such Registerable Common Stock at
any time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in such registration statement contains an
untrue statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company will prepare a supplement or amendment to such prospectus so
that, as
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thereafter delivered to the purchasers of such Registerable Common Stock,
such prospectus will not contain an untrue statement of a material fact or
omit to state any fact required to be stated therein or necessary
to make the statements therein not misleading;
(g) use its best efforts to cause all such Registerable
Common Stock to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(h) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and
covering such matters of the type customarily covered by cold comfort
letters in such transactions;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions
as reasonably required in order to expedite or facilitate the disposition
of such Registerable Common Stock; and
(j) make available for inspection by any seller of
Registerable Common Stock, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or
other agent retained by any such seller and/or representative of such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by
any such seller, underwriter, attorney, accountant or agent in connection
with such registration statement.
7.4 REGISTRATION AND SELLING EXPENSES.
(a) All expenses incurred by the Company in connection with
the Company's performance of or compliance with this Section 7, including,
without limitation (A) all registration and filing fees (including all
expenses incident to filing with the National Association of Securities
Dealers, Inc.), (B) blue sky fees and expenses, (C) all printing expenses
and (D) all fees and disbursements of counsel and accountants for the
Company (including the expenses of any audit of financial statements),
retained by the Company (all such expenses being herein called
"Registration Expenses"), will be paid by the Company except as otherwise
expressly provided in this Section 7.4.
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(b) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees
performing legal, accounting or other duties in connection therewith and
expenses of audits of year-end financial statements), and the expenses and
fees for listing the securities to be registered on one or more securities
exchanges on which similar securities issued by the Company are then
listed.
(c) The Company shall bear the Registration Expenses of
each Demand Registration, each Incidental Registration and each Short Form
Registration hereunder.
(d) Notwithstanding any of the foregoing, all underwriting
discounts, selling commissions and stock transfer taxes applicable to sales
of Registerable Common Stock in connection with any Demand Registration,
Incidental Registration or Short Form Registration shall be borne by all
persons who are selling Registerable Common Stock pursuant to such
Registration Statement in proportion to the dollar value of the securities
being sold by each such person.
(e) All fees and expenses required to be paid by the
holders of Registerable Common Stock pursuant to Section 7.4(d) in
connection with any Incidental Registration hereunder shall be borne by
said holders in proportion to the dollar value of the securities of such
holder covered by such Incidental Registration.
7.5 OTHER CONDITIONS RELATING TO REGISTRATIONS. The Company
shall not be required to furnish any audited financial statements at the request
of any holder of Registerable Common Stock other than those statements
customarily prepared at the end of its fiscal year, unless (a) the requesting
holder of Registerable Common Stock shall agree to reimburse the Company for the
out-of-pocket costs incurred by the Company in the preparation of such other
audited financial statements or (b) such other audited financial statements
shall be required by the Commission as a condition to declaring a Demand
Registration effective under the Securities Act.
7.6 OTHER PUBLIC SALES AND REGISTRATIONS. The Company agrees
(a) that if it has previously filed a registration statement with respect to
Registerable Common Stock in connection with a Demand Registration or Incidental
Registration hereunder, and if such previous registration has not been withdrawn
or abandoned, the Company will not file or cause to become effective any other
registration of any of its securities under the Securities Act or otherwise
effect a public sale or distribution
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of its securities (except pursuant to registration on Form S-8 or any successor
form relating to a special offering to the employees or security holders of the
Company or any Subsidiary hereafter formed or acquired), whether on its own
behalf or at the request of any holder of such securities, until at least 60
days have elapsed after the effective date of such previous registration; and
(ii) to cause each holder of securities purchased from the Company any time
after the date of this Agreement (other than in a registered public offering)
to agree not to effect any such public sale or distribution during such 60 day
period of any such securities or any securities issuable on the conversion
thereof or in redemption or exchange therefor. The foregoing 60-day limitation,
however, shall not preclude the Company from proceeding with a registration
statement requested by a holder of securities with "demand" registration rights
who requests registration prior to the time a registered holder of Securities
requests a registration pursuant to Section 7.1.
7.7 TRANSFEREES OF SECURITIES. Notwithstanding anything else
set forth in this Section 7, no person to whom Securities are transferred shall
have any rights under this Section 7 as a holder of such Securities unless (a)
such person (i) is a partner of any Investor which is a partnership or a retired
partner of such partnership who retires after the date hereof, (ii) is a family
member of or trust for the benefit of any Investor, or (iii) acquires at least
100,000 shares of Registerable Common Stock, (b) such person agrees to be bound
by the terms and conditions of this Agreement and (c) the Company is given
prompt written notice of such transfer.
7.8 INDEMNIFICATION.
(a) The Company hereby agrees to indemnify, to the extent
permitted by law, each holder of Registerable Common Stock, its officers
and directors, if any, and each person, if any, who controls such holder
within the meaning of the Securities Act, against all losses, claims,
damages, liabilities and expenses under the Securities Act, applicable
state securities laws, common law or otherwise (including, as incurred,
legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by Section 7.8(c) below) caused by any untrue statement or alleged
untrue statement of a material fact contained in any registration statement
or prospectus (and as amended or supplemented if the Company has furnished
any amendments or supplements thereto) or any preliminary prospectus, which
registration statement, prospectus or preliminary prospectus shall be
prepared in connection with a Demand Registration or Incidental
Registration, or caused by any omission or alleged omission to state
therein a material fact required
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to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from information
furnished in writing to the Company by such holder in connection with a
Demand Registration or Incidental Registration, provided the Company will
not be liable pursuant to this Section 7.8 if such losses, claims, damages,
liabilities or expenses have been caused by any selling security holder's
failure to deliver a copy of the registration statement or prospectus, or
any amendments or supplements thereto, after the Company has furnished such
holder with a sufficient amount of copies of the same.
(b) In connection with any registration statement in which
a holder of Registerable Common Stock is participating, each such holder
shall furnish to the Company in writing such information as is reasonably
requested by the Company for use in any such registration statement or
prospectus and shall indemnify, to the extent permitted by law, the
Company, its directors and officers and each person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities and expenses under the Securities Act,
applicable state securities laws, common law or otherwise (including, as
incurred, legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by Section 7.8(c) below) caused by any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of
a material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, but only to the extent such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or alleged untrue statement contained in or by an omission or
alleged omission from information so furnished in writing by such holder in
connection with the Demand Registration or Incidental Registration. If the
offering pursuant to any such registration is made through underwriters,
each such holder agrees to enter into an underwriting agreement in
customary form with such underwriters and to indemnify such underwriters,
their officers and directors, if any, and each person who controls such
underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by such holder of the
Company. Notwithstanding the foregoing, no such holder of Registerable
Common Stock shall be liable under this Section 7.8(b) for any amounts
exceeding the product of (i)
31
<PAGE>
the offering price per share of Registerable Common Stock pursuant to the
registration statement in which such holder is participating (less any
underwriting discounts or commissions which reduce the amount such holder
receives), multiplied by (ii) the number of shares of Registerable Common
Stock being sold by such holder pursuant to such registration statement.
(c) Promptly after receipt by an indemnified party under
Section 7.8(a) or Section 7.8(b) of notice of the commencement of any
action or proceeding, such indemnified party will, if a claim in respect
thereof is or is to be made against the indemnifying party under such
Section, notify the indemnifying party in writing of the commencement
thereof; but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party
otherwise than under such Section. In case any such action or proceeding
is brought against any indemnified party, and it notifies the indemnifying
party of the commencement thereof, the indemnifying party will be entitled
to participate therein, and, to the extent that it wishes, jointly with any
other indemnifying party similarly notified, to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under such Section for any legal or any
other expenses subsequently incurred by such indemnified party in
connection with the defense thereof (other than reasonable costs of
investigation) unless incurred at the written request of the indemnifying
party. Notwithstanding the above, the indemnified party will have the
right to employ one counsel (exclusive of local counsel) of its own choice
in any such action or proceeding if the indemnified party has reasonably
concluded that there may be defenses available to it which are different
from or additional to those of the indemnifying party, or counsel to the
indemnified party is of the opinion that it would not be desirable for the
same counsel to represent both the indemnifying party and the indemnified
party because such representation might result in a conflict of interest
(in either of which cases the indemnifying party will not have the right to
assume the defense of any such action or proceeding on behalf of the
indemnified party or parties and such legal and other expenses will be
borne by the indemnifying party). An indemnifying party will not be liable
to any indemnified party for any settlement of any such action or
proceeding effected without the consent of such indemnifying party.
32
<PAGE>
(d) If the indemnification provided for in Section 7.8(a)
or Section 7.8(b) is unavailable under applicable law to an indemnified
party in respect of any losses, claims, damages or liabilities referred to
therein, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
fault of the Company on the one hand and of the holders of Registerable
Common Stock on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as well as
any other relevant equitable considerations. The relative fault of the
Company on the one hand and of the holders of Registerable Common Stock on
the other shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission
to state a material fact relates to information supplied by the Company or
by the holders of Registerable Common Stock and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages and liabilities referred to
above shall be deemed to include, subject to the limitations set forth in
Section 7.8(c), any legal or other fees or expenses reasonably incurred by
such party in connection with investigating or defending any action or
claim. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
(e) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of any action or proceeding, such
party will, if a claim for contribution in respect thereof is to be made
against another party (the "contributing party"), notify the contributing
party of the commencement thereof; but the omission so to notify the
contributing party will not relieve it from any liability which it may have
to any other party other than for contribution hereunder. In case any such
action, suit, or proceeding is brought against any party, and such party
notifies a contributing party of the commencement thereof, the contributing
party will be entitled to participate therein with the notifying party and
any other contributing party similarly notified. No party shall be liable
for contribution with regard to the settlement of any action or proceeding
effected without its consent.
33
<PAGE>
7.9 CONVERSION OF PREFERRED STOCK. Any request for a Demand
Registration or Incidental Registration with respect to Registerable Common
Stock issuable upon the conversion of Shares will provide in the intended method
of disposition accompanying such request that conversion of Shares into Common
Stock in accordance with the terms thereof will be undertaken promptly after a
registration statement has become effective or the sale thereof to underwriters
has been consummated so that no Shares will be distributed to the public under
such registration statement.
7.10 AMENDMENT OF SECTION 7. Any provision of this Section 7 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and holders of record of a majority of the
Securities and the Series A Securities, voting as a class, outstanding as of a
record date between 10 and 90 days prior to the effective date of such amendment
or waiver. Any amendment or waiver effected in accordance with this Paragraph
7.10 shall be binding upon each holder of Securities and Series A Securities at
the time outstanding (including securities into which such Securities and Series
A Securities are convertible), each future holder of all such Securities or such
Series A Securities, and the Company.
Section 8. CERTAIN DEFINITIONS.
For the purposes of this Agreement the following terms have the
respective meanings set forth below:
8.1 "BUSINESS PLAN" means the Business Plan of the Company
dated May, 1993.
8.2 "COMMISSION" means the Securities and Exchange Commission
and includes any governmental body or agency succeeding to the functions
thereof.
8.3 "COMMON STOCK" means the Company's Common Stock, par value
$.01 per share.
8.4 "ERISA" means, as of any given time, the Employee Retirement
Income Security Act of 1974, as amended.
8.5 "EXCHANGE ACT" means, as of any given time, the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
8.6 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles, consistently applied; and any accounting
determination or calculation required
34
<PAGE>
to be made under this Agreement shall be made (unless otherwise provided) in
accordance with generally accepted accounting principles, consistently applied.
8.7 "REGISTERABLE COMMON STOCK" means any Common Stock issued or
issuable upon conversion of the Shares.
8.8 "SECURITIES" means the Shares and any Common Stock issued
upon conversion thereof, whether at Closing or thereafter, but shall not include
any such Shares or Common Stock sold in any public offering or in any sale
pursuant to Rule 144 under the Securities Act. For purposes of computing at any
date any percentage of Securities required in connection with any action taken
or to be taken under this Agreement, the Shares shall be deemed to equal the
number of shares of Common Stock issuable at such date upon conversion thereof.
8.9 "SECURITIES ACT" means, as of any given time, the Securities
Act of 1933, as amended, or any similar federal law then in force.
8.10 "SERIES A AGREEMENT" means the Stock Purchase Agreement,
dated as of June 25, 1992, by and among the Company and the Investors listed on
Exhibit 1(a) thereto.
8.11 "SERIES A CONVERTIBLE PREFERRED STOCK" means the 3,900,000
shares of Series A Convertible Preferred Stock issued pursuant to the Series A
Agreement.
8.12 "SERIES A INVESTORS" means Investors as defined in the
Series A Agreement.
8.13 "SERIES A REGISTERABLE COMMON STOCK" means Registerable
Common Stock as defined in the Series A Agreement.
8.14 "SERIES A SECURITIES" means Securities as defined in the
Series A Agreement.
8.15 "SUBSIDIARY" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of which
are, at the time as of which any determination is being made, owned of record or
beneficially by the Company, directly or indirectly, through any Subsidiary or
otherwise.
8.16 "TERMINATING PUBLIC OFFERING" means an underwritten public
offering (whether on a "best efforts" or a "firm commitment" basis) for the
account of the Company of Common Stock or securities convertible into or
exchangeable for shares of Common Stock, where the aggregate sales price of the
securities included in such sale (after deduction of any
35
<PAGE>
underwriting commissions, discounts and concessions) is at least $12,500,000 and
the price per share of such securities is at least $3.33.
Section 9. MISCELLANEOUS.
9.1 ISSUANCE OF ADDITIONAL SHARES OF SERIES B CONVERTIBLE
PREFERRED STOCK. Within ninety days following the date hereof, the Company
intends to offer and sell up to 4,000,000 additional shares of Series B
Convertible Preferred Stock pursuant to one or more stock purchase agreements in
substantially the form as this Agreement (each, an "Additional Stock Purchase
Agreement"). The rights of the investors under any Additional Stock Purchase
Agreement shall be PARI PASSU with the rights of the Investors under this
Agreement. To the extent applicable, the term "Investors" as used in Sections
6.15 and 9.15 of this Agreement shall include the investors acquiring shares of
Series B Convertible Preferred Stock pursuant to, and the term "Shares" as used
in Sections 6.20, 9.15 and 9.16 of this Agreement shall include the shares of
Series B Convertible Preferred Stock issued under, any Additional Stock Purchase
Agreement. In addition, to the extent applicable, the term "Securities" as used
in Section 7 of this Agreement shall include any shares of Series B Convertible
Preferred Stock (and any Common Stock issued upon conversion thereof) issued
under any Additional Stock Purchase Agreements and the term "Registerable Common
Stock" as used in Section 7 of this Agreement shall include any shares of Common
Stock issued or issuable upon conversion of any shares of Series B Convertible
Preferred Stock issued under any Additional Stock Purchase Agreement.
9.2 EXHIBITS. The Exhibits attached to this Agreement
constitute a part of this Agreement. They are incorporated herein by reference
and shall have the same force and effect as if set forth in full in the main
body of this Agreement.
9.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any other
writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the date of Closing and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Investors or on their behalf. Notwithstanding the
foregoing, all obligations of the Company under this Agreement (except for the
obligations of the Company under Section 7 hereof), including the obligations of
the Company under Section 6 hereof, will cease and be of no further
36
<PAGE>
force and effect upon the closing of a Terminating Public Offering.
9.4 ASSIGNS; PARTIES IN INTEREST. This Agreement shall bind and
inure to the benefit of the Company, the Investors, each other person who shall
become a registered holder of any certificate representing the Securities and
the respective successors and assigns of the Company, the Investors and each
such other person. The parties hereto understand and agree that (i) DSV
Partners IV ("DSV") is a limited partnership formed under the laws of the State
of New Jersey, (ii) the limited partners of DSV will not be liable for any
liabilities of DSV, and will not be required to perform any of the obligations
of DSV, pursuant to this Agreement, and (iii) neither the Company, nor the
shareholders or officers of the Company, will seek to enforce such liabilities
and/or obligations or otherwise seek relief with respect thereto against such
limited partners.
9.5 GOVERNING LAW. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
governed by and construed and enforced in accordance with the internal laws of
said Commonwealth, and without giving effect to conflicts of laws.
9.6 INDEMNIFICATION. The Company shall, with respect to the
representations, warranties, covenants and agreements made by the Company
herein, and each Investor shall, with respect to the representations,
warranties, covenants and agreements made by such Investor, indemnify, defend
and hold the Investors or the Company, as the case may be, harmless against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including legal and accounting fees and expenses), arising from
the untruth, inaccuracy or breach of any such representations, warranties,
covenants or agreements of the Company or such Investor, as the case may be.
Without limiting the generality of the foregoing, the Investors or the Company,
as the case may be, shall be deemed to have suffered liability, loss or damage
as a result of the untruth, inaccuracy or breach of any such representations,
warranties, covenants or agreements if such liability, loss or damage shall be
suffered by the Company as a result of, or in connection with, such untruth,
inaccuracy or breach of any facts or circumstances constituting such untruth,
inaccuracy or breach.
9.7 LIABILITY AND INDEMNIFICATION. The Company shall, to the
full extent permitted by Sections 1741 through 1750 of the Business Corporation
Law of 1988 of the Commonwealth of Pennsylvania, as amended from time to time,
indemnify all persons whom it may indemnify thereunder. To the fullest extent
permitted by the Business Corporation Law of the Commonwealth of Pennsylvania,
as amended from time to time, a director of the
37
<PAGE>
Company shall not be liable to the Company or its shareholders for monetary
damages for breach of fiduciary duty as a director.
9.8 REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or an Investor, an Investor or the Company, as the case may be, may proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific performance of any such covenant or
agreement contained in this Agreement. An Investor or the Company acting
pursuant to this Section 9.8 shall be indemnified against all liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses) in accordance with Section
9.6.
9.9 EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. Upon
surrender by an Investor to the Company of any certificate representing shares
of Series B Convertible Preferred Stock (or Common Stock issuable upon
conversion thereof) purchased or acquired hereunder, the Company at its expense
will issue in exchange therefor, and deliver to such Investor, a new certificate
or certificates representing such shares, in such denominations as may be
requested by the Investor. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any certificate representing
any Securities purchased or acquired by the Investors hereunder, and in case of
such loss, theft or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in case of any such mutilation, upon surrender
and cancellation of such certificate, the Company at its expense will issue and
deliver to the Investors a new certificate for such Series B Preferred Stock (or
Common Stock issuable upon conversion thereof) of like tenor, in lieu of such
lost, stolen or mutilated certificate.
9.10 NOTICES. All communications provided for in this Agreement
shall be in writing and shall be sent to each party as follows:
<TABLE>
<CAPTION>
TO THE COMPANY TO INVESTORS
<S> <C>
Vincent R. Zurawski, Jr., Ph.D. At the addresses set
Apollon, Inc. forth below their
One Great Valley Parkway respective names on
Malvern, PA 19355 Exhibit 1.1 hereto.
FAX: (215) 647-9732
</TABLE>
38
<PAGE>
With a Copy To:
Morris Cheston, Jr. Esq.
Ballard Spahr Andrews
& Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
FAX: (215) 864-8999
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (a) physical delivery, (b) if given by
facsimile transmission, when such facsimile is transmitted to the telephone
number specified in this Agreement and telephone confirmation of receipt thereof
is received, (c) three days after mailing by prepaid first class mail and (d)
two days after mailing by prepaid overnight or express mail.
9.11 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties regarding the transactions contemplated herein and
may not be modified or amended except by written agreement of all parties
hereto.
9.12 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the interpretation of
this Agreement.
9.13 PRONOUNS. If any Investor is an individual, neuter pronouns
used in reference to Investors shall be deemed to refer to individuals as well
as corporations or partnerships.
9.14 EFFECT OF STOCK SPLITS, ETC. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares or price per share is involved, such number shall be
appropriately adjusted to reflect any stock split, stock dividend, combination
of securities into a smaller number of securities or reclassification of stock.
9.15 AMENDMENTS. This Agreement may be amended only by an
instrument in writing, signed by the Company and by Investors holding, on the
date of such amendment, a majority of the Securities held of record on such date
by all of the Investors.
9.16 SHARES HELD BY AFFILIATES. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares is involved, each Investor shall be deemed to own any
Securities that are owned by any of the partners of such Investor or any
retired partners of such Investor who retire after the date hereof or the
39
<PAGE>
estate of any such partner or retired partner or the spouse, lineal
descendants, ancestors or any Affiliates of such Investor or any such partner
or retired partner.
9.17 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be one and the same instrument.
9.18 DISCLOSURES ELSEWHERE. No representation or warranty
contained in this Agreement or in any exhibit, schedule, certificate or other
document delivered pursuant hereto shall be considered to be breached due to the
omission of matters required to be disclosed pursuant to the terms of this
Agreement if the matter or matters giving rise to any such breach or omission is
or are disclosed anywhere in this Agreement or in any of the exhibits,
schedules, certificates or other documents delivered pursuant hereto.
40
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /S/ VINCENT R. ZUZRAWSKI, JR.
______________________________
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV, a New Jersey
Limited Partnership
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: /s/ Morton Collins
---------------------
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR DELAWARE, INC., a Delaware
corporation
By: /s/ David P. Holveck
------------------------
Name: David P. Holveck
Title: President
Address: 1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Fax: c/o Centocor, Inc.
(215) 651-6331
41
<PAGE>
TECHNOLOGY LEADERS, L.P., a Delaware
limited partnership
By: TECHNOLOGY LEADERS MANAGEMENT, L.P.,
General Partner
By: TECHNOLOGY LEADERS MANAGEMENT,
INC., General Partner
By: /S/ CHRISTOPHER MOLLER
___________________________
Address: 800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Fax: (215) 293-0601
TECHNOLOGY LEADERS OFFSHORE C.V., a
Netherland Antilles limited partnership
By: TECHNOLOGY LEADERS MANAGEMENT, L.P.,
General Partner
By: TECHNOLOGY LEADERS MANAGEMENT,
INC., General Partner
By: /S/ CHRISTOPHER MOLLER
______________________________
Address: 800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Fax: (215) 293-0601
42
<PAGE>
EXHIBITS
<TABLE>
<C> <C> <S>
Exhibit 1.1 - Investors, Shares to be Purchased and Consideration
Exhibit 2.1 - Form of Opinion of Ballard Spahr Andrews & Ingersoll
Exhibit 2.4(a) - Amended Articles
Exhibit 2.4(b) - Statement Affecting Class or Series of Shares
Exhibit 2.7 - Shareholders' Agreement
Exhibit 4.2(a) - Authorized Capital Stock
Exhibit 4.2(b) - Shareholders of the Company
Exhibit 4.2(c) - Warrants, Options or Agreements
Exhibit 4.8(a) - Consents
Exhibit 4.8(b) - Offers of Securities
Exhibit 4.14 - Related Transactions
Exhibit 4.15 - Registration Rights
Exhibit 4.16 - Benefit Plans
Exhibit 4.18(a) - Intellectual Property
Exhibit 4.18(b) - Additional Intellectual Property Required
Exhibit 4.18(c) - Form of Confidentiality Agreement
Exhibit 4.18(d) - Confidentiality Agreements Restricting Employees
Exhibit 4.19 - Material Contracts
Exhibit 4.20 - Officers and Employees; Compensation Matters
</TABLE>
<PAGE>
D118481.A(BF) EXHIBIT 1.1
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE
NAME SHARES PURCHASED PURCHASE PRICE
<S> <C> <C>
Centocor Delaware, Inc. 800,000 $2,000,000
1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
DSV Partners IV, L.P. 400,000 $1,000,000
221 Nassau Street
Princeton, NJ 08542
Technology Leaders, L.P. 373,520 $ 933,800
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Technology Leaders 426,480 $1,066,200
Offshore C.V.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
</TABLE>
<PAGE>
AMENDMENT NO. 1 TO SERIES B STOCK PURCHASE AGREEMENT
This Amendment, made as of the 10th day of September, 1994, by and
among Apollon, Inc., a Pennsylvania corporation (the "Company"), and the
Investors listed in Exhibit A hereto (the "Investors");
WHEREAS, the Company and the Investors wish to amend the Stock
Purchase Agreement, dated as of November 15, 1993, by and among the Company and
the Investors listed in Exhibit 1.1 thereto (the "Agreement") as hereinafter
provided;
NOW, THEREFORE, in consideration of the mutual covenants of the
Company and the Investors, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors, intending to be legally bound, hereby agree as follows:
1. Section 8.10 of the Agreement is hereby amended to read as
follows:
"8.10 "Series A Agreement" means the Stock Purchase
Agreement, dated as of June 25, 1992, by and among the Company and the
Investors listed on Exhibit 1(a) thereto, as amended from time to
time."
2. The following definitions are hereby added to the Agreement as
Sections 8.17 and 8.18:
"8.17 "Centocor Stock Purchase Agreement" means the Stock
Purchase Agreement, dated as of September 10, 1994, between the Company and
Centocor, Inc., as amended from time to time;
8.18 "Centocor Shares" means the Shares as defined in the
Centocor Stock Purchase Agreement."
<PAGE>
3. The following Section is hereby added to the Agreement as Section
9.19:
"9.19 Issuance of Series B Convertible Preferred Stock to
Centocor. The term "Shares" as used in Sections 6.12, 6.13, 6.20, 7.9,
9.14 and 9.16 of this Agreement shall include the shares of Series B
Convertible Preferred Stock issued under the Centocor Stock Purchase
Agreement. The term "Securities" as used in Sections 7 and 9.16 of this
Agreement shall include the Centocor Shares. The term "Registerable Common
Stock" as used in Section 7 of this Agreement shall include any Common
Stock issuable upon conversion of the Centocor Shares."
2
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 1 to Series B Stock Purchase Agreement all as of the day and year
first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr.
------------------------------
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT
By: /s/ Morton Collins
----------------------
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR DELAWARE, INC.
By: /s/ David P. Holveck
----------------------------
Name: David P. Holveck
Title: President
Address: 1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Fax: c/o Centocor, Inc.
(215) 651-6331
TECHNOLOGY LEADERS, L.P.
By: TECHNOLOGY LEADERS MANAGEMENT, L.P.
By: /s/ Chris Moller
----------------------
Name:
Title: Vice President
3
<PAGE>
Address: 800 The Safeguard
Building
435 Devon Park Drive
Wayne, PA 19087
Fax: (215) 293-0601
TECHNOLOGY LEADERS OFFSHORE,
C.V.
By: TECHNOLOGY LEADERS
MANAGEMENT, L.P.
By: /s/ Chris Moller
----------------------
Name:
Title: Vice President
Address: 800 The Safeguard
Building
435 Devon Park Drive
Wayne, PA 19087
Fax: (215) 293-0601
4
<PAGE>
EXHIBIT A
NAME
- ----
DSV Partners IV, L.P.
221 Nassau Street
Princeton, NJ 08542
Centocor Delaware, Inc.
1105 N. Market Street
Suite 1300
P.O. Box 8985
Wilmington, DE 19899-8985
Technology Leaders, L.P.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Technology Leaders Offshore, C.V.
800 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
5
<PAGE>
FIRST AMENDMENT TO SERIES B STOCK PURCHASE AGREEMENT
This Amendment, made as of the 1st day of May, 1996, by and among
Apollon, Inc., a Pennsylvania corporation (the "Company"), and the Investors
listed in Exhibit A hereto (the "Investors");
WHEREAS, the Company and the Investors wish to amend the Stock
Purchase Agreement, dated as of November 15, 1993, by and among the Company
and the Investors listed in Exhibit 1.1 thereto (the "Agreement") as
hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants of the
Company and the Investors, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Investors, intending to be legally bound, hereby agree as follows:
1. The eighth through tenth lines of Section 6.6 of the
Agreement are hereby amended to read as follows:
"record of a majority of the shares of Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock and Series C Convertible
Preferred Stock, voting as a class, outstanding as of a record date between
10 and 90..."
2. The ninth through eleventh lines of Section 6.7 of the Agreement
are hereby amended to read as follows:
"holders of record of a majority of the shares of Series A Convertible
Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock, voting as a class, outstanding as of a record
date between..."
3. The sixth and seventh lines of Section 6.8 of the Agreement are
hereby amended to read as follows:
"A Convertible Preferred Stock, Series B Convertible Preferred Stock or
Series C Convertible Preferred Stock), whether now or hereafter outstanding
without obtaining..."
4. The ninth and tenth lines of Section 6.8 of the Agreement are
hereby amended to read as follows:
"shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock, voting as a
class, outstanding as of..."
<PAGE>
5. The eighteenth and nineteenth lines of Section 6.10 of the
Agreement are hereby amended to read as follows:
"shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock, voting as a
class, outstanding as of..."
6. The twelfth and thirteenth lines of Section 6.15(a) of the
Agreement is hereby amended to read as follows:
"shall have first offered to sell to the Investors, the Series A Investors
and the Series C Investors such securities (the "Offered Securities"), at
a..."
7. The fifteenth and sixteenth lines of Section 6.15 (a) of the
Agreement are hereby amended to read as follows:
"Company in writing delivered to each of the Investors, the Series A
Investors and the Series C Investors (the "Offer"), which offer by its
terms shall..."
8. The eighteenth and nineteenth lines of Section 6.15 (a) are hereby
amended to read as follows:
"the date it is delivered by the Company to the Investors, the Series A
Investors and the Series C Investors."
9. The tenth and eleventh lines of Section 6.15(b) is hereby amended
to read as follows:
"Series A Convertible Preferred Stock, Series B Convertible Preferred Stock
and Series C Convertible Preferred Stock and of all shares issuable upon
the conversion of..."
10. Section 6.15(d) of the Agreement is hereby amended to read in full
as follows:
"(d) In the event that the Investors, the Series A Investors
and the Series C Investors do not elect to purchase all of the Offered
Securities which they are entitled to purchase under Section 6.15(b)
hereof, Paragraph 6(p)(ii) of the Series A Agreement and Section 6.13(b) of
the Series C Agreement, the Company shall within 5 days of the earlier of
(A) the receipt of all of the Notices of Acceptances from the Investors
pursuant to subsection (c) above, from the Series A Investors pursuant to
Paragraph 6(p)(ii) of the Series A Agreement and the Series C Investors
pursuant to Section 6.13(c) of the Series C Agreement or (B) the expiration
of the 30-day period provided in subparagraph 6.15(a) provide each of the
Investors who have delivered a Notice of Acceptance with
-2-
<PAGE>
written notice of the number of Offered Securities which have not been
accepted by the Investors, the Series A Investors or the Series C
Investors (the "Refused Shares"), and each such Investor shall have 10
days to inform the Company in writing of its intention to purchase its
pro rata share of such Refused Shares. For the purposes of this
subsection (d), "pro rata share" shall mean the percentage obtained by
dividing the number of Securities, Series A Securities, Series C
Securities and other shares of Common Stock owned and to be purchased by
an Investor who has delivered a Notice of Acceptance pursuant to
subsection (c) above by the total number of Securities, Series A
Securities, Series C Securities or other shares of Common Stock owned and
to be purchased by Investors who have delivered Notices of Acceptance
pursuant to subsection (c) above, by Series A Investors who have
delivered Notices of Acceptance pursuant to Paragraph 6(p)(iii) of the
Series A Agreement or by Series C Investors who have delivered Notices of
Acceptance pursuant to Section 6.13(c) of the Series C Agreement. Upon
the expiration of such ten-day period, the Company shall have 90 days to
sell all or any part of such Refused Shares as to which the Company has
not received a notice from the Investors pursuant to subsection 6.15(c),
this subsection 6.15(d), from the Series A Investors pursuant to
subparagraphs 6(p)(iii) or 6(p)(iv) of the Series A Agreement or from the
Series C Investors pursuant to Sections 6.13(c) or 6.13(d) of the Series
C Agreement to any other person or persons, but only upon terms and
conditions in all material respects, including, without limitation, unit
price and interest rates (but excluding payment of legal fees of counsel
of the purchaser), which are no more favorable, in the aggregate, to such
other person or persons or less favorable to the Company that those set
forth in the Offer. Upon the closing of the sale to such other person or
persons of all the Refused Securities, which shall include payment of the
purchase price to the Company in accordance with the terms of the Offer,
the Investors shall purchase from the Company, and the Company shall sell
to the Investors, the Offered Securities in respect of which a Notice of
Acceptance was delivered to the Company by an Investor, at the terms
specified in the Offer. The purchase by an Investor of any Offered
Securities is subject in all cases to the preparation, execution and
delivery by the Company and the Investor of a purchase agreement relating
to such Offered Securities satisfactory in form and substance to the
Investor and its counsel."
11. The third through eighth lines of Section 6.15(e) of the Agreement
are hereby amended to read as follows:
-3-
<PAGE>
"subsections 6.15(b), (c) and (d) hereof, by the Series A Investors in
accordance with Paragraph 6(p) of the Series A Agreement or by the Series C
Investors in accordance with Section 6.13 of the Series C Agreement may not
be sold or otherwise disposed of until they are again offered to the
Investors, the Series A Investors and the Series C Investors under the
procedures specified in subsections 6.15(a), (b), (c) and (d) hereof,
Paragraph 6(p) of the Series A Agreement and Section 6.13 of the Series C
Agreement."
12. The first through third lines of Section 6.15(f) are hereby
amended to read as follows:
"The rights of the Investors, the Series A Investors and the Series C
Investors under this Section 6.15 shall not apply to the following
securities (the "Excluded Securities"):
13. Section 6.15(f)(A) is hereby amended to read in full as follows:
"(A) Common Stock, securities by their terms convertible into or
exchangeable for Common Stock (including Common Stock issuable on
conversion thereof) and options, warrants and other rights to subscribe
for, purchase or otherwise acquire Common Stock or securities by their
terms convertible into or exchangeable for Common Stock (including Common
Stock issuable on conversion thereof) issued, issuable, sold or granted to
existing or prospective officers, directors or employees of, or consultants
to, the Company, pursuant to any stock option, stock incentive, stock
appreciation, stock bonus, stock award, compensation plan or arrangement or
employment letter, or any other agreement, plan, arrangement or letter,
presently in effect or hereafter adopted or entered into by the Company;"
14. The ninth line of Section 7.1 of the Agreement is hereby amended
to read as follows:
"holders of Securities, Series A Securities, Series C Securities and
Warrant Stock, and thereupon ..."
15. The fifteenth through seventeenth lines of Section 7.1 of the
Agreement are hereby amended to read as follows:
"such request) and (y) all other shares of Registerable Common Stock,
Series A Registerable Common Stock, Series C Registerable Common Stock and
shares of Warrant Stock, the holders of which have made written request to
the Company for..."
-4-
<PAGE>
16. The seventh and eighth lines of Section 7.1(a) are hereby amended
to read as follows:
"pursuant to this Section 7.1, Paragraph 7(a) of the Series A Agreement or
Section 7.1 of the Series C Agreement (except that, upon request of any
holder of..."
17. The seventh through thirteenth lines of Section 7.1(b) are hereby
amended to read as follows:
"information in the notice to the other holders of Securities, Series A
Securities, Series C Securities and Warrant Stock. In that event, the
other holders of Securities, Series A Securities, Series C Securities and
Warrant Stock shall have the right to include their shares of Registerable
Common Stock, Series A Registerable Common Stock, Series C Registerable
Common Stock and Warrant Stock in the underwriting (unless otherwise
mutually agreed by a majority in interest of the holders of the Securities,
the Series A Securities, Series C Securities and Warrant Stock)..."
18. The second and third lines of Section 7.1(c) are hereby amended to
read as follows:
"not permit third parties other than holders of Series A Securities, Series
C Securities and Warrant Stock to include additional securities in a Demand
Registration..."
19. The fifth and sixth lines of Section 7.1(c) are hereby amended to
read as follows:
"majority of the shares of Registerable Common Stock, Series A Registerable
Common Stock and Series C Registerable Common Stock included in such
Demand..."
20. Section 7.1(d) is hereby amended to read in full as follows:
(d) if a Demand Registration under this Section 7.1(d) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock, Series A Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock requested to be included in
such registration exceeds the amount of such Registerable Common Stock,
Series A Registerable Common Stock, Series C Registerable Common Stock and
Warrant Stock which can be successfully sold in such offering, the Company
will nevertheless include in such registration, prior to the inclusion of
any securities which
-5-
<PAGE>
are not Registerable Common Stock, Series A Registerable Common Stock,
Series C Registerable Common Stock or Warrant Stock (notwithstanding any
consent obtained in accordance with Section 7.1(c) hereof), the amount of
Registerable Common Stock, Series A Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock requested to be included
which in the opinion of such underwriters can be sold, pro rata among the
holders of Registerable Common Stock, Series A Registerable Common Stock,
Series C Registerable Common Stock and Warrant Stock requesting inclusion
on the basis of the number of shares of Registerable Common Stock, Series
A Registerable Common Stock, Series C Registerable Common Stock and
Warrant Stock of such holders; provided, however, that if the holders of
Registerable Common Stock are unable to include in such offering at least
fifty percent (50%) of the Registerable Common Stock sought to be
registered in a Demand Registration under this Section 7.1, the holders
of Securities will be entitled to an additional Demand Registration under
this Section;"
21. The third and fourth lines of Section 7.2(a) are hereby amended to
read as follows:
"(other than pursuant to Section 7.1 hereof), whether of its own accord or
at..."
22. The sixteenth through twentieth lines of Section 7.2(b) are hereby
amended to read as follows:
"(ii) second, all of the Registerable Common Stock, Series A Registerable
Common Stock, Series C Registerable Common Stock and Warrant Stock
requested to be included in such registration, pro rata among the holders
thereof on the basis of the number of shares of Registerable Common Stock,
Series A Registerable Common Stock, Series C Registerable Common Stock and
Warrant Stock then owned by such..."
23. The eighteenth through twenty-first lines of Section 7.2(c) are
hereby amended to read as follows:
"Stock, Series A Registerable Common Stock, Series C Registerable Common
Stock and Warrant Stock requested to be included in such registration, pro
rata among the holders thereof on the basis of the number of shares of
Registerable Common Stock, Series A Registerable Common Stock, Series C
Registerable Common Stock and Warrant Stock then..."
24. The fifth and sixth lines of Section 7.10 are hereby amended to
read as follows:
-6-
<PAGE>
"the Company and holders of record of a majority of the Securities, Series
A Securities and Series C Securities, voting as a class, outstanding as of
a ..."
25. The tenth through thirteenth lines of Section 7.10 are hereby
amended to read as follows:
"holder of Securities, Series A Securities and Series C Securities at the
time outstanding (including securities into which such Securities, Series A
Securities and Series C Securities are convertible), each future holder of
all such Securities, Series A Securities and Series C Securities and the
Company."
25. The following definitions are hereby amended to read in full as
follows:
"8.7 "Registerable Common Stock" means (a) any Common Stock
issued or issuable upon conversion of the Shares, (b) any Common Stock
issued or issuable upon conversion of the Note Shares and (c) except
for purposes of Section 6 of this Agreement, any Common Stock issued
or issuable upon conversion of the Centocor Shares. For purposes of
Section 6 of this Agreement, "Registerable Common Stock" specifically
excludes the Centocor Shares."
8.8 "Securities" means (a) the Shares and any Common Stock
issued upon conversion thereof, (b) the Note Shares and any Common
Stock issued upon conversion thereof, whether at Closing or
thereafter, but shall not include any such Note Shares or Common Stock
sold in any public offering or in any sale pursuant to Rule 144 under
the Securities Act, and (c) except for purposes of Section 6 of this
Agreement, the Centocor Shares and any Common Stock issued upon
conversion thereof, whether at Closing or thereafter, but shall not
include any such Centocor Shares or Common Stock sold in any public
offering or in any sale pursuant to Rule 144 under the Securities Act.
For purposes of Section 6 of this Agreement, "Securities" specifically
excludes the Centocor Shares and any Common Stock issued upon
conversion thereof, whether at Closing or thereafter."
8.10 "Series A Agreement" means the Stock Purchase
Agreement, dated as of June 25, 1992, by and among the Company and the
Investors listed on Exhibit 1(a) attached thereto, as amended."
-7-
<PAGE>
26. The following definitions are hereby added to the Agreement as
follows:
8.17 "Centocor Agreement" means the Stock Purchase Agreement,
dated September 20, 1994, by and between the Company and Centocor,
Inc.
8.18 "Centocor Shares" means the 400,000 shares of the Company's
Series B Convertible Preferred Stock, $.01 par value per share, issued
to Centocor, Inc. pursuant to the Centocor Agreement.
8.19 "Conversion Agreement" means the Conversion Agreement,
dated as of April 23, 1996, by and among the Company and the Series B
Investors.
8.20 "Note Shares" means the 1,600,000 shares of the Company's
Series B Convertible Preferred Stock, $.01 par value per share, issued
pursuant to the Conversion Agreement.
8.21 "Investors" means (a) the parties listed on Exhibit 1.1
attached hereto and (b) any successors and assigns of the parties
listed on Exhibit 1.1 attached hereto who (i) have executed the
Shareholders' Agreement attached hereto as Exhibit 2.7, and (ii) have
complied with the terms of Section 9.4 of this Agreement; provided
that any such successor or assign shall not acquire any rights granted
to Investors by Section 7 of this Agreement unless the transfer and
transferee of Securities satisfy the requirements of Section 7.7 of
this Agreement.
8.22 "Series B Convertible Preferred Stock" means (a) the
2,000,000 shares of the Company's Series B Convertible Preferred
Stock, $.01 par value per share, issued pursuant to this Agreement,
(b) the Note Shares and (c) except for purposes of Section 6 of this
Agreement, the Centocor Shares. For purposes of Section 6 of this
Agreement, "Series B Convertible Preferred Stock" specifically
excludes the Centocor Shares.
8.23 "Series C Agreement" means the Stock Purchase Agreement,
dated as of May 1, 1996, by and among the Company and the Investors
listed on Schedule 1.1 attached thereto relating to the purchase of
shares of the Company's Series C Convertible Preferred Stock, as it
may be amended from time to time.
-8-
<PAGE>
8.24 "Series C Convertible Preferred Stock" means the up to
3,000,000 shares of the Company's Series C Convertible Preferred
Stock, $.01 par value per share, issued pursuant to the Series C
Agreement.
8.25 "Series C Investors" means Investors as defined in the
Series C Agreement.
8.26 "Series C Registerable Common Stock" means Series C
Registerable Common Stock as defined in the Series C Agreement.
8.27 "Series C Securities" means Securities as defined in the
Series C Agreement.
8.28 "Warrant Stock" means Warrant Stock as defined in the Series
C Agreement."
-9-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 1 all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr.
-------------------------------
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV, L.P.
By: DSV MANAGEMENT, a New
Jersey Limited Partnership
By: ______________________
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
CENTOCOR, INC.
By: /s/ David P. Holveck
-------------------------------
David P. Holveck
President
Address: 200 Great Valley Parkway
Malvern, PA 19355
Fax: (610) 651-6331
-10-
<PAGE>
TECHNOLOGY LEADERS, L.P.
By: Technology Leaders Management, Inc., General
Partner
By: /s/ Chris Moller
-------------------------------
Name: Chris Moller
Title: Managing Director
Address: 800 The Safeguard Building
435 Devon Park Drive
Wayne PA 19087
Fax:
TECHNOLOGY LEADERS OFFSHORE, C.V.
By: Technology Leaders Management, Inc., General
Partner
By: /s/ Chris Moller
-------------------------------
Name: Chris Moller
Title: Managing Director
Address: 800 The Safeguard
Building
435 Devon Park Drive
Wayne PA 19087
Fax: (215) 293-0601
-11-
<PAGE>
EXHIBIT A
NAME
DSV Partners IV, L.P.
Centocor, Inc.
Technology Leaders, L.P.
Technology Leaders Offshore, C.V.
-12-
<PAGE>
SECOND AMENDMENT TO SERIES B STOCK PURCHASE AGREEMENT
THIS AMENDMENT to the Agreement (as hereinafter defined), is made as of the
26th day of September, 1997, by and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the Investors signing the signature page hereto
(the "Investors").
WHEREAS, the Company and the Investors wish to amend the Stock Purchase
Agreement, dated as of November 15, 1993 and amended as of May 1, 1996, by and
among the Company and the Investors listed in Exhibit 1.1 thereto (collectively,
the "Agreement") as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants of the Company and
the Investors, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors,
intending to be legally bound, hereby agree as follows:
1. The ninth line of Section 7.1 of the Agreement is hereby amended
to read as follows:
"holders of Securities, Series A Securities, Series C Securities, Warrant
Stock and AHP Stock, and thereupon . . . "
2. The fifteenth through seventeenth lines of Section 7.1 of the
Agreement are hereby amended to read as follows:
"such request and (y) all other shares of Registerable Common Stock, Series
A Registerable Common Stock, Series C Registerable Common Stock, shares of
Warrant Stock and shares of AHP Stock, the holders of which have made
written request to the Company for..."
3. The seventh and eighth lines of Section 7.1(a) are hereby amended
to read as follows:
"pursuant to this Section 7.1, Paragraph 7(a) of the Series A Agreement,
Section 7.1 of the Series C Agreement or Section 6.1 of the AHP Agreement
(except that, upon request of any holder of..."
4. The seventh through thirteenth lines of Section 7.1(b) are hereby
amended to read as follows:
"information in the notice to the other holders of Securities, Series A
Securities, Series C Securities, Warrant Stock and AHP Stock. In that
event, the other
<PAGE>
holders of Securities, Series A Securities, Series C Securities, Warrant
Stock and AHP Stock shall have the right to include their shares of
Registerable Common Stock, Series A Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock in the underwriting
(unless otherwise mutually agreed by a majority in interest of the holders
of the Securities, the Series A Securities, Series C Securities, Warrant
Stock and AHP Stock)..."
5. The second and third lines of Section 7.1(c) are hereby amended
to read as follows:
"not permit third parties other than holders of Series A Securities, Series
C Securities, Warrant Stock and AHP Stock to include additional securities
in a Demand..."
6. The fifth and sixth lines of Section 7.1(c) are hereby amended to
read as follows:
"majority of the shares of Registerable Common Stock, Series A Registerable
Common Stock, Series C Registerable Common Stock and AHP Stock included in
such Demand..."
7. Section 7.1(d) is hereby amended to read in full as follows:
(d) if a Demand Registration under this Section 7.1(d) is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock, Series A Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock requested to be
included in such registration exceeds the amount of such Registerable
Common Stock, Series A Registerable Common Stock, Series C Registerable
Common Stock, Warrant Stock and AHP Stock which can be successfully sold in
such offering, the Company will nevertheless include in such registration,
prior to the inclusion of any securities which are not Registerable Common
Stock, Series A Registerable Common Stock, Series C Registerable Common
Stock, Warrant Stock or AHP Stock (notwithstanding any consent obtained in
accordance with Section 7.1(c) hereof), the amount of Registerable Common
Stock, Series A Registerable Common Stock, Series C Registerable Common
Stock, Warrant Stock and AHP Stock requested to be included which in the
opinion of such underwriters can be sold, pro rata among the holders of
Registerable Common Stock, Series A Registerable Common Stock, Series C
Registerable Common Stock, Warrant Stock and AHP Stock requesting inclusion
on the basis of the number of shares of Registerable Common Stock, Series A
Registerable Common Stock, Series C Registerable Common Stock, Warrant
Stock and AHP Stock then
2
<PAGE>
owned by such holders; provided, however, that if the holders of
Registerable Common Stock are unable to include in such offering at least
fifty percent (50%) of the Registerable Common Stock sought to be registered
in a Demand Registration under this Section 7.1, the holders of Securities
will be entitled to an additional Demand Registration under this Section;"
8. The sixteenth through twentieth lines of Section 7.2(b) are
hereby amended to read as follows:
"(ii) second, all of the Registerable Common Stock, Series A Registerable
Common Stock, Series C Registerable Common Stock, Warrant Stock and AHP
Stock requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of shares of Registerable Common
Stock, Series A Registerable Common Stock, Series C Registerable Common
Stock, Warrant Stock and AHP Stock then owned by such..."
9. The eighteenth through twenty-first lines of Section 7.2(c) are
hereby amended to read as follows:
"Stock, Series A Registerable Common Stock, Series C Registerable Common
Stock, Warrant Stock and AHP Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the number
of shares of Registerable Common Stock, Series A Registerable Common Stock,
Series C Registerable Common Stock, Warrant Stock and AHP Stock then..."
10. The fourth and fifth lines of Section 9.15 are hereby amended to
read as follows:
"the Securities, the Series A Securities and the Series C Securities held
of record as of a record date between 10 and 90 days prior to such date,
voting together as a class."
11. The following definitions are hereby added to the Agreement as
follows:
"8.29 "AHP Agreement" means the Securities Purchase Agreement, dated
September 19, 1997, by and between the Company and A.H. Investments Ltd."
"8.30 "AHP Stock" means the shares of Common Stock issued or issuable
upon conversion of a convertible note in the aggregate principal amount of
$3 million issued and sold by the
3
<PAGE>
Company to A.H. Investments Ltd. and the shares of Common Stock issued or
issuable upon exercise of a warrant to purchase 150,000 shares of Common
Stock sold by the Company to A.H. Investments Ltd. pursuant to the AHP
Agreement."
12. Pursuant to Sections 7.10 and 9.15 of the Agreement, this
Amendment shall be effective upon the written consent of the holders of a
majority of Securities, Series A Securities and Series C Securities, voting as a
class, outstanding as of September 17, 1997 and upon the written consent of the
holders of a majority of the Securities then outstanding and shall thereafter be
binding upon each holder of Securities, Series A Securities and Series C
Securities at the time outstanding (including securities into which such
Securities, Series A Securities and Series C Securities are convertible), each
future holder of all such securities and the Company. Such written consent
shall be evidenced by the signature of the Investors signing this Amendment.
13. All other terms of the Agreement shall remain in full force and
effect.
14. This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute together one and
the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 2 all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski
__________________________
Vincent R. Zurawski, Jr.
President
INVESTORS
DSV PARTNERS IV
By: DSV MANAGEMENT LTD., a New
Jersey Limited Partnership
By: /s/ Morton Collins
______________________
Morton Collins,
General Partner
Address: 221 Nassau Street
Princeton, NJ 08542
Fax: (609) 683-0174
4
<PAGE>
CENTOCOR, INC.
By: /s/ David P. Holveck
__________________________
David P. Holveck
President
Address: 200 Great Valley Parkway
Malvern, PA 19355
Fax: (610) 651-6331
TECHNOLOGY LEADERS, L.P.
By: Technology Leaders Management, Inc.,
General Partner
By: /s/ Chris Moller
___________________________
Name: Chris Moller
Title: Managing Director
Address: 800 The Safeguard
Building
435 Devon Park Drive
Wayne PA 19087
Fax: (610) 975-9330
TECHNOLOGY LEADERS OFFSHORE, C.V.
By: Technology Leaders Management,
Inc., General Partner
By: /s/ Chris Moller
___________________________
Name: Chris Moller
Title: Managing Director
Address: 800 The Safeguard Building
435 Devon Park Drive
Wayne PA 19087
Fax: (610) 975-9330
5
<PAGE>
STOCK PURCHASE AGREEMENT
(SERIES B CONVERTIBLE PREFERRED STOCK)
Stock Purchase Agreement ("Agreement") made and entered into as of
the 20th day of September, 1994 by and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and Centocor, Inc., a Pennsylvania corporation
("Centocor").
W I T N E S S E T H
WHEREAS, the Company is in need of a biopharmaceutical manufacturing
facility and Centocor is willing to upgrade an existing Centocor
manufacturing facility to specifications suitable for the Company's needs,
and make such upgraded facility available to the Company for use in the
development and manufacture of the Company's nucleic acid-based product
candidates and genetic vaccine product candidates; and
WHEREAS, the Company desires to sell to Centocor 400,000 shares of
the Company's Series B Convertible Preferred Stock (the "Shares") in
consideration of Centocor's upgrading of its manufacturing facility and
making it available to the Company for the Company's use; and
WHEREAS, the Company desires to have, and Centocor is willing to
grant to the Company, an option to pay to the Company $1,000,000 in cash in
lieu of delivering the Shares.
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, as well as the expression of intention by the
parties hereto to be legally bound by this, a written agreement, subject to
the terms and conditions hereof and in reliance upon the representations,
warranties and covenants contained herein, it is agreed as follows:
Section 1. Purchase of Shares.
1.1 Purchase and Sale. The Company shall sell, and Centocor
shall purchase, the Shares in consideration of Centocor's upgrading and
making available certain production facilities, currently leased by Centocor,
consisting of approximately 3,100 square feet, as more particularly described
in the Facilities Use Agreement (defined below) (the "Facilities"). The
Company, at its sole discretion and option, may satisfy its obligation to
deliver any of the Shares by paying to Centocor the cash equivalent of such
Shares at the price
<PAGE>
of $2.50 per share (the "Cash Equivalent"). Any payment of the Cash
Equivalent shall be made by check in next day funds.
1.2 The Facilities. Centocor and the Company shall execute
deliver a Facilities Use Agreement (the "Facilities Use Agreement") in
substantially the form of Exhibit 1.2(a) to this Agreement. On or before the
date hereof, Centocor shall complete in full the upgrade of the Facilities in
accordance with Exhibit 1.2(b) to this Agreement, and shall make the
Facilities available to the Company in accordance with the Facilities Use
Agreement.
1.3 Initial Closing. The initial closing ("Initial Closing")
shall be held at the offices of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, Philadelphia, Pennsylvania, 19103 on the date the Facilities
are made available to the Company in accordance with Section 1.2, commencing
at 2:00 p.m., or at such other time, date or place as may be mutually agreed
upon (the "Initial Closing Date"). At the Initial Closing, the Company shall
deliver 200,000 Shares or the Cash Equivalent to Centocor and Centocor shall
execute and deliver to the Company the Facilities Use Agreement and shall
make the Facilities available to the Company.
1.4 Second Closing. The second closing (the "Second Closing")
shall be held at the offices of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, Philadelphia, Pennsylvania, 19103 on the date the Company
shall successfully manufacture in the Facilities its first GMP lot of a
genetic vaccine product candidate for use in human clinical trials,
commencing at 2:00 p.m., or at such other time, date or place as may be
mutually agreed upon (the "Second Closing Date"). At the Second Closing, the
Company shall deliver 200,000 Shares or the Cash Equivalent to Centocor.
Section 2. Conditions to the Obligations of Centocor
at Closing.
The obligation of Centocor to execute and deliver the Facilities Use
Agreement, to make the Facilities available to the Company and to purchase the
Shares at the Initial Closing is subject to the satisfaction on or prior to the
Initial Closing of the following conditions, any of which may be waived by
Centocor:
2.1 Opinion of Counsel to the Company. Centocor shall have
received an opinion, dated the Initial Closing Date, of Ballard Spahr Andrews
& Ingersoll, counsel for the Company, substantially in the form of Exhibit
2.1 hereto.
2.2 Representations and Warranties. All of the
representations and warranties of the Company contained in this Agreement
shall be true and correct in all material respects at and as of the Initial
Closing Date with the same effect as if made on the Initial Closing Date,
except to the extent of changes
2
<PAGE>
contemplated hereby or caused by the transactions contemplated hereby.
2.3 Performance of Covenants. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the Initial Closing Date shall have been performed
in a manner reasonably satisfactory in all respects to Centocor and its
counsel.
2.4 Legal Action. No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful
the transactions contemplated by this Agreement, cause such transactions to
be rescinded or materially and adversely affect the financial condition or
operations of the Company.
2.5 Consents. All consents required to enable the Company to
observe and comply with all of its obligations under this Agreement and in
connection with the transactions contemplated hereby shall have been obtained
and all "blue sky" filings necessary in connection with the issuance and sale
of the Shares shall have been made.
2.6 Closing Documents. The Company shall have delivered to
Centocor (a) an officer's certificate dated the Initial Closing Date (i)
stating that the conditions in Sections 2.2 through 2.5 have been satisfied,
and (ii) attaching the Company's Articles of Incorporation, as amended (the
"Articles"), Bylaws (the "Bylaws"), all resolutions of the Board of Directors
relating to the issuance and sale of the Shares and a good standing
certificate issued by the Commonwealth of Pennsylvania, and (b) such
certificates, other documents and instruments as Centocor may reasonably
request in connection with, and to effect, the transactions contemplated by
this Agreement.
2.7 Proceedings. All corporate, shareholder and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby to be consummated at Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to Centocor
and its counsel.
Section 3. Conditions to the Obligations of the
Company at Closing.
The obligation of the Company to enter into the Facilities Use
Agreement and to deliver the Shares at the Initial Closing and to deliver the
Shares at the Second Closing is subject to the satisfaction on or prior to
the date of such
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<PAGE>
Closing of the following conditions, any of which may be waived by the
Company:
3.1 Representations and Warranties. All of the
representations and warranties of Centocor contained in this Agreement and
the Facilities Use Agreement shall be true and correct in all material
respects at and as of the Initial Closing Date with the same effect as if
made on the Initial Closing Date, except to the extent of changes
contemplated hereby or thereby or caused by the transactions contemplated
hereby or thereby.
3.2 Legal Action. No action or proceeding before any court or
governmental body shall be threatened or pending wherein an unfavorable
judgment, decree or order would or could prevent the carrying out of this
Agreement or any of the transactions contemplated by this Agreement or cause
such transactions to be rescinded.
3.3 Agreement of Lease. The Agreement of Lease, dated
September 28, 1989, between Centocor and Rouse & Associates-256 Great Valley
Parkway (the "Landlord") shall be in full force and effect and no default,
and no event which, with the giving of notice or the passage of time, or
both, could constitute a default thereunder, shall have occurred.
3.4 Facilities Use Agreement. Centocor shall have upgraded
and validated the Facilities in accordance with Exhibit 1.2(b) to this
Agreement and shall have executed and delivered the Facilities Use Agreement.
Centocor shall not be in default, and no event shall have occurred which
with the giving of notice or the passage of time, or both, could constitute a
default under the Facilities Use Agreement.
3.5 Consents. Centocor shall have obtained all consents,
authorizations and approvals which are required to be obtained from any other
person, including without limitation the Landlord, to enable Centocor to
execute, deliver and perform this Agreement and the Facilities Use Agreement.
3.5 Closing Documents. Centocor shall have delivered to the
Company such certificates, other documents and instruments as the Company may
reasonably request in connection with, and to effect, the transactions
contemplated by this Agreement.
Section 4. Representations and Warranties
of the Company.
The Company represents and warrants to Centocor as follows:
4
<PAGE>
4.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized and validly subsisting under the laws
of the Commonwealth of Pennsylvania and has all requisite corporate power and
authority to carry on its business as currently conducted and as proposed to
be conducted, to own its properties, and to enter into and perform this
Agreement and the Facilities Use Agreement. The Company is not qualified as
a foreign corporation in any jurisdiction and the Company's conduct of its
business or its ownership or leasing of property does not make any such
qualification necessary, except where the failure to so qualify would not
have a material adverse effect on the financial condition or results of
operations of the Company.
4.2 Capital Stock. The authorized capital stock and the
outstanding capital stock of the Company as of the date of this Agreement
consists in each case solely of the shares indicated on Exhibit 4.2(a)
annexed hereto. All of the outstanding shares have been duly authorized and
are fully paid and non-assessable. An accurate list of the Company's
shareholders and their holdings as of the date of this Agreement is set forth
in Exhibit 4.2(b) annexed hereto. Except for the holders of Series A
Convertible Preferred Stock and the holders of Series B Convertible Preferred
Stock, no person or entity is entitled to preemptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as
described on Exhibit 4.2(c) annexed hereto, as of the date of this Agreement
there are no outstanding warrants, options, convertible securities or other
agreements or arrangements of any character under which the Company is or may
be obligated to issue any equity securities of any kind, or to transfer any
equity securities of any kind owned by it, and the Company is not obligated
to issue any equity securities of any kind, or to transfer any equity
securities of any kind owned by it. Except as listed on Exhibit 4.2(c)
annexed hereto, as of the date of this Agreement the Company does not know of
any voting agreements, buy-sell agreements, option or right of first purchase
agreements or other agreements of any kind among any of the security holders
of the Company relating to the securities held by them. The voting rights,
designations, preferences, limitations and special rights of the Shares, when
issued, shall be as fully set forth in the Articles. When issued, delivered
and paid for pursuant to this Agreement, the Shares will be validly issued,
fully paid and non-assessable.
4.3 Subsidiaries. The Company does not own any shares of
stock, partnership interest, joint venture interest or any other security or
interest in any other corporation or other organization or entity.
5
<PAGE>
4.4 Corporate Proceedings. The execution, delivery and
performance of this Agreement and the Facilities Use Agreement have been duly
authorized by all requisite action on the part of the officers, directors and
shareholders of the Company. This Agreement and the Facilities Use Agreement
constitute valid and binding obligations of the Company, enforceable in
accordance with their terms. The Shares, when issued pursuant hereto, will
be free and clear of all encumbrances and restrictions except for
restrictions on transfer imposed by applicable securities laws, by this
Agreement or by the Shareholders' Agreement, dated November 15, 1993, among
the Company and Centocor and certain other shareholders of the Company (the
"Shareholders' Agreement"). The Company has reserved a sufficient number of
shares of its Common Stock (as hereinafter defined) for issuance upon the
conversion of the Shares and such shares of Common Stock, when issued in
accordance with the terms of the Shares, will be duly authorized, validly
issued, fully paid, non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer imposed by applicable
securities laws, by this Agreement or by the Shareholders' Agreement.
4.5 Litigation. There are no actions, suits, proceedings,
orders, investigations or claims pending or, to the knowledge of the Company
or any officer, director or key employee of the Company, threatened against
or affecting the Company, or against the assets or business of the Company,
or against any key employee, officer, director or shareholder of the Company
in his capacity as such person or relating to any of his activities with the
Company, at law or in equity or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, except as would not have a material adverse effect on the
Company.
4.6 Compliance with Laws and Other Instruments. Neither the
execution, delivery or performance of this Agreement, nor the offer,
issuance, sale or delivery of the Shares to Centocor, nor the issuance of
shares of Common Stock upon conversion of the Shares, with or without the
giving of notice or passage of time, or both, will (i) violate, or result in
any breach of, or constitute a default under, or result in the imposition of
any encumbrance upon any asset of the Company pursuant to, any provision of
the Articles or the By-laws, or any contract, law, rule, regulation,
judgment, decree or other document or instrument to which the Company is a
party or by which it is bound or (ii) cause the Company to lose the benefit
of any right or privilege it presently enjoys, except as contemplated by this
Agreement.
4.7 Governmental Consents; Offering of Shares. No consent,
authorization, approval, permit or order of, or
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<PAGE>
declaration to or filing with, any governmental or regulatory authority is
required in connection with the execution, delivery and performance of this
Agreement or the offer, issuance, sale or delivery of the Shares. Neither
the Company nor any agent acting on its behalf has, directly or indirectly,
sold or offered for sale, or solicited any offers to buy, any securities, or
otherwise approached or negotiated with any person or persons, so as to
subject the offer or sale of the Shares to Centocor to the provisions of
Section 5 of the Securities Act, and the Company agrees that neither it nor
any agent acting on its behalf will take any action that would subject the
offer or sale of the Shares to those provisions. Except as set forth on
Exhibit 4.7 hereto, neither the Company nor anyone acting on its behalf has
directly or indirectly offered the Series B Convertible Preferred Stock or
any part thereof or any similar security of the Company (or any other
securities convertible or exchangeable for the Series B Convertible Preferred
Stock or any similar security), for sale to, or solicited any offer to buy
the same from, anyone other than Centocor. Assuming the accuracy of the
representations and warranties of Centocor made herein, the offer, sale and
issuance of the Series B Convertible Preferred Stock and the Common Stock
issuable upon conversion of the Series B Convertible Preferred Stock do not
and will not require registration under the Securities Act.
4.8 Registration Rights. Except as described in Exhibit 4.8
to this Agreement and as contemplated by this Agreement, no person has any
right to cause the Company to effect the registration under the Securities
Act of any shares of Common Stock or any other securities (including debt
securities) of the Company.
4.9 Brokers and Finders. No person or firm has, or will have,
any right, interest or valid claim against the Company or Centocor for any
commission, fee or other compensation as a finder or broker or in any similar
capacity as a result of any act or omission by the Company or anyone acting
on behalf of the Company in connection with any transaction contemplated by
this Agreement.
4.10 Disclosure. Neither the representations and warranties
made by the Company in this Agreement or the Exhibits annexed hereto nor any
writing furnished to Centocor pursuant to this Agreement or in connection
with this Agreement by the Company or anyone acting on its behalf contains
any untrue statement of a material fact or omits to state any material fact
required to make the statements herein or therein not misleading in the light
of the circumstances under which those statements were made. There exists no
fact or circumstance which, to the knowledge of the Company or any officer or
director of the Company, materially adversely affects or could reasonably be
7
<PAGE>
anticipated to have a materially adverse effect on, the existing or expected
financial condition, operating results, assets or business prospects of the
Company.
Section 5. Representations and Warranties
of Centocor.
Centocor represents and warrants to the Company as follows:
5.1 Organization; Capacity. Centocor is a corporation
organized under the laws of Pennsylvania, with full authority (corporate or
otherwise) to make and perform its obligations under this Agreement and the
Facilities Use Agreement.
5.2 Authorization; No Breach. The execution, delivery and
performance by Centocor of this Agreement and the Facilities Use Agreement
have been duly authorized by all requisite corporate action and will not
violate Centocor's articles of incorporation or constitute a breach of or
default under any instrument to which Centocor is a party or by which any of
its properties are bound.
5.3 Binding Obligation. This Agreement and the Facilities Use
Agreement constitute valid and binding obligations of Centocor enforceable in
accordance with their terms.
5.4 No Broker. No person or firm has, or will have, any
right, interest or valid claim against the Company for any commission, fee or
other compensation as a finder or broker or in any similar capacity as a
result of any act or omission by Centocor or anyone acting on behalf of
Centocor in connection with any transaction contemplated by this Agreement.
5.5 Purchase for Investment. Centocor is purchasing the
Shares for its own account for investment and not with a view to or for sale
in connection with any distribution of the Shares.
5.6 Suitability. (a) Centocor has such knowledge and
experience in financial and business matters as to be capable of evaluating
the risks and the merits of an investment in the Company; (b) Centocor can
bear the economic risk of its investment (i.e., at the time of the investment
Centocor can afford a complete loss of the investment and can afford to hold
the investment for an indefinite period of time), and (iii) Centocor is an
"Accredited Investor" as that term is defined in Regulation D under the
Securities Act or to the extent Centocor is not an "Accredited Investor,"
Centocor is fully capable of
8
<PAGE>
making all of the representations and warranties in this Section 5, including
(a) and (b) above, and by its execution hereof does so affirm.
5.7 Registration or Sales. (a) Centocor understands that the
Securities (as hereinafter defined) are not registered under the Securities
Act nor any regulatory authority of any state and must be held indefinitely
unless they are subsequently registered under the Securities Act and any
applicable state law or an exemption from such registration is available; (b)
Centocor is aware that any routine sales of the Shares or any shares received
upon conversion of the Shares made under Rule 144 of the Commission (as
hereinafter defined) under the Securities Act may only be made in limited
amounts and in accordance with the terms and conditions of that Rule and that
in cases where that Rule is not applicable, compliance with Regulation A or
some other disclosure exemption will be required; and (c) Centocor
understands that, except as otherwise provided herein, the Company is under
no obligation whatsoever and has no intention to register the Shares or any
shares that might be received upon conversion of the Shares under the
Securities Act, to comply with any such Rule or exemption, or to supply
Centocor with any information necessary to enable Centocor to make routine
sales of the Shares, or any shares received upon conversion of the Shares,
under Rule 144.
5.8 Legended Certificates. Centocor understands that the
certificates evidencing the Shares, and any other shares or equity securities
distributed on or in respect of or in substitution for or upon conversion of
such Shares (other than Shares that shall have been transferred pursuant to
an effective registration statement), will bear a legend substantially in the
following form until the Company's counsel determines that the legend is no
longer advisable:
"The securities evidenced by this certificate have not been
registered under the Securities Act of 1933 (the "Act") and
are "restricted securities" as defined in Rule 144
promulgated under the Act. The securities may not be sold
or offered for sale or otherwise distributed except (i)
pursuant to an effective registration statement for the
securities under the Act; (ii) in compliance with Rule 144;
or (iii) after receipt of an opinion of counsel satisfactory
to the company that such registration or compliance is not
required as to said sale, offer or distribution."
9
<PAGE>
and that appropriate stop-transfer orders will be noted on the Company's
stock records with respect to all Shares so legended.
5.9 Confidentiality. Centocor shall hold in confidence any
confidential information about the Company that Centocor has received or
hereafter receives pursuant to any provision of this Agreement under
circumstances indicating the confidentiality of such information until the
Company shall have publicly disclosed such information, except information
that otherwise comes into the public domain or is disclosed by a third party
having the right to disclose it to Centocor without breach of this Agreement
or any other agreement by which the disclosing party is bound.
5.10 Lock Up. Centocor shall not, with respect to any public
offering of the Company's securities which occurs following the Initial
Closing Date, effect any public sale or distribution of the Securities during
such period of time, if any, not to exceed 120 days, as any underwriter shall
reasonably require in connection with such public offering.
5.11 Investment Company Status. Centocor is not an "investment
company" within the meaning of the Investment Company Act of 1940.
Section 6. Shares Subject to Repurchase Option.
6.1 Repurchase Option. The Company shall have the right, but
not the obligation, to repurchase any of the Shares, upon thirty (30) days'
prior written notice from the Company to Centocor, at a purchase price of
$2.50 per share (the "Repurchase Option").
6.2 Shareholder Rights. Until such time as the Company
actually exercises its Repurchase Option, Centocor shall have all the rights
of a shareholder of the Company with respect to any Shares that have been
issued and delivered to Centocor.
6.3 Assignability of Repurchase Option. The Company, at its
sole discretion, may assign the Repurchase Option.
6.4 Expiration of Repurchase Option. The Repurchase Option
shall expire at the earlier of (a) January 1, 1995 or (b) thirty (30) days
after the Company has completed the sale of all currently authorized but
unissued shares of the Company's Series B Convertible Preferred Stock.
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Section 7. Additional Agreements of the Parties.
7.1 Intent to be Bound by Series B Agreement. The Company and
Centocor hereby covenant to each other and agree to be bound, subject to the
terms of this Agreement, by Sections 6.2, 6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.10,
6.11, 6.12, 6.13, 6.16, 6.18, 6.20, 6.22, 6.23, 7 and 8 of the Series B
Agreement. The Company and Centocor agree that the term "Shares" as used in
Sections 6.12, 6.13, 6.20, 7.9, 9.14 and 9.16 of the Series B Agreement, the
term "Securities" as used in Sections 7 and 9.16 of the Series B Agreement
and the term "Registerable Common Stock" as used in Section 7 of the Series B
Agreement shall include the Shares, as defined herein.
7.2 Intent to be bound by the Shareholders' Agreement.
Centocor hereby covenants and agrees that all of the Shares shall be subject
to the terms and conditions of the Shareholders' Agreement and that the term
"Shares" as used in the Shareholders' Agreement shall include the Shares, as
defined herein.
Section 8. Certain Definitions.
For the purposes of this Agreement the following terms have the
respective meanings set forth below:
8.1 "Commission" means the Securities and Exchange Commission
and includes any governmental body or agency succeeding to the functions
thereof.
8.2 "Common Stock" means the Company's Common Stock, par value
$.01 per share.
8.3 "Exchange Act" means, as of any given time, the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
8.4 "Securities" means the Shares and any Common Stock issued
upon conversion thereof, whether at the Initial Closing or thereafter, but
shall not include any such Shares or Common Stock sold in any public offering
or in any sale pursuant to Rule 144 under the Securities Act.
8.5 "Securities Act" means, as of any given time, the
Securities Act of 1933, as amended, or any similar federal law then in force.
8.6 "Series B Agreement" means the Stock Purchase Agreement,
dated as of November 15, 1993, by and among the Company and the Investors
listed on Exhibit 1.1 thereto, as amended from time to time.
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<PAGE>
8.7 "Series B Investors" means Investors as defined in the
Series B Agreement.
8.8 "Subsidiary" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of
which are, at the time as of which any determination is being made, owned of
record or beneficially by the Company, directly or indirectly, through any
Subsidiary or otherwise.
8.9 "Terminating Public Offering" means an underwritten public
offering (whether on a "best efforts" or a "firm commitment" basis) for the
account of the Company of Common Stock or securities convertible into or
exchangeable for shares of Common Stock, where the aggregate sales price of
the securities included in such sale (after deduction of any underwriting
commissions, discounts and concessions) is at least $12,500,000 and the price
per share of such securities is at least $3.33.
Section 9. Miscellaneous.
9.1 Exhibits. The Exhibits attached to this Agreement
constitute a part of this Agreement. They are incorporated herein by
reference and shall have the same force and effect as if set forth in full in
the main body of this Agreement.
9.2 Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any
other writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the Initial Closing Date and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by or on behalf of Centocor. Notwithstanding the
foregoing, all obligations of the Company under this Agreement, other than
the obligations under Section 1.4, will cease and be of no further force and
effect upon the closing of a Terminating Public Offering.
9.3 Assigns; Parties in Interest. This Agreement shall bind
and inure to the benefit of the Company, Centocor, each other person who
shall become a registered holder of any certificate representing the
Securities and the respective successors and assigns of the Company, Centocor
and each such other person.
9.4 Governing Law. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
governed by and construed and enforced
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in accordance with the internal laws of said Commonwealth, and without giving
effect to conflicts of laws.
9.5 Indemnification. The Company shall, with respect to the
representations, warranties, covenants and agreements made by the Company
herein, and Centocor shall, with respect to the representations, warranties,
covenants and agreements made by Centocor herein, indemnify, defend and hold
Centocor or the Company, as the case may be, harmless against all liability,
loss or damage, together with all reasonable costs and expenses related
thereto (including legal and accounting fees and expenses), arising from the
untruth, inaccuracy or breach of any such representations, warranties,
covenants or agreements of the Company or Centocor, as the case may be.
Without limiting the generality of the foregoing, Centocor or the Company, as
the case may be, shall be deemed to have suffered liability, loss or damage
as a result of the untruth, inaccuracy or breach of any such representations,
warranties, covenants or agreements if such liability, loss or damage shall
be suffered by the Company as a result of, or in connection with, such
untruth, inaccuracy or breach of any facts or circumstances constituting such
untruth, inaccuracy or breach.
9.6 Liability and Indemnification. The Company shall, to the
full extent permitted by Sections 1741 through 1750 of the Business
Corporation Law of 1988 of the Commonwealth of Pennsylvania, as amended from
time to time, indemnify all persons whom it may indemnify thereunder. To the
fullest extent permitted by the Business Corporation Law of the Commonwealth
of Pennsylvania, as amended from time to time, a director of the Company
shall not be liable to the Company or its shareholders for monetary damages
for breach of fiduciary duty as a director.
9.7 Remedies. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the
Company or Centocor, Centocor or the Company, as the case may be, may proceed
to protect and enforce its rights either by suit in equity and/or by action
at law, including, but not limited to, an action for damages as a result of
any such breach and/or an action for specific performance of any such
covenant or agreement contained in this Agreement. Centocor or the Company
acting pursuant to this Section 9.7 shall be indemnified against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including legal and accounting fees and expenses) in
accordance with Section 9.6.
9.8 Exchanges; Lost, Stolen or Mutilated Certificates. Upon
surrender by Centocor to the Company of any certificate representing shares
of Series B Convertible Preferred Stock (or Common Stock issuable upon
conversion thereof)
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purchased or acquired hereunder, the Company at its expense will issue in
exchange therefor, and deliver to Centocor, a new certificate or certificates
representing such shares, in such denominations as may be requested by
Centocor. Upon receipt of evidence satisfactory to the Company of the loss,
theft, destruction or mutilation of any certificate representing any
Securities purchased or acquired by Centocor hereunder, and in case of such
loss, theft or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Company at its expense
will issue and deliver to Centocor a new certificate for such Series B
Preferred Stock (or Common Stock issuable upon conversion thereof) of like
tenor, in lieu of such lost, stolen or mutilated certificate.
9.9 Notices. All communications provided for in this Agreement
shall be in writing and shall be sent to each party as follows:
<TABLE>
TO THE COMPANY TO CENTOCOR
-------------- -----------
<S> <C>
Vincent R. Zurawski, Jr., Ph.D. David P. Holveck
Apollon, Inc. Centocor, Inc.
One Great Valley Parkway 200 Great Valley Parkway
Malvern, PA 19355 Malvern, PA 19355
FAX: (215) 647-9732 FAX: (215) 889-0895
With a Copy To: With a Copy To:
Morris Cheston, Jr.,Esq.
Ballard Spahr Andrews
& Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
FAX: (215) 864-8999
</TABLE>
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (a) physical delivery, (b) if given
by facsimile transmission, when such facsimile is transmitted to the
telephone number specified in this Agreement and telephone confirmation of
receipt thereof is received, (c) three days after mailing by prepaid first
class mail and (d) two days after mailing by prepaid overnight or express
mail.
9.10 Entire Agreement; Amendments. This Agreement and the
Facilities Use Agreement constitute the entire agreement among the parties
regarding the transactions contemplated herein. This Agreement may not be
modified or amended except by written agreement of all parties hereto.
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<PAGE>
9.11 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the interpretation of
this Agreement.
9.12 Counterparts. This Agreement may be executed in one or
more counterparts each of which shall be deemed to be one and the same
instrument.
9.13 Disclosures Elsewhere. No representation or warranty
contained in this Agreement or in any exhibit, schedule, certificate or other
document delivered pursuant hereto shall be considered to be breached due to
the omission of matters required to be disclosed pursuant to the terms of
this Agreement if the matter or matters giving rise to any such breach or
omission is or are disclosed anywhere in this Agreement or in any of the
exhibits, schedules, certificates or other documents delivered pursuant
hereto.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr.
-------------------------------
Vincent R. Zurawski, Jr.
President
CENTOCOR, INC.
By: /s/ David P. Holveck
-------------------------------
Name: David P. Holveck
Title: President
<PAGE>
Exhibits
Exhibit 1.2(a) - Form of Facilities Use Agreement
Exhibit 1.2(b) - Facilities Upgrade Standards
Exhibit 2.1 - Form of Opinion of Ballard Spahr Andrews
& Ingersoll
Exhibit 4.2(a) - Authorized Capital Stock
Exhibit 4.2(b) - Shareholders of the Company
Exhibit 4.2(c) - Warrants, Convertable Securities, Options or Other
Agreements With Shareholders
Exhibit 4.7 - Offers of Securities
Exhibit 4.8 - Registration Rights
<PAGE>
STOCK PURCHASE AGREEMENT
(SERIES C CONVERTIBLE PREFERRED STOCK)
Stock Purchase Agreement ("Agreement") made and entered into as of May
1, 1996, by and among Apollon, Inc., a Pennsylvania corporation (the "Company"),
and the parties listed on Schedule 1.1 to this Agreement (hereinafter sometimes
referred to individually as an "Investor" and collectively as the "Investors").
W I T N E S S E T H
WHEREAS, the Company desires to sell to the Investors and the
Investors desire to purchase from the Company in the aggregate a minimum of
1,500,000 but no more than 3,000,000 shares of the Company's Series C
Convertible Preferred Stock, $.01 par value per share (the "Shares").
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, as well as the expression of intention by the parties hereto
to be legally bound by this, a written agreement, subject to the terms and
conditions hereof and in reliance upon the representations, warranties and
covenants contained herein, it is agreed as follows:
Section 1. PURCHASE OF SHARES.
1.1 PURCHASE AND SALE. The Company shall sell, and each
Investor shall purchase, the Shares in the number and for the consideration set
forth opposite such Investor's name on Schedule 1.1 attached hereto.
1.2 CLOSING. The closing ("Closing") of the purchase by the
Investors of the Shares shall be held at the offices of Ballard Spahr Andrews &
Ingersoll, 1735 Market Street, Philadelphia, Pennsylvania, 19103, on May 7,
1996, commencing at 12:00 p.m. local time, or at such other time, date or place
as may be mutually agreed upon (the "Closing Date").
1.3 DELIVERY OF CERTIFICATES. At Closing, the Company shall
deliver to each Investor a certificate or certificates evidencing the Shares to
be issued and delivered to each such Investor at Closing in accordance with
Schedule 1.1 attached hereto.
1.4 PAYMENT. The Investors shall pay the purchase price to be
paid at Closing by delivery to the Company at Closing of a check or checks or by
wire transfer in immediately available funds in the amounts set forth on
Schedule 1.1 attached hereto.
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Section 2. CONDITIONS TO THE OBLIGATIONS OF THE
INVESTORS AT CLOSING.
The obligation of each of the Investors to purchase and pay for the
Shares to be purchased by such Investor at Closing is subject to the
satisfaction on or prior to the date of Closing of the following conditions, any
of which may be waived by such Investor:
2.1 OPINION OF COUNSEL TO THE COMPANY. The Investors shall have
received an opinion, dated the date of Closing, of Ballard Spahr Andrews &
Ingersoll, counsel for the Company, substantially in the form of Exhibit 2.1
attached hereto.
2.2 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Company contained in this Agreement shall be true and
complete in all material respects at and as of the date of Closing with the same
effect as if made on the date of Closing, except to the extent of changes
contemplated hereby or caused by the transactions contemplated hereby.
2.3 PERFORMANCE OF COVENANTS. All of the covenants and
agreements of the Company contained in this Agreement and required to be
performed on or prior to the date of Closing shall have been performed in a
manner reasonably satisfactory in all respects to the Investors and their
counsel.
2.4 AMENDED ARTICLES OF INCORPORATION. The Company's Articles
of Incorporation, as amended, shall have been duly amended substantially as set
forth on Exhibit 2.4(a) attached hereto (the "Amended Articles"), and the
Company shall have filed with the Department of State of the Commonwealth of
Pennsylvania (the "Department") a Statement Affecting Class or Series of Shares
(the "Statement") establishing the Series C Convertible Preferred Stock,
substantially in the form of Exhibit 2.4(b) attached hereto.
2.5 LEGAL ACTION. No action or proceeding before any court or
governmental body shall be pending or threatened wherein an unfavorable
judgment, decree or order will or could prevent the carrying out of this
Agreement or any of the transactions contemplated hereby, declare unlawful the
transactions contemplated by this Agreement, cause such transactions to be
rescinded or materially and adversely affect the financial condition or
operations of the Company.
2.6 CONSENTS. All consents required to enable the Company to
observe and comply with all of its obligations under this Agreement and in
connection with the transactions
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contemplated hereby shall have been obtained and all "blue sky" filings
necessary in connection with the issuance and sale of the Shares shall have
been made.
2.7 CLOSING DOCUMENTS. The Company shall have delivered to the
Investors (a) a certificate of the Company's President dated the date of
Closing, substantially in the form of Exhibit 2.7(a) attached hereto, stating
that the conditions set forth in Sections 2.2 through 2.6 have been satisfied,
and (b) a certificate of the Company's Secretary dated the date of Closing,
substantially in the form of Exhibit 2.7(b) attached hereto, attaching copies of
the Company's Articles of Incorporation, as amended, the Company's Bylaws (the
"Bylaws"), all resolutions of the Board of Directors of the Company relating to
the issuance and sale of the Shares and a good standing certificate issued by
the Commonwealth of Pennsylvania, and (c) such certificates, other documents and
instruments as the Investors may reasonably request in connection with, and to
effect, the transactions contemplated by this Agreement.
2.8 PROCEEDINGS. All corporate, shareholder and other
proceedings taken or to be taken in connection with the transactions
contemplated hereby to be consummated at Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to the Investors
and their counsel.
Section 3. CONDITIONS TO THE OBLIGATIONS OF THE
COMPANY AT CLOSING.
The obligation of the Company to issue and deliver the Shares to be
purchased by each Investor at Closing is subject to the satisfaction on or prior
to the date of Closing of the following conditions, any of which may be waived
by the Company:
3.1 REPRESENTATIONS AND WARRANTIES. All of the representations
and warranties of the Investors contained in this Agreement shall be true and
complete in all material respects at and as of the date of Closing with the same
effect as if made on the date of Closing, except to the extent of changes
contemplated hereby or caused by the transactions contemplated hereby.
3.2 DELIVERY OF CONSIDERATION. The Investors shall have
delivered, in accordance with Section 1.4, the consideration for the Shares set
forth opposite such Investor's name on Schedule 1.1 attached hereto.
3.3 LEGAL ACTION. No action or proceeding before any court or
governmental body shall be threatened or pending wherein an unfavorable
judgment, decree or order would or could prevent the carrying out of this
Agreement or any of the
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transactions contemplated by this Agreement or cause such transactions to be
rescinded.
3.4 CLOSING DOCUMENTS. The Investors shall have delivered to
the Company such certificates, other documents and instruments as the Company
may reasonably request in connection with, and to effect, the transactions
contemplated by this Agreement.
Section 4. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY.
The Company represents and warrants to each Investor as follows:
4.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company
is a corporation duly organized and validly subsisting under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and authority
to carry on its business as currently conducted and as proposed to be conducted
in the Private Placement Memorandum (as defined herein), to own its properties,
and to enter into and perform this Agreement. The Company is not qualified as a
foreign corporation in any jurisdiction and the Company's conduct of its
business or its ownership or leasing of property does not make any such
qualification necessary, except where the failure to so qualify would not have a
material adverse effect on the financial condition or results of operations of
the Company.
4.2 CAPITAL STOCK. On the Closing Date, the authorized capital
stock, and the outstanding capital stock, of the Company will consist in each
case solely of the shares set forth on Schedule 4.2(a) attached hereto. All of
the outstanding shares have been duly authorized and are fully paid and
non-assessable. An accurate list of the Company's shareholders and their
holdings is set forth on Schedule 4.2(b) attached hereto. Except for the
holders of Series A Convertible Preferred Stock (as defined herein) and the
holders of Series B Convertible Preferred Stock (as defined herein), no person
or entity is entitled to preemptive or similar statutory or contractual rights
with respect to any securities of the Company. Except as described on Schedule
4.2(c) attached hereto, there are no outstanding warrants, options or other
agreements or arrangements of any character under which the Company is or may be
obligated to issue any equity securities of any kind, or to transfer any equity
securities of any kind owned by it, and the Company is not obligated to issue
any equity securities of any kind, or to transfer any equity securities of any
kind owned by it. Except as listed on Schedule 4.2(c) attached hereto, the
Company does not know of any voting agreements, buy-sell agreements, option or
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right of first purchase agreements or other agreements of any kind among any
of the security holders of the Company relating to the securities held by
them. The voting rights, designations, preferences, limitations and special
rights of the Shares, when issued, shall be as fully set forth in the Amended
Articles and the Statement. When issued, delivered and paid for pursuant to
this Agreement, the Shares will be validly issued, fully paid and
non-assessable.
4.3 SUBSIDIARIES. The Company does not own any shares of stock,
partnership interest, joint venture interest or any other equity security or
interest in any other corporation or other organization or entity.
4.4 CORPORATE PROCEEDINGS. The execution, delivery and
performance of this Agreement have been duly authorized by all requisite action
on the part of the officers, directors and shareholders of the Company. This
Agreement constitutes a valid and binding obligation of the Company and is
enforceable in accordance with all stated terms except as limited (a) by
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other laws relating to or affecting the enforcement of creditors' rights, or (b)
by general equitable principles, whether applied in law or in equity. The
Shares, when issued pursuant hereto, will be free and clear of all encumbrances
and restrictions except for restrictions on transfer imposed by applicable
securities laws and by this Agreement. The Company has reserved a sufficient
number of shares of its Common Stock (as defined herein) for issuance upon the
conversion of the Shares and such shares of Common Stock, when issued in
accordance with the resolutions of the Board of Directors of the Company
authorizing their issuance, will be duly authorized, validly issued, fully paid,
non-assessable and free and clear of all encumbrances and restrictions, except
for restrictions on transfer imposed by applicable securities laws and by this
Agreement.
4.5 LITIGATION. There are no actions, suits, proceedings,
orders, investigations or claims pending (in which service of process or written
notice has been received by an employee of the Company) or, to the knowledge of
the Company or any officer, director or key employee of the Company, threatened
against or affecting the Company, or against the assets or business of the
Company, or against any key employee, officer, director or shareholder of the
Company in his capacity as such person or relating to any of his activities with
the Company, at law or in equity or before or by any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality.
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4.6 TAX MATTERS. The Company has duly and timely filed, or
caused to be filed, all Federal, state and local tax returns required to be
filed by it and has paid all taxes shown to be due and payable on such returns,
as well as all deficiencies and assessments, notice of which has been received
by it.
4.7 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Neither the
execution, delivery or performance of this Agreement, nor the offer, issuance,
sale or delivery of the Shares to the Investors, nor the issuance of shares of
Common Stock upon conversion of the Shares, with or without the giving of notice
or passage of time, or both, will (i) violate, or result in any breach of, or
constitute a default under, or result in the imposition of any encumbrance upon
any asset of the Company pursuant to, any provision of its Articles of
Incorporation, as amended, or the Amended Articles, as the case may be, or the
Bylaws or any contract, law, rule, regulation, judgment, decree or other
document or instrument to which the Company is a party or by which it is bound
or (ii) cause the Company to lose the benefit of any right or privilege it
presently enjoys, except as contemplated by this Agreement.
4.8 GOVERNMENTAL CONSENTS; OFFERING OF SHARES. Except as set
forth on Schedule 4.8(a) attached hereto, no consent, authorization, approval,
permit or order of, or declaration to or filing with, any governmental or
regulatory authority is required in connection with the execution, delivery and
performance of this Agreement or the offer, issuance, sale or delivery of the
Shares. Neither the Company nor any agent acting on its behalf has, directly or
indirectly, sold or offered for sale, or solicited any offers to buy, any
securities, or otherwise approached or negotiated with any person or persons, so
as to subject the offer or sale of the Shares to the Investors to the provisions
of Section 5 of the Securities Act (as defined herein), and the Company agrees
that neither it nor any agent acting on its behalf will take any action that
would subject the offer or sale of the Shares to those provisions. Except as
set forth on Schedule 4.8(b) attached hereto, neither the Company nor anyone
acting on its behalf has directly or indirectly offered the Series C Convertible
Preferred Stock or any part thereof or any similar security of the Company (or
any other securities convertible or exchangeable for the Series C Convertible
Preferred Stock or any similar security), for sale to, or solicited any offer to
buy the same from, anyone other than the Investors. Assuming the accuracy of
the representations and warranties of the Investors made herein, the offer, sale
and issuance of the Series C Convertible Preferred Stock and the Common Stock
issuable upon conversion of the Series C Convertible
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Preferred Stock do not and will not require registration under the Securities
Act.
4.9 PRIOR ISSUANCE OF SECURITIES. All securities of the Company
heretofore sold and issued by it were sold and issued in compliance with all
applicable federal and state securities laws.
4.10 ENCUMBRANCES. The Company owns, or has a valid leasehold
interest in, or valid license for, all of its property and assets, real,
personal or fixed, tangible or intangible, subject to no mortgages, liens,
security interests, pledges, charges or other encumbrances of any kind.
4.11 PRIVATE PLACEMENT MEMORANDUM. The Company has previously
presented and delivered to the Investors the Private Placement Memorandum, which
Private Placement Memorandum has been material to the Investors in their
decision to enter into this Agreement and to purchase the Series C Convertible
Preferred Stock hereunder. The description of the business, operations (as
presently conducted and as proposed to be conducted), properties and assets of
the Company contained in the Private Placement Memorandum, as well as all other
factual statements contained therein, are true, correct and do not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading as
of the date of such description or statement. The financial and market
projections and other estimates contained in the Private Placement Memorandum
are based on the best estimates of the Company derived from reasonable
expectations at the time such projections and estimates were made. Neither the
projections nor the assumptions on which the projections are based have been
prepared, reviewed or approved by the Company's counsel, agents or accountants.
The projections are subject to change inasmuch as all material events and
circumstances cannot be predicted and unanticipated events and circumstances are
likely to occur. Accordingly, it is likely that there will be differences
between the projected results and the Company's actual results. These
differences may be material. Therefore, no representation or warranty as to the
accuracy of these projections can be or is being made by the Company or any of
their principals or affiliates and no assurance can be given that the projected
results will actually be achieved.
4.12 COMPLIANCE. The Company has complied with its Articles of
Incorporation, as amended, or the Amended Articles, as the case may be, and the
Bylaws, and has complied in all material respects with all federal, state, local
and foreign laws, ordinances, regulations and orders applicable to its business
or the ownership of its assets and all decrees, orders
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or judgments of any court of competent jurisdiction. The Company has all
federal, state, local and foreign governmental licenses and permits material
to and necessary in the conduct of its business; such licenses and permits
are in full force and effect, no violations have been recorded in respect of
any such licenses or permits, and no proceeding is pending or, to the
knowledge of the Company or any officer, director or key employee of the
Company, threatened to revoke or limit any thereof.
4.13 INSURANCE. All policies of liability, property, casualty,
workmen's compensation, health and other forms of insurance held by the Company
are, to the best of the Company's knowledge, valid and enforceable policies and
are outstanding and duly in force and all premiums with respect thereto are paid
to date. The amounts of coverage under such policies of insurance for the
assets and properties of the Company are adequate against risks usually insured
against by persons operating similar businesses and operating similar
properties. The Company does not carry professional liability or directors and
officers liability insurance.
4.14 RELATED TRANSACTIONS. Except as contemplated by this
Agreement and as set forth on Schedule 4.14 attached hereto, no current or
former shareholder, director, officer or employee of the Company (other than the
Investors) nor any "associate" (as defined in the rules and regulations
promulgated under the Exchange Act (as defined herein)) of any such person is
presently, directly or indirectly through his or its affiliation with any other
person or entity, a party to any transaction with the Company providing for the
furnishing of services (other than employment of such individuals by the
Company) by or to, or rental of real or personal property from or to, or
otherwise requiring cash payments to or by, any such person in excess of
$15,000. For purposes of this Agreement, a transaction of the type described in
this Section 4.14 is sometimes herein referred to as a "Related Transaction".
4.15 REGISTRATION RIGHTS. Except as contemplated by this
Agreement or as described on Schedule 4.15 attached hereto, no person has any
right to cause the Company to effect the registration under the Securities Act
of any shares of Common Stock or any other securities (including debt
securities) of the Company.
4.16 COMPLIANCE WITH ERISA; BENEFIT PLANS. Except as described
on Schedule 4.16 attached hereto, the Company does not sponsor or maintain, and
is not required, either by law or by contract, to contribute to, any employee
welfare benefit plan, within the meaning of section 3(1) of ERISA (as defined
herein), or any employee pension benefit plan, within the meaning of
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section 3(2) of ERISA. The Company has not contributed to and is not
required to contribute to any multiemployer plan within the meaning of
section 3(37) of ERISA.
4.17 INVESTMENT COMPANY ACT. The Company is not an "investment
company" as that term is defined in, and is not otherwise subject to regulation
under, the Investment Company Act of 1940, as amended.
4.18 PATENTS, TRADEMARKS, ETC. The Company owns or has rights to
various patents, trademarks, service marks, trade names, copyrights, licenses,
applications for patents, inventions, trade secrets, know-how, proprietary
processes and formulae, and other intellectual property rights (collectively,
the "Intellectual Property"), without any known conflict with the rights of
others. Except as set forth on Schedule 4.18(a) attached hereto, the Company
knows of no additional Intellectual Property required to conduct its business as
now conducted without conflict with the rights or claimed rights of others. The
Company has not received notice of any alleged infringement by it, nor is the
Company aware of any infringement or any basis for an alleged infringement by it
of any third-party patent, trademark, service mark, trade name, copyright or
license. The Company has confidentiality agreements with all of its employees
substantially in the form of Exhibit 4.18(b) attached hereto. Except as set
forth on Schedule 4.18(c) attached hereto, to the best knowledge of the Company
after due inquiry, none of the Company's employees are subject to
confidentiality or similar types of agreements which would hinder or prevent
them from fully and lawfully performing their responsibilities as employees.
4.19 NO DEFAULTS. The Company has in all material respects
performed all obligations required to be performed by it, and is not in default
in any material respect, under any material contract, commitment or instrument,
and no event or condition has occurred which, with the giving of notice or
passage of time, or both, would constitute such a default. To the best
knowledge of the Company, all parties having material contracts or commitments
with the Company are in compliance therewith in all material respects. Schedule
4.19 attached hereto contains an accurate list of all material contracts or
commitments as of the date of this Agreement, oral or written.
4.20 BROKERS AND FINDERS. Except for Genesis Merchant Group
Securities, no person or firm has, or will have, any right, interest or valid
claim against the Company or any Investor for any commission, fee or other
compensation as a finder or broker or in any similar capacity as a result of any
act or omission by the Company or anyone acting on behalf of the
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Company in connection with any transaction contemplated by this Agreement.
4.21 DISCLOSURE. Neither the representations and warranties made
by the Company in this Agreement nor the Schedules attached hereto contain any
untrue statement of a material fact or omit to state any material fact required
to make the statements herein or therein not misleading in the light of the
circumstances under which those statements were made. There exists no fact or
circumstance which, to the knowledge of the Company or any officer or director
of the Company, materially adversely affects or could reasonably be anticipated
to have a materially adverse effect on, the existing or expected financial
condition, operating results, assets or business prospects of the Company.
Section 5. REPRESENTATIONS AND WARRANTIES
OF INVESTORS.
Each Investor severally represents and warrants to the Company as
follows:
5.1 ORGANIZATION; CAPACITY. If such Investor is not an
individual, it is a partnership or corporation organized under the laws of the
jurisdiction as indicated under its name on the signature page of this
Agreement, with full authority (corporate or otherwise) to make and perform its
obligations under this Agreement. If such Investor is an individual, such
Investor is SUI JURIS and of full capacity to make and perform his or her
obligations under this Agreement.
5.2 AUTHORIZATION; NO BREACH. The execution, delivery and
performance by such Investor of this Agreement has been duly authorized and will
not violate any partnership agreement or articles of incorporation, as amended,
of such Investor or constitute a breach of or default under any instrument to
which such Investor is a party or by which any of its, his or her properties are
bound.
5.3 BINDING OBLIGATION. This Agreement constitutes a valid and
binding obligation of such Investor enforceable in accordance with its terms.
5.4 NO BROKER. No person or firm has, or will have, any right,
interest or valid claim against the Company or any other Investor for any
commission, fee or other compensation as a finder or broker or in any similar
capacity as a result of any act or omission by such Investor or anyone acting on
behalf of such Investor in connection with any transaction contemplated by this
Agreement.
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5.5 PURCHASE FOR INVESTMENT. Such Investor is purchasing the
Shares for its, his or her own account for investment and not with a view to or
for sale in connection with any distribution of the Shares.
5.6 SUITABILITY. (a) Such Investor has such knowledge and
experience in financial and business matters as to be capable of evaluating the
risks and the merits of an investment in the Company; (b) such Investor can bear
the economic risk of its, his or her investment in the amount set forth opposite
its, his or her name on Schedule 1.1 attached hereto (i.e., at the time of the
investment such Investor can afford a complete loss of the investment and can
afford to hold the investment for an indefinite period of time), and (c) such
Investor is an "Accredited Investor" as that term is defined in Regulation D
under the Securities Act or to the extent such Investor is not an "Accredited
Investor," such Investor is fully capable of making all of the representations
and warranties in this Section 5, including (a) and (b) above, and by its, his
or her execution hereof does so affirm.
5.7 REGISTRATION OR SALES. (a) Such Investor understands that
the Securities (as defined herein) are not registered under the Securities Act
nor any regulatory authority of any state and must be held indefinitely unless
they are subsequently registered under the Securities Act and any applicable
state law or an exemption from such registration is available; (b) such Investor
is aware that any routine sales of the Shares or any shares received upon
conversion of the Shares made under Rule 144 of the Commission (as defined
herein) under the Securities Act may only be made in limited amounts and in
accordance with the terms and conditions of that Rule and that in cases where
that Rule is not applicable, compliance with Regulation A or some other
disclosure exemption will be required; and (c) such Investor understands that,
except as otherwise provided herein, the Company is under no obligation
whatsoever and has no intention to register the Shares or any shares that might
be received upon conversion of the Shares under the Securities Act, to comply
with any such Rule or exemption, or to supply such Investor with any information
necessary to enable such Investor to make routine sales of the Shares, or any
shares received upon conversion of the Shares, under Rule 144.
5.8 LEGENDED CERTIFICATES. Such Investor understands that the
certificates evidencing the Shares, and any other shares or equity securities
distributed on or in respect of or in substitution for or upon conversion of
such Shares (other than Shares that shall have been transferred pursuant to an
effective registration statement), will bear a legend
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substantially in the following form until the Company's counsel determines
that the legend is no longer advisable:
"The securities evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Act"), and are
"restricted securities" as defined in Rule 144 promulgated under the Act.
The securities may not be sold or offered for sale or otherwise distributed
except (i) pursuant to an effective registration statement for the
securities under the Act; (ii) in compliance with Rule 144; or (iii) after
receipt of an opinion of counsel satisfactory to the Company that such
registration or compliance is not required as to said sale, offer or
distribution."
and that appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Shares so legended.
5.9 CONFIDENTIALITY. Such Investor shall hold in confidence any
confidential information about the Company that such Investor has received or
hereafter receives pursuant to any provision of this Agreement under
circumstances indicating the confidentiality of such information until the
Company shall have publicly disclosed such information, except information that
otherwise comes into the public domain or is disclosed by a third party having
the right to disclose it to the Investor without breach of this Agreement or any
other agreement by which the disclosing party is bound.
5.10 LOCK UP. Such Investor shall not, with respect to any
public offering of the Company's securities which occurs following the Closing
Date, effect any public sale or distribution of the Securities during such
period of time, if any, not to exceed 180 days, as any underwriter shall
reasonably require in connection with such public offering.
5.11 INVESTMENT COMPANY STATUS. Such Investor is not an
"investment company" within the meaning of the Investment Company Act of 1940.
Section 6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Investors as follows:
6.1 USE OF PROCEEDS. The cash proceeds of the sale of the
Shares to the Investors will be used to fund the research and development of new
products and for general corporate purposes.
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6.2 BOOKS AND ACCOUNTS. The Company will (a) make and keep
books, records and accounts, which, in reasonable detail, accurately and fairly
reflect its transactions and dispositions of its assets; and (b) devise and
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles (as defined herein) and in accordance
with the Company's past practices or any other criteria applicable to such
statements, and to maintain accountability for assets, (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.
6.3 PERIODIC REPORTS; BUDGETS.
(a) The Company will furnish as soon as practicable, and in
any event within 90 days after the end of each fiscal year of the Company, to
each Investor continuing to own any Securities, an annual report of the Company,
including a balance sheet as of the end of such fiscal year and statements of
operations, shareholders' equity and cash flows for such fiscal year, together
with the related notes thereto, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year, all of which will present
fairly the financial position of the Company and the results of its operations
and changes in its financial position as of the time and for the period then
ended. The financial statements shall be accompanied by a report of independent
public accountants to the effect that such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior years (except as otherwise specified in such
report), and present fairly the financial position of the Company and the
results of its operations and changes in its financial position as of the time
and for the period then ended. Notwithstanding the foregoing, the obligations
of the Company under this Section 6.3(a) will cease and be of no further force
and effect upon the closing of an Initial Public Offering (as defined herein),
and an Investor's right to receive audited annual financial statements pursuant
to this Section may be suspended by the Board of Directors of the Company if the
Board, in good faith, determines that such Investor's intentions are actually or
potentially in conflict with the interests of the Company and/or its
shareholders.
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(b) The Company will furnish as soon as practicable, and in
any event within 45 days after the end of each fiscal quarter of the Company, to
each Investor owning, as of the last day of each such quarter, not less than
125,000 shares of Common Stock or Shares convertible into at least 125,000
shares of Common Stock, a report of the Company consisting of an unaudited
balance sheet as of the end of such quarter, and unaudited statements of
operations, shareholders' equity and cash flows for such quarter, and for the
fiscal year-to-date, setting forth in each case in comparative form the
corresponding figures for the preceding year. All such reports shall be
certified by the Treasurer of the Company to present fairly the financial
position of the Company and the results of its operations and changes in its
financial position as of the time and for the period then ended and to have been
prepared in accordance with generally accepted accounting principles, subject to
normal year-end adjustments. Notwithstanding the foregoing, the obligations of
the Company under this Section 6.3(b) will cease and be of no further force and
effect upon the closing of an Initial Public Offering, and an Investor's right
to receive unaudited quarterly financial statements pursuant to this Section may
be suspended by the Board of Directors of the Company if the Board, in good
faith, determines that such Investor's intentions are actually or potentially in
conflict with the interests of the Company and/or its shareholders.
6.4 MERGER; SALE OF ASSETS; DISSOLUTION. So long as shares of
Series C Convertible Preferred Stock issued hereunder are outstanding, the
Company will not become a party to any merger or consolidation, or sell, lease
or otherwise dispose of substantially all of its assets, other than sales and
leases of assets in the ordinary course of business, or dissolve or liquidate
its assets without the prior approval of holders of record of a majority of the
shares of Series A Convertible Preferred Stock, Series B Convertible Preferred
Stock and Series C Convertible Preferred Stock outstanding as of a record date
between 10 and 90 days prior to the consummation of any such transaction, voting
together as a class, except that (a) any subsequently formed Subsidiary (as
defined herein) may merge or consolidate with the Company so long as the Company
is the surviving entity of such merger or consolidation, and (b) any
subsequently formed Subsidiary may lease, sell, transfer or otherwise dispose of
all or any part of its properties and assets to the Company.
6.5 ACQUISITION. So long as shares of Series C Convertible
Preferred Stock issued hereunder are outstanding, the Company will not acquire
any interest in any business from any person, firm or entity (whether by a
purchase of assets, purchase of stock, merger or otherwise) in which the
consideration to be
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paid, as of the date as of which any such agreement with respect to such
acquisition is entered into, represents more than 25% of the total assets of
the Company without the prior approval of holders of record of a majority of
the shares of Series A Convertible Preferred Stock, Series B Convertible
Preferred Stock and Series C Convertible Preferred Stock outstanding as of a
record date between 10 and 90 days prior to the consummation of any such
transaction, voting together as a class, except as otherwise specifically
permitted pursuant to the provisions of this Agreement.
6.6 DIVIDENDS; REPURCHASES. So long as shares of Series C
Convertible Preferred Stock issued hereunder are outstanding, the Company shall
not declare or pay any dividends on, and shall not purchase, redeem, retire or
otherwise acquire, any shares of its capital stock (other than shares of Series
A Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock), whether now or hereafter outstanding, without
obtaining the prior approval of holders of record of a majority of the shares of
Series A Convertible Preferred Stock, Series B Convertible Preferred Stock and
Series C Convertible Preferred Stock outstanding as of a record date between 10
and 90 days prior to the declaration date or the date of consummation of any
such transaction, as applicable, voting together as a class.
6.7 CONSENTS. Prior to Closing, the Company shall obtain all
consents and shareholder approvals needed to enable it to perform all of its
obligations under this Agreement and the transactions contemplated hereby.
6.8 ISSUANCE OF ADDITIONAL SECURITIES. Except for Common Stock
issued on conversion of the Series C Convertible Preferred Stock or on
conversion of any other securities by their terms convertible into or
exchangeable for Common Stock and except for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock (including Common Stock
issuable on conversion thereof) and options, warrants and other rights to
subscribe for, purchase or otherwise acquire Common Stock or securities by their
terms convertible into or exchangeable for Common Stock (including Common Stock
issuable on conversion thereof) issued, issuable, sold or granted to existing or
prospective officers, directors or employees of, or consultants to, the Company,
pursuant to any stock option, stock incentive, stock appreciation, stock bonus,
stock award, compensation plan or arrangement or employment letter, or any other
agreement, plan, arrangement or letter, presently in effect or hereafter adopted
or entered into by the Company, the Company will not issue or sell, or enter
into any agreement providing for the issuance or sale of, any equity or debt
securities or
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options, warrants or other rights to subscribe for, purchase or otherwise
acquire any equity or debt securities, or any securities convertible into or
exchangeable for any equity or debt securities, without obtaining the prior
approval of holders of record of a majority of the shares of Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock and Series
C Convertible Preferred Stock outstanding as of a record date between 10 and
90 days prior to the consummation of any such transaction, voting together as
a class, which approval will not be unreasonably withheld.
6.9 TAXES AND LIENS. The Company will duly pay and discharge,
when payable, all taxes, assessments and governmental charges imposed upon or
against the Company or its properties, or any part thereof or upon the income or
profits therefrom, in each case before the same become delinquent and before
penalties accrue thereon, as well as all claims for labor, materials or supplies
which if unpaid might by law become a lien upon any of its property, unless and
to the extent that the same are being contested in good faith and by appropriate
proceedings and the Company has set aside on its books adequate reserves with
respect thereto.
6.10 RESTRICTIVE AGREEMENT. Subsequent to Closing, the Company
will not be a party to any agreement or instrument which by its terms would
restrict the Company's performance of its obligations pursuant to this Agreement
or the terms of the Shares including any redemption or conversion thereof.
6.11 NOTIFICATION OF REGISTRATION UNDER THE EXCHANGE ACT. The
Company will give each holder of record of the Shares prompt written notice of
the effectiveness of any registration statement filed pursuant to the
requirements of Section 12 of the Exchange Act or pursuant to any equivalent
provision of any similar federal law then in force (a "1934 Act Registration
Statement") relating to the Common Stock of the Company, and the number of
shares of such class of equity securities outstanding at the time such
registration statement becomes effective. If the Company has filed a 1934 Act
Registration Statement or a registration statement on any form other than Form
S-8 (or any successor form) pursuant to the requirements of the Securities Act,
the Company further covenants that it will file all reports required to be filed
by it under the Securities Act or the Exchange Act and the rules and regulations
adopted by the Commission thereunder or, if the Company is not required to file
such reports, it will, upon the request of a holder of Shares, make publicly
available such information as will enable such holder to sell such Shares
without a registration statement (as described below), and will
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take such further action as such holder may request, all to the extent
required from time to time to enable such holder to sell such Shares, without
registration within the limitations of the exemptions provided by (i) Rule
144 and Rule 144A adopted by the Commission under the Securities Act, as such
rules may be amended from time to time, or (ii) any similar rule or
regulation hereafter adopted by the Commission.
6.12 SALE OR TRANSFER OF RESTRICTED SECURITIES. An opinion of
counsel will not be necessary for a transfer by an Investor which is a
partnership to a partner of such partnership or to a retired partner of such
partnership who retires after the date hereof, or to the estate of any partner
or retired partner, or to a trust for the benefit of an Investor or an
Investor's family members or the transfer by gift, will or intestate succession
of any partner to his spouse or lineal descendants or ancestors, if the
transferee agrees in writing to be subject to the terms hereof to the same
extent as if he were an original Investor hereunder.
6.13 RIGHT OF FIRST OFFER.
(a) Except in the case of Excluded Securities (as defined
herein), the Company shall not issue, sell or exchange, agree to issue, sell or
exchange, or reserve or set aside for issuance, sale or exchange, any (A) shares
of Common Stock, (B) any other equity security of the Company, (C) any debt
security of the Company which, by its terms, is convertible into or exchangeable
for any equity security of the Company, (D) any security of the Company that is
a combination of debt and equity or (E) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any such
debt security of the Company, unless in each case the Company shall have first
offered to sell to the Investors, the Series A Investors (as defined herein) and
the Series B Investors (as defined herein) such securities (the "Offered
Securities"), at a price and on such other terms as shall have been specified by
the Company in writing delivered to each of the Investors, the Series A
Investors and the Series B Investors (the "Offer"), which Offer by its terms
shall remain open and irrevocable for a period of 30 days from the date it is
delivered by the Company to the Investors, the Series A Investors and the Series
B Investors.
(b) Each of the Investors shall have the right to purchase
up to its pro rata share (as defined below) of the Offered Securities. For the
purposes of this subsection (b), each Investor's "pro rata share" shall be that
amount of the Offered Securities which would result in such Investor owning the
same percentage of the Company's issued and outstanding Common Stock after the
issuance of Offered Securities as such Investor
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owned immediately prior to the issuance (assuming in each case the issuance
of all Common Stock issuable upon conversion of the Series A Convertible
Preferred Stock, the Series B Convertible Preferred Stock, the Series C
Convertible Preferred Stock and all shares issuable upon the conversion of
the Offered Securities).
(c) Notice of an Investor's intention to accept, in whole
or in part, an Offer shall be evidenced by a writing signed by the Investor and
delivered to the Company prior to the end of the 30-day period of such Offer,
setting forth such portion of the Offered Securities as the Investor elects to
purchase (the "Notice of Acceptance").
(d) In the event that the Investors, the Series A Investors
and the Series B Investors do not elect to purchase all of the Offered
Securities which they are entitled to purchase under Section 6.13(b) hereof,
Paragraph 6(p)(ii) of the Series A Agreement (as defined herein) and Section
6.15(b) of the Series B Agreement (as defined herein), the Company shall within
5 days of the earlier of (A) the receipt of all of the Notices of Acceptances
from the Investors pursuant to subsection (c) above, from the Series A Investors
pursuant to Section 6(p)(iii) of the Series A Agreement and from the Series B
Investors pursuant to Section 6.15(c) of the Series B Agreement or (B) the
expiration of the 30-day period provided in Section 6.13(a) hereof provide each
of the Investors who have delivered a Notice of Acceptance with written notice
of the number of Offered Securities which have not been accepted by the
Investors, the Series A Investors or the Series B Investors (the "Refused
Shares"), and each such Investor shall have 10 days to inform the Company in
writing of its intention to purchase its pro rata share (as defined below) of
such Refused Shares. For the purposes of this subsection (d), "pro rata share"
shall mean the percentage obtained by dividing the number of Securities, Series
A Securities (as defined herein), Series B Securities (as defined herein) and
other shares of Common Stock owned and to be purchased by an Investor who has
delivered a Notice of Acceptance pursuant to subsection (c) above by the total
number of Securities, Series A Securities, Series B Securities and other shares
of Common Stock owned and to be purchased by Investors who have delivered
Notices of Acceptance pursuant to subsection (c) above, by Series A Investors
who have delivered Notices of Acceptance pursuant to Paragraph 6(p)(iii) of the
Series A Agreement and by Series B Investors who have delivered Notices of
Acceptance pursuant to Section 6.15(c) of the Series B Agreement. Upon the
expiration of such 10-day period, the Company shall have 90 days to sell all or
any part of such Refused Shares as to which the Company has not received a
notice from the Investors pursuant to Section 6.13(c) hereof or this subsection
(d), from the Series A Investors pursuant to Paragraphs 6(p)(iii) or 6(p)(iv) of
the Series A Agreement or
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from the Series B Investors pursuant to Sections 6.15(c) or (d) of the Series
B Agreement to any other person or persons, but only upon terms and
conditions in all material respects, including, without limitation, unit
price and interest rates (but excluding payment of legal fees of counsel of
the purchaser), which are no more favorable, in the aggregate, to such other
person or persons or less favorable to the Company that those set forth in
the Offer. Upon the closing of the sale to such other person or persons of
all the Refused Shares, which shall include payment of the purchase price to
the Company in accordance with the terms of the Offer, the Investors shall
purchase from the Company, and the Company shall sell to the Investors, the
Offered Securities in respect of which a Notice of Acceptance was delivered
to the Company by an Investor, at the terms specified in the Offer. The
purchase by an Investor of any Offered Securities is subject in all cases to
the preparation, execution and delivery by the Company and the Investor of a
purchase agreement relating to such Offered Securities satisfactory in form
and substance to the Investor and its counsel.
(e) In each case, any Offered Securities not purchased by
the Investors or other person or persons in accordance with Sections 6.13(b),
(c) and (d) hereof or by the Series A Investors in accordance with Paragraph
6(p) of the Series A Agreement or by the Series B Investors in accordance with
Section 6.15 of the Series B Agreement may not be sold or otherwise disposed of
until they are again offered to the Investors, the Series A Investors and the
Series B Investors under the procedures specified in Sections 6.13(a), (b), (c)
and (d) hereof, in Paragraph 6(p) of the Series A Agreement and in Section 6.15
of the Series B Agreement.
(f) The rights of the Investors, the Series A Investors and
the Series B Investors under this Section 6.13 shall not apply to the following
securities (the "Excluded Securities"):
(A) Common Stock, securities by their terms
convertible into or exchangeable for Common Stock (including Common Stock
issuable on conversion thereof) and options, warrants and other rights to
subscribe for, purchase or otherwise acquire Common Stock or securities by their
terms convertible into or exchangeable for Common Stock (including Common Stock
issuable on conversion thereof) issued, issuable, sold or granted to existing or
prospective officers, directors or employees of, or consultants to, the Company,
pursuant to any stock option, stock incentive, stock appreciation, stock bonus,
stock award, compensation plan or arrangement or employment letter, or any other
agreement, plan, arrangement or letter,
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presently in effect or hereafter adopted or entered into by the Company;
(B) Common Stock issued as a stock dividend or upon
any stock split or other subdivision or combination of shares of Common Stock;
(C) Common Stock issued upon conversion of any of the
Series C Convertible Preferred Stock;
(D) Common Stock issued upon conversion of any other
shares of convertible stock of the Company;
(E) securities issued in connection with any
acquisition by the Company;
(F) securities issued by the Company in connection
with the redemption of the Series C Convertible Preferred Stock or any other
shares of convertible stock of the Company as provided in the Articles of
Incorporation, as amended, of the Company; and
(G) securities issued by the Company in connection
with any public offering of any securities of the Company pursuant to a
registration statement filed by the Company under the Securities Act on any form
other than Form S-8.
(g) Notwithstanding the provisions of Section 9.4 hereof,
the rights under this Section 6.13 shall not be assignable except (A) to a
partner of any of the Investors or retired partner of any of the Investors who
retires after the date hereof or the estate of any such partner or retired
partner, or (B) to an Affiliate (as such term is defined in Rule 501(b) of the
Securities Act) of an Investor. An Investor shall provide the Company with
notice of any assignment under this subsection (g) within 10 days after its
occurrence.
6.14 VISITATION RIGHTS. So long as the Investors shall continue
to own collectively at least 5% of the issued and outstanding Common Stock,
assuming conversion of all outstanding convertible securities of the Company,
those Investors continuing to own Securities collectively shall have the right
to elect one representative (the "Representative") who shall have visitation
rights at meetings of the Board of Directors of the Company; provided, however,
(a) that this Section 6.15 will cease and be of no further force and effect upon
the closing of an Initial Public Offering, and (b) an Investor's right to
participate in the election of the Representative may be suspended by the Board
of Directors of the Company if the Board, in good faith, determines that such
Investor's intentions are actually or
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potentially in conflict with the interests of the Company and/or its
shareholders.
6.15 INSURANCE. The Company shall keep its insurable properties
insured at all times to such extent and against such risks, including fire,
business interruption, and other risks insured against by extended coverage, as
is customary with companies of comparable size and financial condition in the
same or similar businesses; maintain in full force and effect product liability
insurance and public liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection with the use
of any properties owned, occupied or controlled by the Company, in such amount
as the Company shall reasonably deem necessary; and maintain workers'
compensation insurance and such other insurance as may be required by law.
6.16 REGISTRATION RIGHTS. In the event the Company makes an
offering of its securities subsequent to the Closing, it shall not grant
registration rights that are senior in any respect to the registration rights
granted to the Investors pursuant to Section 7 hereof; provided, however, that
the Company shall have the right to grant registration rights on a PARI PASSU
basis to the registration rights granted in Section 7 hereof.
Section 7. REGISTRATION OF COMMON STOCK.
7.1 DEMAND REGISTRATION. Upon the written request of one or
more record holders of Securities, which request will state the intended method
of disposition by such holders and will request that the Company effect the
registration under the Securities Act of all or part of the Registerable Common
Stock (as defined herein) of such holders, the Company will, within 10 days
after receipt of such request, give written notice of such requested
registration to all record holders of Securities, Series A Securities, Series B
Securities and Warrant Stock (as defined herein), and thereupon (except as
expressly provided herein) will use its best efforts to effect the registration
("Demand Registration") under the Securities Act of (x) the shares of
Registerable Common Stock included in the initial request for registration (for
disposition in accordance with the intended method of disposition stated in such
request) and (y) all other shares of Registerable Common Stock, shares of Series
A Registerable Common Stock (as defined herein), shares of Series B Registerable
Common Stock (as defined herein) and shares of Warrant Stock, the record holders
of which have made written request to the Company for registration thereof
within 30 days after the receipt of such written notice from the Company,
provided that:
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(a) the Company shall be required to effect only two Demand
Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Securities outstanding at the
time of the request; PROVIDED that the Company shall not be required to effect
more than one registration during any one-year period pursuant to this Section
7.1, Paragraph 7(a) of the Series A Agreement or Section 7.1 of the Series B
Agreement (except that, upon request of any record holder of Securities
(regardless of the number of Securities held by such holder), the Company, if it
is then qualified to do so, shall be required to effect an unlimited number of
registrations on Form S-3, or a similar short form registration statement, which
registrations (hereinafter referred to as "Short Form Registrations") shall not
be counted for purposes of this Section 7.1(a) as the Demand Registration which
the Company is required to effect);
(b) if the holders of Registerable Common Stock who
initiated the request for registration intend to sell their Registerable Common
Stock by means of an underwriting (whether on a "best efforts" or a "firm
commitment" basis), they shall so advise the Company as part of their request,
and the Company shall include such information in the notice to the other record
holders of Securities, Series A Securities, Series B Securities and Warrant
Stock. In that event, the other record holders of Securities, Series A
Securities, Series B Securities and Warrant Stock shall have the right to
include their shares of Registerable Common Stock, Series A Registerable Common
Stock, Series B Registerable Common Stock and Warrant Stock in the underwriting
(unless otherwise mutually agreed by a majority in interest of the record
holders of Securities, Series A Securities, Series B Securities and Warrant
Stock). The managing underwriter for such offering shall be selected by the
Board of Directors of the Company. Each such holder agrees, with respect to an
underwritten public offering which occurs following the Closing Date, by its
acquisition of Securities not to effect any public sale or distribution of such
Securities or Registerable Common Stock (other than as part of such underwritten
public offering) during such period, if any, not to exceed 180 days, as shall
reasonably be requested by any underwriter;
(c) the Company shall not include and shall not permit
third parties other than (i) the holders of Series A Securities, (ii) the
holders of Series B Securities, and (iii) the holders of Warrant Stock to
include additional securities in a Demand Registration without the consent of
the holders of a majority of the shares of Registerable Common Stock, Series A
Registerable Common Stock and Series B Registerable Common Stock included in
such Demand Registration, voting together as a class;
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(d) if a Demand Registration under this Section 7.1 is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount of
Registerable Common Stock, Series A Registerable Common Stock, Series B
Registerable Common Stock and Warrant Stock requested to be included in such
registration exceeds the amount of such Registerable Common Stock, Series A
Registerable Common Stock, Series B Registerable Common Stock and Warrant Stock
which can be successfully sold in such offering, the Company will nevertheless
include in such registration, prior to the inclusion of any securities which are
not Registerable Common Stock, Series A Registerable Common Stock, Series B
Registerable Common Stock or Warrant Stock (notwithstanding any consent obtained
in accordance with Section 7.1(c) hereof), the amount of Registerable Common
Stock, Series A Registerable Common Stock, Series B Registerable Common Stock
and Warrant Stock requested to be included which in the opinion of such
underwriters can be sold, pro rata among the holders of Registerable Common
Stock, Series A Registerable Common Stock, Series B Registerable Common Stock
and Warrant Stock requesting inclusion on the basis of the number of shares of
Registerable Common Stock, Series A Registerable Common Stock, Series B
Registerable Common Stock and Warrant Stock then owned by such holders;
provided, however, that if the holders of Registerable Common Stock are unable
to include in such offering at least fifty percent (50%) of the Registerable
Common Stock sought to be registered in a Demand Registration under this Section
7.1, the record holders of Securities will be entitled to an additional Demand
Registration under this Section;
(e) if the Company shall furnish to the holders requesting
a registration pursuant to this Section 7 a certificate signed by the President
of the Company stating that, in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company for a
registration statement to be filed as requested, the Company shall have the
right to defer such filing for a period of not more than 120 days after receipt
of the initial request for registration under this Section 7.1; provided,
however, that the Company may not utilize this right more than once in any
one-year period;
(f) registrations under this Section 7.1 will be on a form
permitted by the rules and regulations of the Commission selected by the
underwriters if the Demand Registration is in connection with an underwritten
public offering or otherwise by the Company; and
(g) notwithstanding anything else contained herein, the
Company will not be required to effect a Demand
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Registration pursuant to this Section 7.1 unless the aggregate number of
shares of Common Stock to be registered exceeds 20% of the shares of Common
Stock then held by the holders of the Securities or issuable to such holders
upon conversion of the Shares.
7.2 INCIDENTAL REGISTRATIONS.
(a) If the Company at any time proposes to register any of
its securities under the Securities Act (other than pursuant to Section 7.1
hereof), whether of its own accord or at the demand of any holder of such
securities pursuant to an agreement with respect to the registration thereof
(provided such agreement does not prohibit third parties from including
additional securities in such registration), and if the form of registration
statement proposed to be used may be used for the registration of Registerable
Common Stock, the Company will give notice to all record holders of Securities
not less than 5 days nor more than 30 days prior to the filing of such
registration statement of its intention to proceed with the proposed
registration (the "Incidental Registration"), and, upon the written request of
any such holder made within 5 days after the receipt of any such notice (which
request will specify the Registerable Common Stock intended to be disposed of by
such holder and state the intended method of disposition thereof), the Company
will use its best efforts to cause all Registerable Common Stock as to which
registration has been requested to be registered under the Securities Act,
provided that if such registration is in connection with an underwritten public
offering, such holder's Registerable Common Stock to be included in such
registration shall be offered upon the same terms and conditions as apply to any
other securities included in such registration. Notwithstanding anything
contained in this Section 7.2 to the contrary, the Company shall have no
obligation to cause Registerable Common Stock to be registered with respect to
any Investor whose Registerable Common Stock shall be eligible for resale under
Rule 144(k) of the Securities Act.
(b) If an Incidental Registration is a primary registration
on behalf of the Company and is in connection with an underwritten public
offering, and if the managing underwriters advise the Company in writing that in
their opinion the amount of securities requested to be included in such
registration (whether by the Company, the holders of registration rights
pursuant to Section 7.2(a) hereof or other holders of its securities pursuant to
any other rights granted by the Company to demand inclusion of any such
securities in such registration) exceeds the amount of such securities which can
be successfully sold in such offering, the Company will include in such
registration the amount of securities requested to be included
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which in the opinion of such underwriters can be sold, in the following order
(i) first, all of the securities the Company proposes to sell, (ii) second,
all of the Registerable Common Stock, Series A Registerable Common Stock,
Series B Registerable Common Stock and Warrant Stock requested to be included
in such registration, pro rata among the holders thereof on the basis of the
number of shares of Registerable Common Stock, Series A Registerable Common
Stock, Series B Registerable Common Stock and Warrant Stock then owned by
such holders, and (iii) third, any other securities requested to be included
in such registration, pro rata among the holders thereof on the basis of the
amount of such securities then owned by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount of
securities requested to be included in such registration (whether by such
holders, by holders of registration rights pursuant to Section 7.2(a) hereof or
by holders of its securities pursuant to any other rights granted by the Company
to demand inclusion of securities in such registration) exceeds the amount of
such securities which can be sold in such offering, the Company will include in
such registration the amount of securities requested to be included which in the
opinion of such underwriters can be sold, in the following order (i) first, all
of the securities requested to be included by holders demanding or requesting
such registration, (ii) second, all of the Registerable Common Stock, Series A
Registerable Common Stock, Series B Registerable Common Stock and Warrant Stock
requested to be included in such registration, pro rata among the holders
thereof on the basis of the number of shares of Registerable Common Stock,
Series A Registerable Common Stock, Series B Registerable Common Stock and
Warrant Stock then owned by such holders, and (iii) third, any other securities
requested to be included in such registration, pro rata among the holders
thereof on the basis of the amount of such securities then owned by such
holders.
7.3 REGISTRATION PROCEDURES. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registerable Common Stock under the Securities Act as provided in this
Section 7, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Registerable Common Stock and use its best
efforts (which shall not, in any case, require the Company to incur any
unreasonable expense) to cause such registration statement to become effective;
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(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than six months or such shorter period in
which the disposition of all securities in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement shall be completed, and to comply with the provisions of the
Securities Act (to the extent applicable to the Company) with respect to such
dispositions;
(c) furnish to each seller of such Registerable Common
Stock such number of copies of such registration statement and of each such
amendment and supplement thereto (in each case including all exhibits), such
number of copies of the prospectus included in such registration statement
(including each preliminary prospectus), in conformity with the requirements of
the Securities Act, and such other documents, as such seller may reasonably
request, in order to facilitate the disposition of the Registerable Common Stock
owned by such seller;
(d) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or qualify
such Registerable Common Stock covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as any seller reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registerable Common Stock owned by such seller, except
that the Company will not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would
not, but for the requirements of this Section 7.3(d) be obligated to be
qualified, to subject itself to taxation in any such jurisdiction, or to consent
to general service of process in any such jurisdiction;
(e) provide a transfer agent and registrar for all such
Registerable Common Stock covered by such registration statement not later than
the effective date of such registration statement;
(f) notify each seller of such Registerable Common Stock at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue statement
of a material fact or omits any fact necessary to make
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the statements therein not misleading, and, at the request of any such
seller, the Company will prepare a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registerable
Common Stock, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact required to be stated therein or
necessary to make the statements therein not misleading;
(g) use its best efforts to cause all such Registerable
Common Stock to be listed on each securities exchange on which similar
securities issued by the Company are then listed;
(h) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters in such
transactions;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
reasonably required in order to expedite or facilitate the disposition of such
Registerable Common Stock; and
(j) make available for inspection by any seller of
Registerable Common Stock, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant or other
agent retained by any such seller and/or representative of such seller or
underwriter, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors and
employees to supply all information reasonably requested by any such seller,
underwriter, attorney, accountant or agent in connection with such registration
statement.
7.4 REGISTRATION AND SELLING EXPENSES.
(a) All expenses incurred by the Company in connection with
the Company's performance of or compliance with this Section 7, including,
without limitation (A) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
(B) blue sky fees and expenses, (C) all printing expenses and (D) all fees and
disbursements of counsel and accountants for the Company (including the expenses
of any audit of financial statements) retained by the Company (all such expenses
being herein called "Registration Expenses"), will be paid by the Company except
as otherwise expressly provided in this Section 7.4.
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(b) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or other duties in connection therewith and expenses of audits
of year-end financial statements), and the expenses and fees for listing the
securities to be registered on one or more securities exchanges on which similar
securities issued by the Company are then listed.
(c) The Company shall bear the Registration Expenses of
each Demand Registration, each Incidental Registration and each Short Form
Registration hereunder.
(d) Notwithstanding any of the foregoing, all underwriting
discounts, selling commissions and stock transfer taxes applicable to sales of
Registerable Common Stock in connection with any Demand Registration, Incidental
Registration or Short Form Registration shall be borne by all persons who are
selling Registerable Common Stock pursuant to such Registration Statement in
proportion to the dollar value of the securities being sold by each such person.
(e) All fees and expenses required to be paid by the
holders of Registerable Common Stock pursuant to Section 7.4(d) hereof in
connection with any Incidental Registration hereunder shall be borne by said
holders in proportion to the dollar value of the securities of such holder
covered by such Incidental Registration.
7.5 OTHER CONDITIONS RELATING TO REGISTRATIONS. Except as
otherwise provided in this Agreement, the Company shall not be required to
furnish any audited financial statements at the request of any holder of
Registerable Common Stock other than those statements customarily prepared at
the end of its fiscal year, unless (a) the requesting holder of Registerable
Common Stock shall agree to reimburse the Company for the out-of-pocket costs
incurred by the Company in the preparation of such other audited financial
statements or (b) such other audited financial statements shall be required by
the Commission as a condition to declaring a Demand Registration effective under
the Securities Act.
7.6 OTHER PUBLIC SALES AND REGISTRATIONS. The Company agrees
(a) that if it has previously filed a registration statement with respect to
Registerable Common Stock in connection with a Demand Registration or Incidental
Registration hereunder, and if such previous registration has not been withdrawn
or abandoned, the Company will not file or cause to become effective any other
registration of any of its securities under the
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Securities Act or otherwise effect a public sale or distribution of its
securities (except pursuant to registration on Form S-8 or any successor form
relating to a special offering to the employees or security holders of the
Company or any Subsidiary hereafter formed or acquired), whether on its own
behalf or at the request of any holder of such securities, until at least 60
days have elapsed after the effective date of such previous registration; and
(ii) to cause each holder of securities purchased from the Company any time
after the date of this Agreement (other than in a registered public offering)
to agree not to effect any such public sale or distribution during such
60-day period of any such securities or any securities issuable on the
conversion thereof or in redemption or exchange therefor. The foregoing
60-day limitation, however, shall not preclude the Company from proceeding
with a registration statement requested by a holder of securities with
"demand" registration rights who requests registration prior to the time a
record holder of Securities requests a registration pursuant to Section 7.1
hereof.
7.7 TRANSFEREES OF SECURITIES. Notwithstanding anything else
set forth in this Section 7, no person to whom Securities are transferred shall
have any rights under this Section 7 as a holder of such Securities unless (a)
such person (i) is a partner of any Investor which is a partnership or a retired
partner of such partnership who retires after the date hereof, (ii) is a family
member of or trust for the benefit of any Investor, or (iii) acquires at least
100,000 shares of Registerable Common Stock, (b) such person agrees to be bound
by the terms and conditions of this Agreement and (c) the Company is given
prompt written notice of such transfer.
7.8 INDEMNIFICATION.
(a) The Company hereby agrees to indemnify, to the extent
permitted by law, each holder of Registerable Common Stock, its officers and
directors, if any, and each person, if any, who controls such holder within the
meaning of the Securities Act, against all losses, claims, damages, liabilities
and expenses under the Securities Act, applicable state securities laws, common
law or otherwise (including, as incurred, legal and other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, except to the extent limited by Section 7.8(c) below) caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if the
Company has furnished any amendments or supplements thereto) or any preliminary
prospectus, which registration statement, prospectus or preliminary prospectus
shall be prepared in connection with a
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Demand Registration or Incidental Registration, or caused by any omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are caused
by any untrue statement or alleged untrue statement contained in or by any
omission or alleged omission from information furnished in writing to the
Company by such holder in connection with a Demand Registration or Incidental
Registration, provided the Company will not be liable pursuant to this
Section 7.8 if such losses, claims, damages, liabilities or expenses have
been caused by any selling security holder's failure to deliver a copy of the
registration statement or prospectus, or any amendments or supplements
thereto, after the Company has furnished such holder with a sufficient amount
of copies of the same.
(b) In connection with any registration statement in
which a holder of Registerable Common Stock is participating, each such
holder shall furnish to the Company in writing such information as is
reasonably requested by the Company for use in any such registration
statement or prospectus and shall indemnify, to the extent permitted by law,
the Company, its directors and officers and each person, if any, who controls
the Company within the meaning of the Securities Act, against any losses,
claims, damages, liabilities and expenses under the Securities Act,
applicable state securities laws, common law or otherwise (including, as
incurred, legal and other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, except to the extent
limited by Section 7.8(c) below) caused by any untrue statement or alleged
untrue statement of a material fact or any omission or alleged omission of a
material fact required to be stated in the registration statement or
prospectus or any amendment thereof or supplement thereto or necessary to
make the statements therein not misleading, but only to the extent such
losses, claims, damages, liabilities or expenses are caused by an untrue
statement or alleged untrue statement contained in or by an omission or
alleged omission from information so furnished in writing by such holder in
connection with the Demand Registration or Incidental Registration. If the
offering pursuant to any such registration is made through underwriters, each
such holder agrees to enter into an underwriting agreement in customary form
with such underwriters and to indemnify such underwriters, their officers and
directors, if any, and each person who controls such underwriters within the
meaning of the Securities Act to the same extent as hereinabove provided with
respect to indemnification by such holder of the Company. Notwithstanding
the foregoing, no such holder of Registerable Common Stock shall be liable
under this Section 7.8(b) for any amounts exceeding the product of (i) the
offering price per share of Registerable Common Stock
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pursuant to the registration statement in which such holder is participating
(less any underwriting discounts or commissions which reduce the amount such
holder receives), multiplied by (ii) the number of shares of Registerable
Common Stock being sold by such holder pursuant to such registration
statement.
(c) Promptly after receipt by an indemnified party under
Section 7.8(a) or Section 7.8(b) of notice of the commencement of any action or
proceeding, such indemnified party will, if a claim in respect thereof is or is
to be made against the indemnifying party under such Section, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under such Section. In case
any such action or proceeding is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and, to the extent that it
wishes, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under such Section for any legal or any
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof (other than reasonable costs of investigation) unless
incurred at the written request of the indemnifying party. Notwithstanding the
above, the indemnified party will have the right to employ one counsel
(exclusive of local counsel) of its own choice in any such action or proceeding
if the indemnified party has reasonably concluded that there may be defenses
available to it which are different from or additional to those of the
indemnifying party, or counsel to the indemnified party is of the opinion that
it would not be desirable for the same counsel to represent both the
indemnifying party and the indemnified party because such representation might
result in a conflict of interest (in either of which cases the indemnifying
party will not have the right to assume the defense of any such action or
proceeding on behalf of the indemnified party or parties and such legal and
other expenses will be borne by the indemnifying party). An indemnifying party
will not be liable to any indemnified party for any settlement of any such
action or proceeding effected without the consent of such indemnifying party.
(d) If the indemnification provided for in Section 7.8(a)
or Section 7.8(b) is unavailable under applicable law to an indemnified party in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable
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indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative fault of the Company on the one hand
and of the holders of Registerable Common Stock on the other in connection
with the statements or omissions which resulted in such losses, claims,
damages, or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
holders of Registerable Common Stock on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the Company or by the holders of Registerable
Common Stock and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages and liabilities referred to above shall be deemed to include, subject
to the limitations set forth in Section 7.8(c), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating
or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
(e) Promptly after receipt by the Company or any holder of
Securities of notice of the commencement of any action or proceeding, such party
will, if a claim for contribution in respect thereof is to be made against
another party (the "contributing party"), notify the contributing party of the
commencement thereof; but the omission so to notify the contributing party will
not relieve it from any liability which it may have to any other party other
than for contribution hereunder. In case any such action, suit, or proceeding
is brought against any party, and such party notifies a contributing party of
the commencement thereof, the contributing party will be entitled to participate
therein with the notifying party and any other contributing party similarly
notified. No party shall be liable for contribution with regard to the
settlement of any action or proceeding effected without its consent.
7.9 CONVERSION OF PREFERRED STOCK. Any request for a Demand
Registration or Incidental Registration with respect to Registerable Common
Stock issuable upon the conversion of Shares will provide in the intended method
of disposition accompanying such request that conversion of Shares into Common
Stock in accordance with the terms thereof will be undertaken promptly after a
registration statement has become effective but in any event before the sale
thereof to underwriters has been
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consummated so that no Shares will be distributed to the public under such
registration statement.
7.10 AMENDMENT OF SECTION 7. Any provision of this Section 7 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and holders of record of a majority of the
Securities, the Series A Securities and the Series B Securities outstanding as
of a record date between 10 and 90 days prior to the effective date of such
amendment or waiver, voting together as a class. Any amendment or waiver
effected in accordance with this Section 7.10 shall be binding upon each holder
of Securities, Series A Securities and Series B Securities at the time
outstanding (including securities into which such Securities, Series A
Securities and Series B Securities are convertible), each future holder of all
such Securities, such Series A Securities or such Series B Securities, and the
Company.
Section 8. CERTAIN DEFINITIONS.
For the purposes of this Agreement, the following terms have the
respective meanings set forth below:
8.1 "CENTOCOR AGREEMENT" means the Stock Purchase Agreement,
dated September 20, 1994, by and between the Company and Centocor, Inc.
8.2 "CENTOCOR SHARES" means the 400,000 shares of the Company's
Series B Convertible Preferred Stock, $.01 par value per share, issued to
Centocor, Inc. pursuant to the Centocor Agreement.
8.3 "COMMISSION" means the Securities and Exchange Commission
and includes any governmental body or agency succeeding to the functions
thereof.
8.4 "COMMON STOCK" means the Company's Common Stock, $.01 par
value per share.
8.5 "CONVERSION AGREEMENT" means the Conversion Agreement, dated
as of April 23, 1996, by and among the Company and the Series B Investors.
8.6 "ERISA" means, as of any given time, the Employee Retirement
Income Security Act of 1974, as amended.
8.7 "EXCHANGE ACT" means, as of any given time, the Securities
Exchange Act of 1934, as amended, or any similar federal law then in force.
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8.8 "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" means generally
accepted accounting principles, consistently applied; and any accounting
determination or calculation required to be made under this Agreement shall be
made (unless otherwise provided) in accordance with generally accepted
accounting principles, consistently applied.
8.9 "INITIAL PUBLIC OFFERING" means an underwritten initial
public offering (whether on a "best efforts" or a "firm commitment" basis) for
the account of the Company of Common Stock or securities convertible into or
exchangeable for shares of Common Stock.
8.10 "NOTE SHARES" means the 1,600,000 shares of the Company's
Series B Convertible Preferred Stock, $.01 par value per share, issued pursuant
to the Conversion Agreement.
8.11 "PRIVATE PLACEMENT MEMORANDUM" means the Company's
Confidential Private Placement Memorandum dated March, 1996.
8.12 "REGISTERABLE COMMON STOCK" means any Common Stock issued or
issuable upon conversion of the Shares.
8.13 "SECURITIES" means the Shares and any Common Stock issued
upon conversion thereof, whether at Closing or thereafter, but shall not include
any such Shares or Common Stock sold in any public offering or in any sale
pursuant to Rule 144 under the Securities Act. For purposes of computing at any
date any percentage of Securities required in connection with any action taken
or to be taken under this Agreement, the Shares shall be deemed to equal the
number of shares of Common Stock issuable at such date upon conversion thereof.
8.14 "SECURITIES ACT" means, as of any given time, the Securities
Act of 1933, as amended, or any similar federal law then in force.
8.15 "SERIES A AGREEMENT" means the Stock Purchase Agreement,
dated as of June 25, 1992, by and among the Company and the Investors listed on
Exhibit 1(a) attached thereto, as amended.
8.16 "SERIES A CONVERTIBLE PREFERRED STOCK" means the 3,900,000
shares of the Company's Series A Convertible Preferred Stock, $.01 par value per
share, issued pursuant to the Series A Agreement.
8.17 "SERIES A INVESTORS" means Investors as defined in the
Series A Agreement.
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8.18 "SERIES A REGISTERABLE COMMON STOCK" means Registerable
Common Stock as defined in the Series A Agreement.
8.19 "SERIES A SECURITIES" means Securities as defined in the
Series A Agreement.
8.20 "SERIES B AGREEMENT" means the Stock Purchase Agreement,
dated as of November 15, 1993, by and among the Company and the Investors listed
on Exhibit 1.1 attached thereto, as amended.
8.21 "SERIES B CONVERTIBLE PREFERRED STOCK" means (a) the
2,000,000 shares of the Company's Series B Convertible Preferred Stock, $.01
par value per share, issued pursuant to the Series B Agreement, (b) the Note
Shares and (c) except for purposes of Section 6 of this Agreement, the
Centocor Shares. For purposes of Section 6 of this Agreement, "Series B
Convertible Preferred Stock" specifically excludes the Centocor Shares.
8.22 "SERIES B INVESTORS" means Investors as defined in the
Series B Agreement.
8.23 "SERIES B REGISTERABLE COMMON STOCK" means (a) Registerable
Common Stock as defined in the Series B Agreement, (b) any Common Stock issued
or issuable upon conversion of the Note Shares and (c) except for purposes of
Section 6 of this Agreement, any Common Stock issued or issuable upon conversion
of the Centocor Shares. For purposes of Section 6 of this Agreement, "Series B
Registerable Common Stock" specifically excludes the Centocor Shares.
8.24 "SERIES B SECURITIES" means (a) Securities as defined in the
Series B Agreement, (b) the Note Shares and any Common Stock issued upon
conversion thereof, whether at Closing or thereafter, but shall not include any
such Note Shares or Common Stock sold in any public offering or in any sale
pursuant to Rule 144 under the Securities Act, and (c) except for purposes of
Section 6 of this Agreement, the Centocor Shares and any Common Stock issued
upon conversion thereof, whether at Closing or thereafter, but shall not include
any such Centocor Shares or Common Stock sold in any public offering or in any
sale pursuant to Rule 144 under the Securities Act. For purposes of Section 6
of this Agreement, "Series B Securities" specifically excludes the Centocor
Shares and any Common Stock issued upon conversion thereof, whether at Closing
or thereafter.
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8.25 "SUBSIDIARY" means any person, corporation, firm or entity
at least the majority of the equity securities (or equivalent interest) of which
are, at the time as of which any determination is being made, owned of record or
beneficially by the Company, directly or indirectly, through any Subsidiary or
otherwise.
8.26 "TERMINATING PUBLIC OFFERING" means an underwritten public
offering (whether on a "best efforts" or a "firm commitment" basis) for the
account of the Company of Common Stock or securities convertible into or
exchangeable for shares of Common Stock, where the aggregate sales price of the
securities included in such sale (after deduction of any underwriting
commissions, discounts and concessions) is at least $15,000,000 and the price
per share of such securities is at least $5.00.
8.27 "WARRANT PURCHASE AGREEMENT" means the Warrant Purchase
Agreement, dated as of a date on or before the Closing Date, by and between the
Company and Genesis Merchant Group Securities.
8.28 "WARRANT STOCK" means up to 360,000 shares of the Company's
Common Stock, $.01 par value per share, issuable pursuant to the Warrant
Purchase Agreement.
Section 9. MISCELLANEOUS.
9.1 SCHEDULES. The Schedules attached to this Agreement
constitute a part of this Agreement. They are incorporated herein by reference
and shall have the same force and effect as if set forth in full in the main
body of this Agreement.
9.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. All
representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any other
writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the date of Closing and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Investors or on their behalf. Notwithstanding the
foregoing, all obligations of the Company under this Agreement (except for the
obligations of the Company under Section 7 hereof), including the obligations of
the Company under Section 6 hereof, will cease and be of no further force and
effect upon the closing of a Terminating Public Offering.
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9.3 ASSIGNS; PARTIES IN INTEREST. This Agreement shall bind and
inure to the benefit of the Company, the Investors, each other person who shall
become a record holder of any certificate representing the Securities and the
respective successors and assigns of the Company, the Investors and each such
other person.
9.4 GOVERNING LAW. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania and shall be
governed by and construed and enforced in accordance with the internal laws of
said Commonwealth, and without giving effect to conflicts of laws.
9.5 INDEMNIFICATION. The Company shall, with respect to the
representations, warranties, covenants and agreements made by the Company
herein, and each Investor shall, with respect to the representations,
warranties, covenants and agreements made by such Investor, indemnify, defend
and hold the Investors or the Company, as the case may be, harmless against all
liability, loss or damage, together with all reasonable costs and expenses
related thereto (including legal and accounting fees and expenses), arising from
the untruth, inaccuracy or breach of any such representations, warranties,
covenants or agreements of the Company or such Investor, as the case may be.
Without limiting the generality of the foregoing, the Investors or the Company,
as the case may be, shall be deemed to have suffered liability, loss or damage
as a result of the untruth, inaccuracy or breach of any such representations,
warranties, covenants or agreements if such liability, loss or damage shall be
suffered by the Company as a result of, or in connection with, such untruth,
inaccuracy or breach of any facts or circumstances constituting such untruth,
inaccuracy or breach.
9.6 LIABILITY AND INDEMNIFICATION. The Company shall, to the
full extent permitted by Sections 1741 through 1750 of the Business Corporation
Law of 1988 of the Commonwealth of Pennsylvania, as amended from time to time,
indemnify all persons whom it may indemnify thereunder. To the fullest extent
permitted by the Business Corporation Law of the Commonwealth of Pennsylvania,
as amended from time to time, a director of the Company shall not be liable to
the Company or its shareholders for monetary damages for breach of fiduciary
duty as a director.
9.7 REMEDIES. In case any one or more of the covenants and/or
agreements set forth in this Agreement shall have been breached by the Company
or an Investor, an Investor or the Company, as the case may be, may proceed to
protect and enforce its rights either by suit in equity and/or by action at law,
including, but not limited to, an action for damages as a result of any such
breach and/or an action for specific
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performance of any such covenant or agreement contained in this Agreement.
An Investor or the Company acting pursuant to this Section 9.7 shall be
indemnified against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including legal and accounting
fees and expenses) in accordance with Section 9.5.
9.8 EXCHANGES; LOST, STOLEN OR MUTILATED CERTIFICATES. Upon
surrender by an Investor to the Company of any certificate representing shares
of Series C Convertible Preferred Stock (or Common Stock issuable upon
conversion thereof) purchased or acquired hereunder, the Company at its expense
will issue in exchange therefor, and deliver to such Investor, a new certificate
or certificates representing such shares, in such denominations as may be
requested by the Investor. Upon receipt of evidence satisfactory to the Company
of the loss, theft, destruction or mutilation of any certificate representing
any Securities purchased or acquired by the Investors hereunder, and in case of
such loss, theft or destruction, upon delivery of any indemnity agreement
satisfactory to the Company, or in case of any such mutilation, upon surrender
and cancellation of such certificate, the Company at its expense will issue and
deliver to the Investors a new certificate for such Series C Convertible
Preferred Stock (or Common Stock issuable upon conversion thereof) of like
tenor, in lieu of such lost, stolen or mutilated certificate.
9.9 NOTICES. All communications provided for in this Agreement
shall be in writing and shall be sent to each party as follows:
TO THE COMPANY TO THE INVESTORS
Vincent R. Zurawski, Jr., Ph.D. At the addresses set
Apollon, Inc. forth below their
One Great Valley Parkway respective names on
Malvern, PA 19355 Schedule 1.1 attached
FAX: (215) 647-9732 hereto
With a Copy To:
Morris Cheston, Jr., Esq.
Ballard Spahr Andrews
& Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103
FAX: (215) 864-8999
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (a) physical
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delivery, (b) if given by facsimile transmission, when such facsimile is
transmitted to the telephone number specified in this Agreement and telephone
confirmation of receipt thereof is received, (c) three days after mailing by
prepaid first class mail and (d) two days after mailing by prepaid overnight
or express mail.
9.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties regarding the transactions contemplated herein and
may not be modified or amended except by written agreement of all parties
hereto.
9.11 HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the interpretation of
this Agreement.
9.12 PRONOUNS. If any Investor is an individual, neuter pronouns
used in reference to Investors shall be deemed to refer to individuals as well
as corporations or partnerships.
9.13 EFFECT OF STOCK SPLITS, ETC. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares or price per share is involved, such number shall be
appropriately adjusted to reflect any stock split, stock dividend, combination
of securities into a smaller number of securities or reclassification of stock.
9.14 AMENDMENTS. This Agreement may be amended only by an
instrument in writing, signed by the Company and by Investors holding, on the
date of such amendment, a majority of the Securities held of record on such date
by all of the Investors.
9.15 SHARES HELD BY AFFILIATES. Whenever any rights under this
Agreement are available only when at least a specified minimum number or
percentage of Shares is involved, each Investor shall be deemed to own any
Securities that are owned by any of the partners of such Investor or any retired
partners of such Investor who retire after the date hereof or the estate of any
such partner or retired partner or the spouse, lineal descendants, ancestors or
any Affiliates of such Investor or any such partner or retired partner.
9.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be one and the same instrument.
9.17 DISCLOSURES ELSEWHERE. No representation or warranty
contained in this Agreement or in any exhibit, schedule,
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certificate or other document delivered pursuant hereto shall be considered
to be breached due to the omission of matters required to be disclosed
pursuant to the terms of this Agreement if the matter or matters giving rise
to any such breach or omission is or are disclosed anywhere in this Agreement
or in any of the exhibits, schedules, certificates or other documents
delivered pursuant hereto.
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IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
--------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
ARDMORE INVESTMENTS
-----------------------------
(Print Name)
/s/ George H. McGovern
-----------------------------
(Signature)
Partner
-----------------------------
(Title, if applicable)
SSN/Tax ID NO: -----------------------------
Address: c/o GEORGE McGOVERN
---------------------------
PO BOX 309
-----------------------------
ARDMORE, PA 19003
-----------------------------
Number of
Shares Purchased: 17,500
-----------------------
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IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-------------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Robert J. Becker, M.D.
----------------------------------
(Print Name)
/s/ Robert J. Becker, M.D.
----------------------------------
(Signature)
----------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
---------------------------------
Address: One Tower Lane
----------------------------------
Suite 1140
----------------------------------
Oakbrook Terrace, IL 60181
----------------------------------
Number of
Shares Purchased: 12,500
-----------------------------
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IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-------------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Jerome Blank
---------------------------------
(Print Name)
/s/ Jerome Blank
---------------------------------
(Signature)
---------------------------------
(Title, if applicable)
SSN/Tax ID NO:
----------------------------------
Address: 9350 S. Dixie Hwy - Suite 900
----------------------------------
Miami, FL 33156
----------------------------------
----------------------------------
Number of
Shares Purchased: 25,000
----------------------------
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IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-------------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Neil G. Bluhm
------------------------------------
(Print Name)
/s/ Neil G. Bluhm
---------------------------------
(Signature)
---------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
---------------------------------
Address: 900 N. Michigan Avenue
---------------------------------
Suite 1900
---------------------------------
Chicago, IL 60611
---------------------------------
Number of
Shares Purchased: 62,500
-----------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-------------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Richard A. Carrano
----------------------------------
(Print Name)
/s/ Richard A. Carrano
----------------------------------
(Signature)
Vice President
----------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
----------------------------------
Address: 524 Foxwood Lane
----------------------------------
Paoli, PA 19301
----------------------------------
----------------------------------
Number of
Shares Purchased: 18000
------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-------------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
CONNECTICUT CAPITAL ASSOC. L.P.
-------------------------------
(Print Name)
/s/ J. Howard Coale
-------------------------------
(Signature)
PRES., GENERAL PARTNER
-------------------------------
(Title, if applicable)
SSN/Tax ID NO: 06-1360691
-------------------------------
Address: 44 Signal Road
-------------------------------
Stamford, CT 06902
-------------------------------
-------------------------------
Number of
Shares Purchased: 50,000
-------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
------------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
INVESTOR:
CENTOCOR, INC., a Pennsylvania
corporation
BY:/s/ George D. Hobbs
---------------------------------
NAME: George D. Hobbs
TITLE: Vice President, Corporate Counsel
and Secretary
SSN/TAX ID NO.: 23-2117202
-42-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed
this Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
S. COHEN
-------------------------------------
(Print Name)
/s/ Stanley Cohen
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 106 26 2631
-------------------------------------
Address: 919 Third Ave.
-------------------------------------
NY 10022
-------------------------------------
-------------------------------------
Number of
Shares Purchased: $25,000
--------------------------------
6,250 shares
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Steven A. Cohen
-------------------------------------
(Print Name)
/s/ S Cohen
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: c/o S.A.C. Capital Advisors, LLC
-------------------------------------
520 Madison Avenue, 7th Floor
-------------------------------------
New York, New York 10022
-------------------------------------
Number of
Shares Purchased: $62,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
DINA PARTNERS, L.P.
-------------------------------------
(Print Name)
/s/ David B. Solomon
-------------------------------------
(Signature)
GENERAL PARTNER
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 22-2691254
-------------------------------------
Address: c/o
-------------------------------------
DLD HOLDINGS, INC.
2180 SAND HILL ROAD
-------------------------------------
SUITE 160
MENLO PARK, CA 94025
-------------------------------------
Number of
Shares Purchased: 50,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
THOMAS S. EDGINGTON
-------------------------------------
(Print Name)
/s/ T S Edginson
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 2362 Ceranida de la Playa
-------------------------------------
La Jolla CA 92037
-------------------------------------
-------------------------------------
Number of
Shares Purchased: 20,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Pat Foley
-------------------------------------
(Print Name)
/s/ Pat Foley
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 333 Twin Dolphin Drive
-------------------------------------
Redwood City, CA 94065
-------------------------------------
-------------------------------------
Number of
Shares Purchased: 12,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
FWK Investors
-------------------------------------
(Print Name)
/s/ M J Waldman
-------------------------------------
(Signature)
Partner
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 94-2771027
-------------------------------------
Address: 235 Montgomery Stree
-------------------------------------
Suite 2700
-------------------------------------
San Francisco, CA 94104
-------------------------------------
Number of
Shares Purchased: 12,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR: WALTER & Anita HADDAD
TTEE FBO HADDAD FAMILY TR
DTD 1/9/90
-------------------------------------
(Print Name) /s/ Walter R. Haddad
/s/ Walter R. Haddad
-------------------------------------
(Signature)
TTEE
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 364 18th St
-------------------------------------
Santa Monica
-------------------------------------
Ca 90402
-------------------------------------
Number of
Shares Purchased: 37,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
VERNA R. HARRAH
-------------------------------------
(Print Name)
/s/ Verna R. Harrah
-------------------------------------
(Signature)
TRUSTEE
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 9951 Beverly Grove Dr.
-------------------------------------
Beverly Hills, CA 90210
-------------------------------------
-------------------------------------
Number of
Shares Purchased: 25,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
HPB ASSOCIATES, L.P.
-------------------------------------
(Print Name)
/s/ Howard P. Berkowitz
-------------------------------------
(Signature)
By: HPB GROUP, LLC
By: Howard P. BERKOWITZ
SR. MANAGING MEMBER
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 13-3002457
-------------------------------------
Address: 888 Seventh Ave., 46th Floor
-------------------------------------
New York, Ny 10106
-------------------------------------
Number of
Shares Purchased: 187,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
KEIBREAUX ASSOCIATES
-------------------------------------
(Print Name)
/s/ David Keibreaux
-------------------------------------
(Signature)
(G.P.)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 23-2587188
-------------------------------------
Address: 166 E. Levening Mill Rd.
-------------------------------------
Suite 110
-------------------------------------
Bala Cynwyd Pa 19004
-------------------------------------
Number of
Shares Purchased: 37,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
ODED LEVY
-------------------------------------
(Print Name)
/s/ Oded Levy
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 856A Green Street
-------------------------------------
San Francisco, CA 94133
-------------------------------------
Number of
Shares Purchased: 6,250
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
THE LINCOLN TAX ADVANTAGED, L.P.
Neil Matlins
-------------------------------------
(Print Name)
/s/ Neil Matlins
-------------------------------------
(Signature)
Neil Matlins, President
-------------------------------------
(Title, if applicable)
Matlins Financial Consulting Inc.
General Partner of the Lincoln Fund
Tax Advantage, L.P.
SSN/Tax ID NO: 37-1322962
-------------------------------------
Address: 4 West Old State Capitol Plaza
-------------------------------------
Suite 710
-------------------------------------
Springfield IL 62701
-------------------------------------
Number of
Shares Purchased: $100,000.00
---------------------------------
25,000 shares
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
JAMES F. LISSETTE
-------------------------------------
(Print Name)
/s/ James F. Lissette
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 515 E. 72nd Street, #31D
-------------------------------------
New York, NY 10021
-------------------------------------
Number of
Shares Purchased: 5,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
LZ INVESTMENTS GENERAL PARTNERSHIP
-------------------------------------
(Print Name)
/s/ Sam Zell
-------------------------------------
(Signature)
TRUSTEE PARTNER
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 36-4073958
-------------------------------------
Address: 2 North Riverside Plaza
-------------------------------------
Suite 700
-------------------------------------
Chicago, IL 60606
-------------------------------------
Number of
Shares Purchased: 50,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
MARITIME CAPITAL PARTNERS, L.P.
BY MARITIME CAPITAL MANAGEMENT,
ITS GENERAL PARTNER
BY: ANDREW L. EVANS
-------------------------------------
(Print Name)
/s/ Andrew L. Evans
-------------------------------------
(Signature)
PRESIDENT
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 91-1680235
-------------------------------------
MARITIME CAPITAL PARTNERS, L.P.
Address: 15302 25th Drive S.E
-------------------------------------
Mill Creek, WA 98012
-------------------------------------
Number of
Shares Purchased: 125,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
JAMES G. MURPHY
-------------------------------------
(Print Name)
/s/ James G. Murphy
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 25 McIntosh RD.
-------------------------------------
Sewell, NJ 08080
-------------------------------------
Number of
Shares Purchased: 5,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
ORACLE PARTNERS, L.P.
/s/ Larry N. Feinberg
-------------------------------------
(Signature)
MANAGING GENERAL PARTNER
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 13-3714191
-------------------------------------
Address: 712 FIFTH AVE
-------------------------------------
45th FLOOR
-------------------------------------
New York NY 10019
-------------------------------------
Number of
Shares Purchased: $800,000
----------------------------------
200,000
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
BERNARD OSHER TRUST
BERNARD OSHER TRUSTEE, UTA 3/8/88
-------------------------------------
(Print Name)
/s/ Bernard Osher, TRUSTEE
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 220 San Bruno Avenue
-------------------------------------
San Francisco, CA 94103
-------------------------------------
Number of
Shares Purchased: 50,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
PORRIGE PARTNERS II
-------------------------------------
(Print Name)
/s/ [illegible signature]
-------------------------------------
(Signature)
GENERAL PARTNER
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 06-1391106
-------------------------------------
c/o DACOSON-SAULBERG CAP. MGMT
Address: 354 PEQUOT AVENUE
-------------------------------------
SOUTHPORT, CT 06490
-------------------------------------
Number of
Shares Purchased: 37,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
QUASAR INTERNATIONAL PARTNERS
/s/ Larry N. Feinberg
-------------------------------------
(Signature)
LARRY FEINBERG PRESIDENT OF
ORACLE MGMT INC.
-------------------------------------
(Title, if applicable)
INVESTMENT ADVISOR
SSN/Tax ID NO: NONE FOREIGN CORP
-------------------------------------
Address: c/o ORACLE PARTNERS L.P.
-------------------------------------
712 FIFTH AVENUE, 45TH FL.
-------------------------------------
New York, N.Y. 10019
-------------------------------------
Number of
Shares Purchased: $200,000
---------------------------------
50,000
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
S.A.C. Capital Associates, LLC
-------------------------------------
(Print Name)
/s/ Scott J. Lederman
-------------------------------------
(Signature)
By: S.A.C. Capital Advisors, LLC,
its attorney-in-fact
-------------------------------------
(Title, if applicable)
By: Scott J. Lederman,
Executive Vice President
SSN/Tax ID NO: N/A
-------------------------------------
Address: c/o S.A.C. Capital Advisors, LLC
-------------------------------------
520 Madison Avenue, 7th Floor
-------------------------------------
New York, New York 10022
-------------------------------------
Number of
Shares Purchased: 62,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Fred Stein
-------------------------------------
(Print Name)
/s/ Fred Stein
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: c/o Newberger & Berman
-------------------------------------
605 Third Avenue
-------------------------------------
New York, NY 10158
-------------------------------------
Number of
Shares Purchased: 25,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
F/B/O FRED STEIN
IRA Rollover
Newberger & Berman as Custodian
-------------------------------------
(Print Name)
/s/ Fred Stein
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: c/o Newberger & Berman
-------------------------------------
605 Third Avenue
-------------------------------------
New York, NY 10158
-------------------------------------
Number of
Shares Purchased: 25,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
MICHAEL H. STEINHARDT
-------------------------------------
(Print Name)
/s/ Michael H. Steinhardt
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 116-30-06-70
-------------------------------------
Address: 605 3RD AVE
-------------------------------------
NY NY 10158
-------------------------------------
Number of
Shares Purchased: 62,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Bruce E. Toll
-------------------------------------
(Print Name)
/s/ Bruce E. Toll
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 175-36-35060
-------------------------------------
Address: 1477 Rydal Rd.
-------------------------------------
Rydal, PA 19046
-------------------------------------
Number of
Shares Purchased: 100,000
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
Robert I. Toll
-------------------------------------
(Print Name)
/s/ Robert I. Toll
-------------------------------------
(Signature)
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: ###-##-####
-------------------------------------
Address: 3103 Philmont Avenue
-------------------------------------
Huntingdon Valley, PA 19006
-------------------------------------
Number of
Shares Purchased: 62,500
---------------------------------
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
IRA ZIERING
5700 W. 96th ST.
PARTNERSHIP
-------------------------------------
(Print Name)
/s/ Ira Ziering
-------------------------------------
(Signature)
PARTNER
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 95-367 1708
-------------------------------------
Address: 5700 W. 96th St.
-------------------------------------
LOS ANGELES CA
-------------------------------------
90045-5597
-------------------------------------
Number of
Shares Purchased: 12,500
---------------------------------
($50,000)
-41-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Agreement all as of the day and year first above written.
APOLLON, INC.
By: /s/ James G. Murphy
----------------------------------
James G. Murphy
Vice President, Finance and
Administration, and Chief Financial
Officer
INVESTOR:
WESTFIELD PERFORMANCE FUND
-------------------------------------
(Print Name)
/s/ C. Michael Hazard
-------------------------------------
(Signature)
CHAIRMAN
-------------------------------------
(Title, if applicable)
SSN/Tax ID NO: 04 306 1294
-------------------------------------
Address: WESTFIELD CAPITAL MANAGEMENT CO
-------------------------------------
ONE FINANCIAL CENTER
-------------------------------------
BOSTON, MASS 02111
-------------------------------------
Number of
Shares Purchased: 125,000
---------------------------------
-41-
<PAGE>
EXHIBITS
Exhibit 2.1 - Form of Opinion of Ballard Spahr Andrews & Ingersoll
Exhibit 2.4(a) - Form of Amendments to Articles of
Incorporation
Exhibit 2.4(b) - Form of Statement Affecting Class or Series of Shares
Exhibit 2.7(a) - Form of Certificate of President
Exhibit 2.7(b) - Form of Certificate of Secretary
Exhibit 4.18(b) - Form of Confidentiality Agreement
<PAGE>
SCHEDULES
Schedule 1.1 - Investors, Shares to be Purchased and Consideration
Schedule 4.2(a) - Authorized Capital Stock
Schedule 4.2(b) - Shareholders of the Company
Schedule 4.2(c) - Warrants, Options or Agreements
Schedule 4.8(a) - Consents
Schedule 4.8(b) - Offers of Securities
Schedule 4.14 - Related Transactions
Schedule 4.15 - Registration Rights
Schedule 4.16 - Benefit Plans
Schedule 4.18(a) - Additional Intellectual Property Required
Schedule 4.18(c) - Confidentiality Agreements Restricting Employees
Schedule 4.19 - Material Contracts
<PAGE>
FIRST AMENDMENT TO SERIES C STOCK PURCHASE AGREEMENT
THIS AMENDMENT to the Agreement (as hereinafter defined), is made as of
the 26th day of September, 1997, by and among Apollon, Inc., a Pennsylvania
corporation (the "Company"), and the Investors signing the signature page
hereto (the "Investors").
WHEREAS, the Company and the Investors wish to amend the Stock Purchase
Agreement, dated as of May 1, 1996 by and among the Company and the Investors
listed in Schedule 1.1 thereto
(the "Agreement") as hereinafter provided;
NOW, THEREFORE, in consideration of the mutual covenants of the Company and
the Investors, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investors,
intending to be legally bound, hereby agree as follows:
1. The ninth and tenth lines of Section 7.1 of the Agreement are
hereby amended to read as follows:
"Securities, Series A Securities, Series B Securities, Warrant Stock (as
defined herein) and AHP Stock (as defined herein), and thereupon (except as
expressly..."
2. The sixteenth through nineteenth lines of Section 7.1 of the
Agreement are hereby amended to read as follows:
"and (y) all other shares of Registerable Common Stock, Shares of Series A
Registerable Common Stock (as defined herein), Shares of Series B
Registerable Common Stock (as defined herein), shares of Warrant Stock and
shares of AHP Stock, the record holders of which have made written..."
3. The seventh and eighth lines of Section 7.1(a) are hereby amended
to read as follows:
"pursuant to this Section 7.1, paragraph 7(a) of the Series A Agreement,
Section 7.1 of the Series B Agreement or Section 6.1 of the AHP Agreement
(except that, ..."
4. The eighth through fifteenth lines of Section 7.1(b) are hereby
amended to read as follows:
"Securities, Warrant Stock and AHP Stock. In that event, the other holders
of Securities, Series A Securities, Series B Securities, Warrant Stock and
AHP Stock shall have the right to include their shares of Registerable
Common Stock, Series A Registerable Common Stock, Series B Registerable
<PAGE>
Common Stock, Warrant Stock and AHP Stock in the underwriting (unless
otherwise mutually agreed by a majority in interest of the holders of the
Securities, the Series A Securities, Series B Securities, Warrant Stock and
AHP Stock). The managing..."
5. The second through fourth line of Section 7.1(c) are hereby
amended to read as follows:
"not permit third parties other than (i) holders of Series A Securities,
(ii) the holders of Series B Securities, (iii) the holders of Warrant Stock
and (iv) the holders of AHP Stock to include additional securities in..."
6. The sixth and seventh lines Section 7.1(c) are hereby amended to
read as follows:
"majority of the shares of Registerable Common Stock, Series A Registerable
Common Stock, Series B Registerable Common Stock and AHP Stock..."
7. Section 7.1(d) is hereby amended to read in full as follows:
(d) if a Demand Registration under this Section 7.1 is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount
of Registerable Common Stock, Series A Registerable Common Stock, Series B
Registerable Common Stock, Warrant Stock and AHP Stock requested to be
included in such registration exceeds the amount of such Registerable
Common Stock, Series A Registerable Common Stock, Series B Registerable
Common Stock, Warrant Stock and AHP Stock which can be successfully sold in
such offering, the Company will nevertheless include in such registration,
prior to the inclusion of any securities which are not Registerable Common
Stock, Series A Registerable Common Stock, Series B Registerable Common
Stock, Warrant Stock or AHP Stock (notwithstanding any consent obtained in
accordance with Section 7.1(c) hereof), the amount of Registerable Common
Stock, Series A Registerable Common Stock, Series B Registerable Common
Stock, Warrant Stock and AHP Stock requested to be included which in the
opinion of such underwriters can be sold, pro rata among the holders of
Registerable Common Stock, Series A Registerable Common Stock, Series B
Registerable Common Stock, Warrant Stock and AHP Stock requesting inclusion
on the basis of the number of shares of Registerable Common Stock, Series A
Registerable Common Stock, Series B Registerable Common Stock, Warrant
Stock and AHP Stock then owned by such holders; provided, however, that if
the holders of Registerable Common Stock are unable to include
2
<PAGE>
in such offering at least fifty percent (50%) of the Registerable Common
Stock sought to be registered in a Demand Registration under this Section
7.1, the holders of Securities will be entitled to an additional Demand
Registration under this Section;"
8. The sixteenth through twenty-first lines of Section 7.2(b) are
hereby amended to read as follows:
"Stock, Series A Registerable Common Stock, Series B Registerable Common
Stock, Warrant Stock and AHP Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the number
of shares of Registerable Common Stock, Series A Registerable Common Stock,
Series B Registerable Common Stock, Warrant Stock and AHP Stock then owned
by such holders, and (iii) third, any..."
9. The seventeenth through twenty-first lines of Section 7.2(c) are
hereby amended to read as follows:
"Registerable Common Stock, Series B Registerable Common Stock, Warrant
Stock and AHP Stock requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of
Registerable Common Stock, Series A Registerable Common Stock, Series B
Registerable Common Stock, Warrant Stock and AHP Stock then..."
10. The fourth and fifth lines of Section 9.14 are hereby amended to
read as follows:
"the Securities, the Series A Securities and the Series B Securities held
of record as a record date between 10 and 90 days prior to such date,
voting together as a class."
11. The following definitions are hereby added to the Agreement as
follows:
"8.29 "AHP Agreement" means the Securities Purchase Agreement, dated
September 19, 1997, by and between the Company and A.H. Investments Ltd."
"8.30 "AHP Stock" means the shares of Common Stock issued or issuable
upon conversion of a convertible note in the aggregate principal amount of
$3 million issued and sold by the Company to A.H. Investments Ltd. and the
shares of Common Stock issued or issuable upon exercise of a warrant to
purchase 150,000 shares of Common Stock sold by the Company to A.H.
Investments Ltd. pursuant to the AHP Agreement."
3
<PAGE>
12. Pursuant to Section 7.10 and 9.14 of the Agreement, this
Amendment shall be effective upon the written consent of the holders of a
majority of Securities, Series A Securities and Series B Securities, voting as a
class, outstanding as of September 17, 1997 and upon the written consent of the
holders of a majority of the Securities then outstanding and shall thereafter be
binding upon each holder of Securities, Series A Securities and Series B
Securities at the time outstanding (including securities into which such
Securities, Series A Securities and Series B Securities are convertible), each
future holder of all such securities and the Company. Such written consent
shall be evidenced by the signature of the Investors signing this Amendment.
13. All other terms of the Agreement shall remain in full force and
effect.
14. This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute together one and
the same instrument.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 1 all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski
--------------------------
Vincent R. Zurawski, Jr.
President
INVESTORS
CENTOCOR, INC.
By: /s/ David P. Holveck
--------------------------
David P. Holveck
President
Address: 200 Great Valley Parkway
Malvern, PA 19355
Fax: (610) 651-6331
4
<PAGE>
ARDMORE INVESTMENTS
By: /s/ George H. McGovern
--------------------------
Name:
Title:
Address: c/o George McGovern, III
700 Ardmore Avenue,
Suite 202
Ardmore, PA 19003
/s/ Robert J. Becker
------------------------------
Robert J. Becker, M.D.
Address: c/o Becker Consulting
2200 S. Ocean Lane #1905
Fort Lauderdale, FL 33316
/s/ Jerome Blank
------------------------------
Jerome Blank
Address: 201 Bitterroot Rd.
Sun Valley, ID 83353
/s/ Neil G. Bluhm
------------------------------
Neil G. Bluhm
Address: 900 N. Michigan Avenue
Suite 1900
Chicago, IL 60611
/s/ Richard A. Carrano
------------------------------
Richard A. Carrano
Address: 524 Foxwood Lane
Paoli, PA 19301
CONNECTICUT CAPITAL ASSOC. L.P.
By: /s/ J. Howard Coale
--------------------------
Name:
Title:
Address: 48 Signal Road
Stamford, CT 06902
5
<PAGE>
/s/ Stanley Cohen
------------------------------
Stanley Cohen
Address: 919 Third Avenue
New York, NY 10022
/s/ Steven A. Cohen
------------------------------
Steven A. Cohen
Address: c/o S.A.C. Capital
Advisors, LLC
777 Longridge Road
Stamford, CT 06902
DINA PARTNERS, L.P.
By: /s/ David B. Solomon
--------------------------
Name:
Title:
Address: c/o DLD Holdings, Inc.
2180 Sand Hill Road
Suite 160
Menlo Park, CA 94025
THOMAS S. EDGINGTON &
JOANNE R. EDGINGTON TRUST
By: /s/ Thomas S. Edgington TTEE
----------------------------
Name:
Title:
Address: 2362 Avenida de la Playa
La Jolla, CA 92037
/s/ Pat Foley
------------------------------
Pat Foley
Address: 33 Twin Dolphin Drive
Redwood City, CA 94065
6
<PAGE>
FWK INVESTORS
By: /s/ M.J. Waldman
--------------------------
Name:
Title:
Address: 3 Embarcadero Cntr.
Suite 2800
San Francisco, CA 94111
WALTER & ANITA HADDAD
TTEE FBO HADDAD FAMILY TR
DTD 1/9/90
By: /s/ Walter Haddad TTEE
--------------------------
Name:
Title:
Address: 364 18th Street
Santa Monica, CA 90402
THE HADAD FAMILY LIMITED PARTNERSHIP
By: /s/ Walter Haddad
--------------------------
Name:
Title:
Address: 364 18th Street
Santa Monica, CA 90402
VERNA R. HARRAH TRUST
By: /s/ Verna P. Harrah
--------------------------
Name:
Title:
Address: 9951 Beverly Grove Drive
Beverly Hills, CA 90210
HPB ASSOCIATES, L.P.
By: /s/ Howard P. Berkowitz
--------------------------
Name:
Title:
Address: 888 Seventh Avenue
46th Floor
New York, NY 10106
7
<PAGE>
KEIBREAUX ASSOCIATES
By: /s/ Andrew H. Keiser
--------------------------
Name: Andrew H. Keiser
Title: Partner
Address: 2450 Wheatsheat Lane
Philadelphia, PA 19137
/s/ Oded Levy
------------------------------
Oded Levy
Address: 1750 Grant Avenue
San Francisco, CA 94133
THE LINCOLN TAX ADVANTAGED, L.P.
By: /s/ Neil Matlins
--------------------------
Name:
Title:
Address: 4 West Old State Capitol
Plaza - Suite 710
Springfield, IL 62701
/s/ James Lissette
-------------------------------
James F. Lissette
Address: 290 Headlands Court
San Francisco, CA 94965
LZ INVESTMENTS GENERAL PARTNERSHIP
By: /s/ Donald J. Liebentrit
--------------------------
Name:
Title:
Address: 2 North Riverside Plaza
Suite 700
Chicago, IL 60606
8
<PAGE>
MARITIME CAPITAL PARTNERS, L.P.
BY MARITIME CAPITAL MANAGEMENT,
ITS GENERAL PARTNER
By: /s/ Andrew L. Evans
--------------------------
Name:
Title:
Address: 300 Park Avenue, 17th Floor
New York, NY 10022
/s/ James G. Murphy
------------------------------
James G. Murphy
Address: 25 McIntosh Road
Sewell, NJ 08080
ORACLE PARTNERS, L.P.
By: /s/ Larry Feinberg
--------------------------
Name:
Title:
Address: 712 Fifth Avenue
45th Floor
New York, NY 10019
BERNARD OSHER TRUST, UTA 3/8/88
By: /s/ Bernard Osher Trustee U/T/D
--------------------------
Name:
Title:
Address: 220 San Bruno Avenue
San Francisco, CA 94103
PORRIDGE PARTNERS II
By:
--------------------------
Name:
Title:
Address: c/o Dacoson-Saulberg Cap. Mgmt.
354 Pequot Avenue
Southport, CT 06490
9
<PAGE>
QUASAR INTERNATIONAL PARTNERS
By: /s/ Larry Feinberg
--------------------------
Name:
Title:
Address: c/o Oracle Partners L.P.
712 Fifth Avenue, 45th Fl.
New York, NY 10019
S.A.C. CAPITAL ASSOCIATES, LLC
By: /s/ Barry M. Skalka
--------------------------
Name:
Title:
Address: c/o S.A.C. Capital Advisors, LLC
777 Longridge Road
Stamford, CT 06902
/s/ Fred Stein
------------------------------
Fred Stein
Address: c/o Neuberger & Berman
605 Third Avenue
New York, NY 10158
F/B/O FRED STEIN
IRA Rollover
By: /s/ Fred Stein
--------------------------
Name:
Title:
Address: c/o Neuberger & Berman
605 Third Avenue
New York, NY 10158
/s/ Michael H. Steinhardt
------------------------------
Michael H. Steinhardt
Address: 605 3rd Avenue
New York, NY 10158
10
<PAGE>
/s/ Bruce E. Toll
------------------------------
Bruce E. Toll
Address: 1477 Rydal Road
Rydal, PA 19046
/s/ Robert I. Toll
------------------------------
Robert I. Toll
Address: 3103 Philmont Avenue
Huntingdon Valley, PA 19006
5700 W. 96TH ST. PARTNERSHIP
By: /s/ Michael Ziering
--------------------------
Name:
Title:
Address: 5700 W. 96th Street
Los Angeles, CA 90045-5597
WESTFIELD PERFORMANCE FUND
By: /s/ Westfield Performance Fund
--------------------------
Name: C. Michael Hazard
Title: Chairman
Address: Westfield Capital Management Co.
One Financial Center
Boston, MA 02111
11
<PAGE>
COMMON STOCK WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED
UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR SUCH
SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933,
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
----------------
APOLLON, INC.
One Great Valley Parkway
Suite 30
Malvern, Pennsylvania 19355-1423
Name of Registered Holder: Genesis Merchant Group Securities
Date of Issuance: As of May 1, 1996
No. K1
Warrant for the Purchase of 266,480 Shares of Common Stock
For value received, Apollon, Inc., a Pennsylvania corporation (the
"Company"), hereby grants the rights herein specified to the initial registered
holder hereof (the "Initial Holder") and certifies that the Initial Holder or
any registered assignee of the Initial Holder (each of the Initial Holder and
any such registered assignee being hereinafter referred to as the "Holder") is
entitled, subject to the conditions and upon the terms of this Warrant, to
purchase from the Company, at any time or from time to time during the Exercise
Period (as defined in Section 1), the number of shares of Common Stock (as
defined in Section 1) set forth above. The Company hereby acknowledges receipt
from the Initial Holder of $266,480 in full payment for the issuance of this
Warrant. The number of shares of Common Stock to be received upon the exercise
of this Warrant and the Exercise Price (as defined in Section 1) are subject to
adjustment from time to time as hereinafter set forth.
Section 1. Certain Definitions. Terms defined in the preceding
paragraph and elsewhere in this Warrant have the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Agreement" means this Warrant.
<PAGE>
"Centocor Agreement" means the Stock Purchase Agreement, dated
September 20, 1994, by and between the Company and Centocor, Inc.
"Centocor Shares" means the 400,000 shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share, issued to Centocor, Inc.
pursuant to the Centocor Agreement.
"Commission" means the Securities and Exchange Commission and
includes any governmental body or agency succeeding to the functions thereof.
"Common Stock" means the fully paid and nonassessable shares of
Common Stock of the Company, $.01 par value per share, together with any other
equity securities that may be issued by the Company in addition thereto or in
substitution therefor, as provided herein.
"Conversion Agreement" means the Conversion Agreement, dated as of
April 23, 1996, by and among the Company and and the Investors listed on Exhibit
1.1 attached thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Period" means the period beginning on the date of issuance
of this Warrant and ending on May 1, 2001.
"Exercise Price" means an amount per share equal to $4.00, subject
to change or adjustment pursuant to Section 9 hereof.
"Financing" means the Financing as defined in the Financial Advisory
Agreement, dated as of March 6, 1996, by and between the Company and GMGS.
"GMGS" means Genesis Merchant Group Securities, an Illinois limited
partnership.
"Note Shares" means the 1,600,000 shares of the Company's Series B
Convertible Preferred Stock, $.01 par value per share, issued pursuant to the
Conversion Agreement.
"Reorganization Event" means (i) any capital reorganization or
leveraged recapitalization of the Company or reclassification of the Common
Stock (other than a subdivision, combination or reclassification of the
outstanding Common Stock for which adjustment is provided in Subsection 9.1 and
other than a change in the par value of the Common Stock or an increase in the
authorized capital stock of the Company not involving the issuance of any shares
thereof), (ii) any consolidation of the Company with, or merger of the Company
with or into, another person or entity (other than a consolidation or merger
with a subsidiary of the Company in which the Company is the continuing
corporation and in which the Company issues securities representing, immediately
prior to such issuance, no more than 30% of the combined voting power of the
Company's then outstanding voting securities having power to vote in the
election of directors and for which no adjustment is required by Subsection 9.1)
or any sale, lease, transfer or conveyance of all or substantially all of the
property and assets of the Company or (iii) the announcement or commencement by
any "person" or "group" (within the meaning of Section 13(d) and Section 14(d)
of the
2
<PAGE>
Exchange Act) of a bona fide tender offer or exchange offer in accordance with
the rules and regulations of the Exchange Act to purchase, or the acquisition of
securities in the Company, such that after such acquisition or proposed
purchase, the acquiror "beneficially owns" or would "beneficially own" (as
defined in Rule 13d-3 under the Exchange Act) securities in the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities having power to vote in the election of directors.
"Series A Agreement" means the Stock Purchase Agreement, dated as of
June 25, 1992, by and among the Company and the Investors listed on Exhibit 1(a)
attached thereto, as amended.
"Series B Agreement" means the Stock Purchase Agreement, dated as of
November 15, 1993, by and among the Company and the Investors listed on Exhibit
1.1 attached thereto, as amended.
"Series C Agreement" means the Stock Purchase Agreement, dated as of
May 1, 1996, by and among the Company and the Investors listed on Exhibit 1.1
attached thereto.
"Series A Registerable Common Stock" means Registerable Common Stock
as defined in the Series A Agreement.
"Series B Registerable Common Stock" means (i) Registerable Common
Stock as defined in the Series B Agreement, (ii) any Common Stock issued or
issuable upon conversion of the Note Shares and (iii) any Common Stock issued or
issuable upon conversion of the Centocor Shares.
"Series C Registerable Common Stock" means Registerable Common Stock
as defined in the Series C Agreement.
"Series A Securities" means Securities as defined in the Series A
Agreement.
"Series B Securities" means (i) Securities as defined in the Series
B Agreement, (ii) the Note Shares and any Common Stock issued upon conversion
thereof, but shall not include any such Note Shares or Common Stock sold in any
public offering or in any sale pursuant to Rule 144 under the Act, and (c) the
Centocor Shares and any Common Stock issued upon conversion thereof, but shall
not include any such Centocor Shares or Common Stock sold in any public offering
or in any sale pursuant to Rule 144 under the Act.
"Series C Securities" means Securities as defined in the Series C
Agreement.
"Subsidiary" means any person or entity at least the majority of the
equity securities (or equivalent interest) of which are, at the time as of which
any determination is being made, owned of record or beneficially by the Company,
directly or indirectly, through any Subsidiary or otherwise.
"Warrant" means this Warrant and any Warrant or Warrants which may
be issued pursuant to Section 4 or 6 hereof in substitution or exchange for or
upon transfer of this Warrant, any Warrant which may be issued pursuant to
Section 2 hereof upon partial exercise of this Warrant and any Warrant which may
be issued pursuant to Section 7 hereof upon the loss, theft, destruction or
mutilation of this Warrant.
3
<PAGE>
"Warrant Register" means the register maintained at the principal
office of the Company, or at the office of its agent, in which the name of the
Holder of this Warrant shall be registered.
"Warrant Shares" means the shares of Common Stock, as adjusted from
time to time, deliverable or delivered upon exercise of this Warrant.
Section 2. Exercise of Warrant. This Warrant may be exercised, in
whole or in part, at any time or from time to time during the Exercise Period,
by presentation and surrender hereof to the Company at its principal office at
the address set forth on the signature page hereof (or at such other address of
the Company or any agent appointed by the Company to act hereunder as the
Company or such agent may hereafter designate in writing to the Holder), with
the purchase form annexed hereto (the "Purchase Form") duly executed and
accompanied by cash or a certified or official bank check drawn to the order of
"Apollon, Inc." (or its successor in interest, if any) in the amount of the
Exercise Price (unless the Holder has made a net issue election pursuant to, and
in accordance with, Section 10 of this Agreement) multiplied by the number of
Warrant Shares specified in such Purchase Form. If this Warrant should be
exercised in part only, the Company or its agent shall, upon surrender of this
Warrant, execute and deliver a Warrant evidencing the right of the Holder
thereof to purchase the balance of the Warrant Shares purchasable hereunder.
Upon receipt by the Company during the Exercise Period of this Warrant, together
with (a) the Purchase Form in proper form for exercise, (b) the proper payment
of the Exercise Price and (c) a duly executed Shareholder's Agreement, at its
principal office or its agent's principal office, as the case may be, the Holder
shall be deemed to be the holder of record of the number of Warrant Shares
specified in such Purchase Form. If the date of such receipt by the Company or
its agent is a date on which the stock transfer books of the Company are closed,
such person shall be deemed to have become the record holder of such Warrant
Shares on the next business day on which the stock transfer books of the Company
are open. The Company shall pay any and all documentary, stamp or similar issue
or transfer taxes payable in respect of the issue or delivery of such Warrant
Shares. Any Warrant issued upon partial exercise of this Warrant pursuant to
this Section 2 shall be dated the date of this Warrant.
Section 3. Reservation of Shares. The Company shall at all times
keep reserved solely for issuance and delivery pursuant to the Warrants the
number of shares of its Common Stock that are or would be issuable from time to
time upon exercise of all Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free of all preemptive rights.
Before taking any action that would cause an adjustment pursuant to Section 9
hereof reducing the Exercise Price below the then par value (if any) of the
Warrant Shares issuable upon exercise of this Warrant, the Company will take any
corporate action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares at the Exercise Price as so adjusted.
Section 4. Transfer in Compliance with Applicable Securities Laws;
Investment Intent and Suitability.
4.1 Neither this Warrant nor any of the Warrant Shares, nor
any interest in either, may be sold, assigned, pledged, hypothecated, encumbered
or in any other manner transferred or disposed of, in whole or in part, except
in accordance with Section 6
4
<PAGE>
hereof and in compliance with applicable United States federal and state
securities laws and the terms and conditions hereof. Except as provided in
Subsection 4.2 or 4.3, each Warrant shall bear the following legend:
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS.
NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD, OFFERED FOR
SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
4.2 If (x) the Warrant Shares have been registered under the
Act and registered or qualified under applicable state securities or Blue Sky
laws or (y) the Holder has received an opinion of counsel reasonably
satisfactory to the Company that the Warrant Shares may be freely sold or
transferred without registration under the Act or registration or qualification
under applicable state securities or Blue Sky laws, the Holder can require the
Company to issue, in substitution for a Warrant with the foregoing legend, a
Warrant with the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY
LAWS. THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE STATE
SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND REGULATIONS
THEREUNDER.
4.3 The Holder can require the Company to issue a Warrant
without either of the foregoing legends in substitution for a Warrant bearing
one of such legends if either (x) this Warrant and the Warrant Shares issuable
upon the exercise hereof have been registered under the Act and registered or
qualified under applicable state securities or Blue Sky laws or (y) the Holder
has received an opinion of counsel reasonably satisfactory to the Company that
this Warrant may be freely sold or transferred without registration under the
Act or registration or qualification under applicable state securities or Blue
Sky laws. The provisions of this Section 4 shall be binding on all subsequent
holders of this Warrant.
4.4 The Holder represents to the Company as follows:
(a) The Holder is purchasing this Warrant for its own
account for investment purposes only and not with a view to or for sale in
connection with any distribution of the Warrant or the Warrant Shares;
5
<PAGE>
(b) The Holder has such knowledge and experience in
financial and business matters as to be capable of evaluating the risks and the
merits of an investment in the Company;
(c) The Holder can bear the economic risk of its, his or
her investment in the Warrant and the Warrant Shares (i.e., at the time of the
investment the Holder can afford a complete loss of the investment and can
afford to hold the investment for an indefinite period of time); and
(d) The Holder is an "Accredited Investor" as that term
is defined in Regulation D under the Act or to the extent the Holder is not an
"Accredited Investor," such Holder is fully capable of making all of the
representations and warranties in this Section 4.4 and by its, his or her
execution hereof does so affirm.
Section 5. Warrant Shares Registration Rights. The Holder shall have
such registration rights with respect to the Warrant Shares as are set forth in
this Section 5.
5.1 Demand Registration. Upon the written request of one or
more holders of Warrant Shares, which request will state the intended method of
disposition by such holders and will request that the Company effect the
registration under the Act of all or part of the Warrant Shares of such holders,
the Company will, within 10 days after receipt of such request, give written
notice of such requested registration to all registered holders of Warrant
Shares, Series A Securities, Series B Securities and Series C Securities, and
thereupon (except as expressly provided herein) will use its best efforts to
effect the registration ("Demand Registration") under the Act of (x) the Warrant
Shares included in the initial request for registration (for disposition in
accordance with the intended method of disposition stated in such request) and
(y) all other shares of Series A Registerable Common Stock, shares of Series B
Registerable Common Stock and shares of Series C Registerable Common Stock, the
holders of which have made written request to the Company for registration
thereof within 30 days after the receipt of such written notice from the
Company, provided that:
(a) the Company shall be required to effect only two
Demand Registrations hereunder, each of which must be initially requested by the
holders of record of at least a majority of the Warrant Shares outstanding at
the time of the request; provided that the Company shall not be required to
effect more than one registration during any one-year period pursuant to this
Section 5.1, Paragraph 7(a) of the Series A Agreement, Section 7.1 of the Series
B Agreement or Section 7.1 of the Series C Agreement;
(b) if the holders of Warrant Shares who initiated the
request for registration intend to sell their Warrant Shares by means of an
underwriting (whether on a "best efforts" or a "firm commitment" basis), they
shall so advise the Company as part of their request, and the Company shall
include such information in the notice to the holders of Series A Securities,
Series B Securities and Series C Securities. In that event, the other holders of
Warrant Shares, Series A Securities, Series B Securities and Series C Securities
shall have the right to include their Warrant Shares or shares of Series A
Registerable Common Stock, Series B Registerable Common Stock and Series C
Registerable Common Stock in the underwriting (unless otherwise mutually agreed
by a majority in interest of the holders of the Warrant Shares, Series A
Securities, Series B Securities and Series C Securities). The managing
underwriter for such offering shall be selected by the Board of
6
<PAGE>
Directors of the Company. Each such holder of Warrant Shares agrees, with
respect to an underwritten public offering which occurs following the Closing
Date, by its acquisition of this Warrant, not to effect any public sale or
distribution of this Warrant or the Warrant Shares issuable upon the exercise
hereof (other than as part of such underwritten public offering) during such
period, if any, not to exceed 180 days, as shall reasonably be requested by any
underwriter;
(c) if a Demand Registration under this Section 5.1 is
in connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount of
Warrant Shares, Series A Registerable Common Stock, Series B Registerable Common
Stock and Series C Registerable Common Stock requested to be included in such
registration exceeds the amount of such Warrant Shares, Series A Registerable
Common Stock, Series B Registerable Common Stock and Series C Registerable
Common Stock which can be successfully sold in such offering, the Company will
nevertheless include in such registration, prior to the inclusion of any
securities which are not Warrant Shares, Series A Registerable Common Stock,
Series B Registerable Common Stock or Series C Registerable Common Stock
(notwithstanding any consent obtained in accordance with Section 5.1(c) hereof),
the amount of Warrant Shares, Series A Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock requested to be
included which in the opinion of such underwriters can be sold, pro rata among
the holders of Warrant Shares, Series A Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock requesting
inclusion on the basis of the number of Warrant Shares and shares of Series A
Registerable Common Stock, Series B Registerable Common Stock and Series C
Registerable Common Stock then owned by such holders;
(d) if the Company shall furnish to the holders
requesting a registration pursuant to this Section 5 a certificate signed by the
President of the Company stating that, in the good faith judgment of the Board
of Directors of the Company, it would be seriously detrimental to the Company
for a registration statement to be filed as requested, the Company shall have
the right to defer such filing for a period of not more than 120 days after
receipt of the initial request for registration under this Section 5.1;
provided, however, that the Company may not utilize this right more than once in
any one-year period;
(e) registrations under this Section 5.1 will be on a
form permitted by the rules and regulations of the Commission selected by the
underwriters if the Demand Registration is in connection with an underwritten
public offering or otherwise by the Company; and
(f) notwithstanding anything else contained herein, the
Company will not be required to effect a Demand Registration pursuant to this
Section 5.1 unless the aggregate number of shares of Common Stock to be
registered exceeds 20% of the Warrant Shares then held by the holders of the
Warrant Shares.
5.2 Incidental Registrations.
(a) If the Company at any time proposes to register any
of its securities under the Act (other than pursuant to Section 5.1 hereof),
whether of its own accord or at the demand of any holder of such securities
pursuant to an agreement with respect to the registration thereof (provided such
agreement does not prohibit third parties from including additional securities
in such registration), and if the form of registration
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statement proposed to be used may be used for the registration of Warrant
Shares, the Company will give notice to all holders of record of Warrant Shares
not less than 5 days nor more than 30 days prior to the filing of such
registration statement of its intention to proceed with the proposed
registration (the "Incidental Registration"), and, upon the written request of
any such holder made within 5 days after the receipt of any such notice (which
request will specify the Warrant Shares intended to be disposed of by such
holder and state the intended method of disposition thereof), the Company will
use its best efforts to cause all Warrant Shares as to which registration has
been requested to be registered under the Act, provided that if such
registration is in connection with an underwritten public offering, such
holder's Warrant Shares to be included in such registration shall be offered
upon the same terms and conditions as apply to any other securities included in
such registration. Notwithstanding anything contained in this Section 5.2 to the
contrary, the Company shall have no obligation to cause Warrant Shares to be
registered with respect to any holder whose Warrant Shares shall be eligible for
resale under Rule 144(k) of the Act.
(b) If an Incidental Registration is a primary
registration on behalf of the Company and is in connection with an underwritten
public offering, and if the managing underwriters advise the Company in writing
that in their opinion the amount of securities requested to be included in such
registration (whether by the Company, the holders of registration rights
pursuant to Section 5.2(a) hereof or other holders of its securities pursuant to
any other rights granted by the Company to demand inclusion of any such
securities in such registration) exceeds the amount of such securities which can
be successfully sold in such offering, the Company will include in such
registration the amount of securities requested to be included which in the
opinion of such underwriters can be sold, in the following order (i) first, all
of the securities the Company proposes to sell, (ii) second, all of the Warrant
Shares, Series A Registerable Common Stock, Series B Registerable Common Stock
and Series C Registerable Common Stock requested to be included in such
registration, pro rata among the holders thereof on the basis of the number of
Warrant Shares and shares of Series A Registerable Common Stock, Series B
Registerable Common Stock and Series C Registerable Common Stock then owned by
such holders, and (iii) third, any other securities requested to be included in
such registration, pro rata among the holders thereof on the basis of the amount
of such securities then owned by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their opinion the amount of
securities requested to be included in such registration (whether by such
holders, by holders of registration rights pursuant to Section 5.2(a) hereof or
by holders of its securities pursuant to any other rights granted by the Company
to demand inclusion of securities in such registration) exceeds the amount of
such securities which can be sold in such offering, the Company will include in
such registration the amount of securities requested to be included which in the
opinion of such underwriters can be sold, in the following order (i) first, all
of the securities requested to be included by holders demanding or requesting
such registration, (ii) second, all of the Warrant Shares, Series A Registerable
Common Stock, Series B Registerable Common Stock and Series C Registerable
Common Stock requested to be included in such registration, pro rata among the
holders thereof on the basis of the number of Warrant Shares and shares of
Series A Registerable Common Stock, Series B Registerable Common Stock and
Series C Registerable Common Stock then owned by such holders, and (iii) third,
any other securities requested to be included in such registration, pro rata
among the holders thereof on the basis of the amount of such securities then
owned by such holders.
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5.3 Registration Procedures. If and whenever the Company has
been requested to, or is under an obligation to, use its best efforts to effect
or cause the registration of any Warrant Shares under the Act as provided in
this Section 5, the Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Warrant Shares and use its best efforts (which
shall not, in any case, require the Company to incur any unreasonable expense)
to cause such registration statement to become effective;
(b) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of not less than six months or such shorter period in
which the disposition of all securities in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement shall be completed, and to comply with the provisions of the Act (to
the extent applicable to the Company) with respect to such dispositions;
(c) furnish to each seller of such Warrant Shares such
number of copies of such registration statement and of each such amendment and
supplement thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the Act, and
such other documents, as such seller may reasonably request, in order to
facilitate the disposition of the Warrant Shares owned by such seller;
(d) use its best efforts (which shall not, in any case,
require the Company to incur any unreasonable expense) to register or qualify
such Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as any seller reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Warrant Shares owned by such seller, except that the
Company will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not, but
for the requirements of this Section 5.3(d) be obligated to be qualified, to
subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(e) provide a transfer agent and registrar for all such
Warrant Shares covered by such registration statement not later than the
effective date of such registration statement;
(f) notify each seller of such Warrant Shares at any
time when a prospectus relating thereto is required to be delivered under the
Act, of the happening of any event as a result of which the prospectus included
in such registration statement contains an untrue statement of a material fact
or omits any fact necessary to make the statements therein not misleading, and,
at the request of any such seller, the Company will prepare a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such Warrant Shares, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact required to be stated therein or
necessary to make the statements therein not misleading;
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(g) use its best efforts to cause all such Warrant
Shares to be listed on each securities exchange on which similar securities
issued by the Company are then listed;
(h) use its best efforts to obtain a cold comfort letter
from the Company's independent public accountants in customary form and covering
such matters of the type customarily covered by cold comfort letters in such
transactions;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
reasonably required in order to expedite or facilitate the disposition of such
Warrant Shares; and
(j) make available for inspection by any seller of
Warrant Shares, any underwriter participating in any disposition pursuant to
such registration statement, and any attorney, accountant or other agent
retained by any such seller and/or representative of such seller or underwriter,
all financial and other records, pertinent corporate documents and properties of
the Company, and cause the Company's officers, directors and employees to supply
all information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
5.4 Registration and Selling Expenses.
(a) All expenses incurred by the Company in connection
with the Company's performance of or compliance with this Section 5, including,
without limitation (A) all registration and filing fees (including all expenses
incident to filing with the National Association of Securities Dealers, Inc.),
(B) Blue Sky fees and expenses, (C) all printing expenses and (D) all fees and
disbursements of counsel and accountants for the Company (including the expenses
of any audit of financial statements) retained by the Company (all such expenses
being herein called "Registration Expenses"), will be paid by the Company except
as otherwise expressly provided in this Section 5.4.
(b) The Company will, in any event, in connection with
any registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or other duties in connection therewith and expenses of audits
of year-end financial statements), and the expenses and fees for listing the
securities to be registered on one or more securities exchanges on which similar
securities issued by the Company are then listed.
(c) The Company shall bear the Registration Expenses of
each Demand Registration and each Incidental Registration hereunder.
(d) Notwithstanding any of the foregoing, all
underwriting discounts, selling commissions and stock transfer taxes applicable
to sales of Warrant Shares in connection with any Demand Registration or
Incidental Registration shall be borne by all persons who are selling Warrant
Shares pursuant to such Registration Statement in proportion to the dollar value
of the securities being sold by each such person.
(e) All fees and expenses required to be paid by the
holders of Warrant Shares pursuant to Section 5.4(d) hereof in connection with
any Incidental Registration hereunder shall be borne by said holders in
proportion to the dollar value of the securities of such holder covered by such
Incidental Registration.
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5.5 Other Conditions Relating to Registrations. The Company
shall not be required to furnish any audited financial statements at the request
of any holder of Warrant Shares other than those statements customarily prepared
at the end of its fiscal year, unless (a) the requesting holder of Warrant
Shares shall agree to reimburse the Company for the out-of-pocket costs incurred
by the Company in the preparation of such other audited financial statements or
(b) such other audited financial statements shall be required by the Commission
as a condition to declaring a Demand Registration effective under the Act.
5.6 Other Public Sales and Registrations. The Company agrees
(a) that if it has previously filed a registration statement with respect to
Warrant Shares in connection with a Demand Registration or Incidental
Registration hereunder, and if such previous registration has not been withdrawn
or abandoned, the Company will not file or cause to become effective any other
registration of any of its securities under the Act or otherwise effect a public
sale or distribution of its securities (except pursuant to registration on Form
S-8 or any successor form relating to a special offering to the employees or
security holders of the Company or any Subsidiary hereafter formed or acquired),
whether on its own behalf or at the request of any holder of such securities,
until at least 60 days have elapsed after the effective date of such previous
registration; and (ii) to cause each holder of securities purchased from the
Company any time after the date of this Agreement (other than in a registered
public offering) to agree not to effect any such public sale or distribution
during such 60-day period of any such securities or any securities issuable on
the conversion thereof or in redemption or exchange therefor. The foregoing
60-day limitation, however, shall not preclude the Company from proceeding with
a registration statement requested by a holder of securities with "demand"
registration rights who requests registration prior to the time a registered
holder of Warrant Shares requests a registration pursuant to Section 5.1 hereof.
5.7 Transferees of Warrant Shares. Notwithstanding anything
else set forth in this Section, no person or entity to whom this Warrant or
Warrant Shares are transferred shall have any rights under this Section 5 as a
holder of this Warrant or such Warrant Shares unless (a) such person or entity
(i) is a partnership whose partners are directors, officers or employees of GMGS
(provided that the partnership is either an Accredited Investor (as defined in
Regulation D of the Act), advised by a Purchased Representative (as defined in
Regulation D of the Act) or a sophisticated investor, or (ii) officers or
directors of GMGS who are either Accredited Investors, advised by a Purchaser
Representative or sophisticated investors; (b) such person agrees to be bound by
the terms and conditions of this Agreement; and (c) the Company is given prompt
written notice of such transfer.
5.8 Indemnification.
(a) The Company hereby agrees to indemnify, to the
extent permitted by law, each holder of Warrant Shares, its officers, attorneys,
accountants, agents and directors, if any, and each person, if any, who controls
such holder within the meaning of the Act, against all losses, claims, damages,
liabilities and expenses under the Act, applicable state securities laws, common
law or otherwise (including, as incurred, legal and other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, except to the extent limited by Section 5.8(c) below) caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or prospectus (and as amended or supplemented if the
Company has furnished any amendments or supplements thereto) or any preliminary
prospectus, which registration
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statement, prospectus or preliminary prospectus shall be prepared in connection
with a Demand Registration or Incidental Registration, or caused by any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses are caused by
any untrue statement or alleged untrue statement of a material fact contained in
or by any omission or alleged omission of a material fact from information
furnished in writing to the Company by such holder in connection with a Demand
Registration or Incidental Registration, provided the Company will not be liable
pursuant to this Section 5.8 if such losses, claims, damages, liabilities or
expenses have been caused by any selling security holder's failure to deliver a
copy of the registration statement or prospectus, or any amendments or
supplements thereto, after the Company has furnished such holder with a
sufficient amount of copies of the same.
(b) In connection with any registration statement in
which a holder of Warrant Shares is participating, each such holder shall
furnish to the Company in writing such information as is reasonably requested by
the Company for use in any such registration statement or prospectus and shall
indemnify, to the extent permitted by law, the Company, its officers, attorneys,
accountants, agents and directors and each person, if any, who controls the
Company within the meaning of the Act, against any losses, claims, damages,
liabilities and expenses under the Act, applicable state securities laws, common
law or otherwise (including, as incurred, legal and other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, except to the extent limited by Section 5.8(c) below) caused by any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
such losses, claims, damages, liabilities or expenses are caused by an untrue
statement or alleged untrue statement contained in or by an omission or alleged
omission from information so furnished in writing by such holder in connection
with the Demand Registration or Incidental Registration. If the offering
pursuant to any such registration is made through underwriters, each such holder
agrees to enter into an underwriting agreement in customary form with such
underwriters and to indemnify such underwriters, their officers and directors,
if any, and each person who controls such underwriters within the meaning of the
Act to the same extent as hereinabove provided with respect to indemnification
by such holder of the Company. Notwithstanding the foregoing, no such holder of
Warrant Shares shall be liable under this Section 5.8(b) for any amounts
exceeding the product of (i) the offering price per share of Warrant Shares
pursuant to the registration statement in which such holder is participating
(less any underwriting discounts or commissions which reduce the amount such
holder receives), multiplied by (ii) the number of Warrant Shares being sold by
such holder pursuant to such registration statement.
(c) Promptly after receipt by an indemnified party under
Section 5.8(a) or Section 5.8(b) hereof of notice of the commencement of any
action or proceeding, such indemnified party will, if a claim in respect thereof
is, or is to be, made against the indemnifying party under such Section, notify
the indemnifying party in writing of the commencement thereof; but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party otherwise than under such Section. In case
any such action or proceeding is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and, to the extent that it
wishes, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel
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reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such indemnified
party under such Section for any legal or any other expenses subsequently
incurred by such indemnified party in connection with the defense thereof (other
than reasonable costs of investigation) unless incurred at the written request
of the indemnifying party. Notwithstanding the above, the indemnified party will
have the right to employ one counsel (exclusive of local counsel) of its own
choice in any such action or proceeding if the indemnified party has reasonably
concluded that there may be defenses available to it which are different from or
additional to those of the indemnifying party, or counsel to the indemnified
party is of the opinion that it would not be desirable for the same counsel to
represent both the indemnifying party and the indemnified party because such
representation might result in a conflict of interest (in either of which cases
the indemnifying party will not have the right to assume the defense of any such
action or proceeding on behalf of the indemnified party or parties and such
legal and other expenses will be borne by the indemnifying party). An
indemnifying party will not be liable to any indemnified party for any
settlement of any such action or proceeding effected without the consent of such
indemnifying party.
(d) If the indemnification provided for in Section
5.8(a) or Section 5.8(b) hereof is unavailable under applicable law to an
indemnified party in respect of any losses, claims, damages or liabilities
referred to therein, then each applicable indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the Company on the one hand and of the holders of Warrant Shares on the other
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Company on the one hand and of the
holders of Warrant Shares on the other shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information supplied by
the Company or by the holders of Warrant Shares and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid or payable by a party as a result of
the losses, claims, damages and liabilities referred to above shall be deemed to
include, subject to the limitations set forth in Section 5.8(c), hereof any
legal or other fees or expenses reasonably incurred by such party in connection
with investigating or defending any action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) will be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation.
(e) Promptly after receipt by the Company or any holder
of Warrant Shares of notice of the commencement of any action or proceeding,
such party will, if a claim for contribution in respect thereof is to be made
against another party (the "contributing party"), notify the contributing party
of the commencement thereof; but the omission so to notify the contributing
party will not relieve it from any liability which it may have to any other
party other than for contribution hereunder. In case any such action, suit, or
proceeding is brought against any party, and such party notifies a contributing
party of the commencement thereof, the contributing party will be entitled to
participate therein with the notifying party and any other contributing party
similarly notified. No party shall be liable for contribution with regard to the
settlement of any action or proceeding effected without its consent.
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Section 6. Exchange, Transfer or Assignment of Warrant.
6.1 This Warrant may be, at the option of the Holder, and upon
presentation and surrender hereof to the Company at its principal office or to
the Company's agent at its office, (x) exchanged for other Warrants of different
denominations, entitling the Holder or Holders to purchase in the aggregate the
same number of Warrant Shares at the Exercise Price or, (y) if delivered
together with a written notice specifying the denominations in which new
Warrants are to be issued and signed by the Holder, divided or combined with
other Warrants that carry the same rights.
6.2 Subject to Section 4, this Warrant may be transferred and
assigned, at the option of the Holder, upon surrender of this Warrant to the
Company at its principal office or to the Company's agent at its office, with
the Warrant assignment form attached hereto ("Warrant Assignment Form") duly
executed and accompanied by funds sufficient to pay any transfer tax. The
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees named in such Warrant Assignment Form and, if the Holder's
entire interest is not being transferred or assigned, in the name of the Holder;
and this Warrant shall promptly be cancelled.
6.3 Any transfer or exchange of this Warrant shall be without
charge to the Holder and any Warrant or Warrants issued pursuant to this Section
6 shall be dated the date hereof.
Section 7. Lost, Mutilated or Missing Warrant. Upon receipt by the
Company or its agent of evidence satisfactory to it of the loss, theft or
destruction of this Warrant, and of satisfactory indemnification, and upon
surrender and cancellation of this Warrant if mutilated, the Company or its
agent shall execute and deliver a Warrant of like tenor and date in exchange for
this Warrant.
Section 8. Rights of the Holder. The Holder shall not, by virtue of
being a Holder, be entitled to any rights of a shareholder in the Company,
either at law or in equity, and the rights of the Holder are limited to those
expressed in this Warrant.
Section 9. Anti-dilution.
9.1 The Exercise Price shall be adjusted as described below in
the event the Company shall fix or have fixed a record date at any time after
the date hereof and before the expiration of the Exercise Period for a Stock
Distribution, a Below Market Issuance or a Distribution (all as defined below).
(a) Stock Dividends, Subdivisions, Combinations,
Reclassifications, etc.
(i) A "Stock Distribution" shall be deemed to have
occurred upon (A) the declaration of a dividend or distribution on the Common
Stock payable in shares of capital stock (whether shares of Common Stock or of
capital stock of any other class), (B) the subdivision of shares of the Common
Stock into a greater number of shares, (C) the combination of the Common Stock
into a smaller number of shares or (D) the issuance of any shares of its capital
stock by reclassification of the Common Stock in connection with a consolidation
or merger with a subsidiary of the Company in which the Company is the
continuing corporation and in which the Company issues securities
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representing, immediately prior to such issuance, more than 30% of the combined
voting power of the Company's then outstanding voting securities having power to
vote in the election of directors.
(ii) Upon the occurrence of a Stock Distribution,
the Holder shall be entitled to receive the aggregate number and kind of shares
which, if the Warrant had been exercised immediately prior to such record date,
it would have been entitled to receive by virtue of such dividend, distribution,
subdivision, combination or reclassification, and the Exercise Price shall be
appropriately adjusted. Such adjustment shall be made successively whenever any
event listed in subparagraph (i) shall occur.
(b) Issuance at Less Than Fair Market Value.
(i) A "Below Market Issuance" shall be deemed to
have occurred upon the Company's issuance of rights, options, warrants or shares
of stock, other than Permitted Shares (as hereinafter defined), to any person or
entity at a price per share or having a conversion or exercise price per share
(including the amount paid, if any, for such rights, options or warrants) less
than the Exercise Price, as adjusted, on such record date (excluding rights or
warrants that are not immediately exercisable and for which provision is made
for the Holder to receive comparable rights or warrants). As used in this
paragraph, "Permitted Shares" shall mean (x) any shares of Common Stock or
securities convertible into Common Stock ("Convertible Securities") issued or
issuable, after the date hereof, to officers, directors or employees of, or
consultants to, or to persons who were to become officers, directors or
employees of, or consultants to, the Company pursuant to awards or grants made
prior to the date hereof, (y) 500,000 shares of Common Stock issued after the
date hereof, including but not limited to any shares of Common Stock or
Convertible Securities issued or issuable to officers, directors or employees
of, or consultants to, or to persons who were to become officers, directors or
employees of, or consultants to, the Company pursuant to awards or grants made
after the date hereof under stock option, stock incentive, stock appreciation,
stock bonus, stock award or compensation plans or arrangements or employment
letters or any other employee benefit plans presently in effect or which may
hereafter be adopted or entered into by the Company, and (z) any shares of
Common Stock or Convertible Securities issued or issuable upon conversion of any
Convertible Securities.
(ii) Upon the occurrence of a Below Market
Issuance, the Exercise Price shall be adjusted to a price determined by dividing
(y) an amount equal to the sum of (A) the number of shares of Common Stock
outstanding immediately prior to such Below Market Issuance multiplied by the
Exercise Price then in effect, plus (B) the consideration, if any, received by
the Company upon such Below Market Issuance, by (z) the total number of shares
of Common Stock outstanding immediately after such Below Market Issuance. For
purposes of this paragraph, "Common Stock outstanding" shall mean all issued and
outstanding shares of Common Stock and all issued and outstanding shares of
Convertible Securites.
(iii) Shares of Common Stock owned by or held for
the account of the Company or any subsidiary of the Company on such record date
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall become effective immediately after such record date. Such
adjustment shall be made successively whenever any such Below Market Issuance
shall occur. If such rights, options or warrants are not so issued, the number
of Warrant Shares receivable hereunder shall again
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be adjusted to be the number that would have been in effect had such record date
not been fixed.
(iv) On the expiration of such rights, options or
warrants, the number of Warrant Shares receivable hereunder shall be readjusted
to be the number that would have obtained had the adjustment made upon the
issuance of such rights, options or warrants been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such rights, options or warrants, provided, however, that if the
Holder of this Warrant shall have exercised this Warrant prior to any such
readjustment, the number of Warrant Shares that have been delivered or the
number of Warrant Shares to be delivered shall not be subject to any
readjustment.
(v) In any case in which this Subsection (b) shall
require that an adjustment in the number of shares receivable hereunder or the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event issuing to the
Holder of any Warrant exercised after such record date the number of Warrant
Shares, if any, issuable upon such exercise over and above the number of Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such Holder a due bill or other appropriate instrument evidencing
such Holder's right to receive such additional Warrant Shares upon the
occurrence of the event requiring such adjustments.
(c) Distribution of Subscription Rights, Warrants,
Evidences of Indebtedness or Assets.
(i) The Company shall be deemed to have made a
"Distribution" upon the making of a distribution to all holders of Common Stock
(or other securities deliverable hereunder) (including any such distribution to
be made in connection with a consolidation or merger in which the Company is to
be the continuing corporation) of (A) any shares of capital stock of the Company
(other than Common Stock), (B) subscription rights or warrants (excluding those
for which adjustment is provided in Subsection 9.1(b) above and excluding those
that are not immediately exercisable and for which provision is made for the
Holder to receive comparable subscription rights or warrants) or (C) evidences
of its indebtedness or assets (excluding (x) dividends paid in or distributions
of the Company's capital stock for which the number of Warrant Shares receivable
hereunder shall have been adjusted pursuant to Subsection 9.1(a) and (y) cash
dividends or distributions payable out of earnings or surplus not in excess of
10% of the Exercise Price before the date of declaration multiplied by the
number of outstanding shares of Common Stock) (any of the foregoing being
hereinafter in this paragraph (iii) called the "Securities").
(ii) Upon the making of any such Distribution
(unless the Company elects to reserve shares or other units of such securities
for distribution to each Holder upon exercise of the Warrant so that, in
addition to the shares of the Common Stock to which each Holder is entitled,
each Holder will receive upon such exercise the amount and kind of such
securities which such Holder would have received if the Holder had, immediately
prior to the record date for the distribution of the securities, exercised the
Warrant), the number of Warrant Shares receivable hereunder after such record
date shall be determined by multiplying the number of Warrant Shares receivable
hereunder immediately prior to such record date by a fraction, the denominator
of which shall be the Exercise Price on the day immediately prior to the date on
which the right to receive such securities
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<PAGE>
accrues, less the fair market value (as determined in the reasonable judgment of
the Board of Directors of the Company and described in a statement mailed by
certified mail to the Holder) of the portion of the assets or evidences of
Indebtedness so to be distributed to a holder of one share of the Common Stock
or of such subscription rights or warrants applicable to one share of the Common
Stock, and the numerator of which shall be the Exercise Price on such date; and
the Exercise Price shall be appropriately adjusted.
(iii) Such adjustment shall become effective
immediately after such record date and shall be made successively whenever such
a record date is fixed. If such distribution is not so made, the number of
Warrant Shares receivable hereunder shall be readjusted to be the number that
was in effect immediately prior to such record date.
(iv) In the event that the Holder of this Warrant
exercises this Warrant after an adjustment is made under this Subsection (c) and
prior to a readjustment under this Subsection (c), the number of Warrant Shares
that have been delivered or the number of Warrant Shares to be delivered shall
not be subject to any readjustment. In any case in which this Subsection (c)
shall require that an adjustment in the number of Warrant Shares receivable
hereunder or the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Holder of any Warrant exercised after such record date the
number of Warrant Shares, if any, issuable upon such exercise over and above the
number of Warrant Shares, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares upon the occurrence of the event requiring such adjustments.
9.2 Reorganization Event. In case of any Reorganization Event
the Company shall, as a condition precedent to the consummation of the
transaction constituting, or announced as, such Reorganization Event, cause
effective provisions to be made so that the Holder shall have the right
immediately thereafter, by exercising this Warrant, to receive the aggregate
amount and kind of shares of stock and other securities and property that were
receivable upon such Reorganization Event by a holder of the number of shares of
Common Stock that would have been received immediately prior to such
Reorganization Event upon exercise of this Warrant. Any such provision shall
include provision for adjustments in respect of such shares of stock and other
securities and property that shall be as nearly equivalent as may be practicable
to the adjustments provided for in Subsection 9.1. The foregoing provisions of
this Subsection 9.2 shall similarly apply to successive Reorganization Events.
9.3 Fractional Shares. No fractional shares of Common Stock
(or other securities deliverable hereunder) or scrip shall be issued to any
Holder in connection with the exercise of this Warrant. Instead of any
fractional share of Common Stock (or other securities deliverable hereunder)
that would otherwise be issuable to such Holder, the Company shall pay to such
Holder a cash adjustment in respect of such fractional interest in an amount
equal to such fractional interest multiplied by the Exercise Price per share of
Common Stock (or other securities deliverable hereunder) on the date of such
exercise.
9.4 Carryover. Notwithstanding any other provision of this
Section 9, no adjustment shall be made to the number of shares of Common Stock
(or other securities deliverable hereunder) to be delivered to each Holder (or
to the Exercise Price) if
17
<PAGE>
such adjustment would represent less than one percent of the number of shares to
be so delivered, but any such adjustment shall be carried forward and shall be
made at the time and together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to one percent or
more of the number of shares to be so delivered.
9.5 Notices of Certain Events. If at any time after the date
hereof and before the expiration of the Exercise Period:
(a) the Company authorizes the issuance to all holders
of its Common Stock of (i) rights or warrants to subscribe for or purchase
shares of its Common Stock or (ii) any other subscription rights or warrants; or
(b) the Company authorizes the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets (other
than cash dividends or distributions excluded from the operation of Subsection
9.1(c)); or
(c) there shall be any capital reorganization of the
Company or reclassification of the Common Stock (other than a change in par
value of the Common Stock or an increase in the authorized capital stock of the
Company not involving the issuance of any shares thereof) or any consolidation
or merger to which the Company is a party (other than a consolidation or merger
with a subsidiary in which the Company is the continuing corporation and that
does not result in any reclassification or change in the Common Stock
outstanding) or a conveyance or transfer of all or substantially all of the
properties and assets of the Company;
(d) there shall be any voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(e) there shall be any other event that would result in
an adjustment pursuant to this Section 9 in the Exercise Price or the number of
Warrant Shares that may be purchased upon the exercise hereof;
the Company will cause to be mailed to the Holder,
at least fifteen days (or ten days in any case specified in clauses (a) or (b)
above) before the applicable record or effective date hereinafter specified, a
notice stating (i) the date as of which the holders of Common Stock of record
entitled to receive any such rights, warrants or distributions is to be
determined, or (ii) the date on which any such reorganization, reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record will be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up.
9.6 Failure to Give Notice. The failure to give the notice
required by Subsection 9.5 or any defect therein shall not affect the legality
or validity of any distribution right, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up or the vote upon
any such action.
Section 10. Net Issue Election. The Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this
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<PAGE>
Warrant or any portion hereof by the surrender of this Warrant or such portion
to the Company, with the net issue election notice annexed hereto duly executed,
at the office of the Company; provided, that the Holder may not make such an
election unless (i) the Company has registered the Common Stock pursuant to the
Act or in connection with such registration or (ii) upon the expiration of this
Warrant. Thereupon, the Company shall issue to the Holder such number of fully
paid and nonassessable shares of Common Stock as is computed using the following
formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 10.
Y = the number of shares covered by this Warrant in respect of which
the net issue election is made pursuant to this Section 10.
A = the fair market value of one share of Common Stock. If the Common
Stock is registered pursuant to the Act, the fair market value shall
mean the average high and low prices of the Common Stock on the day
prior to the exercise of this Warrant, if the Common Stock is being
traded on a national exchange; or the last reported sale price on
the day prior to exercise of this Warrant, if the Common Stock is
traded on the Nasdaq National Market, and the Common Stock is not
traded on a national exchange; or the closing bid price (or average
of bid prices) last quoted on the day prior to the exercise of this
Warrant by an established quotation service for over-the-counter
securities, if the Common Stock is not reported on the Nasdaq
National Market or a national exchange. If the election occurs in
connection with the registration of Common Stock under the Act, then
the fair market value shall be the price offered to the public.
Otherwise, the fair market value shall be as determined in good
faith by the Board of Directors of the Company, at the time the net
issue election is made pursuant to this Section 10.
B = the Exercise Price in effect under this Warrant at the time the
net issue election is made pursuant to this Section 10. The Board of
Directors shall promptly respond in writing to an inquiry by the
Holder as to the fair market value of one share of Common Stock.
Section 11. Officers' Certificate. Whenever the number of Warrant
Shares that may be purchased on exercise of this Warrant or the Exercise Price
is adjusted as required by the provisions of Section 9, the Company will
forthwith file in the custody of its Secretary or an Assistant Secretary at its
principal office and at the office of its agent an officers' certificate showing
the adjusted number of Warrant Shares that may be purchased at the Exercise
Price on exercise of this Warrant and the adjusted Exercise Price determined as
herein provided, setting forth in reasonable detail the facts requiring such
adjustment and the manner of computing such adjustment. Each such officers'
certificate shall be signed by the President, Chief Financial Officer or
Treasurer of the Company and by the Secretary or an Assistant Secretary of the
Company. Each such officers' certificate shall be made available at all
reasonable times for inspection by the Holder. The Company shall, forthwith
after each such adjustment, cause a copy of such certificate to be mailed to the
Holder.
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<PAGE>
Section 12. Warrant Register. The Company will register this Warrant
in the Warrant Register in the name of the record holder to whom it has been
distributed or assigned in accordance with the terms hereof. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof (notwithstanding any notation of ownership or other writing hereon made
by anyone) for the purpose of any exercise hereof or any distribution to the
Holder and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 13. Successors. All of the provisions of this Warrant by or
for the benefit of the Company or the Holder shall bind and inure to the benefit
of their respective successors and assigns.
Section 14. Headings. The headings of sections of this Warrant have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15. Amendments. This Warrant may be amended by the
affirmative vote of Holders holding Warrants to purchase not less than
two-thirds of the Warrant Shares purchasable pursuant to all of the then
outstanding Warrants; provided, that, except as expressly provided herein, this
Warrant may not be amended, without the consent of the Holder, to change (a) any
price at which this Warrant may be exercised, (b) the period during which this
Warrant may be exercised, (c) the number or type of securities to be issued upon
the exercise hereof or (d) the provisions of this Section 15.
Section 16. Notices. Unless otherwise provided in this Warrant, any
notice or other communication required or permitted to be made or given to any
party hereto pursuant to this Warrant shall be in writing and shall be deemed
made or given if delivered by hand, on the date of such delivery to such party
or, if mailed, on the fifth day after the date of mailing, if sent to such party
by certified or registered mail, postage prepaid, addressed to it (in the case
of a Holder) at its address in the Warrant Register or (in the case of the
Company) at its address set forth below, or to such other address as is
designated by written notice, similarly given to each other party hereto.
Section 17. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be construed in accordance with the laws of said Commonwealth as
applied to contracts made and to be performed in Pennsylvania between
Pennsylvania residents.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed and attested by its duly authorized officer and to be dated as of the
date first above written.
APOLLON, INC.
By: /s/ James G. Murphy
-------------------------------
Name: James G. Murphy
Title: Vice President
20
<PAGE>
Address: One Great Valley Parkway
Suite 30
Malvern, PA 19355-1423
21
<PAGE>
PURCHASE FORM
The undersigned, ______________, hereby irrevocably elects to
exercise the within Warrant to purchase _____ shares of Common Stock and hereby
makes payment of $_________ in payment of the exercise price thereof.
Date:_____________, ____ __________________________________________
[Signature]
__________________________________________
[Street Address]
__________________________________________
[City and State]
<PAGE>
NET ISSUE ELECTION NOTICE
The undersigned, _________________________, hereby irrevocably
elects under Section 10 of the within Warrant to surrender the right to purchase
________ shares of Common Stock pursuant to this Warrant. The certificate(s) for
the shares issuable upon such net issue election shall be issued in the name of
the undersigned or as otherwise indicated below.
Date:_____________, ____ __________________________________________
[Signature]
__________________________________________
[Name of Registration]
__________________________________________
[Street Address]
__________________________________________
[City and State]
<PAGE>
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________
("Assignor"), hereby sells, assigns and transfers unto
Name: ________________________________________ ("Assignee")
(Please type or print in block letters.)
Address: _____________________________________
_____________________________________
Social Security or Taxpayer I.D. No.: __________________
Assignor's right to purchase up to ______ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint the Company and
any of its officers, secretary, or assistant secretaries, as attorneys-in-fact
to transfer the same on the books of the Company, with full power of
substitution in the premises.
Date: ____________, ____ ________________________________________________
[Signed]
<PAGE>
FORM OF
COMMON STOCK WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR REGISTERED
UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR SUCH
SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933,
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
---------------
APOLLON, INC.
One Great Valley Parkway
Suite 30
Malvern, Pennsylvania 19355-1423
Name of Registered Holder: [ ]
No. [ ] Date of Issuance:
Warrant for the Purchase of [ ] Shares of Common Stock
IN CONSIDERATION OF the loan by the initial registered holder hereof
(the "Initial Holder") of $[ ] to Apollon, Inc., a Pennsylvania corporation
(the "Company"), and for value received, the Company hereby grants the rights
herein specified and certifies that the Initial Holder or any registered
assignee of the Initial Holder (each of the Initial Holder and any such
registered assignee being hereinafter referred to as the "Holder"), is entitled,
subject to the conditions and upon the terms of this Warrant, to purchase from
the Company, at any time or from time to time during the Exercise Period (as
defined in Section 1), the number of shares of Common Stock (as defined in
Section 1) set forth above. The number of shares of Common Stock to be received
upon the exercise of this Warrant and the Exercise Price are subject to
adjustment from time to time as hereinafter set forth.
Section 1. Certain Definitions. Terms defined in the preceding
paragraph and elsewhere in this Warrant have the respective meanings provided
for therein. The following additional terms, as used herein, have the following
respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Common Stock" means the fully paid and nonassessable shares of common
stock of the Company, par value $.01 per share, together with any other equity
securities that may be issued by the Company in addition thereto or in
substitution therefor, as provided herein.
<PAGE>
"Exercise Period" means the period beginning on the date of this
Warrant and ending on _______________.
"Exercise Price" means an amount per share equal to $____, subject to
change or adjustment pursuant to Section 9 hereof.
"Investors" means Centocor Delaware, Inc., DSV Partners IV, Technology
Leaders, L.P. and Technology Leaders Offshore C.V.
"Notes" means the three promissory notes issued by the Company on
_______________, two of which were each in the principal amount of $_______ and
were issued to each of Centocor Delaware, Inc. and DSV Partners IV, one of which
was in the principal amount of $_______ and was issued to Technology Leaders,
L.P., and one of which was in the principal amount of $_______ and was issued to
Technology Leaders Offshore C.V.
"Reorganization Event" means (i) any capital reorganization or
leveraged recapitalization of the Company or reclassification of the Common
Stock (other than a subdivision, combination or reclassification of the
outstanding Common Stock for which adjustment is provided in Subsection 9.1 and
other than a change in the par value of the Common Stock or an increase in the
authorized capital stock of the Company not involving the issuance of any shares
thereof), (ii) any consolidation of the Company with, or merger of the Company
with or into, another person (including any individual, partnership, joint
venture, corporation, trust or group thereof) (other than a consolidation or
merger with a subsidiary of the Company in which the Company is the continuing
corporation and in which the Company issues securities representing, immediately
prior to such issuance, no more than 30% of the combined voting power of the
Company's then outstanding voting securities having power to vote in the
election of directors and for which no adjustment is required by Subsection 9.1)
or any sale, lease, transfer or conveyance of all or substantially all of the
property and assets of the Company or (iii) the announcement or commencement by
any "person" or "group" (within the meaning of Section 13(d) and Section 14(d)
of the Exchange Act) of a bona fide tender offer or exchange offer in accordance
with the rules and regulations of the Exchange Act to purchase, or the
acquisition of securities in the Company, such that after such acquisition or
proposed purchase, the acquiror "beneficially owns" or would "beneficially own"
(as defined in Rule 13d-3 under the Exchange Act), securities in the Company
representing 30% or more of the combined voting power of the Company's then
outstanding securities having power to vote in the election of directors.
"Warrant" means one of the Common Stock Warrants issued by the Company
to each of the Investors in connection with the issuance of the Notes, including
this Warrant and any Warrant or Warrants which may be issued pursuant to Section
4 or 6 hereof in substitution or exchange for or upon transfer of this Warrant,
any Warrant which may be issued pursuant to Section 2 hereof upon partial
exercise of this Warrant and any Warrant which may be issued pursuant to Section
7 hereof upon the loss, theft, destruction or mutilation of this Warrant.
"Warrant Register" means the register maintained at the principal
office of the Company, or at the office of its agent, in which the name of the
Holder of this Warrant shall be registered.
"Warrant Shares" means the shares of Common Stock, as adjusted from
time to time, deliverable upon exercise of this Warrant.
2
<PAGE>
Section 2. Exercise of Warrant. This Warrant may be exercised, in
whole or in part, at any time or from time to time during the Exercise Period,
by presentation and surrender hereof to the Company at its principal office at
the address set forth on the signature page hereof (or at such other address of
the Company or any agent appointed by the Company to act hereunder as the
Company or such agent may hereafter designate in writing to the Holder), with
the purchase form annexed hereto (the "Purchase Form") duly executed and
accompanied by cash or a certified or official bank check drawn to the order of
"Apollon, Inc." (or its successor in interest, if any) in the amount of the
Exercise Price, multiplied by the number of Warrant Shares specified in such
Purchase Form. If this Warrant should be exercised in part only, the Company or
its agent shall, upon surrender of this Warrant, execute and deliver a Warrant
evidencing the right of the Holder thereof to purchase the balance of the
Warrant Shares purchasable hereunder. Upon receipt by the Company during the
Exercise Period of this Warrant and such Purchase Form in proper form for
exercise, together with proper payment of the Exercise Price at its principal
office, or by its agent at its office, the Holder shall be deemed to be the
holder of record of the number of Warrant Shares specified in such Purchase
Form. If the date of such receipt by the Company or its agent is a date on
which the stock transfer books of the Company are closed, such person shall be
deemed to have become the record holder of such Warrant Shares on the next
business day on which the stock transfer books of the Company are open. The
Company shall pay any and all documentary, stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of such Warrant Shares. Any
Warrant issued upon partial exercise of this Warrant pursuant to this Section 2
shall be dated the date of this Warrant.
Section 3. Reservation of Shares. The Company shall at all times
keep reserved solely for issuance and delivery pursuant to the Warrants the
number of shares of its Common Stock that are or would be issuable from time to
time upon exercise of all Warrants. All such shares shall be duly authorized
and, when issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free of all preemptive rights.
Before taking any action that would cause an adjustment pursuant to Section 9
hereof reducing the Exercise Price below the then par value (if any) of the
Warrant Shares issuable upon exercise of this Warrant, the Company will take any
corporate action that may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and nonassessable
Warrant Shares at the Exercise Price as so adjusted.
Section 4. Transfer in Compliance with Applicable Securities Laws.
4.1 Neither this Warrant nor any of the Warrant Shares, nor any
interest in either, may be sold, assigned, pledged, hypothecated, encumbered or
in any other manner transferred or disposed of, in whole or in part, except in
accordance with Section 6 hereof and in compliance with applicable United States
federal and state securities laws and the terms and conditions hereof. Except
as provided in Subsection 4.2, each Warrant shall bear the following legend:
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE
EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE
SKY LAWS. NEITHER THIS WARRANT NOR SUCH SECURITIES MAY BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF
1933, APPLICABLE STATE SECURITIES
3
<PAGE>
OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
4.2 If (x) the Warrant Shares have been registered under the Act
and registered or qualified under applicable state securities or Blue Sky laws
or (y) the Holder has received an opinion of counsel reasonably satisfactory to
the Company that the Warrant Shares may be freely sold or transferred without
registration under the Act or registration or qualification under applicable
state securities or Blue Sky laws, the Holder may require the Company to issue,
in substitution for a Warrant with the foregoing legend, a Warrant with the
following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE
SKY LAWS. THIS WARRANT MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR DISPOSED OF
EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, APPLICABLE
STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
4.3 The Holder may require the Company to issue a Warrant
without either of the foregoing legends in substitution for a Warrant bearing
one of such legends if either (x) this Warrant and the Warrant Shares issuable
upon the exercise hereof have been registered under the Act and registered or
qualified under applicable state securities laws or (y) the Holder has received
an opinion of counsel reasonably satisfactory to the Company that this Warrant
may be freely sold or transferred without registration under the Act or
registration or qualification under applicable state securities laws. The
provisions of this Section 4 shall be binding on all subsequent holders of this
Warrant.
Section 5. Warrant Shares Registration Rights. The Holder shall have
such registration rights with respect to the Warrant Shares as are set forth in
Section 7 of the Stock Purchase Agreement for Series B Convertible Preferred
Stock dated as of November 15, 1993 between the Company and the Investors, as
amended from time to time, with respect to holders of Securities (as defined
therein).
Section 6. Exchange, Transfer or Assignment of Warrant.
6.1 This Warrant may be, at the option of the Holder, and upon
presentation and surrender hereof to the Company at its principal office or to
the Company's agent at its office, (x) exchanged for other Warrants of different
denominations, entitling the Holder or Holders to purchase in the aggregate the
same number of Warrant Shares at the Exercise Price or, (y) if delivered
together with a written notice specifying the denominations in which new
Warrants are to be issued and signed by the Holder, divided or combined with
other Warrants that carry the same rights.
6.2 Subject to Section 4, this Warrant may be transferred and
assigned, at the option of the Holder, upon surrender of this Warrant to the
Company at its principal office or to the Company's agent at its office, with
the Warrant assignment form attached hereto ("Warrant Assignment Form") duly
executed and accompanied by funds sufficient to pay any transfer tax. The
Company shall execute and deliver a new Warrant or Warrants in the name of the
assignee or assignees named in such Warrant Assignment Form
4
<PAGE>
and, if the Holder's entire interest is not being transferred or assigned, in
the name of the Holder; and this Warrant shall promptly be cancelled.
6.3 Any transfer or exchange of this Warrant shall be without
charge to the Holder and any Warrant or Warrants issued pursuant to this Section
6 shall be dated the date hereof.
Section 7. Lost, Mutilated or Missing Warrant. Upon receipt by the
Company or its agent of evidence satisfactory to it of the loss, theft or
destruction of this Warrant, and of satisfactory indemnification, and upon
surrender and cancellation of this Warrant if mutilated, the Company or its
agent shall execute and deliver a Warrant of like tenor and date in exchange for
this Warrant.
Section 8. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at law
or in equity, and the rights of the Holder are limited to those expressed in
this Warrant.
Section 9. Anti-dilution.
9.1 The Exercise Price shall be adjusted as described below in
the event the Company shall fix or have fixed a record date at any time after
the date hereof and before the expiration of the Exercise Period for a Stock
Distribution, a Below Market Issuance or a Distribution (all as defined below).
(a) Stock Dividends, Subdivisions, Combinations,
Reclassifications, etc.
(i) A "Stock Distribution" shall be deemed to
have occurred upon (A) the declaration of a dividend or distribution on the
Common Stock payable in shares of capital stock (whether shares of Common Stock
or of capital stock of any other class), (B) the subdivision of shares of the
Common Stock into a greater number of shares, (C) the combination of the Common
Stock into a smaller number of shares or (D) the issuance of any shares of its
capital stock by reclassification of the Common Stock in connection with a
consolidation or merger with a subsidiary of the Company in which the Company is
the continuing corporation and in which the Company issues securities
representing, immediately prior to such issuance, more than 30% of the combined
voting power of the Company's then outstanding voting securities having power to
vote in the election of directors.
(ii) Upon the occurrence of a Stock Distribution,
the Holder shall be entitled to receive the aggregate number and kind of shares
which, if the Warrant had been exercised immediately prior to such record date,
it would have been entitled to receive by virtue of such dividend, distribution,
subdivision, combination or reclassification, and the Exercise Price shall be
appropriately adjusted. Such adjustment shall be made successively whenever any
event listed in subparagraph (i) shall occur.
(b) Issuance at Less Than Fair Market Value.
(i) A "Below Market Issuance" shall be deemed to
have occurred upon the Company's issuance of rights, options or warrants to all
holders of Common Stock entitling them to subscribe for or purchase Common Stock
at a price per share or having a conversion or exercise price per share
(including the amount paid, if any, for such rights, options or warrants) less
than the Exercise Price on such record date
5
<PAGE>
(excluding rights or warrants that are not immediately exercisable and for which
provision is made for the Holder to receive comparable rights or warrants).
(ii) Upon the occurrence of a Below Market
Issuance, the number of Warrant Shares to be received hereunder after such
record date shall be determined by multiplying the number of shares receivable
hereunder immediately prior to such record date by a fraction, the denominator
of which shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares of Common Stock that the aggregate
offering price of the total number of shares so offered for subscription or
purchase would purchase at the Exercise Price on such record date, and the
numerator of which shall be the number of shares of Common Stock outstanding on
such record date plus the number of additional shares of Common Stock offered
for subscription or purchase, and the Exercise Price shall be appropriately
adjusted.
(iii) Shares of Common Stock owned by or held
for the account of the Company or any subsidiary of the Company on such record
date shall not be deemed outstanding for the purpose of any such computation.
Such adjustment shall become effective immediately after such record date. Such
adjustment shall be made successively whenever any such Below Market Issuance
shall occur. If such rights, options or warrants are not so issued, the number
of Warrant Shares receivable hereunder shall again be adjusted to be the number
that would have been in effect had such record date not been fixed.
(iv) On the expiration of such rights, options or
warrants, the number of Warrant Shares receivable hereunder shall be readjusted
to be the number that would have obtained had the adjustment made upon the
issuance of such rights, options or warrants been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such rights, options or warrants, provided, however, that if the
Holder of this Warrant shall have exercised this Warrant prior to any such
readjustment, the number of Warrant Shares that have been delivered or the
number of Warrant Shares to be delivered shall not be subject to any
readjustment.
(v) In any case in which this Subsection (b)
shall require that an adjustment in the number of shares receivable hereunder or
the Exercise Price be made effective as of a record date for a specified event,
the Company may elect to defer until the occurrence of such event issuing to the
Holder of any Warrant exercised after such record date the number of Warrant
Shares, if any, issuable upon such exercise over and above the number of Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver to such Holder a due bill or other appropriate instrument evidencing
such Holder's right to receive such additional Warrant Shares upon the
occurrence of the event requiring such adjustments.
(c) Distribution of Subscription Rights, Warrants,
Evidences of Indebtedness or Assets.
(i) The Company shall be deemed to have made a
"Distribution" upon the making of a distribution to all holders of Common Stock
(or other securities deliverable hereunder) (including any such distribution to
be made in connection with a consolidation or merger in which the Company is to
be the continuing corporation) of (A) any shares of capital stock of the Company
(other than Common Stock), (B) subscription rights or warrants (excluding those
for which adjustment is provided in Subsection 9.1(b) above and excluding those
that are not immediately exercisable and for which provision is
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<PAGE>
made for the Holder to receive comparable subscription rights or warrants) or
(C) evidences of its indebtedness or assets (excluding (x) dividends paid in or
distributions of the Company's capital stock for which the number of Warrant
Shares receivable hereunder shall have been adjusted pursuant to Subsection
9.1(a) and (y) cash dividends or distributions payable out of earnings or
surplus not in excess of 10% of the Exercise Price before the date of
declaration multiplied by the number of outstanding shares of Common Stock) (any
of the foregoing being hereinafter in this paragraph (iii) called the
"Securities").
(ii) Upon the making of any such Distribution
(unless the Company elects to reserve shares or other units of such Securities
for distribution to each Holder upon exercise of the Warrant so that, in
addition to the shares of the Common Stock to which each Holder is entitled,
each Holder will receive upon such exercise the amount and kind of such
Securities which such Holder would have received if the Holder had, immediately
prior to the record date for the distribution of the Securities, exercised the
Warrant), the number of Warrant Shares receivable hereunder after such record
date shall be determined by multiplying the number of Warrant Shares receivable
hereunder immediately prior to such record date by a fraction, the denominator
of which shall be the Exercise Price on the day immediately prior to the date on
which the right to receive such Securities accrues, less the fair market value
(as determined in the reasonable judgment of the Board of Directors of the
Company and described in a statement mailed by certified mail to the Holder) of
the portion of the assets or evidences of Indebtedness so to be distributed to a
holder of one share of the Common Stock or of such subscription rights or
warrants applicable to one share of the Common Stock, and the numerator of which
shall be the Exercise Price on such date; and the Exercise Price shall be
appropriately adjusted.
(iii) Such adjustment shall become effective
immediately after such record date and shall be made successively whenever such
a record date is fixed. If such distribution is not so made, the number of
Warrant Shares receivable hereunder shall be readjusted to be the number that
was in effect immediately prior to such record date.
(iv) In the event that the Holder of this Warrant
exercises this Warrant after an adjustment is made under this Subsection (c) and
prior to a readjustment under this Subsection (c), the number of Warrant Shares
that have been delivered or the number of Warrant Shares to be delivered shall
not be subject to any readjustment. In any case in which this Subsection (c)
shall require that an adjustment in the number of Warrant Shares receivable
hereunder or the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Holder of any Warrant exercised after such record date the
number of Warrant Shares, if any, issuable upon such exercise over and above the
number of Warrant Shares, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such Holder a due bill or other appropriate
instrument evidencing such Holder's right to receive such additional Warrant
Shares upon the occurrence of the event requiring such adjustments.
9.2 Reorganization Event. In case of any Reorganization Event
the Company shall, as a condition precedent to the consummation of the
transaction constituting, or announced as, such Reorganization Event, cause
effective provisions to be made so that the Holder shall have the right
immediately thereafter, by exercising this Warrant, to receive the aggregate
amount and kind of shares of stock and other securities and property that were
receivable upon such Reorganization Event by a holder of the number of shares of
Common Stock that would have been received immediately prior to such
Reorganization Event upon exercise of this Warrant. Any such provision shall
include provision for adjustments in
7
<PAGE>
respect of such shares of stock and other securities and property that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
Subsection 9.1. The foregoing provisions of this Subsection 9.2 shall similarly
apply to successive Reorganization Events.
9.3 Fractional Shares. No fractional shares of Common Stock (or
other securities deliverable hereunder) or scrip shall be issued to any Holder
in connection with the exercise of this Warrant. Instead of any fractional
share of Common Stock (or other securities deliverable hereunder) that would
otherwise be issuable to such Holder, the Company shall pay to such Holder a
cash adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Exercise Price per share of Common
Stock (or other securities deliverable hereunder) on the date of such exercise.
9.4 Carryover. Notwithstanding any other provision of this
Section 9, no adjustment shall be made to the number of shares of Common Stock
(or other securities deliverable hereunder) to be delivered to each Holder (or
to the Exercise Price) if such adjustment would represent less than one percent
of the number of shares to be so delivered, but any such adjustment shall be
carried forward and shall be made at the time and together with the next
subsequent adjustment which, together with any adjustments so carried forward,
shall amount to one percent or more of the number of shares to be so delivered.
9.5 Notices of Certain Events. If at any time after the date
hereof and before the expiration of the Exercise Period:
(a) the Company authorizes the issuance to all holders of
its Common Stock of (i) rights or warrants to subscribe for or purchase shares
of its Common Stock or (ii) any other subscription rights or warrants; or
(b) the Company authorizes the distribution to all holders
of its Common Stock of evidences of its indebtedness or assets (other than cash
dividends or distributions excluded from the operation of subsection 9.1(c)); or
(c) there shall be any capital reorganization of the
Company or reclassification of the Common Stock (other than a change in par
value of the Common Stock or an increase in the authorized capital stock of the
Company not involving the issuance of any shares thereof) or any consolidation
or merger to which the Company is a party (other than a consolidation or merger
with a subsidiary in which the Company is the continuing corporation and that
does not result in any reclassification or change in the Common Stock
outstanding) or a conveyance or transfer of all or substantially all of the
properties and assets of the Company;
(d) there shall be any voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
(e) there shall be any other event that would result in an
adjustment pursuant to this Section 9 in the Exercise Price or the number of
Warrant Shares that may be purchased upon the exercise hereof;
the Company will cause to be mailed to the Holder, at least fifteen days (or ten
days in any case specified in clauses (a) or (b) above) before the applicable
record or effective date hereinafter specified, a notice stating (i) the date as
of which the holders of Common Stock of record entitled to receive any such
rights, warrants or distributions is to be determined, or (ii) the date on which
any such reorganization, reclassification, consolidation, merger,
8
<PAGE>
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record will be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding-up.
9.6 Failure to Give Notice. The failure to give the notice
required by Subsection 9.5 or any defect therein shall not affect the legality
or validity of any distribution right, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up or the vote upon
any such action.
Section 10. Net Issue Election. The Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares equal
to the value of this Warrant or any portion hereof by the surrender of this
Warrant or such portion to the Company, with the net issue election notice
annexed hereto duly executed, at the office of the Company; provided, that the
Holder may not make such an election unless (i) the Company has registered the
Common Stock pursuant to the Act or in connection with such registration or (ii)
upon the expiration of this Warrant. Thereupon, the Company shall issue to the
Holder such number of fully paid and nonassessable shares of Common Stock as is
computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 10.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this Section 10.
A = the fair market value of one share of Common Stock. If the Common
Stock is registered pursuant to the Act, the fair market value shall
mean the average high and low prices of the Common Stock on the day
prior to the exercise of this Warrant, if the Common Stock is being
traded on a national exchange; or the last reported sale price on the
day prior to exercise of this Warrant, if the Common Stock is traded
on the Nasdaq National Market, and the Common Stock is not traded on
a national exchange; or the closing bid price (or average of bid
prices) last quoted on the day prior to the exercise of this Warrant
by an established quotation service for over-the-counter securities,
if the Common Stock is not reported on the Nasdaq National Market or
a national exchange. If the election occurs in connection with the
registration of Common Stock under the Act, then the fair market
value shall be the price offered to the public. Otherwise, the fair
market value shall be as determined in good faith by the Board of
Directors of the Company, at the time the net issue election is made
pursuant to this Section 10.
B = the Exercise Price in effect under this Warrant at the time the net
issue election is made pursuant to this Section 10. The Board of
Directors shall promptly respond in writing to an inquiry by the
Holder as to the fair market value of one share of Common Stock.
Section 11. Officers' Certificate. Whenever the number of Warrant
Shares that may be purchased on exercise of this Warrant or the Exercise Price
is adjusted as required by the provisions of Section 9, the Company will
forthwith file in the custody of its
9
<PAGE>
Secretary or an Assistant Secretary at its principal office and at the office of
its agent an officers' certificate showing the adjusted number of Warrant Shares
that may be purchased at the Exercise Price on exercise of this Warrant and the
adjusted Exercise Price determined as herein provided, setting forth in
reasonable detail the facts requiring such adjustment and the manner of
computing such adjustment. Each such officers' certificate shall be signed by
the President, Chief Financial Officer or Treasurer of the Company and by the
Secretary or an Assistant Secretary of the Company. Each such officers'
certificate shall be made available at all reasonable times for inspection by
the Holder. The Company shall, forthwith after each such adjustment, cause a
copy of such certificate to be mailed to the Holder.
Section 12. Warrant Register. The Company will register this Warrant
in the Warrant Register in the name of the record holder to whom it has been
distributed or assigned in accordance with the terms hereof. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof (notwithstanding any notation of ownership or other writing hereon made
by anyone) for the purpose of any exercise hereof or any distribution to the
Holder and for all other purposes, and the Company shall not be affected by any
notice to the contrary.
Section 13. Successors. All of the provisions of this Warrant by or
for the benefit of the Company or the Holder shall bind and inure to the benefit
of their respective successors and assigns.
Section 14. Headings. The headings of sections of this Warrant have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15. Amendments. This Warrant may be amended by the
affirmative vote of Holders holding Warrants to purchase not less than two-
thirds of the Warrant Shares purchasable pursuant to all of the then outstanding
Warrants; provided, that, except as expressly provided herein, this Warrant may
not be amended, without the consent of the Holder, to change (a) any price at
which this Warrant may be exercised, (b) the period during which this Warrant
may be exercised, (c) the number or type of securities to be issued upon the
exercise hereof or (d) the provisions of this Section 15.
Section 16. Notices. Unless otherwise provided in this Warrant, any
notice or other communication required or permitted to be made or given to any
party hereto pursuant to this Warrant shall be in writing and shall be deemed
made or given if delivered by hand, on the date of such delivery to such party
or, if mailed, on the fifth day after the date of mailing, if sent to such party
by certified or registered mail, postage prepaid, addressed to it (in the case
of a Holder) at its address in the Warrant Register or (in the case of the
Company) at its address set forth below, or to such other address as is
designated by written notice, similarly given to each other party hereto.
Section 17. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be construed in accordance with the laws of said Commonwealth as
applied to contracts made and to be performed in Pennsylvania between
Pennsylvania residents.
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<PAGE>
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
signed and attested by its duly authorized officer and to be dated as of the
date first above written.
APOLLON, INC.
By ---------------------------------------------
Name:
Title:
Address: One Great Valley Parkway
Suite 30
Malvern, PA 19355-1423
11
<PAGE>
PURCHASE FORM
The undersigned, -------------, hereby irrevocably elects to exercise
the within Warrant to purchase ------ shares of Common Stock and hereby makes
payment of $-------- in payment of the exercise price thereof.
Date: ------------, ---- ------------------------------------------
[Signed]
------------------------------------------
[Street Address]
------------------------------------------
[City and State]
<PAGE>
NET ISSUE ELECTION NOTICE
The undersigned, ------------------------, hereby irrevocably
elects under Section 10 to surrender the right to purchase -------- shares of
Common Stock pursuant to this Warrant. The certificate(s) for the shares
issuable upon such net issue election shall be issued in the name of the
undersigned or as otherwise indicated below.
Date: ----------, ------- --------------------------------------
Signature
--------------------------------------
Name of Registration
--------------------------------------
[Street Address]
--------------------------------------
[City and State]
<PAGE>
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, ------------------
("Assignor"), hereby sells, assigns and transfers unto
Name: --------------------------------------- ("Assignee")
(Please type or print in block letters.)
Address: -------------------------------------
-------------------------------------
Social Security or Taxpayer I.D. No.: ------------------
Assignor's right to purchase up to ------ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint the Company and
any of its officers, secretary, or assistant secretaries, as attorneys-in-fact
to transfer the same on the books of the Company, with full power of
substitution in the premises.
Date: ------------, ---- -----------------------------------------
[Signed]
<PAGE>
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT, is made as of the 17th day of July,
1997, by and between Apollon, Inc., a Pennsylvania corporation ("APOLLON") and
The Trustees of the University of Pennsylvania, a Pennsylvania nonprofit
corporation ("PENN").
WHEREAS, as of December 1, 1994, APOLLON and PENN have entered into a
License Agreement, amended by Amendment to License Agreement, dated as of July
17, 1997, pursuant to which PENN has granted APOLLON a worldwide, exclusive
license to develop, make, have made, sell and have sold certain technology owned
by PENN relating to genetic vaccines, i.e., facilitated transfer and expression
of nucleic acids ("LICENSE AGREEMENT I"); and
WHEREAS, in partial consideration of the exclusive license granted by
PENN to APOLLON pursuant to LICENSE AGREEMENT I, APOLLON has granted to PENN
shares of APOLLON's common stock, in accordance with the terms and conditions of
this Agreement.
NOW THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Issuance of Shares. As promptly as practicable after execution
of the Amendment to License Agreement, APOLLON shall issue to PENN 50,000 shares
of APOLLON's Common Stock, par value $.01 per share ("COMMON STOCK"), pursuant
to the INITIATION GRANT as defined in LICENSE AGREEMENT I and shall deliver or
cause to be delivered to PENN a certificate or certificates therefor, registered
in PENN's name. Upon receipt of such shares, PENN shall execute and deliver to
APOLLON such other documents as APOLLON may reasonably request.
2. Representations and Warranties of PENN.
(a) No Registration of the Shares. PENN represents and warrants
to APOLLON that: (i) it understands that the shares of COMMON STOCK issuable
hereunder (the "SHARES") are being sold to it under certain exemptions from the
registration provisions of the Securities Act of 1933, as amended (the
"SECURITIES ACT"); PENN is purchasing the SHARES without being furnished any
offering literature or prospectus; and the sales of the SHARES have not been and
will not be examined by the Securities and Exchange Commission or by any agency
charged with the administration of the securities laws of any state or other
jurisdiction; (ii) PENN has, either alone or together with its advisors, such
knowledge and experience in financial and business
<PAGE>
matters that PENN is capable of evaluating the merits and risks of an
investment in the SHARES and of making an informed investment decision with
respect thereto; and (iii) PENN understands that APOLLON is relying on and
will rely on the truth and accuracy of the representations and warranties
made herein by PENN in selling the SHARES hereunder and under LICENSE
AGREEMENT I without having first registered such SHARES under the SECURITIES
ACT or under the securities laws of any state or other jurisdiction.
(b) Investment Intent. PENN confirms to APOLLON that: (I) PENN
understands that there are substantial restrictions on the transferability of
the SHARES and, accordingly, it may not be possible for PENN to liquidate its
investment in the SHARES in case of emergency; (ii) PENN is able to bear the
economic risk of its investment in the SHARES, to hold the SHARES for an
indefinite period of time, and to afford a complete loss of this investment,
(iii) the SHARES are being acquired in good faith solely for PENN's own personal
account, for investment purposes only, and are not being purchased with a view
to or for the resale or distribution thereof; (iv) PENN does not have any
contract, undertaking, understanding, agreement or arrangement, formal or
informal, with any person to sell, transfer or pledge to any person the SHARES,
or any part thereof, and has no current plan to enter into any such contract,
undertaking, agreement or arrangement; and (v) PENN understands that the legal
consequences of the foregoing representations and warranties are that PENN must
bear the economic risk of its investment in the SHARES for an indefinite period
of time because the SHARES have not been and the SHARES will not be registered
under the SECURITIES ACT.
(c) Decision to Invest. PENN confirms to APOLLON that, in
making its decision to invest in the SHARES, PENN has relied solely upon
independent investigations made by it or its representatives and advisors, and
that PENN and such representatives and advisors have been given the opportunity
to ask questions of, and to receive answers from, management of APOLLON with
respect to the business and affairs of APOLLON.
3. Restrictions on Transfer.
(a) Permitted Transfers. No SHARES may be sold, transferred,
assigned, pledged, hypothecated or otherwise disposed of by any holder thereof
except (i) pursuant to a public offering thereof registered under the SECURITIES
ACT, or (ii) an opinion of counsel satisfactory to APOLLON that registration
under the SECURITIES Act is not required in connection with such sale, transfer,
assignment, pledge, hypothecation or other disposition.
2
<PAGE>
(b) Restrictive Legend. PENN understands that each certificate
representing any SHARES or any shares of capital stock received in respect
thereof, whether by reason of a stock split or share reclassification thereof, a
stock dividend thereon or otherwise, shall be stamped or otherwise imprinted
with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT") AND ARE "RESTRICTED
SECURITIES" AS DEFINED IN RULE 144 PROMULGATED UNDER THE ACT.
THESE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR OTHERWISE
DISTRIBUTED EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE ACT; (II) IN COMPLIANCE
WITH RULE 144; OR (III) AFTER RECEIPT OF AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION OR COMPLIANCE
IS NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
4. Compliance with Governmental and Other Regulations. APOLLON will
not be obligated to issue and sell the SHARES if, in the opinion of its counsel,
such issuance and sale would violate any applicable federal or state securities
laws, rules or regulations. APOLLON will seek to obtain from each regulatory
commission or agency having jurisdiction such authority as may be required to
issue and sell the SHARES. Inability of APOLLON to obtain from any such
regulatory commission or agency authority which counsel for APOLLON deems
necessary for the lawful issuance and sale of the SHARES shall relieve APOLLON
from any liability for failure to issue and sell the SHARES until the time, if
at all, when such authority is obtained or is obtainable.
5. Rights of PENN in Stock. Neither PENN nor its legal
representatives, heirs, legatees, or distributees shall be deemed to be the
holder of, or to have any rights of a holder with respect to, any SHARES unless
and until such SHARES are issued to it or them.
6. Piggyback Registrations.
a. Right to Piggyback. If, after the expiration of one hundred
eighty (180) days after the occurrence of a closing of an initial public sale
for the account of APOLLON of shares of its Common Stock or securities
convertible into or exchangeable for shares of its Common Stock, where the gross
proceeds to APOLLON from such sale (before deduction of any underwriting
commissions, discounts or concessions or expenses of
3
<PAGE>
sale) is at least $12,500,000 (a "Public Offering"), APOLLON proposes to
register any of its securities under the Securities Act and the registration
form to be used may be used for the registration of the SHARES (a "Piggyback
Registration"), APOLLON will give prompt written notice to PENN of its
intention to effect such a registration and will use its best efforts to
include in such registration all SHARES with respect to which APOLLON has
received, within five (5) days after the receipt of APOLLON's notice, a
written request from PENN for inclusion therein, which request shall specify
the SHARES intended to be sold or disposed of by PENN and shall state the
intended method of disposition of such SHARES (the "Registrable Securities"),
all to the extent requisite to permit the sale of the Registrable Securities
by PENN (in accordance with the intended method thereof as set forth in such
request). If the securities proposed to be registered by APOLLON include
securities to be distributed by or through a firm of underwriters, then the
Registrable Securities shall also be included in such underwriting.
Notwithstanding anything contained in this Section 6 to the contrary, APOLLON
shall have no obligation to cause Registrable Securities to be registered if
the SHARES are eligible for resale under Rule 144(k) of the Securities Act.
b. Registration Procedures. If and whenever APOLLON is
required by the provisions of Section 6 hereof to use its best efforts to
include the Registrable Securities in a Piggyback Registration, APOLLON will, as
expeditiously as possible,
(1) furnish to PENN such number of copies of a prospectus,
including a preliminary prospectus and any amendments or supplements to the
prospectus, in conformity with the requirements of the Securities Act, and such
other documents, as PENN may reasonably request in order to facilitate the
public sale or other disposition of the Registrable Securities;
(2) use every reasonable effort to register or qualify the
Registrable Securities covered by the Piggyback Registration under the
securities or blue sky laws of such jurisdictions as APOLLON shall reasonably
determine in its sole discretion, and do any and all other acts as things which
may be
necessary under such securities or blue sky laws to enable PENN to consummate
the public sale or other disposition in such jurisdictions of the Registrable
Securities;
(3) before filing a registration statement with respect to
the Registrable Securities or prospectus or amendments or supplements thereto
with the Securities and Exchange Commission (the "Commission"), furnish PENN and
its counsel with an opportunity to meet with responsible officers of APOLLON for
a "due diligence" review of the filing and with
4
<PAGE>
copies of all such documents proposed to be filed which, insofar as they
relate to PENN, shall be subject to the reasonable approval of its counsel;
(4) cause all such Registrable Securities registered as
described herein to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by APOLLON are then listed
or quoted;
(5) provide a transfer agent and registrar for all
Registrable Securities registered as described herein and a CUSIP number for all
such Registrable Securities; and
(6) comply with all applicable rules and regulations of the
Commission.
c. Expenses. APOLLON shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or compliance
hereunder, and PENN shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Registrable
Securities. "Registration Expenses" shall mean all expenses, except for Selling
Expenses, incurred by APOLLON in complying with the registration provisions of
this Agreement, including without limitation all registration, qualification and
filing fees, printing expenses, escrow fees, fees and disbursements of counsel
for APOLLON, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration. "Selling Expenses" shall mean
all selling commissions, underwriting fees and stock transfer taxes applicable
to the Registrable Securities and all fees and disbursements of counsel for
PENN.
d. Information from PENN. PENN shall cooperate with APOLLON in
connection with any such registration and furnish to APOLLON such information
regarding it and the distribution proposed by it as APOLLON may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance described herein. PENN shall
represent that such information is true and complete.
e. Marketing Restrictions. If:
(1) PENN requests registration of SHARES under Section 6,
and
(2) the offering proposed to be made is to be an
underwritten public offering, and
(3) the managing underwriter of such public offering
furnishes a written opinion that the total amount of
5
<PAGE>
securities to be included in such offering would exceed the maximum amount of
securities (as specified in such opinion) which can be marketed at a price
reasonably related to the then current market value of such securities and
without materially and adversely affecting such offering, then the Company
will include in such registration the amount of securities which, in such
opinion, can be sold, in the following order:
First: If such registration statement shall be with respect to
a primary offering, all of the securities APOLLON proposes to sell; and
then
Second: All of the Common Stock converted from Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Stock and all stock issued upon exercise of Warrants issued by
the Company and requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of such
Common Stock then awarded by such holders; and then
Third: All other securities, including the SHARES, the holders
of which have the right to include such securities in a registration
statement filed by APOLLON pro rata in accordance with the relative
priorities, if any, as shall exist among them.
f. Holdback Agreements. Unless the managing underwriters
otherwise agree, with respect to any underwritten public offering of Common
Stock, PENN agrees not to effect any public sale or distribution (including
sales pursuant to Rule 144) of the SHARES during a period equal to the lesser of
(1) the lock-up period for APOLLON's senior management with respect to such
underwritten offering or (2) one hundred eighty (180) days beginning on the
effective date of such underwritten offering (except as part of such
underwritten registration).
7. Indemnification.
a. In the event of any registration of any of the SHARES under
the Securities Act pursuant to Section 6, APOLLON agrees to indemnify and hold
harmless PENN from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which PENN may become subject
(under the Securities Act or otherwise) insofar as such losses, claims, damages
or liabilities (or actions or proceedings in respect thereof) arise out of, or
are based upon, any claim by a third party asserting any untrue statement of a
material fact contained in a registration statement or omission of a material
fact required to be stated therein, on the effective date thereof, or arise out
of any failure by APOLLON to fulfill any
6
<PAGE>
undertaking included in such registration statement, and APOLLON will, as
incurred, reimburse PENN for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that APOLLON shall not be liable in
any such case to the extent that such loss, claim, damages or liability
arises out of, or is based upon (i) an untrue statement or omission made in
such registration statement in reliance upon and in conformity with written
information furnished to APOLLON by or on behalf of PENN specifically for use
in preparation of such registration statement or (ii) any untrue statement or
omission in any prospectus that is corrected in any subsequent prospectus
that was delivered to PENN prior to confirmation of the pertinent sale or
sales by PENN.
b. PENN agrees to indemnify and hold harmless APOLLON, its
directors and officers and each other person, if any, who controls APOLLON
within the meaning of the Securities Act from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
APOLLON may become subject (under the Securities Act or otherwise) insofar as
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof) arise out of, or are based upon any claim by a third party
asserting (i) an untrue statement of a material fact made in such registration
statement or omission to state a material fact required to be stated therein in
reliance upon and in conformity with written information furnished to APOLLON by
or on behalf of PENN specifically for use in preparation of such registration
statement, and PENN will, as incurred, reimburse APOLLON for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that PENN shall not be
liable in any such case for any untrue statement or omission in any prospectus
which statement or omission has been corrected, in writing, by PENN and
delivered to APOLLON before confirmation of the sale from which such loss
occurred.
c. Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to Sections 7.a or 7.b, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, and, subject to the provisions
hereinafter stated, in case any such action shall be brought against an
indemnified person and the indemnifying person shall have been notified thereof,
the indemnifying person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such
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indemnified person of the indemnifying person's election to assume the
defense thereof, the indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof; provided that if
there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person, the
indemnified person shall be entitled to retain its own counsel at the expense
of such indemnifying person, it being understood, however, that the
indemnifying person shall not, in connection with any one such action or
proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
than one separate firm of attorneys (together with appropriate local counsel)
at any time for all such indemnified persons, which firm shall be designated
in writing by such indemnified persons. The indemnifying person shall not be
liable for any settlement of any such action or proceeding effected without
its written consent, but if settled with its written consent, or if there be
a final judgment for the plaintiff in any such action or proceeding, the
indemnifying person shall indemnify and hold harmless the indemnified person
from and against any loss or liability (to the extent stated above) by reason
of such settlement or judgment.
d. The indemnification provided for under this Agreement will
remain in full force and effect regardless of any investigation made by or on
behalf of the indemnified person or any officer, director or controlling person
of such indemnified person and will survive the transfer of the Registrable
Securities.
e. Indemnification similar to that specified in the preceding
subdivisions of this Section (with appropriate modifications) shall be given by
APOLLON and PENN with respect to any required registration or other
qualification of securities under any federal or state law or regulation of any
governmental authority other than the Act.
f. The indemnity agreements contained in this Section shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement or any underwriting agreement and (ii) the consummation of the
sale of the Registrable Securities.
g. The obligations of APOLLON and PENN under this Section 7
shall be in addition to any liability which APOLLON and PENN may otherwise have
and shall extend, upon the same terms and conditions, to each person, if any,
who controls APOLLON of PENN within the meaning of the Securities Act.
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8. Participation in Underwritten Registrations. PENN may not
participate in any registration hereunder which is underwritten unless PENN (a)
agrees to sell the Registrable Securities on the basis provided in any
underwriting arrangements approved by the managing underwriter, and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
9. Transfer of Piggyback Registration Rights. The right to sell
Registrable Securities pursuant to a Piggyback Registration described herein may
not be assigned or transferred by PENN.
10. Agreement to be Bound by Procedures, Restrictions, etc. If PENN
shall propose to sell any Registrable Securities pursuant to a registration
statement, it shall notify APOLLON of its intent to do so in accordance with
Section 6, and the provision of such notice to APOLLON shall be deemed to
establish an agreement by PENN to comply with the registration procedures,
marketing restrictions and other provisions contained herein. Such notice shall
be deemed to constitute a representation that any information supplied by PENN
to APOLLON is accurate and complete.
11. Use of Terms. Capitalized terms used but not defined herein
shall have the meanings set forth in LICENSE AGREEMENT I.
12. Miscellaneous.
(a) Survival of Warranties. All representations, warranties,
covenants and agreements made in this Agreement shall survive the execution of
this Agreement.
(b) Assigns. This Agreement shall bind and inure to the benefit
of the parties hereto and their respective successors and assigns.
(c) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the Commonwealth of
Pennsylvania.
(d) Notices. All communications provided for in this Agreement
shall be made in the manner provided in LICENSE AGREEMENT I.
(e) Entire Agreement. This Agreement and LICENSE AGREEMENT I
constitute the entire agreement between the parties regarding the subject matter
and transactions contemplated
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herein. This Agreement may not be modified or amended except by written
agreement of both parties.
(f) Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the interpretation of
this Agreement.
(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
THE TRUSTEES OF THE APOLLON, INC.
UNIVERSITY OF PENNSYLVANIA
By: /s/ Louis B. Berneman By: /s/ Vincent R. Zurawski
--------------------- ----------------------------
Name: Louis B. Berneman Name: Vincent R. Zurawksi, Jr.
------------------- ------------------------
Title: Managing Director, CTT Title: President and CEO
----------------------- ------------------------
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SCHEDULE TO STOCK PURCHASE AGREEMENT BETWEEN
APOLLON, INC. AND THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA
DATED JULY 17, 1997
On December 1, 1994, the same date on which Apollon, Inc. (the
"Registrant") and the Trustees of the University of Pennsylvania ("Penn")
entered into the License Agreement relating to nucleic acid constructs ("License
Agreement I"), the Registrant and Penn also entered into a License Agreement
relating to the HIV vpr gene, vpr protein and vpr receptor ("License Agreement
II"). On July 17, 1997, the same date on which the Registrant and Penn entered
into the Stock Purchase Agreement related to License Agreement I to which this
schedule is attached ("Stock Purchase Agreement I"), the Registrant and Penn
also entered into a Stock Purchase Agreement related to License Agreement II
("Stock Purchase Agreement II"). Stock Purchase Agreement I and Stock Purchase
Agreement II are identical except that Stock Purchase Agreement I relates to
License Agreement I and Stock Purchase Agreement II relates to License Agreement
II.
Stock Purchase Agreement II has not been filed as a separate exhibit to the
Registrant's Registration Statement in accordance with Instruction 2 to Item 601
of Regulation S-K.
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SECURITIES PURCHASE AGREEMENT
This AGREEMENT is entered into as of this 19th day of September 1997, by
and among APOLLON, INC., a Pennsylvania corporation with its principal place of
business at One Great Valley Parkway, Malvern, Pennsylvania 19355 (the
"Company") and A.H. INVESTMENTS LTD., a Delaware corporation with offices at
Five Giralda Farms, Madison, NJ 07940 (the "Investor").
WHEREAS, the Company and a business unit of American Home Products
Corporation ("AHP"), the ultimate parent corporation of the Investor are
collaborating on the development of certain product candidates pursuant to a
Research and Development and License Agreement, dated July 19, 1995;
WHEREAS, the Company and a business unit of AHP have agreed to collaborate
on the commercialization of certain product candidates, if and when approved,
pursuant to a Supply Agreement, dated July 19, 1995;
WHEREAS, the Company desires to sell and the Investor desires to purchase a
package of securities consisting of a convertible note in the principal amount
of $3 million and a warrant to purchase 150,000 shares of the Company's Common
Stock; and
WHEREAS, the Company has agreed to amend certain provisions of the Research
and Development Agreement and the Supply and License Agreement as further
consideration to AHP and to the Investor.
NOW THEREFORE, in consideration of the mutual agreements, undertakings and
covenants herein contained, the parties, intending to be legally bound hereby,
agree as follows:
1. The Securities.
1.1 Purchase and Sale of Convertible Note. Subject to the terms and
conditions of this Agreement, the Company will issue and sell to the Investor,
and the Investor will purchase from the Company, a convertible note in the form
set forth as Exhibit A hereto (the "Note") in an aggregate principal amount of
Three Million Dollars ($3 million).
1.2 Purchase and Sale of Warrant. Subject to the terms and
conditions of this Agreement and as further consideration for the purchase of
the Note, the Company shall sell, and the Investor shall purchase, a warrant to
purchase 150,000 shares of the Company's common stock, par value $.01 per
<PAGE>
share ("Common Stock"), in the form set forth as Exhibit B hereto
(the "Warrant").
1.3 Amendment to Agreements. Subject to the terms and conditions of
this Agreement and as further consideration for the purchase of the Note, the
Company shall execute and deliver the Amendment to the Research and Development
and License Agreement and the Amendment to the Supply Agreement, the forms of
which are attached as Exhibit C and Exhibit D, respectively (collectively
referred to as the "Amendments").
1.4 Certain Terms. The shares of Common Stock issued or issuable
upon conversion of the Note and the shares of Common Stock issued or issuable
upon exercise of the Warrant shall hereinafter be referred to as the "Conversion
Shares," and the Note and the Warrant shall hereinafter collectively be referred
to as the "Securities." For purposes of this Agreement, an "Initial Public
Offering" shall have occurred upon a closing of a public sale for the account of
the Company of the Common Stock or securities convertible or exchangeable for
shares of Common Stock in which the gross proceeds to the Company exceed $10
million.
2. Closing Date; Conditions to Closing; Deliveries.
2.1 Closing Dates. The closing and delivery of the Securities shall
be held on October 3, 1997, at the offices of Ballard Spahr Andrews &
Ingersoll, 1735 Market Street, 51st Floor, Philadelphia, PA 19103-7599,
concurrently with the execution of this Agreement (the "Closing"), or as soon
as possible after all of the conditions to the Closing set forth in Sections
2.2 and 2.3 of this Agreement have been fulfilled, or at such time and place
as the Company and the Investor may agree. The date of the Closing is
hereinafter referred to as the "Closing Date." At the Closing, the Investor
will pay to the Company the full aggregate Purchase Price of $3,000,000 (the
"Purchase Price") and will receive the Securities and the Amendments, all
subject to the terms and conditions of this Agreement.
2.2 Conditions to Closing. The Investor's obligation to close at the
Closing shall be subject to the fulfillment on or prior to the Closing Date of
the conditions set forth in this Section 2.2. In no event shall the Investor be
under any obligation to pay any portion of the Purchase Price to the Company if
the Company fails to fulfill the conditions to Closing. The Investor may,
however, at its option, waive any of the conditions below and proceed to
closing, and become entitled to the Securities and the Amendments, upon payment
of the Purchase Price and satisfaction of the conditions set forth in Section
2.3. The conditions to Closing are as follows:
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(a) The representations and warranties made by the Company in
this Agreement shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
(b) The Company shall have performed all obligations and
conditions herein required to be performed or observed by it on or prior to the
Closing Date.
(c) The Investor shall have received from the Company all items
required to be delivered pursuant to Section 2.4 of this Agreement.
(d) The Company shall have obtained all consents, permits and
waivers deemed necessary or appropriate for the consummation of the transactions
contemplated by this Agreement, including the requisite approval of the Board of
Directors and of the preferred shareholders of the Company of: (i) this
Agreement; (ii) the issuance of the Securities; and (iii) the consummation of
all other transactions contemplated hereby.
(e) The Investor shall have completed all investigations of the
Company's business that the Investor deemed necessary, including, but not
limited to, discussions with the Company's management, and no material adverse
information shall have been discovered in the course of such investigations.
(f) The Investor shall have received the requisite corporate
approval with respect to this Agreement and the purchase of the Securities.
2.3 Conditions to Closing. The Company's obligation to close and to
deliver the Securities at the Closing shall be subject to the fulfillment on or
prior to the Closing Date of the following conditions:
(a) The representations and warranties made by the Investor
contained in this Agreement shall be true and correct when made, and shall be
true and correct on the Closing Date with the same force and effect as if they
had been made on and as of the Closing Date.
(b) The Investor shall have delivered to the Company, a
certificate of an executive officer of the Investor, dated the Closing Date,
that all representations and warranties made by the Investor contained in this
Agreement are true and correct as of the Closing Date.
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2.4 Deliveries of the Company at the Closing. The Company shall make
the following deliveries to the Investor at the Closing on the Closing Date.
(a) The Note, in the form attached as Exhibit A, the Warrant,
in the form attached as Exhibit B and the Amendments, in the forms attached as
Exhibit C and Exhibit D.
(b) A certificate, executed by the Chief Executive Officer of
the Company, dated the Closing Date, certifying to the fulfillment of the
conditions specified in Section 2.2 hereof (other than Section 2.2 (e) and
(f)), and further certifying that there does not exist as of the Closing Date
a state of facts that would constitute a default by the Company under any of
the terms, conditions or provisions of this Agreement, its Articles of
Incorporation, as amended, its Bylaws, the Note, or any indenture, mortgage
or deed of trust or other material contract, agreement, lease, or instrument
to which it is a party or by which it is bound or, which state of facts
would, with notice or lapse of time, or both, constitute such a default
(collectively, a "Default").
(c) Copies of resolutions adopted by the Board of Directors of
the Company authorizing and approving this Agreement, the Amendments, the
issuance of the Securities, and the Conversion Shares and the consummation of
all other transactions contemplated hereby, certified by the Secretary of the
Company.
(d) Copies of the Company's Articles of Incorporation, as
amended, and By-laws as then in effect, certified by the Secretary of the
Company.
(e) A Subsistence Certificate for the Company issued by the
Secretary of State of the Commonwealth of Pennsylvania, dated within 15 days
prior to the Closing Date.
(f) An opinion letter, from Ballard Spahr Andrews & Ingersoll,
counsel to the Company, addressed to the Investor, dated the Closing Date in the
form of Exhibit E attached hereto.
(g) A certificate of incumbency signed by the Secretary of the
Company, certifying the names, titles and signatures of the Company's officers
and directors.
2.5 Deliveries of the Investor at the Closing. The Investor shall
deliver to the Company at the Closing on the Closing Date a certified bank check
or wire transfer in the aggregate amount of $3,000,000 and the certificate
required by Section 2.3(b); provided that the conditions contained in Section
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<PAGE>
2.2 hereof have been fulfilled, and the deliveries required to be made under
Section 2.4 hereof have been made.
3. Representations and Warranties of the Company. Except as set forth
and identified to a specific section number on the Schedules attached hereto
setting forth the specific exceptions to the specific sections of this Article
3, the Company represents and warrants to the Investor, as a material inducement
to enter into this Agreement, as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly subsisting under the laws of the Commonwealth of
Pennsylvania. The Company has all requisite corporate power and authority to
own and lease its properties and to conduct its business as presently
conducted. The Company is duly qualified to do business as a foreign
corporation and is in good standing under the laws of each jurisdiction in
which it owns or leases properties or conducts any business so as to require
such qualification, except for such jurisdictions where the failure to so
qualify or be licensed would not have a material adverse effect on the
Company's business or financial condition. The minute books and stock records
of the Company are complete and accurate in all material respects.
3.2 Subsidiaries, etc. Other than Apollon Delaware, Inc., a Delaware
corporation and a wholly owned subsidiary of the Company, the Company has no
subsidiaries and does not own any capital stock, security, partnership interest
or other interest of any kind in any corporation, partnership, joint venture,
association or other entity.
3.3 Capitalization. On the Closing Date, the authorized capital
stock, and the outstanding capital stock, of the Company will consist in each
case solely of the shares set forth on Schedule 3.3(a) attached hereto. All of
the outstanding shares have been duly authorized and are fully paid and
non-assessable. An accurate list of the Company's shareholders and their
holdings is set forth on Schedule 3.3(b) attached hereto. Except for the
holders of Series A Convertible Preferred Stock, the holders of Series B
Convertible Preferred Stock and the holders of Series C Convertible Preferred
Stock, no person or entity is entitled to preemptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as
described on Schedule 3.3(c) attached hereto, there are no outstanding warrants,
options or other agreements or arrangements of any character under which the
Company is or may be obligated to issue any equity securities of any kind, or to
transfer any equity securities of any kind owned by it, and the Company is not
obligated to issue any equity securities of any kind, or to transfer any equity
securities of any kind owned by
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<PAGE>
it. Except as listed on Schedule 3.3(c) attached hereto, the Company does
not know of any voting agreements, buy-sell agreements, option or right of
first purchase agreements or other agreements of any kind among any of the
security holders of the Company relating to the securities held by them.
When issued, delivered and paid for pursuant to this Agreement, the
Securities will be validly issued, fully paid and non-assessable. The Company
has reserved a sufficient number of shares of Common Stock for issuance upon
conversion of the Securities and such shares of Common Stock, when issued in
accordance with the resolutions of the Board of Directors authorizing their
issuance, will be validly issued, fully paid and non-assessable.
3.4 Authorization. The Company has all necessary corporate power to
enter into this Agreement, to issue and deliver the Securities hereunder, and to
carry out all of the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by the Company and the consummation of the
transactions contemplated hereby, including, without limitation, the issuance of
the Securities and the Conversion Shares, have been duly authorized by all
requisite corporate action on the part of the Company. This Agreement
constitutes a valid and binding instrument of the Company, enforceable in
accordance with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general equity principles.
3.5 Contracts, Leases, Agreements and Other Commitments. Except as
described on Schedule 3.5, the Company is not a party to or bound by any
written, oral or implied contract, agreement, lease, power of attorney,
guaranty, surety arrangement, or other commitment, in excess of $100,000.
3.6 Breach. The Company is not in violation or breach of any of the
terms, conditions or provisions of its Articles of Incorporation, as amended,
its By-laws, or in material violation or material breach of any indenture,
mortgage or deed of trust or other material contract, agreement, lease, or
instrument to which it is a party or by which it is bound.
3.7 Compliance with Laws. The Company is in compliance in all
material respects with all existing requirements of laws, federal, state, local,
and foreign, and all existing requirements of all governmental bodies or
agencies having jurisdiction over it, the failure to comply with which might
have a material adverse effect on the Company.
3.8 Conflict with Documents. Neither the execution, delivery and
performance of this Agreement by the Company, nor the consummation of the
transactions contemplated hereby, either
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<PAGE>
immediately or with the passage of time or the giving of notice or both, will:
(a) Conflict with or cause a breach or default under any of the
terms, conditions or provisions of, result in a termination or modification of,
or cause any acceleration of any obligation of the Company under any contract,
lease or other instrument to which the Company is bound or by which any of the
Company's properties or assets may be affected;
(b) Conflict with the provisions of the Company's Articles of
Incorporation, as amended, or any statute, law, rule or regulation or any order,
judgment, decree, indenture, mortgage, lease or other material agreement or
instrument to which the Company or any of its properties or assets are subject;
or
(c) Result in the creation or imposition of any lien, charge or
encumbrance against the Company or any of the Company's properties or assets.
3.9 Financial Statements. The Company has furnished to the Investor
a copy of its unaudited internally prepared balance sheet as of June 30, 1997,
and the corresponding statements of operations, shareholders' equity and cash
flows for the periods therein specified, a copy of which is attached hereto as
Exhibit F. The unaudited financial statements referred to above are correct,
are in accordance with the Company's books and records and present fairly the
Company's financial position at June 30, 1997, and the results of its operations
and financial condition for the period therein specified in conformity with U.S.
generally accepted accounting principles applied on a consistent basis.
3.10 Taxes. The Company has filed all applicable federal, state,
local and foreign tax returns required to be filed to date, in accordance with
the provisions of law pertaining thereto, and has paid all taxes, interest,
penalties and assessments required to have been paid to date. The Company has
not been advised that any of its returns, federal, state, local or foreign, have
been or are being audited as of the date hereof.
3.11 Litigation. There are no pending suits, legal proceedings,
claims or governmental investigations against or with respect to the Company or
its directors or officers, or its properties or assets, nor, to the best of the
knowledge of the Company, is there any threatened suit, legal proceeding, claim
or governmental investigation.
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3.12 Trademarks, Patents, etc. The Company owns or has rights to
various patents, trademarks, service marks, trade names, copyrights, licenses,
applications for patents, inventions, trade secrets, know-how, proprietary
processes and formulae, and other intellectual property rights (collectively,
the "Intellectual Property"), without any known conflict with the rights of
others. The Company knows of no additional Intellectual Property required to
conduct its business as now conducted without conflict with the rights or
claimed rights of others. The Company has not received notice of any alleged
infringement by it, nor is the Company aware of any infringement or any basis
for an alleged infringement by it of any third-party patent, trademark, service
mark, trade name, copyright or license. The Company has confidentiality
agreements with all of its employees. To the best knowledge of the Company,
none of the Company's employees are subject to confidentiality or similar types
of agreements which would hinder or prevent them from fully and lawfully
performing their responsibilities as employees.
3.13 Insurance. All policies of liability, property, casualty,
workers' compensation, health and other forms of insurance held by the Company
are, to the best of the Company's knowledge after reasonable inquiry, valid and
enforceable policies and are outstanding and duly in force and all premiums with
respect thereto are paid to date. The amounts of coverage under such policies
of insurance for the assets and properties of the Company are adequate against
risks usually insured against by persons operating similar businesses and
operating similar properties. The Company does not carry professional liability
or directors and officers liability insurance.
3.14 Governmental Consent. No permit, consent, approval or
authorization of, or filing with, any governmental regulatory authority or
agency is required of the Company in connection with the execution, delivery and
performance of this Agreement, or the consummation of the transactions
contemplated hereby.
3.15 Absence of Material Changes. Since June 30, 1997, there has not
been and there is not threatened any material adverse change in the financial
condition, business, prospects or affairs of the Company.
3.16 Statements and Other Documents Not Misleading. No provision of
this Agreement relating to the Company or any other document, schedule, exhibit
or other information furnished by the Company to the Investor in connection with
the execution, delivery and performance of this Agreement, or the consummation
of the transactions contemplated hereby, when taken together as a whole with all
other such statements, contains or will contain any untrue statement of a
material fact or omits or will omit to
8
<PAGE>
state a material fact required to be stated in order to make the statement,
in light of the circumstances in which it is made, not misleading.
4. Representations and Warranties of the Investor and Restrictions on
Transfer.
4.1 Representations and Warranties by the Investor. The Investor
represents and warrants to the Company as follows:
(a) This Agreement has been duly executed and delivered by the
Investor and constitutes a valid and legally binding obligation of the Investor,
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(b) The Investor is an "accredited investor," as that term is
defined in Rule 501 of the Securities Act.
(c) The Investor is an "institutional investor," as that term is
defined in Regulation Section 102.111 of the Pennsylvania Securities Act of 1972
(the "PA Securities Act"), and, accordingly, the offer and sale of the
Securities to the Investor is an exempt transaction pursuant to Section 203(c)
of the PA Securities Act.
4.2 Purchase for Investment. The Investor is purchasing the
Securities and the Conversion Shares for its own account for investment and not
with a view to or for sale in connection with any distribution of the Securities
or the Conversion Shares.
4.3 Suitability. (a) The Investor has such knowledge and experience
in financial and business matters as to be capable of evaluating the risks and
the merits of an investment in the Company; (b) the Investor can bear the
economic risk of its investment (i.e., at the time of the investment the
Investor can afford a complete loss of the investment and can afford to hold the
investment for an indefinite period of time), and (c) the Investor is fully
capable of making all of the representations and warranties in this Article 4,
including (a) and (b) above, and by its execution hereof does so affirm.
4.4 Registration or Sales. (a) The Investor understands that the
Securities and the Conversion Shares are not registered under the Securities Act
of 1933, as amended (the "Securities Act"), nor any regulatory authority of any
state and must be held indefinitely unless they are subsequently registered
under the Securities Act and any applicable state law or an
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exemption from such registration is available; (b) the Investor is aware that
any market sales of the Note, the Warrant or any Conversion Shares made under
Rule 144 of the Securities and Exchange Commission (the "Commission") under
the Securities Act may only be made in accordance with the terms, conditions
and limitations of that Rule until such time as Rule 144(k) or any successor
regulation shall apply (in which case upon presentment to the Company along
with an opinion of the Investor's inside counsel reasonably acceptable to the
Company, the Company shall cause or cause its transfer agent to exchange any
Company stock certificate or certificates which contain restrictive legends
attached thereto for newly issued Company stock certificates with no such
restrictive legend, and that in cases where that Rule is not applicable,
compliance with Regulation A or some other disclosure exemption will be
required; and (c) the Investor understands that, except as otherwise provided
herein, the Company is under no obligation whatsoever and has no intention to
register the Securities or any Conversion Shares under the Securities Act, to
comply with any such Rule or exemption, or to supply the Investor with any
information necessary to enable the Investor to make routine sales of the
Securities or any Conversion Shares, under Rule 144 provided, however, that
following the closing of the Initial Public Offering, the Company shall make
all periodic filings and reports required pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and keep current on such reports
and filings.
4.5 Legended Note, Warrant and Certificates. The Investor
understands that the Note will bear a legend substantially in the following form
until the Company's counsel determines in its reasonable opinion that the legend
is no longer required:
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION
PROVIDED FOR HEREIN HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE
SKY LAWS. NEITHER THIS NOTE NOR SUCH SECURITIES MAY BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF
1933, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE
APPLICABLE RULES AND REGULATIONS THEREUNDER.
The Investor also understands that the Warrant and the
certificates evidencing the Conversion Shares (other than Conversion Shares that
shall have been registered pursuant to an effective registration statement or
are otherwise exempt from registration under Rule 144(k) as described in Section
4.4 hereof), will bear a legend substantially in the following form
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until the Company's counsel determines in its reasonable opinion that the
legend is no longer required:
The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), and are "restricted securities" as defined in Rule 144
promulgated under the Act. The securities may not be sold or
offered for sale or otherwise distributed except (i) pursuant to
an effective registration statement for the securities under the
Act; (ii) in compliance with Rule 144; or (iii) after receipt of
an opinion of counsel reasonably satisfactory to the Company that
such registration or compliance is not required as to said sale,
offer or distribution.
and that appropriate stop-transfer orders will be noted on the Company's stock
records with respect to all Conversion Shares so legended.
4.6 Confidentiality. Except as required by law or applicable legal
process, for a period of five years from the date hereof, the Investor shall
hold in confidence any confidential information about the Company that the
Investor has received or hereafter receives pursuant to any provision of this
Agreement under circumstances indicating the confidentiality of such information
until the Company shall have publicly disclosed such information, except
information that otherwise comes into the public domain or is disclosed by a
third party having the right to the Investor's knowledge to disclose it to the
Investor without breach of this Agreement or any other agreement by which the
disclosing party is bound to the Company. Promptly upon the request of the
Company, at any time during, or at the expiration of, such five-year period the
Investor agrees to return to the Company all copies of tangible confidential
information (including any copies or extracts therefrom) and to destroy all
memoranda, compilations, analyses, notes and other materials based on or
reflecting such confidential information.
4.7 Lock Up. Except for any shares included in an offering under
which the Investor is a participant pursuant to the terms of this Agreement, the
Investor shall not, with respect to any public offering of the Company's
securities for not less than $5 million which occurs for a period of five years
following the Closing Date, effect any public sale or distribution of the
Securities or any Conversion Shares during such period of time, if any, not to
exceed 180 days, as any underwriter shall reasonably require in connection with
such public offering, provided, however, that the Investor shall not be required
to lock up its shares unless all executive officers, directors and
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principal shareholders of the Company (within the meaning given such terms in
the Exchange Act) except those participating in such offering have agreement
to a similar lock up.
4.8 Acknowledgement of Amendments to Articles of Incorporation. The
Investor understands and agrees that in conjunction with a proposed Initial
Public Offering the Articles of Incorporation, as amended, are proposed to be
amended, subject to shareholder approval, to effectuate a reverse split of the
Common Stock and that all of the Securities will be adjusted upon conversion to
reflect the reverse split. The Investor further understands and agrees that the
Articles of Incorporation, as amended, will be amended and restated, subject to
shareholder approval and will become effective after conversion of all preferred
stock pursuant to an Initial Public Offering to delete the terms of all series
of preferred stock and to amend the number of shares of capital stock the
Company shall have the authority to issue to 60,000,000 of which 50,000,000
would be designated as Common Stock.
5. Affirmative Covenants of the Company. The Company hereby covenants
and agrees with the Investor as follows:
5.1 Periodic Reports; Budgets.
(a) The Company will furnish as soon as practicable, and in any
event within 90 days after the end of each fiscal year of the Company, to the
Investor, an annual report of the Company, including an audited balance sheet as
of the end of such fiscal year and audited statements of operations, audited
shareholders' equity and cash flows for such fiscal year, together with the
related notes thereto, setting forth in each case in comparative form
corresponding figures for the preceding fiscal year, all of which will present
fairly the financial position of the Company and the results of its operations
and changes in its financial position as of the time and for the period then
ended. The financial statements shall be accompanied by a report of independent
public accountants to the effect that such financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a basis consistent with prior years (except as otherwise specified in such
report), and present fairly the financial position of the Company and the
results of its operations and changes in its financial position as of the time
and for the period then ended. Notwithstanding the foregoing, the obligations
of the Company under this Section 5.1(a) will cease and be of no further force
and effect upon the closing of an Initial Public Offering.
(b) The Company will furnish as soon as practicable, and in any
event within 45 days after the end of each fiscal quarter of the Company, to the
Investor, a report of
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the Company consisting of an unaudited balance sheet as of the end of such
quarter, and unaudited statements of operations, shareholders' equity and
cash flows for such quarter, and for the fiscal year-to-date, setting forth
in each case in comparative form the corresponding figures for the preceding
year. All such reports shall be certified by the Chief Financial Officer of
the Company to present fairly the financial position of the Company and the
results of its operations and changes in its financial position as of the
time and for the period then ended and to have been prepared in accordance
with generally accepted accounting principles, subject to normal year-end
adjustments. Notwithstanding the foregoing, the obligations of the Company
under this Section 5.1(b) will cease and be of no further force and effect
upon the closing of an Initial Public Offering.
5.2 Books and Records. The Company shall make and keep books,
records and accounts, which, in reasonable detail, accurately and fairly reflect
its transactions, and shall devise and maintain a system of internal accounting
controls sufficient to provide reasonable assurances that: (a) transactions are
executed in accordance with management's general or specific authorization; (b)
transactions are recorded as necessary to permit preparation of the financial
statements required herein and to maintain accountability for assets; and (c)
access to assets is permitted only in accordance with management's general or
specific instructions and recorded assets are compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
difference.
5.3 Insurance. The Company shall maintain insurance against such
risks and in at least such amounts as is customarily carried by companies of
comparable size and financial condition in the same or a similar business, under
valid and enforceable policies issued by insurers of recognized responsibility.
5.4 Contracts and Agreements. The Company shall comply with the
provisions of all contracts, indentures, instruments and agreements to which it
is a party or by which the Company or its properties are bound, and with all
other obligations which the Company incurs or to which it becomes subject.
5.5 Taxes. The Company shall pay and discharge when payable all
federal, state, local, and foreign taxes, assessments, penalties, interest and
governmental charges which become payable by the Company or which shall be
imposed upon its properties, and all claims for labor, materials or supplies
which if unpaid might by law become a lien upon any of its properties; provided,
however, that the Company may in good faith contest any tax, assessment,
penalty, or charge, provided that such contest is asserted in accordance with
applicable procedures.
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5.6 Merger; Sale of Assets; Dissolution. So long as the Securities
or any Conversion Shares are outstanding, the Company will not become a party to
any merger or consolidation, or sell, lease or otherwise dispose of
substantially all of its assets, other than sales and leases of assets in the
ordinary course of business, or dissolve or liquidate its assets without the
prior approval of the Investor, which approval shall not be unreasonably
withheld, except that (a) any wholly owned subsidiary of the Company may merge
or consolidate with the Company so long as the Company is the surviving entity
of such merger or consolidation, and (b) any wholly owned subsidiary of the
Company may lease, sell, transfer or otherwise dispose of all or any part of its
properties and assets to the Company.
5.7 Acquisition. So long as the Securities or any Conversion Shares
are outstanding, the Company will not acquire any interest in any business from
any person, firm or entity (whether by a purchase of assets, purchase of stock,
merger or otherwise) in which the consideration to be paid, as of the date as of
which any such agreement with respect to such acquisition is entered into,
represents more than 25% of the total assets of the Company set forth on the
most recent quarterly balance sheet without the prior approval of the Investor,
which approval shall not be unreasonably withheld, except as otherwise
specifically permitted pursuant to the provisions of this Agreement.
5.8 Dividends; Repurchases. So long as the Securities or any
Conversion Shares are outstanding, the Company shall not declare or pay any
dividends on, and shall not purchase, redeem, retire or otherwise acquire, any
shares of its capital stock (other than shares of Series A Convertible Preferred
Stock, Series B Convertible Preferred Stock and Series C Convertible Preferred
Stock), whether now or hereafter outstanding, without obtaining the prior
approval of the Investor, which approval shall not be unreasonably withheld.
5.9 Restrictive Agreement. Subsequent to Closing, the Company will
not be a party to any agreement or instrument which by its terms would restrict
the Company's performance of its obligations pursuant to this Agreement or the
terms of the Securities including conversion thereof.
6. Registration of Common Stock.
6.1 Demand Registration. Upon the written request of the Investor,
which request will state the intended method of disposition by the Investor and
will request that the Company effect the registration under the Securities Act
of all or part of the Conversion Shares, the Company will, within 10 days after
receipt of such request, give written notice of such requested registration to
all record holders of securities who have
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registration rights, and thereupon (except as expressly provided herein) will
use its best efforts to effect the registration ("Demand Registration") under
the Securities Act of (x) the shares of Conversion Shares included in the
initial request for registration (for disposition in accordance with the
intended method of disposition stated in such request) and (y) all other
shares of securities, the record holders of which have made written request
to the Company for registration thereof within 30 days after the receipt of
such written notice from the Company, provided that:
(a) except as set forth below, the Company shall be
required to effect only one Demand Registration hereunder; provided that the
Company shall not be required to effect more than one registration during any
one-year period pursuant to this Section 6.1, Paragraph 7(a) of the Series A
Agreement, Section 7.1 of the Series B Agreement or Section 7.1 of the Series C
Agreement(except that, upon request of the Investor (regardless of the number of
Securities held by the Investor at the time), the Company, if it is then
qualified to do so, shall be required to effect an unlimited number of
registrations on Form S-3, or a similar short form registration statement, which
registrations (hereinafter referred to as "Short Form Registrations") shall not
be counted for purposes of this Section 6.1 as the Demand Registration which the
Company is required to effect);
(b) if the Investor intends to sell its Conversion Shares
by means of an underwriting (whether on a "best efforts" or a "firm commitment"
basis), it shall so advise the Company as part of its request, and the Company
shall include such information in the notice to the other record holders of
securities who have registration rights. In that event, such other record
holders shall have the right to include their shares of such registerable
securities in the underwriting. The managing underwriter for such offering
shall be selected by the Board of Directors of the Company, who shall be
reasonably acceptable to the Investor, or the Investor may withdraw its demand
request and such request shall not be counted for purposes of this Section 6.1;
(c) the Company shall not include and shall not permit
third parties other than (i) the holders of Series A Convertible Preferred
Stock, (ii) the holders of Series B Convertible Preferred Stock, (iii) the
holders of Series C Convertible Preferred Stock, and (iv) Genesis Merchant Group
Securities or its assigns as the holder of warrants to purchase shares of Common
Stock (collectively, the "Preferred Registerable Common Stock") to include
additional securities in a Demand Registration without the consent of the
holders of a majority of
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the Conversion Shares and the Preferred Registerable Common Stock included in
such Demand Registration, voting together as a class;
(d) if a Demand Registration under this Section 6.1 is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their reasonable opinion the
amount of Conversion Shares, and securities the holders of which have
registration rights requested to be included in such registration exceeds the
amount of such securities which can be successfully sold in such offering, the
Company will nevertheless include in such registration, prior to the inclusion
of any securities which are not Conversion Shares or shares of Common Stock
issued or issuable upon conversion or exercise of Preferred Registrable Common
Stock, the amount of Conversion Shares and Preferred Registerable Common Stock
requested to be included which in the opinion of such underwriters can be sold,
pro rata among the holders of Conversion Shares and Preferred Registerable
Common Stock requesting inclusion on the basis of the number of shares of
Conversion Shares and Preferred Registerable Common Stock then owned by such
holders; provided, however, that if the Investor is unable to include in such
offering at least fifty percent (50%) of the Conversion Shares sought to be
registered in a Demand Registration under this Section 6.1, the Investor will be
entitled to an additional Demand Registration under this Section;
(e) if the Company shall furnish to the holders requesting
a registration pursuant to this Section 6.1 a certificate signed by the Chief
Executive Officer of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be materially detrimental to the
Company for a registration statement to be filed as requested, the Company shall
have the right to defer such filing for a period of not more than 120 days after
receipt of the initial request for registration under this Section 6.1;
provided, however, that the Company may not utilize this right more than once in
any one-year period;
(f) registrations under this Section 6.1 will be on a form
reasonably acceptable to Investor (or it may withdraw its demand without losing
such demand right) permitted by the rules and regulations of the Commission
selected by the underwriters if the Demand Registration is in connection with an
underwritten public offering or otherwise by the Company provided, however, that
within 30 days of notice from the Company of the form selected, the Investor
shall confirm in writing to the Company that the form selected for registration
is reasonably acceptable to the Investor and the Investor shall thereafter be
precluded from withdrawing its demand for such registration on the basis of this
Section 6.1(f); and
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(g) notwithstanding anything else contained herein, the
Company will not be required to effect a Demand Registration pursuant to this
Section 6.1 unless the aggregate number of shares of Common Stock to be
registered exceeds 40% of the shares of Common Stock then held by the Investor
or issuable to the Investor upon conversion of the Note.
6.2 Incidental Registrations.
(a) If the Company at any time proposes to register any of
its securities under the Securities Act (other than pursuant to Section 6.1
hereof), whether of its own accord or at the demand of any holder of securities
pursuant to an agreement with respect to the registration thereof (provided such
agreement does not prohibit third parties from including additional securities
in such registration), and if the form of registration statement proposed to be
used may be used for the registration of Conversion Shares, the Company will
give notice to the Investor not less than 5 days nor more than 30 days prior to
the filing of such registration statement of its intention to proceed with the
proposed registration (the "Incidental Registration"), and, upon the written
request of the Investor made within 5 days after the receipt of any such notice
(which request will specify the Conversion Shares intended to be disposed of by
such holder and state the intended method of disposition thereof), the Company
will use its best efforts to cause all Conversion Shares as to which
registration has been requested to be registered under the Securities Act,
provided that if such registration is in connection with an underwritten public
offering, the Conversion Shares to be included in such registration shall be
offered upon the same terms and conditions as apply to any other securities
included in such registration. Notwithstanding anything contained in this
Section 6.2 to the contrary, the Company shall only be obligated to cause
Conversion Shares to be registered under this Section 6.2 on one occasion and
the Company shall have no obligation to cause Conversion Shares to be registered
(i) if the primary registration is in connection with the Initial Public
Offering of the Company's Common Stock or (ii) at any time after five years
following the closing of the Initial Public Offering, provided, however, that
once the Conversion Shares become eligible for resale under Rule 144(k) of the
Securities Act, the Company shall have no obligation to cause the Conversion
Shares to be registered if the Investor holds less than 2% of the then
outstanding Common Stock.
(b) If an Incidental Registration is a primary registration
on behalf of the Company and is in connection with an underwritten public
offering, and if the managing underwriters advise the Company in writing that in
their reasonable opinion the amount of securities requested to be included in
such registration (whether by the Company, the
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Investor or other holders of its securities pursuant to any other rights
granted by the Company to demand inclusion of any such securities in such
registration) exceeds the amount of such securities which can be successfully
sold in such offering, the Company will include in such registration the
amount of securities requested to be included which in the opinion of such
underwriters can be sold, in the following order (i) first, all of the
securities the Company proposes to sell, (ii) second, all of the Preferred
Registerable Common Stock and Conversion Shares requested to be included in
such registration, pro rata among the holders thereof on the basis of the
number of shares of Preferred Registerable Common Stock and Conversion Shares
then owned by such holders, and (iii) third, any other securities requested
to be included in such registration, pro rata among the holders thereof on
the basis of the amount of such securities then owned by such holders.
(c) If an Incidental Registration is a secondary
registration on behalf of holders of securities of the Company and is in
connection with an underwritten public offering, and if the managing
underwriters advise the Company in writing that in their reasonable opinion the
amount of securities requested to be included in such registration (whether by
such holders, by the Investor or by holders of its securities pursuant to any
other rights granted by the Company to demand inclusion of securities in such
registration) exceeds the amount of such securities which can be sold in such
offering, the Company will include in such registration the amount of securities
requested to be included which in the opinion of such underwriters can be sold,
in the following order (i) first, all of the securities requested to be included
by holders initially demanding or requesting such registration, (ii) second, all
of the Preferred Registerable Common Stock and Conversion Shares requested to be
included in such registration, pro rata among the holders thereof on the basis
of the number of shares of Preferred Registerable Common Stock and Conversion
Shares then owned by such holders, and (iii) third, any other securities
requested to be included in such registration, pro rata among the holders
thereof on the basis of the amount of such securities then owned by such
holders.
(d) In the event that the number of Conversion Shares
proposed to be included by the Investor in an Incidental Registration pursuant
to this Section 6.2 is reduced by 20% or more, the Investor shall receive an
additional Incidental Registration right under this Section 6.2, provided,
however, that such additional Incidental Registration right shall not be granted
in the event the Company has registered 75% of the Investor's Conversion Shares
under the Demand Registration and Incidental Registration rights provided under
Sections 6.1 and 6.2 hereof.
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6.3 Registration Procedures. If and whenever the Company is required
to use its best efforts to effect or cause the registration of any Conversion
Shares under the Securities Act as provided in this Section 6, the Company will,
as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement with respect to such Conversion Shares and use its best efforts (which
shall not, in any case, require the Company to incur any unreasonable expense)
to cause such registration statement to become effective;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
a period of not less than six months or such shorter period in which the
disposition of all securities in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such registration
statement shall be completed, and to comply with the provisions of the
Securities Act (to the extent applicable to the Company) with respect to such
dispositions;
(c) furnish to the Investor such number of copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus),
in conformity with the requirements of the Securities Act, and such other
documents, as the Investor may reasonably request, in order to facilitate the
disposition of the Conversion Shares owned by the Investor;
(d) use its best efforts (which shall not, in any case, require
the Company to incur any unreasonable expense) to register or qualify such
Conversion Shares covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as the Investor reasonably
requests, and do any and all other acts and things which may be reasonably
necessary or advisable to enable the Investor to consummate the disposition in
such jurisdictions of the Conversion Shares owned by the Investor, except that
the Company will not for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it would not, but
for the requirements of this Section 6.3(d) be obligated to be qualified, to
subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
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(e) provide a transfer agent and registrar for all such
Conversion Shares covered by such registration statement not later than the
effective date of such registration statement;
(f) notify the Investor at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, of the happening
of any event as a result of which the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading, and, at the request of
the Investor, the Company will prepare a supplement or amendment to such
prospectus so that, as thereafter delivered to the purchasers of such Conversion
Shares, such prospectus will not contain an untrue statement of a material fact
or omit to state any fact required to be stated therein or necessary to make the
statements therein not misleading;
(g) use its best efforts to cause all such Conversion Shares to
be listed on each securities exchange on which similar securities issued by the
Company are then listed;
(h) use its best efforts to obtain a cold comfort letter from
the Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters in such
transactions;
(i) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other actions as
reasonably required in order to expedite or facilitate the disposition of such
Conversion Shares including, but not limited to, if requested by the managing
underwriter in an underwritten public offering, making the Company management
reasonably available to participate in "Roadshows" with respect to such
offering; and
(j) make available for inspection by the Investor, any
underwriter participating in any disposition pursuant to such registration
statement, and any attorney, accountant or other agent retained by the Investor
and/or representative of the Investor or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by the Investor, underwriter, attorney, accountant or agent
in connection with such registration statement.
6.4 Registration and Selling Expenses.
(a) All expenses incurred by the Company in connection with the
Company's performance of or compliance with this Section 6, including, without
limitation (A) all
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registration and filing fees (including all expenses incident to filing with
the National Association of Securities Dealers, Inc.), (B) blue sky fees and
expenses, (C) all printing expenses and (D) all fees and disbursements of
counsel and accountants for the Company (including the expenses of any audit
of financial statements) retained by the Company (all such expenses being
herein called "Registration Expenses"), will be paid by the Company except as
otherwise expressly provided in this Section 6.4.
(b) The Company will, in any event, in connection with any
registration statement, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal, accounting or other duties in connection therewith and expenses of audits
of year-end financial statements), and the expenses and fees for listing the
securities to be registered on one or more securities exchanges on which similar
securities issued by the Company are then listed.
(c) The Company shall bear the Registration Expenses of each
Demand Registration and each Incidental Registration hereunder.
(d) Notwithstanding any of the foregoing, all underwriting
discounts and selling commissions applicable to sales of Conversion Shares in
connection with any Demand Registration or Incidental Registration shall be
borne by the Investor and all persons who are selling registerable Common Stock
pursuant to such Registration Statement in proportion to the dollar value of the
securities being sold by the Investor and all persons who are selling
registerable Common Stock.
(e) All fees and expenses required to be paid by the Investor
pursuant to Section 6.4(d) hereof in connection with any Incidental Registration
hereunder shall be borne by the Investor in proportion to the dollar value of
the securities of the Investor covered by such Incidental Registration.
6.5 Other Conditions Relating to Registrations. Except as otherwise
provided in this Agreement, the Company shall not be required to furnish any
audited financial statements at the request of the Investor other than those
statements customarily prepared at the end of its fiscal year, unless (a) the
Investor shall agree to reimburse the Company for the out-of-pocket costs
incurred by the Company in the preparation of such other audited financial
statements or (b) such other audited financial statements shall be required by
the Commission as a condition to declaring a Demand Registration effective under
the Securities Act.
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6.6 Other Public Sales and Registrations. The Company agrees (a)
that if it has previously filed a registration statement with respect to
Conversion Shares in connection with a Demand Registration or Incidental
Registration hereunder, and if such previous registration has not been withdrawn
or abandoned, the Company will not file or cause to become effective any other
registration of any of its securities under the Securities Act or otherwise
effect a public sale or distribution of its securities (except pursuant to
registration on Form S-8 or any successor form relating to a special offering to
the employees or security holders of the Company or any Subsidiary now or
hereafter formed or acquired), whether on its own behalf or at the request of
any holder of such securities, until the earlier of (i) at least 60 days have
elapsed after the effective date of such previous registration or (ii) all
securities to be sold thereunder have been sold; and (b) to cause each holder of
securities purchased from the Company any time after the date of this Agreement
(other than in a registered public offering) to agree not to effect any such
public sale or distribution during such 60-day period of any such securities or
any securities issuable on the conversion thereof or in redemption or exchange
therefor. The foregoing 60-day limitation, however, shall not preclude the
Company from proceeding with a registration statement requested by a holder of
securities with "demand" registration rights who requests registration prior to
the time the Investor requests a registration pursuant to Section 6.1 hereof.
6.7 Transferees of Securities. Notwithstanding anything else set
forth in this Section 6, no person to whom Securities or Conversion Shares are
transferred shall have any rights under this Section 6 as a holder of such
Securities or Conversion Shares unless (a) such person acquires at least 200,000
shares of Conversion Shares, (b) such person agrees to be bound by the terms and
conditions of this Agreement and (c) the Company is given prompt written notice
of such transfer.
6.8 Indemnification.
(a) The Company hereby agrees to indemnify, to the extent
permitted by law, the Investor, its officers, directors, employees and auditors,
and each person, if any, who controls such holder within the meaning of the
Securities Act, against all losses, claims, damages, liabilities and expenses
under the Securities Act, applicable state securities laws, common law or
otherwise (including, as incurred, legal and other expenses reasonably incurred
in connection with investigating, preparing or defending any such claim, except
to the extent limited by Section 6.8(c) below) caused by any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus (and as amended or supplemented if the Company has
furnished any amendments or
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supplements thereto) or any preliminary prospectus, which registration
statement, prospectus or preliminary prospectus shall be prepared in
connection with a Demand Registration or Incidental Registration, or caused
by any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
expenses are caused by any untrue statement or alleged untrue statement
contained in or by any omission or alleged omission from information
furnished in writing to the Company by such holder for the particular purpose
of use in connection with a Demand Registration or Incidental Registration,
provided the Company will not be liable pursuant to this Section 6.8 if such
losses, claims, damages, liabilities or expenses have been caused by the
Investor's failure to deliver a copy of the registration statement or
prospectus, or any amendments or supplements thereto, after the Company has
furnished the Investor with a sufficient number of copies of the same.
(b) In connection with any registration statement in which the
Investor is participating, the Investor shall furnish to the Company in writing
such information as is reasonably requested by the Company for the particular
purpose of use in any such registration statement or prospectus and shall
indemnify, to the extent permitted by law, the Company, its directors, officers,
employees and auditors and each person, if any, who controls the Company within
the meaning of the Securities Act, against any losses, claims, damages,
liabilities and expenses under the Securities Act, applicable state securities
laws, common law or otherwise (including, as incurred, legal and other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, except to the extent limited by Section 6.8(c) below) caused by any
untrue statement or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
such losses, claims, damages, liabilities or expenses are caused by an untrue
statement or alleged untrue statement contained in or by an omission or alleged
omission from information so furnished in writing by the Investor for the
particular purpose of use in connection with the Demand Registration or
Incidental Registration. If the offering pursuant to any such registration is
made through underwriters, the Investor agrees to enter into an underwriting
agreement in customary form with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinabove provided with respect to indemnification by the Investor of the
Company. Notwithstanding the foregoing, the
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Investor shall not be liable under this Section 6.8(b) for any amounts
exceeding the product of (i) the offering price per share of Conversion
Shares pursuant to the registration statement in which the Investor is
participating (less any underwriting discounts or commissions which reduce
the amount the Investor receives), multiplied by (ii) the number of shares of
Conversion Shares being sold by the Investor pursuant to such registration
statement.
(c) Promptly after receipt by an indemnified party under Section
6.8(a) or Section 6.8(b) of notice of the commencement of any action or
proceeding, such indemnified party will, if a claim in respect thereof is or is
to be made against the indemnifying party under such Section, notify the
indemnifying party in writing of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under such Section. In case
any such action or proceeding is brought against any indemnified party, and it
notifies the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein, and, to the extent that it
wishes, jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, the indemnifying party will not
be liable to such indemnified party under such Section for any legal or any
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof (other than reasonable costs of investigation) unless
incurred at the written request of the indemnifying party. Notwithstanding the
above, the indemnified party will have the right to employ one counsel
(exclusive of local counsel) of its own choice in any such action or proceeding
if the indemnified party has reasonably concluded that there may be defenses
available to it which are different from or additional to those of the
indemnifying party, or counsel to the indemnified party is of the opinion that
it would not be desirable for the same counsel to represent both the
indemnifying party and the indemnified party because such representation might
result in a conflict of interest (in either of which cases the indemnifying
party will not have the right to assume the defense of any such action or
proceeding on behalf of the indemnified party or parties and such legal and
other expenses will be borne by the indemnifying party). An indemnifying party
will not be liable to any indemnified party for any settlement of any such
action or proceeding effected without the consent of such indemnifying party
which consent shall not be unreasonably withheld.
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(d) If the indemnification provided for in Section 6.8(a) or
Section 6.8(b) is unavailable under applicable law to an indemnified party in
respect of any losses, claims, damages or liabilities referred to therein, then
each applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages or liabilities in such proportion as
is appropriate to reflect the relative fault of the Company on the one hand and
of the Investor on the other in connection with the statements or omissions
which resulted in such losses, claims, damages, or liabilities, as well as any
other relevant equitable considerations. The relative fault of the Company on
the one hand and of the Investor on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the Company or by the Investor and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The amount paid or payable by a party as a result of the
losses, claims, damages and liabilities referred to above shall be deemed to
include, subject to the limitations set forth in Section 6.8(c), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation.
(e) Promptly after receipt by the Company or the Investor of
notice of the commencement of any action or proceeding, such party will, if a
claim for contribution in respect thereof is to be made against another party
(the "contributing party"), notify the contributing party of the commencement
thereof; but the omission so to notify the contributing party will not relieve
it from any liability which it may have to any other party other than for
contribution hereunder. In case any such action, suit, or proceeding is brought
against any party, and such party notifies a contributing party of the
commencement thereof, the contributing party will be entitled to participate
therein with the notifying party and any other contributing party similarly
notified. No party shall be liable for contribution with regard to the
settlement of any action or proceeding effected without its consent.
6.9 Conversion/Exercise of the Securities. Any request for a Demand
Registration or Incidental Registration with respect to Conversion Shares
issuable upon the conversion of the Note or upon exercise of the Warrant will
provide in the intended method of disposition accompanying such request that
conversion of the Note or upon exercise of the Warrant into Common Stock in
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accordance with the terms thereof will be undertaken promptly after a
registration statement has become effective but in any event before the sale
thereof to underwriters has been consummated so that the Note and the Warrant
will not be distributed to the public under such registration statement.
6.10 Amendment of Section 6. Any provision of this Section 6 may be
amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Investor.
7. Events of Default.
Each of the following shall constitute an Event of Default under this
Agreement and the Note:
7.1 Default on Payments to the Investor. The failure of the Company
to make on the date when due, any principal or interest payment pursuant to the
Note, or any other payment required to be made (whether under the terms of the
Note or otherwise) in connection with the Note, and failure to pay within 30
days after such due date with at least 15 days prior notice of late payment by
the Investor; regardless of whether any such failure to make the payments
described in this Section 7.1 is due to a legal inability or incapacity of the
Company to make any such payments.
7.2 Information, Representations and Warranties. Any information
furnished or representation or warranty made or given by the Company herein or
furnished at any time in connection with the transactions contemplated hereby
shall prove to have been untrue when made or given in any material respect or
shall have omitted to state a material fact respecting the matters set forth
therein necessary to make the matters set forth therein not misleading.
7.3 Covenants and Agreements. The failure of the Company to observe,
perform or abide by any other covenant, warranty, agreement or provision of this
Agreement, the Note, or any of the documents executed by the Company in
connection herewith or therewith or referred to herein or therein, which failure
is not cured to the Investor's reasonable satisfaction within 60 days after
written notice from the Investor to the Company of its occurrence (a "Cure
Notice"); provided, however, that no Event of Default shall be considered to
have occurred if the failure is not the failure to pay money and is of such a
nature that it reasonably cannot be cured within such 60 day period, but if it
is curable and the Company in good faith begins efforts to cure it within such
60 day period and continues diligently to do so, the Company shall have 20 days
from the date
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of the Cure Notice to petition the Investor in writing for an
additional 60 day period to effect the cure. The Investor shall notify the
Company in writing within 10 days after receipt of such petition as to whether
it shall grant such petition. If the Investor grants such petition and the
failure continues after the expiration of such additional 60 day period,
regardless whether such failure might be curable at some time beyond such
additional 60 day period, such failure shall nevertheless be considered an Event
of Default. If the Investor rejects such petition, such failure shall be
considered an Event of Default upon such rejection.
7.4 Default on Other Obligations. The occurrence of a default
following the expiration of any applicable cure period, if any, in any material
obligation of the Company or any violation of law or refusal of regulatory
permission which has a material adverse effect on the Company's operations or
any other default under the Note.
7.5 Certain Events As To The Company. The Company or any of its
subsidiaries shall (A) admit in writing its inability to pay its debts generally
as they become due; (B) file a petition or answer or consent seeking relief
under the Federal Bankruptcy Code, as now constituted or hereafter amended, or
any other applicable federal or state bankruptcy or insolvency law or other
similar law, not discharged or vacated or set aside or stayed within 60 days;
(C) consent to the institution of proceedings under any law referenced in (B)
above, not discharged or vacated or set aside or stayed within 60 days, or to
the filing of any such petition, not discharged or vacated or set aside or
stayed within 60 days or to the appointment or taking possession of a receiver,
liquidator, assignee, trustee, custodian (or other similar official) of the
Company or any subsidiary or of any substantial part of their property; (D) fail
generally to pay its debts as such debts become due, or take corporate action in
furtherance of any such action; or (E) make an assignment for the benefit of its
creditors.
8. Rights of the Investor Upon Default.
8.1 Rights on Default. If there shall occur an Event of Default as
defined in the foregoing Section 7, the Investor may, by written notice to the
Company, declare the Company to be in default hereunder, whereupon, if the
Investor so specifies in such notice, the balance of the principal amount of the
Note and accrued interest under the Note, and all other indebtedness of the
Company to the Investor now or hereafter incurred pursuant to the Note or this
Agreement, shall become immediately due and payable without further demand,
presentation or notice of any kind, and effective from the date which an Event
of Default occurs and until such time as all Events of Default have been
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cured (as provided in Section 7.3 above), any principal amount and/or accrued
interest thereon which is due and payable under the Note shall bear interest
at a rate of 18% per annum, such interest being cumulative and concurrent
with all other right, power and remedy given hereunder, under the Note or in
any other documents and agreements delivered or given in connection herewith
or if such interest rate exceeds the amount of interest permitted under
applicable law, the interest rate shall be the maximum rate permitted under
applicable law.
8.2 Additional Rights. The Investor shall have such additional
rights and remedies as are contained herein, in the Note or in any other
documents and agreements delivered or given in connection herewith, and all
rights which it might have at law or equity, all of which rights and remedies
shall be cumulative.
9. Further Assurances. The Company and the Investor agree to execute and
deliver all such other instruments and take all such other actions as any party
may reasonably request from time to time before or after the Closing Date and
without payment of further consideration, in order to effectuate the
transactions provided for herein. The parties shall cooperate fully with each
other and with their respective counsel and accountants in connection with any
steps required to be taken as part of their respective obligations under this
Agreement.
10. Miscellaneous.
10.1 Survival of Representations, Warranties and Covenants. All
representations, warranties, covenants and agreements contained in this
Agreement, or in any document, exhibit, schedule or certificate or in any other
writing by any party delivered in connection herewith shall survive the
execution and delivery of this Agreement and the Closing Date and the
consummation of the transactions contemplated hereby, regardless of any
investigation made by the Investor or on its behalf. Notwithstanding the
foregoing, all obligations of the Company under this Agreement (except for the
obligations of the Company under Article 6 hereof or relating to the Warrant),
including the obligations of the Company under Article 5 hereof, will cease and
be of no further force and effect upon the closing of an Initial Public
Offering.
10.2 Waivers and Amendments. No waiver by either party of any
condition, or the breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
or construed as a further or continuing waiver of any such condition or breach
or a waiver of any other condition. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated
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other than by an agreement in writing signed by all of the parties hereto.
10.3 Governing Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement shall be governed by and
construed in accordance with the laws of the Commonwealth of Pennsylvania,
notwithstanding any conflict-of-law provisions to the contrary.
10.4 Successors and Assigns. Except as otherwise expressly provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties hereto, and their respective representatives, successors and assigns.
10.5 Entire Agreement. This Agreement, the Securities and the other
documents delivered pursuant hereto constitute the full and entire understanding
and agreement between the parties with regard to the subjects hereof and
thereof, and supersedes all prior agreements, understandings, inducements or
conditions, express or implied, oral or written, except as herein contained.
The express terms hereof control and supersede any course of performance and/or
usage of trade inconsistent with any of the terms hereof.
10.6 Notices. All notices, requests, demands and other
communications required or permitted under this Agreement shall be in writing
and shall be deemed to have been duly made and received when personally served,
or when mailed by first class mail or overnight, by courier service such as
Federal Express, postage prepaid, or telecopied with answer back receipt and
hard copy sent in the manner set forth above, addressed as set forth below:
(i) If to the Company, then to:
Apollon, Inc.
One Great Valley Parkway
Malvern, PA 19355
Phone: 610-647-9452
Fax: 610-647-9732
Attn: Vincent R. Zurawski, Jr.,
Chief Executive Officer
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<PAGE>
with a copy, given in the manner
prescribed above, to:
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103-7599
Phone: 215-864-8609
Fax: 215-864-8999
Attn: Morris Cheston, Jr., Esquire
(ii) If to the Investor, then to:
A.H. Investments Ltd.
1403 Foulk Road
Suite 102
Wilmington, DE 19803
Attn: President
with a copy, given in the manner
prescribed above, to:
American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
Phone: (973) 660-5000
Fax: (973) 660-7155
Attn: Senior Vice President
and General Counsel
Any party may alter the address to which communications are to be sent by giving
notice of such change of address in conformity with the provisions of this
Section providing for the giving of notice.
10.7 Brokers. Each party represents that it has not retained any
finder or broker in connection with the transactions contemplated by this
Agreement and will indemnify, defend and hold the other party harmless from any
claim based on breach of this representation.
10.8 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy upon any breach or default of the other
party under this Agreement, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of any similar breach or default thereafter occurring;
nor shall any waiver of any single breach or default be deemed a waiver of any
other breach or default theretofore or thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character of
any
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<PAGE>
breach or default under this Agreement, or any waiver of any provision or
condition of this Agreement must be in writing and shall be effective only to
the extent specifically set forth in writing, and that all remedies, either
under this Agreement or by law or otherwise, shall be cumulative and not
alternative.
10.9 Titles. The titles of the Sections of this Agreement are for
convenience of reference only and are not to be considered in construing this
Agreement.
10.10 Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
10.11 Execution; Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
10.12 Exhibits; Schedules. All Exhibits and Schedules attached
hereto are hereby incorporated by reference into, and made a part of, this
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
Attest: APOLLON, INC.
/s/ James G. Murphy /s/ Vincent R. Zurawski
- ---------------------- By: ------------------------
Name: Vincent R. Zurawski
Title:
A.H. INVESTMENTS LTD.
/s/ Gerald A. Jibilian
By: ------------------------
Name: Gerald A. Jibilian
Title: Vice President
<PAGE>
LIST OF EXHIBITS
Exhibit A Form of Note
Exhibit B Form of Warrant
Exhibit C Form of Amendment to Research and Development and License
Agreement
Exhibit D Form of Amendment to Supply Agreement
Exhibit E Form of Opinion of Company Counsel
Exhibit F Unaudited Balance Sheet as of June 30, 1997
<PAGE>
LIST OF SCHEDULES
Schedule of Exceptions to Representations and Warranties
3.3(a) Authorized and Outstanding Capital Stock
3.3(b) List of Shareholders
3.3(c) List Outstanding Warrants and Options and of Voting, Buy-sell and
Option Agreements
3.5 Contracts, Leases, Agreements and Other Commitments
<PAGE>
EXHIBIT 4.11
COMMON STOCK WARRANT
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR
REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS WARRANT NOR
SUCH SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES
ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE
RULES AND REGULATIONS THEREUNDER.
________________
APOLLON, INC.
One Great Valley Parkway
Malvern, Pennsylvania 19355-1423
Name of Registered Holder: A.H. Investments Ltd.
No. 97-1 Date of Issuance: October 3, 1997
Warrant for the Purchase of 150,000 Shares of Common Stock
IN CONSIDERATION OF the financing provided by the initial registered
holder hereof (the "Initial Holder"), consisting of the purchase of a
convertible promissory note in the principal amount of $3,000,000, to
Apollon, Inc., a Pennsylvania corporation (the "Company"), and for value
received, the Company hereby grants the rights herein specified and certifies
that the Initial Holder or any registered assignee of the Initial Holder
(each of the Initial Holder and any such registered assignee being
hereinafter referred to as the "Holder"), is entitled, subject to the
conditions and upon the terms of this Warrant, to purchase from the Company,
at any time or from time to time during the Exercise Period (as defined in
Section 1), the number of shares of Common Stock (as defined in Section 1)
set forth above. The number of shares of Common Stock to be received upon
the exercise of this Warrant and the Exercise Price are subject to adjustment
from time to time as hereinafter set forth.
Section 1. Certain Definitions. Terms defined in the preceding
paragraph and elsewhere in this Warrant have the respective meanings provided
for therein. The following additional terms, as used herein, have the
following respective meanings:
"Act" means the Securities Act of 1933, as amended.
"Common Stock" means the fully paid and nonassessable shares of common
stock of the Company, par value $.01 per share, together with any other
equity securities that may be issued by the Company in addition thereto or in
substitution therefor, as provided herein.
<PAGE>
"Exercise Period" means the period beginning on the date six months after
the closing of an Initial Public Offering or in the event no Initial Public
Offering closes prior to twelve months from the date hereof then on such date
and ending on the date five years after the beginning of the Exercise Period.
"Exercise Price" means an amount per share equal to 115% of the price per
share at which shares of Common Stock are offered for sale in an initial
public offering, subject to change or adjustment pursuant to Section 9
hereof. In the event an Initial Public Offering of the Company's Common Stock
does not occur prior to one year from the date hereof, the Exercise Price per
share of Common Stock shall thereafter be equal to 115% of the lesser of (i)
$6.00 or (ii) the price per share paid by purchasers of Common Stock or any
series of the Company's preferred stock in any purchase of Common Stock or
preferred stock closest in time to such date.
"Initial Public Offering: means a public offering for the account of the
Company of shares of Common Stock or securities convertible or exchangeable
for shares of Common Stock in which the gross proceeds to the Company exceed
$10 million.
"Reorganization Event" means (i) any capital reorganization or leveraged
recapitalization of the Company or reclassification of the Common Stock
(other than a subdivision, combination or reclassification of the outstanding
Common Stock for which adjustment is provided in Subsection 9.1 and other
than a change in the par value of the Common Stock or an increase in the
authorized capital stock of the Company not involving the issuance of any
shares thereof), (ii) any consolidation of the Company with, or merger of the
Company with or into, another person (including any individual, partnership,
joint venture, corporation, trust or group thereof) (other than a
consolidation or merger with a subsidiary of the Company in which the Company
is the continuing corporation and in which the Company issues securities
representing, immediately prior to such issuance, no more than 40% of the
combined voting power of the Company's then outstanding voting securities
having power to vote in the election of directors and for which no adjustment
is required by Subsection 9.1) or any sale, lease, transfer or conveyance of
all or substantially all of the property and assets of the Company or (iii)
the announcement or commencement by any "person" or "group" (within the
meaning of Section 13(d) and Section 14(d) of the Exchange Act) of a bona
fide tender offer or exchange offer in accordance with the rules and
regulations of the Exchange Act to purchase, or the acquisition of securities
in the Company, such that after such acquisition or proposed purchase, the
acquiror "beneficially owns" or would "beneficially own" (as defined in Rule
13d-3 under the Exchange Act), securities in the Company representing 40% or
more of the combined voting power of the Company's then outstanding
securities having power to vote in the election of directors.
"Warrant" means this Warrant and any Warrant or Warrants which may be
issued pursuant to Section 4 or 6 hereof in substitution or exchange for or
upon transfer of this Warrant, any Warrant which may be issued pursuant to
Section 2 hereof upon partial exercise of this Warrant and any Warrant which
may be issued pursuant to Section 7 hereof upon the loss, theft, destruction
or mutilation of this Warrant.
"Warrant Register" means the register maintained at the principal office
of the Company, or at the office of its agent, in which the name of the
Holder of this Warrant shall be registered.
"Warrant Shares" means the shares of Common Stock, as adjusted from time
to time, deliverable upon exercise of this Warrant.
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Section 2. Exercise of Warrant. This Warrant may be exercised, in whole
or in part, at any time or from time to time during the Exercise Period, by
presentation and surrender hereof to the Company at its principal office at
the address set forth on the signature page hereof (or at such other address
of the Company or any agent appointed by the Company to act hereunder as the
Company or such agent may hereafter designate in writing to the Holder), with
the purchase form annexed hereto (the "Purchase Form") duly executed and
accompanied by cash or a certified or official bank check drawn to the order
of "Apollon, Inc." (or its successor in interest, if any) (or other
arrangement for a wire transfer of the purchase price in immediately
available funds to an account specified by the Company) in the amount of the
Exercise Price, multiplied by the number of Warrant Shares specified in such
Purchase Form. If this Warrant should be exercised in part only, the Company
or its agent shall, upon surrender of this Warrant, execute and deliver a
Warrant evidencing the right of the Holder thereof to purchase the balance of
the Warrant Shares purchasable hereunder. Upon receipt by the Company during
the Exercise Period of this Warrant and such Purchase Form in proper form for
exercise, together with proper payment of the Exercise Price at its principal
office, or by its agent at its office, the Holder shall be deemed to be the
holder of record of the number of Warrant Shares specified in such Purchase
Form. If the date of such receipt by the Company or its agent is a date on
which the stock transfer books of the Company are closed, such person shall
be deemed to have become the record holder of such Warrant Shares on the next
business day on which the stock transfer books of the Company are open. The
Company shall pay any and all documentary, stamp or similar issue or transfer
taxes payable in respect of the issue or delivery of such Warrant Shares.
Any Warrant issued upon partial exercise of this Warrant pursuant to this
Section 2 shall be dated the date of this Warrant.
Section 3. Reservation of Shares. The Company shall at all times keep
reserved solely for issuance and delivery pursuant to the Warrants the number
of shares of its Common Stock that are or would be issuable from time to time
upon exercise of all Warrants. All such shares shall be duly authorized and,
when issued upon such exercise, shall be validly issued, fully paid and
nonassessable, free and clear of all liens, security interests, charges and
other encumbrances or restrictions on sale and free of all preemptive rights.
Before taking any action that would cause an adjustment pursuant to Section 9
hereof reducing the Exercise Price below the then par value (if any) of the
Warrant Shares issuable upon exercise of this Warrant, the Company will take
any corporate action that may, in the opinion of its counsel, be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares at the Exercise Price as so adjusted.
Section 4. Transfer in Compliance with Applicable Securities Laws.
4.1 Neither this Warrant nor any of the Warrant Shares, nor
any interest in either, may be sold, assigned, pledged, hypothecated,
encumbered or in any other manner transferred or disposed of, in whole or in
part, except in accordance with Section 6 hereof and in compliance with
applicable United States federal and state securities laws and the terms and
conditions hereof. Except as provided in Subsection 4.2, each Warrant shall
bear the following legend:
NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED
OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS
WARRANT NOR SUCH SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED,
HYPOTHECATED OR OTHERWISE TRANSFERRED OR
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DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933,
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
4.2 If (x) the Warrant Shares have been registered under the
Act and registered or qualified under applicable state securities or Blue Sky
laws or (y) the Holder has received an opinion of inside counsel reasonably
satisfactory to the Company that the Warrant Shares may be freely sold or
transferred without registration under the Act or registration or
qualification under applicable state securities or Blue Sky laws, the Holder
may require the Company to issue, in substitution for a Warrant with the
foregoing legend, a Warrant with the following legend:
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
QUALIFIED OR REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. THIS
WARRANT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR
OTHERWISE TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE
SECURITIES ACT OF 1933, APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND
THE APPLICABLE RULES AND REGULATIONS THEREUNDER.
4.3 The Holder may require the Company to issue a Warrant
without either of the foregoing legends in substitution for a Warrant bearing
one of such legends if either (x) this Warrant and the Warrant Shares
issuable upon the exercise hereof have been registered under the Act and
registered or qualified under applicable state securities laws or (y) the
Holder has received an opinion of inside counsel reasonably satisfactory to
the Company that this Warrant may be freely sold or transferred without
registration under the Act or registration or qualification under applicable
state securities laws. The provisions of this Section 4 shall be binding on
all subsequent holders of this Warrant.
Section 5. Warrant Shares Registration Rights. The Holder shall have
such registration rights with respect to the Warrant Shares as are set forth
in Section 6 of the Securities Purchase Agreement dated as of September 19,
1997 between the Company and the Initial Holder, as amended from time to time.
Section 6. Exchange, Transfer or Assignment of Warrant.
6.1 This Warrant may be, at the option of the Holder, and upon
presentation and surrender hereof to the Company at its principal office or
to the Company's agent at its office, (x) exchanged for other Warrants of
different denominations, entitling the Holder or Holders to purchase in the
aggregate the same number of Warrant Shares at the Exercise Price or, (y) if
delivered together with a written notice specifying the denominations in
which new Warrants are to be issued and signed by the Holder, divided or
combined with other Warrants that carry the same rights.
6.2 Subject to Section 4, this Warrant may be transferred and
assigned, at the option of the Holder, upon surrender of this Warrant to the
Company at its principal office or to the Company's agent at its office, with
the Warrant assignment form attached hereto ("Warrant Assignment Form") duly
executed and accompanied by funds sufficient to pay any transfer tax. The
Company shall execute and deliver a new Warrant or
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Warrants in the name of the assignee or assignees named in such Warrant
Assignment Form and, if the Holder's entire interest is not being transferred
or assigned, in the name of the Holder; and this Warrant shall promptly be
cancelled.
6.3 Any transfer or exchange of this Warrant shall be without
charge to the Holder and any Warrant or Warrants issued pursuant to this
Section 6 shall be dated the date hereof.
Section 7. Lost, Mutilated or Missing Warrant. Upon receipt by the
Company or its agent of evidence satisfactory to it of the loss, theft or
destruction of this Warrant, and of satisfactory indemnification, and upon
surrender and cancellation of this Warrant if mutilated, the Company or its
agent shall execute and deliver a Warrant of like tenor and date in exchange
for this Warrant.
Section 8. Rights of the Holder. The Holder shall not, by virtue
hereof, be entitled to any rights of a shareholder in the Company, either at
law or in equity, and the rights of the Holder are limited to those expressed
in this Warrant.
Section 9. Anti-Dilution.
9.1 The Exercise Price shall be adjusted as described below in
the event the Company shall fix or have fixed a record date at any time after
the date hereof and before the expiration of the Exercise Period for a Stock
Distribution, a Below Market Issuance or a Distribution (all as defined
below).
(a) Stock Dividends, Subdivisions, Combinations,
Reclassifications, etc.
(i) A "Stock Distribution" shall be deemed to
have occurred upon (A) the declaration of a dividend or distribution on the
Common Stock payable in shares of capital stock (whether shares of Common
Stock or of capital stock of any other class), (B) the subdivision of shares
of the Common Stock into a greater number of shares, (C) the combination of
the Common Stock into a smaller number of shares or (D) the issuance of any
shares of its capital stock by reclassification of the Common Stock in
connection with a consolidation or merger with a subsidiary of the Company in
which the Company is the continuing corporation and in which the Company
issues securities representing, immediately prior to such issuance, more than
30% of the combined voting power of the Company's then outstanding voting
securities having power to vote in the election of directors.
(ii) Upon the occurrence of a Stock
Distribution, the Holder shall be entitled to receive the aggregate number
and kind of shares which, if the Warrant had been exercised immediately prior
to such record date, it would have been entitled to receive by virtue of such
dividend, distribution, subdivision, combination or reclassification, and the
Exercise Price shall be appropriately adjusted. Such adjustment shall be
made successively whenever any event listed in subparagraph (i) shall occur.
(b) Issuance at Less Than Fair Market Value.
(i) A "Below Market Issuance" shall be deemed to
have occurred upon the Company's issuance of rights, convertible securities,
options or warrants to all holders of Common Stock entitling them to
subscribe for or purchase Common Stock at a price per share or having a
conversion or exercise price per share
5
<PAGE>
(including the amount paid, if any, for such rights, options or warrants)
less than the Exercise Price on such record date (excluding rights or
warrants that are not immediately exercisable and for which provision is made
for the Holder to receive comparable rights or warrants).
(ii) Upon the occurrence of a Below Market
Issuance, the number of Warrant Shares to be received hereunder after such
record date shall be determined by multiplying the number of shares
receivable hereunder immediately prior to such record date by a fraction, the
denominator of which shall be the number of shares of Common Stock
outstanding on such record date plus the number of shares of Common Stock
that the aggregate offering price of the total number of shares so offered
for subscription or purchase would purchase at the Exercise Price on such
record date, and the numerator of which shall be the number of shares of
Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered for subscription or purchase, and the Exercise
Price shall be appropriately adjusted so that the new Exercise Price
multiplied by the new number of Warrant Shares shall equal the Exercise Price
multiplied by the Warrant Shares immediately preceding such adjustment.
(iii) Shares of Common Stock owned by or held
for the account of the Company or any subsidiary of the Company on such
record date shall not be deemed outstanding for the purpose of any such
computation. Such adjustment shall become effective immediately after such
record date. Such adjustment shall be made successively whenever any such
Below Market Issuance shall occur. If such rights, options or warrants are
not so issued, the number of Warrant Shares receivable hereunder shall again
be adjusted to be the number that would have been in effect had such record
date not been fixed.
(iv) On the expiration of such rights, options
or warrants, the number of Warrant Shares receivable hereunder shall be
readjusted to be the number that would have been obtained had the adjustment
made upon the issuance of such rights, options or warrants been made upon the
basis of the issuance of only the number of shares of Common Stock actually
issued upon the exercise of such rights, options or warrants, provided,
however, that if the Holder of this Warrant shall have exercised this Warrant
prior to any such readjustment, the number of Warrant Shares that have been
delivered or the number of Warrant Shares to be delivered shall not be
subject to any readjustment.
(v) In any case in which this Subsection 9.1(b)
shall require that an adjustment in the number of shares receivable hereunder
or the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event
issuing to the Holder of any Warrant exercised after such record date the
number of Warrant Shares, if any, issuable upon such exercise over and above
the number of Warrant Shares, if any, issuable upon such exercise on the
basis of the Exercise Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such Holder a due bill or other
appropriate instrument evidencing such Holder's right to receive such
additional Warrant Shares upon the occurrence of the event requiring such
adjustments.
(c) Distribution of Subscription Rights, Warrants,
Evidences of Indebtedness or Assets.
(i) The Company shall be deemed to have made a
"Distribution" upon the making of a distribution to all holders of Common
Stock (or other
6
<PAGE>
securities deliverable hereunder) (including any such distribution to be made
in connection with a consolidation or merger in which the Company is to be
the continuing corporation) of (A) any shares of capital stock of the Company
(other than Common Stock), (B) subscription rights or warrants (excluding
those for which adjustment is provided in Subsection 9.1(b) above and
excluding those that are not immediately exercisable and for which provision
is made for the Holder to receive comparable subscription rights or warrants)
or (C) evidences of its indebtedness or assets (excluding (x) dividends paid
in or distributions of the Company's capital stock for which the number of
Warrant Shares receivable hereunder shall have been adjusted pursuant to
Subsection 9.1(a) and (y) cash dividends or distributions payable out of
earnings or surplus not in excess of 10% of the Exercise Price before the
date of declaration multiplied by the number of outstanding shares of Common
Stock) (any of the foregoing being hereinafter in this paragraph (iii) called
the "Securities").
(ii) Upon the making of any such Distribution
(unless the Company elects to reserve shares or other units of such
Securities for distribution to each Holder upon exercise of the Warrant so
that, in addition to the shares of the Common Stock to which each Holder is
entitled, each Holder will receive upon such exercise the amount and kind of
such Securities which such Holder would have received if the Holder had,
immediately prior to the record date for the distribution of the Securities,
exercised the Warrant), the number of Warrant Shares receivable hereunder
after such record date shall be determined by multiplying the number of
Warrant Shares receivable hereunder immediately prior to such record date by
a fraction, the denominator of which shall be the Exercise Price on the day
immediately prior to the date on which the right to receive such Securities
accrues, less the fair market value (as determined in the reasonable judgment
of the Board of Directors of the Company and described in a statement mailed
by certified mail to the Holder) of the portion of the assets or evidences of
Indebtedness so to be distributed to a holder of one share of the Common
Stock or of such subscription rights or warrants applicable to one share of
the Common Stock, and the numerator of which shall be the Exercise Price on
such date; and the Exercise Price shall be appropriately adjusted so that the
new Exercise Price multiplied by the new number of Warrant Shares shall equal
the Exercise Price multiplied by the Warrant Shares immediately preceding
such adjustment.
(iii) Such adjustment shall become effective
immediately after such record date and shall be made successively whenever
such a record date is fixed. If such distribution is not so made, the number
of Warrant Shares receivable hereunder shall be readjusted to be the number
that was in effect immediately prior to such record date.
(iv) In the event that the Holder of this
Warrant exercises this Warrant after an adjustment is made under this
Subsection 9.1(c) and prior to a readjustment under this Subsection 9.1(c),
the number of Warrant Shares that have been delivered or the number of
Warrant Shares to be delivered shall not be subject to any readjustment. In
any case in which this Subsection 9.1(c) shall require that an adjustment in
the number of Warrant Shares receivable hereunder or the Exercise Price be
made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event issuing to the Holder of
any Warrant exercised after such record date the number of Warrant Shares, if
any, issuable upon such exercise over and above the number of Warrant Shares,
if any, issuable upon such exercise on the basis of the Exercise Price in
effect prior to such adjustment; provided, however, that the Company shall
deliver to such Holder a due bill or other appropriate instrument evidencing
such Holder's right to receive such additional Warrant Shares upon the
occurrence of the event requiring such adjustments.
7
<PAGE>
9.2 Reorganization Event. In case of any Reorganization Event
the Company shall, as a condition precedent to the consummation of the
transaction constituting, or announced as, such Reorganization Event, cause
effective provisions to be made so that the Holder shall have the right
immediately thereafter, by exercising this Warrant, to receive the aggregate
amount and kind of shares of stock and other securities and property that
were receivable upon such Reorganization Event by a holder of the number of
shares of Common Stock that would have been received immediately prior to
such Reorganization Event upon exercise of this Warrant. Any such provision
shall include provision for adjustments in respect of such shares of stock
and other securities and property that shall be as nearly equivalent as may
be practicable to the adjustments provided for in Subsection 9.1. The
foregoing provisions of this Subsection 9.2 shall similarly apply to
successive Reorganization Events.
9.3 Fractional Shares. No fractional shares of Common Stock
(or other securities deliverable hereunder) or scrip shall be issued to any
Holder in connection with the exercise of this Warrant. Instead of any
fractional share of Common Stock (or other securities deliverable hereunder)
that would otherwise be issuable to such Holder, the Company shall pay to
such Holder a cash adjustment in respect of such fractional interest in an
amount equal to such fractional interest multiplied by the Exercise Price per
share of Common Stock (or other securities deliverable hereunder) on the date
of such exercise.
9.4 Carryover. Notwithstanding any other provision of this
Section 9, no adjustment shall be made to the number of shares of Common
Stock (or other securities deliverable hereunder) to be delivered to each
Holder (or to the Exercise Price) if such adjustment would represent less
than one percent of the number of shares to be so delivered, but any such
adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which, together with any
adjustments so carried forward, shall amount to one percent or more of the
number of shares to be so delivered.
9.5 Notices of Certain Events. If at any time after the date
hereof and before the expiration of the Exercise Period:
(a) the Company authorizes the issuance to all holders of
its Common Stock of (i) rights or warrants to subscribe for or purchase
shares of its Common Stock or (ii) any other subscription rights or warrants;
or
(b) the Company authorizes the distribution to all holders
of its Common Stock of evidences of its indebtedness or assets (other than
cash dividends or distributions excluded from the operation of Subsection
9.1(c)); or
(c) there shall be any capital reorganization of the
Company or reclassification of the Common Stock (other than a change in par
value of the Common Stock or an increase in the authorized capital stock of
the Company not involving the issuance of any shares thereof) or any
consolidation or merger to which the Company is a party (other than a
consolidation or merger with a subsidiary in which the Company is the
continuing corporation and that does not result in any reclassification or
change in the Common Stock outstanding) or a conveyance or transfer of all or
substantially all of the properties and assets of the Company;
(d) there shall be any voluntary or involuntary
dissolution, liquidation or winding-up of the Company; or
8
<PAGE>
(e) there shall be any other event that would result in an
adjustment pursuant to this Section 9 in the Exercise Price or the number of
Warrant Shares that may be purchased upon the exercise hereof;
the Company will cause to be mailed to the Holder, at least fifteen days (or
ten days in any case specified in clauses (a) or (b) above) before the
applicable record or effective date hereinafter specified, a notice stating
(i) the date as of which the holders of Common Stock of record entitled to
receive any such rights, warrants or distributions is to be determined, or
(ii) the date on which any such reorganization, reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding-up is expected to become effective, and the date as of which it is
expected that holders of Common Stock of record will be entitled to exchange
their shares of Common Stock for securities or other property, if any,
deliverable upon such reorganization, reclassification, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up.
9.6 Failure to Give Notice. The failure to give the notice
required by Subsection 9.5 or any defect therein shall not affect the
legality or validity of any distribution right, warrant, consolidation,
merger, conveyance, transfer, dissolution, liquidation or winding-up or the
vote upon any such action.
Section 10. Net Issue Election. The Holder may elect to receive,
without the payment by the Holder of any additional consideration, shares
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election
notice annexed hereto duly executed, at the office of the Company; provided,
that the Holder may not make such an election unless (i) the Company has
registered the Common Stock pursuant to the Act or in connection with such
registration or (ii) upon the expiration of this Warrant. Thereupon, the
Company shall issue to the Holder such number of fully paid and nonassessable
shares of Common Stock as is computed using the following formula:
X = Y (A-B)
-------
A
where X = the number of shares to be issued to the Holder pursuant to this
Section 10.
Y = the number of shares covered by this Warrant in respect of which the
net issue election is made pursuant to this Section 10.
A = the fair market value of one share of Common Stock. If the Common
Stock is registered pursuant to the Act, the fair market value shall
mean the average high and low prices of the Common Stock on the day
prior to the exercise of this Warrant, if the Common Stock is being
traded on a national exchange; or the last reported sale price on the
day prior to exercise of this Warrant, if the Common Stock is traded
on the Nasdaq National Market, and the Common Stock is not traded on a
national exchange; or the closing bid price (or average of bid prices)
last quoted on the day prior to the exercise of this Warrant by an
established quotation service for over-the-counter securities, if the
Common Stock is not reported on the Nasdaq National Market or a
national exchange. If the election occurs in connection with the
registration of Common Stock under the Act, then the fair market value
shall be the price offered to the public. Otherwise, the fair market
value shall be as determined in good faith by the Board of Directors
of the Company, at the time the net issue election is made pursuant to
this Section 10.
9
<PAGE>
B = the Exercise Price in effect under this Warrant at the time the net
issue election is made pursuant to this Section 10. The Board of
Directors shall promptly respond in writing to an inquiry by the
Holder as to the fair market value of one share of Common Stock.
Section 11. Officers' Certificate. Whenever the number of Warrant
Shares that may be purchased on exercise of this Warrant or the Exercise
Price is adjusted as required by the provisions of Section 9, the Company
will forthwith file in the custody of its Secretary or an Assistant Secretary
at its principal office and at the office of its agent an officers'
certificate showing the adjusted number of Warrant Shares that may be
purchased at the Exercise Price on exercise of this Warrant and the adjusted
Exercise Price determined as herein provided, setting forth in reasonable
detail the facts requiring such adjustment and the manner of computing such
adjustment. Each such officers' certificate shall be signed by the
President, Chief Financial Officer or Treasurer of the Company and by the
Secretary or an Assistant Secretary of the Company. Each such officers'
certificate shall be made available at all reasonable times for inspection by
the Holder. The Company shall, forthwith after each such adjustment, cause a
copy of such certificate to be mailed to the Holder.
Section 12. Warrant Register. The Company will register this Warrant in
the Warrant Register in the name of the record holder to whom it has been
distributed or assigned in accordance with the terms hereof. The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof (notwithstanding any notation of ownership or other writing hereon
made by anyone) for the purpose of any exercise hereof or any distribution to
the Holder and for all other purposes, and the Company shall not be affected
by any notice to the contrary.
Section 13. Successors. All of the provisions of this Warrant by or for
the benefit of the Company or the Holder shall bind and inure to the benefit
of their respective successors and assigns.
Section 14. Headings. The headings of sections of this Warrant have
been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
Section 15. Amendments. This Warrant may be amended by the affirmative
vote of Holders holding Warrants to purchase not less than two-thirds of the
Warrant Shares purchasable pursuant to all of the then outstanding Warrants;
provided, that, except as expressly provided herein, this Warrant may not be
amended, without the consent of the Holder, to change (a) any price at which
this Warrant may be exercised, (b) the period during which this Warrant may
be exercised, (c) the number or type of securities to be issued upon the
exercise hereof or (d) the provisions of this Section 15.
Section 16. Notices. Unless otherwise provided in this Warrant, any
notice or other communication required or permitted to be made or given to
any party hereto pursuant to this Warrant shall be in writing and shall be
deemed made or given if delivered by hand, on the date of such delivery to
such party or, if mailed, on the fifth day after the date of mailing, if sent
to such party by certified or registered mail, postage prepaid, addressed to
it (in the case of a Holder) at its address in the Warrant Register or (in
the case of the Company) at its address set forth below, or to such other
address as is designated by written notice, similarly given to each other
party hereto.
Section 17. Governing Law. This Warrant shall be deemed to be a
contract made under the laws of the Commonwealth of Pennsylvania and for all
purposes shall be
10
<PAGE>
construed in accordance with the laws of said Commonwealth as applied to
contracts made and to be performed in Pennsylvania between Pennsylvania
residents.
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
and attested by its duly authorized officer and to be dated as of the date
first above written.
APOLLON, INC.
By /s/ Vincent R. Zurawski, Jr.
-------------------------------
Name: Vincent R. Zurawski, Jr.
Title: President and CEO
Address: One Great Valley Parkway
Malvern, PA 19355-1423
11
<PAGE>
PURCHASE FORM
The undersigned, ______________, hereby irrevocably elects to exercise
the within Warrant to purchase _____ shares of Common Stock and hereby makes
payment of $_________ in payment of the exercise price thereof.
Date:
-------------, ---- --------------------------------
[Signed]
---------------------------------
[Street Address]
---------------------------------
[City and State]
<PAGE>
NET ISSUE ELECTION NOTICE
The undersigned, _________________________, hereby irrevocably
elects under Section 10 to surrender the right to purchase ________ shares of
Common Stock pursuant to this Warrant. The certificate(s) for the shares
issuable upon such net issue election shall be issued in the name of the
undersigned or as otherwise indicated below.
Date:
----------------, ---- ------------------------------
Signature
-------------------------------
Name of Registration
-------------------------------
[Street Address]
-------------------------------
[City and State]
<PAGE>
WARRANT ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned, __________________ ("Assignor"),
hereby sells, assigns and transfers unto
Name: ("Assignee")
----------------------------------------
(Please type or print in block letters.)
Address:
-------------------------------------
-------------------------------------
Social Security or Taxpayer I.D. No.:
------------------
Assignor's right to purchase up to ____ shares of Common Stock represented by
this Warrant and does hereby irrevocably constitute and appoint the Company
and any of its officers, secretary, or assistant secretaries, as
attorneys-in-fact to transfer the same on the books of the Company, with full
power of substitution in the premises.
Date:
------------, ---- -----------------------------------------
[Signed]
<PAGE>
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION PROVIDED FOR
HEREIN HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR QUALIFIED OR
REGISTERED UNDER STATE SECURITIES OR BLUE SKY LAWS. NEITHER THIS NOTE NOR SUCH
SECURITIES MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED OR DISPOSED OF EXCEPT IN COMPLIANCE WITH THE SECURITIES ACT OF 1933,
APPLICABLE STATE SECURITIES OR BLUE SKY LAWS AND THE APPLICABLE RULES AND
REGULATIONS THEREUNDER.
PROMISSORY NOTE
$3,000,000 October 3, 1997
FOR VALUE RECEIVED AND INTENDING TO BE LEGALLY BOUND HEREBY, the
undersigned, Apollon, Inc. ("Apollon"), promises to pay to the order of A.H.
Investments Ltd. ("Investor") at 1403 Foulk Road, Suite 102, Wilmington, DE
19803 the sum of Three Million Dollars ($3,000,000), to be paid as follows: at
any time on or after April 3, 1999, principal is payable on demand, together
with accrued interest then outstanding. Interest from the date hereof shall
accrue on the unpaid principal balance hereof at the prime commercial rate of
interest of PNC Bank, N.A. plus 2% from time to time and shall be payable
quarterly.
CONVERTIBLE NOTE PURCHASE AGREEMENT - This Note is the Note referred to in
the Securities Purchase Agreement, dated as of September 19, 1997, between
Apollon and Investor (the "Securities Purchase Agreement"). The Securities
Purchase Agreement, among other things, contains provisions for the acceleration
of the maturity hereof upon the happening of certain events, and for the
amendment or waiver of certain provisions of the Securities Purchase Agreement.
DEFAULT - Upon the occurrence of any one or more of the Events of Default
specified in the Securities Purchase Agreement, all amounts then remaining
unpaid on this Note shall become, or may be declared to be, immediately due and
payable, all as provided therein.
PREPAYMENTS - Unless otherwise agreed to in writing by Apollon, this Note
may be prepaid in whole or in part, without penalty, provided that Investor
shall have the right to convert this Note as set forth herein.
CONVERSION - This Note shall be deemed automatically converted into shares
of Apollon's Common Stock, par value $.01 per share (the "Common Stock"), upon
the occurrence of a closing of an initial public offering for the account of
Apollon of Common Stock or securities convertible into or exchangeable for
shares of Common Stock in which the gross proceeds to Apollon exceed $10 million
(an "IPO"). The number of shares of Common Stock that shall be issued upon
conversion in the event of an IPO shall be the number obtained by dividing the
outstanding principal amount of this Note, plus any interest which has accrued
and remains unpaid at the time of conversion, by the per share purchase price
paid by investors for the Common Stock in such IPO. On or after the date of the
closing of such IPO, and in any event within ten days after receipt of notice,
by mail, postage prepaid from Apollon of the occurrence thereof, Investor shall
surrender this Note at the principal executive offices of Apollon, and shall
thereupon be entitled to receive certificates evidencing the number of shares of
Common Stock into which this Note shall have been converted. On the date of the
closing of such IPO, Investor shall be deemed to be a holder of record of the
shares of Common Stock issuable upon such conversion, notwithstanding that this
Note shall
<PAGE>
not have been surrendered as provided above, that notice from Apollon shall not
have been received by Investor, or that the certificates evidencing such shares
of Common Stock shall not then be actually delivered to Investor. No fractional
shares of Common Stock or scrip shall be issued to Investor upon conversion.
Instead of any fractional shares that would otherwise be issuable to Investor,
Apollon will pay to Investor a cash adjustment.
In the event an IPO does not close prior to the date twelve months
from the date of the Securities Purchase Agreement (the "Anniversary Date"),
Investor shall thereafter have the right, exercisable at any time on or after
such Anniversary Date during which the principal amount of this Note remains
unpaid, to convert this Note into shares of Common Stock (any conversion of this
Note into Common Stock upon the exercise of this right shall be referred to as
an "Optional Conversion"). The number of shares of Common Stock that shall be
issued upon an Optional Conversion shall be the number obtained by dividing the
outstanding principal amount of this Note, plus any interest which has accrued
and remains unpaid at the time of conversion, by the Conversion Price (as
hereinafter defined). For purposes hereof, the "Conversion Price" shall mean
the lesser of (i) $6.00 or (ii) the price per share paid by purchasers of Common
Stock, any series of Apollon's preferred stock or any instrument convertible
into Common Stock or preferred stock in the purchase of Common Stock, preferred
stock or such convertible instruments in a mezzanine financing, if any,
occurring after the date of this Note and most immediately preceding the
conversion. The Conversion Price shall be subject to adjustment as set forth
herein.
In the event that Apollon elects to exercise its right to prepay this
Note, Apollon shall provide Investor with written notice of its intention to
prepay this Note. Such notice shall be given in accordance with the notice
provisions of the Securities Purchase Agreement. For a period of 15 days
following the date of such written notice, Investor shall have the right to
convert this Note into shares of Common Stock (any conversion of this Note into
Common Stock upon the exercise of this right shall be referred to as a
"Prepayment Conversion"). Investor shall, by written notice, set a date for
such conversion which shall be no later than the 15th day following such
notice. The number of shares of Common Stock that shall be issued upon a
Prepayment Conversion shall be the number obtained by dividing the
outstanding principal amount of this Note, plus any interest which has
accrued and remains unpaid at the time of conversion, by the Conversion
Price. The Conversion Price shall be subject to adjustment as set forth
herein.
In the event Apollon reclassifies the Common Stock or consolidates
with or merges into another person or otherwise reorganizes its capital
structure (other than a subdivision, combination or reclassification of the
outstanding Common Stock for which adjustment is provided herein and other than
a change in the par value of the Common Stock or an increase in the authorized
capital stock of Apollon not involving the issuance of shares thereof) or
conveys or transfers all or substantially all the assets of Apollon (each, a
"Reorganization Event"), the unpaid principal amount of this Note, plus any
interest which has accrued and remains unpaid at the time of the Reorganization
Event, shall, at the option of the Investor (i) become immediately due and
payable or (ii) be convertible into the aggregate amount and kind of shares of
stock and other securities and property that were receivable upon such
Reorganization Event by a holder of the number of shares of
Common Stock that would have been received immediately prior to such
Reorganization Event upon conversion of this Note under the Optional
Conversion right. In case of any Reorganization Event Apollon shall, as a
condition precedent to the consummation of the transaction constituting, or
announced as, such Reorganization Event, cause effective provisions to be
made so that Investor shall have the right immediately thereafter, by
converting this Note, to receive the aggregate amount and kind of shares of
stock and other securities and property that were receivable upon such
Reorganization Event by a holder of the number of shares of
2
<PAGE>
Common Stock that would have been received immediately prior to such
Reorganization Event upon conversion of this Note. Any such provision shall
include provision for adjustments in respect of such shares of stock and
other securities and property that shall be as nearly equivalent as may be
practicable to the adjustments provided for herein. The foregoing provisions
of this paragraph shall similarly apply to successive Reorganization Events.
ADJUSTMENT AND ANTI-DILUTION - The Conversion Price shall be adjusted as
described below in the event Apollon shall fix or have fixed a record date at
any time after the date hereof and before the repayment of this Note for a Stock
Distribution or a Distribution (all as defined below).
(a) Stock Dividends, Subdivisions, Combinations, Reclassifications,
etc.
(i) A "Stock Distribution" shall be deemed to have occurred upon
(A) the declaration of a dividend or distribution on the Common Stock payable in
shares of capital stock (whether shares of Common Stock or of capital stock of
any other class), (B) the subdivision of shares of the Common Stock into a
greater number of shares, (C) the combination of the Common Stock into a smaller
number of shares or (D) the issuance of any shares of its capital stock by
reclassification of the Common Stock in connection with a consolidation or
merger with a subsidiary of Apollon in which Apollon is the continuing
corporation and in which Apollon issues securities representing, immediately
prior to such issuance, more than 40% of the combined voting power of Apollon's
then outstanding voting securities having power to vote in the election of
directors.
(ii) Upon the occurrence of a Stock Distribution, Investor shall
be entitled to receive the aggregate number and kind of shares which, if the
Note had been converted immediately prior to such record date, it would have
been entitled to receive by virtue of such dividend, distribution, subdivision,
combination or reclassification, and the Conversion Price shall be appropriately
adjusted. Such adjustment shall be made successively whenever any event listed
in subparagraph (i) shall occur.
(b) Distribution of Subscription Rights, Warrants, Evidences of
Indebtedness or Assets.
(i) Apollon shall be deemed to have made a "Distribution" upon
the making of a distribution to all holders of Common Stock (or other securities
deliverable hereunder) (including any such distribution to be made in connection
with a consolidation or merger in which Apollon is to be the continuing
corporation) of (A) any shares of capital stock of Apollon (other than Common
Stock), (B) subscription rights or warrants or (C) evidences of its indebtedness
or assets (excluding (x) dividends paid in or distributions of Apollon's capital
stock for which the number of shares of Common Stock (the "Conversion Shares")
receivable hereunder shall have been adjusted pursuant to paragraph (A) and (y)
cash dividends or distributions payable out of earnings or surplus not in excess
of 10% of the Conversion Price before the date of declaration multiplied by the
number of outstanding shares of Common Stock) (any of the foregoing being
hereinafter in this paragraph (b) called the "Securities").
(ii) Upon the making of any such Distribution (unless Apollon
elects to reserve shares or other units of such Securities for distribution to
each Investor upon conversion of this Note so that, in addition to the shares of
the Common Stock to which Investor is entitled, Investor will receive upon such
conversion the amount and kind of such Securities which Investor would have
received if Investor had, immediately prior to the record
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date for the distribution of the Securities, converted this Note), the number of
Conversion Shares receivable hereunder after such record date shall be
determined by multiplying the number of Conversion Shares receivable hereunder
immediately prior to such record date by a fraction, the denominator of which
shall be the Conversion Price on the day immediately prior to the date on which
the right to receive such Securities accrues, less the fair market value (as
determined in the reasonable judgment of the Board of Directors of Apollon and
described in a statement mailed by certified mail to Investor) of the portion of
the assets or evidences of Indebtedness so to be distributed to a holder of one
share of the Common Stock or of such subscription rights or warrants applicable
to one share of the Common Stock, and the numerator of which shall be the
Conversion Price on such date; and the Conversion Price shall be appropriately
adjusted so that the new Conversion Price multiplied by the new number of
Conversion Shares shall equal the Conversion Price multiplied by the Conversion
Shares immediately preceding such adjustment.
(iii) Such adjustment shall become effective immediately
after such record date and shall be made successively whenever such a record
date is fixed. If such distribution is not so made, the number of Conversion
Shares receivable hereunder shall be readjusted to be the number that was in
effect immediately prior to such record date.
(iv) In the event that Investor converts this Note after an
adjustment is made under this paragraph (b) and prior to a readjustment under
this paragraph (b), the number of Conversion Shares that have been delivered or
the number of Conversion Shares to be delivered shall not be subject to any
readjustment. In any case in which this paragraph (b) shall require that an
adjustment in the number of Conversion Shares receivable hereunder or the
Conversion Price be made effective as of a record date for a specified event,
Apollon may elect to defer until the occurrence of such event issuing to the
number of Conversion Shares, if any, issuable upon such exercise over and above
the number of Conversion Shares, if any, issuable upon such exercise on the
basis of the Conversion Price in effect prior to such adjustment; provided,
however, that Apollon shall deliver to Investor a due bill or other appropriate
instrument evidencing such Investor's right to receive such additional
Conversion Shares upon the occurrence of the event requiring such adjustments.
MISCELLANEOUS - Apollon hereby waives protest, notice of protest,
presentment, dishonor, notice of dishonor and demand. Apollon agrees to
reimburse Investor for all costs, including reasonable counsel fees, not to
exceed fifteen percent (15%) of all amounts due hereunder, incurred by Investor
in connection with the enforcement hereof. Interest shall be calculated
hereunder for the actual number of days that the principal is outstanding, based
on a year of three hundred sixty (360) days. The rights and privileges of
Investor under this Note shall inure to the benefit of its successors and
assigns. All representations, warranties and agreements of Apollon made in
connection with this Note shall bind Apollon's successors and assigns. If any
provision of this Note shall for any reason be held to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provision hereof, but this Note shall be construed as if such invalid or
unenforceable provision had never been contained herein. This Note has been
delivered in, and shall be governed by the internal laws of the Commonwealth of
Pennsylvania. The waiver of any default hereunder shall not be a waiver of any
subsequent default.
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IN WITNESS WHEREOF, Apollon has duly executed this Note the day and year
first above written and has hereunto set hand and seal.
APOLLON, INC.
Attest: /s/ James G. Murphy By: /s/ Vincent R. Zurawski, Jr.
---------------------- ----------------------------
Name: James G. Murphy Name: Vincent R. Zurawski, Jr.
Title: Vice President, Title: President and CEO
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APOLLON, INC.
1992 Omnibus Stock Option Plan
(Adopted June 15, 1992)
1. Objectives
The objectives of this Plan are to assist Apollon, Inc. (the
"Company") in attracting and retaining employees, officers and directors of and
consultants to the Company and in promoting the identification of such persons'
interests with those of the Company's shareholders.
2. Definitions
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
any successor statute or codification of the income tax laws of the United
States.
"Committee" shall mean the Stock Option Committee of the Board of
Directors, which shall consist of at least two directors, each of whom is a
disinterested person within the meaning of Rule 16b-3(c)(2)(i) under the
Exchange Act.
"Common Stock" shall mean the Company's Common Stock, par value $.01
per share.
"Date of Grant" in relation to any option granted under this Plan
shall mean the date on which, or the future date as of which, the Board or the
Committee grants that option.
"Eligible Person" shall mean any employee, consultant, officer or
director of the Company or any Parent or Subsidiary. For the purposes of
Incentive Stock Options, Eligible Persons must meet all the requirements under
Section 422 of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Exercise" in respect of an option shall mean the delivery by the
Optionee to the Company of (a) written notice of exercise of the option as to a
specified number of Shares; (b) payment of the option exercise price for such
Shares; and (c) any other statement or evidence required pursuant to Section 9
hereof.
"Fair Market Value" of a Share with respect to any day shall mean
(i) the average of the high and low price on such day for a share of Common
Stock as reported on the principal securities exchange on which shares of Common
Stock are then listed or as quoted on the NASDAQ National
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Market System, (ii) if not so listed or quoted, the average of the closing bid
and asked prices on such day as reported on NASDAQ, and (iii) if not so listed,
quoted or reported, the value as determined in good faith by the Board or the
Committee, as the case may be.
"Incentive Stock Option" shall mean any option that, at the time of
grant, meets the requirements of Section 422 of the Code and is identified as an
incentive stock option.
"ISO Plans" shall mean the Plan and all other incentive stock option
plans under Section 422 of the Code adopted or assumed by corporations that are
Qualified Employers.
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotation System.
"Non-Qualified Stock Option" shall mean any option granted under the
Plan other than an Incentive Stock Option.
"Non-Section 16 Eligible Person" shall mean an Eligible Person who
is not an Officer or a director of the Company.
"Officer" shall mean a person who has been designated by the Board
as an officer of the Company within the meaning of Rule 16a-1(f) of the Exchange
Act.
"Optionee" shall mean a person holding an option granted under this
Plan which has not been exercised or surrendered and has not expired.
"Parent" shall mean a corporation which, at the time in question,
owns at least 50% of the total combined voting power of all classes of
outstanding stock of the Company (or of a corporation that has issued or assumed
a stock option of the Company in a transaction to which Section 424(a) of the
Code applies) and a corporation which, at such time, owns at least 50% of the
total combined voting power of all classes of stock in another Parent.
"Plan" means this 1992 Omnibus Stock Option Plan, as amended from
time to time.
"Qualified Employer" shall mean the Company, any Parent or any
Subsidiary.
"Section 16 Eligible Person" shall mean an Eligible Person who is an
Officer or a director of the Company.
"Shares" shall mean shares of Common Stock of the Company for which
options may be granted hereunder.
"Subsidiary" shall mean a corporation in which, at the time in
question, the Company (or a corporation that issued or assumed a stock option of
the Company in a transaction to which Section 424(a) of the Code applies) owns
at least 50% of the total combined voting power of all classes of stock
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outstanding and a corporation in which, at such time, another Subsidiary owns at
least 50% of the total combined voting power of all classes of stock
outstanding.
"Ten Percent Shareholder" shall mean an Eligible Person who owns at
the Date of Grant more than 10% of the total combined voting power of all
classes of stock of a Qualified Employer.
3. Maximum Number of Shares to be Optioned and Adjustments in Optioned Shares
The maximum number of Shares for which options may be granted
hereunder is 1,000,000. This number shall be adjusted if the number of
outstanding shares of Common Stock of the Company is increased or reduced by
split-up, reclassification, stock dividend, or the like. The number of Shares
previously optioned and not theretofore delivered and the option exercise price
per Share shall likewise be adjusted whenever the number of outstanding shares
of Common Stock is increased or reduced by any such procedure. Shares for which
options have expired or have been surrendered may again be optioned pursuant to
the Plan.
4. Administration and Interpretation
Except to the extent provided below, this Plan shall be administered
by the Board. The Board may delegate responsibility for administration to the
Committee. The Board, or such Committee, may make such rules and establish such
procedures as it deems appropriate for the administration of the Plan. In the
event of any disagreement as to the interpretation of the Plan or any rule or
procedure thereunder, the decision of the Board, or such Committee, shall be
final and binding upon all persons in interest. Members of the Board who are
eligible to participate in or have been granted options under the Plan may vote
on matters affecting administration of the Plan; provided, however, that the
Committee shall have the authority and sole responsibility for granting options
to Section 16 Eligible Persons and authorizing the issuance of Shares upon the
exercise thereof, and for the administration of the Plan with respect thereto.
5. Granting of Options
The Board is authorized to grant options to Non-Section 16 Eligible
Persons pursuant to this Plan. The number of Shares, if any, optioned in each
year, the Non-Section 16 Eligible Persons to whom and the time or times at which
options are granted, the number of Shares optioned to each Non-Section 16
Eligible Person and the other terms and provisions of such options shall be
wholly within the discretion of the Board, subject to the limitation that no
option shall be granted (notwithstanding any other provisions of this Plan to
the contrary) later than June 15, 2002.
The Committee is authorized to grant options to Section 16 Eligible
Persons pursuant to this Plan. The number of Shares, if any, optioned in each
year, the Section 16 Eligible Persons to whom and the time or times at which
options are granted, the number of Shares optioned to each Section 16 Eligible
Person and the other terms and provisions of such options shall be wholly within
the discretion of the Committee, subject to the limitation that no option shall
be granted (notwithstanding any other provisions of this Plan to the contrary)
later than June 15, 2002.
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6. Type of Options
This Plan permits the grant of Non-Qualified Stock Options, as well
as Incentive Stock Options. Options granted under the Plan will be designated as
Non-Qualified Stock Options or Incentive Stock Options at the time of their
grant.
7. Option Terms
Subject to the limitation prescribed in Section 5 above, the options
granted under this Plan shall be on the terms stated in clauses (a) through (h)
below. The Board or the Committee, as the case may be, may specify additional
terms not inconsistent with this Plan by rules of general application or by
specific direction in connection with a particular option or group of options.
(a) The option exercise price shall be fixed by the Board or the
Committee, as the case may be, but shall not be less than 100% (110% in the case
of an Incentive Stock Option granted to a Ten Percent Shareholder) of the Fair
Market Value of the underlying Shares on the Date of Grant.
(b) The option exercise price shall be payable in cash, property,
services rendered or, under certain circumstances, in shares of Common Stock of
the Company having a Fair Market Value equal to the option exercise price on the
date of exercise, or any combination thereof, or any other means which the Board
or the Committee, as the case may be, determines are consistent with the Plan's
purpose and applicable laws.
(c) The option shall not be transferable otherwise than by will or
the laws of descent and distribution and shall be exercisable during the
Optionee's lifetime only by the Optionee or after his death by the person or
persons entitled thereto by will or the laws of descent and distribution.
(d) The term of the option shall be fixed by the Board or the
Committee, as the case may be, but no option shall be granted for a term to
exceed ten years or, in the case of an Incentive Stock Option being granted to a
Ten Percent Shareholder, for a term to exceed five years.
(e) The option shall terminate and may not be exercised if the
Optionee ceases for any reason (including death, retirement or disability) to be
an employee of the Qualified Employer, except to the extent provided in Section
9 hereof.
(f) In the event that the Company is succeeded by another company in
a reorganization, merger, consolidation, acquisition of property or stock,
separation or liquidation, the successor company shall assume the outstanding
options granted under this Plan or shall substitute new options for them, which
shall provide that the Optionee, at the same cost, shall be entitled upon the
exercise of such option to receive such securities of the surviving or resulting
corporation as the Board of Directors of such corporation shall determine to be
equivalent, as nearly as practicable, to the nearest whole number and class of
shares of stock or other securities to which the Optionee would have been
entitled under the terms of the agreement governing the reorganization, merger,
consolidation, acquisition of property or stock, separation or liquidation as
if, immediately prior to such event, the Optionee had been the holder of record
of the number of Shares which were then subject to such option.
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(g) The aggregate Fair Market Value (determined as of the Date of
Grant) of the Shares for which Incentive Stock Options are granted under the ISO
Plans to any one Eligible Person that are exercisable for the first time during
any calendar year shall not exceed $100,000.
(h) The terms and conditions of the grant of each option granted
hereunder shall be embodied in a written award certificate in a form prescribed
by the Board or by the Committee, as the case may be, which (i) has been
completed with the date, name of Optionee, number of Shares to which it relates,
type of option, term of option, option price per Share, name of Optionee's
employing company and (with respect to Incentive Stock Options) the conditions
required to qualify as an incentive stock option under Section 422 of the Code,
(ii) has been signed by a member of the Board or the Committee or an officer of
the Company designated by the Board or by the Committee, as the case may be, and
(iii) has been delivered to the Optionee.
8. Limited Stock Appreciation Rights
(a) The Committee is authorized, in its discretion, to grant limited
stock appreciation rights ("LSARs") with respect to all or any portion of the
Shares covered by stock options granted hereunder to Officers and directors of
the Company, simultaneously with the grant of, or at any time during the term
of, non-qualified options or simultaneously with the grant of incentive stock
options. The grant of the LSAR will not be effective until six months after the
date of its grant. Those options with respect to which an LSAR has been granted
and become effective shall become immediately exercisable upon the occurrence of
any of the following events (each, a "Triggering Event"): (i) the consummation
by the Company of a reorganization, merger, or consolidation after approval of
any such transaction by shareholders, other than Section 16 Eligible Persons,
holding at least the minimum number of shares necessary to approve such
transaction under the Company's Articles of Incorporation and applicable law,
(ii) the consummation by the Company of a sale of substantially all its assets
after approval of any such transaction by shareholders, other than Section 16
Eligible Persons, holding at least the minimum number of shares necessary to
approve such transaction under the Company's Articles of Incorporation and
applicable law, or (iii) the acquisition by a single purchaser or group of
related purchasers of in excess of 51% of the issued and outstanding shares of
Common Stock from shareholders of the Company other than Section 16 Eligible
Persons, in any case other than in a transaction in which the surviving
corporation or the purchaser is the Company or a Subsidiary of the Company
(other than a transaction in which the surviving corporation or the purchaser is
the Company or a Subsidiary of the Company but the capital stock of the Company
or a Subsidiary of the Company is converted into capital stock of any entity
other than the Company or any such Subsidiary) or an entity controlled by
Section 16 Eligible Persons.
(b) The LSARs shall provide that upon the occurrence of any
Triggering Event, the Optionee shall receive from the Company, for each LSAR, an
amount in cash equal to the amount by which the option exercise price per Share
of the option to which the LSAR relates is exceeded by the Fair Market Value of
the Shares issuable upon exercise of such option on the date such Triggering
Event occurs. When a Triggering Event occurs, the option to which the LSAR
relates will cease to be exercisable, but will be deemed to have been exercised
for purposes of determining the number of Shares for which options may be
granted hereunder.
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(c) An LSAR shall be expressly subject to the following additional
requirements: (i) the LSAR shall expire no later than the expiration of the
underlying option; (ii) the LSAR shall be transferable only when the underlying
option is transferable, and under the same conditions; and (iii) a Triggering
Event shall be deemed to have occurred only when the Fair Market Value of the
Shares subject to the underlying option exceeds the exercise price of such
option.
9. Exercise Rights Upon Ceasing to Be an Employee, Officer, Consultant or
Director
(a) If an Optionee becomes permanently and totally disabled, he may
exercise his option for up to one year after the date he ceases to be an
employee, officer or director of or a consultant to a Qualified Employer on
account of such disability, but in no event later than the date on which the
option would have expired if the Optionee had not become disabled. During such
period, the option may be exercised only to the extent that the Optionee was
entitled to do so at the date of disability and, to the extent the option is not
so exercised, it shall expire at the end of such period. For purposes of this
Section 9(a), an Optionee shall be deemed to be disabled if, in the
determination of the Board or the Committee, as the case may be, he is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period of
not less than 12 months.
(b) If an Optionee dies during a period in which he is entitled to
exercise an option (including the period referred to in subsection (a) above),
the option shall terminate one year after the date of death, but in no event
later than the date on which the option would have expired if the Optionee had
lived. During such period, the option may be exercised by the Optionee's
executor or administrator or by any person or persons who shall have acquired
the option directly from the Optionee by bequest or inheritance or by reason of
the death of the Optionee, but only to the extent that the Optionee was entitled
to do so at the date of death and, to the extent the option is not so exercised,
it shall expire at the end of such period.
(c) If an Optionee ceases to be an employee, officer or director of
or consultant to any and all Qualified Employers in circumstances other than
those described in subsections (a) or (b) above, he may exercise options granted
hereunder for a period not to exceed three months after the date of such
cessation, but in no event later than the date on which the option would have
expired if the Optionee had remained an employee, officer or director of or
consultant to a Qualified Employer. During such period, the option may be
exercised only to the extent that the Optionee was entitled to do so on the date
of cessation and, to the extent the option is not so exercised, it shall expire
at the end of such three-month period. This provision shall not apply if the
Optionee's employment or consultant relationship was terminated for "cause," or
if the officer or director was removed for "cause," which shall include theft,
falsification of records, fraud, embezzlement, gross negligence or willful
misconduct, causing a Qualified Employer to violate any federal, state, or local
law, or administrative regulation or ruling having the force and effect of law,
insubordination, conflict of interest, diversion of corporate opportunity, or
conduct that results in publicity that reflects unfavorably on a Qualified
Employer.
(d) For purposes of this section an Optionee who is an employee
shall not be treated as having ceased employment if (1) the Optionee is on
military, sick leave or other bona fide leave of absence (such as temporary
employment by the United States Government); and (2) the period of such
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leave does not exceed 90 days, or, if longer, so long as the Optionee's right to
reemployment with a Qualified Employer is guaranteed by statute or by contract.
Where the period of leave exceeds 90 days and the Optionee's right to
reemployment is not guaranteed by statute or by contract, such Optionee shall be
deemed to have ceased being an employee on the 91st day of such leave.
10. Additional Requirements
Upon the exercise of an option granted hereunder the Board or the
Committee, as the case may be, may require the Optionee to deliver the
following:
(a) A written statement satisfactory to the Company or its counsel
that the Optionee is purchasing the Shares for investment and not with a view
toward their distribution or sale and will not sell or transfer any Shares
received upon the exercise of the option except in accordance with the
Securities Act of 1933 and applicable state securities laws; and
(b) Evidence reasonably satisfactory to the Company that at the time
of exercise the Optionee meets such other requirements as the Board or the
Committee, as the case may be, may determine.
11. Shares Subject to Option
The Shares issuable upon exercise of options granted hereunder may
be unissued shares or treasury shares, including shares bought on the open
market. The Company at all times during the term of this Plan shall reserve for
issuance the number of Shares issuable upon exercise of options granted
hereunder.
12. Compliance with Governmental and Other Regulations
The Company will not be obligated to issue and sell the Shares
issued pursuant to options granted hereunder if, in the opinion of its counsel,
such issuance and sale would violate any applicable federal or state securities
laws. The Company will seek to obtain from each regulatory commission or agency
having jurisdiction such authority as may be required to issue and sell Shares
issuable upon exercise of any option granted hereunder. Inability of the Company
to obtain from any such regulatory commission or agency authority which counsel
for the Company deems necessary for the lawful issuance and sale of Shares upon
exercise of an option granted hereunder shall relieve the Company from any
liability for failure to issue and sell such Shares until the time when such
authority is obtained or is obtainable.
13. Nonassignment of Options
Except as otherwise provided in Paragraph 7(c) hereof, any option
granted hereunder and the rights and privileges conferred hereby shall not be
transferred, assigned, pledged or hypothecated in any way (whether by operation
of law otherwise) and shall not be subject to execution, attachment, or similar
process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise
dispose of such option, right or privilege contrary to the provisions hereof, or
upon the levy or any attachment or similar
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process upon the rights and privileges conferred hereby, such option and the
rights and privileges conferred hereby shall immediately terminate.
14. Rights of Optionee in Shares
Neither any Optionee nor the legal representatives, heirs, legatees,
or distributees of any Optionee, shall be deemed to be the holder of, or to have
any rights of a holder with respect to, any Shares issuable upon exercise of an
option granted hereunder unless and until such Shares are issued to him or them.
15. Delivery of Shares Issued Pursuant to Option
Subject to the other terms and conditions of this Plan, upon the
exercise of an option granted hereunder, the Company shall sell to the Optionee
the Shares with respect to which the option has been exercised.
16. Withholding of Applicable Taxes
A Qualified Employer shall have the right to reduce the number of
Shares otherwise required to be issued upon exercise of an option granted
hereunder by an amount which would have a Fair Market Value on the date of such
exercise equal to all Federal, state, city, or other taxes as shall be required
to be withheld by the Qualified Employer pursuant to any statute or other
governmental regulation or ruling. In connection with all such withholding
obligations (whether arising in connection with an exercise of an option granted
hereunder or in connection with a disqualifying disposition (as defined in
Section 421(b) of the Code) of stock obtained upon exercise of an Incentive
Stock Option granted hereunder), a Qualified Employer may make any other
arrangements consistent with this Plan as it may deem appropriate, including but
not limited to withholding such taxes from cash compensation payable to the
Optionee and requiring the Optionee to remit cash in an amount equal to the
taxes required to be withheld.
17. Plan and Options Not to Affect Employment or Other Affiliation
Neither this Plan nor any options granted hereunder shall confer
upon any Eligible Person any right to continue employment or affiliation with
any Qualified Employer.
18. Amendment of Plan
The Board may make such amendments to this Plan as it deems
necessary or advisable, provided that, without further action by the
shareholders of the Company, no such amendment shall (a) materially increase the
maximum number of Shares for which options may be granted, except as provided in
Section 3, (b) materially increase the benefits under the Plan, or (c)
materially modify the requirements as to eligibility for participation in the
Plan, and in no event shall any such amendment impair the rights of any
participant under any option theretofore granted.
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19. Notices
Any notice required or permitted hereunder shall be sufficiently
given only if sent by registered or certified mail, postage prepaid, addressed
to the Company, 200 Great Valley Parkway, Malvern, PA 19355 and to the Optionee
at the address on file with the Company at the time of grant hereunder, or to
such other address as either party may hereafter designate in writing by notice
similarly given by one party to the other.
20. Successors
The Plan shall be binding upon and inure to the benefit of any
successor, successors or assigns of the Company.
21. Severability
If any part of this Plan shall be determined to be invalid or void
in any respect, such determination shall not affect, impair, invalidate, or
nullify the remaining provisions of this Plan which shall continue in full force
and effect.
22. Termination of the Plan
The Board may terminate this Plan at any time; otherwise this Plan
shall terminate June 15, 2002. Termination of the Plan shall not deprive
Optionees of their rights under previously granted options.
23. Grants of Options after Amendments to Plan
The grant of any option hereunder on or after the date the Board has
adopted any amendments to the Plan that require shareholder approval pursuant to
Section 18 hereof, is subject to the express condition that within 12 months
after such date, the holders of a majority of the outstanding shares of Common
Stock present, or represented, and entitled to vote thereon shall have approved
the Plan at a duly held meeting of the shareholders of the Company.
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Exhibit 10.2
APPOLLON, INC.
1997 NON-QUALIFIED STOCK OPTION PLAN
ARTICLE I
Purpose
The purpose of the 1997 Non-Qualified Stock Option Plan (the "Plan") is
to enable Apollon, Inc. (the "Company") to attract and retain employees,
officers and directors of, and consultants to, the Company and to promote the
identification of such persons' interests with those of the Company's
shareholders.
ARTICLE II
Definitions
For purposes of the Plan, the following terms shall have the following
meanings:
2.1 "Administrator" shall mean the Board or, if the Board has delegated
its responsibility to administer the Plan pursuant to Section 3.1 hereof, the
Committee.
2.2 "Board" shall mean the Board of Directors of the Company.
2.3 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.4 "Committee" shall mean the Compensation Committee of the Board.
2.5 "Common Stock" shall mean the Common Stock, par value $.01 per
share, of the Company.
2.6 "Disability" shall mean a disability that results in an Optionee's
Termination of Employment, as determined in good faith by the Administrator.
2.7 "Effective Date" shall mean the date on which the Plan is approved
by the Board.
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2.8 "Eligible Person" shall mean (i) any employee or officer of the
Company or any parent or subsidiary of the Company, (ii) any director of the
Company or (iii) any consultant to the Company.
2.9 "Fair Market Value" for purposes of the Plan, unless otherwise
required by any applicable provision of the Code or any regulations issued
thereunder, shall mean, as of any date, the average of the high and low sales
prices of a share of Common Stock as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to
trading, or, if not listed or traded on any such exchange, The Nasdaq Stock
Market ("Nasdaq"), or , if such sales prices are not available, the average
of the bid and asked prices per share reported on Nasdaq, or, if such
quotations are not available, the fair market value as determined by the
Board, which determination shall be conclusive.
2.10 "Optionee" shall mean an individual to whom a Stock Option has
been granted under the Plan.
2.11 "Stock Option" or "Option" shall mean any option to purchase
shares of Common Stock granted pursuant to Article VI hereof.
2.12 "Termination of Employment" shall mean (i) in the case of an
Optionee who is an employee or officer, the termination of such Optionee's
employment with the Company and all of its subsidiaries for reasons other
than military or personal leave of absence granted by the Company, (ii) in
the case of an Optionee who is a director of the Company, such Optionee's
ceasing to be a member of the Board, and (iii) in the case of an Optionee who
is a consultant, the termination of such Optionee's consulting relationship
with the Company.
ARTICLE III
Administration
3.1 Administration. The Plan shall be administered and interpreted by
the Board; provided, however, that the Board may delegate its administration
responsibility to the Committee. The Administrator shall have full authority
to grant, pursuant to the terms of the Plan, Stock Options to any Eligible
Person. In particular, the Administrator shall have the authority: (a) to
select the Eligible Persons to whom Stock Options may from time to time be
granted; (b) to determine whether and to what extent Stock Options are to be
granted to Eligible Persons; (c) to determine the number of shares of Common
Stock to be covered by each Option granted pursuant to Article VI; and (d) to
determine the terms and conditions, not inconsistent with the terms of the
Plan, of any Option granted under Article
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VI (including, but not limited to, the option price, the option term,
installment exercise or waiting period provisions and provisions relating to
the waiver or acceleration thereof).
3.2 Guidelines. Subject to the express provisions of the Plan, the
Administrator shall have the following authority: (i) to adopt, alter and
repeal such administrative rules, guidelines and practices governing the Plan
as it shall, from time to time, deem advisable; (ii) to interpret the terms
and provisions of the Plan and any Option granted under the Plan (and any
agreements relating thereto); and (iii) to otherwise supervise the
administration of the Plan. The Administrator may correct any defect, supply
any omission or reconcile any inconsistency in the Plan or in any Option in
the manner and to the extent it shall deem necessary to carry the Plan into
effect. Notwithstanding the foregoing, no action of the Administrator under
this Section 3.2 shall impair the rights of any Optionee without such
person's consent, unless otherwise required by law.
3.3 Decisions Final. Any decision, interpretation or other action made
or taken in good faith by the Administrator arising out of or in connection
with the Plan shall be final, binding and conclusive on the Company, the
Administrator, all officers, employees, directors and consultants, and their
respective heirs, executors, administrators, successors and assigns.
ARTICLE IV
Share Limitation
4.1 Shares. The maximum aggregate number of shares of Common Stock
that may be issued under the Plan shall be 200,000 shares of Common Stock
(subject to any increase or decrease pursuant to Section 4.2 hereof), which
may be either authorized and unissued shares of Common Stock or issued Common
Stock that has been reacquired by the Company. If any Option granted under
the Plan shall expire, terminate or be cancelled for any reason without having
been exercised in full, the number of unpurchased shares shall again be
available for the purposes of the Plan.
4.2 Changes. In the event of any merger, reorganization,
consolidation, recapitalization, dividend (other than a regular cash
dividend), stock split, or other change in corporate structure affecting the
Common Stock, such substitution or adjustment shall be made in the maximum
aggregate number of shares that may be issued under the Plan and the number
of shares subject to, and the option price of, outstanding Options as may be
determined to be appropriate by the Board, in its sole discretion, provided
that the number of shares subject to any Option shall always be a whole
number.
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ARTICLE V
Eligibility
5.1 Eligible Persons. Options may be granted to any Eligible Person.
Eligibility under the Plan shall be determined by the Administrator.
ARTICLE VI
Grant of Stock Options
6.1 Non-Qualified Options. All Stock Options granted to Eligible
Persons under the Plan shall be non-qualified stock options (i.e., options
that do not qualify as incentive stock options under Section 422 of the Code).
6.2 Grants. The Administrator shall have the authority to grant one or
more Stock Options to any Eligible Person, subject to the terms and
conditions set forth herein.
6.3 Terms of Options. Options granted under the Plan shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of the Plan, as the
Administrator shall deem desirable:
(a) Stock Option Certificate. Each Stock Option shall be
evidenced by, and subject to the terms of, a Stock Option Certificate
executed by the Company. The Stock Option Certificate shall specify the
number of shares of Common Stock subject to the Stock Option, the option
price, the option term, and the other terms and conditions applicable to the
Stock Option.
(b) Option Price. The option price per share of Common Stock
purchasable upon exercise of a Stock Option shall be determined by the
Administrator at the time of grant, but in no event shall be less than 100%
of the Fair Market Value of a share of Common Stock on the date the Option is
granted.
(c) Option Term. The term of each Stock Option shall be fixed by
the Administrator at the time of grant, but no Option shall be exercisable
more than ten years after the date it is granted.
(d) Exercisability. Stock Options shall become exercisable at
such time or times and subject to such terms and conditions as shall
be determined by the
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Administrator at the time of grant. The Administrator may waive any
installment exercise or waiting period provisions, in whole or in part, at
any time after the date of grant, based on such factors as the Administrator
shall deem appropriate in its sole discretion.
(e) Method of Exercise. Subject to such installment exercise and
waiting period provisions as may be imposed by the Administrator, Stock
Options may be exercised in whole or in part at any time during the option
term by giving written notice of exercise to the Company specifying the
number of shares of Common Stock to be purchased and the option price
therefor. The notice of exercise shall be accompanied by payment in full of
the option price and, if requested, by the representation described in
Section 9.2. The option price may be paid in cash or by check payable to the
Company or in such other form as the Administrator deems acceptable. Unless
otherwise determined by the Administrator, payment of the option price may be
made in the form of Common Stock duly owned by the Optionee (and for which
the Optionee has good title free and clear of any liens and encumbrances) or
by reduction in the number of shares issuable upon such exercise, based, in
either case, on the Fair Market Value of the Common Stock on the date of
exercise. Upon payment in full of the option price and satisfaction of the
other conditions provided herein, a stock certificate representing the number
of shares of Common Stock to which the Optionee is entitled shall be issued
and delivered to the Optionee. An Optionee shall not be deemed to be the
holder of Common Stock, or to have the rights of a holder of Common Stock,
with respect to shares subject to the Option, unless and until a stock
certificate representing such shares of Common Stock is issued to such
Optionee.
(f) Death. Unless otherwise determined by the Administrator on
or after the date of grant, upon an Optionee's Termination of Employment by
reason of death, any Stock Option that was exercisable on the date of such
Optionee's death may thereafter be exercised by the legal representative of
the Optionee's estate for a period of one year after the date of death or
until the expiration of the stated term of the Stock Option, whichever period
is shorter, and any Stock Option not exercisable on the date of death shall
be forfeited.
(g) Disability. Unless otherwise determined by the Administrator
on or after the date of grant, upon an Optionee's Termination of Employment
by reason of Disability, any Stock Option that was exercisable on the date of
Termination of Employment may thereafter by exercised by the Optionee for a
period of one year after such date or until the expiration of the stated term
of the Stock Option, whichever period is shorter, and any Stock Option not
exercisable on the date of Termination of Employment shall be forfeited;
provided, however, that if the Optionee dies during such one-year period, any
unexercised Stock Options may be exercised by the legal representative of the
Optionee's estate for a period of one year after the date of the Optionee's
death or until the expiration of the stated term of the Stock Option,
whichever period is shorter.
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(h) Other Termination. Unless otherwise determined by the
Administrator on or after the date of grant, in the event of an Optionee's
Termination of Employment for any reason other than death or Disability, any
Stock Option that was exercisable on the date of Termination of Employment
may thereafter be exercised by the Optionee for a period of three months
after such date or until the expiration of the stated term of the Stock
Option, whichever period is shorter, and any Stock Option not exercisable on
the date of Termination of Employment shall be forfeited.
(i) Committee Discretion. Notwithstanding any other provision of
this Plan, the Administrator may, in its sole discretion, accelerate the
exercisability of any outstanding Stock Option and/or extend the
post-termination exercise periods set forth in subsections (f), (g) and (h)
of this Section 6.3, provided that such post-termination exercise period may
not be extended beyond the expiration of the stated term of such Stock Option.
(j) Non-Transferability of option. No Stock Option shall be
transferable by an Optionee otherwise than by will or by the laws of descent
and distribution, to the extent consistent with the terms of the Plan and the
Option, and all Stock Options shall be exercisable, during an Optionee's
lifetime, only by the Optionee.
ARTICLE VII
Termination or Amendment
7.1 Termination or Amendment of the plan. The Board may at any time
amend, discontinue or terminate the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article IX); provided, however, that,
unless otherwise required by law, the rights of an Optionee with respect to
Options granted prior to such amendment, discontinuance or termination, may
not be impaired without the consent of such Optionee and, provided further,
that the Company will submit an amendment to the Company's shareholders for
their approval if such approval is necessary to comply with the Code, Federal
or state securities laws or other applicable rules or regulations.
7.2 Amendment of Options. The Administrator may amend the terms of
any Stock Options theretofore granted, prospectively or retroactively, but,
subject to Article IV, no such amendment or other action by the Administrator
shall impair the rights of any Optionee without the Optionee's consent.
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ARTICLE VIII
Unfunded Plan
8.1 Unfunded Status of Plan. The Plan is intended to constitute an
"unfunded" plan for incentive compensation. With respect to any payment not
yet made to an Optionee by the Company, nothing contained herein shall give
any such individual any rights that are greater than those of a general
creditor of the Company.
ARTICLE IX
General Provisions
9.1 Nonassignment. Except as otherwise provided in the Plan, Options
granted hereunder and the rights and privileges conferred thereby shall not
be sold, transferred, assigned, pledged or hypothecated in any way (whether
by operation of law or otherwise), and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of such Option, right or privilege contrary
to the provisions hereof, or upon the levy of any attachment or similar
process thereon, such Option and the rights and privileges conferred thereby
shall immediately terminate and the Option shall immediately be forfeited to
the Company.
9.2 Legend.
(a) The Administrator may require each person purchasing shares
upon exercise of an Option to represent to the Company in writing that the
Optionee is acquiring the shares without a view to distribution thereof. The
stock certificates representing such shares may include any legend which the
Administrator deems appropriate to reflect any restrictions on transfer.
(b) All certificates representing shares of Common Stock
delivered under the Plan shall be subject to such stock transfer orders and
other restrictions as the Administrator may deem advisable under the rules,
regulations and other requirements of the Securities and Exchange Commission,
any stock exchange upon which the Common Stock is then listed or traded on
Nasdaq, any applicable Federal or state securities law, and any applicable
corporate law, and the Board may cause a legend or legends to be put on any
such certificates to make appropriate reference to such restrictions.
9.3 No Rights as a Shareholder. The recipient of any Option under the
Plan, unless otherwise provided by the Plan, shall have no rights as a
shareholder of the
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Company unless and until options are exercised and shares of Common Stock are
delivered to him.
9.4 Other Plans. Nothing contained in the Plan shall prevent the Board
from adopting other or additional compensation arrangements, subject to
shareholder approval if such approval is required; and such arrangements may
be either generally applicable or applicable only in specific cases.
9.5 No Right to Continue Relationship. Neither the Plan nor the grant
of any Option under the Plan shall confer upon any person any right to
continue as an employee, consultant or director of the Company, or limit the
right of the Company to terminate any Optionee's employment or consulting
relationship with the Company at any time, or obligate the Company to
nominate any director for reelection by the Company's shareholders.
9.6 Withholding of Taxes. The Company shall have the right to reduce
the number of shares of Common Stock otherwise deliverable upon exercise of
an Option by an amount that would have a Fair Market Value equal to the
amount of all Federal, state and local taxes required to be withheld, or to
deduct the amount of such taxes from any cash payment otherwise to be made to
the Optionee. In connection with such withholding, the Company may make such
arrangements as are consistent with the Plan as it may deem appropriate.
9.7 Listing and Other Conditions.
(a) If the Common Stock is listed on a national securities exchange
or Nasdaq, the issuance of any shares of Common Stock upon exercise of an
Option shall be conditioned upon such shares being listed on such exchange or
Nasdaq. The Company shall have no obligation to issue such shares unless and
until such shares are so listed, and the right to exercise any Option shall
be suspended until such listing has been effected.
(b) If at any time counsel to the Company shall be of the opinion
that any sale or delivery of shares of Common Stock upon exercise of an
Option is or may in the circumstances be unlawful or result in the imposition
of excise taxes under the statutes, rules or regulations of any applicable
jurisdiction, the Company shall have no obligation to make such sale or
delivery, or to make any application or to effect or to maintain any
qualification or registration under the Securities Act of 1933, as amended,
or otherwise with respect to shares of Common Stock, and the right to
exercise any Option shall be suspended until, in the opinion of such counsel,
such sale or delivery shall be lawful or shall not result in the imposition of
excise taxes.
(c) Upon termination of any period of suspension under this Section
9.7, any Option affected by such suspension which shall not then have expired
or terminated
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shall be reinstated as to all shares available before such suspension and as
to shares which would otherwise have become available during the period of
such suspension, but no such suspension shall extend the term of any Option.
9.8 Governing Law. The Plan and actions taken in connection herewith
shall be governed and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
9.9 Construction. Wherever any words are used in the Plan in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any
words are used herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they would so apply.
9.10 Liability of the Board. No member of the Board nor any employee of
the Company or any of its subsidiaries shall be liable for any act or action
hereunder, whether of omission or commission, by any other member of the
Board or employee or by any agent to whom duties in connection with the
administration of the Plan have been delegated or, except in circumstances
involving bad faith, gross negligence or fraud, for anything done or omitted
to be done by himself.
9.11 Costs. The Company shall bear all expenses incurred in
administering the Plan, including expenses of issuing Common Stock upon the
exercise of Options.
9.12 Severability. If any part of the Plan shall be determined to be
invalid or void in any respect, such determination shall not affect, impair,
invalidate or nullify the remaining provisions of the Plan which shall
continue in full force and effect.
9.13 Successors. The Plan shall be binding upon and inure to the benefit
of any successor or successors of the Company.
9.14 Heading. Article and section headings contained in the Plan are
included for convenience only and are not to be used in construing or
interpreting the Plan.
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ARTICLE X
Term of Plan
10.1 Effective Date. The Plan shall be effective as of the Effective
Date.
10.2 Termination. Unless sooner terminated, the Plan shall terminate ten
years after the Effective Date and no Options shall be granted thereafter.
Termination of the Plan shall not affect Options granted before such date,
which shall continue to be exercisable, in accordance with the terms of the
Plan, after the Plan terminates.
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APOLLON, INC.
STOCK OPTION CERTIFICATE
This certifies that, pursuant to the Apollon, Inc. 1997 Non-Qualified
Stock Option Plan, an option to purchase shares of Common Stock of Apollon,
Inc. has been granted as follows:
Name and Address
of Optionee:
Position of
Optionee:
Date of Grant:
Type of Option: Non-Qualified
Number of shares
subject to Option:
Exercise Price:
Vesting Schedule:
Expiration Date:
<PAGE>
The option is subject to all the terms and conditions of the
aforementioned Plan, a copy of which is attached to this certificate.
Date: APOLLON, INC.
------------------------------
By:
Title:
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
RESEARCH AND DEVELOPMENT and LICENSE AGREEMENT
between
APOLLON, INC.
and
AMERICAN CYANAMID COMPANY
July 19, 1995
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS................................................. 2
ARTICLE II
COMMITTEES
SECTION 2.01. STEERING COMMITTEE.......................................... 10
SECTION 2.02. R&D MANAGEMENT COMMITTEE.................................... 11
SECTION 2.03. REPRESENTATION OF COMMITTEES................................ 12
SECTION 2.04. REPLACEMENT OF MEMBERS; MEETINGS OF
COMMITTEES............................................. 13
SECTION 2.05. COSTS OF PARTICIPATION ON COMMITTEES........................ 13
SECTION 2.06. DISPUTE RESOLUTION.......................................... 14
ARTICLE III
RESEARCH PROGRAMS
SECTION 3.01. SCOPE OF COLLABORATION...................................... 15
SECTION 3.02. PRIMARY PRODUCT RESEARCH AND DEVELOPMENT
AND PRECLINICAL PHASES OF PRODUCT
DEVELOPMENT............................................ 16
SECTION 3.03. CLINICAL PHASE OF PRODUCT DEVELOPMENT....................... 17
SECTION 3.04. SUPPLY OF ACY INCLUDED GENES................................ 18
SECTION 3.05. EFFORTS REQUIRED............................................ 18
SECTION 3.06. NO GUARANTEE OF RESULTS..................................... 19
SECTION 3.07. RIGHT TO SUBCONTRACT........................................ 19
SECTION 3.08. NO FUNDING FROM THIRD PARTIES............................... 20
ARTICLE IV
REGULATORY MATTERS
SECTION 4.01. REGULATORY APPROVAL STRATEGY................................ 21
SECTION 4.02. COOPERATION OF PARTIES; EFFORTS REQUIRED.................... 21
SECTION 4.03. ADVERSE EVENT REPORTS....................................... 22
SECTION 4.04. COMMUNICATIONS WITH AGENCIES................................ 22
SECTION 4.05. OWNERSHIP OF PRODUCT REGULATORY FILES
AND REGULATORY APPROVALS............................... 23
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ARTICLE V
OPTIONS FOR [ ] AND [ ] VACCINES
Page
SECTION 5.01. GRANT OF OPTIONS............................................ 24
SECTION 5.02. EXERCISE OF OPTIONS and R&D PAYMENTS........................ 24
SECTION 5.03. EXTENSION OF OPTION TERM.................................... 25
SECTION 5.04. EXCLUSIVITY OF RESEARCH DURING OPTION TERM.................. 26
SECTION 5.05. RIGHT OF FIRST NEGOTIATION.................................. 26
SECTION 5.06. SUPPLY OF CONSTRUCT PLASMIDS................................ 28
ARTICLE VI
FUNDING OF RESEARCH PROGRAMS
SECTION 6.01. MILESTONE PAYMENTS.......................................... 28
SECTION 6.02. PAYMENT DUE FOR MILESTONES OF INITIAL
HIV PRODUCT............................................ 30
SECTION 6.03. NOTIFICATION OF MILESTONES.................................. 30
SECTION 6.04. REIMBURSEMENT OF PHASE III RESEARCH AND
DEVELOPMENT EXPENSES OF APOLLON........................ 30
SECTION 6.05. FUNDING OF PHASE III TRIALS OF HIV
PRODUCTS BY APOLLON.................................... 31
SECTION 6.06. ADDITIONAL R&D PAYMENTS TO APOLLON.......................... 31
SECTION 6.07. RESEARCH AND DEVELOPMENT TAX CREDITS........................ 31
ARTICLE VII
LICENSE GRANTS
SECTION 7.01. LICENSE GRANT TO APOLLON.................................... 32
SECTION 7.02. REQUIRED ROYALTIES.......................................... 32
SECTION 7.03. OPTION TO ACQUIRE SUBLICENSE................................ 33
SECTION 7.04. LICENSE GRANT TO ACY........................................ 34
SECTION 7.05. NO RIGHT TO SUBLICENSE...................................... 34
SECTION 7.06. EXCLUSIVITY OF RESEARCH AND DEVELOPMENT..................... 35
ARTICLE VIII
PATENTS
SECTION 8.01. OWNERSHIP................................................... 35
SECTION 8.02. PATENT PROSECUTION.......................................... 36
SECTION 8.03. INTELLECTUAL PROPERTY RIGHT DISCLAIMERS..................... 38
SECTION 8.04. PATENT TERM RESTORATION AND OTHER
EXTENSIONS OF PATENT LIFE.............................. 38
SECTION 8.05. THIRD PARTY INFRINGEMENT.................................... 39
SECTION 8.06. LICENSING OF JOINT INVENTIONS............................... 43
SECTION 8.07. INTELLECTUAL PROPERTY SUBJECT TO APOLLON'S
AGREEMENTS WITH ACADEMIC COLLABORATORS................. 44
SECTION 8.08. USE AND OWNERSHIP OF MATERIALS.............................. 45
SECTION 8.09. SHARING OF DATA ON [ ]......................... 45
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ARTICLE IX
MANUFACTURING OF PRODUCTS
Page
SECTION 9.01. MANUFACTURING FOR RESEARCH AND DEVELOPMENT.................. 46
SECTION 9.02. MANUFACTURE, PURCHASE AND SUPPLY FOR
COMMERCIAL SALES....................................... 46
SECTION 9.03. MANUFACTURING PLANS......................................... 47
SECTION 9.04. RIGHT TO SUBCONTRACT MANUFACTURING.......................... 47
ARTICLE X
REPRESENTATIONS AND WARRANTIES
SECTION 10.01. REPRESENTATIONS AND WARRANTIES OF APOLLON.................. 48
SECTION 10.02. REPRESENTATIONS AND WARRANTIES OF ACY...................... 50
ARTICLE XI
RECORD KEEPING AND AUDITS
SECTION 11.01. RECORDS RETENTION.......................................... 53
SECTION 11.02. AUDIT RIGHTS............................................... 53
SECTION 11.03. RETENTION OF RECORDS....................................... 54
SECTION 11.04. SURVIVAL................................................... 54
ARTICLE XII
PUBLICATIONS
SECTION 12.01. PUBLICATIONS............................................... 54
SECTION 12.02. PUBLICITY.................................................. 55
ARTICLE XIII
CONFIDENTIALITY
SECTION 13.01. CONFIDENTIALITY; EXCEPTIONS................................ 56
SECTION 13.02. AUTHORIZED DISCLOSURE...................................... 57
SECTION 13.03. CONFIDENTIAL OR PROPRIETARY INFORMATION
OF OTHERS............................................. 58
SECTION 13.04. SURVIVAL................................................... 58
ARTICLE XIV
TERM OF AGREEMENT
SECTION 14.01. TERM....................................................... 59
SECTION 14.02. TERMINATION BY MUTUAL AGREEMENT............................ 59
SECTION 14.03. UNILATERAL TERMINATION WITHOUT CAUSE....................... 60
SECTION 14.04. TERMINATION FOR BREACH..................................... 61
SECTION 14.05. TERMINATION FOR CHANGE IN CONTROL.......................... 64
SECTION 14.06. TERMINATION FOR PATENT BLOCKING EVENT...................... 65
SECTION 14.07. TERMINATION DUE TO INSOLVENCY.............................. 67
SECTION 14.08. EFFECT OF TERMINATION ON SUPPLY AGREEMENT.................. 69
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
ARTICLE XV
MISCELLANEOUS
Page
SECTION 15.01. NOTICES.................................................... 69
SECTION 15.02. NO AGENCY.................................................. 70
SECTION 15.03. FORCE MAJEURE.............................................. 71
SECTION 15.04. NO IMPLIED LICENSES........................................ 72
SECTION 15.05. NO WAIVER.................................................. 72
SECTION 15.06. SEVERABILITY............................................... 72
SECTION 15.07. GOVERNING LAW.............................................. 72
SECTION 15.08. MODIFICATION; ASSIGNMENT................................... 73
SECTION 15.09. THIRD PARTY LICENSE(S)..................................... 74
SECTION 15.10. LIMITATIONS OF DAMAGES..................................... 75
SECTION 15.11. METHOD OF PAYMENT.......................................... 75
SECTION 15.12. ENTIRE AGREEMENT........................................... 75
SECTION 15.13. COUNTERPARTS............................................... 76
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
RESEARCH AND DEVELOPMENT AGREEMENT
This Agreement, dated as of the 19th day of July, 1995, by and
between Apollon, Inc., a corporation organized and existing under the laws of
the Commonwealth of Pennsylvania, having its principal place of business at One
Great Valley Parkway, Malvern, Pennsylvania ("Apollon"), and American Cyanamid
Company, a corporation organized and existing under the laws of the State of
Maine, having its principal place of business at One Cyanamid Plaza, Wayne, New
Jersey ("ACY").
W I T N E S S E T H
WHEREAS, Apollon is a biotechnology company engaged in, among other
things, the development of therapeutic and prophylactic vaccines incorporating
certain technology relating to facilitated transfer and expression of nucleic
acids;
WHEREAS, ACY is engaged in the development, manufacture, and sale of
therapeutic and prophylactic vaccines;
WHEREAS, Apollon and ACY have discussed opportunities concerning
their joint efforts in a worldwide cooperation in the
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
development, manufacture and sale of certain therapeutic and prophylactic
polynucleotide-based genetic vaccination products;
WHEREAS, ACY wishes to provide certain development funding for such
products and obtain, inter alia, certain licenses and the exclusive right to
purchase such products from Apollon; and
WHEREAS, ACY and Apollon have entered into that certain supply
agreement of even date herewith (the "Supply Agreement").
NOW, THEREFORE, in consideration of the mutual promises and
undertakings set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS.
(a) Unless otherwise provided herein, each capitalized term
used herein shall have the following meanings:
"Affiliate" shall mean any corporation or other business entity
which directly or indirectly through stock ownership or through another
arrangement either controls, is controlled by, or is under common control with,
a party, with the
2
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
proviso that Wyeth-Eisai Co., Ltd., Genetics Institute, Inc., and Immunex
Corporation shall not be considered Affiliates hereunder, until such time as ACY
shall notify Apollon that one or more of said companies shall be considered an
Affiliate hereunder.
"Agreement Year" means, initially, from the Effective Date hereof
through December 31, 1995, and thereafter, each calendar year during the term of
this Agreement for any partial calendar year ending on the termination of this
Agreement).
"Allocated Manufacturing Overhead Costs" shall mean all costs (fixed
and variable), other than Direct Labor Costs and Direct Material Costs (each as
defined below), associated with or incurred by Apollon in connection with the
manufacturing of any Product, including clinical trial quantities, such as
indirect materials, indirect labor, repairs and maintenance, utilities,
insurance premiums for property, casualty, and similar facilities coverage
(allocated on the basis of square footage used in production), leased equipment
costs and equipment depreciation, real estate and property taxes, and
administrative costs. With respect to any Product, Allocated Manufacturing
Overhead Costs shall be equitably allocated among the Product and Apollon's
other products.
"Application" as used hereunder shall mean application of the
Technology to develop Products for Indications in the Field.
3
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
"Anniversary Date" shall mean the date that is (12) twelve months
from the Effective Date of this Agreement, and each subsequent annual
anniversary thereof.
"Background Technology" shall mean all Know-How that Apollon has an
ownership interest or other rights in or has the right to acquire an ownership
interest in or other rights in (under licenses from others or otherwise) as of
the Effective Date and that is necessary or materially useful to manufacture,
import, Exploit, or otherwise use Products.
[
]
"Business Information" shall mean any and all business and
commercial information or other data in any form concerning the business,
operations, financials, or assets of a party.
"Direct Labor Costs" shall mean the cost of employees who are
directly employed in producing Products or in testing and approving materials
used in manufacturing, completed manufacturing batches or finished Products.
This excludes supervision, which is included in Allocated Manufacturing Overhead
Costs. Direct Labor Costs includes, but is not limited to, base pay, overtime,
vacation and holidays, illness, personal days off with pay, shift differential,
costs of employee fringe
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benefits, such as health and life insurance, payroll taxes, welfare, pension and
profit sharing.
"Direct Material Costs" shall mean all material and packaging costs
that are specifically identifiable to a Product, including, but not limited to,
inert raw materials or excipient, active substances/ingredients, packaging
components and the cost of finished or unfinished materials purchased from
others.
"Effective Date" shall mean the date set forth in the first
paragraph of this Agreement.
"Exploitation" shall mean commercial development, promotion,
marketing, sale, offer for sale, or other commercial disposition, and "Exploit"
shall have a correlative meaning.
"FDA" shall mean the United States Food and Drug Administration or
any successor agency thereof.
"Field" shall initially mean treatment or prophylaxis relating to
infections or any disease state caused by HIV, HSV and HPV, but excluding
associated opportunistic infections. Upon ACY's exercise of either the [ ]
Option and/or the [ ] Option, the Field shall be expanded to also include
infections or any disease states caused by [ ] or
[ ], but in each case excluding associated opportunistic infections.
"Fully Burdened Manufacturing Costs" shall mean all costs incurred
in connection with the manufacture of a Product,
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including Direct Material Costs, Direct Labor Costs and Allocated Manufacturing
Overhead Costs.
"GMP" shall mean the then-current good manufacturing practice
regulations of the FDA as described in Title 21 of the United States Code of
Federal Regulations or any successor regulations.
"Government Approvals" shall mean any approvals, licenses,
registrations or authorizations, howsoever called, of any federal, state or
local regulatory agency, department, bureau or other government entity, anywhere
in the world, including, without limitation, the FDA, necessary for the
manufacture, use, storage, transport or sale of a Product, both interterritory
and intraterritory, anywhere in the Territory, and including, without
limitation, PLAs or ELAs (as defined below). "Governmental Approval" and
"Government Approved" shall each have a corollary adjectival meaning.
"HIV" (Human Immunodeficiency Virus) shall mean a human retrovirus
which is able to enter, infect and eventually kill healthy immune cells, leading
to AIDS.
"HPV" (Human Papillomavirus) shall mean a subfamily of the
Papovavirida, which as a group are known to be small, nonenveloped, icosahedral
DNA viruses which replicate episomally in the nuclei of squamous epithelial
cells.
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"HSV" (Herpes Simplex Virus) shall mean viruses which are members of
the family Herpesviridae, generally consisting of virions having an
electron-opaque core containing a double stranded DNA, an icosahedral capsid
surrounding the core, and an outer envelope exhibiting glycoprotein spikes on
its surface. Herpes simplex virus 1 and Herpes simplex virus 2, also known as
HSV-1 and HSV-2, respectively are members of this family.
"Indication" shall mean the use of a specific Product in humans for
(i) any therapeutic treatment of an infection or disease state, or (ii) for any
prophylaxis of an infection or disease state.
[
]
"Intellectual Property Right" shall mean rights under Patents,
copyrights, trademarks, trade secret rights and other similar rights relating to
the Research Programs or Products.
"Know-How" shall mean all technical data, whether or not tangible,
processes, formulae, and information, whether or not patentable, but for which
patent applications have not been filed, including without limitation, any and
all data, preclinical and clinical results, techniques, discoveries, inventions,
(including inventions pursuant to Section 8.01 hereof) ideas, processes, and
other proprietary information, licenses and sublicenses, relating to the
Research Programs and
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Products. For the avoidance of doubt, Know-How shall include, without
limitation, all such aforementioned information or Materials relating to
biological, chemical, pharmacological, toxicological, physical, and analytical
aspects relating to the Research Programs or Products hereunder.
"Materials" shall mean present and future compounds, compositions,
assays or biological materials relating to the Research Programs or Products
hereunder.
"Patents" shall mean all the patents and applications for patent
(including Certificates of Invention) relating to the Research Programs or
Products existing now or developed solely by a party or jointly by the parties
during the course of this Agreement and as
(a) are identified in Schedule II hereto, which Schedule shall
be updated from time to time;
(b) any patents or application therefor which contain claims
that would be infringed by the development, manufacture, use, importation,
sale, or offer for sale of a Product, unless said development,
manufacture, use, importation, sale, or offer for sale was otherwise
authorized, and under which and to the extent that a party has the right
to grant a license, or may reasonably obtain such right; together with any
and all continuations, continuations-in-part, divisions and renewals
thereof, all
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patents which may be granted thereon, and all reissues, reexaminations,
extensions, patents of addition, and patents of importation thereof.
"Person" shall mean an individual, a partnership, a joint venture, a
corporation, a trust, a business trust, a limited liability company, an estate,
an unincorporated organization, a government, or any department or agency
thereof, or any other entity.
"PLA" and "ELA" shall mean a Product License Application and
Establishment License Application, including all necessary pre-approvals, or
foreign equivalents thereof, requesting approval for the commercial sale of
Product.
"Product" shall mean any therapeutic and/or prophylactic
polynucleotide-based genetic vaccination product based upon the Technology
and/or Intellectual Property Rights in the Field, in the Territory.
"Program Technology" shall mean all Know-How that is developed,
acquired, conceived, or licensed during the Research Programs by or on behalf of
either party or any of its Affiliates that is necessary or materially useful to
manufacture, Exploit, import, or otherwise use Products, but in all cases
excluding Background Technology.
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"R&D Payments" shall mean payments made by ACY in consideration of
research and development activities performed hereunder.
"Research Program" shall mean any research, clinical testing or
development relating to a Product conducted, directly or indirectly, by Apollon
or ACY pursuant to this Agreement, including, without limitation, the research,
clinical testing and development necessary or useful to receive FDA and other
Governmental Approvals to manufacture, import, Exploit, or otherwise use any
Product in the Territory.
"Technology" shall mean all Background Technology and Program
Technology.
"Territory" shall mean the entire world.
"University Licenses" shall mean any license or rights granted to
Apollon under any patent or know-how by (i) the Trustees of the University of
Pennsylvania, (ii) the Wistar Institute of Anatomy and Biology; or (iii) the
Institute of Biotechnology and Advanced Molecular Medicine which are necessary
or materially useful for the development, manufacture, use, marketing,
importation, offer for sale, or sale of Products.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
TERM SECTION
---- -------
ACY Included Gene 3.04
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ACY Inventions 8.01
Adverse Event Reports 4.03
Apollon Inventions 8.01
[ ]Products 3.01
[ ] Option 5.01
Clinical Development Plan 3.03
Confidential Information 13.01
Exercise Period 5.05
Included Gene 3.02
[ ] Option 5.01
Initial Phase II Studies 3.03(a)
Joint Inventions 8.01
Manufacturing Plan 9.03
Marketing Plans 2.02
non-Primary Party 8.05(b)
Option Exercise Notice 5.02(b)
Option Term 5.02(b)
Preclinical Development Plan 3.02
Primary Party 8.05(b)
R&D Management Committee 2.02
Regulatory Approval Plan 4.01
Right of First Negotiation 5.05
Steering Committee 2.01(a)
University License Option 7.03
ARTICLE II
COMMITTEES
SECTION 2.01. STEERING COMMITTEE.
(a) As soon as practical after the Effective Date hereunder,
Apollon and ACY shall form a Steering Committee which shall be responsible for
managing the implementation of the research and development collaboration
hereunder, and in particular, shall be responsible for monitoring the Research
Programs (the "Steering Committee"). The Steering Committee shall approve all
major decisions regarding each Product,
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including without limitation, decisions regarding selection of Products for
development (including the composition and formulation thereof), selection of
Indications for each Product, allocation of preclinical and clinical development
responsibilities between the parties for each of the Products, development of a
Regulatory Approval Plan for each Product, development of a Manufacturing Plan
for each Product, and patent prosecution relating to Joint Inventions.
(b) The Steering Committee shall consist of at least four
persons, including the President of Apollon and the President of Lederle-Praxis
Biologicals division of ACY (or their representatives). To initiate formation of
the Steering Committee, each party shall notify the other of the names of its
initial representatives on the Steering Committee, as soon as practical after
the execution of this Agreement.
(c) The Steering Committee shall meet once every calendar
quarter, or as otherwise mutually agreed. The location of the meetings of the
Steering Committee shall be as determined by the parties.
SECTION 2.02. R&D MANAGEMENT COMMITTEE. Apollon and ACY shall form
an R&D Management Committee, which shall be responsible for developing the
Preclinical Development Plans, Clinical Development Plans and Regulatory
Approval Plans (the "R&D Management Committee"). The R&D Management Committee
shall
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also make recommendations to the Steering Committee regarding significant
research and development issues concerning each of the Research Programs, as
well as issues relating to the Manufacturing Plans, and shall discuss ACY's
marketing plans for Products ("Marketing Plans"). The R&D Management Committee
shall consist of six persons. The R&D Management Committee shall meet at such
times and at such places as the parties deem appropriate. The parties may elect
to create separate R&D Management Committees for one or more Products.
SECTION 2.03. REPRESENTATION OF COMMITTEES. Each party shall have
equal representation/voting power on both the Steering Committee and the R&D
Management Committee. All decisions of either committee require the affirmative
vote of a majority of all members of such committee. The Steering Committee
shall diligently endeavor to reach a consensus on all decisions, including
matters relating to or which result in a milestone payment to Apollon as set
forth in Section 6.01 hereof. With regard to such matters relating to or which
result in a milestone payment, the parties shall diligently endeavor to reach a
consensus as to criteria that constitutes achievement of such milestones, using
standards or requirements of performance that are substantially similar to those
used for its own efforts for similar activities conducted in the ordinary course
of each party's business and research, and further, in endeavoring to
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reach such consensus, each party shall avoid standards or requirements that are
not generally accepted in the research or clinical fields or by regulatory
bodies, or that may be otherwise arbitrary or unreasonable as construed by
persons engaged in such research or clinical fields or regulatory bodies.
Notwithstanding the foregoing, if such consensus was not established prior to
substantial work being undertaken by Apollon, relating to such milestone, and
Apollon subsequently seeks payment of a milestone R&D Payment pursuant to the
payment schedule set forth in Section 6.01 hereof, such payment or any
modification thereof shall be made to Apollon by ACY in ACY's sole discretion,
and any decision taken by ACY to withhold such payment in its entirety or to
make a modified payment shall not constitute a breach of this Agreement.
SECTION 2.04. REPLACEMENT OF MEMBERS; MEETINGS OF COMMITTEES. Each
party may replace its representatives on the Steering Committee or R&D
Management Committee at any time upon prior written notice to the other. The
Steering Committee and the R&D Management Committee may from time to time invite
other scientific and management personnel of the parties to attend their
meetings as they deem appropriate. Members of the Steering Committee and the R&D
Management Committee may participate in meetings by conference telephone or
similar communications equipment.
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SECTION 2.05. COSTS OF PARTICIPATION ON COMMITTEES. Each party shall
bear its own costs associated with its participation on both the Steering
Committee and the R&D Management Committee.
SECTION 2.06. DISPUTE RESOLUTION. It is the parties' intention to
resolve any dispute or deadlock hereunder as quickly as possible. Any dispute or
deadlock which arises at the R&D Management Committee level and which is not
resolved within thirty days from the date such dispute or deadlock first arises
shall be referred to the Steering Committee. If the Steering Committee is unable
to resolve such dispute or deadlock (or any dispute or deadlock that arises at
the level of the Steering Committee itself) within thirty (30) days after the
date of such referral (or the date such dispute arises or deadlock occurs in the
case of dispute or deadlock at the level of the Steering Committee), it shall
refer such dispute or deadlock to the Presidents of Apollon and the
Lederle-Praxis Biologicals division of ACY, who shall endeavor to resolve such
dispute as quickly as possible. With the exception of final decisions relating
to milestone Payments and if after a period of sixty (60) days, such deadlock or
dispute shall not have been resolved, Apollon shall have the controlling vote on
issues relating to preclinical development and Phase I and II clinical
development, and ACY
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shall have the controlling vote on all issues relating to Phase III clinical
development and thereafter.
ARTICLE III
RESEARCH PROGRAMS
SECTION 3.01. SCOPE OF COLLABORATION. The parties shall collaborate
on the development of Products in the Field for one or more Indications. The
Steering Committee shall select each candidate construct, and formulation
thereof, for development into Products and appropriate Indication(s) therefore,
to be the subject of research and development pursuant hereto and the parties
will each provide research and development efforts and funding for such Products
in accordance with the terms and conditions hereof. Each party shall have such
obligations regarding the primary product research and development, preclinical
and clinical development activities and commercialization of any Product as are
specified below. Subject to ACY's research and development funding obligations
pursuant to Section 6.01 and the payments for clinical trial quantities of
Product pursuant to Section 9.01, it is expected that Apollon will conduct and
bear the costs of all primary product development and clinical testing of each
Product through completion of Phase II clinical trials, sufficient to enable
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commencement of Phase III clinical trials, and provide all clinical trial
quantities of Product therefor. It is expected that Apollon will conduct Phase
III clinical trials for all HIV Products, all of which will be at ACY's expense,
subject to any election made by Apollon pursuant to Section 6.05. It is also
expected that ACY will conduct and bear all costs of Phase III clinical trials
for all HPV and HSV Products. ACY shall conduct and bear all costs of Phase IV
clinical trials for all such Phase IV trials ACY determines to conduct. For any
Products developed hereunder by reason of the exercise of the [ ] Option
and/or the [ ] Option ("[ ] Products"), the parties will
determine, at the time of exercise, the scope of respective obligations of the
parties. Notwithstanding any of the foregoing, the Steering Committee may elect
to allocate responsibilities with respect to a Product different from those set
forth in this Article III; provided that any reallocation of responsibilities
may not materially increase a party's expenses hereunder without the prior
written consent of such party.
SECTION 3.02. PRIMARY PRODUCT RESEARCH AND DEVELOPMENT AND
PRECLINICAL PHASES OF PRODUCT DEVELOPMENT. The Steering Committee shall make the
selection of each antigen target gene(s), or portions thereof, to be included as
part of each Product (each, an "Included Gene"). As soon as practicable after
selecting a Product for development, the R&D Management Committee
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shall devise, and the Steering Committee shall approve, a plan for the primary
product development and preclinical phases for such Product, which shall be
conducted under protocols approved by the Steering Committee (a "Preclinical
Development Plan"), the basic outline of which is set forth in Schedule I
attached hereto. Each Preclinical Development Plan shall specify, among other
things, (i) performance milestones and criteria for evaluating the results of
each test or study, and (ii) a timetable for achieving each of the milestones or
completing each of the tests or studies. On a quarterly basis, or as often as
otherwise determined by the parties, the Steering Committee shall review each
Preclinical Development Plan and evaluate the progress of the parties with
respect thereto, and make all such modifications as are deemed appropriate.
Minutes shall be kept of each such meeting, the content of which having been
mutually agreed.
SECTION 3.03. CLINICAL PHASE OF PRODUCT DEVELOPMENT.
(a) In the event of the successful completion of preclinical
studies with respect to any Product, the R&D Management Committee shall develop,
subject to Steering Committee approval, a clinical development plan with respect
to such Product (a "Clinical Development Plan"), which shall be set forth in
writing. Each Clinical Development Plan shall include, among other things,
provisions which specify (i) the countries within
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the Territory in which the parties shall seek to conduct human clinical trials
with respect to the Product, (ii) the order in which the parties shall conduct
such human clinical trials, (iii) with respect to Phase II clinical trials, the
specific set of studies which the parties believe will be necessary in order to
proceed into Phase III clinical trials (collectively, the "Initial Phase II
Studies"), (iv) with respect to Phase III clinical trials for HIV, the party
primarily responsible for conducting such trials, (v) appropriate criteria for
evaluating the results of each clinical trial, and (vi) a timetable for the
completion of each clinical trial.
(b) It is expected that Apollon will conduct Phase III trials
for all HIV Products and that ACY will conduct Phase III trials for all other
Products. The parties shall conduct all human clinical trials and studies in
good faith in accordance with the protocols approved by the Steering Committee.
(c) On a quarterly basis, or as often as otherwise determined
by the parties, the Steering Committee shall review each Clinical Development
Plan and evaluate the progress of the parties with respect thereto. Minutes
shall also be kept of each such meeting, the content of which having been
mutually agreed upon by the parties.
SECTION 3.04. SUPPLY OF ACY INCLUDED GENES. To the extent the
Steering Committee shall elect to include in any
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Product any Included Gene owned by or licensed (with the right to sublicense) to
ACY or its Affiliates (each, an "ACY Included Gene"), ACY shall supply or cause
to be supplied to Apollon, at no cost to Apollon, sufficient quantities of such
Included Gene to enable Apollon to fulfill its obligations pursuant hereto.
SECTION 3.05. EFFORTS REQUIRED. Each party shall use reasonable
efforts to complete as promptly as practicable the preclinical and clinical
research and development tasks assigned pursuant to this Agreement as well as
all tasks as shall be assigned to it from time to time by the Steering
Committee. Each party shall report to the other and to the Steering Committee in
writing from time to time and as reasonably requested by the Steering Committee
on the progress of its research and development activities related to each
Product.
SECTION 3.06. NO GUARANTEE OF RESULTS. Neither party guarantees that
any of the Research Programs will be successful in whole or in part or that any
Products will actually be developed or suitable for sale as a result thereof or
that appropriate Governmental Approvals can be obtained.
SECTION 3.07. RIGHT TO SUBCONTRACT. In fulfilling its research and
development obligations with respect to the Research Programs, each party may
contract or otherwise deal with its Affiliates and with subcontractors and other
Persons so long as such Affiliates, subcontractors or other Persons (i) are
bound to
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obligations of confidence and non-use at least as stringent as those set forth
herein; (ii) do not, unless otherwise provided for herein, acquire any
ownership, license or other rights whatsoever to any Products, Intellectual
Property Rights, Included Genes, or Technology; and, (iii) are reasonably
acceptable to the other party, as reflected in Steering Committee minutes. To
the extent Apollon obtains rights to indemnification from any subcontractor or
other Person with respect to losses incurred by Apollon arising out of any work
performed by such subcontractor or Person, Apollon shall use reasonable efforts
to have ACY named as a third-party beneficiary of such indemnification rights.
SECTION 3.08. NO FUNDING FROM THIRD PARTIES. Except as may be
otherwise agreed by the parties in writing, during the term of this Agreement
neither party will, without the other party's prior written consent, enter into
any agreement, whether oral or written, with another Person pursuant to which
such Person provides funding to such party, and which would (i) grant to or
create in such Person any rights to any Technology or Intellectual Property
Rights with respect to the Exploitation of any Product, (ii) permit such Person
to assert any claim to royalties with respect to the Exploitation of any
Product; or (iii) create or impose any restrictions on the use of the Technology
or Intellectual Property Rights with respect to the
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Exploitation of any Product. Nothing contained in this Section 3.08, however,
shall prohibit a party from entering into any agreement with another Person
which grants such Person the right to use, without cost and in strict
confidence, the Program Technology (but not including Products) for educational
and noncommercial laboratory research purposes only. Further, nothing contained
in this Section 3.08 shall prohibit ACY from entering into any co-promotion,
marketing, distribution, wholesaling, consignment, or similar agreements with
any Person with respect to marketing and distribution of the Products.
ARTICLE IV
REGULATORY MATTERS
SECTION 4.01. REGULATORY APPROVAL STRATEGY. With respect to each
Product, the R&D Management Committee shall devise, subject to Steering
Committee approval, a regulatory approval strategy (a "Regulatory Approval
Plan"). Each Regulatory Approval Plan shall specify, among other things, (i) the
countries within the Territory in which the parties shall seek to obtain and
maintain Governmental Approvals for the Product, (ii) the order in which the
parties shall seek such Governmental Approvals, and (iii) a timetable for
obtaining such Governmental Approvals. On a quarterly basis, or as often as
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otherwise determined by the parties, the Steering Committee shall review each
Regulatory Approval Plan and the progress of the parties with respect thereto.
Minutes shall also be kept of such meetings, the content of which having been
mutually agreed upon by the parties.
SECTION 4.02. COOPERATION OF PARTIES; EFFORTS REQUIRED. Each of the
parties shall cooperate with the other in making all regulatory filings that may
be necessary or desirable in connection with the research, development,
marketing, importation, offer for sale, and sale of any Product. Each party
shall use reasonable efforts to obtain any Governmental Approvals necessary or
desirable in order to manufacture, use, import, and Exploit Products in the
Territory.
SECTION 4.03. ADVERSE EVENT REPORTS. During the term of this
Agreement, each party shall, within the time periods prescribed from time to
time by the Steering Committee, notify the other party of all information coming
into its possession concerning side effects, injury, toxicity or sensitivity
reactions, including unexpected increased incidence and severity thereof,
associated with commercial or clinical uses, studies, investigations or tests of
a Product, anywhere in the Territory, whether or not determined to be
attributable to such Product ("Adverse Event Reports").
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SECTION 4.04. COMMUNICATIONS WITH AGENCIES. The Steering Committee
shall determine from time to time which party shall be responsible for
communicating with various government agencies regarding the Governmental
Approvals for each Product and shall divide those responsibilities as it sees
fit, and in accordance with all applicable laws and regulations related thereto,
provided that each party shall be responsible for such communications as are
required of such party by virtue of its ownership of Product licenses or
permits. During the term of this Agreement, each party shall provide the other
with copies of any significant communications (which are known to the party to
exist and which the party can obtain copies of through reasonable efforts) with
any governmental agency throughout the world concerning a Product, including but
not limited to, Adverse Event Reports.
SECTION 4.05. OWNERSHIP OF PRODUCT REGULATORY FILES AND REGULATORY
APPROVALS. All Government Approvals and any regulatory files relating thereto
will be owned by a party in accordance with applicable laws and regulations.
Notwithstanding ownership of any such Governmental Approval in accordance with
applicable laws, the parties shall jointly own an undivided one-half interest in
all the underlying data, materials, and other information relevant to such
Governmental Approval. Upon request, either party may obtain duplicate copies of
all such
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data, materials, and other information from the party responsible for preparing
same. Apollon will be primarily responsible for obtaining and maintaining all
Government Approvals, and as such, it is envisioned that Apollon shall be the
named sponsor of IND studies and Phase I and II clinical studies as set forth in
the Pre-Clinical and Clinical Development Plans, and shall be the named
applicant in the PLA and ELA filings pursuant to the Regulatory Approval and
Manufacturing Plans. Notwithstanding the foregoing, each party shall have the
right, at all reasonable times, to obtain a duplicate copy of any regulatory
filing, and shall otherwise have at all times full access to all filings and all
information and data relevant to a Product, as well as the right to fully use
and cross reference all such submissions, approvals, information, and data. Each
party agrees to provide the other with a sufficient opportunity to review all
regulatory filings and material correspondence to regulatory agencies prior to
submission, and to provide promptly all information and copies of all material
correspondence received from regulatory agencies, to enable such party to review
and comment on all intended filings and any such responses prior to submission
of same.
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ARTICLE V
OPTIONS FOR [ ] AND [ ] VACCINES
SECTION 5.01. GRANT OF OPTIONS. Apollon hereby grants to ACY the
right to expand the scope of the Field of this Agreement to include Research
Programs relating to the research and development of Products for application
within the [ ] Application and [ ] Application, and to obtain a
license under Apollon's interests in Know-How and Intellectual Property Rights,
co-exclusive with Apollon, to develop, make, have made, import, use, offer for
sale, sell, and have sold such Products (the "[ ] Option" and the
"[ ] Option," respectively).
SECTION 5.02. EXERCISE OF OPTIONS and R&D PAYMENTS.
(a) In consideration of continued research and development on
the part of Apollon relating to the [ ] Application and the [ ]
Application, ACY will pay Apollon, on the date hereof, a non-refundable up-front
R&D Payment of $[ ]
(b) Each of the [ ] Option and the [ ] Option may
be exercised at any time prior to the first Anniversary Date (the "Option
Term"), upon written notice (an "Option Exercise Notice") to Apollon. An Option
Exercise Notice shall be accompanied by a second non-refundable R&D Payment of
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either $[ ] (in the case of the [ ] Option) or $[ ] (in the case of the
[ ] Option) in consideration for research and development to be conducted
by Apollon, with the proviso, however, that, upon the exercise of the [ ]
Option or the [ ] Option, any payments paid by ACY pursuant to this
Section 5.02 or Section 5.03 are each [ ] creditable, on a
one-time basis, against any and all R&D Payments subsequently made to Apollon by
ACY with respect to the [ ] Option or the [ ] Option, as applicable.
Upon the exercise of either the [ ] Option or the [ ] Option, all
applications within the [ ] Application and/or [ ] Application (as
applicable) shall vest as being within the definition of the Field, candidate
products selected by the parties for development shall each be deemed to be a
"Product" hereunder, the resulting Research Programs will be managed in the same
manner (subject to the provisions of Section 3.01 hereof), and subject to the
same terms and conditions, as any other Research Program, and the scope of the
license granted to ACY in Section 7.04 will expand accordingly.
SECTION 5.03. EXTENSION OF OPTION TERM. At any time prior to the
expiration of the Option Term, ACY may extend the expiration date of such term
until the second Anniversary Date by funding research and development to be
conducted by Apollon by payment of an additional non-refundable up-front R&D
Payment of
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$[ ] (in consideration of further research and development related to each of
the [ ] Application and [ ] Application, however applicable). In the
event that ACY shall have elected to so extend the expiration date, ACY may, at
any time prior to said second Anniversary Date, further extend the expiration
date of the Option Term until the third Anniversary Date by continuing said
funding of Apollon with a second additional non-refundable R&D Payment equal to
$[ ] (in consideration of further research and development related to each of
the [ ] Application and [ ] Application, however applicable).
SECTION 5.04. EXCLUSIVITY OF RESEARCH DURING OPTION TERM. During the
Option Term or any extension thereof, Apollon shall not enter into any agreement
with any other Person (whether operating on a for-profit or not-for-profit
basis), granting such Person the right to (i) provide funding for or (ii) enter
into a collaboration with or obtain a license from Apollon with respect to the
development of the Technology and any applicable Intellectual Property Rights
for any [ ] Application or for any [ ] Application without the prior
written consent of ACY, which consent shall be at ACY's sole discretion.
SECTION 5.05. RIGHT OF FIRST NEGOTIATION. Upon expiration of the
Option Term or any applicable extensions thereof, and provided that ACY shall
not have previously
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exercised the [ ] Option or the [ ] Option, as applicable, ACY shall
have, for a period of one year following such expiration, a right of first
negotiation ("Right of First Negotiation") to expand the scope of this Agreement
to include one or more Research Programs for one or more specific Indications
included in the [ ] Application and/or the [ ] Application. Such
Right of First Negotiation may be exercised by ACY within three months after its
receipt of written notice from Apollon that Apollon intends to negotiate with a
third party with respect to the development of the Technology for each such
specific Indication (the "Exercise Period"). In the event ACY does not exercise
its Right of First Negotiation with respect to any such specific Indication,
such Right of First Negotiation will become effective again in the event that
Apollon does not execute a development agreement with a third party within 12
months after the last to occur of Apollon's receipt of ACY's written
notification that it will not exercise its Right of First Negotiation as to such
specific Indication, or the expiration of the Exercise Period. Upon the first
exercise of ACY's Right of First Negotiation with respect to any Indication
included in the [ ] Application, ACY shall pay to Apollon a non-refundable
up-front R&D Payment of $[ ]. Upon the first exercise of ACY's Right of First
Negotiation with respect to any Indication included in the [ ]
Application, ACY
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shall pay to Apollon a non-refundable up-front R&D Payment of $[ ]. Each such
aforementioned R&D Payment shall be deemed to be in consideration for research
and development relating to each of these Applications, respectively. ACY's
exercise of its Right of First Negotiation (i) with respect to additional
Indications included in the [ ] Application, made subsequent to its first
such exercise within such Application, shall not be deemed to give rise to an
additional R&D Payment of $[ ] and (ii) with respect to additional Indications
included in the [ ] Application, made subsequent to its first such
exercise within such Application, shall not be deemed to give rise to an
additional R&D Payment of $[ ].
SECTION 5.06. SUPPLY OF CONSTRUCT PLASMIDS. During the Option Term
or any extensions thereof, ACY may from time to time provide Apollon with a
reasonable number of different antigen target genes for insertion into Apollon's
plasmids. After inserting the antigen target genes, Apollon shall provide ACY
with reasonable quantities of the resulting construct plasmids for expression
and preliminary immunologic testing.
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ARTICLE VI
FUNDING OF RESEARCH PROGRAMS
SECTION 6.01. MILESTONE PAYMENTS. ACY shall fund research and
development activities to be undertaken by Apollon hereunder by making the
following R&D Payments upon achievement of the milestones specified below:
[
]
For purposes of this Section 6.01, R&D Payments for [
] in accordance with the payment schedule set forth above,
shall accrue with respect to each Product on an Indication by Indication basis;
provided, however, that applicable R&D Payments shall be reduced by [ ] for each
Product under development for an Indication, in those situations wherein ACY has
previously paid to Apollon R&D Payments for a substantially identical Product of
substantially the same composition and formulation with regard to the active
moieties, but for a different Indication. Furthermore, [
]
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[
] for the same Product for the same Indication shall not be deemed to give
rise to a new payment obligation hereunder.
SECTION 6.02. PAYMENT DUE FOR MILESTONES OF INITIAL HIV PRODUCT. The
parties expressly agree that ACY shall not be obligated to make any payment with
respect to the [ ] for the initial HIV
Product. On the Effective Date hereof, ACY shall make the second milestone
payment of $[ ] to Apollon for the [
] , notwithstanding that such [ ] has taken place prior
to the Effective Date hereof.
SECTION 6.03. NOTIFICATION OF MILESTONES. Apollon shall notify and
provide supporting documentation (in accordance with the criteria devised
pursuant to Section 2.03 hereof), as appropriate, to ACY within ten (10) days
after the occurrence of any event which purports to create an ACY payment
obligation under Section 6.01 hereof. ACY shall pay Apollon the required amount
within forty-five (45) days after the receipt of such notice, provided that ACY
is in agreement that such event has occurred.
SECTION 6.04. REIMBURSEMENT OF PHASE III RESEARCH AND DEVELOPMENT
EXPENSES OF APOLLON. Subject to the provisions of
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Section 6.05, ACY shall be responsible for and shall pay all costs associated
with Phase III studies of any Product. To the extent that Apollon, as directed
by the Steering Committee, shall conduct any Phase III studies of any Product,
Apollon shall, within ten (10) days following the end of each month, provide ACY
with a reasonably detailed analysis of all expenses incurred by it during the
prior month in connection with such studies. Within forty-five (45) days
following the receipt of such analysis, ACY shall reimburse Apollon for all such
expenses.
SECTION 6.05. FUNDING OF PHASE III TRIALS OF HIV PRODUCTS BY
APOLLON. At any time prior to the completion of the design of Phase III trials
for any HIV Product, Apollon may elect to agree to pay [ ] percent of the cost
of Phase III trials for such HIV Product.
SECTION 6.06. ADDITIONAL R&D PAYMENTS TO APOLLON. In addition to any
other payments due Apollon under this Agreement, ACY shall be obligated to pay
Apollon the non-refundable R&D Payments of $[ ] in consideration for research
and development to be conducted by Apollon, $[ ] of which shall be paid on [
], $[ ] of which shall be paid on [ ] and $[ ]
of which shall be paid on [ ]; provided, however, that in the
event this Agreement is terminated for any reason (other than by ACY pursuant to
the termination provisions of Sections 14.04, 14.05,
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and 14.07) prior to [ ,] all fees which are payable
pursuant to this Section 6.06 which have not been previously paid shall
immediately become due and payable.
SECTION 6.07. RESEARCH AND DEVELOPMENT TAX CREDITS. Each party shall
be entitled to seek the benefit of any research and development tax credits
arising out of any research paid for by such party or its Affiliates pursuant to
any Research Program, including any R&D Payments made by ACY to Apollon
hereunder.
ARTICLE VII
LICENSE GRANTS
SECTION 7.01. LICENSE GRANT TO APOLLON. Upon ACY's termination of
this Agreement in its entirety (and thereby relevant to all Products) or with
respect to any specific Product(s) (and thereby relevant solely to such
terminated Product(s)) pursuant to Section 14.03 hereof or Apollon's termination
of this Agreement in its entirety (and thereby relevant to all Products) or with
respect to any specific Product(s) (and thereby relevant solely to such
terminated Product(s)) pursuant to Sections 14.04, 14.05, or 14.07, ACY grants
to Apollon, co-exclusive with ACY, a worldwide license or sublicense, as
appropriate, and subject always to all other provisions of this Agreement and
the Supply Agreement:
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(a) under ACY's Know-How, Technology and Included Genes to
develop, make, have made, use, import, offer for sale, sell, and have sold
Products in the Territory; and
(b) under ACY's Intellectual Property Rights to develop, make,
have made, use, import, offer for sale, sell, and have sold Products in the
Territory.
SECTION 7.02. REQUIRED ROYALTIES. No royalty or other obligations
shall be due to a party in connection with the licenses or sublicenses granted
pursuant to this Article VII other than as contemplated by the Supply Agreement.
SECTION 7.03. OPTION TO ACQUIRE SUBLICENSE.
(a) To the extent that Apollon has the right to grant
sublicenses under any University Licenses, Apollon hereby grants to ACY an
exclusive option (the "University License Option") to obtain from Apollon one or
more sublicenses (exclusive except as to Apollon) under the University Licenses,
but subject always to the provisions of this Agreement and the Supply Agreement,
to develop, make, have made, use, import, offer for sale, sell, and have sold
Products in the Territory.
(b) In consideration of Apollon's grant of the University
License Option, ACY shall pay Apollon, at the time of notice of exercise of said
option, the sum of $[ ] as a one-time, fully-paid University License initiation
fee.
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(c) ACY may exercise the University License Option, for one or
more sublicenses, at any time during the course of this Agreement by providing
written notice of such exercise to Apollon which specifically identifies the
University License(s) to which ACY elects to sublicense.
(d) The terms of any sublicense acquired by ACY upon exercise
of the University License Option pursuant to this Section 7.03 shall be set
forth in a definitive sublicense agreement to be executed by the parties hereto.
As a condition to the exercise of the University License Option with respect to
any University License, ACY shall agree to be bound by all terms and conditions
of the relevant license agreement between Apollon and its licensor as such
licensor requires Apollon's sublicensees to be directly bound, with the
exception of terms and conditions relating to a license initiation or other
similar up-front license acquisition fee and/or annual maintenance payments.
(e) Unless the prior written consent of ACY is first obtained,
Apollon shall not terminate any such University License and shall otherwise
fulfill all of its obligations, including without limitation, making all
requisite payments sufficient to maintain such licenses in full force and effect
(including Apollon's ability to sublicense hereunder).
SECTION 7.04. LICENSE GRANT TO ACY. Apollon hereby grants to ACY,
co-exclusive with Apollon, a worldwide license or
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sublicense, as appropriate, and subject always to all other provisions of this
Agreement and the Supply Agreement:
(a) under Apollon's interests in Included Genes, Know-How and
Technology (which shall expressly exclude rights to Included Genes, Know-How or
Technology granted by any University License), to develop, make, have made, use,
import, offer for sale, sell, and have sold Products in the Territory; and
(b) under Apollon's Intellectual Property Rights (which shall
expressly exclude any Intellectual Property Rights granted by any University
License), to develop, make, have made, use, import, offer for sale, sell, and
have sold Products in the Territory.
SECTION 7.05. NO RIGHT TO SUBLICENSE. None of the licenses or
sublicenses granted to either party pursuant to this Article VII shall be deemed
to include the right to sublicense or further sublicense, as applicable, unless
otherwise expressly provided for by the parties.
SECTION 7.06. EXCLUSIVITY OF RESEARCH AND DEVELOPMENT. During the
period during which any Research Program is ongoing and for a period of two
years thereafter, neither party shall engage in or sponsor any research with any
Person with respect to any polynucleotide-based genetic vaccination product or
technology in the Field, other than as provided in this Agreement.
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ARTICLE VIII
PATENTS
SECTION 8.01. OWNERSHIP. ACY and Apollon shall each promptly notify
the other in writing of any ideas, improvements, discoveries or inventions
arising out of the research performed by it or on its behalf under this
Agreement solely by such party or arising jointly with the other. Inventions,
including Materials, made solely by ACY, and any patent applications and patents
thereon ("ACY Inventions"), shall be owned solely by ACY. Inventions, including
Materials, made solely by Apollon, and any patent applications and patents
thereon ("Apollon Inventions"), shall be owned solely by Apollon. Inventions,
including Materials, made jointly by ACY and Apollon ("Joint Inventions") shall
be owned jointly by ACY and Apollon. All Inventions shall be considered within
the definition of Know-How or Patents, however appropriate, and as such, subject
to all other terms and conditions of this Agreement.
SECTION 8.02. PATENT PROSECUTION.
(a) ACY Inventions. ACY shall be responsible for filing and
prosecuting United States and foreign patent applications on ACY Inventions. ACY
shall be solely responsible for all expenses incurred in connection with filing
and prosecuting any such patent application and maintaining issued
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patents thereon. While ACY shall be responsible for making decisions regarding
the scope and content of any such applications and prosecution thereof, Apollon
shall, to the extent the ACY Invention covered thereby may be useful in the
manufacture or Exploitation of Products, have an opportunity to review all such
patent application preparation and prosecution and provide its reasonable
comments, other than any such patent application directed to any ACY Included
Genes.
(b) Apollon Inventions. Apollon shall be responsible for
filing and prosecuting United States and foreign patent applications on Apollon
Inventions. Apollon shall be solely responsible for all expenses incurred in
connection with filing and prosecuting any such patent application and
maintaining issued patents thereon. While Apollon shall be responsible for
making decisions regarding the scope and content of any such applications and
prosecution thereof, ACY shall, to the extent the Apollon Invention covered
thereby may be useful in the manufacture, Exploitation, or other use of
Products, have an opportunity to review all such patent application preparation
and prosecution and provide its reasonable comments.
(c) Joint Inventions. Decisions on when, where and whether to
file United States or foreign patent applications on Joint Inventions shall be
made by the Steering Committee. The Steering Committee shall select mutually
acceptable outside
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counsel to act on behalf of each of them and to be responsible for filing,
prosecuting and maintaining any such patent application. The parties shall
assist one another in assembling inventorship information and data for filing
same, and shall continue to assist one another in the continued prosecution. All
costs and expenses reasonably incurred in connection with the filing,
prosecuting and maintaining of any patent application on a Joint Invention or
the maintenance of any patent issued thereon shall be shared equally by the
parties. All such Joint Inventions shall be considered within the definition of
Know-How or Patents, whichever is appropriate, and as such, shall be subject to
all other applicable terms and conditions of this Agreement.
(d) Standby Right of Parties. Except with respect to
maintenance of an invention as a trade secret, but otherwise in the event that
either party elects not to file a patent application on an ACY Invention, an
Apollon Invention, or Joint Invention, as the case may be, or decides to
discontinue prosecution or maintenance of any such application, specific claims
thereof, or maintenance of any patent issued thereon, such party shall promptly
notify the other of such non-election in good time in respect of patent filing,
prosecution, and maintenance deadlines. The other party shall thereupon have the
option, exercisable for a period of 90 days, to file, prosecute,
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and/or maintain, at its own expense, any such patent application or patent, as
the case may be. Upon exercise of such option, the party electing not to file,
prosecute or maintain such patent application or patent, or specific claims
thereof, as the case may be, shall have no further rights under the patent
rights in question and will grant all necessary authority to the other party to
so file, prosecute or maintain such patent application or patent, all at such
other party's expense.
SECTION 8.03. INTELLECTUAL PROPERTY RIGHT DISCLAIMERS. Neither party
shall disclaim any Intellectual Property Right or abandon any application for
any Intellectual Property Right relating to any Program Technology without
allowing the other party the opportunity to exercise standby rights pursuant to
the terms of Section 8.02. This Section shall survive termination of this
Agreement as to any Apollon Inventions or ACY Inventions, all or a portion of
which are the subject of a subsisting license to a party hereunder, and as to
Joint Inventions.
SECTION 8.04. PATENT TERM RESTORATION AND OTHER EXTENSIONS OF PATENT
LIFE. The parties shall keep each other informed of the issuance of each U.S.
patent and foreign patent within Patents, giving the date of issuance and patent
numbers, and each notice pertaining to any patent included within Patents which
it receives as patent owner pursuant to the Drug Price Competition and Patent
Term Restoration Act of 1984 or any
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equivalent foreign laws, including notices pursuant to sections 101 or 103 of
said Act from persons who have filed an abbreviated NDA ("ANDA"), and also, any
other notices relating to any administrative or otherwise extensions of patent
life. All such notices shall be given promptly, but in any case within 10 days
of each such patent's date of issue or receipt of each such notice under such
Act or equivalent, whichever is applicable. The parties shall cooperate in
obtaining and maintaining any such permitted extension of patent life.
SECTION 8.05. THIRD PARTY INFRINGEMENT.
(a) The party to this Agreement first having knowledge of any
imitations of any Product or of any actual, suspected or threatened misuse or
infringement (hereinafter collectively "infringement") of any Intellectual
Property Rights necessary or materially useful to manufacture, import, or
Exploit, or otherwise use one or more Products, shall promptly notify the other
in writing and shall provide the other with any available evidence thereof. The
notice shall set forth the relevant facts in reasonable detail.
(b) Unless otherwise.prohibited by law, prior agreement, or
regulation, (i) Apollon (or its licensor, if applicable) shall have the primary
right in the first instance, but not the obligation, to institute, prosecute,
and control any action or proceeding with respect to the infringement of any
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Apollon Intellectual Property Right or any Intellectual Property Right covered
by a University License, and (ii) ACY shall have the primary right in the first
instance, but not the obligation, to institute, prosecute, and control any
action or proceeding with respect to the infringement of any Intellectual
Property Right owned or licensed by ACY (other than any such Intellectual
Property Right licensed or sublicensed pursuant to this Agreement or under any
University License) or Intellectual Property Right relating to a Joint
Invention, in each case by counsel of its own choice. With respect to any
particular infringement proceeding, the party which is the primary party
pursuant to the preceding sentence (the "Primary Party") shall have the right to
control such action; provided, however, that the other party (the "non-Primary
Party") shall have the right, at its own expense, to intervene (to the extent
permitted by law) and be represented in that action by counsel of its own
choice. The Primary Party may not, without the prior written consent of the
non-Primary party (which consent may not be unreasonably withheld), enter into
any agreement or other arrangement effecting a settlement of such infringement
action which imposes any obligations or restrictions on the non-Primary Party
regarding the use of the Intellectual Property Rights which were the subject of
such infringement action.
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(c) If the Primary Party brings an infringement action and the
non-Primary Party determines to pursue such action or proceeding also, the
non-Primary Party shall, within thirty (30) days of receipt of notice by the
non-Primary Party of the initiation of suit by such Primary Party, notify the
Primary Party of its desire to be joined as a party plaintiff, and shall
thereafter agree to join as a party plaintiff within fifteen (15) days of its
notice of such desire to the Primary Party (to the extent such party is
permitted by law to so join); and further, shall give the Primary Party
reasonable assistance and authority to file and prosecute such infringement
action. The out-of-pocket costs and expenses reasonably incurred by the Primary
Party in bringing and maintaining any such infringement action (including,
without limitation, any such payments made to Apollon's licensors as required by
any University License) shall be reimbursed first out of any damages or other
monetary awards recovered. Any remaining damages or other monetary awards shall
be divided on an equitable basis, taking into account the parties relative lost
revenues and profits or royalty income, as applicable, and as such are allocated
or payable under the Supply Agreement.
(d) If the Primary Party brings an infringement action and the
non-Primary Party determines not to pursue such action or proceeding, the
non-Primary Party nevertheless agrees
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to be joined as a party plaintiff (if permitted by law and if the Primary Party
so requests) and to give the Primary Party reasonable assistance and authority
to file and prosecute the suit. In such case, the Primary Party shall bear all
costs associated therewith and shall be entitled to all damages or other
monetary awards to the exclusion of the non-Primary Party. If the Primary Party
does not request that the non-Primary Party be joined as a party plaintiff, the
non-Primary Party nevertheless agrees to give the Primary Party reasonable
assistance in any such proceedings or preparation therefor, at the Primary
Party's request and expense.
(e) Should the Primary Party lack standing to bring an
infringement action, the non-Primary Party shall bring such action at the
request of the Primary Party upon an undertaking by the Primary Party to
indemnify and hold the non-Primary Party harmless (to the extent permitted by
law) from all consequent liability.
(f) If the Primary Party fails to bring an action or
proceeding within one hundred and eighty (180) days after written notification
of actual infringement of a substantial nature (which, for the purposes hereof
shall mean that the infringing competitor has 20% of the relevant market share
that would reasonably inure to Product sold under the Supply Agreement but for
such infringing sales, as such market share is measured
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by IMS or other industry-accepted marketing survey services) the non-Primary
Party shall have the right, but not the obligation, to bring and control any
such action by counsel of its own choice, and at its own expense, and the
Primary Party (and/or its licensor) shall have the right to be represented in
any such action by counsel of its own choice at its own expense. Any
out-of-pocket costs and expenses reasonably incurred by the non-Primary Party
pursuant to this Subsection (f) (including, without limitation, any such
payments made to Apollon's licensors as required by any University License)
shall be reimbursed first out of any damages or other monetary awards recovered.
Any remaining damages or other monetary awards shall be divided on an equitable
basis, as set forth in Section 8.05(c) above.
(g) The foregoing clauses (b) through (f) of this Section 8.05
shall also apply to the issues of control of any action, costs and expenses, and
recoveries in the event a third party brings an action for declaratory judgment
of invalidity and non-infringement with respect to any Intellectual Property
Rights.
(h) Each party hereto shall promptly bring to the attention of
the other any information which it may receive indicating that any issued patent
would be infringed by the manufacture, use, import, offer for sale, or sale of a
Product. If a party to this Agreement receives a claim of infringement
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from a third party relating to the manufacture, use, import, offer for sale, or
sale of a Product it shall promptly notify the other. The parties shall
cooperate in all reasonable respects in the resolution of any such claim of
infringement and the defense of any lawsuit arising thereunder.
SECTION 8.06. LICENSING OF JOINT INVENTIONS. During the term of this
Agreement and for a period of two (2) years thereafter, and unless otherwise
provided herein, neither party shall grant to any other Person any license or
other rights with respect to any Joint Inventions (i) relating to
polynucleotide-based genetic vaccination technology in the Field, or (ii)
necessary or useful in the development, manufacture, use, import, offer for
sale, or sale of polynucleotide-based genetic vaccination products in the Field,
without the prior written consent of the other.
SECTION 8.07. INTELLECTUAL PROPERTY SUBJECT TO APOLLON'S AGREEMENTS
WITH ACADEMIC COLLABORATORS. To the extent the Steering Committee agrees,
certain primary product development, preclinical or clinical activities assigned
to Apollon by the Steering Committee may be conducted by one or more of
Apollon's academic collaborators pursuant to Apollon's sponsored research
agreements with such collaborators. ACY acknowledges that, pursuant to such
sponsored research agreements, and notwithstanding anything contained in this
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Agreement to the contrary (including Section 3.07), Apollon's academic
collaborators or the government, may acquire rights in inventions made jointly
with Apollon as a result of the work performed by such academic collaborators,
if said collaborators are joint inventors under the relevant patent laws. Such
issues will be thoroughly discussed at the Steering Committee level, as set
forth in the minutes, prior to agreement by the parties that any such
collaborators shall take part in activities hereunder, and the parties, through
the Steering Committee shall mutually agree on the terms and conditions under
which any such collaborators and/or the government shall undertake to conduct
any such activities, including, without limitation, the assignment of or grant
of an exclusive license, or option therefor, to Apollon to any such rights
acquired by Apollon's academic collaborators, and/or the government by reason of
such sponsored research. For the avoidance of doubt, Apollon's ownership
interest or other rights in and to any such joint inventions shall be considered
within the definition of Know-How or Patents hereunder, however applicable.
SECTION 8.08. USE AND OWNERSHIP OF MATERIALS. Except as otherwise
provided herein, all Materials provided by one party to the other hereunder
shall be used by the receiving party solely for purposes of fulfilling its
obligations hereunder and not in or for any commercial or other purpose. The
receiving
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party shall maintain the Materials in a secure area and, except as otherwise
provided herein, shall not make the Materials available to any other person
except those who are under the receiving party's control and doing research at
its direction, and under terms of confidentiality at least as stringent as those
set forth herein. Except as otherwise provided herein, neither the receiving
party nor any person associated with the receiving party shall grant or attempt
to grant any rights in or to the Materials without the prior written consent of
the providing party.
SECTION 8.09. SHARING OF DATA ON [ ]. The parties agree
that during the term of this Agreement, and subject to the provisions of
confidentiality and non-use hereof, to share data regarding their respective
research and development activities relating to the use of polynucleotide-based
genetic vaccination technology for [ ]. Such information shall be
considered to be within Background Technology or Program Technology, as
applicable.
ARTICLE IX
MANUFACTURING OF PRODUCTS
SECTION 9.01. MANUFACTURING FOR RESEARCH AND DEVELOPMENT. Apollon
shall be solely responsible for
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manufacturing and supplying Products for all primary product development
activities and preclinical and clinical trials with respect thereto. With
respect to any Products manufactured and supplied by Apollon in connection with
any Phase III studies, ACY and its Affiliates shall reimburse Apollon at a price
per vial equal to [ ]% of Apollon's Fully Burdened Manufacturing Costs;
provided, however, that if Apollon shall have exercised its rights under Section
6.05 hereof with respect to an HIV Product, ACY and its Affiliates shall
reimburse Apollon at a price per vial equal to [ ]% of Apollon's Fully Burdened
Manufacturing Cost.
SECTION 9.02. MANUFACTURE, PURCHASE AND SUPPLY FOR COMMERCIAL SALES.
Apollon shall also be solely responsible for manufacturing Products for
commercial distribution. Apollon agrees to supply to ACY, and ACY agrees to
purchase from Apollon, all of ACY's requirements of the Products for commercial
distribution under the terms and conditions of the Supply Agreement.
SECTION 9.03. MANUFACTURING PLANS. Within nine (9) months prior to
the anticipated filing date of the first PLA (and/or ELA, however applicable)
for a Product, Apollon shall develop and submit to the Steering Committee for
its review a manufacturing plan with respect to such Product (a "Manufacturing
Plan"). Each Manufacturing Plan shall specify, among other
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things, (i) the facility at which the Product shall be manufactured, (ii) the
plan for completing and validating such facility, (iii) appropriate
specifications for the Product, and (iv) quality control provisions to be
employed in connection with the manufacture of the Product. The Steering
Committee shall review each of the Manufacturing Plans from time to time, and
ACY shall verify to its satisfaction that such plans and the manufacturing
facilities meet GMP and other regulatory requirements and appropriate quality
standards.
SECTION 9.04. RIGHT TO SUBCONTRACT MANUFACTURING. Subject to the
provisions of Section 3.07 hereof, in fulfilling its obligations pursuant to
this Article IX, Apollon may contract or otherwise deal with its Affiliates and
with subcontractors and other Persons; provided however, that with respect to
the manufacture of Products for Phase III clinical trials or commercial
distribution, Apollon's ability to enter into any agreement or arrangement with
a subcontractor or other Person with respect to such manufacturing shall be
subject to strict confidentiality and limited use, as well as the terms and
conditions of Sections 2.6 and 4.4 of the Supply Agreement.
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ARTICLE X
REPRESENTATIONS AND WARRANTIES
SECTION 10.01. REPRESENTATIONS AND WARRANTIES OF APOLLON. Apollon
represents and warrants to ACY as follows:
(a) Organization and Good Standing. Apollon is a corporation
duly organized and validly subsisting under the laws of the Commonwealth of
Pennsylvania, is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of its business or the
ownership of its property makes such qualification necessary, except where the
failure to so qualify would not have a material adverse effect on its business,
and is authorized to own or lease its properties and to carry on its business as
it is now being and proposed to be conducted.
(b) Authority. Apollon has the corporate power to enter into
this Agreement and the Supply Agreement and to carry out the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the Supply Agreement have been duly and validly authorized and approved by
all necessary corporate action on the part of Apollon and such Agreements have
been duly executed by and constitute the legally binding obligations of Apollon,
enforceable in accordance with their respective terms (except that such
enforcement may be
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limited by applicable bankruptcy, insolvency, reorganization, moratorium, and
other similar laws affecting the enforcement of creditors' rights generally from
time to time in effect and general principles of equity). The execution and
delivery of such Agreements do not, and the consummation by Apollon of the
transactions contemplated thereby will not, violate the provisions of or
constitute a default under (i) any laws applicable to Apollon, (ii) Apollon's
Articles of Incorporation or By-laws, (iii) any judgment, decree or order of any
court or governmental agency applicable to Apollon or its assets, or (iv) any
agreements, contracts or commitments to which Apollon is a party or by which its
assets are bound.
(c) Governmental Consents. No consent, approval order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority (other than
Governmental Approvals) is required on the part of Apollon in connection with
the consummation of the transactions contemplated by this Agreement.
(d) Brokers and Finders. Apollon has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement who could be entitled to a broker's, finder's or
similar fee or commission in connection therewith or upon the consummation
thereof.
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(e) Warranty of Title. Except as set forth on Schedule
10.01(e), no Person has asserted to Apollon, nor is Apollon aware of, any claim
of any right or interest in or to the Background Technology and/or Intellectual
Property Rights, and as of the Effective Date hereof, Apollon is not otherwise
aware of any issued patent that would be infringed by the manufacture, use,
import, or Exploitation of the Background Technology or Intellectual Property
Rights in the Field.
(f) Patents; Prior Art. Apollon has sufficient legal and
beneficial title, and/or license rights under the Background Technology and
Intellectual Property Rights for the business as currently proposed to be
conducted under this Agreement and the Supply Agreement, and Apollon shall
continue to be current in all payments and performance under any applicable
license and shall not breach or default under same during the term of such
Agreements. Apollon is not aware of, nor has it received any communications
alleging that Apollon has violated or, by conducting its business as currently
proposed to be conducted under this Agreement or the Supply Agreement, would
violate any patents or other intellectual property rights of any other Person.
SECTION 10.02. REPRESENTATIONS AND WARRANTIES OF ACY. ACY represents
and warrants to Apollon as follows:
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(a) Organization and Good Standing. ACY is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maine, and through its Affiliates may conduct business in foreign jurisdictions
and it or each of its Affiliates, whichever is applicable, is in good standing
in each jurisdiction in which the nature of its business or the ownership of its
property makes such qualification necessary, except where the failure to so
qualify would not have a material adverse effect on its business, and is
authorized to own or lease its properties and to carry on its business as it is
now being and proposed to be conducted.
(b) Authority. ACY has the corporate power to enter into this
Agreement and the Supply Agreement and to consummate the transactions
contemplated thereby. The execution, delivery and performance of this Agreement
and the Supply Agreement have been duly and validly authorized and approved by
all necessary corporate action on the part of ACY and such Agreements have been
duly executed by and constitute the legally binding obligations of ACY
enforceable in accordance with their respective terms (except that such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of creditors' rights
generally from time to time in effect and general principles of equity). The
execution and delivery of such Agreements by ACY do
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not, and the consummation by ACY of the transactions contemplated thereby will
not, violate the provisions of or constitute a default under (i) any laws
applicable to ACY, (ii) the Articles or Certificate of Incorporation or other
charter documents or By-Laws of ACY, (iii) any judgment, decree or order of any
court or governmental agency applicable to ACY or its assets, or (iv) any
agreements, contracts or commitments to which ACY is a party or by which its
assets are bound.
(c) Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority (other than
Governmental Approvals) is required on the part of ACY in connection with the
consummation of the transactions contemplated by this Agreement.
(d) Brokers and Finders. ACY has not employed any broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to a broker's, finder's or
similar fee or commission in connection therewith or upon the consummation
thereof.
(e) Warranty of Title. There are no outstanding options,
licenses or agreements of any kind between ACY and any third party relating to
the use of ACY Included Genes in the Field that would be in conflict with the
terms of this Agreement or the Supply Agreement.
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(f) Patents; Prior Art. ACY has sufficient legal and
beneficial title, and/or license rights under the ACY Included Genes for the
business as currently proposed to be conducted under this Agreement and the
Supply Agreement, and ACY shall continue to be current in all payments and
performance under applicable licenses and shall not breach or default under same
during the term of such Agreements. ACY is not aware of, nor has it received any
communication alleging that ACY has violated or, by conducting its business as
currently proposed to be conducted under this Agreement, would violate any
patents or other intellectual property rights of any other person regarding ACY
Included Genes.
ARTICLE XI
RECORD KEEPING AND AUDITS
SECTION 11.01. RECORDS RETENTION. The parties shall maintain in
confidence complete and accurate records pertaining to the development, use and
sale of Products in sufficient detail to permit the other party to confirm the
accuracy of the calculations of its research and development, regulatory, and
manufacturing expenses. Each party shall record all scientific, clinical study,
or other technical information relating to the research and development of each
Product in standard laboratory
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notebooks or the equivalent thereof, which shall be signed, dated and witnessed
by a person capable of understanding the context.
SECTION 11.02. AUDIT RIGHTS. Each party shall have a right, limited
to one time per year and at its own expense, upon reasonable notice and during
normal business hours, and through an independent representative (who shall be
reasonably acceptable to the other party and who shall be bound to provisions of
strict confidentiality and limited use, in perpetuity), to inspect and audit the
other party's books and records solely to verify a party's financial
calculations regarding its research and development, regulatory approval, and
manufacturing (or preparation thereof) expenses incurred hereunder during the
prior five-year period.
SECTION 11.03. RETENTION OF RECORDS. All scientific records and
other regulatory, research and development, or other technical information
required pursuant to Section 11.01 shall be maintained for a fifteen (15) years
from the expiration or termination of this Agreement, and sales or other
financial information, shall be maintained for a (5) five-year period following
the year in which payments or sales were made or received hereunder.
SECTION 11.04. SURVIVAL. The provisions of this Article XI shall
survive termination of this Agreement.
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ARTICLE XII
PUBLICATIONS
SECTION 12.01. PUBLICATIONS. The Steering Committee shall approve
the submission of any publications, including abstracts of presentations and
content of intended oral presentations, resulting from the research under this
Agreement in advance of submission for publication in order to protect each
party's Know-How, including Technology. The owner of such Know-How shall have
the final authority to determine the scope and content of any publication
materials which contain information relating to such party's Know-How. In the
case of Technology owned jointly by the parties, the parties shall mutually
determine the scope and content of any publication materials which contain
information relating to such Know-How. In the event, that either party, or the
parties jointly, wish to publish any of such results (whether jointly or solely
owned), the Steering Committee shall be provided with a copy of any proposed
publication (whether oral or written) for review and comment at least forty-five
(45) days in advance of submission of the proposed publication. The Steering
Committee shall notify the party(s) within forty-five (45) days of receipt of a
copy of the proposed publication, of any objections to the proposed publication
or of its intention to approve or withhold approval
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of the publication. Any delay of such approval to allow for patent application
filing shall not extend for a period longer than ninety (90) days from the date
such delay is taken by the Steering Committee.
SECTION 12.02. PUBLICITY. Except as otherwise provided herein,
neither party shall use or refer to, without the other party's prior written
consent, the other's name, this Agreement or the terms hereof in any public
statement, whether oral or written, including, but not limited to,
communications with the media, advertising, shareholder reports, communications
with stock analysts or prospectuses; provided, however, that either party may,
without the consent of the other, make any disclosure required by law, and
particularly, but without limitation, by the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, and the regulations
promulgated thereunder, provided however, that the disclosing party shall use
reasonable efforts to redact all material as reasonably requested by the other
party, for any material that may be redacted in accordance with any such law.
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ARTICLE XIII
CONFIDENTIALITY
SECTION 13.01. CONFIDENTIALITY; EXCEPTIONS. Except to the extent
expressly authorized by this Agreement or otherwise agreed in writing, the
parties agree that, for the term of this Agreement and for a period of five
years thereafter, the receiving party shall keep confidential and shall not
publish or otherwise disclose and shall not use for any purpose other than as
provided for in this Agreement any patent application, Business Information, and
Know-How, including Materials, (herewith "Confidential Information") furnished
to it by the other party pursuant to this Agreement, except to the extent that
it can be established by the receiving party by competent proof that such
Confidential Information:
(a) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and
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other than through any act or omission of the receiving party in
breach of this Agreement;
(d) was disclosed to the receiving party, other than under an
obligation of confidentiality, by a third party, unless the receiving party knew
that such third party was under an obligation to the disclosing party not to
disclose such information to others; or
(e) was disclosed by the receiving party pursuant to a
requirement of law.
The parties agree that the financial terms of this Agreement shall
also be considered Confidential Information hereunder.
SECTION 13.02. AUTHORIZED DISCLOSURE. Upon notification to the other
party, each party may disclose the other's Confidential Information to the
extent such disclosure is reasonably necessary in filing or prosecuting patent
applications, prosecuting or defending litigation, and complying with applicable
governmental regulations, including clinical studies, and as required by
agreement with university collaborators. Prior to any such disclosure, if a
party is required by law or regulation or agreement to make any disclosure of
the other party's Confidential Information, it will, except where impractical
for necessary disclosures (e.g., in the event of medical emergency), give
reasonable advance notice to the
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other party of such disclosure requirement, redact all material and information
that may reasonably and permissibly be redacted, and as reasonably requested by
the other party, and, except to the extent inappropriate in the case of patent
applications, will use reasonable efforts to secure confidential treatment of
such Confidential Information required to be disclosed, no less stringent than
the obligations of confidentiality and limited use imposed hereunder. In
addition, each party may disclose the other's Confidential Information to its
employees, consultants and advisors on a need-to-know basis, provided any such
employees, consultants and advisors are subject to agreements of confidentiality
no less stringent than the obligations of confidentiality and limited used
imposed hereunder.
SECTION 13.03. CONFIDENTIAL OR PROPRIETARY INFORMATION OF OTHERS.
Each party agrees that it will not, during the term of this Agreement, knowingly
use, disclose to the other, or induce the other to use, any confidential or
proprietary information belonging to another Person, unless otherwise
authorized.
SECTION 13.04. SURVIVAL. The provisions of this Article 13 shall
survive the termination or expiration of this Agreement for a period of five (5)
years from said termination or expiration.
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ARTICLE XIV
TERM OF AGREEMENT
SECTION 14.01. TERM. Subject to any provision in the Supply
Agreement to the contrary, this Agreement shall become effective on the
Effective Date and, unless earlier terminated pursuant to the provisions of this
Article XIV, continue as to each Product until the earlier of (i) the
termination of this Agreement in accordance with this Article XIV, (ii) the
termination of the development of such Product or the corresponding Research
Program in accordance with the termination provisions hereof; or (iii) the later
of (a) ten (10) years following the first commercial sale of such Product, and
(b) the last to expire patent within Patents covering such Product. Upon
expiration of this Agreement as to a specific Product pursuant to Subsection
(iii) of this Section 14.01, the licenses granted with respect to such Product
pursuant to Article VII hereof shall be deemed fully paid up and irrevocable.
SECTION 14.02. TERMINATION BY MUTUAL AGREEMENT. The parties may
mutually agree in writing to terminate this Agreement as to one or more
Products, or in its entirety. Upon any termination of this Agreement in its
entirety pursuant to this Section 14.02, all rights and obligations of both
parties hereunder (including without limitation any licenses or other
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rights granted pursuant to Articles V and VII hereof, the milestone payments of
Section 6.01 hereof, and the provisions of 7.06 and 8.06) shall, except as
expressly set forth herein, terminate. Upon any termination of this Agreement
pursuant to this Section 14.02 as to a specific Product, all such rights and
obligations of both parties hereunder with respect to such Product, but not with
respect to any other Product, shall, except as expressly set forth herein,
terminate.
SECTION 14.03. UNILATERAL TERMINATION WITHOUT CAUSE. Subject to the
terms and conditions of the Supply Agreement, and upon one hundred twenty (120)
days prior written notice, ACY may, for any reason, unilaterally terminate this
Agreement in its entirety or as to any specific Product.
(a) Upon any termination of this entire Agreement pursuant to
this Section 14.03, (i) all rights and obligations of ACY hereunder, including
without limitation any licenses or options granted to ACY pursuant to Articles V
or VII hereof, but excluding any obligations of ACY under Sections 6.06, 7.06
and 8.06 hereof, shall, except as expressly set forth herein, immediately
terminate, (ii) the licenses granted to Apollon pursuant to Section 7.01 hereof
shall vest, subject to the royalty provisions set forth in Paragraph 6.5 of the
Supply Agreement (iii) all obligations of Apollon hereunder shall, except as
expressly set forth herein, immediately terminate, and
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(iv) to the extent ACY is the owner of Government Approvals hereunder, ACY shall
immediately assign (or grant a right of reference and use if assignment is
prohibited by law) and transfer to Apollon all Governmental Approvals, including
any and all information relating thereto, sufficient for Apollon to enjoy its
rights granted hereunder.
(b) Upon any termination of this Agreement as to any specific
Product pursuant to this Section 14.03, (i) all rights and obligations of ACY
hereunder with respect to such terminated Product (but not with respect to any
other Product), including without limitation any licenses or options granted to
ACY pursuant to Articles V or VII hereof, but excluding any obligations of ACY
under Sections 6.06, 7.06 and 8.06 hereof, as they relate to such Product,
shall, except as expressly set forth herein, immediately terminate, (ii) all
licenses granted to Apollon pursuant to Section 7.01 shall vest as to such
terminated Product, subject to the royalty provisions of Paragraph 6.5 of the
Supply Agreement (iii) all obligations of Apollon with respect to such Product
hereunder shall, except as expressly set forth herein, immediately terminate,
and (iv) to the extent ACY is the owner of any relevant Government Approvals
hereunder, ACY shall immediately assign (or grant a right of reference and use
if assignment is prohibited by law) and transfer to Apollon all Governmental
Approvals, including any and all information
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
relating thereto, relating to such Product sufficient for Apollon to enjoy its
rights granted hereunder.
SECTION 14.04. TERMINATION FOR BREACH. In the event that any
material provision of this Agreement is breached by either party, the
non-breaching party may give the breaching party written notice requiring it to
remedy such breach. In the event the breaching party shall not have fully cured
such breach within sixty days after receipt of such notice (or in the case of a
breach which is not by its nature capable of being cured within sixty days, if
the breaching party shall not have commenced performance to cure within the
sixty day period and thereafter diligently attempted to complete performance of
the cure), or if the parties have not otherwise agreed on a plan to remedy such
breach, the non-breaching party shall, in addition to any other remedies
available to it hereunder, at law or in equity, be entitled, but not obligated,
to terminate, upon written notice to the breaching party, this Agreement in its
entirety; with the proviso that if such breach relates only to a specific
Product, the non-breaching party may terminate this Agreement only as to such
specific Product to which such breach relates.
(a) Upon any termination of this entire Agreement pursuant to
this Section 14.04, (i) all rights and obligations of the breaching party
hereunder, including without limitation any licenses or options granted to the
breaching party pursuant to
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Articles V or VII hereof and right to payments pursuant to Section 6.06 (where
ACY is the non-breaching party), but excluding any obligations of the breaching
party under Sections 6.06 (where ACY is the breaching party), 7.06 and 8.06
hereof, shall, except as expressly set forth herein, immediately terminate, (ii)
all licenses or options granted to the non-breaching party pursuant to Articles
V or VII hereof shall vest or be retained, as appropriate, (iii) all obligations
of the non-breaching party hereunder shall, except as expressly set forth
herein, immediately terminate, and (iv) the breaching party shall immediately
assign (or grant a right of reference and use if assignment is prohibited by
law) and transfer all Governmental Approvals, including any and all information
relating thereto, sufficient for the non-breaching party to enjoy its rights
surviving or granted hereunder.
(b) Upon any termination of this Agreement as to any specific
Product pursuant to this Section 14.04, (i) all rights and obligations of the
breaching party hereunder with respect to such Product (but not with respect to
any other Product), including without limitation any licenses or options granted
to the breaching party pursuant to Articles V or VII hereof and right to
payments pursuant to Section 6.06 hereof (where ACY is the non-breaching party),
but excluding any obligations of the breaching party pursuant to Sections 6.06
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
(where ACY is the breaching party), 7.06 and 8.06, as they relate to such
Product shall, except as expressly set forth herein, immediately terminate, (ii)
all licenses or options granted to the non-breaching party pursuant to Articles
V or VII hereof with respect to such Product (but not with respect to any other
Product) shall vest or be retained, as appropriate, (iii) all obligations of the
non-breaching party with respect to such Product (but not with respect to any
other Product) hereunder shall, except as expressly set forth herein,
immediately terminate, (iv) to the extent Government Approvals are owned by the
breaching party, the breaching party shall immediately assign (or grant a right
of reference and use if assignment is prohibited by law) and transfer all
Governmental Approvals, including any and all information relating thereto,
relating to such Product sufficient for the non-breaching party to enjoy its
rights surviving or granted hereunder, and (v) notwithstanding anything
contained in this Section 14.04(b) to the contrary, all other rights and
obligations of the parties including, without limitation, obligations under
Sections 7.06 and 8.06 shall remain in full force and effect, except as such
rights and obligations apply to the Product being terminated.
SECTION 14.05. TERMINATION FOR CHANGE IN CONTROL.
(a) Within one year following the occurrence of a "Change in
Control," either party may, upon sixty days prior
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
written notice, terminate this Agreement in its entirety or as to an individual
Product. In the event of a termination pursuant to this Section 14.05, and
solely as to such terminated Product or with respect to the Agreement in its
entirety (and thereby inclusive of all Products), as applicable, (i) all rights
and obligations hereunder of the party with respect to whom the Change in
Control shall have occurred, including without limitation any licenses or
options granted to it pursuant to Articles V and VII hereof, shall, except as
expressly set forth herein, immediately terminate, (ii) all licenses or options
granted to the other party pursuant to Articles V or VII hereof shall vest or be
retained, as appropriate, (iii) all obligations of the other party hereunder
shall, except as expressly set forth herein, immediately terminate, and (iv) the
party with respect to whom the Change in Control shall have occurred shall
immediately assign (or grant a right of reference and use if assignment is
prohibited by law) and transfer all Governmental Approvals, including any and
all information relating thereto, sufficient for the other party to enjoy its
rights surviving or granted hereunder.
(b) A "Change in Control" shall be deemed to have occurred if
(A) any person (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, is or becomes the beneficial owner (as defined
in Rule 13d-3 under the
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Act), directly or indirectly, of securities of a party representing 50% or more
of the combined voting power of a party's then outstanding securities; or (B)
the shareholders of a party approve a merger or consolidation of such party with
any other corporation, other than a merger or consolidation wherein the
shareholders of such party retain at least 50% of the combined voting power of
the outstanding securities of the surviving or resulting corporation; or (C) a
party enters into complete liquidation or otherwise enters into an agreement for
the sale or other disposition of all or substantially all of a party's assets to
an entity that is not 50% controlled by such party's shareholders.
SECTION 14.06. TERMINATION FOR PATENT BLOCKING EVENT. Within sixty
(60) days following the occurrence of a "Patent Blocking Event", either party
may, upon sixty days prior written notice, terminate this Agreement as to the
specific Product(s) to which the Patent Blocking Event relates. If the Patent
Blocking Event relates to all Products hereunder, either party may terminate the
Agreement in its entirety pursuant to this Section. For purposes of this Section
14.06, a "Patent Blocking Event" shall be deemed to have occurred with respect
to a Product(s) when such party notifies the other party in writing of its
reasonable belief that a license under any third party U.S. or European patent
is necessary in order to develop, make, have
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
made, use, import, offer for sale, or sell such Product(s), and in accordance
with the provisions of Section 15.09 hereof, it is definitively determined that
such license is not reasonably obtainable by either party. Upon any termination
pursuant to this Section 14.06, (i) all rights and obligations of both the
terminating party and the non-terminating party hereunder with respect to such
terminated Product(s), including without limitation any licenses or options
granted pursuant to Articles V or VII hereof as they relate to such Product(s),
shall, except as expressly set forth herein, immediately terminate, and (ii) all
other rights and obligations of both parties pursuant to Sections 7.06 and 8.06
shall remain in full force and effect, except as such rights and obligations
apply to the Product being terminated, or except when the Agreement in its
entirety is terminated pursuant to this Section, however applicable.
SECTION 14.07. TERMINATION DUE TO INSOLVENCY.
(a) This Agreement may be terminated in its entirety by a
party in the event (i) a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect shall be instituted
by the other party, or the other party shall consent in writing to the entry of
an order for relief of an involuntary case under any such law; (ii) a general
assignment for the benefit of creditors shall be made by the other party; (iii)
the other party shall consent in writing
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
to the appointment of or possession by a receiver, liquidator, trustee,
custodian, sequestrator or similar official of all or any substantial part of
such party's property; (iv) the other party shall adopt a board resolution in
furtherance of any of the foregoing actions specified in Subsections (i) through
(iii) of this Section 14.07; or (v) a decree or order for relief by a court of
competent jurisdiction shall be entered in respect of the other party in an
involuntary case under any applicable bankruptcy, insolvency or other similar
law now.or hereafter in effect, or appointing a receiver, liquidator, trustee,
sequestrator or other similar official of the other party or of any substantial
part of such party's assets, or ordering the winding up or liquidation of its
affairs, and any such decree or order shall remain unstayed or undischarged an
in effect for a period of ninety (90) days (hereinafter an "Insolvency Event").
(b) Upon any termination of this Agreement pursuant to this
Section 14.07, (i) all rights and obligations of the insolvent party hereunder,
including without limitation any licenses or options granted to the insolvent
party pursuant to Articles V or VII hereof, shall, except as expressly set forth
herein, immediately terminate, (ii) all licenses and options granted to the
non-insolvent party pursuant to Articles V and VII hereof shall automatically
convert to exclusive (even as to the insolvent party) licenses, (iii) all
obligations of the;
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
noninsolvent party hereunder shall, except as expressly set forth herein,
immediately terminate, and (iv) the insolvent party shall immediately assign (or
grant a right of reference and use if assignment is prohibited by law) and
transfer all Governmental Approvals, including any and all information relating
thereto, sufficient for the non-insolvent party to enjoy its rights surviving or
granted hereunder.
(c) All rights and licenses granted under or pursuant to any
section of this Agreement are, and shall otherwise be deemed to be, for purposes
of Section 365(n) of the Bankruptcy Code, licenses of rights to "intellectual
property" as defined under Section 101(52) of the Bankruptcy Code. The parties
agree that ACY, as a licensee of such rights under this Agreement, shall retain
and may fully exercise all of its rights and elections under the Bankruptcy
Code. The parties further agree that, if an Insolvency Event shall occur, ACY
shall be entitled to a complete duplicate of (or complete access to, as
appropriate) any such intellectual property and all embodiments of such
intellectual property, and the same, if not already in its possession, shall be
promptly delivered to ACY upon any such occurrence.
(d) Apollon will not take any action to cause directly an
Insolvency Event without giving ACY at least thirty days' prior written notice.
Upon ACY's receipt of such notice,
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
the parties may negotiate in good faith for a period not to exceed thirty days
regarding the possibility of ACY's providing financing to Apollon, on terms and
conditions mutually satisfactory to both parties, to prevent the occurrence of
an Insolvency Event.
SECTION 14.08. EFFECT OF TERMINATION ON SUPPLY AGREEMENT. Except as
expressly set forth herein, any termination of the Agreement shall not affect
any of the rights or obligations of the parties under the Supply Agreement,
including without limitation any obligations to make any payments pursuant to
Article VI thereof.
ARTICLE XV
MISCELLANEOUS
SECTION 15.01. NOTICES. Any notice required or permitted under this
Agreement shall be deemed to have been sufficiently provided and effectively
made as of the delivery date if hand-delivered, or as of the date received if
mailed by registered or certified mail, postage-prepaid, or if by telecopy or
overnight airmail courier the business day the sender has written confirmation
such telecopy or overnight package was received, and addressed to the receiving
party at its respective address as follows:
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
If to ACY:
LEDERLE-PRAXIS BIOLOGICALS
division of AMERICAN CYANAMID COMPANY
c/o Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania 19087
Attention: PRESIDENT
with a copy to:
AMERICAN HOME PRODUCTS CORPORATION
5 Giralda Farms
Madison, New Jersey 07940
Attn: ASSOCIATE GENERAL COUNSEL
If to Apollon:
APOLLON, INC.
One Great Valley Parkway
Malvern, Pennsylvania 19355-1423
Fax: (610) 647-9732
Attn: PRESIDENT
with a copy to:
Morris Cheston, Jr., Esq.
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Fax: (215) 864-8999
or such other address which the receiving party has given notice pursuant to the
provisions of this Section.
SECTION 15.02. NO AGENCY. The relationship of the parties under this
Agreement is that of independent contractors and not as agents of each other or
partners or joint venturers, and neither party shall have the power to bind the
other in any way with respect to any obligation to any third party unless a
specific power of attorney is provided for such purpose. Each
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
party shall be solely and exclusively responsible for its own
employees and operations.
SECTION 15.03. FORCE MAJEURE.
(a) In the event that the performance of this Agreement or of
any obligation hereunder, other than payment of money as herein provided, by
either party hereto is prevented, restricted or interfered with by reason of any
cause not within the control of the respective party, and which could not by
reasonable diligence have been avoided by such party, the party so affected,
upon giving prompt notice to the other party, as to the nature and probable
duration of such event shall be excused from such performance for a period of
one (1) year or to the extent and for the duration of such prevention,
restriction or interference, whichever is the shorter period of time; provided
that the party so affected shall use its reasonable efforts to avoid or remove
such cause of non-performance and shall fulfill and continue performance
hereunder with the utmost dispatch whenever and to the extent such cause or
causes are removed.
(b) For the purpose of the preceding paragraph but without
limiting the generality thereof, the following shall be considered as not within
the control of the respective party: acts or omissions of a governmental agency,
compliance with requests, rules, regulations or orders of any governmental
authority or any department, agency or instrumentality thereof,
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
flood, storm, earthquake, fire, or other acts of God, war, riots, insurrection,
accidents, acts of the public enemy, invasion, quarantine restrictions, strike,
lockout, differences with workmen, embargoes, delays or failure in
transportation and acts of a similar nature.
SECTION 15.04. NO IMPLIED LICENSES. Nothing in this Agreement is
intended to or shall be construed to create, confer, give effect to or otherwise
imply in either party any license, right or property interest in any Product, or
in any know-how or intellectual property owned or licensed by the other except
as expressly provided herein.
SECTION 15.05. NO WAIVER. No failure or delay on the part of a party
in exercising any right hereunder shall operate as a waiver of, or impair, any
such right. No single or partial exercise of any such right shall preclude any
other or further exercise thereof of any other right. No waiver of any such
right shall be deemed a waiver of any other right hereunder.
SECTION 15.06. SEVERABILITY. Should one of the provisions of this
Agreement become or prove to be null and void, such will be without effect on
the validity of this Agreement as a whole. Both parties will, however, endeavor
to replace the void provision by a valid one which in its economic effect is
most consistent with the void provision.
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
SECTION 15.07. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the internal laws of the Commonwealth of
Pennsylvania without regard to principles of conflicts of laws, and the
appropriate state and federal courts of the Commonwealth of Pennsylvania shall
have exclusive jurisdiction over any dispute between the parties, and each party
unconditionally submits to the jurisdiction of such courts; provided however,
that any patent question or controversy between the parties and related to a
U.S. patent shall be construed or resolved in accordance with the relevant
patent laws, and, the U.S. District Court for the Eastern District of
Pennsylvania shall have exclusive jurisdiction thereof. All other patent
questions or controversies shall be construed or resolved in accordance with the
applicable patent laws and in a forum of competent jurisdiction for such patent
related matter.
SECTION 15.08. MODIFICATION; ASSIGNMENT. This Agreement may be
modified or amended only in writing signed by duly authorized representatives of
Apollon and ACY. Neither party shall assign this Agreement or any of its rights
or obligations hereunder without the prior written consent of the other party
hereto (which consent shall not be unreasonably withheld); provided, however,
that either party may assign this Agreement to any wholly-owned subsidiary or,
subject to the other party's right of termination pursuant to Section 14.05
hereof, to
79
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
any successor by merger or sale of substantially all of the business unit to
which this Agreement relates in a manner such that the assignor (if it continues
as a separate entity) shall remain liable and responsible for the performance
and observance of all of its duties and obligations hereunder. This Agreement
shall be binding upon the successors and permitted assigns of the parties
(regardless of whether such successor or assign shall be a competitor of Apollon
or ACY) and the name of a party appearing herein shall be deemed to include the
names of such party's successor's and permitted assignees to the extent
necessary to carry out the intent of this Agreement. Any assignment not in
accordance with this Section shall be void.
SECTION 15.09. THIRD PARTY LICENSE(S).
(a) Prior to a party electing to terminate pursuant to the
provisions of Section 14.06, and in the event that at any time prior to the
first commercial sale of a Product, a party reasonably determines that a
license(s) under any third-party patent is necessary in order to make, use,
import, offer for sale, or sell a Product in the Territory, and neither Apollon
nor ACY is able to obtain such license(s) on terms mutually acceptable to both
parties, then Apollon and ACY shall negotiate in good faith to reach an
agreement on a non-infringing substitute for such Product, on terms and
conditions acceptable
80
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
to each party, which may include a modification of the unit purchase price of
Product.
(b) In the event that Apollon and ACY cannot agree on whether
or not a license is necessary pursuant to a party's determination in accordance
with Subsection (a) hereof, such matter shall be referred to independent patent
counsel for Apollon and ACY, respectively (each assuming all costs of counsel
representing it), who shall attempt to reach agreement. If such independent
counsel are not able to reach an agreement within a reasonable period of time,
they shall jointly choose an independent third patent counsel to make a binding
determination, and all costs thereof shall be shared equally by the parties.
(c) Upon agreement by the parties pursuant to Section 15.09(a)
or upon a binding determination pursuant to 15.09(b) that a license is
necessary, and in the event that the parties cannot reach agreement as to an
acceptable non-infringing substitute, the parties shall use reasonable efforts
to obtain such license, all costs of such acquisition of a license shall be
borne equally by the parties, and the parties shall negotiate in good faith to
reach an agreement regarding the maintenance costs thereof.
SECTION 15.10. LIMITATIONS OF DAMAGES. Neither party shall be liable
to the other for loss of profit or use or incidental or consequential damages in
any claims arising out of
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
or relating to this Agreement, whether based on warranty, contract, negligence
or strict liability.
SECTION 15.11. METHOD OF PAYMENT. All payments due to a party
hereunder shall be made by check or by wire transfer in immediately available
funds.
SECTION 15.12. ENTIRE AGREEMENT. This Agreement and the Supply
Agreement constitute the entire understanding between the parties regarding the
subject matter hereof and no party has relied on any representation not
expressly set forth or referred to in this Agreement or in the Supply Agreement.
No amendment, variation, waiver or modification of any of the terms or
provisions of this Agreement shall be effected unless set forth in writing,
specifically referencing this AGREEMENT, and duly signed on behalf of the
parties hereto.
SECTION 15.13. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which shall
constitute together one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr.
------------------------------------
Print Name: Vincent R. Zurawski, Jr.
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
Title: President and CEO
AMERICAN CYANAMID COMPANY
By: /s/ Robert Essner
------------------------------------
Print Name: Robert Essner
Title: President
Lederle Division of
American Cyanamid
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
SCHEDULE I
[
]
84
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
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SCHEDULE II
<TABLE>
<CAPTION>
===================================================================================================
REFERENCE # TITLE INVENTORS STATUS AS OF May 17, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[ Genetic Immunization Wang
Weiner [ ]
] Williams
USSN 08/008,342
- ---------------------------------------------------------------------------------------------------
[ Genetic Immunization Weiner
Wang [ ]
] Williams
USSN 08/029,336
- ---------------------------------------------------------------------------------------------------
[ Genetic Immunization Weiner [ ]
Wang
] Williams
USSN 08/125,012 Coney
- ---------------------------------------------------------------------------------------------------
[ Non-Human Weiner
Immunocompetent Animal Williams [ ]
] Model Merva
USSN 08/124,962
- ---------------------------------------------------------------------------------------------------
[ Compositions of and Methods Weiner, Williams
for Delivery of Genetic Material Wang, Coney PCT/US94/00899
] Merva, Zurawski
UPAP-0112
- ---------------------------------------------------------------------------------------------------
APL 93-12 Delivery of Genetic Material by Weiner
APOL-0016 (W/W) Needleless Injection Device [ ]
UPAP-0006
USSN 08/093,235
- ---------------------------------------------------------------------------------------------------
[ Compositions and Methods for Carrano
] Delivery of Genetic Material [ ]
USSN 08/221,579
- ---------------------------------------------------------------------------------------------------
[ ] [ ] [ ]
[ ] [ ] [ ]
[ ] [ ]
- ---------------------------------------------------------------------------------------------------
[ ] [ ] [ ]
[ ]
]
- ---------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<TABLE>
<CAPTION>
===================================================================================================
REFERENCE # TITLE INVENTORS STATUS AS OF May 17, 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[ Multifunctional Molecular Boutin [ ]
] Complexes for Gene Transfer to
USSN 08/314,060 Cells
- ---------------------------------------------------------------------------------------------------
[ Methods of Inducing [ Weiner [ ]
] ]
USSN 08/357,398
===================================================================================================
</TABLE>
2
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
SCHEDULE 10.01(e)
1. A portion of the Background Technology is owned by The Trustees of The
University of Pennsylvania and/or the Institute of Biotechnology and
Advanced Molecular Medicine. In connection therewith, Apollon has entered
into license agreements with each such entity, copies of which have been
previously provided to ACY.
2. The Wistar Institute of Anatomy and Biology has also claimed an ownership
interest in portions of the Background Technology. Apollon is in the
process of negotiating a license agreement with Wistar with respect
thereto.
3. Apollon has entered into a License and Option Agreement with Centocor,
Inc. pursuant to which Apollon has granted Centocor an exclusive license
to portions of the Background Technology for cancer applications excluding
any product directed at any viral, fungal or bacterial antigen, and an
option to acquire one or more exclusive sublicenses under the University
Licenses for cancer applications (the "Centocor Agreement"). A copy of the
Centocor Agreement has previously been provided to ACY. As part of the
Centocor Agreement, Apollon has also granted Centocor an exclusive license
to any patents and certain know-how acquired by Apollon after the date of
such agreement which may be necessary or useful in the manufacture and
sale of genetic vaccination products in the field of cancer, excluding any
product directed at any viral, fungal or bacterial antigen.
3
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REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGE 1 AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
FIRST AMENDMENT TO THE
RESEARCH AND DEVELOPMENT AND LICENSE AGREEMENT
This Amendment No. 1 (the "Amendment") is made as of the 3rd day of
October, 1997, by and between Apollon, Inc., a Pennsylvania corporation (the
"Company") and American Cyanamid Company, a Maine corporation ("ACY"), the
signatories to the Research and Development and License Agreement, dated as of
July 19, 1995 (the "Agreement").
WHEREAS, ACY is an indirect majority owned subsidiary of American Home
Products Corporation and the Company and an affiliate of American Home Products
Corporation have entered into a Securities Purchase Agreement dated as of the
date hereof pursuant to which the Company has agreed to amend the Agreement as
hereinafter set forth;
WHEREAS, the Company and ACY wish to amend the Agreement as hereinafter
provided; and
WHEREAS, pursuant to Section 15.08 of the Agreement, the Agreement may only
be modified or amended in writing signed by duly authorized representatives of
the Company and ACY.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, each intending to be legally
bound, hereby agree as follows:
1. All terms used herein and not defined shall have the meanings set
forth in the Agreement.
2. Section 6.01 of the Agreement is hereby amended to add a new
provision, Section 6.01(a) to read as follows:
"(a) Notwithstanding the foregoing or any other provision of this
Agreement, the $[ ] R&D Payment due to Apollon at the time of the
[ ]
(the "[ ] Second R&D Payment") shall be paid on the date arising [ ]
following the date on which such [ ] Second R&D Payment otherwise becomes
due and payable. Apollon shall notify and provide supporting documentation
to ACY in accordance with Sections 6.03 and 2.03 hereof at the time the [ ]
Second R&D Payment otherwise becomes due and payable and shall send another
notice to ACY 30 days prior to the payment date."
<PAGE>
3. The address for notices to be sent to ACY pursuant to Section
15.01 of the Agreement shall be as set forth following the signature line below,
attention: President.
4. All other terms and provisions of the Agreement remain in full
force and effect.
5. This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute together one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the day and year first above written.
APOLLON, INC.
By: /S/Vincent R. Zurawski
______________________________
Vincent R. Zurawski, Jr.
President
Notices to be sent to:
Vincent R. Zurawski, Jr. Ph.D
President and CEO
One Great Valley Parkway
Malvern, PA 19355-1423
Fax: (610) 647-9732
AMERICAN CYANAMID COMPANY
By: /s/Gerald A. Jibilian
_____________________
Name: Gerald A. Jibilian
Title: Vice President
Notices to be sent to:
Ronald J. Saldarini, Ph.D.
President
c/o Wyeth-Ayerst
280 King of Prussia Road
Radnor, PA 19087
Fax: (610) 989-5700
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<PAGE>
SUPPLY AGREEMENT
BETWEEN
APOLLON, INC.
AND
AMERICAN CYANAMID COMPANY
-------------------------
July 19, 1995
-------------------------
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
TABLE OF CONTENTS
ARTICLE I - DEFINITIONS.................................................... 2
ARTICLE II - SUPPLY........................................................ 6
2.1 SUPPLY........................................................... 6
2.2 PRODUCT IMPROVEMENTS AND CHANGES................................. 6
2.3 FORECASTS........................................................ 7
2.4 FIRM ORDERS; INVENTORY LEVELS.................................... 7
2.5 TERMS............................................................ 8
2.6 MANUFACTURING EFFORTS............................................ 8
2.7 SPECIFICATIONS................................................... 10
2.8 INSPECTION....................................................... 10
ARTICLE III - MARKETING.................................................... 11
3.1 PROMOTIONAL EFFORTS.............................................. 11
3.2 MARKETING AND PROMOTIONAL MATERIALS.............................. 12
3.3 MARKETING AGREEMENTS............................................. 12
ARTICLE IV - REGULATORY.................................................... 13
4.1 OWNERSHIP........................................................ 13
4.2 ASSIGNMENT OF CERTAIN REGISTRATIONS PERMITS AND
GOVERNMENT APPROVALS........................................... 13
4.3 REGULATORY ACTION OR OTHER MITIGATION OF GOVERNMENT
APPROVAL....................................................... 13
4.4 ALTERNATE SOURCE FOR MANUFACTURE................................. 14
4.5 MANUFACTURING RECORDS............................................ 14
4.6 MANUFACTURING AUDIT.............................................. 15
4.7 TECHNICAL SUPPORT................................................ 15
ARTICLE V - FAILURE TO SUPPLY.............................................. 15
5.1 GRANT OF CONTINGENT MANUFACTURING RIGHTS......................... 15
5.2 EXERCISE OF CONTINGENT MANUFACTURING RIGHTS...................... 16
5.3 ASSISTANCE PROVIDED BY APOLLON................................... 17
5.4 LENGTH OF ALTERNATE MANUFACTURE.................................. 18
ARTICLE VI - PAYMENTS...................................................... 19
6.1 TRANSFER PRICE................................................... 19
6.2 ACY RESALE PRICES................................................ 21
6.3 ADVANCE PAYMENTS FOR PURCHASES OF PRODUCTS....................... 21
6.4 PAYMENTS; CURRENCY............................................... 22
6.5 PAYMENTS TO ACY.................................................. 23
6.6 TRANSFER PRICE IF PRODUCT MANUFACTURED BY ACY.................... 24
6.7 TIME PERIOD FOR PAYMENTS......................................... 25
6.8 LIABILITY RESERVE................................................ 26
ARTICLE VII - RECORD KEEPING AND AUDITS.................................... 26
7.1 RECORDS RETENTION................................................ 26
7.2 AUDIT RIGHTS..................................................... 27
7.3 TAXES............................................................ 27
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
ARTICLE VIII - TRADEMARKS, TRADENAMES, TRADEDRESS.......................... 28
8.1 RETENTION OF RIGHTS.............................................. 28
8.2 TRADE DRESS...................................................... 29
ARTICLE IX - INFRINGEMENTS................................................. 30
9.1 INFRINGEMENTS.................................................... 30
ARTICLE X - WARRANTIES..................................................... 34
10.1 AUTHORITY TO ENTER INTO AGREEMENT: OTHER RIGHTS
AFFECTING SALE OF PRODUCTS..................................... 34
10.2 AGREEMENT NOT TO BREACH OTHER AGREEMENTS........................ 35
10.3 COMPLIANCE WITH LAWS; PRODUCT WARRANTIES........................ 35
10.4 INDEMNIFICATION BY APOLLON...................................... 36
10.5 INDEMNIFICATION BY ACY.......................................... 36
10.6 ADDITIONAL INDEMNIFICATION BY PARTIES........................... 37
10.7 LIABILITY INSURANCE FOR APOLLON................................. 38
10.8 DEFENSE OF INDEMNIFICATION CLAIMS............................... 39
10.9 COMPLIANCE WITH EXPORT LAWS AND REGULATIONS..................... 39
10.10SURVIVAL OF PROVISIONS.......................................... 40
ARTICLE XI - THIRD-PARTY LICENSES.......................................... 40
11.1 NEED FOR ADDITIONAL LICENSES PRIOR TO FIRST
COMMERCIAL SALE................................................ 40
11.2 NEED FOR ADDITIONAL LICENSES AFTER FIRST
COMMERCIAL SALE................................................ 41
11.3 DISAGREEMENT OVER NEED FOR ADDITIONAL LICENSES.................. 41
11.4 EFFORTS TO OBTAIN LICENSE....................................... 41
ARTICLE XII - CHANGE IN CONTROL/INSOLVENCY................................. 42
12.1 RIGHTS OF ACY.................................................. 42
12.2 ADVANCE NOTICE OF INSOLVENCY EVENT............................. 42
12.3 APOLLON'S CONTINUED MANUFACTURE AND SUPPLY...................... 42
ARTICLE XIII - DURATION AND TERMINATION.................................... 43
13.1 TERM........................................................... 43
13.2 TERMINATION BY MUTUAL AGREEMENT................................ 44
13.3.UNILATERAL TERMINATION WITHOUT CAUSE............................ 44
13.4.TERMINATION FOR BREACH.......................................... 46
13.5.TERMINATION FOR CHANGE IN CONTROL............................... 47
13.6.TERMINATION DUE TO INSOLVENCY................................... 49
13.7.EFFECT OF TERMINATION ON RESEARCH AND DEVELOPMENT
AGREEMENT...................................................... 50
13.8 FAILURE TO EXERCISE RIGHTS..................................... 50
13.9 RIGHT TO SELL REMAINING INVENTORY.............................. 50
13.10 TRANSFER OF GOVERNMENT APPROVALS............................... 51
ARTICLE XIV - CONFIDENTIALITY.............................................. 51
14.1 CONFIDENTIALITY; EXCEPTIONS.................................... 51
14.2 AUTHORIZED DISCLOSURE........................................... 52
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
14.3 CONFIDENTIAL OR PROPRIETARY INFORMATION OF THIRD
PARTIES........................................................ 53
14.4 SURVIVAL........................................................ 53
ARTICLE XV - MISCELLANEOUS................................................. 54
15.1 NOTICES......................................................... 54
15.2 RELATIONSHIP OF PARTIES......................................... 55
15.3 FORCE MAJEURE................................................... 55
15.3 NO IMPLIED LICENSES............................................. 56
15.4 AMENDMENTS OR MODIFICATIONS..................................... 56
15.5 NO WAIVER....................................................... 56
15.6 LIMITATION OF LIABILITY......................................... 57
15.7 SEVERABILITY.................................................... 57
15.8 GOVERNING LAW; JURISDICTION.................................... 57
15.9 SEPARATE AGREEMENTS WITH ACY AFFILIATES......................... 58
15.10 ASSIGNMENT..................................................... 58
15.11 ENTIRE AGREEMENT............................................... 59
15.12 PUBLICITY...................................................... 59
15.13 COUNTERPARTS.................................................. 60
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
SUPPLY AGREEMENT
THIS AGREEMENT is made this 19th day of July, 1995 by and between
APOLLON, INC., a corporation organized and existing under the laws of the
Commonwealth of Pennsylvania, having its principal place of business at One
Great Valley Parkway, Malvern, Pennsylvania ("APOLLON"), and AMERICAN CYANAMID
COMPANY, a corporation organized and existing under the laws of the State of
Maine, having its principal place of business at One Cyanamid Plaza, Wayne, New
Jersey ("ACY").
Whereas, APOLLON and ACY have entered into that certain Research and
Development and License Agreement, dated as of the date hereof, wherein the
parties have agreed to collaborate in the research and development of
polynucleotide-based genetic vaccination products for use in prophylaxis and/or
treatment of certain disease states (the "RESEARCH AND DEVELOPMENT AGREEMENT");
Whereas, in conjunction with said collaboration, APOLLON is willing
to manufacture certain quantities of such product(s) and supply the same to ACY;
and
Whereas, ACY is desirous of having APOLLON manufacture said
quantities of such product(s) and of purchasing such quantities from APOLLON.
Now Therefore, the parties hereto, intending to be legally bound,
hereby agree as follows:
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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ARTICLE I
DEFINITIONS
Terms defined in this Article I shall for all purposes of this
AGREEMENT, as the same may be amended from time to time, have the meanings
herein specified.
1.1 The term "AFFILIATE" shall mean any corporation or other
business entity which directly or indirectly through stock ownership or through
another arrangement either controls, or is controlled by, or is under common
control with a party, with the proviso that Wyeth-Eisai Co., Ltd., Genetics
Institute, Inc., and Immunex Corporation shall not be considered AFFILIATES
hereunder, until such time as ACY shall notify APOLLON that one or more of said
companies shall be considered an AFFILIATE hereunder.
1.2 The term "EFFECTIVE DATE" shall mean the date first written
above.
1.3 The term "FAIR MARKET VALUE" shall mean the cash consideration
which the selling party would realize from an unaffiliated, unrelated buyer in
an arm's length sale of an identical item sold in the same quantity and at the
same time and place of the transaction.
1.4 The-term "FDA" shall mean the Federal Food and Drug
Administration of the United States Department of Health and Human Services, or
any successor agency thereto.
1.5 The term "GMP" shall mean the then current good manufacturing
practice regulations of the FDA as described in
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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Title 21 of the United States Code of Federal Regulations or any successor
regulations.
1.6 The term "GOVERNMENT APPROVALS" shall mean any approvals,
licenses, registrations or authorizations, howsoever called, of any federal,
state or local regulatory agency, department, bureau or other government entity,
anywhere in the world, including, without limitation, the FDA, necessary for the
manufacture, use, storage, transport or sale of a PRODUCT, both interterritory
and intraterritory, anywhere in the TERRITORY, and including, without
limitation, PLAs or ELAs (as defined below). "GOVERNMENTAL APPROVAL" and
"GOVERNMENT APPROVED" shall each have a corollary adjectival meaning.
1.7 The term "NET SALES" shall mean the amount billed or invoiced
and paid on account of worldwide sales of PRODUCT to an independent third party
by ACY or its AFFILIATES or sublicensees (or APOLLON, if APOLLON sells
PRODUCT(S) under Paragraph 6.5 hereof), in bona fide arms' length transactions,
less the following deductions: (i) trade and/or quantity discounts
actually-taken by the customer in such amounts as are customary in the trade;
(ii) any tax, excise, or other governmental charges upon or measured by the
production, sale, transportation, delivery or use of said PRODUCT which are paid
by the selling party; (iii) transportation charges which are paid by the selling
party; (iv) customary and reasonable sales commissions actually paid by the
selling party to non-affiliated third parties in connection with the sale of
such
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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PRODUCT; (v) amounts repaid or credited by reason of rejections or returns or
due to customary retroactive price reductions; and (vi) taxes paid by the
selling party to the United States Government or an instrumentality thereof
under 42 U.S.C. 300 aa-1 et seq. or other similar legislation, or to a State of
the United States insuring against liability arising out of the manufacture,
use, offer for sale, or sale of such PRODUCT. If a PRODUCT is sold in a non-cash
transaction, the NET SALES for such transaction shall be equal to the FAIR
MARKET VALUE attributable to such sale. In the event that a PRODUCT is sold in
the form of a combination product containing one or more products or immunogenic
components which are themselves not PRODUCTS, or is sold as part of a package
which includes one or more products which are themselves not PRODUCTS, the NET
SALES shall be calculated by multiplying the sales price of such combination
product or of such package, as applicable, by the fraction A/(A+B) where A is
the invoice price or FAIR MARKET VALUE, whichever is greater, of the PRODUCT and
B is the total-invoice price or FAIR MARKET VALUE, whichever is greater, of the
other products.
1.8 The term "PLA" or "ELA" shall mean a Product License Application
or Establishment License Application, including all necessary pre-approvals, or
foreign equivalents thereof, requesting approval for the commercial sale of a
PRODUCT.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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1.9 The term "PRODUCT" shall mean a GOVERNMENT APPROVED therapeutic
and/or prophylactic polynucleotide-based genetic vaccine as developed pursuant
to the Research and Development Agreement.
1.10 The term "PRODUCT IMPROVEMENT" shall mean (i) the use without
substantial modification of a PRODUCT to perform a function not initially
prescribed for it or (ii) any material improvement, redesign, or modification of
any PRODUCT.
1.11 The term "PRODUCT INFORMATION" shall mean all information and
data relating to a PRODUCT, including formulae, methods of manufacture,
biological materials, product descriptions, test methods, validation of test
methods, SPECIFICATIONS, and all other supporting documentation, data and
reports relating thereto, developed or acquired by APOLLON in the manufacture
and supply of PRODUCT hereunder.
1.12 The term "SPECIFICATIONS" shall mean any and all specifications
for a PRODUCT agreed to by the parties in writing, including without limitation,
data relevant to the imprinting and packaging thereof, as well as all physical
and chemical properties, product validation and process validation standards,
quality analysis and assurance, test methodologies, packaging, handling,
shipping and other standards, and instructions and procedures for use and
storage of such PRODUCT and raw materials and packaging.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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1.13 The term "TERRITORY" shall mean all territories, possessions,
and countries of the world.
1.14 The term "TRADEMARKS" shall mean any and all marks which are
owned by ACY or its AFFILIATES, or which ACY or its AFFILIATES are otherwise
authorized to use, and which are used to advertise, promote, market, sell or
identify PRODUCTS in the TERRITORY, whether or not registered.
ARTICLE II
SUPPLY
2.1 SUPPLY. Subject to the terms and conditions hereof, APOLLON
shall manufacture for and supply to ACY and its AFFILIATES, on an exclusive
basis throughout the TERRITORY, such quantities of PRODUCTS as requested by ACY
and/or its AFFILIATES, and ACY and its AFFILIATES shall purchase from APOLLON
all of their requirements of PRODUCTS for use and sale throughout the TERRITORY.
2.2 PRODUCT IMPROVEMENTS AND CHANGES. APOLLON shall keep ACY fully
informed of any proposed PRODUCT IMPROVEMENTS which APOLLON proposes to make to
any PRODUCT. The parties may agree from time to time to adopt such PRODUCT
IMPROVEMENTS or incorporate such other proposed changes as agreed into PRODUCTS,
to be governed by the terms and conditions of this AGREEMENT. Additionally,
APOLLON agrees to consider any PRODUCT IMPROVEMENTS suggested by ACY hereunder.
SPECIFICATIONS shall be amended in
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
-7-
accordance with any such foregoing adoption, as well as the applicable
GOVERNMENTAL APPROVAL, if any.
2.3 FORECASTS. Within six (6) months of the filing of the first PLA
and/or ELA for a PRODUCT, and on the first day of each calendar quarter
thereafter, ACY shall supply APOLLON, for planning purposes, a non-binding
five-quarter good faith rolling forecast of projected requirements in units for
such PRODUCT. Forecasts may be expressed in a reasonable range.
2.4 FIRM ORDERS; INVENTORY LEVELS. (a) ACY and its AFFILIATES shall
provide binding orders of their requirements of PRODUCT to APOLLO within a
reasonable amount of time, but in any event not less than ninety (90) days prior
to the requested date of shipment. To the extent practicable, ACY shall
consolidate the orders of ACY and its AFFILIATES. The only terms of any purchase
order or acknowledgment for PRODUCT which shall be binding on APOLLON or ACY are
those which are set forth on the face of such purchase order or acknowledgment
and which deal with description, quantity, and delivery terms for such quantity
of PRODUCT. In the event of any conflict between this AGREEMENT and any such
purchase order or acknowledgment, this AGREEMENT shall govern.
(b) Subject to APOLLON's supply of PRODUCT in conformance with
ACY's orders, ACY shall order such quantities as to maintain at all times a
commercially reasonable inventory of each PRODUCT. APOLLON shall also maintain
at all times a commercially reasonable inventory of each PRODUCT suitable to be
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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supplied hereunder, which the parties agree shall be equal to 400% of the
average monthly quantity of PRODUCT purchased by ACY during the prior 12-month
period. An appropriate inventory for the initial twelve-month period following
the first commercial sale of a PRODUCT will be determined by the parties within
six months following the submission of the first PLA for such PRODUCT.
(c) ACY's forecasts and orders shall separately identify
PRODUCTS to be used as free samples, the transfer price for which shall be
determined in accordance with Paragraph 6.1(c) hereof.
2.5 TERMS. In accordance with Paragraph 2.4, ACY and its AFFILIATES
shall place orders for PRODUCT with APOLLON from time to time, specifying the
quantities of PRODUCT desired, and the place(s) to which, and the manner and
dates by which, shipment is to be made; said shipping dates to be no less than
ninety (90) days from the purchase order date. The quantity of PRODUCTS to be
delivered pursuant to any purchase order shall be subject to a variation of 10%,
and within this limitation, ACY and its AFFILIATES shall accept and pay for the
quantity of PRODUCTS actually delivered. Upon acceptance of and full payment for
PRODUCTS by ACY in accordance with the relevant provisions hereof, title to such
PRODUCTS shall pass to ACY; provided that risk of loss shall pass to ACY on
delivery F.O.B. Malvern, PA.
2.6 MANUFACTURING EFFORTS. (a) APOLLON shall manufacture PRODUCT in
conformance with the SPECIFICATIONS and
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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supply ACY with such quantities of PRODUCT as are ordered in accordance with the
terms of this AGREEMENT. Notwithstanding anything contained in this AGREEMENT to
the contrary, however, APOLLON shall not be obligated to supply ACY and its
AFFILIATES during any calendar quarter with any quantity of a particular PRODUCT
in excess of the average quarterly quantity of such PRODUCT purchased by ACY
during the prior 12-month period. For the first year of supply under this
AGREEMENT, such quantity shall be established by the parties within six months
following the submission of the first PLA for such PRODUCT.
(b) In fulfilling its obligations under this AGREEMENT,
APOLLON may subcontract out a portion of such manufacturing duties to a
subcontractor reasonably acceptable to ACY; provided that APOLLON shall have
first offered ACY in writing the option, which shall remain open for a period of
ninety (90) days from the date of such written offer, to have ACY provide such
manufacturing on terms and conditions which are no less favorable to ACY than
those last offered to such subcontractor. If ACY does not elect to perform such
manufacturing, the selected subcontractor shall, as a condition to ACY's
approval of such subcontractor, agree to be bound by the relevant terms and
conditions of this AGREEMENT. Notwithstanding the foregoing, APOLLON shall
guarantee the performance and monitoring of such subcontractor in accordance
therewith. To the extent APOLLON obtains rights to indemnification from any
subcontractor with respect to losses incurred by APOLLON arising
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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out of any work performed by such subcontractor, APOLLON shall use reasonable
efforts to have ACY named as a third-party beneficiary of such indemnification
rights.
2.7 SPECIFICATIONS. All SPECIFICATIONS and any changes thereto
agreed to by the parties, and as approved by the appropriate government or
regulatory agency, if applicable, shall be set forth in writing. APOLLON shall
have a period of (90) ninety days from receipt of such written and, if
applicable, regulatory approved changes to SPECIFICATIONS in which to conform
its manufacture and supply of PRODUCTS hereunder to any such revised
SPECIFICATIONS, which shall then vest as the current version of SPECIFICATIONS.
2.8 INSPECTION. ACY and its AFFILIATES shall inspect all shipments
of PRODUCTS to determine whether or not the PRODUCTS are in conformity with the
relevant SPECIFICATIONS, or are otherwise adulterated, misbranded, or defective.
In the event that any portion of a shipment of PRODUCTS received by ACY fails to
conform to such SPECIFICATIONS or is otherwise adulterated, misbranded, or
defective, ACY may reject such non-conforming PRODUCT shipment by giving written
notice to APOLLON within sixty (60) days of ACY's (or its distributor's or other
agent's) receipt of the PRODUCTS, which notice shall specify the manner in which
the PRODUCTS fail to meet the SPECIFICATIONS or are otherwise adulterated,
misbranded, or defective. Failing such notification, ACY will be deemed to have
accepted the PRODUCTS,' and APOLLON shall not thereafter be
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
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required to indemnify ACY for breach of its warranties under Paragraph 10.4 as
to such PRODUCTS, except for defects arising out of the negligence of APOLLON
and not reasonably discoverable by ACY in such inspection. Within fifteen (15)
days from receipt by APOLLON of such notice that ACY has determined that the
PRODUCTS are in nonconformance, APOLLON shall notify ACY in writing as to
whether or not it concurs with ACY's determination. If APOLLON concurs with such
determination, APOLLON shall replace such nonconforming PRODUCT-with PRODUCT
that meets SPECIFICATIONS and is otherwise not adulterated, misbranded, or
defective. In the event APOLLON does not agree with ACY and the parties cannot
reach agreement with respect to a replacement shipment of such PRODUCT, the
parties will submit the question of whether the PRODUCT failed to meet the
SPECIFICATIONS or is otherwise adulterated, misbranded, or defective to an
independent laboratory skilled in biotechnological processes and manufacturing,
as mutually selected by the parties, for objective determination. The findings
of such laboratory shall be binding upon APOLLON and ACY and the cost of such
determination shall be paid by the party in error.
ARTICLE III
MARKETING
3.1 PROMOTIONAL EFFORTS. ACY shall use reasonable efforts,
consistent with its accepted business practices and legal requirements as they
relate to its global biologicals
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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business, to promote the sale of PRODUCT in the TERRITORY. ACY's level of effort
in promoting the commercial sale of a PRODUCT shall not be less than the level
of effort which ACY uses for its own products which are at a similar stage of
introduction to the market as the PRODUCT promoted. Such promotional activities
shall be carried out through ACY's or its AFFILIATE's or distributors' sales
forces, who shall receive training and support and have skills and resources
commensurate with those of ACY's and its AFFILIATE's sales forces for other
products which are of a similar nature to the PRODUCT in question.
Notwithstanding the foregoing, ACY does not, however, guarantee that its
implementation of any of its marketing plans for a given country will be
successful in whole or in part.
3.2 MARKETING AND PROMOTIONAL MATERIALS. ACY shall have
responsibility for the preparation of all marketing and promotional materials
with respect to any PRODUCT. Except as required by law, neither party shall
distribute or have distributed any written information regarding a PRODUCT which
bears the name of the other without the prior written approval of the other,
which approval shall not be unreasonably withheld.
3.3 MARKETING AGREEMENTS. In effecting the commercial sale of
PRODUCTS, ACY, in its sole discretion, may enter into co-promotion,
co-detailing, marketing, distribution, or similar agreements with third parties.
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
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ARTICLE IV
REGULATORY
4.1 OWNERSHIP. All GOVERNMENTAL APPROVALS and any regulatory files
relating thereto will be owned by a party in accordance with applicable laws and
regulations. Notwithstanding ownership of any such GOVERNMENTAL APPROVAL in
accordance with applicable laws, the parties shall jointly own an undivided
one-half interest in all the underlying data, materials, and other information
relevant to such GOVERNMENTAL APPROVAL. Each party shall have such rights to
provide comments and to obtain copies of and to otherwise access all such
regulatory filings, data, materials and other information as shall be set forth
in Article IV of the RESEARCH AND DEVELOPMENT AGREEMENT.
4.2 ASSIGNMENT OF CERTAIN REGISTRATIONS PERMITS AND GOVERNMENT
APPROVALS. To the extent required under the laws or regulations of a particular
country to enable ACY to exercise its rights and carry out its obligations under
this AGREEMENT with respect to a particular PRODUCT, and to the extent permitted
by law, APOLLON shall transfer and assign to ACY the registrations, permits and
GOVERNMENT APPROVALS necessary for the distribution, promotion and selling of
such PRODUCT in such country.
4.3 REGULATORY ACTION OR OTHER MITIGATION OF GOVERNMENT APPROVAL. In
the event that a GOVERNMENT APPROVAL with respect to a PRODUCT is mitigated in
any way or withdrawn in any country within the TERRITORY, or in any other manner
ACY is prevented from selling or using any PRODUCT solely as a result of
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any regulatory action by a governmental agency or authority of competent
jurisdiction in the TERRITORY, and such regulatory action has a substantial
adverse impact on ACY's sales of such PRODUCT in the TERRITORY, APOLLON shall
use reasonable efforts to assist ACY in all respects in the abatement of such
mitigation or withdrawal. If such mitigation or withdrawal occurs in the United
States, for the period ACY is prevented from selling or using such PRODUCT,
ACY's obligation to make any advance payments with respect to such PRODUCT
pursuant to Paragraph 6.3 shall be suspended, as shall APOLLON's obligation to
supply such PRODUCT and to maintain any inventory of such PRODUCT pursuant to
Paragraphs 2.6 and 2.4(b), respectively.
4.4 ALTERNATE SOURCE FOR MANUFACTURE. To the extent commercially
reasonable as determined by the parties, APOLLON shall maintain an alternate
site for manufacture of the PRODUCTS meeting all necessary governmental and
regulatory requirements, such alternate site to be reasonably acceptable to ACY.
Any quantities of PRODUCT manufactured at such approved alternate site shall be
deemed to have been manufactured by APOLLON and shall not be deemed to have
involved the subcontracting of any manufacturing, and as such shall be deemed
bound to the terms and conditions hereof mutatis mutandis.
4.5 MANUFACTURING RECORDS. APOLLON agrees to keep, for a period of
five (5) years, or such longer period as may be required by law or agreed upon
by the parties in writing, exact, true and complete records of all operations
involved in the
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
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manufacture and supply of PRODUCT, which records shall at all reasonable times,
and upon reasonable prior written notice, be available for examination, audit,
and copying by ACY, its AFFILIATES, or their representatives.
4.6 MANUFACTURING AUDIT. ACY shall have the right to inspect at
reasonable intervals and during normal business hours, and on reasonable prior
notice, the operations (including without limitation, all such aforesaid
records, processes, and other facets of the manufacturing operations) and
facilities of APOLLON wherein PRODUCT is manufactured, packaged, inspected,
tested, labelled, stored or shipped, and to analyze any tangible material
relevant thereto.
4.7 TECHNICAL SUPPORT. ACY shall be responsible for technical
support for its customers, and shall investigate and respond to its customers
concerning PRODUCTS, with reasonable assistance requested of APOLLON. The
parties shall cooperate with one another in correcting any adverse reactions or
customer complaints and the reporting thereof, or any governmental or regulatory
defect notification or compliance requirements with respect to the PRODUCTS.
ARTICLE V
FAILURE TO SUPPLY
5.1 GRANT OF CONTINGENT MANUFACTURING RIGHTS. APOLLON hereby grants
to ACY the right to manufacture or have manufactured on its behalf any PRODUCT
with respect to which
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APOLLON is unable or unwilling to satisfy its obligations pursuant to Paragraph
2.6 hereof. At such time as ACY shall be entitled to exercise its rights under
this Paragraph 5.1, APOLLON will provide to ACY all relevant PRODUCT INFORMATION
and will otherwise provide ACY or a party designated by ACY with reasonable
assistance to enable such party to manufacture such PRODUCT according to the
best systems then known to APOLLON. Further, upon the filing of the first PLA
and/or ELA for a PRODUCT, ACY shall have the right, but not the obligation, to
qualify itself or its designee as an alternate manufacturer, to enable it to
exercise its rights pursuant to the first sentence of this Paragraph 5.1.
APOLLON shall actively support and participate in a meaningful manner in the
procurement by ACY or its designee of all GOVERNMENT APPROVALS requisite for any
such alternate manufacture, including the granting of assistance in accordance
with the provisions of Paragraph 5.3 hereof.
5.2 EXERCISE OF CONTINGENT MANUFACTURING RIGHTS. If APOLLON is
unable to supply any quantity of a PRODUCT required to be supplied by APOLLON
pursuant to Paragraph 2.6 for forty-five (45) consecutive days, ACY shall,
pursuant to Paragraph 5.1, be entitled to make or have made its entire
requirements for such PRODUCT until such time as APOLLON has built inventories
for such PRODUCT equal to twice the average monthly quantity of such PRODUCT
sold during the prior twelve-month period; provided that such inventories have
been manufactured on a production schedule reasonably consistent with that
required to regularly meet ACY's
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requirements. In the event that ACY shall, pursuant to this Paragraph 5.2, elect
to manufacture or have manufactured its requirements for a PRODUCT:
(a) ACY's obligation to make any advance payments for such
PRODUCT in accordance with Paragraph 6.3 hereof shall be suspended during the
time of alternate manufacture;
(b) APOLLON shall assign (if permitted by law) or otherwise
transfer and grant to ACY a co-exclusive right to use all PRODUCT INFORMATION
and GOVERNMENT APPROVALS and otherwise assist ACY in all material respects in
this alternate manufacture and supply; and
(c) Any expenses reasonably incurred by ACY in establishing
such alternate manufacturer (provided that such manufacturer is an unaffiliated
third party) may be credited against future payments to APOLLON for the purchase
of such PRODUCT; provided that with respect to each such payment due APOLLON,
only [ ] of such amount may be satisfied by credit of such expenses, until
such time as such expenses incurred by ACY have been fully credited.
5.3 ASSISTANCE PROVIDED BY APOLLON. In the event that ACY shall
exercise its rights with respect to qualification of an alternate manufacturer
pursuant to Paragraph 5.1 or with respect to any PRODUCT under Paragraph 5.2,
(a) APOLLON shall, from time to time, at the request of ACY,
arrange to have taken into APOLLON's manufacturing facilities, or those of its
permitted
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subcontractors, technical representatives of ACY, for the purpose of instruction
in all applicable processes of manufacture for such PRODUCT. Such
representatives shall comply with all of the ordinary regulations of such
facility(s) in respect of visitors.
(b) At ACY's request, and at times and for durations
convenient to APOLLON, APOLLON shall furnish the services of APOLLON scientists
and technicians, or any technicians involved in the manufacture of the
applicable PRODUCT, in such numbers as shall be mutually agreeable to the
parties, to advise ACY in connection with the operation of such manufacturing
facility for manufacture hereunder.
(c) To the extent APOLLON has not already done so, APOLLON
shall further provide the names of all suppliers of, and a statement setting
forth APOLLON's inventory of, the raw materials used in the manufacture of the
applicable PRODUCT. To the extent consistent with APOLLON's prior written
contractual obligations with such suppliers, and at the request of ACY, APOLLO
shall transfer to ACY all such inventories, at prices to be agreed upon by the
parties, and if requested, temporarily assign all applicable purchase orders or
other agreements with such suppliers, as applicable, to enable ACY or its
designee to act as an alternate manufacturer for the applicable PRODUCT
hereunder.
5.4 LENGTH OF ALTERNATE MANUFACTURE. In the event ACY shall have
exercised its right to manufacture a PRODUCT pursuant to Paragraph 5.2, APOLLON
shall notify ACY when it is able and
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willing to resume manufacture and supply of such PRODUCT in accordance with its
obligations hereunder, and the parties shall negotiate a reasonable timetable
for APOLLON to resume the supply of such PRODUCT hereunder, subject to ACY's
then existing contractual commitments which shall be reasonable in magnitude and
duration.
ARTICLE VI
PAYMENTS
6.1 TRANSFER PRICE. (a) [
]
(b) In the event that, with respect to any HIV PRODUCT,
APOLLON shall have exercised its rights pursuant to Section 6.05 of the RESEARCH
AND DEVELOPMENT AGREEMENT, and thereby agreed to fund [ ]% of the costs of Phase
III clinical trials for such PRODUCT, the transfer price to be paid to APOLLON
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by ACY or its AFFILIATES with respect to such HIV PRODUCT shall
be [
]
(c) With respect to any PRODUCT to be used as free samples,
the transfer price to be paid to APOLLON by ACY or its AFFILIATES shall be
determined by the parties at the time of the submission of the first PLA for
such PRODUCT; provided, however, that in no event shall such transfer price be
less than [ ]% of APOLLON's FULLY BURDENED MANUFACTURING COST (as such term is
defined in the RESEARCH AND DEVELOPMENT AGREEMENT) for such PRODUCT.
(d) In addition to the transfer price to be paid to APOLLON
pursuant to Subparagraphs (a), (b) or (c), as applicable, ACY and its AFFILIATES
shall pay APOLLON the following amounts in connection with the sale of PRODUCTS
from APOLLON to ACY and its AFFILIATES: [
]
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(e) All prices set forth in this Paragraph 6.1 are F.O.B.
Malvern, PA and are paid on a cumulative basis [
]
6.2 ACY RESALE PRICES. For the avoidance of doubt, and
notwithstanding any provision of the RESEARCH AND DEVELOPMENT AGREEMENT, ACY
shall have the right to set its resale prices of the PRODUCTS without the
approval of APOLLON.
6.3 ADVANCE PAYMENTS FOR PURCHASES OF PRODUCTS. (a) Notwithstanding
any other provision of this AGREEMENT to the contrary, ACY shall pay APOLLON the
following non-refundable amounts with respect to each PRODUCT for each 12-month
period following the first GOVERNMENT APPROVAL to market such PRODUCT in the
U.S., as follows: [
]
(b) Payments payable pursuant to Subparagraph (a) of this
Paragraph shall be paid within forty-five (45) days following the first day of
the applicable 12-month period. Such payments shall serve as an advance payment
against payments due APOLLON for the applicable PRODUCT under Subparagraph 6.1
(a) or
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(b), as applicable, for such 12-month period and as such are fully creditable
against all such percentage of NET SALES due APOLLON for such 12-month period.
Notwithstanding anything contained in this Paragraph 6.3 to the contrary, no
payments shall be due to APOLLON pursuant to this Paragraph with respect to any
PRODUCT IMPROVEMENT, or for a PRODUCT for use in an INDICATION if ACY shall be
currently making payments to APOLLON under this Paragraph for a PRODUCT which
has substantially the same composition and formulation with regard to the active
moieties, but which is being used for another INDICATION ("INDICATION" being
defined as "Indication" in the RESEARCH AND DEVELOPMENT AGREEMENT).
6.4 PAYMENTS; CURRENCY. Payments to APOLLON hereunder shall be in
United States Dollars and made within 60 days of receipt of the quantities of
PRODUCT ordered by ACY, if not rejected by ACY in accordance with Paragraph 2.8
hereof. Payments may be effected by check or wire transfer. Any late payments
shall bear interest from the 61st day after ACY's receipt of the shipment of
such PRODUCT through the date of APOLLON's receipt of payment at a fixed annual
rate equal to 4% over the prime rate as in effect at PNC Bank, N.A. on the 61st
day after such receipt. Invoices shall be sent to, and payable by, the ACY
entity which placed the order. For the purpose of computing NET SALES for
PRODUCTS sold in a currency other than United States Dollars, such currency
shall be converted into United States Dollars in accordance with ACY's customary
and
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usual translation procedures (which shall be in accord with generally accepted
accounting principles). If by reason of any restrictive exchange laws or
regulations, ACY shall be unable to convert to U.S. Dollars amounts equivalent
to the payments payable by ACY hereunder in respect of PRODUCTS sold for funds
other than U.S. Dollars, ACY shall notify APOLLON promptly with an explanation
of the circumstances. In such event, all payments due hereunder in respect of
the transaction so restricted (or the balance thereof due hereunder and not paid
in funds other than U.S. Dollars as hereinafter provided) shall be deferred and
paid in U.S. Dollars as soon as reasonably possible after, and to the extent
that, such restrictive exchange laws or regulations are lifted so as to permit
such conversion to U.S. Dollars, of which lifting ACY shall promptly notify
APOLLON. At its option, APOLLON shall meanwhile have the right to request the
payment (to it or to a nominee), and upon such request, ACY shall pay, or cause
to be paid, all such amounts (or such portions thereof) as are specified by
APOLLON, in funds, other than U.S. Dollars, designated by and legally available
to APOLLON under such then existing restrictive exchange laws or regulations.
6.5 PAYMENTS TO ACY. In the event that the license granted to ACY
pursuant to Section 7.04 of the RESEARCH AND DEVELOPMENT AGREEMENT shall
terminate pursuant to Sections 14.03, 14.04, 14.05, or 14.07 of that Agreement,
APOLLON shall be entitled to sell or have sold such PRODUCT commercially and ACY
shall be entitled to receive a percentage of the NET SALES of
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such PRODUCT. Such percentage shall be based upon the proportion which the
research and development costs for the PRODUCT that were funded by ACY under the
RESEARCH AND DEVELOPMENT AGREEMENT bears to the total research and development
costs of such PRODUCT, all in accordance with the following schedule:
[
] [ ]
- ------ ---------------------------------
[
]
The compensation provided for in this Paragraph shall be in lieu of
any other payments or other compensation relating to the commercial sale of such
PRODUCT to which ACY or its AFFILIATES might otherwise be entitled pursuant to
this AGREEMENT or otherwise. Payments made by APOLLON to ACY under this
Paragraph 6.5 shall be subject to the provisions of Paragraph 6.4, mutatis
mutandis.
6.6 TRANSFER PRICE IF PRODUCT MANUFACTURED BY ACY. Notwithstanding
anything contained in Paragraph 6.1 to the contrary, in the event that ACY shall
manufacture or shall have manufactured on its behalf (other than by APOLLON or
its permitted designees) any PRODUCT,
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(a) Then ACY and its AFFILIATES shall pay APOLLON the
following [
]
(b) And in the event that, with respect to such PRODUCT, APOLLON
shall have exercised its rights pursuant to Section 6.05 of the RESEARCH AND
DEVELOPMENT AGREEMENT, then ACY and its AFFILIATES shall pay APOLLON an amount
equal [
]
(c) The compensation provided for in this Paragraph shall be
in lieu of any other payments or other compensation, including, without
limitation, the advance payments pursuant to Paragraph 6.3 hereof, relating to
the commercial sale of such PRODUCT manufactured by ACY or its AFFILIATES to
which APOLLON or its AFFILIATES might otherwise be entitled pursuant to this
AGREEMENT or otherwise, with the exception that Subparagraph 6.1(c) shall apply,
mutatis mutandis.
6.7 TIME PERIOD FOR PAYMENTS. All payments due to a party pursuant
to Paragraphs 6.5 or 6.6 shall be paid to such party within 60 days of the last
day of each calendar quarter.
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6.8 LIABILITY RESERVE. APOLLON shall establish and maintain a
reserve for any liabilities that it may incur arising out of the manufacture,
use, offer for sale or sale of PRODUCTS in a dollar amount equal to the
percentage of NET SALES paid to APOLLON under Paragraphs 6.1 or 6.6 hereof
multiplied by the dollar amount of such a reserve established and maintained by
ACY; provided that the establishment, maintenance and amount of such reserve
will not cause APOLLON'S independent auditors to fail to deliver their opinion
that APOLLON'S financial statements have been prepared in accordance with
generally accepted accounting principles.
ARTICLE VII
RECORD KEEPING AND AUDITS
7.1 RECORDS RETENTION. Each party shall keep, for a period of five
(5) years following shipment, full, true and accurate books of accounts and
other records containing all information and data which may be necessary to
ascertain and verify the transfer price charged for all PRODUCT shipped pursuant
to this AGREEMENT. The parties shall also each keep complete and accurate
records pertaining to the development, use and sale of PRODUCTs in sufficient
detail to permit the other party to confirm the accuracy of the calculations of
ACY's research and development expenses, and ACY's and its AFFILIATES' NET
SALES, and in the case of APOLLON, the accuracy of the calculations of APOLLON's
research and development, regulatory
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approval and manufacturing expenses and, if applicable, any APOLLON NET SALES
received as a result of its sale of a PRODUCT pursuant to Paragraph 6.5 hereof.
The provisions of this Paragraph 7.1 shall survive termination of this AGREEMENT
for any reason.
7.2 AUDIT RIGHTS. Each party shall have the right, limited to one
time per year and at its own expense, upon reasonable notice and during normal
business hours, and through an independent representative (who shall agree to be
bound to provisions of strict confidentiality and limited use, in perpetuity),
to inspect and audit the other party's books and records solely to verify a
party's financial calculations and reporting obligations under this AGREEMENT.
In the event that (i) ACY has understated by more than 5.0% of any NET SALES
relating to its sale of any PRODUCT as contemplated by Paragraphs 6.1 or 6.6
hereof, or (ii) APOLLON has understated by more than 5.0% any NET SALES relating
to its sale of any PRODUCT as contemplated by Paragraph 6.5 hereof, the party
making such understatement error shall pay the reasonable costs and expenses of
the other party's accountant in connection with its review or audit. The
provisions of this Paragraph 7.2 shall survive termination of this AGREEMENT for
any reason.
7.3 TAXES. APOLLON shall bear and pay all federal, state and local
taxes based upon or measured by its net income, and all franchise taxes based
upon its corporate existence, or its general corporate right to transact
business. Any other tax,
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however denominated and howsoever measured, imposed upon a PRODUCT, or upon the
production, sale, transportation, delivery, or use of a PRODUCT, shall be paid
directly by ACY and its AFFILIATES, or if prepaid by APOLLON, shall be invoiced
to ACY and its AFFILIATES as a separate item and paid by ACY and its AFFILIATES
to APOLLON. ACY and its AFFILIATES shall provide APOLLON with all documentation,
including without limitation any resale exemption certificates, reasonably
requested by APOLLON to enable it to qualify for any exemption from any sales,
transfer or excise tax based upon the sale of PRODUCTS from APOLLON to ACY and
its AFFILIATES.
ARTICLE VIII
TRADEMARKS, TRADENAMES, TRADEDRESS
8.1 RETENTION OF RIGHTS. ACY shall use any TRADEMARKS, trade names
and trade dress it may choose, in its sole discretion, in connection with any
PRODUCT, including, without limitation, (but provided that the license granted
to ACY with respect to such PRODUCT pursuant to Section 7.04 of the RESEARCH AND
DEVELOPMENT AGREEMENT shall not have terminated) any trade marks or trade names
of APOLLON. Nothing contained in this AGREEMENT, however, shall prohibit, or be
construed to prohibit, APOLLON from using its trade names and trade marks in
connection with the sale of any products not subject to this AGREEMENT, if
otherwise permitted by the relevant trademark laws.
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Notwithstanding anything in the RESEARCH AND DEVELOPMENT AGREEMENT or this
AGREEMENT to the contrary, and in the event the license granted to ACY with
respect to a particular PRODUCT pursuant to Section 7.04 of the RESEARCH AND
DEVELOPMENT AGREEMENT is terminated pursuant to Sections 14.03, 14.04, 14.05 or
14.07 of that Agreement, ACY and its AFFILIATES shall grant to APOLLON the
exclusive right to use, in connection with the sale of such PRODUCT, any
TRADEMARKS or trade names previously used by ACY and/or its AFFILIATES in
connection with the sale of such PRODUCT, provided however, that in no event
shall ACY be obliged to grant such right to use TRADEMARKS or trade names that
ACY determines to be part of, related to as related to a line of products,
housemarks, and the like) or confusingly similar with any other trade marks or
trade names of ACY or its AFFILIATES.
8.2 TRADE DRESS. To the extent permitted by all applicable laws and
regulations, APOLLON shall package and label PRODUCTS in trade dress of ACY's
choosing, and consistent with SPECIFICATIONS, and if directed by ACY, and
provided that the parties shall agree upon additional consideration, if any, to
be paid to APOLLON therefor, such PRODUCTS shall be packaged together with other
products for sale by ACY.
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ARTICLE IX
INFRINGEMENTS
9.1 INFRINGEMENTS.
(a) The party to this AGREEMENT first having knowledge of any
imitations of any PRODUCT or of any actual, suspected or threatened misuse or
infringement (hereinafter collectively "infringement") of any INTELLECTUAL
PROPERTY RIGHTS (as such term is defined in the RESEARCH AND DEVELOPMENT
AGREEMENT) necessary or materially useful to manufacture, import, offer for
sale, sell, or otherwise use one or more PRODUCTS, shall promptly notify the
other in writing and shall provide the other with any available evidence
thereof. The notice shall set forth the relevant facts in reasonable detail.
(b) Unless otherwise prohibited by law, prior agreement, or
regulation, (i) APOLLON (or its licensor, if applicable, shall have the primary
right in the first instance, but not the obligation, to institute, prosecute,
and control any action or proceeding with respect to the infringement of any
APOLLON INTELLECTUAL PROPERTY RIGHTS or those covered by a UNIVERSITY LICENSE,
and (ii) ACY shall have the primary right in the first instance, but not the
obligation, to institute, prosecute, and control any action or proceeding with
respect to the infringement of any INTELLECTUAL PROPERTY RIGHTS owned or
licensed by ACY (other than any licensed or sublicensed pursuant to the RESEARCH
AND DEVELOPMENT AGREEMENT or under any UNIVERSITY LICENSE) or INTELLECTUAL
PROPERTY RIGHTS relating to a JOINT
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INVENTION, in each case by counsel of its own choice. With respect to any
particular infringement proceeding, the party which is the primary party
pursuant to the preceding sentence (the "PRIMARY PARTY"), shall have the right
to control such action; provided, however, that the other party (the
"non-PRIMARY PARTY") shall have the right, at its own expense, to intervene (to
the extent permitted by law) and be represented in that action by counsel of its
own choice. The PRIMARY PARTY may not, without the prior written consent of the
non-PRIMARY PARTY (which consent may not be unreasonably withheld), enter into
any agreement or other arrangement effecting a settlement of such infringement
action which imposes any obligations or restrictions on the non-PRIMARY PARTY
regarding the use of the INTELLECTUAL PROPERTY RIGHTS which were the subject of
such infringement action.
(c) If the PRIMARY PARTY brings an infringement action and the
non-PRIMARY PARTY determines to pursue such action or proceeding also, the
non-PRIMARY PARTY shall, within thirty (30) days of receipt of notice by the
non-PRIMARY PARTY of the initiation of suit by such PRIMARY PARTY, notify the
PRIMARY PARTY of its desire to be joined as a party plaintiff, and shall
thereafter agree to join as a party plaintiff within fifteen (15) days of its
notice of such desire to the PRIMARY PARTY (to the extent such party is
permitted by law to so join); and further, shall give the PRIMARY PARTY
reasonable assistance and authority to file and prosecute such infringement
action. The out-of--
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pocket costs and expenses reasonably incurred by the PRIMARY PARTY in bringing
and maintaining any such infringement action (including, without limitation, any
such payments made to APOLLON'S licensors as required by any UNIVERSITY LICENSE)
shall be reimbursed first out of any damages or other monetary awards recovered.
Any remaining damages or other monetary awards shall be divided on an equitable
basis, taking into account the parties relative lost revenues and profits or
royalty income, as applicable and as such are allocated or payable hereunder.
(d) If the PRIMARY PARTY brings an infringement action and the
non-PRIMARY PARTY determines not to pursue such action or proceeding, the
non-PRIMARY PARTY nevertheless agrees to be joined as a party plaintiff (if
permitted by law and if the PRIMARY PARTY so requests) and to give the PRIMARY
PARTY reasonable assistance and authority to file and prosecute the suit. In
such case, the PRIMARY PARTY shall bear all costs associated therewith and be
entitled to all damages or other monetary awards to the exclusion of the
non-PRIMARY PARTY. If the PRIMARY PARTY does not request that the non-PRIMARY
PARTY be joined as a party plaintiff, the non-PRIMARY PARTY nevertheless agrees
to give the PRIMARY PARTY reasonable assistance in any such proceedings or
preparation therefor, at the PRIMARY PARTY's request and expense.
(e) Should the PRIMARY PARTY lack standing to bring an
infringement action, the non-PRIMARY PARTY shall bring such action at the
request of the PRIMARY PARTY upon an
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undertaking by the PRIMARY PARTY to indemnify and hold the non-PRIMARY PARTY
harmless (to the extent permitted by law) from all consequent liability.
(f) If the PRIMARY PARTY fails to bring an action or
proceeding within one hundred and eighty (180) days after written notification
of actual infringement of a substantial nature (which, for purposes hereof shall
mean that the infringing competitor has 20% of the relevant market share that
would reasonably inure to PRODUCT sold hereunder, but for such infringing sales,
as such market share is measured by IMS or other industry-accepted marketing
survey services) the non-PRIMARY PARTY shall have the right, but not the
obligation, to bring and control any such action by counsel of its own choice,
and at its own expense, and the PRIMARY PARTY (and/or its licensor) shall have
the right to be represented in any such action by counsel of its own choice at
its own expense. Any out-of-pocket costs and expenses reasonably incurred by the
non-PRIMARY PARTY pursuant to this Subparagraph (f) (including, without
limitation, any such payments made to APOLLON'S licensors as required by any
UNIVERSITY LICENSE) shall be reimbursed first out of any damages or other
monetary awards recovered. Any remaining damages or other monetary awards shall
be divided on an equitable basis, as set forth in Paragraph 9.1(c) above.
(g) The foregoing clauses (b) through (f) of this Paragraph
9.1 shall also apply to the issues of control of any action, costs and expenses,
and recoveries in the event a third
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party brings an action for declaratory judgment of invalidity and
non-infringement with respect to any INTELLECTUAL PROPERTY RIGHTS.
(h) Each party hereto shall promptly bring to the attention of
the other any information which it may receive indicating that any issued patent
would be infringed by the manufacture, use, importation, offer for sale or sale
of a PRODUCT. If a party to this AGREEMENT receives a claim of infringement from
a third party relating to the manufacture, use, importation, offer for sale or
sale of a PRODUCT, it shall promptly notify the other. The parties shall
cooperate in all reasonable respects in the resolution of any such claim of
infringement and the defense of any lawsuit arising thereunder.
(i) Capitalized terms used but not defined in this Article IX
shall have the meanings provided to such terms in the RESEARCH AND DEVELOPMENT
AGREEMENT.
ARTICLE X
WARRANTIES
10.1 AUTHORITY TO ENTER INTO AGREEMENT: OTHER RIGHTS AFFECTING SALE
OF PRODUCTS. Each party represents and warrants that it has and will continue to
have the full power and authority to enter into this AGREEMENT and to carry out
the transactions contemplated hereby. Each party further represents and warrants
that, except as disclosed in the RESEARCH AND
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DEVELOPMENT AGREEMENT, it has not granted any option, license, right or interest
in or to patents, technological data, products, or PRODUCTS, or any method of
manufacture or use of products or PRODUCTS to any third party that would
prohibit the use or sale of PRODUCTS, nor is it aware of any such claim by a
third party.
10.2 AGREEMENT NOT TO BREACH OTHER AGREEMENTS. The parties further
represent and warrant that the execution of this AGREEMENT and the full
performance and enjoyment of the rights of APOLLON and ACY under this AGREEMENT
will not breach the terms and conditions of any license, contract, or agreement,
whether written or oral, between APOLLON or ACY, as applicable, and any third
party.
10.3 COMPLIANCE WITH LAWS; PRODUCT WARRANTIES. Each party will
comply with all applicable Federal, state and local governmental and regulatory
requirements, including without limitation FDA rules and regulations, in
connection with the manufacture, transportation, storage and sale of the
PRODUCTS. APOLLON represents and warrants that any PRODUCT supplied by it
pursuant to this AGREEMENT shall meet GMP specifications required by the FDA and
shall meet current SPECIFICATIONS. Each party hereby represents that it will not
take any action or omit to take any action that will cause any PRODUCT supplied
hereunder to be (i) a PRODUCT that is adulterated or misbranded within the
meaning of governmental acts and regulations, and especially the U.S. Food,
Drug, & Cosmetic Act, or (ii) an article which may not, under the provisions of
Section 404 or Section 505 of the
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aforesaid Act, be introduced into interstate commerce. EXCEPT AS OTHERWISE
EXPRESSLY SET FORTH HEREIN, THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO
WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO ANY PRODUCT.
BY WAY OF EXAMPLE BUT NOT OF LIMITATION, THE PARTIES MAKE NO REPRESENTATIONS OR
WARRANTIES (i) OF COMMERCIAL UTILITY; (ii) OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE; OR (iii) THAT THE MANUFACTURE, USE OR SALE OF PRODUCTS WILL
NOT INFRINGE ANY PATENT, COPYRIGHT OR TRADEMARK OR OTHER PROPRIETARY OR PROPERTY
RIGHTS OF OTHERS.
10.4 INDEMNIFICATION BY APOLLON. Subject to the limitations set
forth in Paragraph 2.8, APOLLON shall indemnify, defend and hold harmless ACY
from all actions, losses, claims, demands, costs and liabilities (including
reasonable attorneys' fees and expenses of total or partial recalls) to which
ACY is or may become subject insofar as they arise out of or are alleged or
claimed to arise out of (i) the inaccuracy of any representation or warranty of
APOLLON contained herein, or (ii) the negligence or willful misconduct of
APOLLON or its employees, subcontractors or agents, including, without
limitation, as relating to any manufacturing defect when APOLLON is the
manufacturer (collectively, "APOLLON INDEMNIFIED CLAIMS").
10.5 INDEMNIFICATION BY ACY. ACY shall indemnify, defend and hold
harmless APOLLON from all actions, losses, claims, demands, damages, costs and
liabilities (including reasonable attorneys' fees and expenses of total or
partial
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recalls) to which APOLLON is or may become subject insofar as they arise out of
or are alleged or claimed to arise out of (i) the inaccuracy of any
representation or warranty of ACY contained herein, or (ii) the negligence or
willful misconduct of ACY or its employees, subcontractors or agents, including,
without limitation, as relating to any manufacturing defect when ACY is the
manufacturer ("ACY INDEMNIFIED CLAIMS").
10.6 ADDITIONAL INDEMNIFICATION BY PARTIES. Except for APOLLON
INDEMNIFIED CLAIMS or ACY INDEMNIFIED CLAIMS, as applicable, each party shall
indemnify, defend and hold harmless the other for its PRO-RATA PERCENTAGE
(defined below) of all losses, claims, demands, damages, costs and liabilities
(including reasonable attorneys' fees and expenses of total or partial recalls)
to which the other is or may become subject insofar as they arise out of or are
alleged or claimed to arise out of the design, manufacture, use, handling,
storage or other disposition of a PRODUCT. For purposes of this Paragraph 10.6,
(i) with respect to any sales of a PRODUCT other than pursuant to Paragraph 6.5,
(x) APOLLON's PRO-RATA PERCENTAGE for such PRODUCT shall be equal to the
weighted average applicable percentage of NET SALES of such PRODUCT paid to
APOLLON pursuant to Article VI during the year immediately preceding the year in
which written notice is first received by a party alleging the occurrence of
losses, claims, demands, damages, costs or liabilities upon which the claim for
indemnification pursuant to this Paragraph 10.6 is based, and (y) ACY's PRO-RATA
PERCENTAGE for such PRODUCT shall
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be equal to 100% minus APOLLON's PRO-RATA PERCENTAGE, and (ii) with respect to
any sales of a PRODUCT pursuant to Paragraph 6.5, (x) ACY's PRO-RATA PERCENTAGE
for such PRODUCT shall be equal to the applicable percentage of NET SALES of
such PRODUCT paid to ACY pursuant to such Paragraph during the year immediately
preceding the year in which written notice is first received by a party alleging
the occurrence of losses, claims, demands, damages, costs or liabilities upon
which the claim for indemnification pursuant to this Paragraph 10.6 is based,
and (y) APOLLON's PRO-RATA PERCENTAGE for such PRODUCT shall be equal to 100%
minus ACY's PRO-RATA PERCENTAGE.
10.7 LIABILITY INSURANCE FOR APOLLON. During the period of APOLLON's
manufacture of PRODUCTS for supply hereunder, APOLLON shall use reasonable
efforts to maintain comprehensive general liability insurance with an insurance
carrier reasonably acceptable to ACY, which insurance policy or policies shall
maintain the full products hazards provisions with products hazards limits
subject to deductibles not in excess of $250,000 in the aggregate, and with at
least $2,000,000 overall coverage for claims of bodily injury and property
damage arising out of any loss, such coverage to be on a claims made basis. Such
policy or policies shall include ACY as an additional insured in each such
policy or policies insofar as its interests under this AGREEMENT. Both parties
shall provide notice to the other of any loss, whether actual or threatened,
promptly upon receipt of notice thereof.
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10.8 DEFENSE OF INDEMNIFICATION CLAIMS. A party entitled to
indemnification hereunder shall give prompt written notice to the indemnifying
party after the receipt by such party of any written notice of the commencement
of any action, suit, proceeding or investigation or threat thereof made in
writing for which such party may claim indemnification pursuant to this
AGREEMENT; provided, however, that a party's failure to notify promptly the
other of such claim or suit shall not obviate its right to receive
indemnification hereunder so long as such failure does not materially prejudice
the defense of such claim or suit. Unless, in the reasonable judgment of the
indemnified party, a conflict of interest may exist between the indemnified
party and the indemnifying party with respect to a claim, the indemnifying party
may assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim, the indemnified party shall assume the
defense of such claim with counsel reasonably satisfactory to the indemnifying
party (and the indemnifying party shall pay the fees and expenses of such
counsel). The indemnifying party will not be subject to any liability for any
settlement made without its written consent, which shall not be unreasonably
withheld.
10.9 COMPLIANCE WITH EXPORT LAWS AND REGULATIONS. In undertaking its
obligations hereunder and under the RESEARCH AND DEVELOPMENT AGREEMENT, each
party represents and warrants that it will comply with all export laws and
regulations of the
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Department of Commerce or other United States or foreign agency or authority,
and not export, or allow the export or reexport of any proprietary material or
information or any direct product thereof in violation of any such restrictions,
laws or regulations, or, without obtaining all necessary approvals and
authorizations, to Afghanistan, the People's Republic of China or any Group Q,
S, W, Y or Z country specified in the then current Supplement No. 1 to Section
770 of the U.S. Export Administration Regulations (or any successor supplement
or regulations, and as they may be amended from time to time).
10.10 SURVIVAL OF PROVISIONS. The provisions and obligations of this
Article X shall survive any termination of this AGREEMENT.
ARTICLE XI
THIRD-PARTY LICENSES
11.1 NEED FOR ADDITIONAL LICENSES PRIOR TO FIRST COMMERCIAL SALE. In
the event either ACY or APOLLON determines, at any time prior to the first
commercial sale of a PRODUCT, that a license(s) under any third-party patent is
necessary in order to make, use, import, offer for sale or sell such PRODUCT in
the TERRITORY, and neither APOLLON nor ACY is able to obtain such license(s) on
terms mutually acceptable to both parties, then APOLLON and ACY shall negotiate
in good faith to reach an agreement on a non-infringing substitute for such
PRODUCT, on
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terms and conditions acceptable to each party, which may include a modification
in the transfer price of such PRODUCT.
11.2 NEED FOR ADDITIONAL LICENSES AFTER FIRST COMMERCIAL SALE. In
the event ACY and APOLLON mutually agree, at any time before or subsequent to
the first commercial sale of a PRODUCT but prior to the expiration or
termination of this AGREEMENT with respect to such PRODUCT, that a license(s)
under any third-party patent is necessary or advisable in order to make, use or
sell a PRODUCT in the TERRITORY, and such license(s) is obtained, the parties
shall negotiate in good faith to reach an agreement regarding an equitable
modification of the transfer price or fees to be paid by one party to the other
with respect to such PRODUCT pursuant to Article VI hereof.
11.3 DISAGREEMENT OVER NEED FOR ADDITIONAL LICENSES. In the event
that APOLLON and ACY cannot agree on whether or not a license is necessary
pursuant to a party's determination in accordance with Paragraphs 11.1 or 11.2
hereof, such matter shall be referred to independent patent counsel for APOLLON
and ACY, respectively, (each assuming all costs of counsel representing it), who
shall attempt to reach agreement on such matters. If such independent counsel
are not able to reach an agreement within a reasonable time period, they shall
jointly chose an independent third patent counsel to make a binding
determination, and all costs thereof shall be shared equally by the parties.
11.4 EFFORTS TO OBTAIN LICENSE. Upon agreement by the parties
pursuant to Paragraph 11.1 or 11.2 or upon a binding
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determination pursuant to Paragraph 11.3 that a license is necessary, and in the
event that the parties cannot reach agreement as to an acceptable non-infringing
substitute, the parties shall use reasonable efforts to obtain such license, and
all costs of such acquisition of a license shall be borne equally by the
parties.
ARTICLE XII
CHANGE IN CONTROL/INSOLVENCY
12.1 RIGHTS OF ACY. Upon the occasion of a "CHANGE IN CONTROL" or an
"INSOLVENCY EVENT" (each as defined below) with respect to APOLLON, ACY shall,
in addition to any rights set forth in Article XIII, for a period of 180 days
following such CHANGE IN CONTROL or INSOLVENCY EVENT, be entitled to exercise
its rights as granted in Paragraph 5.1 hereof to manufacture or have
manufactured on its behalf all quantities of PRODUCT as required by ACY and its
AFFILIATES.
12.2 ADVANCE NOTICE OF INSOLVENCY EVENT. APOLLON will not take any
action to cause directly an INSOLVENCY EVENT without giving ACY at least thirty
days' prior written notice. Upon ACY's receipt of such notice, the parties may
negotiate in good faith for a period not to exceed thirty days regarding the
possibility of ACY's providing financing to APOLLON, on terms and conditions
mutually satisfactory to both parties, to prevent the occurrence of an
INSOLVENCY EVENT.
12.3 APOLLON'S CONTINUED MANUFACTURE AND SUPPLY. In
the event ACY exercises its right to manufacture PRODUCT pursuant
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to Paragraph 12.1, APOLLON shall not be relieved of its obligations of
manufacture and supply hereunder until such time (which in any event may not
exceed five years from the date ACY shall have exercised such right) as ACY has
qualified an alternate manufacturer and supplier in accordance with the terms
and conditions of Article V (Failure to Supply), which terms and conditions
shall apply mutatis mutandis to alternate manufacture pursuant to this Article
with the exception that ACY's rights to exclusive manufacture and supply
pursuant to Paragraph 12.1 shall be irrevocable and that the provisions of
Paragraph 5.2(c) shall be inapplicable, and all licenses or other rights
requisite to such manufacture, if not already vested in and to ACY, shall also
vest irrevocably in and to ACY.
ARTICLE XIII
DURATION AND TERMINATION
13.1 TERM. This AGREEMENT shall become effective as of the EFFECTIVE
DATE and shall continue in full force and effect as to each PRODUCT, unless
earlier terminated pursuant to the provisions set forth in this Article, until
the later of (i) the expiration date of the last to expire applicable patent
within PATENTS (as such term is defined in the RESEARCH AND DEVELOPMENT
AGREEMENT), or (ii) the date that is ten (10) years following the first
commercial sale of such PRODUCT. At least two years prior the expiration of this
AGREEMENT as to any PRODUCT, the parties shall meet to discuss their desire to
extend this AGREEMENT as to
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such PRODUCT so as to enable ACY to have a sufficient supply of such PRODUCT
following such expiration.
13.2 TERMINATION BY MUTUAL AGREEMENT. The parties may mutually agree
in writing to terminate this Agreement as to one or more PRODUCTS or in its
entirety. Upon any termination of this entire AGREEMENT pursuant to this
Paragraph 13.2, all rights and obligations of both parties hereunder shall,
except as expressly set forth herein, terminate. Upon any termination of this
AGREEMENT as to a specific PRODUCT pursuant to this Paragraph 13.2, all rights
and obligations of both parties hereunder with respect to such PRODUCT, but not
with respect to any other PRODUCT, shall, except as expressly set forth herein,
terminate.
13.3. UNILATERAL TERMINATION WITHOUT CAUSE. Either party may, upon
one hundred eight (180) days prior written notice, unilaterally terminate this
AGREEMENT in its entirety or as to any specific PRODUCT; provided, however, that
upon any termination by APOLLON pursuant to this Paragraph 13.3, APOLLON shall
continue to supply to ACY the terminated PRODUCTS under the terms and conditions
hereof until such time as ACY has procured a GOVERNMENT APPROVED alternative
source of supply for such PRODUCT, except in no event shall APOLLON be obligated
to continue to supply ACY with any quantities of any terminated PRODUCT after
the date that is five (5) years following the date that APOLLON shall have
delivered to ACY its notice of termination pursuant to this Paragraph 13.3
unless the
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unavailability of an alternate source of supply for the PRODUCT arises solely
out of regulatory constraints which are beyond the control of, and which could
not have been avoided by, ACY.
(a) Upon any termination of this entire AGREEMENT pursuant to
this Paragraph 13.3, (i) if the RESEARCH AND DEVELOPMENT AGREEMENT shall not
have been previously terminated, the terminating party shall be deemed to have
breached the RESEARCH AND DEVELOPMENT AGREEMENT (thereby entitling the
non-breaching party to terminate such agreement pursuant to Section 14.04
thereof), (ii) all rights and obligations of the terminating party hereunder
shall, except as expressly set forth herein, immediately terminate, and (iii)
all obligations of the non-terminating party hereunder (other than the
obligation to make any payments due the terminating party under Paragraph 6.5 or
Paragraph 6.6, as applicable) shall, except as expressly set forth herein,
immediately terminate.
(b) Upon any termination of this AGREEMENT as to any PRODUCT
pursuant to this Paragraph 13.3, (i) if the RESEARCH AND DEVELOPMENT AGREEMENT
shall not have been previously terminated with respect to such PRODUCT, the
terminating party shall be deemed to have breached the RESEARCH AND DEVELOPMENT
AGREEMENT as to such specific PRODUCT, but not with respect to any other PRODUCT
or any PRODUCT IMPROVEMENT (thereby entitling the non-terminating party to
terminate such agreement solely as to such specific PRODUCT pursuant to Section
14.04 thereof), (ii) all rights and obligations of the terminating party
hereunder as
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to such specific PRODUCT, but not with respect to any other PRODUCT or PRODUCT
IMPROVEMENT, shall, except as expressly set forth herein, immediately terminate,
and (iii) all obligations of the non-terminating party hereunder as to such
specific PRODUCT (other than the obligation to make any payments due the
terminating party under Paragraph 6.5 or 6.6, as applicable) shall, except as
expressly set forth herein, immediately terminate.
13.4. TERMINATION FOR BREACH. In the event that any material
provision of this AGREEMENT is breached by either party, the nonbreaching party
may give the breaching party written notice requiring it to remedy such breach.
In the event the breaching party shall not have fully cured such breach within
sixty days after receipt of such notice (or in the case of a breach which is not
by its nature capable of being cured within sixty days, if the breaching party
shall not have commenced performance to cure within the sixty day period and
thereafter diligently attempted to complete performance of the cure), or if the
parties have not otherwise agreed on a plan to remedy such breach, the
nonbreaching party shall, in addition to any other remedies available to it
hereunder, at law or in equity, be entitled, but not obligated, to terminate,
upon written notice to the breaching party, this AGREEMENT in its entirety, or
if such breach relates only to a specific PRODUCT, the non-breaching party shall
be entitled, but not obligated, to terminate this AGREEMENT only as to the
specific PRODUCT to which such breach
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relates. Notwithstanding anything contained in this AGREEMENT to the contrary,
APOLLON shall not be deemed to be in breach of this AGREEMENT in the event it
shall fail to satisfy its obligations pursuant to Article II hereof; provided
ACY is successfully manufacturing, pursuant to Article V hereof, the PRODUCT(S)
which APOLLON has failed to supply.
(a) Upon any termination of this entire AGREEMENT pursuant to
this Paragraph 13.4, (i) all rights and obligations of the breaching party
hereunder shall, except as expressly set forth herein, immediately terminate,
and (ii) all obligations of the non-breaching party hereunder (other.than the
obligation to make any payments due the breaching party under Paragraph 6.5 or
Paragraph 6.6, as applicable) shall, except as expressly set forth herein,
immediately terminate.
(b) Upon any termination of this AGREEMENT as to any PRODUCT
pursuant to this Paragraph 13.4, (i) all rights and . obligations of the
breaching party hereunder as to such specific PRODUCT shall, except as expressly
set forth herein, immediately terminate, and (ii) all obligations of the
non-breaching party hereunder as to such specific PRODUCT (other than the
obligation to make any payments due the breaching party under Paragraphs 6.5 or
6.6, as applicable) shall, except as expressly set forth herein, immediately
terminate.
13.5. TERMINATION FOR CHANGE IN CONTROL. (a) Within one year
following the occurrence of a "CHANGE IN CONTROL," either party may, upon sixty
days prior written notice, terminate
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this AGREEMENT in its entirety or as to a specific PRODUCT. A "CHANGE IN
CONTROL" shall be deemed to have occurred if (A) any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, is or
becomes the beneficial owner (as defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of a party representing 50% or more of the combined
voting power of such party's then outstanding securities; or (B) the
shareholders of such party approve a merger or consolidation of such party with
any other corporation, other than a merger or consolidation wherein the
shareholders of such party retain at least 50% of the combined voting power of
the outstanding securities of the surviving or resulting corporation; or, such
party enters into complete liquidation or otherwise enters into an agreement for
the sale or other disposition of all or substantially all of such party's assets
to an entity that is not 50% controlled by such party's shareholders.
(b) Upon any termination of this AGREEMENT pursuant to this
Paragraph 13.5, (i) all rights and obligations of the party with respect to whom
the CHANGE IN CONTROL shall have occurred under the entire AGREEMENT or solely
as to such specific PRODUCT, as applicable, shall, except as expressly set forth
herein, immediately terminate, and (ii) all obligations of the other party
hereunder (other than the obligation to make any payments due the party with
respect to whom the CHANGE IN CONTROL shall have occurred under Paragraphs 6.5
or 6.6, as applicable)
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shall, except as expressly set forth herein, immediately terminate.
13.6. TERMINATION DUE TO INSOLVENCY. (a) This AGREEMENT may be
terminated in its entirety by a party in the event (i) a voluntary case under
any applicable bankruptcy, insolvency or other similar law now or hereafter in
effect shall be instituted by the other party, or the other party shall consent
in writing to the entry of an order for relief of an involuntary case under any
such law; (ii) a general assignment for the benefit of creditors shall be made
by the other party; (iii) the other party shall consent in writing to the
appointment of or possession by a receiver, liquidator, trustee, custodian,
sequestrator or similar official of all or any substantial part of such party's
property; (iv) the other party shall adopt a board resolution in furtherance of
any of the foregoing actions specified in Subparagraphs (i) through (iii) of
this Paragraph 13.6; or (v) a decree or order for relief by a court of competent
jurisdiction shall be entered in respect of any party in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or appointing a receiver, liquidator, trustee, sequestrator
or other similar official of the other party or of any substantial part of such
party's assets, or ordering the winding up or liquidation of its affairs, and
any such decree or order shall remain unstayed or undischarged and in effect for
a period of ninety (90) days (hereinafter an "Insolvency Event").
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(b) Upon any termination of this AGREEMENT pursuant to this
Paragraph 13.6, (i) all rights and obligations of the insolvent party hereunder
shall, except as expressly set forth herein, immediately terminate, (ii) all
obligations of the noninsolvent party hereunder (other than the obligation to
make any payments due the insolvent party under Paragraph 6.5 or Paragraph 6.6,
as applicable) shall, except as expressly set forth herein, immediately
terminate.
13.7. EFFECT OF TERMINATION ON RESEARCH AND DEVELOPMENT AGREEMENT.
If this Agreement is terminated in its entirety or as to any PRODUCT(S), the
parties shall be relieved of their rights and obligations under Sections 9.02
and 9.03 of the RESEARCH AND DEVELOPMENT AGREEMENT in their entirety or as to
such PRODUCT(S), as applicable. Except as otherwise expressly set forth herein,
any termination of this AGREEMENT shall not affect any of the rights or
obligations of the parties under the RESEARCH AND DEVELOPMENT AGREEMENT.
13.8 FAILURE TO EXERCISE RIGHTS. Failure on the part of either party
to exercise or enforce any right conferred upon it hereunder shall neither be
deemed to be a waiver of any such right nor operate to bar the exercise or
enforcement thereof at any time thereafter.
13.9 RIGHT TO SELL REMAINING INVENTORY. Upon termination of this
AGREEMENT for any reason (other than a termination by APOLLON pursuant to
Paragraphs 13.4, 13.5 or 13.6), ACY and its AFFILIATES and distributors shall
have the
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right to advertise, promote, market and sell all quantities of such PRODUCTS
remaining in its or their inventory.
13.10 TRANSFER OF GOVERNMENT APPROVALS. To the extent it has not
already done so, the terminating party pursuant to Paragraph 13.3 hereof, and
the non-terminating party pursuant to Paragraphs 13.4, 13.5 and 13.6 hereof,
shall immediately assign (or grant a right of reference and use if assignment is
prohibited by law) and transfer all applicable GOVERNMENT APPROVALS, including
any information relating thereto, to the other party upon the prior written
request of such other party.
ARTICLE XIV
CONFIDENTIALITY
14.1 CONFIDENTIALITY; EXCEPTIONS. Except to the extent expressly
authorized by this AGREEMENT or otherwise agreed in writing, the parties agree
that, for the term of this AGREEMENT and for a period of five years thereafter,
the receiving party shall keep confidential and shall not publish or otherwise
disclose and shall not use for any purpose other than as provided for in this
AGREEMENT any patent application, know-how (including biological materials), or
other information furnished to the other party pursuant to this AGREEMENT
(hereinafter "CONFIDENTIAL INFORMATION"), except to the extent that it can be
established by the receiving party by competent proof that such CONFIDENTIAL
INFORMATION:
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(a) was already known to the receiving party, other than under
an obligation of confidentiality, at the time of disclosure by the other party;
(b) was generally available to the public or otherwise part of
the public domain at the time of its disclosure to the receiving party;
(c) became generally available to the public or otherwise part
of the public domain after its disclosure and other than through any act or
omission of the receiving party in breach of this AGREEMENT;
(d) was disclosed to the receiving party, other than under an
obligation of confidentiality, by a third party, unless the receiving party knew
that such third party was under an obligation to the disclosing party not to
disclose such information to others; or
(e) was disclosed by the receiving party pursuant to a
requirement of law. The parties agree that the financial terms of this AGREEMENT
shall also be considered CONFIDENTIAL INFORMATION-hereunder.
14.2 AUTHORIZED DISCLOSURE. Upon notification to the other party,
each party may disclose the other's CONFIDENTIAL INFORMATION to the extent such
disclosure is reasonably necessary in filing or prosecuting patent applications,
prosecuting or defending litigation or complying with applicable governmental
regulations and as required by agreement with university collaborators. If a
party is required by law, regulation or
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prior agreement to make any disclosure of the other party's CONFIDENTIAL
INFORMATION, it will, except where impractical for necessary disclosures (e.g.,
in the event of medical emergency), give reasonable advance notice to the other
party of such disclosure requirement and, except to the extent inappropriate in
the case of patent applications, will use reasonable efforts to secure
confidential treatment of such CONFIDENTIAL INFORMATION required to be
disclosed, no less stringent than the obligations of confidentiality and limited
use imposed hereunder. In addition, each party may disclose the other's
CONFIDENTIAL INFORMATION to its employees, consultants and advisors on a
need-to-know basis, provided that any such employees, consultants and advisors
are subject to agreements of confidentiality no less stringent than the
obligations of confidentiality and limited use imposed hereunder.
14.3 CONFIDENTIAL OR PROPRIETARY INFORMATION OF THIRD PARTIES. Each
party agrees that it will not, during the term of this AGREEMENT, knowingly use,
disclose to the other, or induce the other to use, any confidential or
proprietary information belonging to third parties, except third party licensors
to a party wherein said party has the right to sublicense to the other party, or
as otherwise authorized by such third parties.
14.4 SURVIVAL. The provisions of this ARTICLE XIV shall survive the
termination or expiration of this AGREEMENT for any reason for a period of five
(5) years from said termination or expiration.
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ARTICLE XV
MISCELLANEOUS
15.1 NOTICES. Any notice required or permitted under this AGREEMENT
shall be deemed to have been sufficiently provided and effectively made as of
the delivery date if hand-delivered, or as of the date received if mailed by
registered or certified mail, postage-prepaid, or if by telecopy or overnight
airmail courier the business day the sender has written confirmation such
telecopy or overnight package was received, and addressed to the receiving party
at its respective address as follows:
If to ACY:
LEDERLE-PRAXIS BIOLOGICALS
division of AMERICAN CYANAMID COMPANY
c/o Wyeth-Ayerst Laboratories
555 Lancaster Avenue
St. Davids, Pennsylvania 19087
Attention: President
with a copy to:
AMERICAN HOME PRODUCTS CORPORATION
5 Giralda Farms
Madison, New Jersey 07940
Attn: Associate General Counsel
If to APOLLON:
APOLLON, INC.
One Great Valley Parkway
Malvern, Pennsylvania 19355-1423
Fax: (610) 647-9732
Attn: PRESIDENT
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with a copy to:
Morris Cheston, Jr., Esq.
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103
Fax: (215) 864-8999
or such other address which the receiving party has given notice pursuant to the
provisions of this Paragraph.
15.2 RELATIONSHIP OF PARTIES. The relationship of the parties under
this AGREEMENT is that of independent contractors and not as agents of each
other or partners or joint venturers, and neither party shall have the power to
bind the other in any way with respect to any obligation to any third party
unless a specific power of attorney is provided for such purpose. Each party
shall be solely and exclusively responsible for its own employees and
operations.
15.3 FORCE MAJEURE. (a) In the event that the performance of this
AGREEMENT or of any obligation hereunder, other than payment of money as herein
provided, by either party hereto is prevented, restricted or interfered with by
reason of any cause not within the control of the respective party, and which
could not by reasonable diligence have been avoided by such party, the party so
affected, upon giving prompt notice to the other party as to the nature and
probable duration of such event, shall be excused from such performance for a
period of one (1) year or to the extent and for the duration of such prevention,
restriction or interference, whichever is the shorter period of time, provided
that the party so affected shall use its
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reasonable efforts to avoid or remove such cause of non-performance and shall
fulfill and continue performance hereunder with the utmost dispatch whenever and
to the extent such cause or causes are removed.
(b) For the purpose of the preceding paragraph but without
limiting the generality thereof, the following shall be considered as not within
the control of the respective party: acts or omissions of a governmental agency,
compliance with requests, rules, regulations or orders of any governmental
authority or any department, agency or instrumentality thereof, flood, storm,
earthquake, fire, or other acts of God, war, riots, insurrection, accidents,
acts of the public enemy, invasion, quarantine restrictions, strike, lockout,
differences with workmen, embargoes, delays or failure in transportation and
acts of a similar nature.
15.3 NO IMPLIED LICENSES. Nothing in this AGREEMENT is intended to
or shall be construed to create, confer, give effect to or otherwise imply in
either party any license, right or property interest in any PRODUCT, or in any
know how or intellectual property owned or licensed by the other except as
expressly provided herein.
15.4 AMENDMENTS OR MODIFICATIONS. This AGREEMENT may be modified or
amended only in writing signed by duly authorized representatives of APOLLON and
ACY.
15.5 NO WAIVER. No failure or delay on the part of a party in
exercising any right hereunder shall operate as a waiver
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of, or impair, any such right. No single or partial exercise of any such right
shall preclude any other or further exercise thereof or of any other right. No
waiver of any such right shall be deemed a waiver of any other right hereunder.
15.6 LIMITATION OF LIABILITY. Neither party shall be liable to the
other for loss of profit or use or incidental or consequential damages in any
claims arising out of or relating to this AGREEMENT, whether based on warranty,
contract, negligence or strict liability.
15.7 SEVERABILITY. Should one of the provisions of this AGREEMENT
become or prove to be null and void, such will be without effect on the validity
of this AGREEMENT as a whole. Both parties will, however, endeavor to replace
the void provision by a valid one which in its economic effect is most
consistent with the void provision.
15.8 GOVERNING LAW; JURISDICTION. This AGREEMENT shall be governed
by and construed in accordance with the internal laws of the Commonwealth of
Pennsylvania without regard to principles of conflicts of laws. The appropriate
state and federal courts of the Commonwealth of Pennsylvania shall have
exclusive jurisdiction over any dispute between the parties, and each party
unconditionally submits to the jurisdiction of such courts; provided however,
that any patent question or controversy between the parties and related to a
U.S. patent shall be construed or resolved in accordance with the relevant
patent laws, and, the U.S. District Court for the Eastern District of
Pennsylvania
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shall have exclusive jurisdiction thereof. All other patent questions or
controversies shall be construed or resolved in accordance with the applicable
patent laws and in a forum of competent jurisdiction for such patent related
matter.
15.9 SEPARATE AGREEMENTS WITH ACY AFFILIATES. Upon request of ACY,
APOLLON shall enter into a direct agreement with an AFFILIATE of ACY for supply
of PRODUCT and receipt of payment therefor; provided that ACY shall have
guaranteed such AFFILIATE's performance thereunder. ACY hereby guarantees the
performance of its AFFILIATES under this AGREEMENT.
15.10 ASSIGNMENT. Neither party shall assign this AGREEMENT or any
of its rights or obligations hereunder without the prior written consent of the
other party hereto (which consent shall not be unreasonably withheld); provided,
however, that either party may assign this AGREEMENT to any wholly owned
subsidiary or, subject to a party's right to terminate pursuant to Paragraph
13.5 hereof, to any successor by merger or sale of substantially all of the
business unit to which this AGREEMENT relates in a manner such that the assignor
(if it continues as a separate entity) shall remain liable and responsible for
the performance and observance of all of its duties and obligations hereunder.
This AGREEMENT shall be binding upon the successors and permitted assigns of the
parties (regardless of whether such successor or assign shall be a competitor of
APOLLON or ACY) and the name of a party appearing herein shall be deemed to
include the names of such party's successor's and permitted assignees to
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the extent necessary to carry out the intent of this AGREEMENT. Any assignment
not in accordance with this Paragraph shall be void.
15.11 ENTIRE AGREEMENT. This AGREEMENT and the RESEARCH AND
DEVELOPMENT AGREEMENT, including the letter dated as of even date herewith and
attached as Exhibit A thereto, constitute the entire understanding between the
parties regarding the subject matter hereof and no party has relied on any
representation not expressly set forth or referred to in this AGREEMENT or in
the RESEARCH AND DEVELOPMENT AGREEMENT (including such aforesaid letter).
15.12 PUBLICITY. Except as otherwise provided herein, neither party
shall use or refer to, without the other party's prior written consent, which
shall not be unreasonably withheld, the other's name, this AGREEMENT or the
terms hereof in any public statement, whether oral or written, including, but
not limited to, communications with the media, advertising, shareholder reports,
communications with stock analysts or prospectuses; provided, however, that
either party may, without the consent of the other, make any disclosure required
by law, and particularly, but without limitation, by the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder, further provided that in any such situation,
the other party is first given an opportunity to redact any information it is
permissible to redact from disclosure thereunder.
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REQUEST. REDACTED MATERIAL IS BRACKETED AND HAS BEEN FILED SEPARATELY WITH THE
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15.13 COUNTERPARTS. This AGREEMENT may be executed in counterparts,
each of which shall be deemed an original and all of which shall constitute
together one and the same agreement.
IN WITNESS WHEREOF, the duly authorized representatives of the
parties hereto have caused this AGREEMENT to be executed.
AMERICAN CYANAMID COMPANY
By:/s/ ROBERT ESSNER
-----------------------------
Print Name ROBERT ESSNER
Title: PRESIDENT
-------------------------
LEDERLE DIVISION OF
AMERICAN CYANAMID
APOLLON, INC.
By:/s/ VINCENT R. ZURAWSKI, JR.
-----------------------------
Print Name VINCENT R. ZURAWSKI, JR.
Title: PRESIDENT AND CEO
-------------------------
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THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGE 1 AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
FIRST AMENDMENT TO THE SUPPLY AGREEMENT
This Amendment No. 1 (the "Amendment") is made as of the 3rd day of
October, 1997, by and between Apollon, Inc., a Pennsylvania corporation (the
"Company") and American Cyanamid Company, a Maine corporation ("ACY"), the
signatories to the Supply Agreement, dated as of July 19, 1995 (the
"Agreement").
WHEREAS, ACY is an indirect majority owned subsidiary of American Home
Products Corporation and the Company and an affiliate of American Home Products
Corporation have entered into a Securities Purchase Agreement dated as of the
date hereof pursuant to which the Company has agreed to amend the Agreement as
hereinafter set forth;
WHEREAS, the Company and ACY desire to amend the Agreement as hereinafter
provided; and
WHEREAS, pursuant to Paragraph 15.4 of the Agreement, the Agreement may
only be modified or amended in writing signed by duly authorized representatives
of the Company and ACY.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto, each intending to be legally
bound, hereby agree as follows:
1. All terms used herein and not defined shall have the meanings set
forth in the Agreement.
2. The first two lines of Subparagraph 6.1(a) of the Agreement are
hereby amended to read as follows:
"6.1 TRANSFER PRICE. (a) Subject to the provisions of Subparagraphs
(b), (c) and (d) of this Paragraph, the transfer price . . ."
3. Paragraph 6.1 of the Agreement is hereby amended to add a new
provision, Paragraph 6.1(d) to read as follows:
"(d) The transfer price to be paid to APOLLON by ACY or its AFFILIATES
with respect to each PRODUCT shall be equal to [ ] of the NET SALES of
each PRODUCT for the first [ ] of aggregate sales of all PRODUCTS.
Thereafter, the payments due to APOLLON shall be paid in accordance with
Subparagraph 6.1(a)."
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4. The address for notices to be sent to ACY pursuant to Paragraph
15.1 of the Agreement shall be as set forth following the signature line below,
attention: President.
5. All other terms and provisions of the Agreement remain in full
force and effect.
6. This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which shall constitute together one and
the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1
as of the day and year first above written.
APOLLON, INC.
By: /s/Vincent R. Zurawski, Jr.
______________________________
Vincent R. Zurawski, Jr.
President
Notices to be sent to:
Vincent R. Zurawski, Jr. Ph.D.
President and CEO
One Great Valley Parkway
Malvern, PA 19355-1423
Fax: (610) 647-9732
AMERICAN CYANAMID COMPANY
By: /s/Gerald A. Jibilian
_____________________
Name: Gerald A. Jibilian
Title: Vice President
Notices to be sent to:
Ronald J. Saldarini, Ph.D.
President
c/o Wyeth-Ayerst
280 King of Prussia Road
Radnor, PA 19087
Fax: (610) 989-5700
2
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TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 1, 2, 5, 6, 7 AND 11
AND PORTIONS OF SCHEDULE 2.3 AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.
LICENSE AND OPTION AGREEMENT
This License and Option Agreement ("Agreement") is dated as of March
6, 1995, between Apollon, Inc., a Pennsylvania corporation ("Apollon") and
Centocor, Inc., a Pennsylvania corporation ("Centocor").
BACKGROUND
Apollon and Centocor are parties to a certain Marketing and
Development Agreement dated as of June 25, 1992, as amended by Amendment No. 1
to Marketing and Development Agreement dated October 15, 1994 (as amended, the
"Development Agreement").
Pursuant to the Development Agreement, Centocor has the right to
provide certain funding for research, experimentation and development of certain
products by Apollon, in exchange for Centocor's right to commercialize such
products.
Centocor now desires to waive its existing funding and
commercialization rights under the Development Agreement in exchange for the
grant by Apollon to Centocor of (i) an exclusive, royalty-bearing license to
certain technology and patents in the Field (as defined herein) and (ii) an
option to obtain an exclusive, royalty-bearing sublicense under certain
University Licenses (as defined herein) in the Field, as further set forth in
this Agreement, and Apollon desires to grant such licenses and options to
Centocor in exchange for Centocor's waiver of its funding and commercialization
rights and certain other consideration.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agrees as follows:
ARTICLE I
TERMINATION OF DEVELOPMENT AGREEMENT
The Development Agreement, except as provided in the following
sentence, is hereby terminated and Apollon and Centocor shall have no further
rights or obligations thereunder. Notwithstanding anything contained herein to
the contrary, the provisions of Article II of the Development Agreement as they
relate to the [ ] shall not terminate and shall remain in full force and
effect.
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Contemporaneously with the execution and delivery of this Agreement, Apollon is
executing and delivering an Assignment pursuant to which Apollon is transferring
and conveying to Centocor all rights Apollon has to certain [ ] and [ ]
compounds.
ARTICLE II
DEFINITIONS
Unless otherwise provided, capitalized terms used herein shall have
the following meanings:
2.1 "Affiliate" of a particular Person means any other Person which,
directly or indirectly, controls, is controlled by, or is under common control
with such particular Person. The term "control" (including, with correlative
meaning, the terms "controlled by" and "under common control with"), as used
with respect to any Person, means the possession, directly or indirectly, of the
power to vote fifty percent (50%) or more of the outstanding voting securities
of such Person, or to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting securities, by
contract or otherwise.
2.2 "Apollon Knowhow" means all Knowhow owned by Apollon or its
Affiliates on the date hereof or at any time prior to March 6, 1998.
2.3 "Apollon Patent Rights" means any Patents owned by Apollon or
its Affiliates and any future Patents owned by Apollon or its Affiliates which
are necessary for the development, manufacture, use, marketing or sale of
Product employing Apollon Knowhow. A listing of Apollon Patent Rights as of the
date of this Agreement is set forth on Schedule 2.3 hereof.
2.4 "Dollars" or "$" means United States Dollars.
2.5 "FDA" means the United States Food and Drug Administration or
any successor agency.
2.6 "Field" means cancer, and shall expressly exclude (i) any
product directed at any viral, fungal or bacterial antigen and (ii) any product
directed at any V[alpha] or V(beta) antigen.
2.7 "Force Majeure" means any occurrence that prevents or
substantially interferes with the performance by a
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reason of any act of god, flood, fire, explosion, breakdown of plant, strike,
lockout, labor dispute, casualty, accident, war, revolution, injunction, law,
order, proclamation, regulation, ordinance, demand or requirement of any
government or of any subdivision, authority or representative of any such
government, inability to procure or use materials, labor, equipment,
transportation or energy sufficient to meet manufacturing needs without the
necessity of allocation, or any other cause whatsoever, whether similar or
dissimilar to those above enumerated, beyond the reasonable control of such
party, if and only if the party affected shall have used reasonable efforts to
avoid such occurrence and to remedy it promptly if it shall have occurred.
2.8 "Improvements" means those modifications made to Knowhow which
confer an improvement to the design, technology, process or product as measured
by its cost, quality, reliability or acceptability to regulatory authorities.
2.9 "Knowhow" means all proprietary information, methods, biological
materials, processes, techniques, formulae, specifications, protocols, standards
and data, whether or not patentable, including all Improvements, relating to or
useful in the development, manufacture, use, marketing or sale of Product.
2.10 "Net Revenues" with respect to sales for any period and with
respect to any item, means the net proceeds received or to be received, under
generally accepted accounting principles, from sales of Products by Centocor, or
any Affiliate of Centocor, to an unaffiliated third party. In determining such
net proceeds, the amounts received from such sales shall be reduced by related
customary prompt payment and other trade discounts, insurance charges, bad debt
and other allowances, credits for rejected, outdated, spoiled, damaged and
returned goods, tariffs, import/export duties, excise taxes, value added taxes,
sales and use taxes and other similar governmental charges paid in connection
with such sales (except income and franchise taxes) and customary distributors',
consignees, and wholesalers' fees and commissions, but shall not be reduced by
any transportation charges. If any part of Net Revenues is not paid in cash, the
non-cash portion ("Other Property") shall be deemed to have a value equal to the
cash consideration which Centocor would receive from an unaffiliated buyer in an
arm's length sale of such Other Property sold at the same time and place and in
the same quantity as such Other Property is received by Centocor.
2.11 "Patents" means all letters patent and pending applications for
patents of the United States and all countries foreign thereto, including
regional patents, and all reissues, divisions, continuations,
continuations-in-part, extensions (including, without limitation, any extensions
thereof under
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the United States Patent Term Restoration Act or otherwise), substitutions,
renewals, confirmations, supplementary protection certificates, registrations,
revalidations or additions of any of the foregoing, as applicable.
2.12 "Person" means an individual, a partnership, a joint venture, a
corporation, a trust, an estate, an unincorporated organization, a government or
any department or agency thereof, or other entity.
2.13 "Product" means any pharmaceutical formulation employing
deoxyribo or ribo nucleic acid based vaccine technology.
2.14 "Quarter" means any calendar quarter beginning or ending during
the term of this Agreement; provided that the first Quarter shall be the period
beginning on the date hereof and ending on the last day of the calendar quarter
in which such date occurs, and the last Quarter shall be the period beginning on
the first day of the last calendar quarter before the date this Agreement is
terminated and ending on the date this Agreement is terminated.
2.15 "University License" means any license or rights granted to
Apollon, at any time, under any Patent or Knowhow by (i) the Trustees of the
University of Pennsylvania; (ii) the Wistar Institute of Anatomy and Biology;
(iii) the Institute of Biotechnology and Advanced Molecular Medicine; or (iv)
any other third party licensor, which are necessary or useful for the
development, manufacture, use, marketing or sale of Product. Any such Patent or
Knowhow under a University License, for which Centocor has exercised its Option
pursuant to Section 3.2, shall be referred to herein respectively, as a
"Sublicensed Patent" and "Sublicensed Knowhow".
ARTICLE III
GRANT OF LICENSE; OPTION; GRANT BACK
3.1 Apollon hereby grants to Centocor, under the Apollon Patent
Rights and Apollon Knowhow, an exclusive, worldwide right and license, including
the right to sublicense (with the prior written consent of Apollon, which shall
not be unreasonably withheld), to develop, make, have made, use, market and
sell, including the right to sell for resale, Product in the Field.
3.2 To the extent Apollon has the right to grant sublicenses under
any University Licenses, Apollon hereby grants to Centocor an exclusive,
irrevocable option (the "Option") to
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obtain from Apollon one or more exclusive sublicenses ("Sublicense") under any
University License(s), solely for use in the Field. To the extent Apollon does
not have the right to grant sublicenses under any University Licenses, Apollon
shall use reasonable commercial efforts to obtain such right to sublicense.
Centocor may exercise the Option, from time to time, by providing written notice
of such exercise to Apollon which specifically identifies the University
License(s) which Centocor elects to sublicense, not less than ten days prior to
the date which Centocor proposes as the effective date for such Sublicense under
the Option. The Sublicense shall be for the same term as the applicable
University License and shall provide to Centocor all of the rights of Apollon
under the applicable University License solely for use in the Field. Subject to
the provisions of Article V hereof, with respect to any Sublicense, Centocor
shall pay royalties to Apollon [ ] on sales of Product in
the amounts equal to the [
] arising from such sales of
Product. Apollon shall not cause or allow, through any action or inaction, any
impairment in Centocor's ability to obtain any Sublicense as provided in this
Section 3.2.; provided, however, that in the event Apollon obtains a University
License which does not permit Apollon to grant a Sublicense to Centocor, and
Apollon had used reasonable efforts to obtain the right to grant such a
Sublicense, such event shall not constitute a breach by Apollon of this Section
3.2 or of this Agreement.
3.3 Centocor hereby grants to Apollon a non-exclusive, royalty free,
worldwide license solely for applications outside of the Field, to any
Improvements owned by Centocor or its Affiliates at any time prior to March 6,
1998 ("Centocor Improvements"). Centocor hereby grants to Apollon a nonexclusive
option to obtain from Centocor a non-exclusive, royalty bearing license under
any Patents owned by Centocor or its Affiliates covering the Centocor
Improvements; such license to be negotiated in good faith by Centocor and
Apollon and on the terms and conditions as they shall mutually agree.
ARTICLE IV
MILESTONE PAYMENTS
4.1 With respect to each Product developed by Centocor for which any
of the following milestones are accomplished, Centocor shall pay to Apollon the
amounts set forth below:
[ ]
-5-
<PAGE>
[ ]
[ ]
[ ]
4.2 Centocor shall notify Apollon within ten (10) days after the
occurrence of any event which created a Centocor payment obligation under this
Article IV and the applicable payment shall accompany such notice. Centocor
shall provide Apollon on each June 1 and December 1 with written reports,
setting forth in such detail as Apollon may reasonably request, the progress of
the development, evaluation, testing and commercialization of each Product under
development. Centocor shall also notify Apollon within thirty (30) days
following the first commercial sale of any Product. For the purposes of this
Article IV, each Product directed at a different target antigen shall be deemed
to be a new Product.
ARTICLE V
ROYALTY PAYMENTS
5.1 In countries where Products are covered by a valid claim (a
"Claim") of an issued, unexpired patent under the Apollon Patent Rights, or
under a Sublicensed Patent, Centocor shall pay to Apollon on a quarterly basis,
within 45 days after the end of each Quarter, the "Royalty Amount" (determined
in accordance with Section 5.2 below) on sales of such Products sold by
Centocor, or any Affiliate of Centocor, to unaffiliated third parties, during
such Quarter; which payment shall include and fully satisfy Centocor's
obligations to pay any [ ] on account of such sales pursuant
to Section 3.2 hereof.
5.2 The Royalty Amount shall be determined as follows:
[ ]
[ ]
- ----------------------------- -----------------------------
[ ] [ ]
-6-
<PAGE>
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
[ ] [ ]
5.3 In countries where Products which incorporate Apollon Knowhow or
Sublicensed Knowhow are not covered by a Claim, Centocor shall pay to Apollon,
on a quarterly basis, within 45 days after the end of each Quarter, an amount
equal to the [ ]
5.4 Any payment due pursuant to Section 5.1 or 5.3 hereof shall be
payable in Dollars without deduction for or on account of any present or future
taxes, duties or other charges levied or imposed by any governmental or
political authority through withholding or deduction with respect to any such
payments to the extent permitted by law (except to the extent any such
withholding or deduction for or on account of any United States federal, state
or local tax, duty or other charge provides a credit or other benefit to Apollon
or is a withholding of tax on or measured by the net income of Apollon). If any
such taxes, duties or other charges are so levied or imposed, or any such
withholding or deduction is required by law, Centocor will make additional
payments in such amounts so that every net payment under this Agreement, after
any required withholding, deduction or payment for or on account of any such
present or future taxes, duties or other charges, will not be less than the
amount provided for herein. Centocor shall furnish promptly to Apollon official
receipts evidencing such withholding or deduction. Any Net Revenues received in
a currency other than Dollars shall be deemed to be equal to the amount of
Dollars obtained by converting the outstanding amount of currency of such Net
Revenues into Dollars at the average spot rate for the purchase
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<PAGE>
of Dollars with such currency as quoted by Morgan Guaranty Trust Company of New
York at approximately 9:00 A.M. (New York City time) on the last 10 business
days of the Quarter with respect to which such payment is made.
5.5 Each payment pursuant to Section 5.1 or 5.3 hereof shall be
accompanied by a summary of the operations that resulted in such payment. Such
report shall be in such detail as Apollon reasonably requests and shall be
signed by an officer of Centocor.
5.6 Any payment under Article IV or Section 5.1 or 5.3 hereof, which
is not made within fifteen (15) days following the date when due, shall accrue
interest thereon from and including such date and until but excluding the date
of payment at a rate per annum equal to one percent (1%) above the prime rate,
as announced by Morgan Guaranty Trust Company of New York for such date (based
on a 365-day year) or, if such rate is in excess of the rate then permitted by
applicable law, at the highest rate then so permitted.
5.7 Centocor shall keep and maintain, in accordance with generally
accepted accounting principles, books of account and other records with respect
to Net Revenues and the payments due under Section 5.1 and 5.3. Apollon shall
have the right upon prior notice to Centocor, not more than once in each Quarter
nor more than once in respect of any Quarter, through an independent public
accountant selected by Apollon and acceptable to Centocor, which acceptance
shall not unreasonably be refused, to have access during normal business hours
to those books and records of Centocor as may reasonably be necessary to verify
the accuracy of the payments due under Section 5.1 and 5.3 hereof in respect of
any Quarter ending not more than thirty-six (36) months prior to the date of
such notice. If such independent public accountant's report shows any
underpayment of the payment amounts due to Apollon under Sections 5.1 or 5.3
hereof, within thirty (30) days after Centocor's receipt of such report,
Centocor shall remit or shall cause its Affiliate to remit to Apollon (a) the
amount of such underpayment and (b) if such underpayment exceeds five percent
(5%) of the total of such amounts owed for the Quarter then being reviewed, the
reasonable and necessary fees and expenses of such independent accountant
performing the audit. Otherwise such fees and expenses shall be borne by
Apollon. Any overpayment shall be fully creditable against any future payment
amounts due under Section 5.1 or 5.3 hereof. All records and other information
required pursuant to this Section 5.7 shall be maintained for a four-year period
following the year in which any such Net Revenues were earned or payments due
under Section 5.1 and 5.3 were made. The provisions of this Section 5.7 shall
survive any termination of this Agreement.
-8-
<PAGE>
5.8 Centocor's obligation to make payments to Apollon pursuant to
Sections 5.1 and 5.3 hereof shall terminate in each country on the later of (i)
the expiration date of the last-to-expire issued patent under the Apollon Patent
Rights or a Sublicensed Patent which covers the Product; or (ii) December 31,
2014.
ARTICLE VI
TERMINATION
6.1 If either party should default in a material manner with respect
to any material provision of this Agreement and the other party shall give the
defaulting party written notice of such default, the defaulting party shall have
sixty (60) days to cure such default. If such default is not cured within such
sixty-day period, the non-defaulting party shall have the right, upon notice to
the defaulting party and without prejudice to any other rights the
non-defaulting party may have, to terminate this Agreement unless the defaulting
party is in the process of attempting in good faith to remedy such default, in
which case the sixty-day cure period shall be extended by an additional forty
five (45) days.
ARTICLE VII
CENTOCOR COVENANTS
7.1 Centocor shall use reasonable commercial efforts to develop and
commercialize Products.
7.2 Without the prior written consent of Apollon, which shall not be
unreasonably withheld, Centocor shall not authorize or sponsor any research or
development of the Product by any third party.
7.3 Without the prior written consent of Apollon, which shall not be
unreasonably withheld, Centocor shall not authorize or direct any third party to
manufacture any Product.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
8.1 Each of Apollon and Centocor hereby represents and warrants to
the other that the execution and delivery by it of this Agreement and the
consummation by it of the transactions contemplated by this Agreement have been
duly authorized by all
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<PAGE>
requisite action and will not contravene any law or regulation, any order,
award, judgment or decree of any court or governmental instrumentality and will
not violate, conflict with, or constitute a default under its Articles of
Incorporation or its Bylaws, or any material indenture, mortgage, deed of trust,
agreement, license or other instrument applicable to it or any of its Affiliates
or by which it or any of its Affiliates is bound.
8.2 Apollon hereby further represents and warrants to~ Centocor
that:
(i) to Apollon's Knowledge, Apollon is the exclusive owner of
the Apollon Knowhow and the Apollon Patent Rights and has the full right to
grant the rights and perform the obligations contemplated by this Agreement;
(ii) Apollon has the right to grant Sublicenses under the
University Licenses from (i) the Trustees of the University of Pennsylvania and
(ii) the Institute of Biotechnology and Advanced Molecular Medicine; and
(iii) to Apollon's knowledge, the inception, development and
reduction of practice of the Apollon Knowhow and the Apollon Patent Rights has
not constituted or involved the misappropriation of trade secrets or other
rights of any other Person.
8.3 EXCEPT AS OTHERWISE SET FORTH IN THIS ARTICLE VIII, WITH RESPECT
TO THE PRODUCT AND THE TECHNOLOGY LICENSED OR SUBLICENSED TO CENTOCOR HEREUNDER,
APOLLON MAKES NO REPRESENTATIONS AND WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING
BUT NOT LIMITED TO REPRESENTATIONS OR WARRANTIES (i) OF COMMERCIAL UTILITY (ii)
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR (iii) THAT THE USE OF
THE PRODUCT OR THE TECHNOLOGY LICENSED OR SUBLICENSED TO CENTOCOR HEREUNDER WILL
NOT INFRINGE ANY PATENT, COPYRIGHT OR TRADEMARK OR OTHER PROPRIETARY OR PROPERTY
RIGHTS OF OTHER PERSONS.
ARTICLE IX
INDEMNIFICATION
9.1 Centocor shall defend, indemnify and hold Apollon, its
Affiliates and their respective directors, officers, employees and agents,
harmless from and against any and all damages, losses, claims, actions, costs
and expenses, including reasonable attorneys' fees ("Losses"), arising out of or
resulting from (i) the breach or falsity of any of Centocor's representations or
warranties contained in this Agreement, (ii) the manufacture, use, handling,
storage, sale or other
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<PAGE>
disposition of the Product by Centocor or (iii) any negligence or willful
misconduct of Centocor relating to the Product.
9.2 Apollon shall defend, indemnify and hold Centocor, its
Affiliates and their respective directors, officers, employees and agents
harmless from and against any and all Losses arising out of or resulting from
(i) the breach or falsity of any of Apollon's representations or warranties
contained in this Agreement or (ii) any activities of Apollon pursuant to the
license granted by Centocor to Apollon under Section 3.3 hereof.
9.3 The provisions of Article IX shall survive any termination of
this Agreement.
ARTICLE X
PAYMENTS
10.1 In partial consideration for the execution and delivery by
Apollon of this Agreement, Centocor shall pay to Apollon: (i) [ ] upon
Apollon's execution and delivery of this Agreement, (ii) [ ] on the date
which is 90 days from the date of this Agreement and (iii) [ ] on the date
which is 180 days from the date of this Agreement. The aggregate amount of the
payments made by Centocor to Apollon pursuant to this Article X (the "Payment
Amount") shall be fully creditable against any amounts which become due from
Centocor to Apollon pursuant to the provisions of Article IV or Sections 5.1 or
5.3 of this Agreement ("Milestone/Royalty Amounts"); provided that with respect
to each Milestone/Royalty Amount due, [ ] of such amount
may be satisfied by credit of the Payment Amount, the balance of such amount due
shall be paid in cash and the unapplied amount of the Payment Amount shall be
carried over and applied to future Milestone/Royalty Amounts due, subject to
foregoing [ ] limitation.
ARTICLE XI
CONFIDENTIALITY
11.1 Except to the extent disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation
or complying with applicable governmental regulations, Apollon shall maintain in
strictest confidence, and shall ensure that its Affiliates and its and their
employees, agents and representatives maintain in strictest confidence all
proprietary and confidential information which is provided by Centocor to
Apollon, including but not limited to,
-11-
<PAGE>
Centocor's inventions, discoveries, improvements and methods, business plans,
marketing techniques or plans, manufacturing and other plant designs, location
of operations, and any other information affecting the business operations of
Centocor ("Centocor Information"), and shall not use, publish, disseminate, or
disclose, in any manner, to any person any Centocor Information unless: (i)
Apollon is legally required to do so, (ii) the Centocor Information is already
or later becomes in the public domain through no fault of Apollon or (iii) the
Centocor Information was already known by Apollon before receipt from Centocor,
as shown by contemporaneous written records.
11.2 Except to the extent disclosure is reasonably necessary in
filing or prosecuting patent applications, prosecuting or defending litigation
or complying with applicable governmental regulations, Centocor shall maintain
in strictest confidence, and shall ensure that its Affiliates and its and their
employees, agents and representatives maintain in strictest confidence, all
proprietary and confidential information of Apollon which is provided by Apollon
to Centocor, including but not limited to, Apollon's inventions, discoveries,
improvements and methods, business plans, marketing techniques or plans,
manufacturing and other plant designs, location of operations, and any other
information affecting the business operations of Apollon ("Apollon
Information"), and shall not use, publish, disseminate, or disclose, in any
manner, to any person, any Apollon Information unless: (i) Centocor is legally
required to do so, (ii) the Apollon Information is already or later becomes in
the public domain through no fault of Centocor or (iii) the Apollon Information
was already known by Centocor before receipt from Apollon, as shown by
contemporaneous written records.
11.3 The provisions of Article XI shall survive any termination of
this Agreement.
ARTICLE XII
MISCELLANEOUS
12.1 Assignment. Neither this Agreement nor any right or obligation
arising hereunder may be assigned or delegated, in whole or in part, by either
party without the prior written consent of the other, which consent shall not be
unreasonably withheld.
12.2 Entire Agreement. This Agreement sets forth and constitutes the
entire agreement between the parties with respect to the subject matter hereof,
and supersedes any and all prior agreements, understandings, promises and
representations, whether
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<PAGE>
oral or written, made by either party to the other concerning the subject matter
hereof and the terms applicable hereto.
12.3 Severability. If any provision of this Agreement is or becomes
or is deemed to be invalid, illegal or unenforceable in any jurisdiction, such
provision shall be ineffective only to the extent of such invalidity, illegality
or unenforceability and the remainder of this Agreement shall remain in full
force and effect.
12.4 Specific Performance. Each of Apollon and Centocor agrees that
remedies at law may be inadequate to protect against breach or threatened breach
of this Agreement, and each hereby agrees that in the event of a breach or a
threatened breach by a party hereto, and in addition to any other remedy
provided herein or by law or in equity, the other party shall be entitled to
appropriate injunctive relief or to obtain specific performance in any court of
competent jurisdiction without proof that the payment of damages would be
inadequate compensation.
12.5 Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than Apollon and Centocor any legal or
equitable right, remedy or claim under this Agreement. This Agreement shall be
for the sole and exclusive benefit of Apollon and Centocor.
12.6 Choice of Law. This Agreement shall be governed by the internal
laws of the Commonwealth of Pennsylvania without regard to conflicts of law
principles.
12.7 Amendments and Waivers. This Agreement may not be released,
discharged, amended or modified in any manner except by an instrument in writing
signed by duly authorized officers of both parties hereto. No waiver of any
right under this Agreement shall be deemed effective unless contained in a
writing signed by the party charged with such waiver. No waiver of any right
shall be deemed to be a waiver of any future such right or of any other right
arising under this Agreement.
12.8 Further Assurances. At the request of either party hereto, the
other party shall execute and deliver from time to time such further instruments
and shall provide each reasonable cooperation and assistance as shall be
necessary or reasonably appropriate to effectuate the purposes of this
Agreement.
12.9 Headings. Section headings contained in this Agreement are
included for convenience only and form no part of the agreement between the
parties.
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<PAGE>
12.10 Notices. Notices required or permitted hereunder shall be in
writing and shall be sent to each party as follows:
If to Centocor, to:
Centocor, Inc.
Two Great Valley Parkway
Malvern, PA 19355
Attention: Secretary
Telefax: (610) 651-6331
If to Apollon, to:
Apollon, Inc.
One Great Valley Parkway
Malvern, PA 19355
Attention: President
Telefax: (610) 647-9732
or to such other address as such party may hereafter specify in writing, and
shall be deemed given on the earlier of (i) physical delivery, (ii) if given by
facsimile transmission, when such facsimile is transmitted to the telephone
number specified in this Agreement and telephone confirmation of receipt thereof
is received, and (iii) the next day following mailing by prepaid overnight or
express mail.
12.11 Force Majeure. Each of the parties shall be excused from
performing such acts required hereunder which are prevented by, or whose purpose
is frustrated by, Force Majeure.
12.12 No Agency. The parties acknowledge that nothing in this
Agreement renders either party an agent of the other for any purpose whatsoever.
Except as otherwise provided herein, without the specific prior written approval
of the other party, neither party has authority to, and shall not, enter into
any contract, make any representation, give any warranty, incur any liability or
otherwise act on behalf of the other.
12.13 No Implied License. Nothing in this Agreement is intended to
or shall be construed to create, confer, give effect to or otherwise imply in
either party any license, right or property interest in any Knowhow, Patent
Rights or other intellectual property rights of the other except as expressly
provided in Article III hereof.
12.14 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which shall
constitute together but one and the same document.
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<PAGE>
IN WITNESS WHEREOF, Centocor and Apollon have caused this Agreement
to be executed as of the date first set forth above.
APOLLON, INC. CENTOCOR, INC.
By: /s/ Richard A. Carrano By: /s/ George Hobbs
-------------------------- --------------------------
Title: Vice President Title: Vice President
---------------------- ----------------------
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<PAGE>
SCHEDULE 2.3
1. [ ]
Title: Compositions and Methods for Delivery of Genetic
Material
Inventor: R. Carrano
Filed: April 1, 1994
2. [
3.
]
4. [ ]
Title: Multifunctional Molecular Complexes for Gene
Transfer to Cells
Inventor: R. Boutin
Filed: September 28, 1994
<PAGE>
AMENDMENT NO. 1 TO LICENSE AND OPTION AGREEMENT
This Amendment No. 1 is dated as of May 31, 1995, by and between
Apollon, Inc., a Pennsylvania corporation ("Apollon"), and Centocor, Inc., a
Pennsylvania corporation ("Centocor").
W I T N E S S E T H
WHEREAS, Apollon and Centocor are parties to a certain License and
Option Agreement, dated as of March 6, 1995 (the "Agreement"), pursuant to which
Apollon, among other things, granted Centocor an exclusive, royalty-bearing
license to certain technology and patents in the Field;
WHEREAS, Apollon and the Lederle-Praxis Biologicals Division of
American Cyanamid Company, a wholly owned subsidiary of American Home Products
Corporation ("LPB"), are in the process of negotiating a collaboration with
respect to the development of polynucleotide-based genetic vaccination products
using Apollon's technology and patents, including without limitation the Apollon
Patent Rights and Apollon Knowhow, for the prophylaxis and/or treatment of
certain viral and other microbial infections;
WHEREAS, the products being considered by Apollon and LPB for
inclusion in their collaboration may be of use in the Field;
WHEREAS, LPB has, as a condition to entering into the collaboration
with Apollon, requested that Apollon and Centocor clarify that the terms and
conditions of the Agreement shall not prohibit Apollon and LPB from marketing
and selling viral vaccines in the Field; and
WHEREAS, it is in Centocor's best interests, as a significant
shareholder and creditor of Apollon, that Apollon enter into the proposed
collaboration with LPB.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Article III of the Agreement is hereby amended to add a new
Section 3.4, which shall read in full as follows:
"3.4 Centocor acknowledges that during the term of this Agreement and
thereafter, Apollon will be engaged, either directly or indirectly
through one or more collaborators, licensors or licensees, in the
research and development of
<PAGE>
polynucleotide-based genetic vaccination products for use in the
prophylaxis and/or treatment of viral and other microbial infections
("Other Products"), which Other Products may also be useful in the Field.
Nothing contained in this Agreement shall, or shall be deemed to, prohibit
Apollon and its collaborators, licensors and licensees from engaging in
research and development with respect to the use of the Apollon Patent
Rights, Apollon Knowhow, or any Patents or Knowhow subject to the
University Licenses in the Field or from marketing and/or selling the Other
Products in the Field."
2. Capitalized terms used but not defined in this Amendment No. 1
shall have the meanings ascribed to such terms in the Agreement.
IN WITNESS WHEREOF, each of the parties hereto has fully executed this
Amendment No. 1 all as of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawksi, Jr.
-----------------------------
Vincent R. Zurawski, Jr.
President
CENTOCOR, INC.
By: /s/ David P. Holveck
-----------------------------
Name:
Title:
2
<PAGE>
THIS AGREEMENT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL
TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 7, 9, 13 AND 14,
AND PORTIONS OF ATTACHMENTS 1 AND 5 AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
LICENSE AGREEMENT
BETWEEN
APOLLON, INC.
AND
THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA
1 DECEMBER 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
RECITALS................................................................... 1
ARTICLE 1 - DEFINITIONS.................................................... 2
ARTICLE 2 - LICENSE GRANT.................................................. 5
ARTICLE 3 - FEES AND ROYALTIES............................................. 6
ARTICLE 4 - CONFIDENTIALITY................................................ 11
ARTICLE 5 - TERM AND TERMINATION........................................... 12
ARTICLE 6 - PATENT MAINTENANCE AND REIMBURSEMENT........................... 13
ARTICLE 7 - INFRINGEMENT AND LITIGATION.................................... 14
ARTICLE 8 - DISCLAIMER OF WARRANTY; INDEMNIFICATION........................ 15
ARTICLE 9 - USE OF PENN'S NAME............................................. 17
ARTICLE 10 - ADDITIONAL PROVISIONS......................................... 18
Attachment 1
Attachment 2
Attachment 3
Attachment 4
Attachment 5
</TABLE>
i
<PAGE>
LICENSE AGREEMENT
This License Agreement ("AGREEMENT") is made by and between The Trustees
of the University of Pennsylvania, a Pennsylvania nonprofit corporation, with
offices located at 3700 Market Street, Suite 300, Philadelphia, Pennsylvania
19104-3147 ("PENN") and Apollon, Inc., a corporation organized and existing
under the laws of Pennsylvania, having a place of business at One Great Valley
Parkway, Malvern, Pennsylvania 19355-1423 ("APOLLON").
This AGREEMENT is effective as of 1 December 1994 ("EFFECTIVE DATE").
RECITALS
WHEREAS, PENN and The Wistar Institute of Anatomy and Biology ("WISTAR")
own and are proprietors of certain intellectual properties developed by Dr.
William V. Williams of PENN's School of Medicine and/or by Dr. David B. Weiner
of PENN's School of Medicine and WISTAR (through 31 June 1993) and of PENN only
(as of 1 July 1993) and/or by other inventors with a duty to assign to PENN or
WISTAR relating to genetic vaccines, i.e., facilitated transfer and expression
of nucleic acids;
WHEREAS, PENN and WISTAR own applications for United States letters
patent listed in Attachment 1 attached hereto and foreign counterparts
relating to the foregoing intellectual property developed by Dr. Williams
and/or Dr. Weiner et al.;
WHEREAS, the Institute of Biotechnology and Advanced Molecular Medicine,
Inc. ("IBAMM"), an industry-driven initiative of the Technology Council of
Greater Philadelphia, has funded certain research of Drs. Williams and Weiner
pursuant to the terms of a sponsored research agreement effective as of 1 July
1992 ("IBAMM SPONSORED RESEARCH AGREEMENT"; Attachment 2);
WHEREAS, APOLLON has secured from IBAMM the exclusive right to negotiate
to acquire a license to use, develope, manufacture, market and exploit the
intellectual property developed by Dr. Williams and/or Dr. Weiner et al. under
the IBAMM SPONSORED RESEARCH AGREEMENT and described in Attachment 1 hereto
pursuant to the terms of a license agreement effective as of 1 December 1994
("IBAMM/APOLLON AGREEMENT"; Attachment 3);
WHEREAS, APOLLON is funding further research at PENN by Dr. Williams and
Dr. Weiner relating to certain nucleic acid constructs and their introduction
into mammalian cells pursuant to the terms of a sponsored research agreement
effective as of 1 July 1993 ("SPONSORED RESEARCH AGREEMENT"; Attachment 4);
1
License Agreement (I)--Apollon/Penn
2 December 1994 Version
<PAGE>
WHEREAS, APOLLON desires to secure the exclusive right and license to use,
develop, manufacture, market and exploit the intellectual property developed by
Dr. Williams and/or Dr. Weiner et al. under the IBAMM SPONSORED RESEARCH
AGREEMENT and the SPONSORED RESEARCH AGREEMENT and described in Attachment 1
hereto; and
WHEREAS, PENN has determined that the exploitation of the intellectual
property developed by Dr. Williams and/or Dr. Weiner et al. is in the best
interest of PENN and is consistent with its educational and research missions
and goals.
NOW, THEREFORE, in consideration of the premises and of the promises and
covenants contained herein and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE 1. DEFINITIONS
1.1 AFFILIATE means, when used with reference to APOLLON, any ENTITY
directly or indirectly controlling, controlled by or under common control with
APOLLON. For purposes of this AGREEMENT, "control" means the direct or indirect
ownership of at least fifty percent (50%) of the outstanding voting securities
of an ENTITY, or the right to receive at least fifty percent (50%) of the
profits or earnings of an ENTITY, or having at least fifty percent (50%)
control of the policy decisions of a ENTITY.
1.2 APOLLON shall include APOLLON and its AFFILIATES.
1.3 BANKRUPTCY EVENT means the ENTITY in question becomes insolvent, or
voluntary or involuntary proceedings by or against such ENTITY are instituted
in bankruptcy or under any insolvency law, or a receiver or custodian is
appointed for such ENTITY, or proceedings are instituted by or against such
ENTITY for corporate reorganization or the dissolution of such ENTITY, which
proceedings, if involuntary, shall not have been dismissed within sixty (60)
days after the date of filing, or such ENTITY makes an assignment for the
benefit of creditors, or substantially all of the assets of such ENTITY are
seized or attached and not released within sixty (60) days thereafter.
1.4 CALENDAR QUARTER means each three-month period, or any portion
thereof, beginning on January 1, April 1, July 1 and October 1 of each year.
1.5 CALENDAR YEAR means a period of twelve (12) months beginning on
January 1 and ending on December 31.
1.6 CLAIM means a claim of an issued, unexpired patent that shall be
presumed to be valid and enforceable unless and until it
2
License Agreement (I)--Apollon/Penn
2 December 1994 Version
<PAGE>
has been held to be invalid and/or unenforceable by a final judgement of a
court of competent jurisdiction from which no appeal can be or is taken.
1.7 CONFIDENTIAL INFORMATION means and includes all technical
information, inventions, developments, discoveries, software, know-how,
methods, techniques, formulae, data, processes and other proprietary ideas,
whether or not patentable or copyrightable, that PENN identifies as
confidential or proprietary at the time it is delivered or communicated to
APOLLON.
1.8 DRUG means an article, intended for use in the diagnosis, cure,
mitigation, treatment, or prevention of disease in man or other animals; or an
article intended to affect the structure or any function of the body of man or
other animals that requires FDA approval as a drug.
1.9 ENTITY means a corporation, an association, a joint venture, a
partnership, a trust, a business, an individual, a government or political
subdivision thereof, including an agency, or any other organization that can
exercise independent legal standing.
1.10 FDA means the Food and Drug Administration of the United States.
1.11 FEDERAL GOVERNMENT INTEREST means the rights of the United States
Government under Public Laws 96-517, 97-256 and 98-620, codified at 35 U.S.C.
200-212, and any regulations issued thereunder, as statute or regulations may
be amended from time to time hereafter.
1.12 FAIR MARKET VALUE means the cash consideration which APOLLON or its
SUBLICENSEE would realize from an unaffiliated, unrelated buyer in an arm's
length sale of an identical item sold in the same quantity and at the same time
and place of the transaction.
1.13 IN REASONABLE COMPETITION WITH SUCH PENN LICENSED PRODUCT means that
it is demonstrated to PENN's reasonable satisfaction that: (a) a competitor's
product is sold in the same geographic and relevant product market as such PENN
LICENSED PRODUCT; and such competitor's product has a unit sales volume that
exceeds twenty-five percent (25%) of APOLLON's unit sales volume for such PENN
LICENSED PRODUCT in such geographic market; or (b) two or more competitors's
product(s) are sold in the same geographic and relevant product market as such
PENN LICENSED PRODUCT; and such competitors's product(s) together have a unit
sales volume that exceeds thirty-five percent (35%) of APOLLON's
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<PAGE>
unit sales volume for such PENN LICENSED PRODUCT in such geographic market.
1.14 JOINT PATENT RIGHTS means those United States patent applications
and foreign counterparts including continuation, divisional and reissue
applications thereof and continuation-in-part applications thereof based upon
intellectual property discovered by PENN through Dr. Williams and/or Dr. Weiner
and/or other inventors with a duty to assign to PENN with one or more inventors
of APOLLON, as a result of the SPONSORED RESEARCH AGREEMENTS between PENN and
APOLLON, together with any and all patents issuing thereupon and reissues,
re-examination and extensions thereof.
1.15 NET SALES means the cash consideration or, if not a cash
transaction, FAIR MARKET VALUE attributable to the SALE of any PENN LICENSED
PRODUCT(S), less qualifying costs directly attributable to such SALE and
actually identified on the invoice and borne by APOLLON or its SUBLICENSEE.
1.15.1 Such qualifying costs shall be limited to the following:
1.15.1.1 Discounts, in amounts customary in the trade, for
quantity purchases, prompt payments and for wholesalers and
distributors.
1.15.1.2 Credits or refunds, not exceeding the original invoice
amount, for claims or returns.
1.15.1.3 Prepaid transportation insurance premiums.
1.15.1.4 Prepaid outbound transportation expenses.
1.15.1.5 Sales and use taxes imposed by a governmental agency.
1.16 PENN LICENSED PRODUCT(S) means products which in the absence of this
AGREEMENT would infringe at least one CLAIM of PENN PATENT RIGHTS and/or JOINT
PATENT RIGHTS on a country-by-country basis, or products which are made using a
process or machine which in the absence of this AGREEMENT would infringe at
least one CLAIM of PENN PATENT RIGHTS and/or JOINT PATENT RIGHTS, or products
made, at least in part, using PENN TECHNICAL INFORMATION.
1.17 PENN PATENT RIGHTS means those United States patent applications
listed in Attachment 1 hereto, as may be amended from time to time in
accordance with the SPONSORED RESEARCH
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AGREEMENT, and foreign counterparts including continuation, divisional and
re-issue applications thereof and continuation-in-part applications thereof
based upon intellectual property discovered by PENN through Dr. Williams
and/or Dr. Weiner and/or other inventors with a duty to assign to PENN as a
result of the SPONSORED RESEARCH AGREEMENT between PENN and APOLLON together
with any and all patents issuing thereupon.
1.18 PENN TECHNICAL INFORMATION means research and development
information, unpatented inventions, know-how, and technical data directly
related to PENN PATENT RIGHTS in the possession of PENN on the EFFECTIVE DATE
of this AGREEMENT or developed in the conduct of the SPONSORED RESEARCH
AGREEMENT which is needed to produce PENN LICENSED PRODUCTS.
1.19 SALE means any bona fide transaction for which consideration is
received or expected for the sale, use, lease, transfer or other disposition of
PENN LICENSED PRODUCT(S). A SALE of PENN LICENSED PRODUCT(S) shall be deemed
completed at the time APOLLON or its SUBLICENSEE invoices, ships, or receives
payment for such PENN LICENSED PRODUCT(S), whichever occurs first.
1.20 SUBLICENSEE shall mean any corporation, company, partnership, or
business entity which neither controls, nor is controlled by, nor is under
common control with APOLLON, to which APOLLON transfers by sublicense rights to
enable said party to make and sell PENN LICENSED PRODUCTS.
ARTICLE 2. LICENSE GRANT
2.1 PENN grants to APOLLON for the term of this AGREEMENT an exclusive,
world-wide right and license, with the right to grant sublicenses, to make,
have made, use, sell, and have sold including the right to sell for resale PENN
LICENSED PRODUCT(S); provided however, that the license to any PENN LICENSED
PRODUCT that incorporates, in whole or in part, the PENN PATENT RIGHTS owned
jointly with WISTAR shall be exclusive only to PENN's undivided interest in
them. No other rights or licenses are granted hereunder. Intellectual property
created or conceived during the performance of the SPONSORED RESEARCH AGREEMENT
shall be governed by the SPONSORED RESEARCH AGREEMENT.
2.2 Except as limited in Section 2.1, the license grant of this ARTICLE 2
is exclusive but for the reserved right of PENN to use and permit other
nonprofit organizations to use the PENN PATENT RIGHTS, the JOINT PATENT RIGHTS,
and the PENN TECHNICAL INFORMATION without cost for educational and research
purposes only.
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2.3 APOLLON acknowledges that in accordance with the FEDERAL GOVERNMENT
INTEREST, the United States government retains certain rights in intellectual
property funded in whole or part under any contract, grant or similar agreement
with a Federal agency. The license grant of this ARTICLE 2 is expressly subject
to all of such rights, if applicable. PENN agrees to follow the applicable
procedures to elect to retain title to intellectual property, subject to the
requirements of the laws and regulations referred to in Section 1.11.
2.4 The right to sublicense conferred upon APOLLON under this AGREEMENT
is subject to the following conditions:
2.4.1 In each such sublicense, the SUBLICENSEE shall be prohibited
from further sublicensing and shall be subject to the terms and conditions of
the license granted to APOLLON under this AGREEMENT.
2.4.2 APOLLON shall forward in confidence to PENN, within thirty
(30) days of execution, a complete and accurate copy written in the English
language of each sublicense granted hereunder. PENN's receipt of such
sublicense shall not constitute an approval of such sublicense or a waiver of
any of PENN's rights or APOLLON's obligations hereunder.
2.4.3 If APOLLON becomes subject to a BANKRUPTCY EVENT, all payments
then or thereafter due and owing to APOLLON from its SUBLICENSEES shall upon
notice from PENN to any such SUBLICENSEE become payable directly to PENN for
the account of APOLLON; provided, however, that PENN shall remit to APOLLON the
amount by which such payments exceed the amounts owed by APOLLON to PENN.
2.4.4 Notwithstanding any such sublicense, APOLLON shall remain
primarily liable to PENN for all of APOLLON'S duties and obligations contained
in this AGREEMENT, and any act or omission of a SUBLICENSEE which would be a
breach of this AGREEMENT if performed by APOLLON shall be deemed to be a breach
by APOLLON of this AGREEMENT, provided that APOLLON shall be given the
opportunity to cure such breach as permitted under Section 5.3.4 hereof.
2.4.5 In the event that during the term of this AGREEMENT, PENN
acquires title to any patent or patent application that PENN is advised may be
infringed by APOLLON's exercise of its license under this AGREEMENT, PENN
agrees to advise APOLLON and discuss APOLLON's exercise of its license
hereunder under such circumstances. Notwithstanding the foregoing, however,
this Section 2.4.5 shall not be construed to grant any rights or licenses to
APOLLON other than those granted under Section 2.1, and PENN makes no
representations regarding
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<PAGE>
patents and patent applications to which third parties may acquire license or
option rights as a result of sponsored research or license agreements such
parties may enter into with PENN.
ARTICLE 3. FEES AND ROYALTIES
3.1 LICENSE INITIATION FEE AND ROYALTIES
3.1.1 In partial consideration of the exclusive license granted
herein, APOLLON shall pay to PENN on the EFFECTIVE DATE of this AGREEMENT, a
non-refundable license initiation fee of [
].
3.1.2 In further consideration of the exclusive license granted
herein, APOLLON shall pay to PENN a royalty on NET SALES of PENN LICENSED
PRODUCTS as follows:
3.1.2.1 [ ] in countries where the PENN
LICENSED PRODUCTS are covered by a CLAIM of an issued patent of PENN PATENT
RIGHTS or JOINT PATENT RIGHTS; or
3.1.2.2 [ ] in countries where the
PENN LICENSED PRODUCTS are not covered by a CLAIM of an issued patent of PENN
PATENT RIGHTS or JOINT PATENT RIGHTS.
3.1.3 The payment of royalties to PENN on any particular PENN
LICENSED PRODUCT shall terminate in each country on (a) the expiration date of
the last-to-expire issued patent from the PENN PATENT RIGHTS or JOINT PATENT
RIGHTS covering such product, or (b) with respect to a PENN LICENSED PRODUCT on
which there has not ever been any patents issued pertaining to PENN PATENT
RIGHTS or JOINT PATENT RIGHTS in such country, on the earlier to occur of the
following: (i) the date on which APOLLON demonstrates to PENN's reasonable
satisfaction that a third party is selling a product in the relevant country IN
REASONABLE COMPETITION WITH SUCH PENN LICENSED PRODUCT; or (ii) ten (10) years
from the first commercial sale in such country. In the event a patent covering
such product issues subsequent to termination of payment of royalties to PENN
pursuant to Section 3.1.3.(b), then payment of royalties to PENN shall resume
pursuant to Section 3.1.2.1 until terminated pursuant to Section 3.1.3.(a).
3.1.4 APOLLON shall promptly pay to PENN [ ]
of any sublicense initiation fee or other such consideration paid by each
SUBLICENSEE of this AGREEMENT. Any non-cash consideration, except consideration
directly related to development or marketing of PENN LICENSED PRODUCTS,
received by
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<PAGE>
the APOLLON from such SUBLICENSEES shall be valued at its FAIR MARKET VALUE
as of the date of receipt.
3.1.5 NET SALES of any PENN LICENSED PRODUCT shall not be subject to
more than one assessment of the scheduled royalty; such assessment shall be the
highest applicable royalty.
3.1.6 In the event that a PENN LICENSED PRODUCT is sold in the form
of a combination product containing one or more DRUGS which are themselves not
PENN LICENSED PRODUCTS, the NET SALES shall be calculated by multiplying the
sales price of such combination product by the fraction A/(A+B) where A is the
invoice price or FAIR MARKET VALUE of the PENN LICENSED PRODUCT and B is the
total invoice price or FAIR MARKET VALUE of the other DRUGS. In the case of a
combination product which includes one or more PENN LICENSED PRODUCTS, the NET
SALES upon which the royalty due PENN is based shall not be less than the
normal aggregate NET SALES for such PENN LICENSED PRODUCTS.
3.1.7 No royalties shall be due on PENN LICENSED PRODUCTS used for
clinical trials or studies which are carried out in order to obtain
governmental marketing approvals or for marketing efforts including the
distribution of a reasonable number of samples for promotional purposes,
unless such clinical trials or studies are Phase III or Phase IV and the PENN
LICENSED PRODUCTS are sold at a profit.
3.1.8 In the event APOLLON is required to obtain a license under
patent rights of a third party in order to exercise its rights under this
AGREEMENT, APOLLON and PENN agree to meet and discuss the royalties due under
this ARTICLE 3 and, if appropriate, to negotiate in good faith.
3.1.9 In the event a PENN LICENSED PRODUCT is covered only by a
CLAIM of JOINT PATENT RIGHTS, PENN and APOLLON agree to meet to discuss the
royalties due under this ARTICLE 3 and if appropriate, to negotiate in good
faith taking into consideration the relative contributions of the parties.
3.2 MILESTONES AND MAINTENANCE FEES
3.2.1 APOLLON shall use its best efforts to develop for commercial
use and to market PENN LICENSED PRODUCTS as soon as practical, consistent with
sound and reasonable business practices. Attachment 3 lists mutually agreed
upon performance milestones and research and development milestones.
3.2.2 APOLLON shall provide PENN on each June 1 and December 1 with
written reports, setting forth in such detail as PENN may reasonably request,
the progress of the development, evaluation, testing and commercialization of
the PENN LICENSED
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PRODUCTS under development. APOLLON shall also notify PENN within thirty
(30) days of the first commercial sale of any PENN LICENSED PRODUCT.
3.2.3 APOLLON shall pay to PENN an annual license maintenance fee of
[ ] due and payable on the anniversary of the
EFFECTIVE DATE until minimum royalties are due; provided, however, that after
the date of first commercial sale of PENN LICENSED PRODUCT no further license
maintenance fee shall become due and payable.
3.3 MINIMUM ROYALTIES
3.3.1 APOLLON shall pay to PENN a non-refundable minimum royalty for
each PENN LICENSED PRODUCT sold for the following periods in the corresponding
amounts:
<TABLE>
<CAPTION>
Period Due Date Minimum Royalty
<S> <C> <C>
[
]
</TABLE>
3.3.2 A minimum royalty payment paid under Section 3.3.1 herein shall
serve as an advanced payment against royalties due under Section 3.1 herein
during the period for which such minimum royalty payment was paid.
3.4 REPORTS AND RECORDS
3.4.1 Upon first commercial sale of a PENN LICENSED PRODUCT, APOLLON
shall deliver to PENN one copy each within forty-five (45) days after the end
of each CALENDAR QUARTER a report, certified by the chief financial officer of
APOLLON setting forth in reasonable detail the calculation of the royalties due
to PENN for such CALENDAR QUARTER, including, without limitation:
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3.4.1.1 Number of PENN LICENSED PRODUCTS involved in SALES,
listed by country.
3.4.1.2 Gross consideration for SALES of PENN LICENSED
PRODUCTS, including all amounts invoiced, billed, or received.
3.4.1.3 Qualifying costs, as defined in Section 1.15, listed by
category of cost.
3.4.1.4 NET SALES of PENN LICENSED PRODUCTS listed by country.
3.4.1.5 Royalties owed to PENN, listed by category, including
without limitation earned, SUBLICENSEE-derived, and minimum
royalty categories.
3.4.1.6 Minimum royalty payments credited against earned
royalty payments.
3.4.2 Royalties payable under Sections 3.1 and 3.3 hereof shall be
paid within forty-five (45) days following the last day of the CALENDAR QUARTER
in which the royalties accrue and shall accompany the report of Section 3.4.1.
3.4.3 APOLLON will maintain and cause its SUBLICENSEES to maintain,
complete and accurate books and records which enable the royalties payable
hereunder to be verified. The records for each CALENDAR QUARTER shall be
maintained for three years after the submission of each report under ARTICLE 3
hereof. Upon reasonable prior notice to APOLLON and its SUBLICENSEES, APOLLON
agrees to permit such books and records to be examined by an independent
certified public accountant designated by PENN. The purpose of such audit shall
be solely for verifying the royalties due and payable per this AGREEMENT and
said accountant shall only disclose to PENN NET SALES and royalties due and
payable hereunder. Such access shall be available not more than once each
CALENDAR YEAR, during normal business hours, and for each of three years after
the expiration or termination of this AGREEMENT. If APOLLON has underpaid
royalties by 5% or more, APOLLON will pay the costs and expenses of said
accountants in connection with their review or audit.
3.5 CURRENCY, PLACE OF PAYMENT, INTEREST
3.5.1 All dollar amounts referred to in this AGREEMENT are expressed
in United States dollars. All payments to PENN under this AGREEMENT shall be
made in United States dollars by check payable to "The Trustees of the
University of Pennsylvania."
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3.5.2 If APOLLON receives revenues from SALES of PENN LICENSED
PRODUCTS in currency other than United States dollars, revenues shall be
converted into United States dollars at the conversion rate for the foreign
currency as published in the eastern edition of THE WALL STREET JOURNAL as of
the last business day of the applicable CALENDAR QUARTER.
3.5.3 Amounts that are not paid when due shall accrue
interest from the due date until paid, at a rate equal to one and one-half
percent (1.5%) per month (or the maximum allowed by law, if less).
ARTICLE 4. CONFIDENTIALITY
4.1 APOLLON agrees to maintain in confidence and not to disclose
to any third party any CONFIDENTIAL INFORMATION of PENN received pursuant to
this AGREEMENT. APOLLON agrees to ensure that its employees have access to
CONFIDENTIAL INFORMATION only on a need-to-know basis and are obligated in
writing to abide by APOLLON's obligations hereunder. The foregoing
obligation shall not apply to:
4.1.1 information that is known to APOLLON or independently
developed by APOLLON prior to the time of disclosure, in each case, to the
extent evidenced by written records promptly disclosed to PENN upon receipt
of the CONFIDENTIAL INFORMATION;
4.1.2 information disclosed to APOLLON by a third party that
has a right to make such disclosure;
4.1.3 information that becomes patented, published or
otherwise part of the public domain as a result of acts by PENN or a third
person obtaining such information through no fault of APOLLON; or
4.1.4 information that is required to be disclosed by order
of United States governmental authority or a court of competent jurisdiction;
provided that APOLLON shall use its reasonable best efforts to obtain
confidential treatment of such information by the agency or court.
4.2 PENN shall not be obligated to accept any confidential
information from APOLLON. PENN bears no institutional responsibility for
maintaining the confidentiality of any confidential information of APOLLON
except PENN's Center for Technology Transfer will maintain in confidence and
not disclose sublicense agreements, reports, and records but will distribute
royalties received according to PENN's patent policy.
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4.3 The placement of a copyright notice on any CONFIDENTIAL
INFORMATION shall not be construed to mean that such information has been
published and will not release APOLLON from its obligation of confidence
hereunder.
4.4 Nothing herein shall be construed to prevent the disclosure of
CONFIDENTIAL INFORMATION as necessary to practice commercially the rights
granted hereunder including without limitation, the disclosure of
CONFIDENTIAL INFORMATION to regulatory or other governmental agencies as
necessary to obtain marketing approval, or to obtain patent protection, or
the disclosure of CONFIDENTIAL INFORMATION under a confidentiality agreement
as appropriate to development of products hereunder.
ARTICLE 5. TERM AND TERMINATION
5.1 This AGREEMENT, unless sooner terminated as provided herein,
shall terminate upon the expiration of the last to expire or become abandoned
of the PENN PATENT RIGHTS or JOINT PATENT RIGHTS, at which time all rights
licensed hereunder shall convert into a fully paid license to APOLLON.
5.2 APOLLON may, at its option, terminate this AGREEMENT at any
time by doing all of the following:
5.2.1 By ceasing to make, have made, use and sell all PENN
LICENSED PRODUCTS; and
5.2.2 By terminating all sublicenses, and causing all
SUBLICENSEES to cease making, having made, using and selling all PENN
LICENSED PRODUCTS; and
5.2.3 By giving sixty (60) days notice to PENN of such
cessation and of APOLLON's intent to terminate; and
5.2.4 By tendering payment of all accrued royalties.
5.3 PENN may terminate this AGREEMENT immediately if any of the
following occur:
5.3.1 APOLLON becomes more than sixty (60) days in arrears in
payment of royalties or expenses due pursuant to this AGREEMENT and APOLLON
does not provide full payment immediately upon demand; or
5.3.2 APOLLON becomes subject to a BANKRUPTCY EVENT; or
5.3.3 APOLLON has not met milestones specified in Section
3.2; or
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<PAGE>
5.3.4 APOLLON breaches this AGREEMENT and does not cure such
breach within sixty (60) days written notice thereof; and
5.3.5 PENN has given APOLLON sixty (60) days written notice
of intent to terminate.
5.4 If APOLLON becomes subject to a BANKRUPTCY EVENT, all duties
of PENN and all rights (but not duties) of APOLLON under this AGREEMENT shall
immediately terminate without the necessity of any action being taken either
by PENN or by APOLLON. To secure the complete and timely payment and
satisfaction of all APOLLON's royalty obligations under this AGREEMENT,
APOLLON hereby grants to PENN a security interest, effective immediately, in
APOLLON's entire right, title and interest in and to this AGREEMENT and to
all inventories of PENN LICENSED PRODUCTS now or hereafter owned by APOLLON.
In addition to any rights or remedies provided for under this AGREEMENT, PENN
shall have all of the rights and remedies of a secured party under the
Uniform Commercial Code. Upon the request and at the sole expense of PENN,
APOLLON shall execute any and all instruments or documents as shall be
reasonably necessary to evidence and perfect such security interest in any
jurisdiction.
5.5 Upon termination of this AGREEMENT, except pursuant to Section
5.1 hereof, APOLLON shall, at PENN's request, return to PENN all CONFIDENTIAL
INFORMATION fixed in any tangible medium of expression as well as any data
generated by APOLLON during the term of this AGREEMENT which will facilitate
the development of the technology directly related to PENN PATENT RIGHTS
licensed hereunder.
5.6 APOLLON's obligation to pay royalties accrued under ARTICLE 3
hereof shall survive termination of this AGREEMENT. In addition, the
provisions of ARTICLES 4, 5, 8, 9 and 10 shall survive such termination.
ARTICLE 6. PATENT MAINTENANCE AND REIMBURSEMENT
6.1 PENN shall control and diligently prosecute and maintain PENN
PATENT RIGHTS provided APOLLON shall promptly reimburse PENN for [ ]
documented attorneys' fees, expenses, official fees and other charges
incident to the preparation, prosecution and maintenance of PENN PATENT
RIGHTS. PENN shall provide APOLLON with itemized statements reflecting these
expenses and APOLLON shall reimburse PENN for such expenses within thirty
(30) days after receipt of such statement. [ ] such reimbursements will be
[ ] creditable against royalties due pursuant to ARTICLE 3 hereof on a
country by country basis; provided, however, that if APOLLON negotiates a
license with
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<PAGE>
WISTAR, wherein [ ] of such fees, expenses, and charges are creditable
against royalties due WISTAR, such fees, expenses and charges will be [ ]
creditable against royalties due PENN; but in no event shall any royalty
payment to PENN at any time be reduced by more than [ ], on
an individual basis for each patent application and associated issued patent.
6.2 In the event that the parties elect to file one or more patent
applications comprising JOINT PATENT RIGHTS, the parties shall confer on how the
preparation and prosecution of such applications shall be accomplished. APOLLON
shall reimburse PENN for [ ] attorneys' fees, expenses, official fees and other
charges incident to the prosecution and maintenance of JOINT PATENT RIGHTS
incurred by PENN. [ ] such reimbursements shall be [ ] creditable against
royalties due pursuant to ARTICLE 3 hereof on a country by country basis.
6.3 APOLLON and its SUBLICENSEES shall comply with all United
States and foreign laws with respect to patent marking of PENN LICENSED
PRODUCTS.
6.4 All fees, costs, and expenses incurred with respect to a patent
convention or a regional authority, such as the Patent Cooperative Treaty or the
European Patent Convention, shall be apportioned on a pro rata basis to the
countries designated thereunder.
ARTICLE 7. INFRINGEMENT AND LITIGATION
7.1 PENN and APOLLON are responsible for notifying each other
promptly of any infringement of PENN PATENT RIGHTS or JOINT PATENT RIGHTS
which may come to their attention, including notice to the other of any
certification filed under the United States "Drug Price Competition and
Patent Term Restoration Act of 1984". PENN and APOLLON shall consult one
another in a timely manner concerning any appropriate response thereto.
7.2 APOLLON shall have the right, but not the obligation to
prosecute such infringement at its own expense. APOLLON shall not settle or
compromise any such suit in a manner that imposes any obligations or
restrictions on PENN or grants any rights to the PENN PATENT RIGHTS or the
PENN TECHNICAL INFORMATION, without PENN's written permission. Financial
recoveries from any such litigation will first be applied to reimburse
APOLLON for its litigation expenditures with additional recoveries being paid
to APOLLON, subject to a royalty due PENN based on the provisions of ARTICLE
3 hereof.
7.3 Such rights of Section 7.2 shall be subject to the continuing
right of PENN to intervene at PENN's own expense and
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<PAGE>
to join APOLLON in any claim or suit for infringement of the PENN PATENT
RIGHTS and JOINT PATENT RIGHTS. Any consideration received by APOLLON in
settlement of any claim or suit shall be shared between PENN and APOLLON in
proportion with their share of the litigation expenses in such infringement
action. Financial recoveries from any such litigation will first be applied
to reimburse PENN and APOLLON for their litigation expenditures and the
portion of the additional recoveries being paid to APOLLON is subject to a
royalty due PENN based on the provisions of ARTICLE 3 hereof.
7.4 If APOLLON fails to prosecute such infringement, PENN shall
have the right, but not the obligation, to prosecute such infringement at its
own expense. In such event, financial recoveries will be retained entirely
by PENN
7.5 In any action to enforce any of the PENN PATENT RIGHTS or the
JOINT PATENT RIGHTS, either party, at the request and expense of the other
party shall cooperate to the fullest extent reasonably possible. This
provision shall not be construed to require a party to undertake any
activities, including legal discovery, at the request of any third party
except as may be required by lawful process of a court of competent
jurisdiction.
ARTICLE 8. DISCLAIMER OF WARRANTIES; INDEMNIFICATION
8.1 THE PENN PATENT RIGHTS, JOINT PATENT RIGHTS, PENN TECHNICAL
INFORMATION, PENN LICENSED PRODUCTS AND ALL OTHER TECHNOLOGY LICENSED UNDER THIS
AGREEMENT ARE PROVIDED ON AN "AS IS" BASIS AND PENN MAKE NO REPRESENTATIONS OR
WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT THERETO. BY WAY OF EXAMPLE BUT NOT
OF LIMITATION, PENN MAKES NO REPRESENTATIONS OR WARRANTIES (i) OF COMMERCIAL
UTILITY; (ii) OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE; OR (iii)
THAT THE USE OF THE PENN PATENT RIGHTS, JOINT PATENT RIGHTS, PENN TECHNICAL
INFORMATION, PENN LICENSED PRODUCTS AND ALL TECHNOLOGY LICENSED UNDER THIS
AGREEMENT WILL NOT INFRINGE ANY PATENT, COPYRIGHT OR TRADEMARK OR OTHER
PROPRIETARY OR PROPERTY RIGHTS OF OTHERS. PENN SHALL NOT BE LIABLE TO APOLLON,
APOLLON'S SUCCESSORS OR ASSIGNS OR ANY THIRD PARTY WITH RESPECT TO: ANY CLAIM
ARISING FROM THE USE OF THE PENN PATENT RIGHTS, JOINT PATENT RIGHTS, PENN
TECHNICAL INFORMATION, PENN LICENSED PRODUCTS AND ALL TECHNOLOGY LICENSED UNDER
THIS AGREEMENT OR FROM THE MANUFACTURE, USE OR SALE OF PENN LICENSED PRODUCTS;
OR ANY CLAIM FOR LOSS OF PROFITS, LOSS OR INTERRUPTION OF BUSINESS, OR FOR
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND.
8.2 APOLLON will defend, indemnify and hold harmless PENN, its
trustees, officers, agents and employees (individually, an "INDEMNIFIED
PARTY", and collectively, the "INDEMNIFIED
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2 December 1994 version
<PAGE>
PARTIES"), from and against any and all liability, loss, damage, action,
claim or expense suffered or incurred by the INDEMNIFIED PARTIES (including
attorneys' fees) (individually, a "LIABILITY", and collectively, the
"LIABILITIES") that results from or arises out of: (a) the development, use,
manufacture, promotion, sale or other disposition, of any PENN PATENT RIGHTS,
JOINT PATENT RIGHTS, PENN TECHNICAL INFORMATION, PENN LICENSED PRODUCTS, or
any technology licensed under this AGREEMENT by APOLLON, its assignees,
SUBLICENSEES, vendors or other third parties; (b) breach by APOLLON of any
covenant or agreement contained in this AGREEMENT; and (c) the enforcement by
an INDEMNIFIED PARTY of its rights under this Section. Without limiting the
foregoing, APOLLON will defend, indemnify and hold harmless the INDEMNIFIED
PARTIES from and against any LIABILITIES resulting from:
8.2.1 any product liability or other claim of any kind
related to the use by a third party of a PENN LICENSED PRODUCT that was
manufactured, sold or otherwise disposed by APOLLON, its assignees,
SUBLICENSEES, vendors or other third parties;
8.2.2 a claim by a third party that the PENN PATENT RIGHTS,
JOINT PATENT RIGHTS or PENN TECHNICAL INFORMATION or the design, composition,
manufacture, use, sale or other disposition of any PENN LICENSED PRODUCT
infringes or violates any patent, copyright, trademark or other intellectual
property rights of such third party; and
8.2.3 clinical trials or studies conducted by or on behalf of
APOLLON relating to the PENN PATENT RIGHTS, JOINT PATENT RIGHTS, PENN
TECHNICAL INFORMATION or PENN LICENSED PRODUCTS, including, without
limitation, any claim by or on behalf of a human subject of any such clinical
trial or study, any claim arising from the procedures specified in any
protocol used in any such clinical trial or study, any claim of deviation,
authorized or unauthorized, from the protocols of any such clinical trial or
study, and any claim resulting from or arising out of the manufacture or
quality control by a third party of any substance administered in any
clinical trial or study;
8.2.4 provided, however, that APOLLON'S obligation to defend,
indemnify, and hold harmless hereunder shall not apply to any liability,
claim, damage, loss, cost or expense to the extent it is attributable to the
proven negligence, or proven reckless or intentional misconduct of any
INDEMNIFIED PARTY hereunder.
8.3 The INDEMNIFIED PARTY shall promptly notify APOLLON of any
claim or action giving rise to LIABILITIES subject to the provisions of the
foregoing Section. APOLLON shall have the right to defend any such claim or
action, at its cost and expense. APOLLON shall not settle or compromise any
such claim or action in a manner that imposes any restrictions or
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License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
obligations on PENN or grants any rights to the PENN PATENT RIGHTS, PENN
TECHNICAL INFORMATION or PENN PATENTED PRODUCTS without PENN's prior written
consent. If APOLLON fails or declines to assume the defense of any such
claim or action within thirty (30) days after notice thereof, PENN may assume
the defense of such claim or action for the account and at the risk of
APOLLON, and any LIABILITIES related thereto shall be conclusively deemed a
liability of APOLLON. APOLLON shall pay promptly to the INDEMNIFIED PARTY
any LIABILITIES to which the foregoing indemnity relates, as incurred. The
indemnification rights of PENN or other INDEMNIFIED PARTY contained herein
are in addition to all other rights which such INDEMNIFIED PARTY may have at
law or in equity or otherwise.
8.4 INSURANCE
8.4.1 APOLLON shall procure and maintain a policy or policies
of comprehensive general liability insurance, including broad form and
contractual liability to be written on an occurrence or a claims made basis,
in a minimum amount of $1,000,000 combined single limit per occurrence and in
the aggregate as respects personal injury, bodily injury and property damage
arising out of APOLLON's performance of this AGREEMENT.
8.4.2 APOLLON shall, upon commencement of clinical trials
involving PENN LICENSED PRODUCTS, procure and maintain a policy or policies
of product liability insurance to be written on an occurrence or a claims
made basis in a minimum amount of $3,000,000 combined single limit per
occurrence and in the aggregate as respects bodily injury and property damage
arising out of APOLLON's performance of this AGREEMENT.
8.4.3 The policy or policies of insurance specified herein
shall be issued by an insurance carrier with a rating of "A-" or better by
A.M. Best and shall name PENN as an additional insured with respect to
APOLLON's performance of this AGREEMENT. APOLLON shall provide PENN with
certificates evidencing the insurance coverage required herein and all
subsequent renewals thereof. Such certificates shall provide that APOLLON's
insurance carrier(s) notify PENN in writing at least 30 days prior to
cancellation or material change in coverage.
8.4.4 PENN shall periodically review the adequacy of the
minimum limits of liability specified herein. Further, PENN reserves the
right to negotiate with APOLLON to adjust such coverage limits accordingly.
The specified minimum insurance amounts shall not constitute a limitation on
APOLLON's obligation to indemnify PENN under this AGREEMENT.
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License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
ARTICLE 9. USE OF PENN'S NAME
9.1 APOLLON and its employees and agents shall not use and APOLLON
shall not permit its SUBLICENSEES to use PENN's name, any adaptation thereof,
any PENN logotype, trademark, service mark or slogan or the name mark or
logotype of any PENN representative or organization in any way without the
prior, written consent of PENN.
ARTICLE 10. ADDITIONAL PROVISIONS
10.1 APOLLON shall comply with all prevailing laws, rules and
regulations pertaining to the development, testing, manufacture, marketing,
sale, use, import or export of products. Without limiting the foregoing, it
is understood that this AGREEMENT may be subject to United States laws and
regulations controlling the export of technical data, computer software,
laboratory prototypes and other commodities, articles and information,
including the Arms Export Control Act as amended in the Export Administration
Act of 1979, and that the parties obligations hereunder are contingent upon
compliance with applicable United States export laws and regulations. The
transfer of certain technical data and commodities may require a license from
the cognizant agency of the United States Government and/or written
assurances by APOLLON that APOLLON shall not export data or commodities to
certain foreign countries without prior approval of such agency. PENN
neither represents that a license is not required nor that, if required, it
will issue.
10.2 This AGREEMENT and the rights and duties appertaining thereto
may not be assigned by APOLLON without first obtaining the express written
consent of PENN; provided, however, that such consent shall not be required
in the event of transfer by APOLLON of all or substantially all of the
business to which this AGREEMENT pertains. Any such purported assignment,
except as permitted herein without the written consent of PENN, shall be null
and of no effect.
10.3 Notices under this AGREEMENT shall be in writing and sent by
public courier and addressed as follows:
If to PENN:
University of Pennsylvania
Center for Technology Transfer
3700 Market Street, Suite 300
Philadelphia, PA 19104-3147
Attention: Managing Director
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License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
with a copy to:
Office of the General Counsel
University of Pennsylvania
221 College Hall
Philadelphia, PA 19104-6303
Attention: General Counsel
If to APOLLON:
Richard A. Carrano, Ph.D.
Vice President of Technical Development
Apollon, Inc.
One Great Valley Parkway
Suite 30
Malvern, PA 19355-1423
Either party may change its official address upon written notice to the other
party.
10.4 This AGREEMENT shall be construed and governed in accordance
with the laws of the Commonwealth of Pennsylvania, without giving effect to
conflict of law provisions.
10.5 This AGREEMENT and the SPONSORED RESEARCH AGREEMENT
(Attachment 4 hereto) each is related to the other in setting forth the
entire agreement of the parties. Any modification of this AGREEMENT shall be
in writing and signed by an authorized representative of both parties.
10.6 In the event that a party to this AGREEMENT perceives the
existence of a dispute with the other party concerning any right or duty
provided for herein, the parties shall, as soon as practicable, confer in an
attempt to resolve the dispute. If the parties are unable to resolve such
dispute amicably, then the parties hereby submit to the exclusive
jurisdiction of and venue in any state or federal courts located within the
Eastern District of Pennsylvania with respect to any and all disputes
concerning the subject of this AGREEMENT.
10.7 A waiver by a party of a breach or violation of any provision
of this AGREEMENT will not constitute or be construed as a waiver of any
subsequent breach or violation of that provision or as a waiver of any breach
or violation of any other provision of this AGREEMENT.
10.8 Any of the provisions of this AGREEMENT which are determined
to be invalid or unenforceable in any jurisdiction shall be ineffective to
the extent of such invalidity or unenforceability in such jurisdiction,
without rendering invalid or unenforceable the remaining provisions hereof or
affecting the
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License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
validity or unenforceability of any of the terms of this AGREEMENT in any
other jurisdiction.
10.9 The headings and captions used in this AGREEMENT are for
convenience of reference only and shall not affect its construction or
interpretation.
10.10 Nothing herein shall be deemed to establish a relationship
of principal and agent between PENN and APOLLON nor any of their agents or
employees, nor shall this AGREEMENT be construed as creating any form of
legal association or arrangement which would impose liability upon one party
for the act or failure to act of the other party. Nothing in this AGREEMENT,
express or implied, is intended to confer on any person, other than the
parties hereto or their permitted assigns, any benefits, rights or remedies.
10.11 PENN and APOLLON shall not discriminate against any employee
or applicant for employment because of race, color, sex, sexual or
affectional preference, age, religion, national or ethnic origin, handicap or
because he or she is a disabled veteran or veteran of the Vietnam Era.
IN WITNESS WHEREOF the parties, intending to be legally bound, have caused this
AGREEMENT to be executed by their duly authorized representatives and to be
effective the first date written above.
THE TRUSTEES OF THE APOLLON, INC.
UNIVERSITY OF PENNSYLVANIA
By: /s/ Anthony Merritt By: /s/ Vincent R. Zurawski, Jr.
------------------------------- ------------------------------
Name: Anthony Merritt Name: Vincent R. Zurawski, Jr.
----------------------------- ----------------------------
Executive Director
Title: Sponsored Programs Title: President & CEO
---------------------------- ---------------------------
Date: December 2, 1994 Date: 5 Dec 94
----------------------------- ----------------------------
License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
Attachment 1
TECHNOLOGY LIST
[ ] "Genetic Immunization;" patent application 08/008,342 filed 26
January 1993; D. Weiner, W. Williams, and B. Wang.
[ ] "Genetic Immunization;" patent application 08/029/336 filed 11
March 1993; D. Weiner, W. Williams, and B. Wang.
[ ] "Genetic Immunization;" patent application 08/125,012 filed 21
September 1993;" D. Weiner, W. Williams, B. Wang, and L. Coney.
[ ] "Delivery of Genetic Material by Needleless Injection Devices;"
patent application 08/093,235 filed 15 July 1993; D. Weiner.
[ ] "Non-Human Immunocompetent Animal Model;" patent application
08/124,962 filed 21 September 1993; D. Weiner, W. Williams, and
M. Merva.
[ ] "Compositions and Methods for Deliver of Genetic Material;"
patent application PCT/US94/00899 filed 26 January 1994; D.
Weiner, W. Williams, B. Wang, L. Coney, M. Merva, and V.
Zurawski.
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License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
Attachment 5.
MILESTONES
1. Performance Milestones:
1.1 Within [ ] of the EFFECTIVE DATE of the AGREEMENT, APOLLON
will have caused an Investigational New Drug (IND) application for a
PENN LICENSED PRODUCT to be submitted to the FDA.
2. Research and Development Milestones:
2.1 For the [ ] of this AGREEMENT, APOLLON will fund
sponsored research at PENN in the amount of [ ].
2.2 For the [ ] of this AGREEMENT, APOLLON will develop
internally the skills and resources necessary to develop and
commercialize PENN LICENSED PRODUCTS. Thereafter, APOLLON's internal
research, development, and commercialization efforts or the combined
efforts of APOLLON and any APOLLON affiliate, any APOLLON joint
venture, and any APOLLON development partnership formed to develop
and/or commercialize PENN LICENSED PRODUCTS, will be funded at a
minimum of [ ] for at least [ ].
License Agreement (I)--Apollon/Penn
2 December 1994 version
<PAGE>
SCHEDULE TO LICENSE AGREEMENT BETWEEN
APOLLON, INC. AND THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA
DATED DECEMBER 1, 1994
On December 1, 1994, the same date on which Apollon, Inc. (the
"Registrant") and the Trustees of the University of Pennsylvania ("Penn")
entered into the License Agreement to which this schedule is attached ("License
Agreement I"), the Registrant and Penn also entered into a License Agreement
relating to the HIV vpr gene, vpr protein and vpr receptor ("License Agreement
II"). License Agreement I and License Agreement II are identical except for the
following differences:
1. License Agreement I relates to nucleic acid constructs and License
Agreement II relates to the HIV vpr gene.
2. The patent applications associated with License Agreement I are owned
by Penn and The Wistar Institute of Anatomy and Biology related to work by Dr.
William V. Williams and Dr. David B. Weiner and the patent applications
associated with License Agreement II are owned by Penn related to work by Dr.
David B. Weiner.
3. Certain fees and royalties have different dollar values in License
Agreement I as compared to License Agreement II. All fees and royalties are
confidential and subject to the confidential treatment request filed with the
Securities and Exchange Commission.
License Agreement II has not been filed as a separate exhibit to the
Registrant's Registration Statement in accordance with Instruction 2 to Item 601
of Regulation S-K.
<PAGE>
AMENDMENT TO LICENSE AGREEMENT
This Amendment, dated as of this 17th day of July 1997, shall serve to
amend the License Agreement by and between Apollon, Inc. ("Apollon") and The
Trustees of the University of Pennsylvania ("Penn"), effective as of December 1,
1994 (the "License Agreement").
WHEREAS, Apollon and Penn have entered into License Agreement
effective as of December 1, 1994, relating to genetic vaccines, i.e.,
facilitated transfer and expression of nucleic acids ("License Agreement I");
and
WHEREAS, Apollon and Penn wish to amend License Agreement I as
provided herein.
NOW THEREFORE, in consideration of the premises set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. License Agreement I is hereby amended to add a new recital to read in full
as follows:
"WHEREAS, PENN and APOLLON have entered into a STOCK
PURCHASE AGREEMENT (Attachment 6) (the "STOCK PURCHASE
AGREEMENT") relating to certain shares of Common Stock of
the Company granted to PENN hereunder;"
2. Section 3.3.1 of License Agreement I is hereby amended to read in full as
follows:
"3.1.1 In partial consideration of the exclusive license
granted herein, APOLLON hereby grants, subject to approval
by the holders of Preferred Stock of the Company, to PENN
(the "INITIATION GRANT"), on the terms and conditions set
forth in the STOCK PURCHASE AGREEMENT, 50,000 shares of
APOLLON's Common Stock, par value $.01 per share ("COMMON
STOCK")."
3. Section 10.5 of License Agreement I is hereby amended to read in full as
follows:
"10.5 This AGREEMENT, as amended, the SPONSORED RESEARCH
AGREEMENT (Attachment 4
<PAGE>
hereto) and the STOCK PURCHASE AGREEMENT (Attachment 6 hereto) set
forth the entire agreement between the parties with respect to the
subject matter hereof. Any modification of this AGREEMENT shall be
in writing and signed by an authorized representative of
both parties."
5. Except as modified by this Amendment, all of the terms and conditions of
License Agreement I shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first above written.
THE TRUSTEES OF THE APOLLON, INC.
UNIVERSITY OF PENNSYLVANIA
By: /s/ Louis B. Berneman By: /s/ Vincent R. Zurawski
---------------------- ------------------------
Name: Louis B. Berneman Name: Vincent R. Zurawksi, Jr.
-------------------- ------------------------
Title: Managing Director, CTT Title:President and CEO
---------------------- ------------------------
2
<PAGE>
SCHEDULE TO AMENDMENT TO LICENSE AGREEMENT BETWEEN
APOLLON, INC. AND THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA
DATED JULY 17, 1997
On December 1, 1994, the same date on which Apollon, Inc. (the
"Registrant") and the Trustees of the University of Pennsylvania ("Penn")
entered into the License Agreement relating to nucleic acid constructs ("License
Agreement I"), the Registrant and Penn also entered into a License Agreement
relating to the HIV vpr gene, vpr protein and vpr receptor ("License Agreement
II"). On July 17, 1997, the same date on which the Registrant and Penn entered
into the Amendment to License Agreement to which this schedule is attached
("Amendment to License Agreement I"), the Registrant and Penn also entered into
an Amendment to License Agreement II ("Amendment to License Agreement II").
Amendment to License Agreement I and Amendment to License Agreement II are
identical except that Amendment to License Agreement I relates to License
Agreement I and Amendment to License Agreement II relates to License Agreement
II.
Amendment to License Agreement II has not been filed as a separate exhibit
to the Registrant's Registration Statement in accordance with Instruction 2 to
Item 601 of Regulation S-K.
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 5, 6 AND 8 AND PORTIONS OF
EXHIBIT C AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
LICENSE AGREEMENT
BETWEEN
APOLLON, INC.
AND
THE INSTITUTE OF BIOTECHNOLOGY AND
ADVANCED MOLECULAR MEDICINE, INC.
EFFECTIVE
DECEMBER 1, 1994
<PAGE>
LICENSE AGREEMENT
This License Agreement ("Agreement") is made by and between Apollon, Inc., a
corporation organized and existing under the laws of Pennsylvania, ("Apollon"),
having a place of business at One Great Valley Parkway, Malvern, Pennsylvania
19355, and The Institute of Biotechnology and Advanced Molecular Medicine, Inc.,
a non-profit corporation organized and existing under the laws of Pennsylvania,
("IBAMM"), having a place of business at 435 Devon Park Drive, Wayne,
Pennsylvania 19087.
This Agreement is effective December 1, 1994 ("Effective Date").
WHEREAS Apollon and IBAMM entered into a Sponsored Research Agreement, effective
August 1, 1992, related to a Collaborative Research Project entitled, "The
Development of Genetic Immunization as a Therapeutic Technique for Treatment of
Diseases in Vertebrates" (the "Collaborative Research Project"), to be carried
out under the supervision of Dr. David B. Weiner, Principal Investigator
(hereinafter "the Apollon/IBAMM Sponsored Research Agreement"), attached as
Exhibit A hereto and made a part hereof;
WHEREAS the Sponsored Research Agreement granted Apollon an option to negotiate
an exclusive, world-wide, royalty bearing license to any and all patent rights
and know-how, including biological materials, developed by IBAMM in the field
(i.e., facilitated transfer and expression of nucleic acids by mammalian cells
for therapy and/or prophylaxis) of the [CA] [VZ] Collaborative Research Project
during the term of the Sponsored Research Agreement; and
WHEREAS IBAMM has acquired a first option to negotiate a license to intellectual
property of the University of Pennsylvania, with the right to assign such option
solely to Apollon, as
1
<PAGE>
set forth in the Sponsored Research Agreement, effective July 1, 1992,
between The Institute of Biotechnology and Advanced Molecular Medicine, Inc.
and the Trustees of the University of Pennsylvania (hereinafter "the
IBAMM/Penn Sponsored Research Agreement"), attached as Exhibit B hereto and
made a part hereof;
WHEREAS Apollon desires to obtain said license to any and all intellectual
property rights of IBAMM arising under the Apollon/IBAMM Sponsored Research
Agreement, including the right to acquire said option to negotiate a license to
the intellectual property of the University of Pennsylvania arising under the
IBAMM/Penn Sponsored Research Agreement, upon the terms and conditions set forth
herein;
NOW THEREFORE, in consideration of the premises and of the mutual promises and
covenants contained herein, and intending to be legally bound thereby, the
parties agree as follows:
I. DEFINITIONS
A. "Patent Rights" shall mean any and all rights owned or controlled by IBAMM
or assigned by IBAMM to the University of Pennsylvania [CA] [VZ] which arise
under any United States or foreign patent application listed in Exhibit C
hereto, and any later filed patent application arising from research carried out
under the Apollon/IBAMM Sponsored Research Agreement and/or the IBAMM/Penn
Sponsored Research Agreement, including any continuation, continuation-in-part,
division, reexamination, reissue or foreign counterpart thereof, and any patent
issuing from any such application.
B. "Collaborative Research Project" shall mean the Research Project Entitled,
"The Development of Genetic Immunization as a Therapeutic Technique for
Treatment of Diseases in Vertebrates" (the "Collaborative Research Project"),
carried out under the supervision of
2
<PAGE>
Dr. David B. Weiner, Principal Investigator and supported by Apollon under
the Sponsored Research Agreement, effective August 1, 1992.
C. "IBAMM Technical Information" shall mean all technology, formulae,
materials, constructs, trade secrets, technical data and any other information,
owned, controlled or possessed by IBAMM arising from research carried out under
the Apollon/IBAMM Sponsored Research Agreement and/or the IBAMM/Penn Sponsored
Research Agreement, which is directly related to Patent Rights and which is
needed to produce IBAMM Licensed Product(s).
D. "IBAMM Licensed Product" shall mean any product covered by a Valid Claim of
Patent Rights on a country-by-country basis, or any product made, at least in
part, using IBAMM Technical Information.
E. "Net Sales" shall mean: with respect to any quantity of IBAMM Licensed
Product on, any Affiliate or any Sublicensee to an unaffiliated third party, Net
Sales shall be the gross invoice selling price for that quantity of Product,
less: (a) discounts and allowances to customers, (b) credits for returned goods,
(c) prepaid freight, (d) sales taxes or other governmental charges paid in
connection with the sale, (e) commissions and other fees paid to distributors
and other sales agencies for or in connection with the sale of Product.
F. "Sublicensee" shall mean any corporation, company, partnership or business
entity which neither controls nor is controlled by, nor is under common control
with Apollon, to which Apollon transfers by sublicense rights to enable said
party to make and sell IBAMM Licensed Product(s).
G. "Affiliate" shall mean any corporation, company, partnership or other
business entity which either controls, is controlled by, or is under common
control with either party. The word "control" shall mean directly or indirectly
owning or having a partnership interest in at
3
<PAGE>
least fifty percent (50%) of the assets or stock normally entitled to vote
for election of directors, or having the right to receive at least fifty
percent (50%) of the profits, or having at least fifty percent (50%) control
of an entity.
H. "Valid Claim" shall mean an issued claim of a Patent Right which has not
lapsed, expired, or become abandoned and which claim has not been declared
invalid by an unreversed or unappealable decision or judgment of a national or
regional patent office or a court of competent jurisdiction.
I. "In Reasonable Competition With A/Such IBAMM Licensed Product" means that it
is demonstrated to IBAMM's reasonable satisfaction that: (a) a competitor's
product is sold in the same geographic and relevant product market as such IBAMM
Licensed Product; and such competitor's product has a unit sales volume that
exceeds twenty-five (25%) percent of Apollon's unit sales volume for such IBAMM
Licensed Product in such geographic market; or (b) two or more competitors'
product(s) are sold in the same geographic and relevant product market as such
IBAMM Licensed Product; and such competitors' product(s) together have a unit
sales volume that exceeds thirty-five percent (35%) of Apollon's unit sales
volume for such IBAMM Licensed Product in such geographic market.
II. OPTION/LICENSE TO APOLLON
As of the Effective Date, IBAMM hereby assigns to Apollon, subject to the terms
and conditions of this Agreement, the exclusive first option to negotiate a
license to Penn Intellectual Property acquired by IBAMM under the IBAMM/Penn
Sponsored Research Agreement effective July 1, 1992. IBAMM further grants to
Apollon, subject to the terms and conditions of this Agreement, an exclusive,
world-wide, royalty bearing license, with the right to grant sublicenses, under
any and all Patent Rights and IBAMM Technical Information to make, have made,
use, sell and have sold IBAMM Licensed Products, including the right to sell
IBAMM Licensed Products for resale, and to practice IBAMM
4
<PAGE>
Technical Information developed under the Apollon/IBAMM Sponsored Research
Agreement and/or the IBAMM/Penn Sponsored Research Agreement. Such license
shall include any and all Patent Rights arising from patent applications
and/or issued patents, rights to biological materials, including
polynucleotide constructs, arising from the Apollon/IBAMM Sponsored Research
Agreement and/or the IBAMM/Penn Sponsored Research Agreement, and any and all
IBAMM Technical Information relating to Products and/or processes arising out
of the Apollon/IBAMM Sponsored Research Agreement and/or the IBAMM/Penn
Sponsored Research Agreement.
III. ROYALTIES
A. In consideration of the option and licenses granted to Apollon under this
Agreement, Apollon shall pay to IBAMM a royalty on Net Sales of IBAMM Licensed
Products as follows.
(1) [ ] in countries where the IBAMM Licensed Products are
covered by a Valid Claim of an issued patent of Patent Rights; or
(2) [ ] in countries where the IBAMM Licensed Products
are not covered by a Valid Claim of an issued patent of Patent Rights.
B. The payment of royalties to IBAMM on any particular IBAMM Licensed Product
shall terminate in each country on (a) the expiration date of the last-to-expire
issued patent of Patent Rights covering such product, or (b) with respect to an
IBAMM Licensed Product which has never been covered by a Valid Claim of an
issued patent of Patent Rights in such country, on the earlier to occur of the
following: (i) the date on which Apollon demonstrates to IBAMM's reasonable
satisfaction that a third party is selling a product in the relevant country
[CA] [VZ] In Reasonable Competition With Such IBAMM Licensed Product; or (ii)
ten (10) years from the first commercial sale in such country. In the event a
patent covering
5
<PAGE>
such product issues subsequent to termination of payment of royalties to IBAMM
pursuant to Section III.B.(b), then payment of royalties to IBAMM shall resume
pursuant to Section III.A (1) until terminated pursuant to III.B(a)[CA] [VZ].
C. Payment of royalties due under this Article shall be made by Apollon to IBAMM
within sixty (60) days after March 31, June 30, September 30, and December 31
each year during the term of this Agreement covering the quantity of IBAMM
Licensed Products sold by Apollon during the preceding calendar quarter.
D. All payments to be made under this Article shall be paid in United States
Dollars in Wayne, Pennsylvania, or in such other place or other way as IBAMM
shall reasonably designate.
E. In the event that any quantity of IBAMM Licensed Product subject to royalty
hereunder is used in the manufacture of another product subject to royalty
hereunder, or is sold to a Sublicensee or an Affiliate of the seller, or if
rights under more than one patent or patent application within Patent Rights is
used, only one royalty, namely the royalty applicable to the ultimate product
subject to royalty hereunder, shall be paid to IBAMM, in order that duplication
of royalties may be avoided.
F. [ ] of the expenses incurred by Apollon in connection
with the filing, prosecution, and maintenance of Patent Rights shall be
creditable against royalties due IBAMM hereunder and such credit may be taken at
the rate of [ ] of royalties due IBAMM in any calendar year.
G. During the term of this Agreement and so long as Apollon is not in default
with respect to any payment due IBAMM hereunder, neither IBAMM nor any party
deriving rights from
6
<PAGE>
or through IBAMM shall assert Patent Rights to prevent the making, using or
selling of IBAMM Licensed Product(s) thereof.
IV. DUE DILIGENCE
Apollon agrees to use its reasonable best efforts to bring one or more IBAMM
Licensed Product(s) to the marketplace through a diligent program of
development, production and marketing. Such reasonable best efforts may
include the efforts of any Affiliate(s) of Apollon or the efforts of any
development, production and/or marketing partner(s) of Apollon.
V. REPORTS AND RECORDS
A. Apollon shall keep true books and accounts containing an accurate record of
the
information necessary for determination of the amounts payable under Article III
hereof. Said records shall be kept at Apollon's principal place of business or
the principal place of business of the appropriate division of Apollon to which
this Agreement relates. Said records shall be available for inspection at
IBAMM's expense by an independent certified public accountant selected by IBAMM
and reasonably acceptable to Apollon during regular business hours, but not more
often than once per year, for three (3) years following the end of the calendar
year to which they pertain in order for IBAMM to ascertain the correctness of
any report and/or payment made under this Agreement.
B. Within sixty (60) days after March 31, June 30, September 30, and December 31
of each year in which this Agreement is in effect, Apollon shall deliver to
IBAMM full, true and accurate reports showing, in sufficient detail to enable
the royalties due hereunder to be calculated, Net Sales of IBAMM Licensed
Product(s) and royalties due, if any, including those of its Sublicensee(s), if
any, relating to this Agreement during the preceding three (3) month period.
With each such report, Apollon shall pay to IBAMM the royalties due and
7
<PAGE>
payable as provided for in Article III. If no royalties are due, the report
shall so state. All such reports shall be maintained in confidence by IBAMM,
except as required by law.
VI. INFRINGEMENT
A. With respect to any Patent Rights licensed to Apollon hereunder, Apollon or
its designated sublicensee shall have the right to prosecute in its own name and
at its own expense any infringement of such Patent Right, and shall have the
right to control, settle, and defend such suit and recover, for its own account,
any damages, awards, or settlements resulting therefrom, subject to Paragraph
VI. If Apollon or its Sublicensee elects to bring such an infringement action
and IBAMM is a legally indispensible party to such action, IBAMM shall have the
right to assign to Apollon all of IBAMM's right, title and interest in each
patent which is a part of Patent Rights and the subject of such action.
Notwithstanding any such assignment by IBAMM to Apollon and regardless of
whether IBAMM is or is not an indispensible party, IBAMM shall cooperate fully
with Apollon in connection with any such action.
B. If Apollon or any Sublicensee elects to bring an action as described above,
Apollon may offset against royalties due IBAMM the out-of-pocket expenses and
costs of such action, including attorney's fees and reimbursements to IBAMM for
IBAMM's out-of-pocket costs in such action. Such offset shall not exceed
[ ] of any royalty due to IBAMM in any payment period.
C. Any recovery by Apollon under Paragraph VI.A shall be deemed to reflect loss
of commercial sales and Apollon shall pay IBAMM a royalty in accordance with
this License Agreement on said recovery.
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VII. TERM
Unless terminated earlier according to the terms hereof, this Agreement shall
commence as of the Effective Date hereof and shall remain in full force and
effect on a country-by-country basis so long as IBAMM Licensed Product(s) are
sold; provided, however, that upon expiration of the last to expire or become
abandoned of Patent Rights covering IBAMM Licensed Product(s), all rights
licensed hereunder shall convert to a fully paid-up license to Apollon.
VIII. TERMINATION
Either party may terminate this Agreement as follows:
A. In the event that any material provision of this Agreement is breached by one
party, the other party may, upon ninety (90) days' written notice to the
breaching party, terminate this Agreement. However, if the breach is corrected
within the ninety (90) day period and there are no unreimbursed damages
resulting from the breach, the Agreement shall continue in force.
B. Should Apollon fail to pay IBAMM such royalties as are due and payable
hereunder, IBAMM shall have the right to terminate this Agreement on at least
ninety (90) days' written notice, unless Apollon shall pay IBAMM within the
ninety (90) day notice period, all such royalties as are due and payable. Upon
the expiration of the ninety (90) day period, if Apollon shall not have paid all
such royalties due and payable, IBAMM at its sole option, may immediately
terminate this Agreement and all rights, privileges and licenses granted
hereunder.
9
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C. Apollon shall have the right to terminate this Agreement at any time upon
ninety (90) days' written notice to IBAMM. Apollon's obligation to pay
royalties accrued to the date of termination, and/or thereafter shall survive
termination.
D. Upon termination of this Agreement for any reason, any sublicense not then in
default shall continue in full force and effect except that IBAMM shall be
substituted in place of the sublicensor.
IX. CONFIDENTIALITY
All proprietary technical and business information, including reports required
to be provided hereunder relevant to IBAMM Licensed Product(s), disclosed by
either party to the other shall be held by the receiving party in confidence,
used only to accomplish the purposes contemplated by this Agreement, and
accorded the same degree of care and security that the receiving party uses to
protect its own confidential information of similar nature, and is not disclosed
except to officers, employees, and agents of the receiving party who have a
reasonable need to know the information, and who are bound to such party by a
written agreement of confidentiality; provided, however, that information shall
not be deemed confidential or proprietary which (a) is or becomes public through
no fault of the receiving party; (b) is learned by the receiving party from a
third party entitled to disclose it; (c) was known to the receiving party at the
time of disclosure as shown by prior written records; or (d) is developed by an
employee or consultant of the receiving party independently of disclosures
hereunder. Nothing herein shall be construed to prevent the disclosure of
information as necessary to practice commercially the rights granted hereunder,
including, without limitation, the disclosure of information to regulatory and
other governmental agencies as necessary to obtain marketing approval for IBAMM
Licensed Product(s) or to obtain patent protection.
10
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X. INDEPENDENT CONTRACTORS
For purposes of this Agreement and the exercise of all rights hereunder, IBAMM
and Apollon agree that each party is operating as an independent contractor and
not as an agent or employee of the other. This Agreement shall not constitute a
partnership or joint venture and neither party may bind the other to any
contract, commitment or understanding except as specifically stated herein.
XI. USE OF NAME
Neither party shall use the name of the other party in any advertising, news
release or other public announcement, written or oral, related to any actions
taken or work carried out pursuant to the terms of this Agreement without the
prior written consent of the other party.
XII. ASSIGNABILITY
This Agreement is binding on and shall inure to the benefit of the parties,
their Affiliates, respective successors and permitted assigns. Except in
connection with a sale or other disposition of all or substantially all of the
business to which the licensed subject matter pertains, or in the event of a
merger or sale of all or substantially all of the assets of Apollon, neither
this Agreement nor any part of it is assignable by either party without the
prior written consent of the other party.
XIII. FORCE MAJEURE
A delay in performance or non-performance by either party shall not constitute a
breach or grounds for termination or prejudice any rights hereunder, if the
delay or non-performance is the result of circumstances beyond the reasonable
control of the party whose performance is excused hereunder, provided that such
party shall promptly provide to the other party written notice of such delay or
non-performance and the reason therefor [CA] [VZ] and shall resume performance
immediately after the cause of such delay or non-performance is removed and
shall be reasonably diligent in minimizing the impact thereof on the other
party. Without
11
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limiting the generality of such circumstances beyond the control of either
party, examples are labor strikes, fire, flood, storm, earthquake, or other
Act of God, war, rebellion, riot, sabotage or insurrection, governmental
enactment, rule or regulation, and inability to obtain material or equipment.
XIV. MODIFICATIONS IN WRITING
No change, modification, extension, termination or waiver of this Agreement, or
any of the provisions herein contained, shall be valid unless made in writing
and signed by a duly authorized representative of each party.
XV. ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties hereto with
respect to the subject matter hereof and as such supersedes all previous written
and oral negotiations, understandings and commitments thereto.
XVI. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
internal laws of the Commonwealth of Pennsylvania. In the event of any dispute
arising hereunder, the parties hereto agree that personal jurisdiction and venue
in any suit shall be exclusively in the United States District Court for the
Eastern District of Pennsylvania or the Court of Common Pleas of Chester County,
Pennsylvania.
XVII. NOTICE
Any notice required under this Agreement shall be deemed sufficiently given if
sent in writing by prepaid first class, certified or registered mail, return
receipt requested, to the addresses specified below:
12
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AS TO IBAMM:
Mr. Charles Andes
IBAMM, Inc.
435 Devon Park Drive
Wayne, Pennsylvania 19087
AS TO APOLLON:
Richard A. Carrano, Ph.D.
Vice President of Technical Development
Apollon, Inc.
One Great Valley Parkway
Suite 30
Malvern, Pennsylvania 19355-1423
Either party may change its address or responsible individual specified above by
giving the other thirty (30) days prior written notice thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first written
above.
APOLLON IBAMM
By:/s/ Vincent R. Zurawski, Jr. By:/s/ Charles L. Andes
---------------------------- ---------------------
Name: Vincent R. Zurawski, Jr. Name: Charles L. Andes
-------------------------- -------------------
Title: President Title: President
------------------------- ------------------
Date: 29 NOV 94 Date: December 6, 1994
-------------------------- -------------------
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EXHIBIT C
PATENT APPLICATIONS
[ ] "Genetic Immunization"; patent application USSN 08/008,342;
filed 26 January 1993; D. Weiner, W. Williams, and B. Wang
[ ] "Genetic Immunization"; patent application USSN 08/029,336; filed
11 March 1993; D. Weiner, W. Williams, and B. Wang
[ ] "Genetic Immunization"; patent application USSN 08/125,012;
filed 21 September 1993; D. Weiner, W. Williams, B. Wang and L.
Coney
[ ] "Delivery of Genetic Material by Needleless Injection Device";
patent application USSN 08/093,235; filed 15 July 1993; D.
Weiner, W. Williams, and M. Merva
[ ] "Non-Human Immunocompetent Animal Model"; patent application USSN
08/124,962; filed 21 September 1993; D. Weiner, W. Williams, and
M. Merva
[ ] "Compositions and Methods for Delivery of Genetic Material";
patent application PCT/US94/00899; filed 26 January 1994; D.
Weiner, W. Williams, B. Wang, L. Coney, M. Merva, and V. Zurawski
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 2 AND 3 AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
LICENSE AGREEMENT
This agreement ("Agreement") is entered into by and between the University of
Iowa Research Foundation, an Iowa Corporation ("UIRF"), and Apollon, Inc., 1
Great Valley Parkway, Malvern, PA 19355 ("Company").
WITNESSETH
WHEREAS, UIRF is owner by assignment from Prof. Mark F. Stinski, of U.S. Patent
No. 5,168,062 issued December 1, 1992, titled "Transfer Vectors and
Microorganisms containing Human Cytomegalovirus (HCMV) Immediate-Early
Promoter-Regulatory DNA Sequence" and any continuations, continuations-in-part,
divisions, reissues, reexaminations and extensions thereof (no foreign filings
relating to this Patent have been undertaken by the UIRF);
WHEREAS, Company desires a non-exclusive license to the above United States
patent for its use in gene therapy applications;
WHEREAS, UIRF wishes to grant such a license to Company, in accordance with the
terms of this Agreement.
NOW THEREFORE, the parties agree as follows:
ARTICLE I -- DEFINITIONS
1.1 Licensed Patent shall mean U.S. Patent No. 5,168,062 titled "Transfer
Vectors and Microorganisms containing Human Cytomegalovirus (HCMV)
Immediate-Early Promoter-Regulatory DNA Sequence", by Prof. Mark F. Stinski,
issued December 1, 1992, or any U.S. patents issuing thereon, including any
continuations, continuations-in-part, divisions, reissues, reexaminations and
extensions thereof and patents corresponding thereto.
1.2 Licensed Products shall mean and include any and all biological materials
and products the making, using or selling of which would otherwise constitute an
infringement of one or more Valid Claims of the Licensed Patent.
1.3 Valid Claim shall mean any claim in an unexpired patent included within
Licensed Patent which claim has not been disclaimed or held invalid or
unenforceable by an unappealed or unappealable decision of a court.
1.4 Licensed Field shall mean the use and/or sale of the Licensed Products for
gene therapy applications, including genetic immunization.
1.5 Net Sales shall mean the gross amount received by Company and/or its
Affiliates from the sale of Licensed Products to third party customers during
the Yearly Accounting Period
<PAGE>
less (i) discounts allowed; (ii) credits for claims, allowances or returned
products; (iii) transportation and insurance; and (iv) governmental charges and
taxes imposed with respect to such sales.
1.6 Yearly Accounting Period shall mean an annual period beginning on January I
and ending on December 31 of the same year.
1.7 Effective Date shall mean the date of the last signature appearing at the
end of this Agreement.
1.8 Earned Royalties shall mean royalties paid or payable by Company to UIRF as
determined with respect to Net Sales.
1.9 Licensed Territory shall mean the United States of America.
1.10 Affiliate shall mean any corporation owning or controlling, directly or
indirectly, at least forty nine (49%) of the stock normally entitled to vote for
election of directors of a party.
ARTICLE II -- THE GRANT
2.1 UIRF hereby grants to Company, subject to the terms and conditions hereof,
a non-exclusive license under Licensed Patent to make, have made, use, market or
sell the Licensed Products within the Licensed Field in the Licensed Territory.
ARTICLE III -- PAYMENTS, REPORTS, RECORD-KEEPING
3.1 In consideration of the rights granted to Company pursuant to Article II of
this Agreement, Company agrees to make the following payments to the UIRF:
(a) A non-refundable payment ("License Fee") of [ ] payable as
follows: [
]
(b) Earned Royalties in an amount equal to [ ] of the
Net Sales of Licensed Products to be paid on a quarterly basis.
Company agrees to submit to UIRF within sixty (60) days after December
31, March 31, June 30, and September 30, reports setting forth for the
preceding three (3) month period, the Net Sales of Licensed Products
and royalty due thereon and with each such royalty report to pay the
amount of royalty due.
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<PAGE>
(c) A payment of [ ] for each of the
[ ]. Such payment shall accrue for each
[ ] and shall be payable within thirty (30) days
of accrual.
(d) A payment of [ ] for each of the
[ ]. Such a payment for each
[ ] and shall be payable within thirty (30)
days of accrual.
(e) A payment of [ ] for each of the
[ ]. Such a payment for each
[ ] and shall be payable within thirty (30)
days of accrual.
(f) A yearly payment ("License Maintenance Fee") of [ ].
The License Maintenance Fees shall accrue yearly
commencing on the first year anniversary of the Effective Date of this
Agreement and shall be payable within sixty (60) days of accrual. The
obligation to pay the License Maintenance Fee shall terminate accrual
in the year that the first [ ] payment
accrues pursuant to section (c) of this Paragraph. Aggregate License
Maintenance Fees up to a maximum total of [ ]
shall be [ ] creditable against any and all Earned Royalties;
however, in any given Yearly Accounting Period, Earned
Royalties shall not be reduced by more than [ ] by
such credit.
3.2 Company's royalty obligations shall commence upon the execution of this
Agreement and shall continue until the expiration of the Licensed Patent.
3.3 In the event that Company becomes obligated at any time or from time to
time during the term of this Agreement to pay royalties to any third party for
the practice of any method or use of any composition of matter covered by any
claim of the Licensed Patents, or for the sale of any Licensed Products,
Company's royalty obligation to the UIRF shall be reduced by an amount equal to
its royalty obligation to such third party; provided, however, that Company's
royalty obligation shall not be reduced by more than [ ] for any
one calendar quarter.
3.4 Company's obligation to pay royalties hereunder shall be suspended during
any period of time that Company is enjoined, or reasonably believes it may be
enjoined, from exercising any of its rights hereunder with respect to the
Licensed Patents or any Licensed Products. Upon resolution of any such matter,
Company shall promptly pay to UIRF all amounts
3
<PAGE>
previously withheld with respect to such matter, less (i) any reduction which
may be applicable pursuant to the paragraph above, and (ii) expenses incurred in
the resolution thereof.
3.5 Company shall report every six (6) months on its efforts and progress made
towards commercialization of the technology.
3.6 Company shall keep accurate and correct records of Licensed Products made,
used or sold under this Agreement. Such records shall be retained for at least
three (3) years following a given reporting period. UIRF is hereby granted by
Company the right, upon reasonable written notice to Company, to retain an
independent certified public accountant reasonably acceptable to Company to
audit Company's records solely to verify sales of the Licensed Products. UIRF
may designate an agent for purposes of this verification and this verification
shall be upon reasonable notice to Company.
3.7 Late payments shall be subject to an interest charge of one and one half
percent (1 1/2%) per month.
ARTICLE IV -- TERM AND TERMINATION
4.1 Unless terminated earlier in accordance with this Agreement, the term of
the license granted hereunder shall expire upon the termination of Company's
royalty obligations to the UIRF.
4.2 In the event Company fails to make payments due hereunder, UIRF shall have
the right to terminate this Agreement upon ninety (90) days written notice,
unless Company makes such payments plus interest within the ninety (90) day
notice period.
4.3 In the event that Company shall become insolvent, shall make an assignment
for the benefit of its creditors, or shall have a petition in bankruptcy filed
for or against it and such petition shall not have been discharged within ninety
(90) days, UIRF may, at its option, terminate this license upon thirty (30) days
written notice.
4.4 Company shall have the right during a period of six (6) months following
the effective date of such termination to sell or otherwise dispose of the
Licensed Products existing at the time of such termination, and shall make a
final report and payment of all royalties related thereto within sixty (60) days
following the end of such period or the date of the final disposition of such
inventory, whichever first occurs.
ARTICLE V - MARKING
5.1 Company agrees to comply with marking provisions of Title 35, U.S. Code,
Section 287, if required, or any future equivalent provisions of the United
States relating to the
4
<PAGE>
marking of patented devices, or with marking complying with the law of the
country where the Licensed Products are shipped, used or sold.
ARTICLE VI -- ASSIGNMENT
6.1 This Agreement may be assigned by Company as part of a transfer of all, or
substantially all, of the business to which this Agreement relates. This
Agreement shall be binding upon and inure to the benefit of successors in
interest and assigns of Company. Company agrees to inform UIRF of such transfer
promptly.
ARTICLE VII -- REPRESENTATIONS AND WARRANTIES: LIMITATIONS
7.1 Nothing in this agreement shall be construed as:
(a) A warranty or representation by UIRF as to the validity or scope of
any Licensed Patent; or
(b) A warranty or representation that anything made, used, sold or
otherwise commercialized under the license granted in this agreement
is or will be free from infringement of patents owned by third
parties; or
(c) Conferring a right to use in advertising, publicity or otherwise the
name of the University of Iowa ("UI") or UIRF, unless UIRF has
specifically approved the same in writing.
7.2 UIRF expressly disclaims any and all implied or express warranties and
makes no express or implied warranties of merchantability or fitness for any
particular purpose of the Licensed Patent, biological materials or processes or
Licensed Products contemplated by this Agreement.
ARTICLE VIII -- GENERAL
8.1 Company shall not distribute or resell the Licensed Products to others
except in accordance with this Agreement. Company agrees to comply with all
applicable laws and regulations.
8.2 UIRF shall have no obligation to defend any action for infringement brought
against Company by a third party.
8.3 The relationship between UIRF and Company shall be that of independent
contractors. UIRF and Company shall have no other relationship other than as
independent contracting parties. UIRF shall have no power to bind or obligate
Company in any manner, except as is expressly set forth in this Agreement.
5
<PAGE>
8.4 Company shall indemnify and hold harmless UIRF and UI and their employees
and officers and their respective successors, heirs and assigns, from any
action, claim or liability, including, without limitation, liability for death,
personal injury, or property damages arising directly or indirectly from
Company's possession, distribution or other use of Licensed products under this
Agreement and/or from Company's publication or distribution of test reports,
data and other information relating to Licensed products.
8.5 If any provision of this Agreement is ultimately held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
8.6 Any delay in enforcing a party's rights under this Agreement or any waiver
as to a particular default or other matter shall not constitute a waiver of a
party's right to the future enforcement of its rights under this Agreement,
except in the event of written and signed waiver.
ARTICLE IX -- NOTICES; APPLICABLE LAW
9.1 Any notice, report or payment provided for in this Agreement shall be
deemed sufficiently given when sent by certified or registered mail addressed to
the party for whom intended at the following addresses, or to such address as
either party may hereafter designate in writing to the other:
For UIRF:
University of Iowa Research Foundation
Attn: Ms. Usha R. Balakrishnan, Associate Director
214 Technology Innovation Center, Iowa City, IA 52242-5000
For Company:
Apollon, Inc., Attn: Dr. Richard Carrano
I Great Valley Parkway, Malvern, PA 19355
9.2 This agreement shall be interpreted in accordance with the laws of the
State of Iowa, without regard for its principles of conflicts of law.
6
<PAGE>
ARTICLE X -- INTEGRATION
10.1 This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof, all prior understandings relating
thereto being merged herein. This Agreement cannot be changed or terminated
orally, but only in writing and if signed by both parties. This Agreement
shall be binding on the heirs, successors, and assigns of the parties hereto.
AGREED to on the dates set forth below.
LICENSOR LICENSEE
University of Iowa, Research Foundation Company
By /s/ W. Bruce Wheaton By /s/ Richard A. Carrano
- ----------------------------- ------------------------------
Date: 9/5/95 Date 9/13/95
Name: W. Bruce Wheaton, Ph.D. Name: Richard A. Carrano
Title: Executive Director Title: Vice President
7
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 5, 6 AND 12 AND PORTIONS
OF SCHEDULE 1 AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
LICENSE AGREEMENT
This LICENSE AGREEMENT is made as of the 2nd day of January, 1997 by
and between THE WISTAR INSTITUTE OF ANATOMY AND BIOLOGY, a nonprofit corporation
organized and existing under the laws of the Commonwealth of Pennsylvania ("The
Wistar Institute"), and APOLLON, INC., a corporation organized and existing
under the laws of the Commonwealth of Pennsylvania, having a place of business
at One Great Valley Parkway, Malvern, Pennsylvania 19355-1423 ("Apollon").
WHEREAS, The Wistar Institute, jointly with The Trustees of the
University of Pennsylvania ("Penn"), owns certain patents and patent
applications relating to genetic vaccines (i.e., the facilitated transfer and
expression of nucleic acids);
WHEREAS, Apollon desires to secure the exclusive right and license to
use, develop, manufacture, market and exploit such patents and patent
applications; and
WHEREAS, The Wistar Institute desires to grant Apollon an exclusive
worldwide license to use, develop, manufacture, market and exploit such patents
and patent applications, in accordance with the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
1.1 The following terms, as used herein, shall have the following
meanings:
"Affiliate" means, when used with reference to Apollon, any person
directly or indirectly controlling, controlled by or under common control with,
Apollon. For purposes of this Agreement, "control" means the direct or indirect
ownership of over 50% of the outstanding voting securities of a person, or the
right to receive over 50% of the profits of a person, or the ability to control
decisions of a person.
"Bankruptcy Event" means, with respect to any person, either of the
following:
(a) such person shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or shall consent to any such relief or to the appointment of or
taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally and substantially to pay its debts
as they become due, or shall take any corporate action to authorize any of the
foregoing; or
Page 1 of 29
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<PAGE>
(b) an involuntary case or other proceeding shall be commenced
against such person seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of ninety (90) days; or an order for
relief shall be entered against such person under the federal bankruptcy laws as
now or hereafter in effect.
"Calendar Quarter" means each three-month period, or any portion
thereof, beginning on January 1, April 1, July 1 and October 1 of each year.
"Effective Date" means the first date when all of the following have
been accomplished: (i) The Wistar Institute and Apollon have executed this
Agreement, and (ii ) Apollon has paid The Wistar Institute the first
installment of the license fee specified in Section 3.1 hereof and has issued
to the Institute 50,000 shares of stock as specified in Section 4.1 hereof.
"Federal Government Interest" means the rights, if any, of the United
States Government and any of its agencies under any law or agreement including,
but not limited to, Public Laws 96-517, 97-256, and 98-620, codified at 35
U.S.C. 200-212, and any regulations issued thereunder, as such statutes or
regulations may be amended from time to time hereafter.
"Licensed Patents" means (i) United States Patent No.
- -----------------, entitled "Genetic Immunization", allowed April 3, 1996; (ii)
United States Patent Applications Nos. 08/008,342, 08/029,336, 08/093,235 and
08/124,962; (iii) any continuations, divisions, reissues, re-examinations and
foreign counterparts of (i) or (ii) above; (iv) any continuations-in-part which
include subject matter which is supported and/or claimed in U.S. Patent
Applications Nos. 08/008,342, 08/029,336 and 08/093,235 (including without
limitation U.S. Patent Applications Nos. 08/495,684, 08/453,349 and 08/453,514);
(v) any continuations, divisions, reissues, re-examinations, and foreign
counterparts of (iv) above; and (vi) excluding, however, any issued patents
listing only inventors with a duty to assign solely to Apollon and not claiming
the benefit of the filing date of any application listed in (ii) above.
"Licensed Product(s)" means and includes (i) all products the
manufacture, composition, use, sale or other disposition of which is subject to
a Valid Claim of the Licensed Patents on a country-by-country basis, or which,
in whole or in part, are identified, discovered or developed by use or practice
of the Licensed Patents, which use or practice would infringe a Valid Claim of
the Licensed Patents on a country-by-country basis but for the license granted
herein; and (ii) all products, the manufacture, composition, use, sale or other
disposition of which is based on or derives from technical information taught in
the Licensed Patents but which are not subject to a Valid Claim of the Licensed
Patents or which, in whole or in part, are identified, discovered or developed
by use of technical information taught in the Licensed Patents, and which are
not otherwise subject to a Valid Claim of the Licensed Patents. Such technical
information shall be limited to information which is directly related to
intellectual property taught in the Licensed Patents, and shall exclude
intellectual property taught in the licensed patents and discovered solely by
inventors with a duty to assign to Apollon.
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<PAGE>
"Person" or "persons" means any corporation, partnership, joint
venture or any other entity or any natural person.
"PLA Approval" means approval by the FDA of an application for a new
biologic.
"PLA Filing" means the preparation and filing with the FDA of an
application for a new biologic.
"Public Offering" means the occurrence of a closing of an initial
public sale for the account of Apollon of shares of its Common Stock or
securities convertible into or exchangeable for shares of its Common Stock ,
where the gross proceeds to Apollon from such sale (before deduction of any
underwriting commissions, discounts or concessions or expenses of sale) is at
least Twelve Million Five Hundred Thousand Dollars ($12,500,000).
"Sale", or "sold" or any variation thereof means the sale, assignment,
lease or other disposition of a Licensed Product by Apollon or any Sublicensee
for commercial purposes.
"Sublicensee" means any person, expressly excluding Affiliates, to
whom Apollon transfers by sublicense Apollon's rights hereunder in conformance
with Section 2.2 hereof, to enable said person to make and sell Licensed
Products.
"Valid Claim" means a claim of (i) a patent application included in
the Licensed Patents that has been neither abandoned nor pending for more than
seven (7) years from its first priority date or (ii) an issued, unexpired
Licensed Patent that has not been withdrawn, canceled or disclaimed or held
invalid by a court or governmental authority of competent jurisdiction in an
unappealed or unappealable decision no longer subject to discretionary review
(for example, by way of writ of certiorari) or other review, on a
country-by-country basis.
ARTICLE II
GRANT OF LICENSE
2.1 Grant of License
(a) Subject to the terms and conditions contained in this
Agreement, The Wistar Institute hereby grants to Apollon an exclusive, worldwide
license to develop, make, have made, use, market, exploit, sell and have sold,
including the right to sell for resale, the Licensed Products and to practice
under the Licensed Patents; provided, however, that the license to Licensed
Patents owned jointly with Penn shall be exclusive only to The Wistar
Institute's undivided interest therein.
(b) Notwithstanding anything to the contrary in this Agreement,
The Wistar Institute may (i) use and practice the Licensed Patents solely for
research purposes; and (ii) grant to any non-profit academic or research
institution the right to use and practice the Licensed Patents solely for
non-commercial research and educational purposes. While Apollon shall have no
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right or license in or to any research conducted pursuant to (i) or (ii) above
or any results thereof (including, without limitation, any inventions or
discoveries), any commercial use of any results of such research shall be
subject to Apollon's exclusive rights under this Agreement.
2.2 Right to Sublicense. Apollon shall have the right to sublicense
to any third party the rights conferred upon Apollon under this Agreement,
subject to the following conditions:
(a) The Wistar Institute shall have the right to approve in
advance any Sublicensee that is not, at the time of the proposed sublicense, a
publicly held and traded company, which approval shall not be unreasonably
withheld. The Sublicensee shall be deemed approved thirty (30) days after
notice to The Wistar Institute unless The Wistar Institute first notifies
Licensee otherwise.
(b) Apollon shall forward, or cause to be forwarded, to The
Wistar Institute, within thirty (30) days after execution, a complete and
accurate written copy of each sublicense granted hereunder, and any amendment or
modification thereto, each of which sublicenses, amendments, or modifications
shall contain an agreement and acknowledgment by the Sublicensee that such
sublicense may be terminated upon thirty (30) days written notice by The Wistar
Institute upon termination of this Agreement; unless terminated in writing by
The Wistar Institute, each such sublicense shall be assigned to The Wistar
Institute.
(c) No Sublicensee shall be permitted to sublicense further any
of its rights under any sublicense. Each sublicense shall contain an agreement
and acknowledgment by the Sublicensee that such sublicense and the Sublicensee
are subject to the terms and conditions of the license granted to Apollon under
this Agreement. Any sublicense which is not in compliance with all of the
provisions of Section 2.2 shall be void.
(d) Notwithstanding any sublicense, Apollon shall remain
primarily liable to The Wistar Institute for all of Apollon's duties and
obligations contained in this Agreement, and any act or omission of a
Sublicensee which would be a breach of this Agreement if performed by Apollon
shall be deemed to be a breach by Apollon of this Agreement, provided that
Apollon shall be given the opportunity to cure such breach as permitted under
section 10.2 (a) hereof.
(e) If Apollon becomes subject to a Bankruptcy Event, all
payments then or thereafter due and owing to Apollon from its Sublicensees under
this Agreement shall thereupon, upon notice from The Wistar Institute to any
such Sublicensee, become payable directly to The Wistar Institute for the
account of Apollon; provided, however, that The Wistar Institute shall remit to
Apollon any amount by which such payments exceed the amounts owed by Apollon to
The Wistar Institute.
2.3 No Rights or Licenses by Implication. No rights or licenses with
respect to the Licensed Patents or otherwise are granted or deemed granted
hereunder or in connection herewith, other than those rights or licenses
expressly granted in this Agreement.
2.4 Federal Government Interest. Apollon acknowledges that in
accordance with the Federal Government Interest, the United States Government
may retain certain rights in inventions
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funded in whole or in part under any contract, grant or similar agreement with a
Federal agency. The license to the Licensed Patents and any other rights
granted under this Agreement are expressly subject to all of such rights, if
applicable.
ARTICLE III
PAYMENTS
3.1 License Initiation Fee. In consideration of the license
granted hereunder, Apollon shall pay The Wistar Institute a nonrefundable
license initiation fee of [ ]. This
license initiation fee shall be payable in three installments, with the first
payment of [ ] due [
], the second payment of [ ]
due [ ] and the third payment of
[ ] due [ ].
This license initiation fee shall be in addition to the other compensation
payable or deliverable pursuant to this Agreement and shall not be credited
against or otherwise reduce other compensation.
3.2 Payments in Lieu of Earned Royalties. In further consideration
of the license hereunder, Apollon shall pay to The Wistar Institute the
following amounts in lieu of royalties on sales of Licensed Products:
[
]
Sales of any Licensed Product by Apollon or any Affiliate or
Sublicensee thereof shall not be subject to a royalty hereunder.
3.3 Sublicense Fees. Apollon shall pay The Wistar Institute
[ ] of any sublicense initiation fee, advance, or other
similar consideration (and including partial payments) received by Apollon
pursuant to a sublicense granted hereunder, or any right or option to receive a
sublicense hereunder (provided that the holder of such right or option
subsequently becomes a Sublicensee of Apollon hereunder), expressly excluding
any payment, support or other consideration received by Apollon directly related
to support for development and/or marketing of Licensed Products.
3.4 Other Compensation. In addition to amounts payable to The Wistar
Institute under Sections 3.1, 3.2 and 3.3 hereof and in further consideration of
the license granted to Apollon in this Agreement, Apollon shall pay or deliver
to The Wistar Institute the milestone payments set forth on Schedule 1 hereto.
These fees shall not be credited against or otherwise reduce other compensation
provided for in this Agreement.
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3.5 Annual License Maintenance Fee. Apollon shall pay to The
Wistar Institute an annual license maintenance fee of [
], due and payable on [ ] and on [
] thereafter until the date [
].
3.6 Payments. Amounts payable under Section 3.3 hereof shall be due
within forty-five (45) days following the last day of the Calendar Quarter in
which they accrue. Payments shall be deemed paid as of the day on which they are
received by The Wistar Institute.
3.7 Currency, Place of Payment, Interest.
(a) All dollar amounts referred to in this Agreement are
expressed in United States dollars. All payments to The Wistar Institute under
this Agreement shall be made in United States dollars (or other legal currency
of the United States) by check payable to "The Wistar Institute of Anatomy and
Biology".
(b) Amounts that are not paid within forty-five (45) days after
such amounts become due shall accrue interest from the due date until paid, at a
rate equal to the lesser of the prime rate as charged by Corestates Bank, or an
alternate financial institution as agreed by the parties, to its prime
commercial customers, or the maximum interest rate allowed by applicable law.
The Wistar Institute may treat the failure to timely pay amounts due as a breach
of this Agreement notwithstanding the payment of interest.
3.8 Records. Apollon will maintain, and will cause its Sublicensees
to maintain, complete and accurate books and records which enable the amounts
payable hereunder to be verified. Upon reasonable prior notice to Apollon,
Apollon agrees to permit such books and records to be examined by an independent
certified public accountant designated by The Wistar Institute and reasonably
acceptable to Apollon. The purpose of such audit shall be solely for verifying
the amounts due and payable pursuant to this Agreement and said accountant shall
only disclose to The Wistar Institute information of Apollon relevant to such
inquiry. Such access shall be available during normal business hours not more
than once each calendar year, and once per year for three (3) years after the
expiration or termination of this Agreement.
ARTICLE IV
ISSUANCE OF SHARES
4.1 Issuance of Shares. In further consideration of the grant of the
license to Apollon hereunder, Apollon will issue, subject to the approval of a
majority of the Series A, Series B, and Series C Convertible Preferred Stock of
Apollon, to The Wistar Institute 50,000 shares (the "Shares") of its common
stock, par value $.01 per share ("Common Stock"), all of which shall be issued
simultaneously with the execution hereof or as soon as the approval of the
preferred shareholders is obtained.
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4.2 Restrictions on Transfer.
4.2.1 Restrictions on Transferability. The Shares shall not be
transferable in the absence of registration under the Securities Act of 1933, as
amended (the "Securities Act"), or an exemption therefrom. Apollon shall be
entitled to give stop transfer instructions to the transfer agent with respect
to the Shares in order to enforce the foregoing restrictions.
4.2.2 Restrictive Legend. Each certificate representing the
Shares shall bear substantially the following legend (in addition to any legends
required under applicable securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. THE SHARES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
4.3 Piggyback Registrations.
4.3.1 Right to Piggyback. If, after the expiration of one hundred
eighty (180) days after the Public Offering, Apollon proposes to register any of
its securities under the Securities Act and the registration form to be used may
be used for the registration of the Shares (a "Piggyback Registration"), Apollon
will give prompt written notice to The Wistar Institute of its intention to
effect such a registration and will use its best efforts to include in such
registration all Shares with respect to which Apollon has received, within five
(5) days after the receipt of Apollon's notice, a written request from The
Wistar Institute for inclusion therein, which request shall specify the Shares
intended to be sold or disposed of by The Wistar Institute and shall state the
intended method of disposition of such Shares (the "Registrable Securities"),
all to the extent requisite to permit the sale of the Registrable Securities by
The Wistar Institute (in accordance with the intended method thereof as set
forth in such request). If the securities proposed to be registered by Apollon
include securities to be distributed by or through a firm of underwriters, then
the Registrable Securities shall also be included in such underwriting.
Notwithstanding anything contained in this Section 4.3.1 to the contrary,
Apollon shall have no obligation to cause Registrable Securities to be
registered if the Shares are eligible for resale under Rule 144(k) of the
Securities Act.
4.3.2 Registration Procedures. If and whenever Apollon is
required by the provisions of Section 4.3.1 hereof to use its best efforts to
include the Registrable Securities in a Piggyback Registration, Apollon will, as
expeditiously as possible,
(a) furnish to The Wistar Institute such number of copies of a
prospectus, including a preliminary prospectus and any amendments or supplements
to the prospectus, in conformity with the requirements of the Securities Act,
and such other documents, as The Wistar Institute may reasonably request in
order to facilitate the public sale or other disposition of the Registrable
Securities;
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(b) use every reasonable effort to register or qualify the
Registrable Securities covered by the Piggyback Registration under the
securities or blue sky laws of such jurisdictions as Apollon shall reasonably
determine in its sole discretion, and do any and all other acts as things which
may be necessary under such securities or blue sky laws to enable The Wistar
Institute to consummate the public sale or other disposition in such
jurisdictions of the Registrable Securities;
(c) before filing a registration statement with respect to the
Registrable Securities or prospectus or amendments or supplements thereto with
the Securities and Exchange Commission (the "Commission"), furnish The Wistar
Institute and its counsel with an opportunity to meet with responsible officers
of Apollon for a "due diligence" review of the filing and with copies of all
such documents proposed to be filed which, insofar as they relate to The Wistar
Institute, shall be subject to the reasonable approval of its counsel;
(d) cause all such Registrable Securities registered as
described herein to be listed on each securities exchange and quoted on each
quotation service on which similar securities issued by Apollon are then listed
or quoted;
(e) provide a transfer agent and registrar for all Registrable
Securities registered as described herein and a CUSIP number for all such
Registrable Securities; and
(f) comply with all applicable rules and regulations of the
Commission.
4.3.3 Expenses. Apollon shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or compliance
hereunder, and The Wistar Institute shall pay all Selling Expenses (as defined
below) and other expenses that are not Registration Expenses relating to the
Registrable Securities. "Registration Expenses" shall mean all expenses, except
for Selling Expenses, incurred by Apollon in complying with the registration
provisions of this Agreement, including without limitation all registration,
qualification and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for Apollon, blue sky fees and expenses and the expense
of any special audits incident to or required by any such registration.
"Selling Expenses" shall mean all selling commissions, underwriting fees and
stock transfer taxes applicable to the Registrable Securities and all fees and
disbursements of counsel for The Wistar Institute.
4.3.4 Information from The Wistar Institute. The Wistar Institute
shall cooperate with Apollon in connection with any such registration and
furnish to Apollon such information regarding it and the distribution proposed
by it as Apollon may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
described herein. The Wistar Institute shall represent that such information is
true and complete.
4.3.5 Marketing Restrictions. If:
(i) The Wistar Institute requests registration of Shares
under Section 4.3.1, and
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(ii) the offering proposed to be made is to be an
underwritten public offering, and
(iii) the managing underwriter of such public offering
furnishes a written opinion that the total amount of securities to be included
in such offering would exceed the maximum amount of securities (as specified in
such opinion) which can be marketed at a price reasonably related to the then
current market value of such securities and without materially and adversely
affecting such offering,
then the Company will include in such registration the amount of securities
which, in such opinion, can be sold, in the following order:
First: If such registration statement shall be with respect to
a primary offering, all of the securities Apollon proposes to sell; and
then
Second: All of the Common Stock converted from Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock, Series C
Convertible Stock and all stock issued upon exercise of Warrants issued by
the Company and requested to be included in such registration, pro rata
among the holders thereof on the basis of the number of shares of such
Common Stock then awarded by such holders; and then
Third: All other securities, including the Shares, the holders
of which have the right to include such securities in a registration
statement filed by Apollon pro rata in accordance with the relative
priorities, if any, as shall exist among them.
4.3.6 Holdback Agreements. Unless the managing underwriters
otherwise agree, with respect to any underwritten public offering of Common
Stock, The Wistar Institute agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144) of the Shares during a period equal to
the lesser of (1) the lock-up period for Apollon's senior management with
respect to such underwritten offering or (2) one hundred eighty (180) days
beginning on the effective date of such underwritten offering (except as part of
such underwritten registration).
4.4 Indemnification.
4.4.1 In the event of any registration of any of the Shares
under the Securities Act pursuant to Section 4.3.1, Apollon agrees to indemnify
and hold harmless The Wistar Institute from and against any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) to which
The Wistar Institute may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any claim by a
third party asserting any untrue statement of a material fact contained in a
registration statement or omission of a material fact required to be stated
therein, on the effective date thereof, or arise out of any failure by Apollon
to fulfill any undertaking included in such registration statement, and Apollon
will, as incurred, reimburse The Wistar Institute for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim; provided, however, that Apollon shall not
be liable in any such case to the extent that such loss, claim, damages or
liability arises out of, or is based upon (i) an
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untrue statement or omission made in such registration statement in reliance
upon and in conformity with written information furnished by Apollon by or on
behalf of The Wistar Institute specifically for use in preparation of such
registration statement or (ii) any untrue statement or omission in any
prospectus that is corrected in any subsequent prospectus that was delivered to
The Wistar Institute prior to confirmation of the pertinent sale or sales by The
Wistar Institute.
4.4.2 The Wistar Institute agrees to indemnify and hold
harmless Apollon, its directors and officers and each other person, if any, who
controls Apollon within the meaning of the Securities Act from and against any
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) to which Apollon may become subject (under the Securities Act or
otherwise) insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon any claim by a
third party asserting (i) an untrue statement of a material fact made in such
registration statement or omission to state a material fact required to be
stated therein in reliance upon and in conformity with written information
furnished to Apollon by or on behalf of The Wistar Institute specifically for
use in preparation of such registration statement, provided that The Wistar
Institute shall not be liable in any such case for any untrue statement or
omission in any prospectus which statement or omission has been corrected, in
writing, by The Wistar Institute and delivered to Apollon before confirmation of
the sale from which such loss occurred, and The Wistar Institute will, as
incurred, reimburse Apollon for any legal or other expenses reasonably incurred
in investigating, defending or preparing to defend any such action, proceeding
or claim.
4.4.3 Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to Sections 4.4.1 or
4.4.2, such indemnified person shall notify the indemnifying person in writing
of such claim or of the commencement of such action, and, subject to the
provisions hereinafter stated, in case any such action shall be brought against
an indemnified person and the indemnifying person shall have been notified
thereof, the indemnifying person shall be entitled to participate therein, and,
to the extent that it shall wish, to assume the defense thereof, with counsel
reasonably satisfactory to the indemnified person. After notice from the
indemnifying person to such indemnified person of the indemnifying person's
election to assume the defense thereof, the indemnifying person shall not be
liable to such indemnified person for any legal expenses subsequently incurred
by such indemnified person in connection with the defense thereof; provided that
if there exists or shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified person, the
indemnified person shall be entitled to retain its own counsel at the expense of
such indemnifying person, it being understood, however, that the indemnifying
person shall not, in connection with any one such action or proceeding or
separate but substantially similar or related actions or proceedings in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys
(together with appropriate local counsel) at any time for all such indemnified
persons, which firm shall be designated in writing by such indemnified persons.
The indemnifying person shall not be liable for any settlement of any such
action or proceeding effected without its written consent, but if settled with
its written consent, or if there be a final judgment for the plaintiff in any
such action or proceeding, the indemnifying person shall indemnify and hold
harmless the indemnified person from and against any loss or liability (to the
extent stated above) by reason of such settlement or judgment.
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4.4.4 The indemnification provided for under this Agreement
will remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified person or any officer, director or controlling
person of such indemnified person and will survive the transfer of the
Registrable Securities.
4.4.5 Indemnification similar to that specified in the
preceding subdivisions of this Section (with appropriate modifications) shall be
given by Apollon and The Wistar Institute with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority other than the Act.
4.4.6 The indemnity agreements contained in this Section
shall remain operative and in full force and effect regardless of (i) any
termination of this Agreement or any underwriting agreement and (ii) the
consummation of the sale of the Registrable Securities.
4.4.7 The obligations of Apollon and The Wistar Institute
under this ARTICLE IV shall be in addition to any liability which Apollon and
The Wistar Institute may otherwise have and shall extend, upon the same terms
and conditions, to each person, if any, who controls Apollon of The Wistar
Institute within the meaning of the Securities Act.
4.5 Participation in Underwritten Registrations. The Wistar
Institute may not participate in any registration hereunder which is
underwritten unless The Wistar Institute (a) agrees to sell the Registrable
Securities on the basis provided in any underwriting arrangements approved by
the managing underwriter, and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
reasonably required under the terms of such underwriting arrangements.
4.6 Transfer of Piggyback Registration Rights. The right to sell
Registrable Securities pursuant to a Piggyback Registration described herein may
not be assigned or transferred by The Wistar Institute.
4.7 Agreement to be Bound by Procedures, Restrictions, etc. If The
Wistar Institute shall propose to sell any Registrable Securities pursuant to a
registration statement, it shall notify Apollon of its intent to do so in
accordance with Section 4.3.1, and the provision of such notice to Apollon shall
be deemed to establish an agreement by The Wistar Institute to comply with the
registration procedures, marketing restrictions and other provisions contained
herein. Such notice shall be deemed to constitute a representation that any
information supplied by The Wistar Institute to Apollon is accurate and
complete.
ARTICLE V
CERTAIN OBLIGATIONS OF APOLLON
5.1 Apollon Efforts: Reporting.
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(a) Apollon shall use its commercially reasonable efforts to
develop for commercial use and to market Licensed Products as soon as
practicable, consistent with sound and reasonable business practices.
(b) Apollon shall be required to submit a PLA Filing for a
Licensed Product by [ ], (the "Milestone Deadline").
provided, however, that Apollon may purchase up to a total of [
] extensions of such Milestone Deadline by paying to The Wistar
Institute, before or on the date of such Milestone Deadline, [
]. Such extension payments
shall be in addition to, and shall not diminish or be credited against, other
payments to which The Wistar Institute is entitled hereunder.
If Apollon (i) fails to meet the Milestone Deadline and does not make
an extension payment(s) as provided above or (ii) makes an extension payment(s)
as provided herein, but fails to meet the extended Milestone Deadline, The
Wistar Institute shall, upon any such failure, have the right to terminate the
Agreement and the licenses granted hereunder. The attainment by an Affiliate or
Sublicensee of this milestone shall be treated as the attainment of such
milestone by Apollon. The Wistar Institute shall give Apollon sixty (60) days
prior written notice of any decision by The Wistar Institute to terminate
Apollon's rights under this provision, and provided that Apollon does not cure
any such failure within such sixty (60) day period, termination shall be
effective without further notice at the conclusion thereof.
(c) Apollon shall provide The Wistar Institute on December 1,
1997, and on December 1 of each year thereafter with written reports, setting
forth in such detail as The Wistar Institute may reasonably request, the
progress of the development, evaluation, testing and commercialization of the
Licensed Products. Similarly, beginning June 1, 1997, Apollon shall provide on
June 1 and December 1 of each year reports on the progress of regulatory matters
before the FDA and on the progress of any Sublicensees developing Licensed
Products. Apollon also shall notify The Wistar Institute within sixty (60) days
after the first commercial sale of a Licensed Product by Apollon, its
Affiliates, or any Sublicensee.
5.2 Compliance With Laws
(a) Apollon shall comply with all applicable laws, rules and
regulations pertaining to the development, testing, manufacture, marketing and
import or export of the Licensed Products. Without limiting the foregoing,
Apollon acknowledges that the transfer of certain commodities and technical data
is subject to United States laws and regulations controlling the export of such
commodities and technical data, including all Export Administration Regulations
of the United States Department of Commerce. These laws and regulations, among
other things, prohibit or require a license for the export of certain types of
technical data to specified countries. Apollon will use its reasonable best
efforts to comply with all United States laws and regulations controlling the
export of commodities and technical data, and will be responsible to The Wistar
Institute for any violation thereof by Apollon or its Sublicensees.
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(b) To the extent required by the Federal Government Interest,
if applicable, all Licensed Products to be used or sold in the United States
shall be manufactured substantially in the United States, and Apollon shall take
such actions as are necessary to assure that it and its Sublicensees comply with
the obligations imposed by this Section 5.2(b).
5.3 Government Approvals. Apollon will be responsible for obtaining,
at its cost and expense, all governmental approvals required to commercially
market the Licensed Products.
5.4 Patent Notices, etc. Apollon shall mark the Licensed Products
sold in the United States with all applicable patent numbers. All Licensed
Products shipped to and/or sold in other countries shall be marked and labelled
in such a manner as to conform with all applicable laws of the country where the
Licensed Products are sold.
ARTICLE VI
WARRANTIES AND REPRESENTATIONS
6.1 Representations and Warranties
(a) Apollon represents and warrants that it is a corporation,
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to execute, deliver and perform this Agreement; and The Wistar
Institute represents and warrants that it is a nonprofit corporation, duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to execute, deliver and perform this Agreement;
(b) Apollon and The Wistar Institute each represent and warrant
to the other that this Agreement, when executed and delivered, will be its
legal, valid and binding obligation, enforceable against it in accordance with
its terms; and
(c) Apollon and The Wistar Institute each represent and warrant
to the other that its execution, delivery and performance of this Agreement does
not conflict with, or constitute a breach or default under, (i) its charter
documents, (ii) any law, order, judgment or governmental rule or regulation
applicable to it or its property, or, (iii) to the best of its knowledge, any
provision of any agreement, contract, commitment or instrument to which it is a
party; and the execution, delivery and performance of this Agreement by it does
not require the consent, approval or authorization of, or notice, declaration,
filing or registration with, any governmental or regulatory authority.
(d) The Wistar Institute represents and warrants to Apollon that
it has such business and financial experience as is required to give it the
capacity to protect its own interests in connection with the purchase of the
Shares and can bear the economic risk of its investment, including total loss
thereof.
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(e) The Wistar Institute represents and warrants to Apollon that
it is acquiring the Shares for investment for its own account only and not with
a view to, or for resale in connection with, any "distribution" thereof within
the meaning of the Securities Act.
(f) The Wistar Institute represents and warrants to Apollon that
it understands that the Shares have not been registered under the Securities Act
or registered or qualified under any state securities law in reliance on
specific exemptions therefrom.
(g) The Wistar Institute represents and warrants to Apollon that
it understands that nothing in this Agreement or any other materials presented
to The Wistar Institute in connection with the acquisition of the Shares
constitutes legal, tax or investment advice. The Wistar Institute has consulted
such legal, tax and investment advisors as it, in its sole discretion, has
deemed necessary or appropriate in connection with its purchase of the Shares.
(h) Apollon represents and warrants to The Wistar Institute that
the issuance and delivery to The Wistar Institute of the Shares have been duly
authorized by all requisite corporate action of Apollon and Apollon has full
corporate power and lawful authority to issue and deliver the Shares on the
terms and conditions contemplated herein, and, when so issued and delivered, the
Shares will be validly issued and outstanding, fully paid and nonassessable,
with no personal liability attaching to the ownership thereof, and not subject
to preemptive or any similar rights of the stockholders of Apollon or any liens
or encumbrances arising through Apollon.
(i) Apollon represents and warrants to The Wistar Institute
that, as of December 18, 1996, the authorized capital stock of Apollon consists
of 50,000,000 shares of Common Stock, of which 1,245,250 are issued and
outstanding, and 12,900,000 shares of preferred stock, of which 10,335,286
shares are issued and outstanding.
ARTICLE VII
LIMITATION ON LIABILITY AND INDEMNIFICATION
7.1 No Warranties: Limitation on Liability. THE LICENSED PATENTS ARE
PROVIDED ON AN "AS IS" BASIS AND THE WISTAR INSTITUTE MAKES NO REPRESENTATIONS
OR WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO THE LICENSED PATENTS OR THE
LICENSED PRODUCTS. BY WAY OF EXAMPLE BUT NOT OF LIMITATION, THE WISTAR INSTITUTE
MAKES NO REPRESENTATIONS OR WARRANTIES (i) OF COMMERCIAL UTILITY, (ii) OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR (iii) THAT THE USE OF
THE LICENSED PATENTS WILL NOT INFRINGE ANY PATENT, COPYRIGHT OR TRADEMARK OR
OTHER PROPRIETARY OR PROPERTY RIGHTS OF OTHERS. THE WISTAR INSTITUTE EXPRESSLY
DISCLAIMS ANY WARRANTY THAT THE LICENSED PATENTS ARE FREE FROM THE RIGHTFUL
CLAIMS OF ANY THIRD PARTY. THE WISTAR INSTITUTE SHALL NOT BE LIABLE TO APOLLON,
APOLLON'S SUCCESSORS OR ASSIGNS OR ANY THIRD PARTY WITH RESPECT TO ANY CLAIM ON
ACCOUNT OF, OR ARISING FROM, THE USE OF THE LICENSED PATENTS SUPPLIED HEREUNDER
OR THE MANUFACTURE, USE OR SALE OF LICENSED PRODUCTS OR ANY OTHER MATERIAL OR
ITEM DERIVED THEREFROM. THE WISTAR
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INSTITUTE SHALL NOT BE LIABLE TO APOLLON OR ANY OTHER PERSON FOR ANY LOSS OF
PROFITS, LOSS OF BUSINESS OR INTERRUPTION OF BUSINESS, OR FOR ANY INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY KIND INCURRED BY APOLLON OR ANY OTHER
PERSON WHETHER UNDER THIS AGREEMENT OR OTHERWISE, EVEN IF THE WISTAR INSTITUTE
HAS BEEN ADVISED OF THE LIKELIHOOD OF SUCH LOSS.
7.2 Apollon Indemnification. Apollon will indemnify and hold
harmless The Wistar Institute, its trustees, managers, officers, agents and
employees (collectively and individually, the "Indemnified Parties" or
"Indemnified Party"), from and against any and all liability, loss, damage,
action, claim or expense (including attorney's fees) suffered or incurred by the
Indemnified Parties due to claims by a Person not a party to this Agreement
(individually, a "Liability" and collectively, the "Liabilities") which result
from or arise out of (a) this Agreement, the license granted hereunder and any
sublicense granted pursuant thereto, or the development, use, manufacture,
promotion, sale or other disposition of any Licensed Products by Apollon, its
assignees, Sublicensees, vendors or other third parties; and (b) the successful
enforcement by an Indemnified Party of its rights under this Section 7.2.
Without limiting the foregoing, Apollon will indemnify and hold harmless the
Indemnified Parties from and against any Liabilities resulting from:
(i) any product liability or other claim of any kind
related to the use by Apollon or a third party of a Licensed Product
manufactured, sold or otherwise disposed of by or on behalf of Apollon, its
assignees, Sublicensees, or its vendors;
(ii) any claim by a third party that the Licensed Patents or
the design, composition, manufacture, use, sale or other disposition of any
Licensed Product manufactured, used, sold or otherwise disposed of by or on
behalf of Apollon, its assignees, Sublicensees, or its vendors infringes or
violates any patent, copyright, trademark or other intellectual property rights
of such third party; or
(iii) clinical trials or studies conducted by or on behalf of
Apollon or any Sublicensee relating to the Licensed Products, including, without
limitation, any claim by or on behalf of a human subject of any such clinical
trial or study, any claim arising from the procedures specified in any protocol
used in any such clinical trial or study, any claim of deviation, authorized or
unauthorized, from the protocols of any such clinical trial or study, and any
claim resulting from or arising out of the manufacture or quality control by a
third party of any substance administered in any clinical trial or study;
(iv) provided, however, that Apollon's obligation to
indemnify and hold harmless hereunder shall not apply to any liability, loss,
damage, action, claim, or expense to the extent it is attributable to the gross
negligence, or reckless or intentional misconduct of any Indemnified Party
hereunder, and shall expressly exclude any liability, loss, damage, action,
claim, or expense arising from any use or practice of the Licensed Patents by or
on behalf of The Wistar Institute or by or on behalf of any other nonprofit,
academic or research institution pursuant to section 2.1 (b) hereof.
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7.3 Procedures. The Indemnified Party shall promptly notify Apollon
of any claim or action giving rise to a Liability subject to the provisions of
Section 7.2. Apollon shall have the right to defend any such claim or action, at
its cost and expense. The Indemnified Party may employ its own counsel at its
own expense. Apollon shall not settle or compromise any such claim or action in
a manner that imposes any restrictions or obligations on any Indemnified Party
without such Indemnified Party's written consent, or grants any rights to the
Licensed Patents without The Wistar Institute's written consent, which shall not
be unreasonably withheld. If Apollon fails or declines to assume the defense of
any such claim or action within thirty (30) days after notice thereof, The
Wistar Institute may assume the defense of such claim or action for the account
and at the risk of Apollon, and any Liability related thereto shall be
conclusively deemed a Liability of Apollon. Apollon shall pay promptly to the
Indemnified Party any Liabilities to which the foregoing indemnity related, as
incurred. The indemnification rights of The Wistar Institute and any other
Indemnified Party contained herein are in addition to all other rights which The
Wistar Institute or such Indemnified Party may have at law or in equity or
otherwise.
7.4 Insurance. Apollon shall maintain general liability and product
liability insurance as follows:
(a) beginning with the Effective Date of this Agreement, general
liability insurance, to be written on an occurrence or a claims made basis, in a
minimum amount of $1,000,000 combined single limit per incident and in the
aggregate.
(b) Beginning with the commencement of human clinical trials of
a Licensed Product, a policy or policies of product liability insurance to be
written on an occurrence or claims made basis in a minimum amount of $2,000,000
combined single limit per occurrence and in the aggregate.
Such insurance shall be issued by an insurance carrier with a
rating of "A-" or better by A.M. Best and shall name The Wistar Institute as an
additional insured with respect to Apollon's performance under this Agreement.
Apollon shall provide The Wistar Institute with copies of endorsements to such
policies upon request. Apollon shall notify The Wistar Institute at least
thirty (30) days prior to cancellation of any such coverage. The Wistar
Institute shall receive a royalty on any insurance award constituting
compensation to Apollon for lost profits on the sale of Licensed Products. The
minimum insurance amounts specified herein shall not be deemed a limitation on
Apollon's indemnification liability under this Agreement.
ARTICLE VIII
PATENTS AND INFRINGEMENT
8.1 Prosecution of Patents.
(a) The preparation, filing, prosecution, and maintenance of
Licensed Patents based on intellectual property discovered by one or more
inventors with a duty to assign to The Wistar Institute and one or more
inventors with a duty to assign to Penn shall be controlled jointly by Penn and
The Wistar Institute, in consultation with Apollon. With respect to joint
patent
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rights, based on intellectual property discovered by one or more inventors with
a duty to assign to The Wistar Institute, one or more inventors with a duty to
assign to Penn, and one or more inventors with a duty to assign to Apollon
(hereinafter the "Joint Patent Rights), the parties shall confer on the
preparation, filing, prosecution, and maintenance of such Joint Patent Rights.
Apollon shall be responsible for all documented expenses (including legal fees,
filing and maintenance fees or other governmental charges) incurred in
connection with the preparation, filing, prosecution and maintenance of the
Licensed Patents, including Joint Patent Rights.
(b) The Wistar Institute and Apollon shall cooperate fully with
each other to execute all lawful papers and instruments and to make all rightful
oaths and declarations as may be necessary in the preparation and prosecution of
all such patents and other applications under this Section 8.1.
8.2 Cooperation. Apollon and The Wistar Institute shall cooperate in
protecting, defending, enforcing and upholding the Licensed Patents and the
claims thereof.
8.3 Ownership. The Wistar Institute shall retain an undivided
ownership interest in and to the Licensed Patents regardless of which party
prepares, prosecutes or maintains the patents, subject to the express license
granted Apollon under Article II hereof.
8.4 Infringement and Litigation.
(a) Each party will promptly notify the other party in writing
of any infringement or possible infringement of any of the Licensed Patents
which may come to its attention, including notice of any certification filed
under the United States "Drug Price Competition and Patent Term Restoration Act
of 1984". The Wistar Institute, Penn, and Apollon shall consult one another in a
timely manner concerning any appropriate response thereto.
(b) Apollon shall have the right, but not the obligation to
prosecute such infringement at its own expense. Apollon will not settle or
compromise any such suit in a manner that imposes any obligations or
restrictions on The Wistar Institute, without The Wistar Institute's written
consent, which shall not be unreasonably withheld. In any such settlement or
compromise, consideration shall be given in good faith to granting the infringer
a sublicense under the Licensed Patents on appropriate terms. Financial
recoveries from any such litigation will first be applied to reimburse Apollon
for its litigation expenses with additional recoveries paid to Apollon. Should
an infringer be granted a sublicense, The Wistar Institute shall be entitled to
a portion of any sublicensee fees, as provided in Section 3.3 hereof.
(c) The Wistar Institute and Penn shall have a continuing right
to intervene at The Wistar Institute's or Penn's own expense and to join Apollon
in any claim or suit for infringement of any of the Licensed Patents. Financial
recoveries from any such litigation shall first be applied to reimburse Apollon,
The Wistar Institute, and/or Penn, as the case may be, with additional
recoveries paid to Apollon. Should an infringer be granted a sublicense, The
Wistar Institute shall be entitled to a portion of any sublicensee fees, as
provided in Section 3.3 hereof.
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(d) If Apollon fails to prosecute such infringement in a timely
manner, Penn and/or The Wistar Institute shall each have the right but not the
obligation to prosecute such infringement at its own expense. In such event,
financial recoveries shall be retained entirely by whichever of Penn and/or The
Wistar Institute prosecuted such infringement, or if Penn and The Wistar
Institute elect to proceed jointly, as determined by Penn and The Wistar
Institute.
(e) In any action to enforce any of the Licensed Patents, either
party, at the request and expense of the other party, shall cooperate to the
fullest extent reasonably possible. This provision shall not be construed to
require a party to undertake any activities, including legal discovery, at the
request of any third party except as may be required by lawful process of a
court of competent jurisdiction.
8.5 Patent Term Extension Obligations. Apollon shall keep The Wistar
Institute fully informed of Apollon's and each Sublicensee's progress toward
regulatory approval for commercial sale of the first Licensed Product with
respect to each Licensed Patent hereunder. Apollon, Penn, and The Wistar
Institute shall cooperate in determining with respect to such Licensed Products
if the Licensed Patents would be eligible for Patent Term Extension pursuant to
35 U.S.C. Section 156 et. seq., and, as appropriate, applicable foreign patent
laws. Apollon acknowledges that time is of the essence with respect to
submission of any application for Patent Term Extension. Apollon shall give The
Wistar Institute prompt oral notification that its or its Sublicensee's first
Licensed Product with respect to each Licensed Patent has received permission
(under the provision of law under which the applicable regulatory review
occurred) for commercial marketing or use (the date of such permission being
herein referred to as the "Approval Date"), and shall confirm such notification
in writing within five (5) days of receipt of written notice of marketing
approval from the regulatory agency. The Wistar Institute and/or any owner of
record of the patent the term of which is to be extended, shall have the right,
but not the obligation to apply for Patent Term Extension. At The Wistar
Institute's request, Apollon shall, in a timely manner, assist The Wistar
Institute in preparing an application for Patent Term Extension in compliance
with 35 U.S.C. Section 156 et. seq., and, as appropriate, any applicable foreign
patent laws. Apollon and its Sublicensees shall cooperate fully with The Wistar
Institute in preparing the applications for Patent Term Extension. Apollon
agrees to join in such applications at The Wistar Institute's request. Apollon
shall fully support such applications and shall provide such information as may
be requested in support of such applications by The Wistar Institute or by the
government. If The Wistar Institute elects not to file an application for
Patent Term Extension, Apollon shall have the right but not the obligation to do
so and The Wistar Institute agrees to join in such application at Apollon's
request and to fully support such application and provide such information as
may be requested in support of such application by Apollon or by the government.
ARTICLE IX
CONFIDENTIALITY
9.1 Confidentiality.
(a) Apollon and The Wistar Institute each agree to and to cause
their agents, employees, and advisors to maintain in confidence and not to
disclose to any third party, any
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confidential or proprietary information or material(s) ("Confidential
Information") of the other party received pursuant to this Agreement (i) in
written or other tangible form and marked "Proprietary" or "Confidential" at the
time it is disclosed to the receiving party, or (ii) if disclosed orally or
otherwise, but not in tangible form, which is identified as confidential or
proprietary at the time of disclosure and which is documented in writing marked
"Proprietary" or "Confidential" to the other party within fifteen (15) business
days of disclosure.
(b) The foregoing obligations shall not apply to:
(i) information that is known to the receiving party
or independently developed by the receiving party prior to the time of
disclosure, in each case, to the extent evidenced by written records promptly
disclosed to the furnishing party upon receipt of the Confidential Information;
(ii) information disclosed to the receiving party by a
third party that has a right to make such disclosure;
(iii) information that becomes patented, published or
otherwise part of the public domain as a result of acts by the furnishing party
or a third person obtaining such information as a matter of right; or
(iv) information that is required to be disclosed by
order of the FDA or similar authority or a court of competent jurisdiction or
other government authority or agency; provided that the parties shall use their
best efforts to obtain confidential treatment of such information by the agency,
authority, or court; or
(v) Information subsequently developed by or for the
receiving party independently of information received from the furnishing party.
(c) Each party will take all reasonable steps to protect the
Confidential Information of the other party with the same degree of care used to
protect its own confidential or proprietary information. Without limiting the
foregoing, each party shall ensure that all of its employees or agents having
access to the Confidential Information of the other party are obligated to abide
by the receiving party's obligations hereunder.
(d) Nothing herein shall be construed to prevent the disclosure
of Confidential Information by Apollon or Sublicensee(s) as necessary to
practice commercially the rights granted hereunder including, without
limitation, the disclosure of Confidential Information to regulatory or other
governmental agencies as necessary to obtain marketing approval, or to obtain
patent protection, or the disclosure of Confidential Information under a
Confidentiality Agreement as appropriate to development and commercialization of
products hereunder.
(e) Subject to the limitations of Sections 9.1 (b) (i)-(v)
hereof, The Wistar Institute and its employees, agents, and advisors shall treat
as Confidential Information hereunder all sublicense agreements provided to The
Wistar Institute by or on behalf of Apollon or any Sublicensee hereunder.
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9.2 Publication. Apollon acknowledges that a basic objective of the
research and development activities of The Wistar Institute is the generation of
new knowledge and its expeditious dissemination. To further that objective, The
Wistar Institute retains the right, at its discretion, to demonstrate, publish
or publicize a description of the Licensed Patents and any results of research
conducted by The Wistar Institute with or relating to the Licensed Patents.
9.3 Use of Name. Apollon shall not directly or indirectly use The
Wistar Institute's name, or the name of any trustee, manager, officer or
employee thereof, without The Wistar Institute's written consent, except that
Apollon may include an accurate description of the terms of this Agreement to
the extent required under federal or state securities or other disclosure laws.
9.4 Attribution of Scientific Contribution. Apollon shall use good
faith efforts to identify The Wistar Institute as an owner of the Licensed
Patents, and/or recognize the role of The Wistar Institute in the development of
the Licensed Patents, in all publications or oral presentations by Apollon
describing the Licensed Patents or any Licensed Products.
ARTICLE X
TERM AND TERMINATION
10.1 Term. The licenses granted under this Agreement shall commence
on the Effective Date and together with this Agreement shall continue, subject
to earlier termination under Sections 10.2 or 10.3 hereof, until the expiration
of the last to expire of the Licensed Patents, at which time all rights licensed
hereunder shall convert to a fully paid exclusive worldwide license to Apollon.
10.2 Termination by The Wistar Institute.
(a) Upon the occurrence of any of the events set forth below and
during the continuance thereof, The Wistar Institute shall have the right to
terminate this Agreement by giving to Apollon written notice of termination,
such termination to be effective with the giving of such notice.
(i) Apollon fails to pay any amount payable to The
Wistar Institute within thirty (30) calendar days after such amount becomes due
and Apollon fails thereafter to provide full payment within twenty (20) calendar
days after receipt of written notice;
(ii) breach by Apollon of any material covenant or
agreement (other than a breach referred to in clause (i) above) or any
representation or warranty contained in this Agreement that is continuing and
uncured sixty (60) calendar days after The Wistar Institute gives Apollon
written notice of such breach;
(iii) Apollon becomes subject to a Bankruptcy Event; or
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(iv) the dissolution or cessation of operations by
Apollon.
(b) No exercise by The Wistar Institute of any right of
termination shall constitute a waiver of any right of The Wistar Institute for
recovery of any monies then due to it hereunder or any other right or remedy The
Wistar Institute may have at law, in equity or under this Agreement.
10.3 Termination by Apollon.
(a) Apollon may, at its option, terminate this Agreement at any
time by doing all of the following:
(i) ceasing to make, have made, use, sell or have sold all
Licensed Products;
(ii) terminating all Sublicenses, and causing all
Sublicensees to cease making, having made, using and selling or having sold all
Licensed Product;
(iii) giving sixty (60) days written notice to The Wistar
Institute of Apollon's termination; and
(iv) tendering payment of all accrued payments.
(b) Apollon may terminate this Agreement upon sixty (60) days
prior written notice to The Wistar Institute if The Wistar Institute is (i)
subject to a Bankruptcy Event or (ii) in breach of a material covenant of this
Agreement or representation or warranty of this Agreement, and such material
breach remains uncured for sixty (60) days after Apollon gives written notice of
such breach.
10.4 Rights and Duties Upon Termination. Within thirty (30) days
after termination of this Agreement, each party shall return to the other party
any Confidential Information of the other party.
10.5 Sublicenses. Any sublicenses granted by Apollon under Section
2.2 of this Agreement shall survive termination of this Agreement by The Wistar
Institute in accordance with the terms of such sublicenses, in which event the
sublicense shall be assigned to The Wistar Institute, unless The Wistar
Institute terminates such sublicenses by prior written notice.
10.6 Provisions Surviving Termination. Apollon's obligation to pay
any amounts accrued but unpaid, and the obligation of Apollon and The Wistar
Institute to discharge any obligations or responsibilities arising prior to
termination of this Agreement shall survive such termination. In addition,
Sections 2.3; 3.8; 4.2; 4.3.6; 4.4; 9.3; 10.4; 10.5;10.6; 11.1 and 11.5 and
ARTICLE VII and any other provisions to the extent required to interpret the
rights and obligations of the parties arising prior to the termination date
shall survive expiration or termination of this Agreement.
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ARTICLE XI
ADDITIONAL PROVISIONS
11.1 Arbitration.
(a) All disputes arising between The Wistar Institute and
Apollon under this Agreement shall be settled by arbitration conducted in the
English language in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA"). The arbitration shall be conducted
by one arbitrator chosen by mutual agreement of the parties. If the parties are
unable to agree on an arbitrator, they shall each pick one arbitrator and the
two arbitrators shall choose a third arbitrator. The parties will cooperate with
each other in causing the arbitration to be held in as efficient and expeditious
a manner as practicable. Any arbitration proceeding instituted by either party
under this Agreement shall be brought in Philadelphia, Pennsylvania.
(b) Any award rendered by the arbitrator(s) shall be final and
binding upon the parties hereto. Judgment upon the award may be entered in any
court of record of competent jurisdiction. Each party shall pay its own
expenses of arbitration and the expenses of the arbitrator(s) shall be equally
shared unless the arbitrator(s) assesses as part of his, her or their award all
or any part of the arbitration expenses of one party (including reasonable
attorney's fees) against the other party.
(c) Apollon and The Wistar Institute each irrevocably and
unconditionally consents to the jurisdiction of any such proceeding and waives
any objection that it may have to personal jurisdiction or the laying of venue
of any such proceeding.
(d) For a period not to exceed twenty (20) days after the
receipt by the parties and arbitrators of the statement of defense or any reply
statement of defense, there shall be limited discovery, upon request of either
party. Each party shall be entitled to one or more requests for relevant
documents and records. Upon such request the other party shall produce such
requested documents or records within five (5) days, unless the arbitrators
decide, upon motion of the parties, that the request is too burdensome to
produce within such time period, in which case the arbitrators shall set a time
period in which such documents or records must be produced.
11.2 Assignment. No rights hereunder may be assigned by Apollon
without the express written consent of The Wistar Institute (not to be
unreasonably withheld), except by operation of law or in connection with a
merger, sale of all or substantially all Apollon's assets to which this
Agreement pertains or other transaction involving a change of control (as
defined in Section 1.1 under "Affiliate") of Apollon. Any prohibited assignment
of this Agreement or the rights hereunder shall be null and void. No assignment
shall relieve Apollon of responsibility for the performance of any accrued
obligations which it has prior to such assignment. This Agreement shall inure to
the benefit of permitted assigns of Apollon.
11.3 No Waiver. A waiver by either party of a breach or violation of
any provision of this Agreement will not constitute or be construed as a waiver
of any subsequent breach
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or violation of that provision or as a waiver of any breach or violation of any
other provision of this Agreement.
11.4 Independent Contractor. Nothing herein shall be deemed to
establish a relationship of principal and agent between The Wistar Institute and
Apollon, nor any of their agents or employees for any purpose whatsoever. This
Agreement shall not be construed as constituting The Wistar Institute and
Apollon as partners, or as creating any other form of legal association or
arrangement which could impose liability upon one party for the act or failure
to act of the other party.
11.5 Notices. Any notice under this Agreement shall be sufficiently
given if sent in writing by prepaid, first class, certified or registered mail,
return receipt requested, or if delivered by hand, or sent by Federal Express,
addressed as follows:
If to The Wistar Institute:
The Wistar Institute of Anatomy and Biology
3601 Spruce Street
Philadelphia, PA 19104
Attn: Dr. Nancy Fogg-Johnson,
Executive Vice President, Administration
If to Apollon:
Apollon, Inc. AND Ballard Spahr Andrews & Ingersoll
One Great Valley Parkway 1735 Market Street, 51st Floor
Malvern, Pennsylvania 19355-1423 Philadelphia, Pennsylvania 19103-7599
Attn: Vincent R. Zurawski, Jr., Ph.D. Attn: Morris Cheston, Jr., Esquire
President and Chief Executive
Officer
or to such other addresses as may be designated from time to time by notice
given in accordance with the terms of this Section.
11.6 Entire Agreement. This Agreement embodies the entire
understanding between the parties relating to the subject matter hereof and
supersedes all prior understandings and agreements, whether written or oral.
This Agreement may not be varied except by a written document signed by duly
authorized representatives of both parties.
11.7 Severability. Any of the provisions of this Agreement which are
determined to be invalid or unenforceable in any jurisdiction shall be
ineffective to the extent of such invalidity or unenforceability in such
jurisdiction, without rendering invalid or unenforceable the remaining
provisions hereof or affecting the validity or unenforceability of any of the
terms of this Agreement in any other jurisdiction.
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11.8 Headings. Any headings and captions used in this Agreement are
for convenience of reference only and shall not affect its construction or
interpretation.
11.9 No Third Party Benefits. Nothing in this Agreement, express or
implied, is intended to confer on any person other than the parties hereto or
their permitted assigns, any benefits, rights or remedies.
11.10 Governing Law. This Agreement shall be construed, governed,
interpreted and applied in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to conflict of law principles.
11.11 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be deemed an original as against the party
whose signature appears thereon, but all of which taken together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this License
Agreement as of the date first above written.
The Wistar Institute Apollon, Inc.
of Anatomy and Biology VINCENT R. ZURAWSKI, JR., Ph.D.
By: /s/ illegible signature By: /s/ Vincent R. Zurawski, Jr.
-------------------------- -------------------------------
Title: President Title: President and CEO
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INDEX OF SCHEDULES
Schedule 1 - Milestone Payments
<PAGE>
SCHEDULE 1 - MILESTONE PAYMENTS
Apollon shall make the following milestone payments to The Wistar Institute,
according to the following schedule:
[
]
<PAGE>
AGREEMENT
AGREEMENT dated as of July 24, 1996 between Apollon, Inc., a
Pennsylvania corporation (the "Company"), and Vincent R. Zurawski, Jr.
("Executive").
WITNESSETH
WHEREAS, in consideration of Executive's past and future service to
the Company, the Company desires to provide certain protections to Executive in
the event of a change in control of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this a written agreement and intending to be legally
bound, the parties agree as follows:
1. Certain Definitions. The following terms will have the meanings
set forth below for purposes of this Agreement:
"Acquiring Person" shall mean a person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including as a partnership, limited partnership, syndicate, or through any means
of affiliation whether or not formally organized, who acquires, directly or
indirectly, voting power over voting shares of the Company that constitute
"Control Shares".
"Acquisition Purchase Price" shall mean:
(i) "Acquisition Purchase Price" shall be the maximum price paid
per share by the "Acquiring Person" for any of its "Control Shares"; provided
that, in the event that all or a portion of the consideration paid by the
"Acquiring Person" for any of such "Control Shares" is in a form other than
cash, then the "Acquisition Purchase Price" shall be any cash consideration paid
plus the "Fair Market Value" of the non-cash consideration paid per share of
such "Control Shares" on the date of such payment; or
(ii) In the event that a "Change in Control" occurs without the
purchase of "Control Shares", then the "Acquisition Purchase Price" shall be the
"Fair Market Value" per share of the equity securities of the Company on the
date of the "Change in Control".
"Change in Control" shall mean:
(i) The acquisition by any person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including
<PAGE>
as a partnership, limited partnership, syndicate, or through any means of
affiliation whether or not formally organized (excluding, for this purpose, the
Company or its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership, (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 50% or more of either
the then outstanding Common Stock and Convertible Preferred Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an Acquiring Person or an affiliate or associate thereof)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of (a) a
reorganization, merger, or consolidation, in each case, with respect to which
persons (other than an "Acquiring Person" or an affiliate or associate
thereof) who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not immediately thereafter, own
more than 50% of the combined voting power of the surviving or resulting
corporation's then outstanding voting securities entitled to vote generally
in the election of directors, (b) a liquidation or dissolution of the Company
or (c) the sale of all or substantially all of the assets of the Company.
"Constructively". Executive shall have been terminated
"Constructively" if, after, as a result of or in connection with a "Change in
Control", (i) Executive is offered a position with the Company or its successor
on terms, including compensation, benefits and duties to be performed, which are
materially inferior to the terms of his position with the Company prior to the
"Change in Control" or (ii) Executive's duties with the Company or its successor
are substantially reduced within 12 months after a "Change in Control".
"Control Shares" shall mean (i) those voting shares of the Company
that, upon acquisition of voting power with respect to such shares by an
"Acquiring Person", would result in a "Change in Control" and (ii) voting shares
of the Company beneficially owned by an "Acquiring Person" where such beneficial
2
<PAGE>
ownership was acquired (a) within 120 days of the day the person or group became
an "Acquiring Person" or (b) with the intention of effecting a "Change in
Control".
"Fair Market Value" shall be the fair market value as determined in
good faith by the "Incumbent Board" as defined herein.
"Justifiable Cause" shall include theft, falsification of records,
fraud, embezzlement, gross negligence or willful misconduct, causing the Company
or its successor to violate any federal, state, or local law, or administrative
regulation or ruling having the force and effect of law, insubordination,
conflict of interest, diversion of corporate opportunity, or conduct that
results in publicity that has a material adverse effect on the Company or its
successor.
2. Purchase of Shares. In the event of a "Change in Control", the
Company or its successor shall (i) purchase for cash, at Executive's option, all
or a portion of Executive's equity securities of the Company, including 72,000
shares of Common Stock held by Executive's children and 230,000 shares of Common
Stock held by Argus Investment Partners, L.P., a family limited partnership, at
the "Acquisition Purchase Price", such option to expire 12 months after the date
of the "Change in Control"; and (ii) pay to Executive an amount in cash equal to
the difference between the exercise price of all granted and outstanding but not
yet exercisable stock options held by Executive immediately prior to the "Change
in Control" and the "Acquisition Purchase Price" times the number of all such
options, upon which payment all such options will terminate.
3. Termination in Connection with a "Change in Control". In the
event Executive's employment with the Company or its successor is terminated,
either actually or "Constructively", by the Company or its successor (exclusive
of termination for "Justifiable Cause") as a result of, in connection with or
within 12 months after a "Change in Control"; or in the event that Executive's
employment terminates due to Executive's resignation as a result of, in
connection with or within 12 months after a "Change in Control" in which
Centocor, Inc. or any affiliate of Centocor, Inc. is the "Acquiring Person", the
Company or its successor shall pay to Executive severance pay, as liquidated
damages and not as penalty, (i) an amount in cash equal to 24 months base salary
of Executive (excluding any bonus) at the greater of the rate payable at the
date of the "Change in Control" or the rate payable at the date of said
termination ("Date of Termination"), which amount shall be accelerated and
immediately due upon any such termination; and (ii) any bonus awarded by the
Board of Directors of the Company on or prior to the Date of Termination and not
yet paid to Executive.
3
<PAGE>
4. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of Section 4.c., all
determinations required to be made under this Section 4, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the independent certified public accountants engaged by the Company to
audit its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days after the Date of Termination or such earlier time as is requested
by the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 4.b., shall be paid to Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up Payment which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.c. and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
Underpayment and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Underpayment
4
<PAGE>
and any income tax, including interest and penalties with respect thereto,
imposed as a result of the Underpayment.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment or the Underpayment. Such notification
shall be given as soon as practicable but no later than ten business days after
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the thirty-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration
of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information relating to such claim,
reasonably requested by the Company,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.c., the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company
5
<PAGE>
directs Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to Executive, on an interest-free basis, and
shall indemnify and hold Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with respect thereto,
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and further provided that any extension of the statute
of limitations relating to payment of taxes for the taxable year of Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and Executive shall be entitled to settle or contest,
as the case may be, any other issue raised by the Internal Revenue Service or
any other taxing authority.
d. If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.c., Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.c.) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.c., a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise. The Company shall not be entitled to set off against the amounts
payable to Executive hereunder any amounts earned by Executive in other
employment after termination of his employment with the Company hereunder or any
amounts which might have been earned by Executive in other employment had he
sought such other employment. The amounts payable to Executive hereunder shall
not be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
6. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter
6
<PAGE>
construed to be invalid or unenforceable, the same shall not affect the
remainder of the covenant or covenants, or the remainder of the Agreement, which
shall be given full effect, without regard to the invalid portions.
7. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any other
term or condition.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no modification
or waiver of any provision hereof shall be valid unless it be in writing and
signed by all of the parties hereto.
9. Assignment. This Agreement and the rights and obligations of the
Company hereunder shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
10. Binding Effect. This Agreement and all of the provisions hereof
shall be binding upon the legal representatives, heirs, distributees, successors
and permitted assigns of the parties hereto.
11. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed therein.
12. Headings. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APOLLON, INC.
By: /s/ Morton Collins /s/ Vincent R. Zurawski, Jr.
- ------------------------- ----------------------------
Name: Morton Collins Vincent R. Zurawski, Jr.
Title: Chairman
7
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Exhibit 10.11
AGREEMENT
AGREEMENT dated as of July 17, 1996 between Apollon, Inc., a
Pennsylvania corporation (the "Company"), and Richard Ginsberg ("Executive").
WITNESSETH
WHEREAS, in consideration of Executive's past and future service to
the Company, the Company desires to provide certain protections to Executive in
the event of a change in control of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this a written agreement and intending to be legally
bound, the parties agree as follows:
1. Certain Definitions. The following terms will have the meanings
set forth below for purposes of this Agreement:
"Acquiring Person" shall mean a person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including as a partnership, limited partnership, syndicate, or through any means
of affiliation whether or not formally organized, who acquires, directly or
indirectly, voting power over voting shares of the Company that constitute
"Control Shares".
"Acquisition Purchase Price" shall mean:
(i) "Acquisition Purchase Price" shall be the maximum price paid
per share by the "Acquiring Person" for any of its "Control Shares"; provided
that, in the event that all or a portion of the consideration paid by the
"Acquiring Person" for any of such "Control Shares" is in a form other than
cash, then the "Acquisition Purchase Price" shall be any cash consideration paid
plus the "Fair Market Value" of the non-cash consideration paid per share of
such "Control Shares" on the date of such payment; or
(ii) In the event that a "Change in Control" occurs without the
purchase of "Control Shares", then the "Acquisition Purchase Price" shall be the
"Fair Market Value" per share of the equity securities of the Company on the
date of the "Change in Control".
"Change in Control" shall mean:
(i) The acquisition by any person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express
<PAGE>
agreement, arrangement, relationship or understanding, including as a
partnership, limited partnership, syndicate, or through any means of affiliation
whether or not formally organized (excluding, for this purpose, the Company or
its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership, (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 50% or more of either
the then outstanding Common Stock and Convertible Preferred Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an Acquiring Person or an affiliate or associate thereof)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of (a) a
reorganization, merger, or consolidation, in each case, with respect to which
persons (other than an "Acquiring Person" or an affiliate or associate
thereof) who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not immediately thereafter, own
more than 50% of the combined voting power of the surviving or resulting
corporation's then outstanding voting securities entitled to vote generally
in the election of directors, (b) a liquidation or dissolution of the Company
or (c) the sale of all or substantially all of the assets of the Company.
"Constructively". Executive shall have been terminated
"Constructively" if, after, as a result of or in connection with a "Change in
Control", (i) Executive is offered a position with the Company or its successor
on terms, including compensation, benefits and duties to be performed, which are
materially inferior to the terms of his position with the Company prior to the
"Change in Control" or (ii) Executive's duties with the Company or its successor
are substantially reduced within 12 months after a "Change in Control".
"Control Shares" shall mean (i) those voting shares of the Company
that, upon acquisition of voting power with respect to such shares by an
"Acquiring Person", would result in a
2
<PAGE>
"Change in Control" and (ii) voting shares of the Company beneficially owned by
an "Acquiring Person" where such beneficial ownership was acquired (a) within
120 days of the day the person or group became an "Acquiring Person" or (b) with
the intention of effecting a "Change in Control".
"Fair Market Value" shall be the fair market value as determined in
good faith by the "Incumbent Board" as defined herein.
"Justifiable Cause" shall include theft, falsification of records,
fraud, embezzlement, gross negligence or willful misconduct, causing the Company
or its successor to violate any federal, state, or local law, or administrative
regulation or ruling having the force and effect of law, insubordination,
conflict of interest, diversion of corporate opportunity, or conduct that
results in publicity that has a material adverse effect on the Company or its
successor.
2. Purchase of Shares. In the event of a "Change in Control", the
Company or its successor shall (i) purchase for cash, at Executive's option,
all or a portion of Executive's equity securities of the Company at the
"Acquisition Purchase Price", such option to expire 12 months after the date
of the "Change in Control"; and (ii) pay to Executive an amount in cash equal
to the difference between the exercise price of all granted and outstanding
but not yet exercisable stock options held by Executive immediately prior to
the "Change in Control" and the "Acquisition Purchase Price" times the number
of all such options, upon which payment all such options will terminate.
3. Termination in Connection with a "Change in Control". In the
event Executive's employment with the Company or its successor is terminated,
either actually or "Constructively", by the Company or its successor
(exclusive of termination for "Justifiable Cause") as a result of, in
connection with or within 12 months after a "Change in Control", the Company
or its successor shall pay to Executive severance pay, as liquidated damages
and not as penalty, (i) an amount in cash equal to 6 months base salary of
Executive (excluding any bonus) at the greater of the rate payable at the
date of the "Change in Control" or the rate payable at the date of said
termination ("Date of Termination"), which amount shall be accelerated and
immediately due upon any such termination; and (ii) any bonus awarded by the
Board of Directors of the Company on or prior to the Date of Termination and
not yet paid to Executive.
3
<PAGE>
4. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of Section 4.c., all
determinations required to be made under this Section 4, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the independent certified public accountants engaged by the Company to
audit its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days after the Date of Termination or such earlier time as is requested
by the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 4.b., shall be paid to Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up Payment which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.c. and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
Underpayment and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Underpayment
4
<PAGE>
and any income tax, including interest and penalties with respect thereto,
imposed as a result of the Underpayment.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment or the Underpayment. Such notification
shall be given as soon as practicable but no later than ten business days after
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the thirty-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration
of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information relating to such claim,
reasonably requested by the Company,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.c., the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
5
<PAGE>
Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.c., Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.c.) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.c., a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise. The Company shall not be entitled to set off against the amounts
payable to Executive hereunder any amounts earned by Executive in other
employment after termination of his employment with the Company hereunder or any
amounts which might have been earned by Executive in other employment had he
sought such other employment. The amounts payable to Executive hereunder shall
not be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
6
<PAGE>
6. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, or the remainder of the Agreement, which shall be given full effect,
without regard to the invalid portions.
7. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any other
term or condition.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no modification
or waiver of any provision hereof shall be valid unless it be in writing and
signed by all of the parties hereto.
9. Assignment. This Agreement and the rights and obligations of the
Company hereunder shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
10. Binding Effect. This Agreement and all of the provisions hereof
shall be binding upon the legal representatives, heirs, distributees, successors
and permitted assigns of the parties hereto.
11. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed therein.
12. Headings. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr. /s/ Richard Ginsberg
- ----------------------------------- --------------------
Name: Vincent R. Zurawski, Jr. Richard Ginsberg
Title: President and CEO
7
<PAGE>
Exhibit 10.12
AGREEMENT
AGREEMENT dated as of July 17, 1996 between Apollon, Inc., a
Pennsylvania corporation (the "Company"), and Richard Ciccarelli ("Executive").
WITNESSETH
WHEREAS, in consideration of Executive's past and future service to
the Company, the Company desires to provide certain protections to Executive in
the event of a change in control of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this a written agreement and intending to be legally
bound, the parties agree as follows:
1. Certain Definitions. The following terms will have the meanings
set forth below for purposes of this Agreement:
"Acquiring Person" shall mean a person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including as a partnership, limited partnership, syndicate, or through any means
of affiliation whether or not formally organized, who acquires, directly or
indirectly, voting power over voting shares of the Company that constitute
"Control Shares".
"Acquisition Purchase Price" shall mean:
(i) "Acquisition Purchase Price" shall be the maximum price paid
per share by the "Acquiring Person" for any of its "Control Shares"; provided
that, in the event that all or a portion of the consideration paid by the
"Acquiring Person" for any of such "Control Shares" is in a form other than
cash, then the "Acquisition Purchase Price" shall be any cash consideration paid
plus the "Fair Market Value" of the non-cash consideration paid per share of
such "Control Shares" on the date of such payment; or
(ii) In the event that a "Change in Control" occurs without the
purchase of "Control Shares", then the "Acquisition Purchase Price" shall be the
"Fair Market Value" per share of the equity securities of the Company on the
date of the "Change in Control".
"Change in Control" shall mean:
(i) The acquisition by any person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express
<PAGE>
agreement, arrangement, relationship or understanding, including as a
partnership, limited partnership, syndicate, or through any means of affiliation
whether or not formally organized (excluding, for this purpose, the Company or
its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership, (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 50% or more of either
the then outstanding Common Stock and Convertible Preferred Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an Acquiring Person or an affiliate or associate thereof)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of (a) a
reorganization, merger, or consolidation, in each case, with respect to which
persons (other than an "Acquiring Person" or an affiliate or associate
thereof) who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not immediately thereafter, own
more than 50% of the combined voting power of the surviving or resulting
corporation's then outstanding voting securities entitled to vote generally
in the election of directors, (b) a liquidation or dissolution of the Company
or (c) the sale of all or substantially all of the assets of the Company.
"Constructively". Executive shall have been terminated
"Constructively" if, after, as a result of or in connection with a "Change in
Control", (i) Executive is offered a position with the Company or its successor
on terms, including compensation, benefits and duties to be performed, which are
materially inferior to the terms of his position with the Company prior to the
"Change in Control" or (ii) Executive's duties with the Company or its successor
are substantially reduced within 12 months after a "Change in Control".
"Control Shares" shall mean (i) those voting shares of the Company
that, upon acquisition of voting power with respect to such shares by an
"Acquiring Person", would result in a
2
<PAGE>
"Change in Control" and (ii) voting shares of the Company beneficially owned by
an "Acquiring Person" where such beneficial ownership was acquired (a) within
120 days of the day the person or group became an "Acquiring Person" or (b) with
the intention of effecting a "Change in Control".
"Fair Market Value" shall be the fair market value as determined in
good faith by the "Incumbent Board" as defined herein.
"Justifiable Cause" shall include theft, falsification of records,
fraud, embezzlement, gross negligence or willful misconduct, causing the Company
or its successor to violate any federal, state, or local law, or administrative
regulation or ruling having the force and effect of law, insubordination,
conflict of interest, diversion of corporate opportunity, or conduct that
results in publicity that has a material adverse effect on the Company or its
successor.
2. Purchase of Shares. In the event of a "Change in Control", the
Company or its successor shall (i) purchase for cash, at Executive's option,
all or a portion of Executive's equity securities of the Company at the
"Acquisition Purchase Price", such option to expire 12 months after the date
of the "Change in Control"; and (ii) pay to Executive an amount in cash equal
to the difference between the exercise price of all granted and outstanding
but not yet exercisable stock options held by Executive immediately prior to
the "Change in Control" and the "Acquisition Purchase Price" times the number
of all such options, upon which payment all such options will terminate.
3. Termination in Connection with a "Change in Control". In the
event Executive's employment with the Company or its successor is terminated,
either actually or "Constructively", by the Company or its successor
(exclusive of termination for "Justifiable Cause") as a result of, in
connection with or within 12 months after a "Change in Control", the Company
or its successor shall pay to Executive severance pay, as liquidated damages
and not as penalty, (i) an amount in cash equal to 6 months base salary of
Executive (excluding any bonus) at the greater of the rate payable at the
date of the "Change in Control" or the rate payable at the date of said
termination ("Date of Termination"), which amount shall be accelerated and
immediately due upon any such termination; and (ii) any bonus awarded by the
Board of Directors of the Company on or prior to the Date of Termination and
not yet paid to Executive.
3
<PAGE>
4. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of Section 4.c., all
determinations required to be made under this Section 4, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the independent certified public accountants engaged by the Company to
audit its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days after the Date of Termination or such earlier time as is requested
by the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 4.b., shall be paid to Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up Payment which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.c. and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
Underpayment and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Underpayment
4
<PAGE>
and any income tax, including interest and penalties with respect thereto,
imposed as a result of the Underpayment.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment or the Underpayment. Such notification
shall be given as soon as practicable but no later than ten business days after
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the thirty-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration
of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information relating to such claim,
reasonably requested by the Company,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.c., the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
5
<PAGE>
Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.c., Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.c.) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.c., a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise. The Company shall not be entitled to set off against the amounts
payable to Executive hereunder any amounts earned by Executive in other
employment after termination of his employment with the Company hereunder or any
amounts which might have been earned by Executive in other employment had he
sought such other employment. The amounts payable to Executive hereunder shall
not be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
6
<PAGE>
6. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, or the remainder of the Agreement, which shall be given full effect,
without regard to the invalid portions.
7. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any other
term or condition.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no modification
or waiver of any provision hereof shall be valid unless it be in writing and
signed by all of the parties hereto.
9. Assignment. This Agreement and the rights and obligations of the
Company hereunder shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
10. Binding Effect. This Agreement and all of the provisions hereof
shall be binding upon the legal representatives, heirs, distributees, successors
and permitted assigns of the parties hereto.
11. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed therein.
12. Headings. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr. /s/ Richard Ciccarelli
- ----------------------------------- ----------------------
Name: Vincent R. Zurawski, Jr. Richard Ciccarelli
Title: President and CEO
7
<PAGE>
Exhibit 10.13
AGREEMENT
AGREEMENT dated as of July 17, 1996 between Apollon, Inc., a
Pennsylvania corporation (the "Company"), and James Murphy ("Executive").
WITNESSETH
WHEREAS, in consideration of Executive's past and future service to
the Company, the Company desires to provide certain protections to Executive in
the event of a change in control of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this a written agreement and intending to be legally
bound, the parties agree as follows:
1. Certain Definitions. The following terms will have the meanings
set forth below for purposes of this Agreement:
"Acquiring Person" shall mean a person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including as a partnership, limited partnership, syndicate, or through any means
of affiliation whether or not formally organized, who acquires, directly or
indirectly, voting power over voting shares of the Company that constitute
"Control Shares".
"Acquisition Purchase Price" shall mean:
(i) "Acquisition Purchase Price" shall be the maximum price paid
per share by the "Acquiring Person" for any of its "Control Shares"; provided
that, in the event that all or a portion of the consideration paid by the
"Acquiring Person" for any of such "Control Shares" is in a form other than
cash, then the "Acquisition Purchase Price" shall be any cash consideration paid
plus the "Fair Market Value" of the non-cash consideration paid per share of
such "Control Shares" on the date of such payment; or
(ii) In the event that a "Change in Control" occurs without the
purchase of "Control Shares", then the "Acquisition Purchase Price" shall be the
"Fair Market Value" per share of the equity securities of the Company on the
date of the "Change in Control".
"Change in Control" shall mean:
(i) The acquisition by any person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express
<PAGE>
agreement, arrangement, relationship or understanding, including as a
partnership, limited partnership, syndicate, or through any means of affiliation
whether or not formally organized (excluding, for this purpose, the Company or
its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership, (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 50% or more of either
the then outstanding Common Stock and Convertible Preferred Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an Acquiring Person or an affiliate or associate thereof)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of (a) a
reorganization, merger, or consolidation, in each case, with respect to which
persons (other than an "Acquiring Person" or an affiliate or associate
thereof) who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not immediately thereafter, own
more than 50% of the combined voting power of the surviving or resulting
corporation's then outstanding voting securities entitled to vote generally
in the election of directors, (b) a liquidation or dissolution of the Company
or (c) the sale of all or substantially all of the assets of the Company.
"Constructively". Executive shall have been terminated
"Constructively" if, after, as a result of or in connection with a "Change in
Control", (i) Executive is offered a position with the Company or its successor
on terms, including compensation, benefits and duties to be performed, which are
materially inferior to the terms of his position with the Company prior to the
"Change in Control" or (ii) Executive's duties with the Company or its successor
are substantially reduced within 12 months after a "Change in Control".
"Control Shares" shall mean (i) those voting shares of the Company
that, upon acquisition of voting power with respect to such shares by an
"Acquiring Person", would result in a
2
<PAGE>
"Change in Control" and (ii) voting shares of the Company beneficially owned by
an "Acquiring Person" where such beneficial ownership was acquired (a) within
120 days of the day the person or group became an "Acquiring Person" or (b) with
the intention of effecting a "Change in Control".
"Fair Market Value" shall be the fair market value as determined in
good faith by the "Incumbent Board" as defined herein.
"Justifiable Cause" shall include theft, falsification of records,
fraud, embezzlement, gross negligence or willful misconduct, causing the Company
or its successor to violate any federal, state, or local law, or administrative
regulation or ruling having the force and effect of law, insubordination,
conflict of interest, diversion of corporate opportunity, or conduct that
results in publicity that has a material adverse effect on the Company or its
successor.
2. Purchase of Shares. In the event of a "Change in Control", the
Company or its successor shall (i) purchase for cash, at Executive's option,
all or a portion of Executive's equity securities of the Company at the
"Acquisition Purchase Price", such option to expire 12 months after the date
of the "Change in Control"; and (ii) pay to Executive an amount in cash equal
to the difference between the exercise price of all granted and outstanding
but not yet exercisable stock options held by Executive immediately prior to
the "Change in Control" and the "Acquisition Purchase Price" times the number
of all such options, upon which payment all such options will terminate.
3. Termination in Connection with a "Change in Control". In the
event Executive's employment with the Company or its successor is terminated,
either actually or "Constructively", by the Company or its successor
(exclusive of termination for "Justifiable Cause") as a result of, in
connection with or within 12 months after a "Change in Control", the Company
or its successor shall pay to Executive severance pay, as liquidated damages
and not as penalty, (i) an amount in cash equal to 6 months base salary of
Executive (excluding any bonus) at the greater of the rate payable at the
date of the "Change in Control" or the rate payable at the date of said
termination ("Date of Termination"), which amount shall be accelerated and
immediately due upon any such termination; and (ii) any bonus awarded by the
Board of Directors of the Company on or prior to the Date of Termination and
not yet paid to Executive.
3
<PAGE>
4. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of Section 4.c., all
determinations required to be made under this Section 4, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the independent certified public accountants engaged by the Company to
audit its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days after the Date of Termination or such earlier time as is requested
by the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 4.b., shall be paid to Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up Payment which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.c. and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
Underpayment and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Underpayment
4
<PAGE>
and any income tax, including interest and penalties with respect thereto,
imposed as a result of the Underpayment.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment or the Underpayment. Such notification
shall be given as soon as practicable but no later than ten business days after
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the thirty-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration
of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information relating to such claim,
reasonably requested by the Company,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.c., the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
5
<PAGE>
Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.c., Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.c.) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.c., a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise. The Company shall not be entitled to set off against the amounts
payable to Executive hereunder any amounts earned by Executive in other
employment after termination of his employment with the Company hereunder or any
amounts which might have been earned by Executive in other employment had he
sought such other employment. The amounts payable to Executive hereunder shall
not be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
6
<PAGE>
6. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, or the remainder of the Agreement, which shall be given full effect,
without regard to the invalid portions.
7. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any other
term or condition.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no modification
or waiver of any provision hereof shall be valid unless it be in writing and
signed by all of the parties hereto.
9. Assignment. This Agreement and the rights and obligations of the
Company hereunder shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
10. Binding Effect. This Agreement and all of the provisions hereof
shall be binding upon the legal representatives, heirs, distributees, successors
and permitted assigns of the parties hereto.
11. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed therein.
12. Headings. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr. /s/ James Murphy
- ----------------------------------- ----------------
Name: Vincent R. Zurawski, Jr. James Murphy
Title: President and CEO
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Exhibit 10.14
AGREEMENT
AGREEMENT dated as of July 17, 1996 between Apollon, Inc., a
Pennsylvania corporation (the "Company"), and Anthony Marcucci ("Executive").
WITNESSETH
WHEREAS, in consideration of Executive's past and future service to
the Company, the Company desires to provide certain protections to Executive in
the event of a change in control of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this a written agreement and intending to be legally
bound, the parties agree as follows:
1. Certain Definitions. The following terms will have the meanings
set forth below for purposes of this Agreement:
"Acquiring Person" shall mean a person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including as a partnership, limited partnership, syndicate, or through any means
of affiliation whether or not formally organized, who acquires, directly or
indirectly, voting power over voting shares of the Company that constitute
"Control Shares".
"Acquisition Purchase Price" shall mean:
(i) "Acquisition Purchase Price" shall be the maximum price paid
per share by the "Acquiring Person" for any of its "Control Shares"; provided
that, in the event that all or a portion of the consideration paid by the
"Acquiring Person" for any of such "Control Shares" is in a form other than
cash, then the "Acquisition Purchase Price" shall be any cash consideration paid
plus the "Fair Market Value" of the non-cash consideration paid per share of
such "Control Shares" on the date of such payment; or
(ii) In the event that a "Change in Control" occurs without the
purchase of "Control Shares", then the "Acquisition Purchase Price" shall be the
"Fair Market Value" per share of the equity securities of the Company on the
date of the "Change in Control".
"Change in Control" shall mean:
(i) The acquisition by any person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express
<PAGE>
agreement, arrangement, relationship or understanding, including as a
partnership, limited partnership, syndicate, or through any means of affiliation
whether or not formally organized (excluding, for this purpose, the Company or
its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership, (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 50% or more of either
the then outstanding Common Stock and Convertible Preferred Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an Acquiring Person or an affiliate or associate thereof)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of (a) a
reorganization, merger, or consolidation, in each case, with respect to which
persons (other than an "Acquiring Person" or an affiliate or associate
thereof) who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not immediately thereafter, own
more than 50% of the combined voting power of the surviving or resulting
corporation's then outstanding voting securities entitled to vote generally
in the election of directors, (b) a liquidation or dissolution of the Company
or (c) the sale of all or substantially all of the assets of the Company.
"Constructively". Executive shall have been terminated
"Constructively" if, after, as a result of or in connection with a "Change in
Control", (i) Executive is offered a position with the Company or its successor
on terms, including compensation, benefits and duties to be performed, which are
materially inferior to the terms of his position with the Company prior to the
"Change in Control" or (ii) Executive's duties with the Company or its successor
are substantially reduced within 12 months after a "Change in Control".
"Control Shares" shall mean (i) those voting shares of the Company
that, upon acquisition of voting power with respect to such shares by an
"Acquiring Person", would result in a
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"Change in Control" and (ii) voting shares of the Company beneficially owned by
an "Acquiring Person" where such beneficial ownership was acquired (a) within
120 days of the day the person or group became an "Acquiring Person" or (b) with
the intention of effecting a "Change in Control".
"Fair Market Value" shall be the fair market value as determined in
good faith by the "Incumbent Board" as defined herein.
"Justifiable Cause" shall include theft, falsification of records,
fraud, embezzlement, gross negligence or willful misconduct, causing the Company
or its successor to violate any federal, state, or local law, or administrative
regulation or ruling having the force and effect of law, insubordination,
conflict of interest, diversion of corporate opportunity, or conduct that
results in publicity that has a material adverse effect on the Company or its
successor.
2. Purchase of Shares. In the event of a "Change in Control", the
Company or its successor shall (i) purchase for cash, at Executive's option,
all or a portion of Executive's equity securities of the Company at the
"Acquisition Purchase Price", such option to expire 12 months after the date
of the "Change in Control"; and (ii) pay to Executive an amount in cash equal
to the difference between the exercise price of all granted and outstanding
but not yet exercisable stock options held by Executive immediately prior to
the "Change in Control" and the "Acquisition Purchase Price" times the number
of all such options, upon which payment all such options will terminate.
3. Termination in Connection with a "Change in Control". In the
event Executive's employment with the Company or its successor is terminated,
either actually or "Constructively", by the Company or its successor
(exclusive of termination for "Justifiable Cause") as a result of, in
connection with or within 12 months after a "Change in Control", the Company
or its successor shall pay to Executive severance pay, as liquidated damages
and not as penalty, (i) an amount in cash equal to 6 months base salary of
Executive (excluding any bonus) at the greater of the rate payable at the
date of the "Change in Control" or the rate payable at the date of said
termination ("Date of Termination"), which amount shall be accelerated and
immediately due upon any such termination; and (ii) any bonus awarded by the
Board of Directors of the Company on or prior to the Date of Termination and
not yet paid to Executive.
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4. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of Section 4.c., all
determinations required to be made under this Section 4, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the independent certified public accountants engaged by the Company to
audit its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days after the Date of Termination or such earlier time as is requested
by the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 4.b., shall be paid to Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up Payment which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.c. and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
Underpayment and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Underpayment
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and any income tax, including interest and penalties with respect thereto,
imposed as a result of the Underpayment.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment or the Underpayment. Such notification
shall be given as soon as practicable but no later than ten business days after
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the thirty-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration
of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information relating to such claim,
reasonably requested by the Company,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.c., the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
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Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.c., Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.c.) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.c., a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise. The Company shall not be entitled to set off against the amounts
payable to Executive hereunder any amounts earned by Executive in other
employment after termination of his employment with the Company hereunder or any
amounts which might have been earned by Executive in other employment had he
sought such other employment. The amounts payable to Executive hereunder shall
not be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
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6. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, or the remainder of the Agreement, which shall be given full effect,
without regard to the invalid portions.
7. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any other
term or condition.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no modification
or waiver of any provision hereof shall be valid unless it be in writing and
signed by all of the parties hereto.
9. Assignment. This Agreement and the rights and obligations of the
Company hereunder shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
10. Binding Effect. This Agreement and all of the provisions hereof
shall be binding upon the legal representatives, heirs, distributees, successors
and permitted assigns of the parties hereto.
11. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed therein.
12. Headings. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr. /s/ Anthony Marcucci
- ----------------------------------- --------------------
Name: Vincent R. Zurawski, Jr. Anthony Marcucci
Title: President and CEO
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Exhibit 10.15
AGREEMENT
AGREEMENT dated as of July 17, 1996 between Apollon, Inc., a
Pennsylvania corporation (the "Company"), and Richard Carrano ("Executive").
WITNESSETH
WHEREAS, in consideration of Executive's past and future service to
the Company, the Company desires to provide certain protections to Executive in
the event of a change in control of the Company.
NOW, THEREFORE, in consideration of the premises and mutual covenants
and agreements contained in this a written agreement and intending to be legally
bound, the parties agree as follows:
1. Certain Definitions. The following terms will have the meanings
set forth below for purposes of this Agreement:
"Acquiring Person" shall mean a person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express agreement, arrangement, relationship or understanding,
including as a partnership, limited partnership, syndicate, or through any means
of affiliation whether or not formally organized, who acquires, directly or
indirectly, voting power over voting shares of the Company that constitute
"Control Shares".
"Acquisition Purchase Price" shall mean:
(i) "Acquisition Purchase Price" shall be the maximum price paid
per share by the "Acquiring Person" for any of its "Control Shares"; provided
that, in the event that all or a portion of the consideration paid by the
"Acquiring Person" for any of such "Control Shares" is in a form other than
cash, then the "Acquisition Purchase Price" shall be any cash consideration paid
plus the "Fair Market Value" of the non-cash consideration paid per share of
such "Control Shares" on the date of such payment; or
(ii) In the event that a "Change in Control" occurs without the
purchase of "Control Shares", then the "Acquisition Purchase Price" shall be the
"Fair Market Value" per share of the equity securities of the Company on the
date of the "Change in Control".
"Change in Control" shall mean:
(i) The acquisition by any person or entity, alone or together
with one or more other persons or entities acting in concert, whether or not
pursuant to an express
<PAGE>
agreement, arrangement, relationship or understanding, including as a
partnership, limited partnership, syndicate, or through any means of affiliation
whether or not formally organized (excluding, for this purpose, the Company or
its subsidiaries, or any employee benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership, (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended) of 50% or more of either
the then outstanding Common Stock and Convertible Preferred Stock or the
combined voting power of the Company's then outstanding voting securities
entitled to vote generally in the election of directors; or
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors of the Company (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of the Company,
provided that any person becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board (other than an Acquiring Person or an affiliate or associate thereof)
shall be, for purposes of this Agreement, considered as though such person were
a member of the Incumbent Board; or
(iii) Approval by the shareholders of the Company of (a) a
reorganization, merger, or consolidation, in each case, with respect to which
persons (other than an "Acquiring Person" or an affiliate or associate
thereof) who were the shareholders of the Company immediately prior to such
reorganization, merger or consolidation do not immediately thereafter, own
more than 50% of the combined voting power of the surviving or resulting
corporation's then outstanding voting securities entitled to vote generally
in the election of directors, (b) a liquidation or dissolution of the Company
or (c) the sale of all or substantially all of the assets of the Company.
"Constructively". Executive shall have been terminated
"Constructively" if, after, as a result of or in connection with a "Change in
Control", (i) Executive is offered a position with the Company or its successor
on terms, including compensation, benefits and duties to be performed, which are
materially inferior to the terms of his position with the Company prior to the
"Change in Control" or (ii) Executive's duties with the Company or its successor
are substantially reduced within 12 months after a "Change in Control".
"Control Shares" shall mean (i) those voting shares of the Company
that, upon acquisition of voting power with respect to such shares by an
"Acquiring Person", would result in a
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"Change in Control" and (ii) voting shares of the Company beneficially owned by
an "Acquiring Person" where such beneficial ownership was acquired (a) within
120 days of the day the person or group became an "Acquiring Person" or (b) with
the intention of effecting a "Change in Control".
"Fair Market Value" shall be the fair market value as determined in
good faith by the "Incumbent Board" as defined herein.
"Justifiable Cause" shall include theft, falsification of records,
fraud, embezzlement, gross negligence or willful misconduct, causing the Company
or its successor to violate any federal, state, or local law, or administrative
regulation or ruling having the force and effect of law, insubordination,
conflict of interest, diversion of corporate opportunity, or conduct that
results in publicity that has a material adverse effect on the Company or its
successor.
2. Purchase of Shares. In the event of a "Change in Control", the
Company or its successor shall (i) purchase for cash, at Executive's option,
all or a portion of Executive's equity securities of the Company at the
"Acquisition Purchase Price", such option to expire 12 months after the date
of the "Change in Control"; and (ii) pay to Executive an amount in cash equal
to the difference between the exercise price of all granted and outstanding
but not yet exercisable stock options held by Executive immediately prior to
the "Change in Control" and the "Acquisition Purchase Price" times the number
of all such options, upon which payment all such options will terminate.
3. Termination in Connection with a "Change in Control". In the
event Executive's employment with the Company or its successor is terminated,
either actually or "Constructively", by the Company or its successor
(exclusive of termination for "Justifiable Cause") as a result of, in
connection with or within 12 months after a "Change in Control", the Company
or its successor shall pay to Executive severance pay, as liquidated damages
and not as penalty, (i) an amount in cash equal to 6 months base salary of
Executive (excluding any bonus) at the greater of the rate payable at the
date of the "Change in Control" or the rate payable at the date of said
termination ("Date of Termination"), which amount shall be accelerated and
immediately due upon any such termination; and (ii) any bonus awarded by the
Board of Directors of the Company on or prior to the Date of Termination and
not yet paid to Executive.
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4. Certain Additional Payments by the Company.
a. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise) (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code (the "Code"), or any interest or penalties
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the "Excise
Tax"), then Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including any Excise Tax imposed upon the Gross-Up Payment, Executive retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.
b. Subject to the provisions of Section 4.c., all
determinations required to be made under this Section 4, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the independent certified public accountants engaged by the Company to
audit its financial statements (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and Executive within 15
business days after the Date of Termination or such earlier time as is requested
by the Company. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 4.b., shall be paid to Executive within five days of the receipt of
the Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by Executive, it shall furnish Executive with an opinion
that he has substantial authority not to report any Excise Tax on his federal
income tax return. Any determination by the Accounting Firm shall be binding
upon the Company and Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that a Gross-Up Payment which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.c. and Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
Executive. The Company shall bear and pay directly all costs and expenses
(including additional interest and penalties) incurred in connection with the
Underpayment and shall indemnify and hold Executive harmless, on an after-tax
basis, for any Underpayment
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and any income tax, including interest and penalties with respect thereto,
imposed as a result of the Underpayment.
c. Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment or the Underpayment. Such notification
shall be given as soon as practicable but no later than ten business days after
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. Executive
shall not pay such claim prior to the expiration of the thirty-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies Executive in writing prior to the expiration
of such period that it desires to contest such claim, Executive shall:
(i) give the Company any information relating to such claim,
reasonably requested by the Company,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company and reasonably
acceptable to Executive,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 4.c., the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and Executive agrees to prosecute such contest
to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the
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Company shall determine; provided, however, that if the Company directs
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to Executive, on an interest-free basis, and shall
indemnify and hold Executive harmless, on an after-tax basis, from any Excise
Tax or income tax, including interest or penalties with respect thereto, imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of Executive with
respect to which such contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of the contest shall
be limited to issues with respect to which a Gross-Up Payment would be payable
hereunder and Executive shall be entitled to settle or contest, as the case may
be, any other issue raised by the Internal Revenue Service or any other taxing
authority.
d. If, after the receipt by Executive of an amount advanced by
the Company pursuant to Section 4.c., Executive becomes entitled to receive any
refund with respect to such claim, Executive shall (subject to the Company's
complying with the requirements of Section 4.c.) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by Executive of an amount
advanced by the Company pursuant to Section 4.c., a determination is made that
Executive shall not be entitled to any refund with respect to such claim and the
Company does not notify Executive in writing of its intent to contest such
denial of refund prior to the expiration of thirty days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of the Gross-Up Payment required to be paid.
5. No Mitigation. Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking employment or
otherwise. The Company shall not be entitled to set off against the amounts
payable to Executive hereunder any amounts earned by Executive in other
employment after termination of his employment with the Company hereunder or any
amounts which might have been earned by Executive in other employment had he
sought such other employment. The amounts payable to Executive hereunder shall
not be treated as damages but as severance compensation to which Executive is
entitled by reason of termination of his employment in the circumstances
contemplated by this Agreement. In no event shall Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to Executive under any of the provisions of this Agreement.
6
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6. Severability. If any of the covenants contained in this
Agreement, any part of any such covenant, are hereafter construed to be invalid
or unenforceable, the same shall not affect the remainder of the covenant or
covenants, or the remainder of the Agreement, which shall be given full effect,
without regard to the invalid portions.
7. Non-Waiver. The waiver or breach of any term or condition of
this Agreement shall not be deemed to constitute a waiver or breach of any other
term or condition.
8. Entire Agreement. This Agreement constitutes the entire
agreement of the parties with respect to its subject matter, and no modification
or waiver of any provision hereof shall be valid unless it be in writing and
signed by all of the parties hereto.
9. Assignment. This Agreement and the rights and obligations of the
Company hereunder shall bind and inure to the benefit of any successor or
successors by reorganization, merger or consolidation and any assignee of all or
substantially all of its business and properties, but, except as to any such
successor or assignee of the Company, neither this Agreement nor any rights or
benefits hereunder may be assigned or transferred by either party without the
prior written consent of the other party.
10. Binding Effect. This Agreement and all of the provisions hereof
shall be binding upon the legal representatives, heirs, distributees, successors
and permitted assigns of the parties hereto.
11. Choice of Law. This Agreement shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania applicable to
agreements made and to be performed therein.
12. Headings. The Section headings appearing in this Agreement are
for purposes of easy reference and shall not be considered a part of this
Agreement or in any way modify, amend, or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr. /s/ Richard Carrano
- ----------------------------------- -------------------
Name: Vincent R. Zurawski, Jr. Richard Carrano
Title: President and CEO
7
<PAGE>
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON EXHIBIT B AND HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
FACILITIES USE AGREEMENT
THIS AGREEMENT is made and entered into as of this 20th day of
September, 1994, by and between CENTOCOR, INC., a Pennsylvania corporation
("Centocor"), and APOLLON, INC., a Pennsylvania corporation ("Apollon").
W I T N E S S E T H:
WHEREAS, Centocor currently leases from Rouse & Associates-256 Great
Valley Parkway (the "Landlord"), pursuant to a lease agreement dated September
28, 1989, with Additional Articles 33 through 39 (collectively, the "Lease")
property (the "Property") located at 240-258 Great Valley Parkway, Great Valley
Corporate Center, Malvern, PA 19355 and the building and improvements thereon
(the "Building");
WHEREAS, the Building contains, among other things, facilities which
are suitable for use as a biopharmaceutical manufacturing facility;
WHEREAS, Apollon desires to have access to a biopharmaceutical
manufacturing facility to develop and manufacture nucleic acid-based product
candidates and genetic vaccine product candidates and Centocor is willing to
improve and upgrade a portion of its existing manufacturing facilities within
the Building to specifications suitable for Apollon's needs; and
WHEREAS, Centocor and Apollon desire to enter into this Agreement as
hereinafter set forth.
NOW THEREFORE, Centocor and Apollon, intending to be legally bound
hereby, agree as follows:
1. Premises and Use.
(a) Centocor hereby grants Apollon and its employees and
agents an irrevocable license (the "License") to use and occupy that portion of
the Building consisting of 3,100 square feet outlined on Exhibit A, attached
hereto (other than that portion which shall constitute Rooms 1059F, 1059G,
1059H, 1059I and 1059J as oulined on Exhibit A) (the "Facility"), together with
the right to use the passageways, halls, lobbies, elevators, entranceways,
parking lots, other common areas, restrooms and vestibules of the Building and
the Property.
(b) The Facility shall be used by Apollon for the development
and manufacture of nucleic acid-based product candidates and genetic vaccine
product candidates and related uses.
<PAGE>
(c) Except as described in the remainder of this Subparagraph
(c), the License shall be exclusive as to all parties, including Centocor.
Subject to the remainder of this Subparagraph (c), Centocor shall have the right
to use, on a co-exclusive basis with Apollon, throughout the Initial Term
(defined below) of this Agreement and all extensions or renewals thereof, that
portion of the Facility which shall constitute Rooms 1059, 1059C, 1059D, 1059E,
1059K (including the contiguous Air Lock) and 1059L, as outlined on Exhibit A
attached hereto (the "Shared Space"). Notwithstanding anything to the contrary
contained herein or in the Standard Operating Procedures (defined below),
Centocor shall not, in exercising its rights under this Paragraph 1 or
otherwise, interfere with or obstruct Apollon's use of the Facility. Centocor
shall, at all times, provide Apollon with sufficient access to the Facility,
including the Shared Space, to enable Apollon to produce and manufacture in the
Facility nucleic acid-based product candidates and genetic vaccine product
candidates in such quantities and at such times as Apollon shall deem necessary
in its sole discretion.
(d) Each of Centocor and Apollon shall adhere at all times in
its use and occupancy of the Facility to the existing Standard Operating
Procedures with respect to the Facility (or such other Standard Operating
Procedures as the parties may agree upon from time to time), so that each party
shall be able to manufacture its product candidates in accordance with Good
Manufacturing Practices.
2. Term.
The term of this Agreement (the "Initial Term") shall, subject
to the terms, conditions and limitations of this Agreement, commence on the
later to occur of (i) the date Apollon may fully and legally use and occupy the
Facility; (ii) the date hereof; and (iii) ten (10) days after written notice by
Centocor of full completion (as determined in the sole discretion of Apollon) of
certain improvements and upgrades to the Facility (the "Improvements") as more
fully described in Exhibit B, attached hereto and made a part hereof (such date
being hereinafter referred to as the "Commencement Date"), and shall expire two
(2) years following the date Apollon shall successfully develop and manufacture
in the Facility its first GMP lot of a genetic vaccine product candidate for use
in connection with human clinical trials, as such date is determined by Apollon
(the "Product Completion Date"). In no event shall the term of this Agreement
extend beyond the term of the Lease.
2
<PAGE>
3. Consideration.
In consideration of the grant of the License and the services
to be rendered by Centocor to Apollon pursuant to this Agreement, Apollon shall
pay to Centocor an aggregate amount of $1,000,000, payable in two installments
(the "Consideration"). On the Commencement Date, Apollon shall pay to Centocor,
at Apollon's sole option, either $500,000 by good check or 200,000 shares of
Apollon's Series B Convertible Preferred Stock. On the Product Completion Date,
Apollon shall pay to Centocor, at Apollon's sole option, either an additional
$500,000 or 200,000 shares of Apollon's Series B Convertible Preferred Stock.
The issuance of any shares of Series B Convertible Preferred Stock by Apollon to
Centocor shall be in accordance with and subject to the terms and conditions of
the Stock Purchase Agreement entered into between Apollon and Centocor dated as
of the date hereof (the "Stock Purchase Agreement").
4. Expenses, Taxes, Utilities and Other Charges.
Centocor shall be responsible for and shall pay all costs,
expenses, charges and obligations of every kind relating directly or indirectly
in any way, foreseen or unforeseen, to Apollon's use, occupancy and possession
of the Facility or to the Building or the Property including, but not limited
to, all charges for utilities, repair costs, taxes of whatever kind or nature,
and operating expenses relating to the Building, the Facility and the Property.
5. Consent.
Centocor represents and warrants that no consent,
authorization or approval of any other person, including without limitation the
Landlord, is required or necessary to enable Centocor to execute, deliver and
perform this Agreement.
6. Repairs and Maintenance.
Centocor, at its sole cost and expense, shall make all repairs
and replacements to the Facility, the Building and the Property and shall
maintain the Facility, the Building and the Property in good order and condition
so that Apollon can develop and manufacture its desired quantities of nucleic
acid-based product candidates and genetic vaccine product candidates. If
Centocor fails to perform its obligations under this Paragraph 6, Apollon shall
have the right to make such repairs or replacements and to maintain the Facility
and deduct any and all costs or expenses relating thereto from the
Consideration.
3
<PAGE>
7. Assignment and Subletting.
Neither party may assign or delegate any of its rights or
obligations hereunder (whether voluntarily or by operation of law) without the
prior written consent of the other. Without limiting the generality of the
foregoing, Centocor shall not (i) grant any other person a license or other
right to use or occupy the Facility or any portion thereof, (ii) sublet the
Facility or any portion thereof, or (iii) enter into any sublease for any other
portion of the Building or enter into any other agreement if such sublease or
agreement would interfere or conflict with or otherwise affect Apollon's right
to use the Facility hereunder without the prior written consent of Apollon.
8. Damage or Destruction; Condemnation.
If the Facility or the Building or the Property shall be
damaged or destroyed by fire or other casualty or the Facility or the Building
or the Property is wholly or partially condemned, at Apollon's option, this
Agreement may be immediately terminated and to the extent Apollon has paid any
Consideration, Apollon shall receive an equitable refund of such Consideration,
and Apollon shall have no further obligations hereunder. If this Agreement is
not terminated, to the extent and for the time the Facility or the Building or
the Property, or a portion thereof, are thereby rendered wholly or partly
untenantable so that Tenant's permitted use of the Facility is diminished, the
Consideration shall be proportionally reduced.
9. Indemnity.
(a) Apollon shall indemnify, defend and hold Centocor harmless
from any claim, loss, damage, liability or expense (including, but not limited
to, reasonable legal fees and disbursements) (collectively "Losses") arising out
of or otherwise related to Apollon's negligence or willful misconduct or the
untruth, inaccuracy or breach of any representation, warranty, covenant or
agreement of Apollon contained herein, except to the extent such Losses are the
result of Centocor's or its agents' or employees' negligence or willful
misconduct or breach of any covenant, representation or warranty of Centocor
contained in this Agreement.
(b) Centocor shall indemnify, defend and hold Apollon harmless
from any Losses arising out of or otherwise related to Centocor's negligence or
willful misconduct or the untruth, inaccuracy or breach of any representation,
warranty, covenant or agreement of Centocor contained herein, except to the
extent such Losses are the result of Apollon's or its agents' or employees'
negligence or willful misconduct or breach of any
4
<PAGE>
covenant, representation or warranty of Apollon contained in this Agreement.
10. Apollon Right to Cure Centocor's Default.
If Centocor defaults under the terms of this Agreement or the
Lease, then Apollon may, but shall not be required to, cure such default and
deduct and setoff such amount from the Consideration.
11. Insurance.
(a) Apollon shall maintain in full force and effect, at its
own expense, commercial general liability insurance naming Centocor as an
additional insured against claims for bodily injury, death or property damage in
amounts not less than $1,000,000. At or prior to the Commencement Date, Apollon
shall deliver the policy or policies of such insurance, or certificates thereof,
to Centocor and shall deliver to Centocor renewals thereof at least fifteen (15)
days prior to each expiration. Said policy or policies of insurance or
certificates thereof shall have attached thereto an endorsement that such policy
shall not be canceled without at least thirty (30) days' prior written notice to
Centocor.
(b) Centocor shall, during the term of this Agreement,
maintain fire and casualty insurance with respect to the Facility and the
Building against loss or damage and other risks as are customarily covered, with
extended coverage, for the full replacement value of the Building. At or prior
to the Commencement Date, Centocor shall deliver a certificate evidencing such
policy to Apollon, which certificate shall provide that the policy shall not be
cancelled, modified or renewed without at least thirty (30) days' prior written
notice to Apollon.
(c) Notwithstanding any provision to the contrary contained in
this Agreement, any property insurance policies obtained by the parties hereto
that relate to the Property, the Building or the Facility shall contain a waiver
by the insurer of all rights of subrogation against the other party.
Accordingly, each party hereto waives and releases any and every claim which
arises or which may arise in its favor and against the other party and its
directors, officers, employees and agents hereto during the term of this
Agreement, or any extension or renewal thereof, for any and all loss of, or
damage to its property located in or upon or constituting a part of the
Facility, the Building or the Property, to the extent such loss or damage is
covered by a policy of insurance carried by such party or that such party is
required to carry under the terms of this Agreement.
5
<PAGE>
12. No Default.
Centocor represents, warrants to and covenants with Apollon
that (i) Centocor is not currently in default under the Lease and no occurrence
or event exists that with the passage of time or the giving of notice, or both,
could become a default under the Lease; (ii) the Lease is in full force and
effect and Centocor shall keep the Lease in full force and effect during the
Initial Term of this Agreement and all extensions or renewals thereof; (iii)
Centocor has delivered to Apollon a true and correct copy of the Lease with all
riders and amendments attached thereto; and (iv) Centocor shall not exercise any
right to terminate the Lease.
13. Environmental.
(a) Centocor hereby represents and warrants that the Facility,
the Building and the Property do not contain nor is there stored therein or
thereon, any hazardous, toxic or polluting substance or waste in violation of,
nor has Centocor received any notice of violation of, any federal, state or
local environmental law, regulation, order or ordinance. In addition, there are
no storage tanks, nor asbestos containing materials, nor polychlorinated
biphenyl containing equipment, nor urea formaldehyde foam insulation, nor any
other chemical, material or substance, exposure to which is prohibited, limited
or regulated by a federal, state or local governmental agency, authority or body
at, in or about the Facility, the Building or the Property.
(b) Centocor does hereby agree to indemnify, defend with
counsel acceptable to Apollon, and save harmless Apollon from all losses, costs,
damages, expenses, demands, liabilities, obligations and rights or causes of
action, including but not limited to governmental action, that is incurred by or
asserted against Apollon or the Facility, the Building or the Property as a
result of the presence of hazardous substances at, on, or under the Facility,
the Building or the Property or the release of hazardous substances from the
Facility, the Building or the Property, the Building or the Property prior to
the date of this Agreement, or, if not caused by Apollon, after the date of this
Agreement.
14. Americans with Disabilities Act.
Centocor represents, warrants and covenants that:
(a) It shall perform all alterations and/or new construction
(as those terms are defined under the Americans With Disabilities Act ("ADA"))
in or about the Building, and in the Facility, in compliance with the applicable
provisions of the ADA and with all other applicable statutes, rules, regulations
and
6
<PAGE>
ordinances relating to handicapped accessibility, including, but not limited to,
Pennsylvania's Universal Accessibility Act; and
(b) Centocor hereby agrees to indemnify, defend with counsel
acceptable to Apollon, and hold Apollon harmless from and against any and all
damages, losses, costs and expenses arising from or in connection with any
failure of the Building, the Property or the Facility to comply with the ADA.
15. Termination; Renewal.
(a) Apollon may terminate this Agreement at any time upon
thirty (30) days' prior written notice to Centocor and thereafter the
Consideration shall be equitably reduced. In the absence of notice from Apollon
at the end of the Initial Term hereof, this Agreement shall automatically renew,
upon the same terms and conditions contained herein except there shall be no
additional consideration payable by Apollon, for a further period of one (1)
year and so on from year to year unless notice of termination has been given by
Apollon as provided above or unless written notice of termination shall have
been given by Centocor to Apollon at least ninety (90) days' prior to the end of
any term hereof.
(b) Apollon shall have the right to terminate this Agreement
immediately upon written notice to Centocor in the event (i) Centocor shall
consolidate or merge with or into any other person or entity (other than a
consolidation or merger with a subsidiary of Centocor in which Centocor is the
continuing corporation), (ii) Centocor shall sell, lease, transfer or convey all
or substantially all of its property or assets, or (ii) any person or group
shall acquire securities of Centocor representing 30% or more of the combined
voting power of Centocor's then outstanding securities having power to vote in
the election of directors.
(c) In the event of a breach by Centocor of any material
representation, covenant or other agreement contained herein, including without
limitation any representation, covenant or agreement contained in Paragraphs
1(c), 5, 7, 12, 13 or 15(b), Apollon shall be entitled to terminate this
Agreement and Centocor shall promptly rebate to Apollon an equitable portion of
the Consideration paid by Apollon.
16. Services.
Centocor shall provide, or cause to be provided, all customary
services to the Facility, at Centocor's expense, including, but not limited to,
heating, air-conditioning, electric, water, telephone, janitorial service and
trash removal, and snow and ice removal, all in suitable amounts for the
7
<PAGE>
comfortable use of the Facility for production of nucleic acid-based product
candidates and genetic vaccine product candidates. If the services contemplated
under this Paragraph 16 are interrupted for a period of time greater than three
(3) days, the Consideration shall be equitably reduced.
17. Rebate of Consideration.
Whenever Apollon shall be entitled, whether pursuant to any
provision of this Agreement or otherwise, to reduce or prorate the Consideration
or to deduct or setoff any amount from the Consideration, and all of the
Consideration has previously been paid to Centocor or the amount of the
reduction, proration, deduction or setoff exceeds that portion of the
Consideration that has yet to be paid to Centocor, Centocor shall, upon written
request from Apollon, promptly rebate an equitable portion of any Consideration
previously paid by Apollon.
18. Equipment; Trade Fixtures.
Any and all equipment, machinery or trade fixtures installed
or brought onto the Facility by Apollon shall remain the property of Apollon and
may be removed by Apollon at the expiration or early termination of this
Agreement.
19. Confidentiality.
Centocor agrees and acknowledges that any information it
receives, obtains or is privy to with respect to the development and manufacture
of Apollon's nucleic acid-based product candidates or genetic vaccine product
candidates or any other projects, research or experiments of Apollon is
confidential and Centocor shall not disclose such information and shall direct
and prevent its employees, officers and agents from disclosing such information
to any other person.
20. No Implied License.
Nothing contained in this Agreement shall be construed so as
to grant to Centocor any right or license with respect to any genetic vaccine
product candidate or nucleic acid-based product candidate of Apollon, whether or
not developed or manufactured at the Facility, or to any other patent, trademark
or other intellectual property right of Apollon.
21. Broker.
Each of Centocor and Apollon represents and warrants that it
has not employed any broker or agent as its representative in the negotiation
for the obtaining of this
8
<PAGE>
Agreement, and agrees to defend, indemnify and hold the other party harmless
from any and all cost or liability for compensation claimed by any broker or
agent with whom it has dealt.
22. Further Assurances; Cooperation.
From and after the date hereof, each party agrees to do, make,
execute, acknowledge and deliver such other documents as the other may
reasonably require in connection with this Agreement, and to otherwise assist
and cooperate fully with the other in order to enable the other to fulfill its
obligations hereunder. Without limiting the generality of the foregoing,
Centocor shall make the Facility and its documentation with respect thereto
available to any inspectors or other agents or employees of the Food and Drug
Administration ("FDA"), and shall otherwise cooperate with Apollon, in
connection with Apollon's efforts to obtain FDA approval for commercial sale of
any nucleic acid-based product candidate or genetic vaccine product candidate
manufactured at the Facility.
23. Disclaimers.
Nothing in this Agreement shall constitute or be construed so
as to constitute or tend to establish a partnership, joint venture or agency
relationship between Centocor and Apollon for any purpose whatsoever. Neither
party hereto, in the name of or on behalf of the other party hereto, shall make,
undertake or accept any promises, warranties, guarantees, or representations of
any kind or participate in the negotiation or conclusion of any contracts or
agreements, and, neither party shall be bound by or liable to any third party
for any act or omission of the other party hereto or for any obligations of debt
incurred by such other party hereto.
24. Notices.
Any notice or demand required or permitted by law or by way of
this Agreement shall be in writing. All notices or demands shall be deemed to
have been given when served personally or when sent by certified or registered
mail, return receipt requested addressed as follows:
With respect to notices and payments intended for Centocor:
Centocor, Inc.
240-258 Great Valley Parkway
Great Valley Corporate Center
Malvern, PA 19355
Attn: President
9
<PAGE>
With respect to notices and payments intended for Apollon:
Apollon, Inc.
One Great Valley Parkway
Malvern, PA 19355
Attn: President
25. Entire Agreement.
This Agreement is the entire agreement between the parties
hereto and there are no collateral or oral agreements with respect to the
Facility except for the Stock Purchase Agreement. Neither party has made or is
relying upon any representation, warranty or agreement except as expressly
provided herein or therein. This Agreement may not be modified or amended in any
manner except by an instrument in writing executed by both parties.
26. Time of the Essence.
All times, wherever specified herein for the performance by
Centocor or Apollon of their respective obligations hereunder, are of the
essence of this Agreement.
27. Successors and Assigns.
All terms and conditions contained in this Agreement shall
apply to and be binding upon Centocor and Apollon and their respective
successors and assigns.
28. Governing Law.
This Agreement shall be construed under the laws of the
Commonwealth of Pennsylvania without giving effect to the choice of law rules
thereof.
29. Survival.
The representations and warranties and the indemnities given
by Centocor under this Agreement shall survive termination or expiration of this
Agreement.
10
<PAGE>
IN WITNESS WHEREOF, Centocor and Apollon have entered into
this Agreement as of the day and year first above written.
CENTOCOR:
Centocor, Inc., a
Pennsylvania corporation
By:/s/ David P. Holveck
--------------------------------------
David P. Holveck
President
APOLLON:
Apollon, Inc., a
Pennsylvania corporation
By:/s/ Vincent R. Zurawski
--------------------------------------
Vincent R. Zurawski, Jr.
President
<PAGE>
EXHIBIT B
Apollon Occupancy in Centocor Pilot Facility
Specifications
(August 10, 1994)
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/s/ Richard A. Carrano 8/10/94
- ------------------------------ ------------------
Richard A. Carrano Date
/s/ Chaunce Bogard 10 Aug 94
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Chaunce Bogard Date
/s/ Jeff A. Mattis 10 Aug 94
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<PAGE>
Date: ____________________, 19___ (as per Section 30(a)
Landlord: Nairn Great Valley, Inc. a Delaware corporation
Tenant: APOLLON, INC., a PENNSYLVANIA CORPORATION
Building: One Great Valley Parkway, Malvern, Pennsylvania
Premises: 21,347 square feet of space in the Building to be known
as Suite _____ as more particularly identified in
EXHIBIT A attached hereto and incorporated herein
Commencement
Date: THIRTY (30) days after Landlord's execution and
acceptance of this Lease
Period Of Lease: SIXTY-TWO (62) months
Minimum Annual Rent: SEE RIDER_______ and _____/100 Dollars
($ )
Monthly Installments: SEE RIDER_______ and _____/100 Dollars
($ )
Tenant Allowance: ($ -O- )
Security Deposit: $
Tenant's
Proportionate Share: 35.064%
Permitted Use: OFFICE AND LABORATORY USE [General office and warehouse
purposes unless otherwise specified]
Addresses: Property Manager:
Landlord: Nairn Great Valley, Inc. Grubb & Ellis, Agent for
c/o Aegis Property Group Nairn Great Valley, Inc.
Suite 2144 440 E. Swedesford Rd.
123 South Broad Street Suite 2020
Philadelphia, PA 19109 Wayne, PA 19087
Tenant: APOLLON, INC.
200 GREAT VALLEY PKWY.
MALVERN, PA 19355
ATTN: GENERAL COUNSEL
Listing Broker: CB Commercial Real Estate Group, Inc.
701 Lee Road, Suite 103
Wayne, PA 19087-5612
Co-Broker: SOURCE REALTY
900 WEST VALLEY ROAD, SUITE 1004
WAYNE, PA 19087
This Term Sheet is an integral part of and is incorporated in the Lease
Agreement attached hereto.
Landlord:
Nairn Great Valley, Inc.
Date signed:JULY 8, 1992 By:/S/ MARK T. LEDGER
Name:MARK T. LEDGER
Attest:[ILLEGIBLE SIGNATURE] Title:PRESIDENT
Tenant: Apollon, Inc .
Date signed:24TH JUNE 1992 By:/S/ VINCENT R. ZURAWSKI,JR.
Name:VINCENT R. ZURAWSKI, JR.
Attest:/S/ M A SINQUETT Title:PRESIDENT
<PAGE>
LEASE AGREEMENT
SECTION 1. DEFINITIONS. The definitions set forth in the preceding Term
Sheet shall apply to the same capitalized terms appearing in this Lease
Agreement. Additional definitions are contained in Section 30 and throughout
this lease.
SECTION 2. PREMISES. Landlord hereby demises and leases the Premises to
Tenant and Tenant hereby leases and takes the Premises from Landlord for the
Term (defined in Section 4) and upon the terms, covenants, conditions, and
provisions set forth in this Flex Space Lease, including the Term Sheet and
Lease Agreement. The Tenant's interest in the Premises as tenant shall include
the right, in common with Landlord and other occupants of the Building, to use
driveways, sidewalks and loading and parking areas, lobbies, hallways and other
facilities which are located within the Property (defined in Section 30) and
which are designated by Landlord from time to time for the use of all of the
tenants of the Building.
SECTION 3. COMPLETION OF PREMISES. The premises shall be delivered to
tenant in accordance with the plans attached hereto as EXHIBIT B (herein called
the "Plans") and the specifications attached hereto as EXHIBIT C (herein called
the "Specifications"). All necessary demolition shall be commenced promptly
following Landlord's execution and acceptance of this Lease and shall be
substantially completed on the Commencement Date set forth in the Term Sheet.
Landlord shall at its own cost and expense, obtain all permits, licenses and
approvals necessary for such demolition. Provided, however, that the time for
substantial completion of the Premises shall be extended for additional periods
of time equal to the time lost by Landlord or Landlord's contractors,
subcontractors or suppliers due to: strikes or other labor troubles; delays in
Tenant's selection of materials, plans or specifications; governmental
restrictions and limitations: scarcity; unavailability or delays in obtaining
fuel, labor or materials; war or other national emergency; accidents; floods;
defective materials; fire damage or other casualties; adverse weather
conditions; the inability to obtain building or use and occupancy permits; or
any cause similar or dissimilar to the foregoing which is beyond the reasonable
control of Landlord or Landlord's contractors, subcontractor or supplier.
Tenant and its authorized agents, employees and contractors shall have the
right, at Tenant's own risk, expense and responsibility, at all reasonable times
prior to the Commencement Date as hereinafter defined, to enter the Premises for
the purpose of taking measurements and installing its furnishings and equipment;
provided that Tenant, in so doing, shall not interfere with or delay the work to
be performed hereunder by Landlord, and Tenant shall use contractor and workmen
compatible with the contractors and workmen engaged in the work to bc performed
hereunder by Landlord, and Tenant shall have obtained Landlord's written consent
to installing any furnishings or equipment.
SECTION 4. TERM. The term of this lease shall commence on the
Commencement Date. Following the Commencement Date, the term of this Lease
shall, unless sooner terminated as expressly provided in this Lease, continue
until the date of expiration of the period specified as the Period of Lease on
the Term Sheet plus the number of days which remain until and including the last
day of the calendar month in which such period expires (the "Expiration Date").
The period between the Commencement Date and the Expiration Date and any agreed
extensions thereof shall be referred to in this Lease as the "Term". Upon
request of the Landlord, Tenant shall enter into a memorandum agreement
stipulating the actual Commencement Date and Expiration Date of the Term.
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SECTION 5. USE OF PREMISES. Tenant shall occupy the Premises throughout
the Term and shall use the same for, and only for, the Permitted Leases
specified on the Term Sheet. The Building is designed to normal building
standards for floor-loading capacity. Tenant shall not use the Premises in such
ways which, in Landlord's judgment, exceed such load limits.
SECTION 6. RENT. Unless otherwise specifically requested by Landlord at
any time, Minimum Annual Rent, additional rent and any other rent or other sums
due under this Flex Space Lease shall be paid and delivered to the Property
Manager, as agent for Landlord, at the address given in the Term Sheet, in the
amounts, time and manner more particularly provided in this Lease Agreement.
(a) MINIMUM ANNUAL RENT. Tenant shall pay, throughout the Term,
Minimum Annual Rent in the amount specified on the Term Sheet, without notice or
demand and without setoff or deduction, in equal monthly installments equal to
one-twelfth of the Minimum Annual Rent (specified as Monthly Installments on the
Term Sheet), in advance, on the first day of each calendar month during the
Term. If the Commencement Date falls on a day other than the first day of a
calendar month, the Minimum Annual Rent shall be apportioned on a per diem basis
for the period between the Commencement Date and the first day of the first full
calendar month in the Term and such apportioned sum shall be paid on the
Commencement Date.
(b) ADDITIONAL RENT. Tenant shall pay to Landlord, as additional
rent, in the manner more particularly set forth below, Tenant's pro rata share
of annual operating costs for the Property:
(i) ANNUAL OPERATING COSTS. The term "annual operating costs"
shall mean all reasonable costs Landlord actually incurs
from owning, operating and maintaining the Building and the
lot or tract of land on which it is situated (the
"Property") as determined under generally accepted
accounting principles consistently applied. Annual
operating costs shall include, by way of example rather than
limitation: insurance premiums; fees; Impositions (defined
below); costs for repairs, maintenance and service
contracts; management fees (if there is no managing agent
for the Property, if the managed agent is affiliated with
Landlord, management fees will not be more than those
customarily charged for management of a first class office
building by an independent managing agent in Malvern,
Pennsylvania); governmental permits fees; costs of
compliance with governmental orders and regulations;
administrative and overhead expenses; costs of furnishing
water, sewer, gas, fuel, and other utility services, for use
in common areas of the Building and Property; and the cost
of janitorial service and trash removal; EXCLUDING, however,
from annual operating costs the following: costs which are
treated as capital expenditures under generally accepted
accounting principles; mortgage debt or ground rents
incurred by Landlord as owner of the Property; income,
excess profits, corporate capital stock or franchise tax
imposed or assessed upon Landlord, unless such tax or any
similar tax is levied or assessed, in lieu of all or any
part of any
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currently existing Imposition or an increase in any
currently existing Imposition; repairs or other work
occasioned by fire, windstorm or other casualties or hazards
to the extent covered by insurance; leasing commissions,
advertising expenses and other expenses incurred in leasing
or procuring new tenants; repairs or rebuilding necessitated
by condemnation; salaries of executives above grade of
superintendent; cost of correcting structural defects;
fines, penalties, judgments, legal fees or court costs
incurred for violation of laws, ordinances or regulations by
Landlord; electricity metered to Tenants in the Building;
expenses for painting, redecorating and other work which
Landlord, at its expense, performs for other Tenants; and
cost of complying with regulations, ordinances and laws
governing disposal of hazardous materials present at the
Property prior to the date of this Lease. "Impositions"
shall mean all levies, taxes, assessments, charges, imposts,
and burdens, of whatever kind and nature, ordinary and
extraordinary, which are assessed or imposed during the Term
by any federal, state or municipal government or public
authority or under any law, ordinance or regulation thereof
or pursuant to any recorded covenants or agreements upon or
with respect to the Property or any part thereof, any
improvements thereto, any personal property necessary to the
operation thereof and owned by Landlord or this Lease. If
under the requirements of any state or local law, a new
Imposition is imposed upon Landlord which Tenant is
prohibited by law from paying, Landlord may, as its
election, terminate this Lease by giving written notice
thereof to Tenant.
(ii) COMPUTATION OF TENANT'S SHARE OF ANNUAL OPERATING COSTS.
After the end of each calendar year of the Term, Landlord
shall compute and submit to Tenant the annual operating
costs for such calendar year. "Tenant's share of the annual
operating costs" for such calendar year shall be [A] the
annual operating costs for the Building divided by [B] the
greater of (x) 90% of the net rentable area in the Building
or (y) the total net rentable area in the Building which is
actually leased; multiplied by [C] Tenant's Proportionate
Share as specified in the Term Sheet but in no event shall
the operation of this section yield greater than 100% of
operating costs.
(iii) TIMING OF ADDITIONAL RENT PAYMENT. Tenant shall pay the
additional rent due hereunder within fifteen (15) days after
submission of Landlord's invoice to Tenant. However, if
Landlord so elects, Landlord may, from time to time during
the Term, reasonably estimate the additional rent which may
become due hereunder with respect to any calendar year and
require Tenant to pay to Landlord, at the time monthly
installments of Minimum Annual Rent are due, an amount equal
to the sum
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obtained by dividing the Landlord's estimate of
additional rent for a calendar year by the number of months
remaining in such calendar year. Landlord shall cause the
actual amount of Tenant's share of the annual operating
costs to be computed and certified and delivered to Tenant
within one hundred and twenty (120) days following the end
of any calendar year in which monthly installments are
required, whereupon either [A] Tenant shall, within ten (10)
days of receipt of the certificates, pay to Landlord the
amount by which Tenant's actual additional rent obligation
for such calendar year exceeds Landlord's estimated
additional rent previously paid by Tenant or [B] Landlord
shall apply as a credit against future payments of Minimum
Annual Rent or additional rent any amount by which
Landlord's estimated payments of additional rent paid by
Tenant during the calendar year exceed the actual additional
rent certified by Landlord. If only part of a calendar year
falls within the Term, the amount computed as additional
rent with respect to such calendar year shall be prorated so
that Tenant pays additional rent only for the portion of the
calendar year falling within the Term. The expiration of
the Term prior to the end of a calendar year shall not
impair Tenant's obligation to pay prorated additional rent
for the period during the Term. Premature expiration of the
Term due to an event of default shall not effect Tenant's
obligation to pay additional rent for the period of the
originally intended Term. Tenant shall make all payments of
additional rent without delay, and regardless of either
dispute over the amount of additional rent which is due or
the Tenant's desire to inspect Landlord's books and records.
(iv) BOOKS AND RECORDS. Tenant shall have the right to inspect
Landlord's books and records used in calculating the annual
operating costs within sixty (60) days of receiving
Landlord's annual operating costs certification. Inspection
may only be made during regular business hours after having
given Landlord at least forty-eight (48) hours prior written
notice.
SECTION 7. INSURANCE.
(a) LIABILITY. Tenant, at Tenant's sole cost and expense, shall
maintain and keep insurance in effect throughout the Term against liability for
bodily injury (including death) and property damage in or about the Premises or
the Property under a policy of comprehensive general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than property damage on or about the Premises or the
Property under a policy of comprehensive general public liability insurance,
with such limits as to each as may be reasonably required by Landlord from time
to time, but not less than $500,000 for each person and $1,000,000 for each
occurrence of bodily injury (including death) and $500,000 for property damage.
The policies of comprehensive general public liability insurance shall name
Landlord and Tenant (and if requested, any mortgagee of Landlord) as the insured
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parties. Each such policy shall provide that it shall not be cancelable without
at least thirty (30) days prior written notice to Landlord and to any mortgagee
named in an endorsement thereto and shall be issued by an insurer and in a form
satisfactory to Landlord. At least ten (10) days prior to the Commencement
Date, and thereafter at least ten (10) days prior to the expiration of any
existing policy and otherwise upon Landlord's reasonable request, a certificate
of insurance shall be delivered to landlord proving compliance with the
foregoing requirements. If Tenant shall fail, refuse or neglect to obtain or to
maintain any insurance that it is required to provide or to furnish landlord
with satisfactory evidence of coverage on any such policy upon ten (10) days
prior written notice, Landlord shall have the right to purchase such insurance.
All payments made by Landlord for such insurance shall be recoverable by
Landlord from Tenant, together with interest thereon, as additional rent
promptly upon demand. Landlord shall maintain and keep in full force and effect
throughout the Term (i) hazard insurance on the Building written on an "all
risks" form in an insured amount of not less than the full replacement cost of
the Building, and (ii) public liability insurance with minimum limits of
$1,000,000 per person and $1,000,000 per occurrence for personal injury and
$1,000,000 for property damage.
(b) WAIVER OF SUBROGATION. The parties to this Lease each release
the other, to the extent of the releasing party's insurance coverage, from any
and all liability for any loss or damage covered by such insurance which may be
inflicted upon the property of such party even if such loss or damage shall be
brought about by the fault or negligence of the other party, its agents or
employees. If any policy does not permit such a release of liability and a
waiver of subrogation, and if the party to benefit therefrom requests that such
a waiver be obtained, the other party agrees to obtain an endorsement to its
insurance policies permitting such waiver of subrogation if it is available. If
an additional premium is changed for such waiver, the party benefiting therefrom
agrees to pay the amount of such additional premium promptly upon demand. In
the event a party is unable to obtain such a waiver, it shall immediately notify
the other party of its inability. In the absence of such notifications, each
party shall be deemed to have obtained such waiver of subrogation.
(c) INCREASE OF PREMIUMS. Tenant will not do anything or fail to do
anything which will cause the cost of Landlord's insurance to increase or which
will prevent Landlord from procuring insurance (including but not limited to
public liability insurance) from companies, and in a form, satisfactory to
Landlord. If any breach of this subsection (c) by Tenant shall cause the rate
of fire or other insurance to be increased, Tenant shall pay the amount of such
increase as additional rent promptly upon demand.
SECTION 8. REPAIR AND MAINTENANCE.
(a) Except as specifically otherwise provided in Paragraphs (b) and
(c) of this Section and unless resulting from the negligence of Landlord or
another tenant in the Building, Tenant, at its sole cost and expense and
throughout the term of this lease, shall keep and maintain the Premises and its
systems in good order and condition, free of accumulation of dirt and rubbish,
and shall promptly make all repairs necessary to keep and maintain such good
order and condition, whether such repairs are interior or exterior, ordinary or
extraordinary, foreseen or unforeseen. Tenant shall not use or permit the use
of any portion of the Property for outdoor storage. When used in this Section
8, the term "repairs" shall include replacements and renewals where necessary.
All repairs made by Tenant shall utilize materials and equipment which are at
least equal in
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quality and usefulness to those originally used in constructing
the Building and Premises. Without limitation of the foregoing, Tenant shall
maintain all HVAC systems appurtenant to the Premises using a service firm(s)
acceptable to Landlord which shall provide service and maintenance in accordance
with the manufacturer's recommendations and shall provide a copy of the contract
to Landlord.
(b) Landlord shall, throughout the Term of this lease and at
Landlord's sole cost and expense, make all necessary repairs to the footings and
foundations and the structural steel columns and girders forming a part of the
Premises; provided, however, that Landlord shall have no responsibility to make
any repair unless and until Landlord receives written notice of the need for
such repair.
(c) Landlord shall, throughout the Term of this Lease, make all
necessary repairs to the roof, walls, exterior portions of the Premises and the
Building; utility lines, equipment and other utility facilities in the Building
which serve more than one tenant of the Building; and any driveways, sidewalks,
curbs, loading, parking and landscaped areas, and other exterior improvements on
the Property; provided, however, that Landlord shall have no responsibility to
make any repairs unless and until Landlord receives written notice of the need
for such repair. Tenant shall pay Tenant's Proportionate Share of the cost of
all repairs to be performed by Landlord under this Section 8 as additional rent
pursuant to Section 6(b).
(d) Landlord shall endeavor to keep and maintain all common areas of
Property (including its common systems) and any sidewalks, parking areas, curbs
and access ways adjoining the Property in a clean and orderly condition, free of
accumulation of dirt, rubbish, and snow to the extent reasonably possible, and
shall keep and maintain all landscaped areas in a neat and orderly condition.
Tenant shall pay Tenant's Proportionate Share of the cost of all work to be
performed by Landlord hereunder pursuant to Section 6(b) as additional rent.
(e) Notwithstanding anything herein to the contrary, repairs to the
Premises and the Property made necessary by Tenant's use, manner of use or
occupancy of the Property or by Tenant's installations in or upon the Property
or by any act or omission of Tenant or any employee, agent, contractor, or
invitee of Tenant shall be made at Tenant's sole cost and expense. Tenant shall
not bear the expense of any repairs to the Premises or the Property arising out
of or caused by any other tenant's use, manner of use or occupancy of the
Property or by any other tenant's installations to or upon the Property, or by
any act or omission of Landlord or any other tenant or any other tenant's
employees, agents, contractors or invitees.
SECTION 9. UTILITIES. Tenant shall be solely responsible for and shall
pay promptly all rents, costs and charges for water service, sewer service, gas,
electricity, light, heat, power, telephone and other communication services, and
any and all other utilities or services solely rendered or supplied upon or in
connection with the Premises.
SECTION 10. GOVERNMENTAL REGULATIONS.
(a) Throughout the Term, Tenant shall, at its sole cost and expense:
(i) comply promptly with all laws, ordinances, notices, orders, rules,
regulations and requirements of all federal, state and municipal governments and
all departments, commissions, boards and officers thereof, and of the National
Fire Protective Authority or any other body now or hereafter constituted
exercising similar functions and affecting the Premises; and (ii) keep in force
at all times all licenses,
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consents and permits necessary for the lawful use of the Premises for the
purposes herein provided; and (iii) comply with the requirements of all
public liability, fire, and other policies of insurance covering the Premises
whether any of the foregoing are foreseen or unforeseen, ordinary or
extraordinary (hereto collectively called the "Laws and Requirements");
provided, however, that Tenant shall not be required to comply with the
foregoing Laws and Requirements with respect to the footings and foundations and
the structural steel columns and girders forming a part of the Premises unless
the need for such compliance arises out of or is caused by Tenant's use, manner
of use or occupancy of the Premises, or by Tenant's installations in or upon the
Premises or by any act or omission of Tenant or any employee, agent, contractor
or invitee of Tenant. Tenant shall not violate any laws, ordinances, notices,
orders, rules, regulations or requirements of any federal, state or municipal
government or any department, commission, board of officer thereof, or of the
National Board of Fire Underwriters or any other body exercising similar
functions, relating to the Premises or to the use or manner of use of the
Property.
(b) Tenant shall pay a pro rata share of capital improvements which
Landlord shall install or construct in compliance with governmental requirements
as energy saving devices, but only if savings actually occur in energy costs.
Tenant's pro rata share shall be determined based upon the estimated life of the
capital investment item, determined by Landlord in accordance with generally
accepted accounting principles, and shall include a cost of capital funds
adjustment equal to twelve percent (12%) per year on the unamortized portion of
all such costs. Tenant shall only have to pay for the portion of the useful
life of the capital improvement which falls within the Term. Tenant shall thus
make payments in equal annual installments for such capital improvements until
the Term expires or until the cost of the improvement has been fully paid for,
whichever first occurs; such payments shall be computed by Landlord at the time
of installation of the capital improvement in the same manner as Landlord makes
computations of Tenant's share of the annual operating costs pursuant to Section
6(b)(ii).
(c) Tenant shall pay all taxes imposed upon Tenant's furnishings,
trade fixtures, equipment or other personal property.
SECTION 11. SIGNS. Landlord will place Tenant's name and suite number on
the building standard sign in the main lobby of the Building and on a building
standard sign adjacent to the entrance to the Premises. Except for signs which
are located wholly within the interior of the Premises and which are not visible
from the exterior of the Premises, Tenant shall place, erect, maintain or paint
no signs at any place upon the Premises or the Property without consent of
Landlord.
SECTION 12. ALTERATIONS, ADDITIONS AND FIXTURES.
(a) Tenant shall have the right to install in the Premises any trade
fixtures; provided, however, that no such installation and no removal thereof
shall be permitted which affects any structural component of the Building or
Premises without consent of Landlord and that Tenant shall repair and restore
any damage or injury to the Premises or the Property caused by installation or
removal.
(b) Tenant shall not make or permit to be made any alterations,
improvements or additions to the Premises or Property without on each occasion
first presenting plans and specifications to Landlord and obtaining Landlord's
prior written consent which consent shall not be unreasonably withheld. If
Landlord consents to any proposed alterations, improvements or
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additions or Tenant's contractor performs any of the work identified in
Section 3 of this Loan Agreement, then Tenant shall make the proposed
alterations, improvements and additions at Tenant's sole cost and expense
provided that: (i) Tenant supplies any necessary permits; (ii) such attention
and improvements do not, in Landlord's judgment, impair the structural strength
of the Building or any other improvements or reduce the value of the Property:
(iii) Tenant takes or causes to be taken all steps that are otherwise required
by Section 13 of this Lease Agreement and that are required or permitted by law
in order to avoid the imposition of any mechanic's, laborer's or materialmen's
lien upon the Premises or Property; (iv) Tenant uses a contractor approved by
Landlord; (v) the occupants of the Building and of any adjoining real estate
owned by Landlord are not annoyed or disturbed by such work; (vi) the
alterations, improvements or additions shall be installed in accordance with
the approved plans and specifications and completed according to a construction
schedule approved by Landlord; and (vii) Tenant provides insurance of the types
and coverage amounts required by Landlord. Any and all alterations,
improvements and additions to the Premises (except trade fixtures) which are
constructed, installed or otherwise made by Tenant shall be the property of
Tenant until the expiration or sooner termination of this lease; at that time
all such alterations and additions shall remain on the Premises and become the
property of Landlord without payment by Landlord unless, upon the termination of
this Lease, Landlord instructs Tenant in writing to remove the same in which
event Tenant will remove such alterations, improvements and additions, and
repair and restore any damage to the Property caused by the installation or
removal.
SECTION 13. MECHANIC'S LIENS. Tenant shall promptly pay any contractor
and materialmen who supply labor, work or materials to Tenant at the Premises or
the Property so as to minimize the possibility of a lien attaching to the
Premises or the Property. Tenant shall take all steps permitted by law in order
to avoid the imposition of any mechanic's, laborer's or materialmen's lien upon
the Premises or the Property. Should any such lien or notice of lien be filed
for work performed for Tenant other than by Landlord, Tenant shall bond against
or discharge the same within fifteen (15) days after the lien or claim is filed
or formal notice of said lien or claim has been issued regardless of the
validity of such lien or claim. Nothing in this Lease is intended to authorize
Tenant to do or cause any work or labor to be done or any materials to be
supplied for the account of Landlord, all of the same to be solely for Tenant's
account and at Tenant's risk and expense. Throughout this lease the term
"mechanic's lien" is used to include any lien, encumbrance or charge levied or
imposed upon the Premises or the Property or any interest therein or income
therefrom on account of any mechanic's, laborer's or materialmen's lien or
arising out of any debt or liability to or any claim or demand of any
contractor, mechanic, supplier, materialmen or laborer and shall include without
limitation any mechanic's notice of intention given to Landlord or Tenant, any
stop order given to Landlord or Tenant, any notice of refusal to pay naming
Landlord or Tenant and any injunctive or equitable action brought by any person
entitled to any mechanic's lien.
SECTION 14. LANDLORD'S RIGHT OF ENTRY.
(a) Tenant shall permit Landlord and the authorized representative of
Landlord and of any mortgagee or any prospective mortgagee to enter the Premises
at all reasonable times upon advance notice for the purpose of (i) inspecting
the Premises or (ii) making any necessary repair to the Premises or to the
Building and performing any work therein. During the progress of any work on
the Premises or the Building, Landlord will attempt not to inconvenience Tenant,
but shall not be liable
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for inconvenience, annoyance, disturbance, loss of business or other damage to
Tenant by reason of making any repair or by bringing or storing materials,
supplies, tools and equipment in the Premises during the performance of any
work, and the obligations of Tenant under this Lease shall not be thereby
affected in any manner whatsoever.
(b) Landlord shall have the right at all reasonable times upon notice
to cater and to exhibit the Premises for the purpose of inspection or showing
the Premises in connection with a sale or mortgage and, during the last nine (9)
months of the Term, to enter upon and to exhibit the Premises to any prospective
tenant.
SECTION 15. DAMAGE BY FIRE OR OTHER CASUALTY.
(a) If the Premises or Building is damaged or destroyed by fire or
other casualty, Tenant shall promptly notify Landlord whereupon Landlord shall,
subject to the consent of Landlord's present or future mortgagee and to the
conditions set forth in this Section 15, repair, rebuild or replace such damage
and restore the Premises to substantially the same condition as the Premises
were in immediately prior to such damage or destruction; provided, however, that
Landlord shall only be obligated to restore such damage or destruction to the
extent of the proceeds of fire and other extended coverage insurance policies.
Notwithstanding the foregoing, if the Premises is destroyed or damaged to the
extent that it cannot be used for its intended purpose or if the cost of
restoration or repair would exceed $100,000 in Landlord's judgment or if the
time necessary for repairs or estimation would, in Landlord's judgment, exceed
the period of coverage of Landlord's rental loss insurance, Landlord may,
subject to the rights of Landlord's mortgagee, terminate this Lease by written
notice to Tenant within 90 days after receipt of notice of the casualty. If the
time for repair, rebuilding or replacement of the Premises to its condition on
the Commencement Date exceeds twelve (12) months, Tenant may terminate this
Lease by written notice to Landlord given within thirty (30) days after the
expiration of such twelve (12) month period.
(b) The repair, rebuilding or replacement work shall bc commenced
promptly and completed with due diligence, taking into account the time required
by Landlord to effect a settlement with, and procure insurance proceeds from,
the insurer, and for delays beyond Landlord's reasonable control.
(c) The net amount of any insurance proceeds recovered by reason of
the damage or destruction of the Building (meaning the gross insurance proceeds
excluding proceeds received pursuant to a rental coverage endorsement and the
cost of adjusting the insurance claim and collecting the insurance proceeds)
shall be applied towards the cost of restoration. Notwithstanding anything to
the contrary in this Loan Agreement, if in Landlord's sole opinion the net
insurance proceeds will not be adequate to complete such restoration, Landlord
shall have the right to terminate this Lease and all the unaccrued obligations
of the parties hereto by sending written notice of such termination to Tenant
specifying a termination date not less than ten (10) days after its
transmission; provided, however, that Tenant may require Landlord, except during
the last two (2) years of the Term, to withdraw the notice of termination by
agreeing to pay the cost of restoration in excess of the net insurance proceeds
and by giving Landlord adequate security for such payment prior to the
termination date specified in Landlord's notice of termination if the net
insurance proceeds are more than adequate, the amount by which the net insurance
proceeds exceed the cost of restoration will be retained by Landlord or applied
to repayment of any mortgage secured by the Premises.
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(d) Landlord's obligation or election to restore the Premises under
this Section shall be subject to the terms of any present or future mortgage
affecting the Premises and to the mortgagee's consent if required in the
mortgage and shall not, in any event, include the repair, restoration or
replacement of the fixtures, improvements, alterations, furniture or any other
property owned, installed, made by, or in the possession of Tenant.
(e) Landlord shall maintain insurance against loss or damage to the
Building by fire and such other casualties as may be included within fire and
extended coverage insurance or all-risk insurance, together with a rental
coverage endorsement or other comparable form of coverage. If Tenant is
dispossessed of the Premises due to fire or other casualty, Tenant will receive
an abatement of its Minimum Annual Rent and Additional Rent during the period
Tenant is dispossessed, provided the fire or other casualty was not the fault of
Tenant or its employees, agents or contractors, but it is further provided that
even in the event of negligence, as aforesaid, Tenant's rent shall be abated
during the period Tenant is dispossessed from the Premises to the extent of the
proceeds of rental insurance actually and unconditionally received by the
Landlord from its insurance carrier.
SECTION 16. NON-ABATEMENT OF RENT. Except as otherwise expressly provided
in subsections 15(e) and as to condemnation in subsections 18(a) and (b) there
shall be no abatement or reduction of the Minimum Annual Rent, additional rent
or other sums payable hereunder for any cause whatsoever and this Lease shall
not terminate, nor shall Tenant be entitled to surrender the Premises, in the
event of fire, casualty or condemnation or any default by Landlord under this
Lease.
SECTION 17. INDEMNIFICATION OF LANDLORD.
(a) Tenant will indemnify Landlord and save Landlord harmless from
and against any and all claims, actions, damages, liability, and expense
(including without limitation fees of attorneys, investigators and experts) in
connection with loss of life, personal injury or damage to property to any
person in or about the Premises or arising out of the occupancy or use by Tenant
of the Premises or any part thereof or occasioned wholly or in part by any act
or omission of Tenant, its agents, contractors, employees, licensees or
invitees; unless such loss, injury or damage was caused by the negligence of
Landlord, its agents, contractors, employees, licensees or invitees. Without
limiting the foregoing, Tenant will forever release and hold Landlord harmless
from all claims arising out of damage to Tenant's property or injury to persons
upon the Premises, from whatever cause, unless such damage or injury occurs as a
result of Landlord's or its employees, agents, contractors, or licensees'
negligence in failing to make repairs for which Landlord is responsible under
this Lease after having received written notice of the need for such repair. In
case any such claim, action or proceeding is brought against Landlord, upon
notice from Landlord Tenant shall resist or defend such claim, action or
proceeding at Tenant's sole cost and expense or shall cause it to be resisted or
defended by an insurer, unless such action or proceeding results from Landlord's
negligence, in which event Tenant shall not be responsible for defense of such
claim.
(b) If (i) action or proceeding is commenced in which Landlord is
made a party by reason of being the Landlord under this Lease, or if
(ii) Landlord shall deem it necessary to engage attorneys or institute any suit
against Tenant in connection with the enforcement of Landlord's rights under
this Lease, the violation of any term of this Lease, the declaration of
Landlord's rights hereunder or the protection of Landlord's
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interests under this Lease and Landlord is successful in such suit against
Tenant. Tenant shall reimburse Landlord for its expense incurred as a result
thereof including, without limitation, court costs and reasonable attorney's
fees.
SECTION 18. CONDEMNATION.
(a) TERMINATION. If (i) all of the Premises are covered by a
condemnation; or (ii) any of the Premises is covered by a condemnation and the
remaining part is insufficient for the reasonable operation therein of Tenant's
business; or (iii) subject to the provisions of Paragraph (b)(i) hereof, any of
the Property is covered by a condemnation and, in Landlord's sole opinion, it
would be impractical or the condemnation proceeds are insufficient to restore
the remainder of the Property; then, in any such event, this Lease shall
terminate and all obligations hereunder shall cease as of the date upon which
possession is taken by the condemnor. Upon such termination the Minimum Annual
Rent and all additional rent herein reserved shall be apportioned and paid in
full by Tenant to Landlord to that date and all such rent prepaid for periods
beyond that date shall forthwith be repaid by Landlord to Tenant.
(b) PARTIAL CONDEMNATION.
(i) If there is a partial condemnation and Landlord decides to
terminate pursuant to subsection (a)(iii) hereof then Tenant
may require Landlord, except during the last two (2) years
of this Term, to withdraw its notice of termination by: [A]
giving Landlord written notice thereof within ten (10) days
from transmission of Landlord's notice to Tenant of
Landlord's intention to terminate, [B] agreeing to pay the
cost of restoration in excess of the condemnation proceeds
reduced by those sums expended by Landlord in collecting the
condemnation proceeds, and [C] giving Landlord adequate
security for such payment within such ten (10) day period.
(ii) If there is a partial condemnation and this Lease has not
been terminated pursuant to subsection (a) hereof. Landlord
shall restore the Building and the improvements which are
part of the Premises to a condition and size as nearly
comparable as reasonably possible to the condition and size
hereof immediately prior to the date upon which possession
shall have been taken by the condemnor; provided, however,
that Landlord shall only be obligated to restore such damage
from condemnation to the extent possible with the award
damage. If the compensation proceeds are more than adequate
to cover the cost of restoration and the Landlord's expenses
to collecting the condemnation proceeds, any excess proceeds
shall be retained by Landlord or applied to repayment of any
mortgage secured by the Premises.
(iii) If there is a partial condemnation and this Lease has not
been terminated by the date upon which the condemnor obtains
possession, the obligations of Landlord and Tenant under
this Lease shall be unaffected by such condemnation except
that there shall be an equitable abatement for the balance
of the
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Term of the Minimum Annual Rent according to the
value of the Premises before and after the date upon which
the condemnor takes possession. In the event that the
parties are unable to agree upon the amount of such
abatement, either party may submit the issue to arbitration.
(c) AWARD. In the event of a condemnation affecting Tenant, Tenant
shall have the right to make a claim against the condemnor for removal expenses,
business dislocation damages and moving expenses; provided and to the extent,
however, that such claims or payments do not reduce the sums otherwise payable
by the condemnor to Landlord. Except as aforesaid, Tenant hereby waives all
claims against Landlord and against the condemnor, and Tenant hereby assigns to
Landlord all claims against the condemnor including, without limitation, all
claims for leasehold damages and diminution in value of Tenant's leasehold
interest.
(d) TEMPORARY TAKING. If the condemnor should take only the right to
possession for a fixed period of time or for the duration of an emergency or
other temporary condition then, notwithstanding anything hereinabove provided,
this Lease shall continue in full force and effect without any abatement of
rent, but the amounts payable by the condemnor with respect to any period of
time prior to the expiration or sooner termination of this Lease shall be paid
by the condemnor to Landlord and the condemnor shall be considered a subtenant
of Tenant. Landlord shall apply the amount received from the condemnor
applicable to the rent due hereunder, net of costs, to Landlord for the
collection thereof, or as much thereof as may be necessary for the purpose,
toward the amount due from Tenant as rent for that period; and, Tenant shall pay
to Landlord any deficiency between the amount thus paid by the condemnor and the
amount of the rent, or Landlord shall pay to Tenant any excess of the amount of
the award over the amount of the rent.
SECTION 19. QUIET ENJOYMENT. Tenant upon paying the Minimum Annual Rent,
additional rent and other charges herein required and observing and keeping all
covenants, agreements and conditions of this Lease, shall quietly have and enjoy
the Premises during the Term without hindrance or molestation by anyone claiming
by or through Landlord, subject, however, to the exceptions, reservations and
conditions of this lease.
SECTION 20. RULES AND REGULATIONS. The Landlord hereby reserves the right
to prescribe, from time to time, at its sole discretion, reasonable rules and
regulations (hereto called the "Rules and Regulations") having uniform
applicability to all or substantially all tenants of the Building and governing
the use and enjoyment of the Premises and the remainder of the Property. The
Rules and Regulations shall not materially interfere with the Tenant's use and
enjoyment of the Premises in accordance with the provisions of this Lease for
the Permitted Use. The Tenant shall comply at all times with the Rules and
Regulations and shall cause its agents, employees, invitees, visitors, and
guests to do so. A copy of the Rules and Regulations in effect on the date
hereof is attached hereto as EXHIBIT D.
SECTION 21. ASSIGNMENT AND SUBLETTING. Tenant shall not assign, mortgage,
pledge or encumber this lease or sublet the whole or any part of the Premises,
without the prior written consent of Landlord which consent shall not be
unreasonably withheld. Consent may be withheld by Landlord if, among other
possible reasons, an event of default exists under this Lease. This prohibition
against assigning or subletting shall be construed to include a prohibition
against any assignment or subletting by operation of law and any transfer by any
person or persons controlling Tenant on the date of the leave of such
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control to a person or persons not controlling Tenant on the date of the Lease.
In the case where Tenant is a corporation, transfer of 50% of the shares of
Tenant is the aggregate in one or more or transfer of majority ownership from
one shareholder to another during the Term shall constitute a change of control
and be a prohibited assignment. In the event of any assignment of this Lease
made with or without Landlord's consent, Tenant nevertheless shall remain
liable for the performance of all of the terms, conditions and covenants of this
Lease and shall require any assignee to execute and deliver to Landlord an
assumption of liability agreement in form satisfactory to Landlord, including an
assumption by the assignee of all the obligations of Tenant and the assignee's
ratification of and agreement to be bound by all provisions of this Lease.
Landlord shall be entitled to, and Tenant shall promptly remit to Landlord, any
profit which may inure to the benefit of Tenant as a result of any subletting of
the Premises or assignment of this lease, whether or not consented to by
Landlord.
SECTION 22. [intentionally deleted]
SECTION 23. SUBORDINATION. This Lease and Tenant's rights hereunder shall
be subject and subordinate at all times in lien and priority to any first
mortgage or other primary encumbrance now or hereafter placed upon or affecting
the Property or the Premises, and to any second mortgage or encumbrance with the
consent of the first mortgagee, and to all renewals, modifications,
consolidations and extensions thereof, without the necessity of any further
instrument or act on the part of Tenant; provided, however, that any mortgagee
hereafter placing a mortgage upon the Premises shall have agreed that, subject
to terms customarily required by such mortgagee to be set forth, if any, in a
Subordination, Non-Disturbance and Attornment Agreement acceptable to the
mortgagee, the Tenant's right of occupancy and possession of the Premises shall
not be disturbed so long as the Tenant is not in default under this Lease.
Tenant shall execute and deliver upon demand any further instrument or
instruments confirming the subordination of this lease to the lien of any such
first mortgage or to the lien of any other mortgage, if requested to do so by
Landlord with the consent of the first mortgagee, and any further instrument or
instruments of attornment that may be desired by say such mortgagee or Landlord.
Notwithstanding the foregoing, any mortgagee, may at any time subordinate its
mortgage to this lease, without Tenant's consent, by giving notice in writing to
Tenant and thereupon this Lease shall be deemed prior to such mortgage without
regard to their respective date of execution and delivery. In that event such
mortgagee shall have the same rights with respect to this Lease as though this
lease had been executed prior to the execution and delivery of the mortgage and
had been assigned to such mortgagee.
SECTION 24. TENANT'S CERTIFICATE. Tenant shall, at any time and from time
to time, within fifteen (15) days after Landlord's written request, execute,
acknowledge and deliver to Landlord a written instrument in recordable form
certifying (a) that this Lease is unmodified and in full force and effect (or,
if modified, stating the modifications); (b) that the improvements required by
Section 3 have been completed; (c) that Tenant has accepted possession of the
Premises; (d) the date on which the Term commenced and the dates to which
Minimum Annual Rent, additional rent and other charges, have been paid; (e)
that, to the best knowledge of the signor of such instrument, Landlord is not in
default of this Lease (or, if in default, stating the nature of the default);
(f) any other fact or condition reasonably requested by Landlord or required by
any mortgagee or prospective mortgagee or purchaser of the Premises, the
Property or any interest therein; and (g) that it is understood that such
instrument may be relied upon by any mortgagee or prospective mortgagee or
purchaser of the Premises
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or any interest therein or by any assignee of Landlord's interest in this
Lease or by any assignee of any mortgagee. The foregoing instrument shall be
addressed to Landlord and to any mortgagee, prospective mortgagee, purchaser or
other party specified by Landlord.
SECTION 25. CURING TENANT'S DEFAULTS. If Tenant defaults in the
performance of any of its obligations hereunder, Landlord may, after the
expiration of any applicable notice and grace periods, provided in this Lease
without any obligation to do so and in addition to any other rights it may have
in law or equity, elect to cure such default on behalf of Tenant after written
notice (except in the case of emergency) to Tenant. Tenant shall reimburse
Landlord upon demand for any sums paid or costs incurred by Landlord in curing
such default, including interest thereon from the respective date of Landlord's
making the payments and incurring such costs, which sums and costs together with
interest thereon shall be deemed additional rent payable within ten (10) days of
demand.
SECTION 26. SURRENDER.
(a) Subject to the terms of subsections 12(b) and 15(c), at the
expiration or earlier termination of the Term Tenant shall promptly yield up the
Premises and all improvements, alterations and additions thereto, and all
fixtures and equipment servicing the Premises (except trade fixtures) in a
coalition which is clean of garbage and debris and broom clean and in the same
condition, order and repair in which they are required to be kept throughout the
Term, ordinary wear and tear excepted.
(b) If Tenant, or any person claiming through Tenant, continues to
occupy the Premises after the expiration or earlier termination of the Term or
any renewal thereof without the written consent of Landlord, such occupancy
shall be deemed to be under a tenancy-at-will under the same terms and
conditions set forth in this Lease; except, however, that the Minimum Annual
Rent during such continued occupancy shall be double the amount set forth in
subsection 6(a) and Tenant shall indemnify Landlord for any loss or damage
incurred by reason of Tenant's failure to surrender the Premises. Anything to
the contrary notwithstanding, any holding over by Tenant without Landlord's
prior written consent shall constitute a default hereunder and shall be subject
to all the remedies set forth in subsection 27(b) hereof.
SECTION 27. DEFAULTS, REMEDIES.
(a) DEFAULTS. It shall be an event of default under this Lease if
any one or more of the following events occurs:
(i) Tenant fails to pay in full, when due and without demand,
any and all installments of Minimum Annual Rent or
additional rent or any other charges or payments due and
payable under this Lease whether or not herein included as
rent.
(ii) Tenant violates or fails to perform or otherwise breaches
any agreement, term, covenant or condition contained in this
Lease.
(iii) Tenant abandons or vacates the Premises or removes or
attempts to remove Tenant's goods or property therefrom
other than in the ordinary course of business without having
first paid to Landlord in full all Minimum Annual Rent,
additional rent and other
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charges that have become due as well as all which will
become due thereafter through the end of the Term.
(iv) Tenant becomes insolvent or bankrupt in any sense or makes
an assignment for the benefit of creditor or offers a
composition or settlement to creditor, or if a petition in
bankruptcy or for reorganization or for an arrangement with
creditor under any federal or state law is filed by or
against Tenant, or a bill in equity or other proceeding for
the appointment of a receiver, trustee, liquidator,
custodian, conservator or similar official for any of
Tenant's assets, is commenced, or if any of the real or
personal property of Tenant shall be levied upon by any
sheriff, marshal or constable; provided, however, that any
preceding brought by anyone other than the parties to this
Lease under any bankruptcy, reorganization arrangement,
insolvency, readjustment, receivership or similar law shall
not constitute an event of default until such proceeding,
decree, judgement or order has continued unstayed for more
than sixty (60) consecutive days.
(v) [intentionally deleted]
(b) REMEDIES. Upon the occurrence of an event of default under this
Lease, Landlord shall have all of the following rights:
(i) Landlord may charge a late payment penalty of five (5%)
percent of any amount owed to Landlord pursuant to this
Lease which is not paid within fifteen (15) days of the due
date which is set forth in the Lease or, if a due date is
not specified in this Lease, within thirty (30) days of the
mailing of a bill therefor by Landlord. If Landlord incurs
a penalty in connection with any payment which Tenant has
failed to make within the times required in this Lease,
Tenant shall pay Landlord, in addition to such payment due,
the full amount of such penalty incurred by Landlord.
(ii) Landlord may accelerate the whole or any part of the Minimum
Annual Rent and all additional rent for the entire unexpired
balance of the Term of this Lease, as well as all other
charges, payments, costs and expenses herein agreed to be
paid by Tenant, and any Minimum Annual Rent or other
charges, payments, costs and expenses so accelerated shall,
in addition to any and all installments of rent already due
and payable and in arrears and any other charge or payment
herein reserved, included or agreed to be treated or
collected as rent and any other charge, expense or cost
herein agreed to be paid by Tenant which may be due and
payable and in arrears, be deemed due and payable as if, by
the forms and provisions of this Lease, such accelerated
rent and other charges, payments, costs and expenses were on
that date payable in advance.
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<PAGE>
(iii) Landlord may re-enter the Premises and, at the option of
Landlord, remove all persons and all or any property
therefrom, either by summary dispossess proceedings or by
any suitable action or proceeding at law or by force or
otherwise, without being liable for prosecution or damages
therefor and Landlord may repossess and enjoy the Premises.
Upon recovering possession of the Premises by reason of or
based upon or arising out of a default on the part of
Tenant, Landlord may, at Landlord's option, either terminate
this Lease or make such alterations and repairs as may be
necessary in order to relet the Premises and may relet the
Premises or any part or parts thereof, either in Landlord's
name or otherwise, for a term or terms which may, at
Landlord's option, be less than or exceed the period which
would otherwise have constituted the balance of the Term of
this Lease and at such rent or rents and upon such other
terms and conditions as in Landlord's sole discretion may
seem advisable and to such person or persons as may in
Landlord's discretion seem best; upon each such reletting
all rents received by Landlord from such reletting shall be
applied as follows: first, to the payment of any costs and
expenses of such reletting, including brokerage fees and
attorney's fees and all costs of alterations and repairs;
second, to the payment of any indebtedness other than
Minimum Annual Rent, additional rent or other charges due
hereunder from Tenant to Landlord; third, to the payment of
Minimum Annual Rent, additional rent and other charges due
and unpaid hereunder; and the residue, if any, shall be held
by Landlord and applied in payment of future rent as it may
become due and payable hereunder. If rentals received from
reletting during any month are less than that to be paid
during that month by Tenant, Tenant shall pay any such
deficiency to Landlord. Such deficiency shall be calculated
and paid monthly. No such re-entry or taking possession of
the Premises or the making of alterations or improvements
thereto or the reletting thereof shall be construed as an
election on the part of Landlord to terminate this Lease
unless written notice of termination is given to Tenant.
Landlord shall in no event be liable in any way whatsoever
for failure to relet the Premises or, in the event that the
Premises or any part or parts thereof are relet, for failure
to collect the rent thereof under such reletting. Tenant,
for Tenant and Tenant's successors and assigns, hereby
irrevocably constitutes and appoints Landlord as agent to
collect the rents due and to become due under all subleases
of the Premises or any parts thereof without in any way
affecting Tenant's obligation to pay any unpaid balance of
rent due or to become due hereunder. Notwithstanding any
such reletting without termination, Landlord may at any time
thereafter elect to terminate this Lease for such previous
breach.
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(iv) Landlord may terminate this Lease and the Term without any
right on the part of Tenant to waive the forfeiture by
payment of any sum due or by other performance of any
condition, term or covenant broken. Upon such termination,
Landlord shall be entitled to recover, in addition to any
and all sums and damages for violation of Tenant's
obligations hereunder in existence at the time of such
termination, damages for Tenant's default in an amount equal
to the amount of the Minimum Annual Rent and additional rent
reserved for the balance of the Term, as well as all other
charges, payments, costs and expenses herein agreed to be
paid by Tenant, all discounted at the rate of six percent
(6%) per annum to their then present worth, less the fair
rental value of the Premises for the remainder of said term,
also discounted at the rate of six percent (6%) per annum to
its then present worth, all of which amount shall be
immediately due and payable from Tenant to Landlord.
(v) Whenever not prohibited by the law of the state in which the
Property is located, when this Lease and the term or any
extension or renewal thereof shall have been terminated on
account of any default by Tenant, or when the Term has
expired, it shall be lawful for any attorney of any court of
record to appear as attorney for Tenant as well as for all
persons claiming by, through or under Tenant, and to sign an
agreement for entering in any competent court an amicable
action in ejectment and judgement against Tenant and all
persons claiming by, through or under Tenant and therein
confess judgment for the recovery by Landlord of possession
of the Premises, for which this Lease shall be his
sufficient warrant; thereupon, if Landlord so desires, an
appropriate writ of possession may issue forthwith, without
any prior writ or proceeding whatsoever, and provided that
if for any reason after such action shall have been
commenced it shall be determined and possession of the
Premises remain in or be restored to Tenant, Landlord shall
have the right for the same default and upon any subsequent
default or defaults, or upon the termination of this Lease
or Tenant's right of possession hereinbefore set forth, to
bring one or more further amicable action or actions as
hereinbefore set forth to recover possession of the Premises
and confess judgment for the recovery of possession of the
Premises as hereinbefore provided.
(vi) [intentionally deleted]
(c) NON-WAIVER. No waiver by Landlord of any breach by Tenant of any
of Tenant's obligations, agreements or covenants herein shall be a waiver of any
subsequent breach or of any other obligation, agreement or covenant, nor shall
any forbearance by Landlord to seek a remedy for any event of default by Tenant
be a waiver by Landlord of any rights and remedies with respect to such or any
subsequent event of default.
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(d) GRACE PERIOD. Notwithstanding anything hereinabove stated,
except in the case of emergency set forth in Section 25 and except in the event
of any default enumerated in subsections (a)(iii), (iv) or (v) of this Section
27, neither party hereto will exercise any right or remedy provided for in this
Lease or allowed by law because of any default of the other, except those
remedies contained in subsection (b)(i) of this Section, unless such party shall
have first given ten ( 10) days written notice thereof to the defaulting party,
and the defaulting party shall have failed to cure the event of default within
such period; provided, however, that if the event of default consists of
something other than the failure to pay money and cannot reasonably be cured
within ten (10) days, neither party hereto will exercise any such right or
remedy if the defaulting party begins to cure the event of default within the
ten (10) days and continues actively and diligently in good faith to completely
cure said event of default; and further provided that Landlord shall not be
required to give such ten (10) days notice and refrain from exercising
Landlord's remedies more than two (2) times during any calendar year.
(e) RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein
conferred upon or reserved to Landlord is intended to be exclusive of any other
right or remedy provided herein or by law, but each shall be cumulative and in
addition to every other right or remedy given herein or now or hereafter
existing at law or in equity or by statute.
SECTION 28. CONDITION OF TITLE AND OF PREMISES. Tenant represents that
the Property and the Premises, the title thereto, the zoning thereof, the street
or streets, sidewalks, parking areas, curbs and access ways adjoining them, any
surface and sub-surface conditions thereof, and the present uses and non-uses
thereof, have been examined by Tenant and Tenant accepts them in the condition
or state in which they now are, or any of them now is, without relying on any
representation, covenant or warranty, express or implied, in fact or in law, by
Landlord and without recourse to Landlord, as to the title thereto, the
encumbrances thereon, the appurtenances thereto, the nature, condition or
usability thereof or the use or uses to which the Premises and the Property or
any part thereof may be put under present zoning ordinances or otherwise, except
as to work to be performed by Landlord pursuant to Section 3. Tenant's
occupancy of the Premises shall constitute acceptance of the Work performed by
Landlord pursuant to Section 3. Landlord makes no warranties or representations,
express or implied, with respect to the condition of the Building or the surface
or subsurface condition of the Property.
SECTION 29. INTERPRETATION.
(a) CAPTIONS. The Captions in this Lease are for convenience only
and are not a part of this Lease and do not in any way define, limit, describe
or amplify the terms and provisions of this Lease or the scope or intent
thereof.
(b) ENTIRE AGREEMENT. This Lease together with the Rider attached
hereto represents the entire agreement between the parties hereto and there are
no collateral or oral agreement or understandings between Landlord and Tenant
with respect to the Premises or the Property. No rights, easements or licenses
are acquired in the Property or any land adjacent to the Property by Tenant by
implication or otherwise except as expressly set forth in the provisions of this
Lease. This Lease shall not be modified in any manner except by an instrument
in writing executed by the parties. Tenant agrees to make such changes to this
Lease as are required by any mortgagee, provided such changes do not
substantially affect Tenant's rights and obligation hereunder. The masculine (or
neuter) pronoun, singular
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<PAGE>
number shall include the masculine, feminine and neuter genders and the singular
and plural number.
(c) EXHIBITS. Each writing or plan referred to herein as being
attached as an Exhibit or otherwise designated herein as an Exhibit hereto is
hereby made a part hereof.
(d) ARBITRATION. Wherever arbitration is set forth herein as the
appropriate resolution of a dispute, issues shall be submitted for arbitration
to the American Arbitration Association in the city nearest to the Premises in
which offices of the American Arbitration Association are located. Landlord and
Tenant will comply with the rules then obtaining of the American Arbitration
Association and the determination of award rendered by the arbitrator[s] shall
be final, conclusive and binding upon the parties and not subject to appeal, and
judgment thereon may be entered in any court of competent jurisdiction.
(e) INTEREST. Wherever interest is required to be paid hereunder,
such interest shall be at the highest rate permitted under law but not in excess
of fifteen percent (15%).
(f) SEVERABILITY. If any term or provision of this Lease, or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the reminder of this Lease, or the application of such
term or provision to persons or circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
(g) JOINT AND SEVERAL LIABILITY. If two or more individuals,
corporations, partnerships or other persons (or any combination of two or more
thereof) shall sign this Lease as Tenant, the liability of each such individual,
corporation, partnership or other persons to pay the Rent and perform all other
obligations hereunder shall be deemed to be joint and several, and all notice,
payments and agreements given or made by, with or to any one of such
individuals, corporation, partnership or other persons shall be deemed to have
been given or made by, with or to all of them. In like manner, if Tenant shall
be a partnership or other legal entity, the members of which are, by virtue of
any applicable law or regulation, subject to personal liability, the liability
of each such member shall be joint and several.
SECTION 30. ADDITIONAL DEFINITIONS.
(a) "Date of this Lease" or date of this Lease shall mean the date of
acceptance of this Lease by the Landlord, following execution and delivery
thereof to Landlord by Tenant and that date shall be inserted in the space
provided in the Term Sheet.
(b) "Landlord". The word "Landlord" is used herein to include the
Landlord named above as well as its successor and assigns, each of whom shall
have the same rights, remedies, powers, authorities and privileges as he would
have had he originally signed this lease as Landlord. Any such person, whether
or not named herein, shall have no liability hereunder after ceasing to hold
title to the Premises. Neither Landlord nor any principal of Landlord nor any
owner of the Building or the Lot, whether disclosed or undisclosed, shall have
any personal liability with respect to any of the provisions of this Lease or
the Premises, and if Landlord is in breach or default with respect to Landlord's
obligations under this Lease or otherwise, Tenant shall look solely to the
equity of Landlord in the Premises for the satisfaction of Tenant's remedies.
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(c) "Tenant". The word "Tenant" is used herein to include the Tenant
named above as well as its heirs, successor and assigns, each of which shall be
under the same obligations, liabilities and disabilities and each of which shall
have the same rights, privileges and power as it would have possessed had it
originally signed this Lease as Tenant. Each and every person named above as
Tenant shall be bound formally and severally by the terms, covenants and
agreements contained herein. However, no such rights, privileges or power shall
inure to the benefit of any assignee of Tenant, immediate or remote, unless the
assignment to such assignee is permitted or has been approved in writing by
Landlord. Any notice required or permitted by the terms of this Lease may be
given by or to any one of the persons named above as Tenant, and shall have the
same force and effect as if given by or to all of them.
(d) "Mortgage" and "Mortgagee". The word "mortgage" is used herein to
include any lien or encumbrance on the Premises or the Property or on any part
of or interest in or appurtenance to any of the foregoing, including without
limitation any ground rent or ground lease if Landlord's interest is or becomes
a leasehold estate. The word "mortgagee" is used herein to include the holder of
any mortgage, including any ground lessor if Landlord's interest is or becomes a
leasehold estate. Whenever any right is given to a mortgagee, that right may be
exercised on behalf of such mortgagee by any representative or servicing agent
of such mortgagee.
(e) "Person". The word "person" is used herein to include a natural
person, a partnership, a corporation, an association, and any other form of
business association or entity.
(f) "Property" shall mean the Building and the lot, tract or parcel
of land on which the Building is situated.
(g) "Rent" or "rent" shall mean all Minimum Annual Rent and
additional rent reserved under this Lease.
SECTION 31. NOTICES. All notices, demands, requests, consents,
certificates, and waivers required or permitted hereunder from either party to
the other shall be in writing and sent by United States certified mail, return
receipt requested, postage prepaid, addressed as set forth in the Term Sheet.
Either party may at any time, in the manner set forth for giving notice to the
other, specify a different address to which notices to it shall thereafter be
sent.
SECTION 32. SECURITY DEPOSIT. [intentionally deleted]
SECTION 33. HAZARDOUS SUBSTANCES.
(a) Tenant shall not cause or allow the generation, treatment,
storage or disposal of Hazardous Substances on or near the Premises or
Property. "Hazardous Substances" shall mean (i) any hazardous substance as that
term is defined in the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. 9601 ET SEQ. as amended, (ii) any hazardous,
waste or hazardous substance as those terms are defined in any local state or
Federal law, regulation or ordinance not inapplicable to the Premises and
Property, or (iii) petroleum including crude oil or any fraction thereof. In
the event Tenant uses any Hazardous Substances, Tenant shall dispose of such
substances in accordance with all applicable Federal, state and local laws,
regulations and ordinances.
(b) Tenant agrees to indemnify, defend and hold harmless Landlord,
its employees, agents, successors, and assigns, from and against any and all
damage, claim, liability,
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or loss, including reasonable attorneys' and other fees, arising out of or in
any way connected to the generation, treatment, storage or disposal of
Hazardous Substances by Tenant, its employees, agents, contractors, or
invitees, on or near the Leased Premises. Such duty of indemnification shall
include, but not be limited to damage, liability or loss pursuant to all
Federal, state and local environmental laws, rules and ordinances, strict
liability and common law.
(c) Tenant agrees to notify Landlord immediately of any disposal of
Hazardous Substances in the Premises, of any discovery of Hazardous Substances
in the Premises, or of any notice by a governmental authority or private party
alleging or suggesting that a disposal of Hazardous Substances on or near the
Premises or Property may have occurred. Furthermore, Tenant agrees to provide
Landlord with full and complete access to any documents or information in
Tenant's possession or control relevant to the question of the generation,
treatment, storage, or disposal of Hazardous Substances on or near the Premises.
SECTION 34. RECORDING. Neither this Lease nor a memorandum of this Lease
shall be recorded in any public records without the written consent of Landlord,
except as expressly provided in the Rider attached hereto.
SECTION 35. BROKER'S COMMISSION. Landlord and Tenant warrant and
represent to each other that no broker, finder or agent has acted for or on
their behalf in connection with the negotiation, execution or procurement of
this Lease or the Rider to this Lease other than those identified as Listing
Broker and Co-Broker on the Term Sheet. Tenant agrees to indemnify and hold
Landlord harmless from and against all liabilities, obligations, and damages
arising, directly or indirectly, out of or in connection with a claim from a
broker, finder or agent (other than the Listing Broker and Co-Broker) with
respect to this Lease or the negotiations thereof, including costs and
attorney's fees incurred in the defense of any claim for compensation.
SECTION 36. IRREVOCABLE OFFER, NO OPTION. Although Tenant's execution of
this Lease shall be deemed an offer irrevocable by Tenant, the submission of
this Lease by Landlord to Tenant for examination shall not constitute a
reservation of or option for the Premises. This Lease shall become effective
only upon execution thereof by both parties and delivery thereof to Tenant.
SECTION 37. INABILITY TO PERFORM. If Landlord is delayed or prevented
from performing any of its obligations under this Lease by reason of strike,
labor troubles, or any cause whatsoever beyond Landlord's control, the period of
such delay or such prevention shall be deemed added to the time herein provided
for the performance of any such obligation by Landlord.
SECTION 38. SURVIVAL. Notwithstanding anything to the contrary contained
in this Lease, the expiration of the Term of this Lease, whether by lapse of
time or otherwise, shall not relieve Tenant from its obligations accruing prior
to the expiration of the Term.
SECTION 39. CORPORATE TENANTS. If Tenant is a corporation, the person(s)
executing this Lease on behalf of Tenant hereby covenant(s) and warrant(s) that:
Tenant is a duly formed corporation qualified to do business in the state in
which the Property is located; Tenant will remain qualified to do business in
said state throughout the Term; and such persons are duly authorized by such
corporation to execute and deliver this Lease on behalf of the corporation.
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SECTION 40. RELATIONSHIP OF PARTIES. This Lease shall not create any
relationship between the parties other than that of Landlord and Tenant.
SECTION 41. ADDITIONAL SECTIONS. The following Additional Sections,
numbered 42 through 50 (if any) are attached hereto and are incorporated in this
Lease.
IN WITNESS WHEREOF, and in consideration of the mutual entry into this
Lease and for other good and valuable consideration, and intending to be legally
bound, each party hereto has caused this agreement to be duly executed under
seal.
Landlord:
Date signed: JULY 8 1992 Nairn Great Valley, Inc.
Attest: /S/ ANNE L. PUTNAM By:/S/ MARK T. LEDGER
Name:MARK T. LEDGER
Title:PRESIDENT
Tenant:
Date signed: 24TH JUNE 1992 APOLLON, INC.
Attest: /S/ MA SINGUETT By:/S/ VINCENT R. ZURAWSKI, JR.
Name:VINCENT R. ZURAWSKI, JR.
Title:PRESIDENT
[Corporate Seal]
Corporate Resolution and Authorization of Agency
It is hereby certified that a unanimous consent of the directors of the
corporation which is the Tenant herein was made on JUNE 24TH, 1992 and that
it was resolved to enter into this Flex Space Lease and further that the
officers of the corporation and VINCENT R. ZURAWSKI as agent of the corporation,
have been authorized, empowered and directed in the corporate name and with the
corporate seal to execute and deliver any or all documents and to pay all fees
and charges necessary to carry out the entry into the compliance with this Flex
Space Lease.
/S/ RICHARD A. CARRANO
Assistant Secretary
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RIDER TO FLEX SPACE LEASE
Nairn Great Valley, Inc., as Landlord,
and
Apollon, Inc., as Tenant
Dated ____________________, 1992
SECTION 42. MINIMUM ANNUAL RENT.
(a) Minimum Annual Rent for the initial, 62-month Term of the Lease
shall be as follows:
(i) Through and including the last day of the 14th full calendar
month of the Term: Forty Two Thousand Five Hundred and
04/100 Dollars ($42,500.04) per annum; with the applicable
Monthly Installment during such period being Three Thousand
Five Hundred Forty One and 67/100 Dollars ($3,541.67).
(ii) Beginning the first day of the 15th full calendar month of
the Term and until the Expiration Date of the initial
62-month Term: Ninety Thousand Seven Hundred Twenty Four and
80/100 Dollars ($90,724.80) per annum; with the applicable
Monthly Installment during such period being Seven Thousand
Five Hundred Sixty and 40/100 Dollars ($7,560.40).
(b) Notwithstanding provisions to the contrary in Section 6 or this
Section 42 of the Lease, provided there exists no uncured event of default by
Tenant at any time under this Lease, Tenant shall be relieved of the obligation
to pay the two Monthly Installments of Minimum Annual Rent described in Section
42(a)(i) and the two monthly installments of Additional Rent described in
Section 6(b) that would otherwise be due and payable on the first day of the
first two full calendar months of the Term. In the event there occurs an event
of default by Tenant under the Lease at any time during the Term as a result of
which Landlord declares the entire unpaid balance of the Minimum Annual Rent for
the Term to be immediately due and payable, Tenant shall be obligated to pay, in
addition, the Monthly Installments of Minimum Annual Rent and of Additional Rent
forgiven under this Section 42.
SECTION 43. ADDITIONAL RENT. Notwithstanding the provisions of Section
6(b)(ii) of the Lease, Tenant's share of annual operating costs shall not exceed
$25,000.00 for the portion of the Term commencing on the first day on which
monthly installments of Minimum Annual Rent and additional rent are due and
ending on the first anniversary of such date. Regular payments of Tenant's
share of annual operating costs, calculated as provided in Section 6(b), shall
commence on the first day of the 15th full calendar month of the initial
62-month term.
SECTION 44. TERM EXTENSION OPTION.
(a) Right to extend Term. Tenant shall have the right, subject to
the requirements of this Section, to extend the Term of the Lease for one five
year period running from the day immediately following the Expiration Date of
the initial 62-month term through the fifth anniversary of such Expiration Date.
(b) Requirements to extend Term. In order for such extension to be
effective, the following conditions must be met:
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(i) Tenant must give written notice to Landlord of Tenant's
intention to extend the Term not less than 180 days prior to the Expiration
Date.
(ii) There must be no Event of Default under the Lease at the time
of written notice to Landlord of Tenant's intention to extend the Term.
(c) Adjustment to Minimum Annual Rent. The Minimum Annual Rent for
the five year extension of the Term shall be the fair market rental of the
Premises at the time of commencement of the extension of the Term. "Fair market
rental" of the Premises shall be the annual rental rate for space of reasonably
comparable age, size, fit-out and facilities, located in other buildings in the
Great Valley Corporate Center or other locations within a radius of 2 miles from
the Building, net of property taxes, Building operating expenses and insurance.
If the fair market rental for the Premises cannot be determined by negotiation
between Landlord and Tenant within 60 days of Tenant's notice of intention to
extend the Term, the fair market rental shall be determined by appraisal as set
forth in subsection (d), below. Notwithstanding the foregoing, the fair market
rental shall not exceed $9.50 per square foot of space in the Premises.
(d) Determining fair market rental by appraisal. If the Landlord and
Tenant have failed to arrive at fair market rental by negotiation within 60 days
as provided in subsection (c), each party shall, within 15 days thereafter,
select a MAI appraiser who is experienced in determining rental value of
commercial premises in the suburban Philadelphia area. Each appraiser shall,
within 30 days, determine the annualized fair market rental rate for the
Premises and disclose such rental rate to the Landlord and the Tenant, together
with a written report of the analysis used in making that determination. If, in
comparing the fair market rental rates determined by the two appraisers, the
difference between the two rates is ten percent (10.0%) or less of the lower of
the two rates, then the Minimum Annual Rent during the extension of the Term
shall be the average of the two rates. If the difference is greater than ten
percent (10.0%), then the two appraisers shall select a third appraiser who
shall, based upon a review of the two existing appraisals and such other
analysis as he or she deems appropriate, select, as the Minimum Annual Rent for
the extended Term, the fair market rental determined in one or the other of the
two existing appraisals. If the two initial appraisers cannot agree upon a third
appraiser, then the third appraiser shall be selected by the President of the
Bar Association of the County in which the building is located.
(e) Notwithstanding anything herein to the contrary, (i) no abatement
of Monthly Installments of Minimum Annual Rent or of Additional Rent shall be
granted, (ii) no improvements to the Premises or credit for tenant improvements
to the Premises shall be made by Landlord during the extension of the Term and
(iii) the Minimum Annual Rent for the extension of the Term shall not be less
than the Minimum Annual Rent set forth in Section 42(a)(ii) of this Lease.
(f) Except for the adjustment in Minimum Annual Rent and the Option
in Section 48, all other terms and conditions of this Lease shall remain in
effect during the extended portion of the Term.
SECTION 45. ASSIGNMENT/SUBLETTING. Notwithstanding the provisions of
Section 21 of the Lease, for so long as shares of the Tenant corporation are
publicly traded on a stock exchange, the sale or exchange of shares of the
Tenant corporation on such stock exchange, whether or not exceeding 50% of such
shares in
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one or more transactions, shall not constitute a prohibited assignment
of this Lease.
SECTION 46. TENANT IMPROVEMENTS. Tenant agrees that it shall, promptly
following the Commencement Date, commence and diligently pursue to completion
the interior renovation of not less than 10,000 square feet of the Premises in
accordance with plans and specifications which must meet the prior written
approval of the Landlord.
SECTION 47. OPTION SPACE. Tenant is hereby granted a right of first
refusal to lease additional space in the Building which is adjacent to the
Premises, upon the following terms and conditions:
(a) If Landlord receives a bona fide offer to lease a portion of the
Building which is adjacent to the Premises, Landlord shall submit to Tenant, in
writing, a summary of the Minimum Annual Rent and additional rent which the
prospective tenant of the adjacent space has offered to pay, together with a
notice of Tenant's right to exercise the right of first refusal to rent the
adjacent space. Tenant shall be afforded 15 days from the date of the
Landlord's notice to Tenant in which to exercise the right of first refusal.
Exercise of the right of first refusal must be made by written notice thereof to
Landlord delivered within such 15 day period. If exercised, Tenant shall be
obligated to lease the adjacent space which was the subject of the Landlord's
notice for the same Minimum Annual Rent and additional rent as was offered by
the prospective tenant, but with all other terms (such as the Term of the lease)
being the same as set forth in this Lease as if the adjacent space was
originally a part of the Premises from the Commencement Date; provided, however,
that if the prospective tenant had agreed to lease office space with tenant
improvements to be paid by the Landlord and if the Tenant hereunder agrees to
take such space without the improvements, Tenant's Minimum Annual Rent shall be
reduced by the cost of such foregone tenant improvements, as if amortized over
the term of the prospective tenant's proposed lease. Further, in the event of
Tenant's exercise of the right of first refusal, Tenant shall execute an
addendum to this Lease presented by the Landlord setting forth the inclusion of
the adjacent space into the Premises on the foregoing terms. If the Tenant fails
to exercise the right of first refusal within the 15 day period specified above,
Landlord shall be free to lease the adjacent space to the offeror or any other
prospective tenant for the same or greater rental, provided the term of such
rental commences within one year of the Landlord's initial notice to the Tenant
and, if so rented, such adjacent space shall no longer be subject to this right
of first refusal.
(b) Notwithstanding the foregoing, this right of first refusal shall
not apply to any space leased by the Landlord to any other tenant either (i)
during such time as an uncured event of default by the Tenant exists under this
Lease or (ii) after Tenant has failed to exercise its option to extend the Term
as hereinabove provided and the time for notice to do so prior to the Expiration
Date has passed.
SECTION 48. OPTION TO PURCHASE THE BUILDING.
(a) In consideration for Tenant entering into this Lease, the
Landlord hereby grants to Tenant, and Tenant accepts from Landlord, an option
(the "option") to purchase all right, title and interest of Landlord in the
Property (hereinafter defined) and all easements, reversions and other rights
appurtenant to the Property, subject to the terms and conditions of this Section
48. The price shall be that which is in effect at the time the Option is
exercised, according to the following schedule (hereinafter called the "Purchase
Price"):
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(i) From the Commencement Date until the last day of the 12th
full calendar month of the Term: $75.00 per square foot of
rentable area in the Building.
(ii) From the first day of the 13th full calendar month of the
Term until the last day of the 24th full calendar month of
the Term: $85.00 per square foot of rentable area in the
Building.
(iii) From the first day of the 25th full calendar month of the
Term until the last day of the 36th full calendar month of
the Term: $100.00 per square foot of rentable area in the
Building if 90% or more of the rentable area of the Building
is under a valid lease agreement or agreements (including
this Lease) or $95.00 per square foot of rentable area in
the Building if less than 90% of the Building is under a
valid lease agreement or agreements (including this Lease).
(iv) From the first day of the 37th full calendar month of the
Term until the last day of the 48th full calendar month of
the Term: $105.00 per square foot of rentable area in the
Building.
(v) From the first day of the 49th full calendar month of the
Term until the last day in the Initial Term on which the
Option may be exercised under subsection (b), below: $110.00
per square foot of rentable area in the Building.
For purposes of this Section 48 the "rentable area in the Building" shall be
deemed to be 60,880 square feet and the "Property" shall mean the Building and
that certain parcel of land upon which the Building is situated comprising 6.79
acres, more or less, and which is more particularly described in EXHIBIT E
attached hereto and incorporated herein.
(b) Tenant may exercise the Option only by giving written notice of
its election to purchase the Property to Landlord at any time between the
Commencement Date and the day which is 120 days prior to the expiration of the
62nd full calendar month of the Term (hereinafter called the "Option Period").
(c) During the period from the giving of Tenant's notice of exercise
of the Option until the Settlement,
(i) this Lease shall continue in effect as herein written
including, without limitation, Tenant's obligation to continue to pay Minimum
Annual Rent and any additional rent, fees and charges due under the Lease;
(ii) Landlord shall operate the Property in substantially the
same manner as theretofore; and
(iii) Landlord shall use its best efforts to comply in all
material respects with laws, ordinances and regulations of governmental
authorities having jurisdiction and applicable to the physical condition of the
Building (except for obligations assumed by tenants in lease agreements).
(iv) Landlord shall enter into no leases or service agreements
without Tenant's consent, unless Landlord was
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already contractually or otherwise legally obligated to do so prior to exercise
of the Option by Tenant.
(d) Delivery of Landlord's deed, delivery to Tenant of exclusive
possession of the Property, payment of the Purchase Price and completion of any
other obligations set forth in this Section 48 (the "Settlement") shall take
place at a time and date (other than a Saturday, Sunday or Pennsylvania or
Federal holiday) mutually agreed upon by the Landlord and Tenant not later than
ninety (90) days following the date on which Tenant exercises the Option and
shall be held at the offices of either the title insurance company insuring
Tenant's title to the Property or Tenant's legal counsel in the Philadelphia
metropolitan area.
(e) In the event that Tenant does not exercise the Option at or
before the expiration of the Option Period, for any reason, or Tenant notifies
the Landlord in writing that Tenant has no intention of exercising the Option in
the future, the provisions, obligations and liabilities under this Section 48
shall terminate and be null and void, without affecting the validity of any
other Section in the Lease.
(f) From and after the exercise of the Option by Tenant in the manner
provided above, the Landlord is obligated to sell and Tenant is obligated to
purchase the Property, subject to the other terms and conditions of this Section
48, as follows:
(i) At Settlement:
1) Landlord shall deliver or cause to be delivered to
Tenant a Special warranty Deed for the Building, duly executed by the Landlord
and acknowledged and otherwise in proper form for recording.
2) Landlord shall convey good and marketable fee simple
title to the Property free and clear of all liens and encumbrances but subject
to all leases, easements, covenants, restrictions and other matters affecting
title as of the date of exercise of the Option by Tenant. Liens on the Property
of an ascertainable amount shall be discharged at Settlement.
3) A corporate tax clearance certificate or title
insurance of the Property against the lien of corporate taxes.
4) Tenant shall deliver the Purchase Price to the Landlord
in immediately available funds by the payment method designated by the Landlord.
5) Real Estate taxes, rental on leases for the Building or
any part thereof, water and sewer rents, and other utility charges, if any,
shall be apportioned as of the date of Settlement. Without limitation of the
foregoing, Landlord shall pay and be responsible for payment of all real estate
taxes, water rents, sewer rents and similar annual charges which have become due
and payable prior to the Settlement.
6) Landlord agrees to pay, at or prior to Settlement, any
assessments for public improvements which were levied against the Property prior
to Settlement by any governmental authority having jurisdiction; provided,
however, that if such assessments are payable in installments to such
governmental authority then Landlord shall be responsible only for payment of
installments pro rated through the date of Settlement.
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7) All realty transfer taxes shall be paid in equal shares
by the Landlord and Tenant.
8) Tenant will pay all title insurance premiums, the cost
of any survey and the cost of recordation and notary acknowledgement of the
Deed.
9) An assignment of leases and rents and a rent roll
certified as accurate in all material respects by the Landlord. Security
deposits held by Landlord under any leases shall be delivered to Tenant, who
shall assume in writing the obligation therefor pursuant to applicable leases.
Original leases of the tenants in the Building shall also be delivered to the
Tenant at Settlement.
10) A Bill of Sale for personal property owned by Landlord
and which is used only in connection with the management or maintenance of the
Building, if any.
11) Landlord shall make a good faith effort to obtain from
the tenants of the building estoppel certificates verifying rental rates then in
effect, the existence or absence of defaults and other matters reasonably
requested by the Tenant.
12) A fully executed affidavit on non-foreign status
pursuant to the Foreign Investment in Real Property Tax Act of 1980, as amended,
stating that Landlord is not a "foreign person" as defined therein or an I.R.S.
exemption from the withholding requirements of the Act or written authorization
for the purchaser to withhold pursuant to the Act.
13) All plans, specifications, surveys, maps, drawings,
subdivision and zoning approvals and permits, and other similar documents
pertaining to the Property which are in Landlord's possession or control.
14) Such other documents, if any, as may be required to be
delivered by Landlord under the terms of this Section 48 or as are required by
law.
(ii) In the event of fire or other casualty damage to the Building,
if the Building is not repaired or restored to its condition prior to the
casualty by the time of Settlement, Tenant may elect to either extinguish its
Option and all its and Landlord's rights and obligations under this Section 48
or to purchase the Property in its damaged condition and receive at Settlement
an assignment of Landlord's share of any insurance proceeds paid or payable as a
result of such casualty. Without affecting the validity of the foregoing, it is
understood that Landlord bears the risk of loss of the Property by fire or other
casualty until the date fixed for Settlement hereunder.
(iii) In the event that a declaration of taking of the Property or
any part thereof is filed in the appropriate public records or delivered to
Landlord or Tenant between the date of Tenant's exercise of the Option and the
date fixed for Settlement hereunder by a governmental or quasi-governmental
authority or public utility company having the power of condemnation, Tenant
shall have the right to terminate its right and obligation to purchase the
Property under this Section by giving written notice thereof to Landlord by the
date fixed for Settlement hereunder. In the event of such termination, the
parties hereto shall have no further liability or obligation under this Section
of the Lease.
(g) In the event Landlord does not have good and marketable fee
simple title to the Property at or preceding the time of Settlement and
insurable as such by a reputable title insurance company doing business in the
Philadelphia metropolitan
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area at such company's regular rates, Tenant shall notify Landlord of the
alleged defect. Landlord shall have 30 days thereafter to correct the defect
if Landlord so desires, with Settlement being delayed to the extent necessary
to allow such 30 day period. If the Landlord is unwilling or unable to do so,
Tenant may, as Tenant's sole choices, either (i) terminate the Option or (ii)
accept such title as Seller shall be able to give and proceed with Settlement
without abatement of the Purchase Price. If Tenant elects to terminate this
Option by written notice to Landlord, the rights and obligations of Landlord and
Tenant under this Section 48 shall be null and void and the Lease shall
otherwise continue in full force and effect with respect to the Premises.
(h) Tenant expressly acknowledges and agrees that if Tenant purchases
the Property it is doing so (i) based upon the results of its own inspection
thereof and not upon any statements, representations or warranties of the
Landlord or any agent of Landlord regarding building or other property
condition, environmental matters, cost of operation, survey matters, zoning,
income, expenses or other matters of any kind or nature whatsoever and (ii) on
an "As Is" basis with no warranties or representations of any kind whatsoever,
whether expressed or implied.
(i) Time is of the essence of this Section 48 and any other
provisions of this Lease. Tender of an executed deed and purchase money are
hereby waived.
(j)(i) Landlord covenants and agrees that during the Option Period
the Landlord shall: 1) afford Tenant and its agents, architects, engineers, and
designers full and unlimited access to the Property (subject to the rights of
other tenants in the Building) at all reasonable times, upon reasonable advance
notice, for the purpose of making such tests, inspections, reviews or
examinations of the Property (hereinafter a "test") as Tenant may desire,
provided, however, that no test shall deface, damage or otherwise alter the
condition of the Building or Property (except that test borings and the like may
be conducted if the Property is immediately restored to its original condition)
and Tenant shall indemnify, defend and hold harmless the Landlord from and
against any loss, cost, liability, claim or damage suffered or incurred by the
Landlord as a result of any test; and 2) afford Tenant or its auditors access to
records pertaining to the revenues and expenses from operation of the Property
and such records pertaining to title to the Property as are in Landlord's
possession, provided that the Tenant and Landlord are engaged at such time in
bona fide negotiations pertaining to the sale of the Property.
(ii) The tests referred to in the preceding paragraph may include an
investigation of Landlord's compliance with federal and state laws pertaining to
the environment and the presence of hazardous substances or underground tanks at
the Property. In connection with such investigation: 1) Landlord will comply in
good faith with any reasonable request for information made by Tenant or its
agents; and 2) Landlord will assist Tenant or its agents in obtaining any
records pertaining to the environmental condition of the Property; provided that
none of the foregoing shall involve material cost and expense to the Landlord.
Tenant shall provide to Landlord, upon request, copies of any written reports,
studies or other results of any tests or investigations permitted under this
Section 48.
(iii) If Tenant, in the course of conducting the tests, discovers any
condition in, under or upon the Property which Tenant reasonably believes
constitutes a violation of any federal or state law, Tenant shall have the
right, but not the obligation, to terminate the Option by written notice to the
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Landlord, in which event this Section 48, but not the Lease, shall be null and
void; provided, however, that such termination by Tenant must occur not later
than 30 days after Tenant's exercise of the option.
(k) Tenant may appoint a nominee to receive title to the Property at
Settlement.
(1) In the event of a willful default under the provisions of this
Section by Landlord after Tenant's exercise of the Option, Tenant shall have the
benefit of all remedies available to it under law or in equity (including,
without limitation, the right to compel conveyance of the Property by an action
for specific performance). Tenant's obligation to purchase the Property under
this Section are contingent upon Landlord's performance of its obligations under
this Section in all material respects.
(m) After expiration of the Tenant's rights to the Option as provided
above and so long as there exists no Event of Default under this Lease and the
Tenant remains lawfully in possession of the Premises, Landlord agrees as
follows:
(i) If the undersigned Landlord elects to actively market the
Property by listing the Property for sale with a broker under a listing
agreement and offering the Property for sale to the public, Landlord will give
Tenant written notice thereof. Tenant shall have seven (7) days after Landlord
gives such notice in which to express an interest in negotiating to purchase the
Property. If such interest is expressed in writing to Landlord, Tenant shall be
allowed a thirty (30) day waiting period from such expression of interest in
which to make an offer or offers to Landlord for the purchase of the Property,
during which time Landlord shall not enter into an agreement of sale for the
Property with any other person or entity. Landlord shall not be obligated to
give any such notice to Tenant more than once in any nine (9) month period.
After nine (9) months from giving Landlord's notice, notice shall again be
required only if the undersigned Landlord has not sold or conveyed the Property
and such Landlord again elects to actively market, or elects to continue to
actively market, the Property as aforesaid.
(ii) If the undersigned is not actively marketing the Property as
described in paragraph (i) and has not given the notice in paragraph (i) within
the preceding nine (9) months and Landlord receives an offer to purchase the
Property, Landlord shall notify the Tenant and shall refrain from entering into
an agreement to sell the Property for a ten (10) day waiting period after giving
such notice in order to allow Tenant, if Tenant so desires, to make an offer to
purchase the Property. No further notice shall be required at any time
thereafter during any negotiations for the sale of the Property between Landlord
and any person or entity involved in the initial offer to purchase the Property.
(iii) Neither of the foregoing paragraphs shall imply any obligation
of Landlord to 1) sell the Property to Tenant on any particular terms or
conditions, on any terms or conditions more or less favorable than those offered
or accepted by anyone else or on any terms not acceptable to Landlord in
Landlord's sole discretion at any time or 2) refrain from selling the Property
to anyone else after the required notice is given and applicable waiting periods
expire. This subsection (m) shall be void following any conveyance of the
Property. Failure of Landlord to comply with the requirements of this Section
shall not void or otherwise affect the validity or enforceability of any
agreement of sale for, or conveyance of, the Property by Landlord.
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SECTION 49. MEMORANDUM OF LEASE. Tenant may prepare and submit to Landlord
a customary form of memorandum of this Lease for recording in the Office of the
Recorder of Deeds and, subject to Landlord's approval of the form and content
(not to be unreasonably withheld), Landlord shall execute the memorandum and
return it to Tenant for recording.
SECTION 50. FINANCING CONTINGENCY. Tenants and Landlord's obligations
under this Lease may be terminated and extinguished by Tenant giving written
notice to Landlord within two weeks of Landlord's execution and acceptance of
this Lease if Tenant is unable, within such time to obtain the financing
necessary for construction of Tenant's planned improvements. If no such notice
of termination and extinguishment is given to Landlord within two weeks, as
aforesaid, then this Section 50 shall have no force or effect. Notwithstanding
the definition of the "Commencement Date" in the Term Sheet or anything else in
the Lease to the contrary, in no event shall the Commencement Date occur until
at least 30 days after the expiration or written waiver of the contingency
contained in this Section.
IN WITNESS WHEREOF, this Rider to Lease has been executed by Landlord and
Tenant as of the date specified upon the signature page of the Lease form.
Nairn Great Valley, Inc.
Attest:/S/ ANNE L. PUTNAM By:/S/ MARK T. LEDGER
Secretary Name:MARK T. LEDGER
Title:PRESIDENT
Apollon, Inc.
Attest:/S/ RICHARD A. CARRANO By:/S/ VINCENT R. ZURAWSKI, JR.
Assistant Secretary Name:VINCENT R. ZURAWSKI, JR.
Title:PRESIDENT
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6/16/92 VZ
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EXHIBIT A
[DIAGRAM DEMONSTRATING DEMISING BOUNDARIES OF
LEASED PREMISES OF APOLLON, INC.]
[TO BE ATTACHED PRIOR TO EXECUTION OF LEASE]
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<PAGE>
EXHIBIT B
[DIAGRAM DEMONSTRATING PLANS FOR LEASED PREMISES
OF APOLLON, INC.]
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<PAGE>
ATTACHED TO AND FORMING A PART OF REPORT OF
TITLE NO. F 253 558 CO
------------------------------------------------
------------------------------------------------
DESCRIPTION - 1 Great Valley Parkway
ALL THAT CERTAIN tract of land, SITUATE on the East side of Route 29, Moorehall
Road, East Whiteland Township, Chester County, Pennsylvania, according to a
Parcel XXIX Land Title Plan of Rouse and Associates, Great Valley Corporate
Center by Yerkes Associates, Inc., dated August 10, 1982, last revised August
11, 1983, as follows:
BEGINNING at a point on the common title line with lands of now or formerly of
Warner Company; said point being measured the following courses and distances
along the title line of Moorehall Road (L.R. 15134) from a point marking its
intersection with the original South right-of-way line of Flat Road (40.00 feet
wide) when extended); South 11 degrees, 44 minutes, 00 seconds East, 280.00 feet
to a point; thence crossing over said Moorehall Road, North 78 degrees, 06
minutes, 00 seconds East, along lands of said Warner Company, 1,077.87 feet to
the beginning point; thence from said beginning point North 7B degrees, 06
minutes, 00 seconds East, along the lands of Warner Co., 420.56 feet to a stone
corner marker; thence South 12 degrees, 36 minutes, 00 seconds East along the
lands of Warner Co. 658.39 feet to a corner point marking the lands of Parcel
III; thence from said point and along the common property line with Parcel III,
South 77 degrees, 39 minutes, 07 seconds Hest, 773.37 feet to a corner point in
the said property line at a point of curve on the Southern side right-of-way of
the cul-de-sac of Great Valley Parkway East; thence from said point and crossing
through a 20 feet wide Water Company Easement along said road cul-de-sac
right-of-way line on an arc of a circle curving to the left with a radius of
60.00 feet, the arc distance of 94.25 feet to a point in the North side of the
road cul-de-sac right-of-way line with lands of parcel XXXI; thence leaving said
cul-de-sac North 77 degrees, 39 minutes, 07 seconds East, along the common
property line with Parcel XXXI, 307.77 feet to a corner point; thence from said
point and still along the common property line with Parcel XXXI North 12
degrees, 36 minutes, 00 seconds West, crossing over a 20 feet wide sanitary
sewer easement, 194.53 feet to an angle point; thence South 77 degrees, 24
minutes, 00 seconds West, 15.00 feet to an angle point; thence still by Parcel
XXXI; North 12 degrees, 36 minutes, 00 seconds West 407.21 feet to the
aforementioned point and place of beginning.
CONTAINING 6,723 acres of land, be the same more or less.
CHESTER COUNTY TAX PARCEL #42-2-12.2
BEING the same premises which became vested in Moorehall Associates Limited
Partnership, a Pennsylvania limited partnership, by Deed from Great Valley
Industrial Holding Corporation, a Pennsylvania corporation, dated August 20,
1982, recorded in Chester County Deed Book I 60, page 60.
<PAGE>
EXHIBIT C
SPECIFICATIONS FOR LEASED PREMISES OF APOLLON, INC.
Landlord's work obligations for the Premises under the Lease to Apollon,
Inc. shall be limited to demolition necessary to bring the Premises into
compliance with the Plans attached as EXHIBIT B.
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EXHIBIT D
RULES AND REGULATIONS FOR ONE GREAT VALLEY PARKWAY
SEE RULES AND REGULATIONS ATTACHED HERETO
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EXHIBIT D
TO FLEX SPACE LEASE
RULES AND REGULATIONS
The following rules and regulations have been formulated for the safety and
well-being of all Tenants of the Building. Adherence to these rules and
regulations insures that each and every Tenant will enjoy a safe and happy
occupancy in the building.
1. Hours of Operations
The Building will be open from 8:00 a.m. through 6:00 p.m., Monday through
Friday ("normal business hours and days of operation"). The building will be
closed on the following holidays:
New Year's Day
Independence Day
Memorial Day
Labor Day
Thanksgiving Day
Christmas Day
2. Building Entrances
All Tenants and Tenant's employees, agents, visitors, and licensees of tenants
are to use the main entrance. Tenant and Tenant's employees, agents, visitors,
and licensees are requested not to use firestairs and exits unless an emergency
situation exists.
3. Stairways and Exits
Fire stairways and exits are marked for the convenience and safety of all.
Please be sure all employees are familiar with fire stairway exits.
4. Fire Alarm and Sprinkler Systems
When fire drills or system tests are required, all Tenants will be notified at
least 12 hours in advance. Please notify all employees upon receipt of said
notice. Neither Tenant nor any of the Tenant's employees, agents, visitors or
licensees shall at any time bring or keep upon the premises any inflammable,
combustible or explosive fluid, chemical or substance.
5. Maintenance Services
Maintenance for which Landlord is obligated will be provided for the building by
the management staff or a contractor. If there are special requirements or
specific maintenance repairs, for which Landlord is obligated, please contact
building management. For scheduled maintenance which may take place during
normal business hours and days of operation, Tenants will be notified 24 hours
in advance when practical. Any request for maintenance which is specifically
recited as the responsibility of the Tenant in the lease agreement will be
billed to Tenant at a rate of the actual cost of labor and material to the
building, plus an administrative charge established by Landlord. No Tenant shall
contract for floor polishing, rug cleaning, changing of light bulbs, cleaning of
electrical fixtures, removal of waste paper, rubbish, garbage service or any
other similar services in the demised premises except from contractors,
companies or persons approved by building management. All such contractors,
companies or persons shall, while in the building and outside the building,
comply with all instructions issued by Grubb & Ellis.
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6. Common Areas
The entrance ways, elevators, corridors or halls, stairways, restrooms or other
areas of the building not occupied by any Tenant ("Common Areas") shall not be
obstructed or encumbered by any Tenant or used for any purpose other than
ingress and egress to and from the demised premises. Restrooms shall not be
obstructed or encumbered by any Tenant. Canvassing, soliciting, displaying and
peddling in the building is prohibited and each Tenant shall cooperate to
prevent the same.
7. Management Office
The management office is located at Five Great Valley Parkway, Suite 352,
Malvern, PA. Office hours will be from 8:00 a.m. - 5:00 p.m., Monday through
Friday. In the case of emergencies, please call 688-5482 for assistance.
8. Alteration to Premises
No additional locks or bolts of any kind shall be placed upon any doors or
windows without the written consent of building management. All keys used in
connection with the demised premises shall be furnished by Landlord, and the
same shall be surrendered upon the termination of the Tenant's lease including,
but not limited to, keys to rooms and offices within the demised premises, to
storage rooms and closets, to cabinets and to the built-in furniture, whether or
not such keys were furnished by Landlord or procured by the Tenant. On
termination of the Tenant's lease, the Tenant shall disclose to Landlord or his
agents the combinations of all locks for safes, safe cabinets and upon the doors
of vaults, if any, remaining in the demised premises. If the Tenant desires
telegraphic, telephonic or electrical connections, management or its agents will
supervise the boring and cutting of walls and other fixtures and the stringing
of wires, at the Tenant's cost. Tenants are not permitted to attach or affix any
antenna, receiver or transmitter to the exterior of any portion of the building
or roof without prior written consent from Landlord.
9. General Restrictions
(a) No bicycles, vehicles, or animals of any kind shall be brought into or kept
in the demised premises. Seeing eye dogs will be an exception to this rule
(owners are responsible for the behavior of their companion).
(b) No cooking shall be done or permitted by Tenant in its demised premises
except with Landlord's prior written approval. Tenant may install and
operate for the convenience of Tenant's employees, those small appliances
such as, by way of example, coffee machines and microwave ovens, necessary
or appropriate for the preparation or heating of beverages and light
snacks.
(c) Tenant shall not cause or be permitted any unusual or objectionable odors
to originate from the demised premises.
(d) No space in or about the building shall be used for the manufacture,
storage or sale at auction of merchandise, goods or tangible property of
any kind without specific permission of owner.
(e) The demised premises shall not be used for lodging or sleeping or for any
immoral or illegal purposes.
(f) Neither the Tenant nor Tenant's employees, agents, visitors or licensees
shall make or permit to be made any disturbing noises that interfere with
occupants of the building or
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<PAGE>
neighboring buildings, whether by the use of any musical instrument, radios,
tapes, records, whistling, singing or by any other way. Neither the Tenant
nor Tenant's employees, agents, visitors or licensees shall throw anything
out of the doors or windows or down the corridors or stairs of the demised
premises and the building.
10. The parking areas and exterior common areas shall not be obstructed by
Tenant or used by Tenant for any purposes other then parking of motor
vehicles and ingress and egress from and to Tenant's offices. Tenant's
agents, invitees and licensees shall not be permitted to park or store on
the grounds any commercial vehicle or storage vehicle for a period longer
than 12 hours. Tenant shall observe and use only for their designated
purpose, and shall cause its employees, contractors, guests, and invitees
to observe and use only for their designated purpose, all handicapped
parking spaces, loading zones and fire lanes as established by Landlord
from time to time.
11. Landlord reserves the right to rescind, suspend or modify any rules or
regulations and to make such other rules or regulations as, in Landlord's
reasonable judgment, may from time to time be required for the safety,
care, maintenance, operation and cleanliness of the building and common
areas or for the preservation of good order therein. Notice to Tenant of
any action by Landlord described to in this paragraph shall have the same
force and effect as if originally made a part of the foregoing lease.
12. No Tenant is to utilize any type of space heater without prior approval of
the Property Manager, as this may tax our electrical system and is a
potential fire hazard.
13. Live Christmas trees are not permitted due to a possible fire hazard.
14. Tenant covenants not to place a load on any floor above the first floor
exceeding an average rate of 50 pounds live load per square foot of floor
area, exclusive of Tenants interior partitions and not to move any safe,
vault or other heavy equipment in, about, or out of the premises, except in
such manner and at such time as Landlord shall in each instance authorize.
15. Tenant's business machines and mechanical equipment which cause vibration
or noise that may be transmitted to the building structure or to any other
space in the building shall be so installed, maintained and used by Tenant
as to eliminate such vibration and noise.
16. The rules and regulations are not intended to give Tenant any rights or
claims in the event that Landlord does not enforce any of them against
other Tenants or if Landlord does not have the right to enforce any of them
against other Tenants and such nonenforcement will not constitute a waiver
as to Tenant. If any provision of the lease conflicts with these Rules and
Regulations, the provision in the lease shall supersede the conflicting
provision herein.
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ATTACHED TO AND FORMING A PART OF REPORT OF
TITLE NO. F 253 558 CO
--------------------------------------------------
--------------------------------------------------
DESCRIPTION - 1 Great Valley Parkway
ALL THAT CERTAIN tract of land, SITUATE on the East side of Route 29, Moorehall
Road, East Whiteland Township, Chester County, Pennsylvania, according to a
Parcel XXIX Land Title Plan of Rouse and Associates, Great Valley Corporate
Center by Yerkes Associates, Inc., dated August 10, 1982, last revised August
11, 1983, as follows:
BEGINNING at a point on the common title line with lands of now or formerly of
Warner Company; said point being measured the following courses and distances
along the title line of Moorehall Road (L.R. 15134) from a point marking its
intersection with the original South right-of-way line of Flat Road (40.00 feet
wide) when extended); South 11 degrees, 44 minutes, 00 seconds East, 280.00 feet
to a point; thence crossing over said Moorehall Road, North 78 degrees, 06
minutes, 00 seconds East, along lands of said Warner Company, 1,077.87 feet to
the beginning point; thence from said beginning point North 78 degrees, 06
minutes, 00 seconds East along the lands of Warner Co., 420.56 feet to a stone
corner marker; hence South 12 degrees, 36 minutes, 00 seconds East along the
lands of Warner Co. 658.39 feet to a corner point marking the lands of Parcel
III; thence from said point and along the common property line with Parcel III,
South 77 degrees, 39 minutes, 1 seconds West, 773.37 feet to a corner point in
the said property line at a point of curve on the Southern side right-of-way of
the cul-de-sac of Great Valley Parkway East; thence from said point and crossing
through a 20 feet wide Water Company Easement along said road cul-de-sac
right-of-way line on an arc of a circle curving to the left with a radius of
60.00 feet, the arc distance of 94.25 feet to a point on the North side of the
road cul-de-sac right-of-way line with lands of parcel XXXI; thence leaving said
cul-de-sac North 77 degrees, 39 minutes, 07 seconds East, along the common
property line with Parcel XXXI, 307.77 feet to a corner point; thence from said
point and still along the common property line with Parcel XXXI North 12
degrees, 36 minutes, 00 seconds West, crossing over a 20 feet wide sanitary
sewer easement, 194.53 feet to an angle point; thence South 77 degrees, 24
minutes, 00 seconds West, 15.00 feet to an angle point; thence still by Parcel
XXXI; North 12 degrees, 36 minutes, 00 seconds West 407.21 feet to the
aforementioned point and place of beginning.
CONTAINING 6,723 acres of land, be the same more or less.
CHESTER COUNTY TAX PARCEL #42-2-12.2
BEING the same premIses which became vested in Moorehall Associates Limited
Partnership, a Pennsylvania limited partnership, by Deed from Great Valley
Industrial Holding Corporation, a Pennsylvania corporation, dated August 20,
1982, recorded in Chester County Deed Book I 60, page 60.
<PAGE>
EXHIBIT E
LEGAL DESCRIPTION OF PROPERTY
[TO BE ATTACHED PRIOR TO EXECUTION]
<PAGE>
FLEX SPACE LEASE
ONE GREAT VALLEY PARKWAY
Between Nairn Great Valley, Inc., as Landlord
and
APOLLON, INC., as Tenant
Date: JULY 8, 1992
<PAGE>
FIRST AMENDMENT TO FLEX SPACE LEASE
THIS FIRST AMENDMENT TO FLEX SPACE LEASE, dated the 11th day of
January, 1993 by and between NAIRN GREAT VALLEY, INC., a Pennsylvania
corporation (the "Landlord"), and APOLLON, INC., a Pennsylvania corporation
("Tenant").
WITNESSETH:
THAT WHEREAS, Landlord and Tenant entered into a certain Flex Space
Lease and Rider to Flex Space Lease, each dated July 8, 1992 (collectively,
the "Lease") for 21,347 square feet of space, known as Suite 30, in the
building known as One Great Valley Parkway, Malvern, Pennsylvania; and
WHEREAS, Landlord and Tenant desire to expand the area of the
demised premises in the Lease and modify the Lease on the terms set forth in
this First Amendment.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, Landlord and Tenant
agree as follows:
1. The Lease remains in full force and effect on the terms and
conditions set forth in the Lease, except as herein modified. Without
limiting the generality of the foregoing, the Landlord hereby ratifies and
confirms that the Tenant has (i) the right to extend the Term of the Lease
pursuant to Section 44 of the Lease, (ii) the right of first refusal to lease
additional space in the Building pursuant to Section 47 of the Lease, and
(iii) the right to purchase the Building pursuant to Section 48 of the Lease.
2. Each capitalized term used in this First Amendment shall have
the same meaning as is ascribed to such term in the Lease, unless defined in
this First Amendment.
3. This First Amendment shall be effective upon the first day of
the first full calendar month after the date of this First Amendment.
4. The definitions of "Premises", "Period of Lease" and "Tenant's
Proportionate Share" in the Term Sheet of the Lease are amended and restated
as follows:
Premises: 25,347 square feet of space in Building to be known
as Suite 30 as more particularly identified in
Exhibit A-1 attached hereto and incorporated herein.
<PAGE>
Period of
Lease: From August 15, 1992 through and including October
31, 1997
Tenant's
Proportionate
Share: 41.6344 percent
5. Section 3 of the Lease entitled "Completion of Premises" is
hereby deleted in its entirety.
6. Section 6(b)(ii) under the title "Computation of Tenant's Share
of Annual Operating Costs", shall be restated in its entirety as follows:
(ii) Computation of Tenant's Share of Annual Operating Costs. After
the end of each calendar year of the Term, Landlord shall
compute and submit to Tenant the annual operating costs for
such calendar year. "Tenant's share of the annual operating
costs" for such calendar year shall be [A] the annual operating
costs for the Building divided by [B] the greater of [x] 90
percent of the net rentable area of the Building or [y] the
total net rentable area in the Building which is actually
leased; multiplied by [C] the number of square feet of space in
the Premises as specified in the Term Sheet, but in no event
shall the operation of this section yield greater than 100
percent of operating costs.
7. Without limitation of any other rights or remedies available to
the Landlord under Section 27(b) entitled "Remedies", or which are otherwise
available at law or in equity, and subject to Section 27(d) of the Lease, the
following remedy of Landlord in the case of a default by the Tenant under the
Lease, as herein amended, is restated and granted as follows:
When this Lease and the Term or any extension or renewal thereof
shall have been terminated on account of any default by Tenant, or when
the Term has expired, it shall be lawful for any attorney of any court of
record in Pennsylvania to appear as attorney for Tenant as well for all
persons claiming by, through or under Tenant and to confess judgment
against it, them or any of them, for the recovery by Landlord of
possession of the Premises, for which this Lease shall be said attorney's
sufficient warrant; and, thereupon, if Landlord so desires, an
appropriate writ of possession may issue forthwith, without any prior
writ or proceeding whatsoever. Landlord shall have the right for the
same default and upon any subsequent
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<PAGE>
default or defaults, or upon the termination of this Lease or Tenant's
right of possession as hereinbefore set forth, to direct any attorney of
any court of record in Pennsylvania to confess judgment for the recovery
of possession of the Premises as hereinbefore provided, on one or more
occasions.
8. Section 42(a) contained on the Rider to Flex Space Lease
entitled "Minimum Annual Rent" shall be restated in its entirety as follows:
(a) "Minimum Annual Rent" for the initial 62-month Term of the
Lease shall be Five Hundred Nine Thousand Eight Hundred Thirty Six and
78/100 Dollars ($509,836.78) payable as follows:
(i) Through and including February 28, 1993: Fifteen Thousand
Nine Hundred Thirty Seven and 52/100 Dollars ($15,937.52);
with the applicable Monthly Installment during such period
being Three Thousand Five Hundred Forty One and 67/100
Dollars ($3,541.67).
(ii) Commencing on March 1, 1993 and continuing through and
including October 31, 1993, Forty One Thousand Dollars
($41,000.00); with the applicable Monthly Installment
during such period being Five Thousand One Hundred Twenty
Five Dollars ($5,125.00).
(iii) Commencing on November 1, 1993 and continuing through and
including January 31, 1995, One Hundred Forty Thousand One
Hundred Fifty Five and 95/100 Dollars ($140,155.95); with
the applicable Monthly Installment during such period
being Nine Thousand Three Hundred Forty Three and 73/100
Dollars ($9,343.73).
(iv) Commencing on February 1, 1995 and continuing through and
including October 31, 1997, Three Hundred Twelve Thousand
Seven Hundred Forty Three and 31/100 Dollars
($312,743.31); with the applicable Monthly Installment
during such period being Nine Thousand Four Hundred
Seventy Seven and 07/100 Dollars ($9,477.07).
9. The sum of $25,000" in Section 43 of the Rider to Flex Space
Lease entitled "Additional Rent" shall be amended to be the sum of $28,333.00.
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<PAGE>
10. Section 50 of the Rider to Flex Space Lease entitled "Financing
Contingency" shall be deleted in its entirety.
11. The Premises are accepted by Tenant in "as is" condition
without warranty or representation of any kind, either express or implied, by
the Landlord.
12. The Lease, as modified by this First Amendment, shall
constitute the entire agreement between Landlord and Tenant with respect to
the Premises and the Building.
13. This First Amendment is intended to be governed and construed
in accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, this First Amendment to Flex Space Lease has
been executed by Landlord and Tenant as of the date first above set forth.
NAIRN GREAT VALLEY, INC.
Attest: By: /s/ (Illegible Signature)
__________________________ _________________________________
Secretary
APOLLON, INC.
Attest: /s/ RICHARD A. CARRANO By: /s/ VINCENT R. ZURAWSKI
___________________________ ________________________________
Secretary President
1/11/93 1/11/93
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<PAGE>
EHXIBIT A-1
[Diagram demonstrating overall
floor plan of the leased
space in the Building.]
<PAGE>
SECOND AMENDMENT TO FLEX SPACE LEASE
THIS SECOND AMENDMENT TO FLEX SPACE LEASE, dated November 19, 1993, is
by and between NAIRN GREAT VALLEY, INC., a Pennsylvania corporation
("Landlord"), and APOLLON, INC., a Pennsylvania corporation ("Tenant").
Landlord and Tenant may be hereinafter referred to individually as a "Party" and
collectively as the "Parties".
BACKGROUND
Landlord and Tenant entered into a certain Flex Space Lease and Rider
to Flex Space Lease, each dated July 8, 1992 (collectively, the "Lease") for
21,347 square feet of space, known as Suite 30, in the building known as One
Great Valley Parkway, Malvern, Pennsylvania.
On January 11, 1993 Landlord and Tenant amended the Original Lease by
a First Amendment to Flex Space Lease (the "First Amendment") wherein, among
other things, the demised premises was enlarged to 25,347 square feet and the
Minimum Annual Rent and Tenant's Proportionate Share of Operating Expenses was
increased.
Landlord and Tenant desire to further expand the area of the demised
premises in the Lease and modify the Lease on the terms set forth in this Second
Amendment.
The Lease, the First Amendment and this Second Amendment shall be
collectively referred to herein as the "Lease".
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, Landlord and Tenant
agree as follows:
1. The Lease remains in full force and effect on the terms and
conditions set forth in the Lease, except as modified by the First Amendment and
this Second Amendment.
2. Each capitalized term used in this Second Amendment shall have
the same meaning as is ascribed to such term in the Lease, unless defined in
this Second Amendment.
3. The "Commencement Date" of the Term is deemed by the Parties to
be August 15, 1992.
<PAGE>
4. This Second Amendment shall be effective upon the first day of
the first full calendar month after the date of this Second Amendment.
5. The definitions of "Premises", "Period of Lease" and "Tenant's
Proportionate Share" in the Term Sheet of the Lease, as amended in the First
Amendment, shall be amended and restated in their entirety as follows:
Premises: 21,347 square feet of space in the Building to be known
as Suite 30 as more particularly identified in Exhibit
A-2, from the Commencement Date through and including
January 31, 1993.
25,347 square feet of space in the Building to be known
as Suites 30 and 24, as more particularly identified in
Exhibit A-2, from February 1, 1993 through and
including August 31, 1993.
35,725 square feet of space in the Building to be known
as Suites 30, 24 and 20, as more particularly
identified in Exhibit A-2, from September 1, 1993
through and including December 31, 1993.
40,700 square feet of space in the Building to be known
as Suites 30, 24, 20, and 18, as more particularly
identified in Exhibit A-2, from January 1, 1994 through
and including August 31, 1998.
Period of
Lease: From August 15, 1992 through and including August 31,
1998.
Tenant's
Proportionate
Share: 35.064 percent from the Commencement Date through
January 31, 1993.
41.6344 percent from February 1, 1993 through August
31, 1993.
58.6810 percent from September 1, 1993 through December
31, 1993.
66.8528 percent from January 1, 1994 through August 31,
1998.
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<PAGE>
6. The "Property Manager" defined on the Term Sheet shall be
restated to be:
Axiom Real Estate Management, Inc., Agent
for Nairn Great Valley, Inc.
1600 Market Street, 19th Floor
Philadelphia, PA 19103
7. Without limitation of any other rights or remedies available to
the Landlord under Section 27(b) entitled "Remedies", or which are otherwise
available at law or in equity, and subject to Section 27(d) of the Lease, the
following remedy of Landlord in the case of a default by the Tenant under the
Lease, as herein amended, is restated and granted as follows:
When this Lease and the Term or any extension or renewal thereof shall
have been terminated on account of any default by Tenant, or when the Term
has expired, it shall be lawful for any attorney of any court of record in
Pennsylvania to appear as attorney for Tenant as well for all persons
claiming by, through or under Tenant and to confess judgment against it,
them or any of them, for the recovery by Landlord of possession of the
Premises, for which this Lease shall be said attorney's sufficient warrant;
and, thereupon, if Landlord so desires, an appropriate writ of possession
may issue forthwith, without any prior writ or proceeding whatsoever.
Landlord shall have the right for the same default and upon any subsequent
default or defaults, or upon the termination of this Lease or Tenant's
right of possession as hereinbefore set forth, to direct any attorney of
any court of record in Pennsylvania to confess judgment for the recovery of
possession of the Premises as hereinbefore provided, on one or more
occasions.
8. Section 42(a) contained on the Rider to Flex Space Lease entitled
"Minimum Annual Rent", as amended in the First Amendment, shall be restated in
its entirety as follows:
(a) The aggregate of all "Minimum Annual Rent" for the
initial Term of the Lease shall be One Million One Hundred Thirty
Five Thousand Three Hundred Eighty Seven and 38/100 Dollars
($1,135,387.38) payable as follows:
i) Through and including February 28, 1993: $23,020.86;
with the applicable Monthly Installment during such
period being $3,541.67.
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<PAGE>
ii) Commencing on March 1, 1993 and continuing through and
including August 31, 1993, $30,750.00; with the
applicable Monthly Installment during such period being
$5,125.00.
iii) Commencing on September 1, 1993 and continuing through
and including October 31, 1993 $13,709.34; with the
applicable Monthly Installment during such period being
$6,854.67.
iv) Commencing on November 1, 1993 and continuing through
and including August 31, 1994, $117,117.30; with the
applicable Monthly Installment during such period being
$11,711.73.
v) Commencing on September 1, 1994 and continuing through
and including August 31, 1995, $157,708.80; with the
applicable Monthly Installment during such period being
$13,142.40.
vi) Commencing on September 1, 1995 and continuing through
and including August 31, 1996, $228,257.16; with the
applicable Monthly Installment during such period being
$19,021.43.
vii) Commencing on September 1, 1996 and continuing through
and including October 31, 1997, $308,480.62, with the
applicable Monthly Installment during such period being
$22,034.33.
viii) Commencing on November 1, 1997 and continuing through
and including August 31, 1998, $256,343.30, with the
applicable Monthly Installment during such period being
$25,634.33.
9. The last sentence of Section 44(c) in the Rider to Flex Space
Lease which states: "Notwithstanding the foregoing, the fair market rental
shall not exceed $9.50 per square foot of space in the Premises"; shall be
restated in its entirety as follows: "Notwithstanding the foregoing, the fair
market rental shall not exceed $10.00 per square foot of space in the Premises.
10. The Premises are and shall be accepted by Tenant in "as is"
condition without warranty or representation of any
4
<PAGE>
kind, either express or implied, by the Landlord. Without limitation of the
foregoing, it is agreed that Landlord shall have no responsibility for, and
Tenant's obligations under this Lease are not conditioned upon, the obtaining of
any building permits or certificates of occupancy for any part of the Premises.
11. The Original Lease, as modified by the First Amendment and this
Second Amendment, shall constitute the entire agreement between Landlord and
Tenant with respect to the Premises and the Building.
12. This Second Amendment is intended to be governed and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, this Second Amendment to Flex Space Lease has been
executed by Landlord and Tenant as of the date first above set forth.
NAIRN GREAT VALLEY, INC.
Attest: [illegible signature] By: [illegible signature]
------------------------------- ---------------------------------
Secretary President
APOLLON, INC.
Attest: /s/ Richard A. Carrano By: /s/ Vincent R. Zurawski
------------------------------- --------------------------------
Assistant Secretary President
5
<PAGE>
EXHIBIT A-2
[Diagram demonstrating overall floor plan of the leased space in the Building.]
6
<PAGE>
THIRD AMENDMENT TO AGREEMENT OF LEASE
THIS 3rd AMENDMENT is made this 23rd day of September, 1997 by and between
LIBERTY PROPERTY LIMITED PARTNERSHIP, a Pennsylvania limited partnership
("Landlord") and Apollon, Inc., a Pennsylvania corporation ("Tenant").
BACKGROUND
A. Nairn Great Valley, Inc., Landlord's predecessor, and Tenant entered
into a Lease Agreement dated July 8, 1992 (the "Original Lease"), covering
premises at One Great Valley Parkway, Malvern, Pennsylvania, as more fully
described in the Original Lease. The Original Lease was amended by first
amendment dated January, 11, 1993 and second amendment dated November 19, 1993
(the Original Lease as amended by the first amendment and second amendment is
hereinafter called the "Lease").
B. Tenant desires to expand into additional space in the Building, and
extend the term of the Lease, and Landlord has agreed to such expansion and
extension subject to the provisions of this Third Amendment.
AGREEMENTS
NOW THEREFORE, the parties hereto, in consideration of the mutual promises
and covenants contained herein and in the Lease, and intending to be legally
bound, hereby agree that the Lease is amended as follows:
1. Expansion Space: Landlord hereby leases to Tenant an additional
5,425 square feet of space in the Building (the "Expansion Space") as shown
in cross-hatch on Exhibit A hereto. The term for the Expansion Space shall
begin as of October 1, 1997, and shall thereafter run concurrently with the
Term of the Lease as provided below. Minimum Annual Rent for the Expansion
Space shall be paid as provided below, in the same time and manner as
required for the balance of the Premises. The total amount of space covered
by this Lease is 46,125 square feet. Tenant's Proportionate Share for
purposes of calculating and paying Tenant's Share of Annual Operating Costs
shall be 76%. Tenant's Share of Annual Operating Costs shall be prorated for
the calendar year 1997 to reflect that Tenant's Proportionate Share has
increased effective as of October 1, 1997. The Expansion Space shall be
deemed to be part of the Premises for all other purposes of the Lease. The
Tenant shall take possession to the Expansion Space "as is, where is."
Landlord has not agreed to make any improvements to same. Any improvements to
the Expansion Space shall be made subject to all other terms and conditions
of the Lease.
2. Term: Section 4 of the Original Lease is amended by deleting the
second sentence thereof and substituting the following is in its place:
<PAGE>
"The term of this Lease shall, unless sooner terminated as expressly
provided in this Lease continue until September 30, 2003 (the
"Expiration Date")."
3. Minimum Annual Rent: Minimum Annual Rent effective October 1, 1997
shall be as follows:
46,125 s.f. Rent/s.f. Annual Monthly
10/1/97-9/30/98 $ 8.75 $403,593.75 $33,632.81
10/1/98-9/30/99 $ 9.75 $449,718.75 $37,476.56
10/1/99-9/30/00 $10.10 $465,862.50 $38,821.88
10/1/00-9/30/01 $10.45 $482,006.25 $40,167.19
10/1/01-9/30/02 $10.80 $498,150.00 $41,512.50
10/1/02-9/30/03 $11.15 $514,293.75 $42,857.81
Effective October 1, 1997, Section 6 (a) of the Original Lease is amended to
substitute the above schedule for Minimum Annual Rent as stated in the Original
Lease.
4. Option To Extend Term. Provided that Landlord has not given Tenant
notice of default more than two (2) times preceding the Expiration Date, that
there then exists no event of default by Tenant under this lease nor any event
that with the giving of notice and/or the passage of time would constitute a
default, and that Tenant is the sole occupant of the Premises, Tenant shall have
the right and option to extend the Term for one (1) additional period of five
(5) years(s), exercisable by giving Landlord prior written notice, at least nine
(9) months in advance of the Expiration Date, of Tenant's election to extend the
Term; it being agreed that time is of the essence and that this option is
personal to Tenant and is nontransferable to any assignee or sublessee
(regardless of whether any such assignment or sublease was made with or without
Landlord's consent) or other party. Such extension shall be under the same terms
and conditions as provided in this lease except as follows:
(a) the additional period shall begin on the Expiration Date and
thereafter the Expiration Date shall be deemed to be extended by five years;
(b) all references to the Term in this lease shall be deemed to mean
the Term as extended pursuant to this Section;
2
<PAGE>
(c) there shall be no further options to extend; and
(d) the Minimum Annual Rent payable by Tenant for the additional
period shall be computed based upon the then "Fair Market Rental Rate", but in
no event shall the new rent be less than the rent at the end of the initial term
of the Lease. Within One (1) month after Landlord receives Tenant's notice of
the exercise of this option, Landlord will notify Tenant of the "Fair Market
Rental Rate" which shall be Landlord's good faith determination of the rental
rate applicable at such time for office space in similar buildings located in
the Malvern, Pennsylvania Market Area ("Landlord's Rental Notice"). If Tenant
objects to the Fair Market Rental Rate as so established, Tenant may rescind its
exercise of this option to extend term, provided Tenant gives notice of such
recision to Landlord on or before two (2) weeks after Tenant receives Landlord's
Rental Notice, time being of the essence. If Tenant so rescinds so exercise,
Tenant's option to extend term shall be deemed both unexercised and
extinguished. If Tenant does not so rescind its exercise, the term of this
Lease shall be extended as provided before, with the Minimum Annual Rent
applicable to such additional period being computed based upon the Fair Market
Rental Rate as stated in the Landlord's Rental Notice.
5. Right of First Offer to Lease Additional Space. If and when any of
the additional rentable spaces in the Building which are shown as "Additional
Space" on Exhibit "A" (individually, the "Additional Space") first becomes
available for rental during the term of this lease and provided that Landlord
has not given Tenant notice of default more than two (2) times during the
immediately preceding twelve (12) months, that there then exists no event of
default by Tenant under this lease nor any event that with the giving of notice
and/or the passage of time would constitute a default, and that Tenant is the
sole occupant of the Premises, Tenant shall have the right of first offer to
lease all of the Additional Space, subject to the following:
(a) Landlord shall notify Tenant when the Additional Space first
becomes available for rental by any party other than the tenant then in
occupancy of the Additional Space and Tenant shall have seven (7) days following
receipt of such notice within which to notify Landlord in writing that Tenant is
interested in negotiating terms for leasing such Additional Space and to have
its offer considered by Landlord prior to the leasing by Landlord of the
Additional Space to a third party. If Tenant notifies Landlord within such time
period that Tenant is so interested, then Landlord and Tenant shall have 30 days
following Landlord's receipt of such notice from Tenant within which to
negotiate mutually satisfactory terms for the leasing of the Additional Space by
Tenant and to execute an amendment to this lease incorporating such terms or a
new lease for the Additional Space.
(b) If Tenant does not notify Landlord within such 7 days of its
interest in leasing the Additional Space or if Tenant does not execute such
amendment or lease within such 30 days, if applicable, then this right of first
offer to lease the Additional Space will
3
<PAGE>
lapse and be of no further force or effect and Landlord shall have the right to
lease all or part of the Additional Space to any other party at any time on any
terms and conditions acceptable to Landlord.
(c) This right of first offer to lease the Additional Space is a
one-time right if and when each Additional Space first becomes available, is
personal to Tenant and is nontransferable to any assignee or sublessee
(regardless of whether any such assignment or sublease was made with or without
Landlord's consent) or other party.
6. Right Of First Offer To Purchase Property.
(a) If at any time during the initial term of this lease (prior to
October 1, 2003), except as set forth in subsections (b) and (c) below, Landlord
desires to sell the whole of the Property known as One Great Valley Parkway in
Malvern, Pennsylvania to a non-related entity for full consideration, Landlord
agrees to notify Tenant of such desire. Tenant shall advise Landlord within ten
(10) days after receiving such notice if Tenant is interested in negotiating
terms for purchase of the Property by Tenant. If Tenant fails to respond within
such time period and/or if Tenant is not interested in purchasing the Property,
then Tenant shall have no further right hereunder to purchase the Property.
However, if Tenant notifies Landlord within such time period that Tenant is
interested in purchasing the Property, then Landlord and Tenant shall have
thirty (30) days following Landlord's receipt of such notice from Tenant within
which to negotiate and execute a mutually satisfactory agreement for the sale of
the Property to Tenant.
(i) In the event that Landlord and Tenant fail to enter into an
agreement of sale and purchase within such thirty (30) days, then Tenant shall
have no further right hereunder to purchase the Property. Thereafter, Landlord
may negotiate with any third party for the sale and purchase of the Property.
(ii) If Landlord and Tenant enter into an agreement of sale and
purchase but transfer of the Property to Tenant is not consummated for any
reason other than Landlord's default under such agreement of sale and purchase,
then Tenant shall have no further right hereunder to purchase the Property.
(b) Tenant's right of first offer set forth above shall not apply to
any transfer of the Property in mortgage foreclosure, by deed in lieu of
foreclosure or as part of a settlement with the mortgagee nor shall such right
apply to any efforts by Landlord to sell the Property as part of a package
transaction which includes one or more other properties owned by Landlord or its
affiliates. In the case of any such mortgage related or package transaction,
Tenant shall have no rights relating to the purchase of the Property and no such
rights shall survive the conveyance of the Property by Landlord pursuant to a
mortgage related or package transaction.
4
<PAGE>
(c) Landlord shall have no obligation to notify Tenant of
Landlord's intention to sell and Tenant shall have no right to purchase the
Property at any time during which Tenant is in default under any of the
provisions of this lease. The right of first offer set forth in this Section
shall terminate automatically if at any time during the Term, including
without limitation at any time after Landlord and Tenant enter into an
agreement of sale and purchase. Tenant defaults under any of the provisions
of this lease and Landlord gives Tenant written notice of such default; in
which event this Section shall be deemed to be null and void and of no
further force or effect. In addition, Tenant's right of first offer shall
terminate automatically if Tenant transfers this lease (as described in
Section 18) or if the Property is wholly or partially destroyed by casualty
or taken by a condemnation or otherwise for any public or quasi-public use.
7. New Facilities for Tenant: The Lease, as amended hereby, shall
terminate in the event Landlord leases or sells to Tenant a new or existing
facility of more than 46,125 square feet, upon terms and conditions satisfactory
to Landlord and Tenant, embodied in a lease or agreement of sale executed by
Landlord and Tenant.
8. Tenant Cancellation Rights: The provisions of this Third Amendment
shall be cancelable by Tenant by delivering written notice to Landlord on or
before October 1, 1997 (time being of the essence hereof), in which event this
Third Amendment shall be deemed to be void from inception, and the Lease as
previously amended shall continue in full force and effect.
9. Tenant Waiver of Previous Provisions: Tenant hereby waives any and
all options and rights to extend or renew the Term of the Lease, options to
expand the Premises and to purchase the Building, and Sections 44, 47 and 48 of
the Original Lease are hereby deleted in their entirety. Tenant further waives
any "cap" on annual operating costs under Section 43 of the Original Lease,
which Section 43 is hereby deleted in its entirety.
10. Confession of Judgment: Without limitation of any other rights or
remedies available to the Landlord under Section 27(b) entitled "Remedies", or
which are otherwise available at law or in equity, and subject to Section 27(d)
of the Lease, the following remedy of Landlord in the case of a default by the
Tenant under the Lease, as herein amended, is restated and granted as follows:
When this Lease and the Term or any extension or renewal thereof shall have
been terminated on account of any default by Tenant, or when the Term has
expired, it shall be lawful for any attorney of any county of record in
Pennsylvania to appear as attorney for Tenant as well for all persons
claiming by, through or under Tenant and to confess judgment against it,
them or any of them, for the recovery by Landlord of possession of the
Premises, for which this Lease shall be said attorney's sufficient warrant;
and, thereupon, if Landlord so desires, an appropriate writ of possession
5
<PAGE>
may issue forthwith, without any prior writ or proceeding whatsoever.
Landlord shall have the right for the same default and upon any subsequent
default or defaults, or upon the termination of this Lease or Tenant's
right of possession as hereinbefore set forth, to direct any attorney of
any court of record in Pennsylvania to confess judgment for the recovery of
possession of the Premises as hereinbefore provided, on one or more
occasions.
11. Miscellaneous: Except as expressly modified herein, the terms and
conditions of the Lease shall remain unchanged and in full force and effect.
All capitalized terms used herein but not separately defined shall have the same
meaning as given in the Lease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the day and year first above written.
LANDLORD:
LIBERTY PROPERTY LIMITED PARTNERSHIP
By: Liberty Property Trust, Sole General Partner
By: /s/ Leslie R. Price
-----------------------------------------------
Name: Leslie R. Price
Title: Senior Vice President
TENANT:
APOLLON, INC.
By: /s/ Vincent R. Zurawski, Jr.
-----------------------------------------------
Name: Vincent R. Zurawski, Jr.
Title: President and CEO
Attest: /s/ James G. Murphy
-------------------------------------------
Name: James G. Murphy
Title: Vice President - Finance
6
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 1 of 16
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON ALL PAGES HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
APOLLON, INC./[ ]/[ ]
EXCLUSIVE LICENSE AGREEMENT
This Agreement, is effective upon date of execution, by and between
Apollon, Inc., One Great Valley Parkway, Malvern, Pennsylvania 19355, a
Pennsylvania corporation ("APOLLON") and
[ ] a [ ]
corporation organized and existing under the laws of the State of [ ]
and having its principal office at
[ ](mailing address:
[ ]
("[ ]") and [ ], a
[ ] corporation duly organized and existing under the laws of the
State of[ ], having its principal office at
[ ] ("[ ]");
Whereas, [ ] and [ ] jointly own the rights to certain inventions,
know-how and pending and allowed patents relating to [ ] Docket No. [
], as developed by
Drs. [ ] and [ ] and [ ] and [
] of the [ ]; and
Whereas, the aforementioned inventions, know-how and pending and allowed
patent applications relate to
[
]
Whereas, by assignment of the inventions from each party's respective
inventors, [ ] and [ ], as joint owners of such inventions, may
exclusively license such inventions, including United States and Canadian
patents, patent applications, and related know-how; and
Whereas, [ ] has heretofore agreed, through prior execution of a
formal [ ] Agreement, that
[ ] ([ ]) will act as
the designated contact point and primary negotiator to any and all licenses
which may be enacted in connection with the aforementioned Docket; and
Whereas, [ ] and [ ] desire to grant licenses to said inventions,
pending and allowed patent applications, patents, and know-how related to said
Docket for development of products, processes, and methods for public use and
benefit; and
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 2 of 16
Whereas, [ ] and [ ] have heretofore agreed, pursuant to said [
] Agreement, to mutual consent between [ ] and [ ] in all such licensing
matters; and
Whereas, [ ] and [ ] have further agreed, pursuant to said [
] Agreement, to a formula for sharing royalty and income from such licensing
matters; and
Whereas, APOLLON is engaged in developing, manufacturing and marketing
products for human health care, utilizing facilitated DNA technology for the
prophylaxis and treatment of HIV (human immunodeficiency virus) and desires
to pursue the commercial development and marketing of such products utilizing
[ ]'s and [ ]'s U.S. and Canadian patent rights, patent applications,
patents, and know-how; and
Whereas, [ ] is willing to license and APOLLON is willing to enter into
a licensing agreement for use of the Licensed Patent Rights and Licensed
Know-how; and
Whereas, [ ] and [ ] and APOLLON each represents and warrants that
it has full right and authority to enter into this Agreement without
additional consent and approval of any third person and that it is not
subject to any restriction which would impair the grant to APOLLON of the
licenses granted hereby or the exercise by APOLLON of such licenses;
NOW THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound,
the parties hereto mutually agree as follows:
ARTICLE I - DEFINITIONS
1.1 "Licensed Patent Rights" means: (a) U.S. Patent No. [ ].
pending Canadian Patent Application Serial No. [ ] filed [
], and any patents which may issue therefrom, including any reissues,
re-examinations, or extensions, and any foreign counterparts thereof, and
(b) to the extent that APOLLON supports patent costs in accordance with
Article VI hereof, any divisions, continuations, and continuations-in-part
based thereon, and any patents which may issue therefrom, including any
reissues, re-examinations, or extensions, and any foreign counterparts thereof.
1.2 "Licensed Product(s)" means any product for use in the Field which in
the absence of this Agreement would infringe at least one Claim of Licensed
Patent Rights, or products made using a process which in the absence of this
Agreement would infringe at least one Claim of Licensed Patent Rights, on a
country-by-country basis.
1.3 "Claim" means a claim of an issued, unexpired patent that shall be
presumed to be valid and enforceable unless and until it has been held to be
invalid
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 3 of 16
and/or unenforceable by a final judgment of a court of competent jurisdiction
from which no appeal can be or is taken.
1.4 "Licensed Know-how" shall mean trade secrets, scientific and/or
technical information, whether or not patentable, including scientific and
practical information, techniques, materials, compositions, formulas, methods,
processes, and procedures, used, useful, or practiced in the design,
development, manufacture, and sale of Licensed Product(s).
1.5 "Affiliate" shall mean a corporation or other business entity that
controls, is controlled by, or that is under common control with another
corporation or other business entity, or is an Affiliate of an Affiliate. For
the purpose of this definition, "control" shall mean direct or indirect
beneficial ownership of more than fifty percent (50%) of the voting stock of a
corporation; direct or indirect ownership of more than fifty percent (50%) of
the income of the corporation or other business; or possession of more than
fifty percent (50%) of the voting rights of the members of a nonprofit or
nonstock corporation.
1.6 "APOLLON" shall include APOLLON, its Affiliates, and its Sublicensees.
1.7 "Sublicensee" shall mean any corporation, company, partnership or
business entity which neither controls, nor is controlled by, nor is under
common control with APOLLON, to which APOLLON transfers by sublicense rights to
enable said party to make and sell Licensed Products.
1.8 "Net Sales" means the gross invoice selling price for Licensed
Products shipped by APOLLON, its Affiliates, and its Sublicensees, less (a)
discounts and allowances for quantity purchases, prompt payments and for
wholesalers and distributors, (b) credits or refunds for claims or returns, (c)
prepaid outbound transportation expenses and transportation insurance costs, (d)
sales taxes or other governmental charges excluding income taxes paid in
connection with the sale, and (e) commissions and other fees paid to
distributors and other sales agencies for or in connection with the sale of
Licensed Products outside of the United States.
1.9 "Field" means the development, use and commercialization of
Polynucleotide Vaccines for the prevention and/or treatment of HIV (human
immunodeficiency virus) infection.
1.10 "[
]
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 4 of 16
1.11 "Polynucleotide Vaccine" means a pharmaceutical composition which
comprises a polynucleotide encoding a polypeptide target of a pathogen which
elicits an immune response useful for prophylactic and/or therapeutic purposes.
1.12 "HIV Target" means a Polynucleotide Vaccine comprising [
]
1.13 "Effective Date" means the date of execution of this Agreement.
ARTICLE II - GRANT
2.1 [ ] and [ ] hereby grant to APOLLON an exclusive, worldwide
license under Licensed Patent Rights and Licensed Know-how to make, have made,
use, sell and have sold Licensed Product(s) for use in the Field.
2.2 The licenses granted by [ ] and [ ] to APOLLON under paragraph
2.1 of this Article II shall include the right to grant sublicenses of no
greater scope than the license granted to APOLLON hereunder.
2.2.1 APOLLON hereby agrees that every sublicensing agreement to
which it is a party and which relates to the rights, privileges and license
granted hereunder shall set forth a date or term after which the rights,
privileges, and sublicense shall terminate.
2.2.2 APOLLON agrees that any sublicense granted by it hereunder
shall have privity of contract between [ ] and [ ] and the Sublicensee
such that the obligations of this Agreement are binding upon the Sublicensee
as if it were in the place of APOLLON.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 5 of 16
2.3 During the term of this Agreement and so long as APOLLON is not in
default with respect to any payment due to [ ] hereunder:
2.3.1 [ ] and/or [ ] will not assert Licensed Patent Rights
to prevent APOLLON or any party deriving rights through APOLLON from importing,
using, selling, or having sold any quantity of Licensed Product(s) on which
royalty has been paid hereunder; and
2.3.2 [ ] and/or [ ] or any party deriving rights through [
] and/or [ ] will not assert any other patent or patent application now or
hereafter controlled by [ ] and/or [ ] comprising subject matter
corresponding to subject matter in any patent or patent application of Licensed
Patent Rights within the Field on which reimbursable patent fees have been paid
to [ ] in accordance with Article VI to prevent APOLLON or any other party
deriving rights through APOLLON from importing, using, selling or having sold
for use in the Field any quantity of Licensed Product(s) on which royalty has
been paid hereunder, or to prevent APOLLON or any party deriving rights through
APOLLON from exercising the Licensed Patent Rights in the Field. APOLLON shall
be given, under applicable confidentiality agreement, notification of any
divisional, continuation and continuation-in-part applications based on Patent
No. [ ].
ARTICLE III - DISCLOSURE OF KNOW-HOW
3.1 Within thirty (30) days following execution of this License Agreement,
[ ] and [ ] shall make available to APOLLON, without expense to APOLLON,
all its existing Licensed Know-how.
ARTICLE IV - DUE DILIGENCE
4.1 APOLLON has represented to [ ] and [ ], to induce [ ] and
[ ] to issue this license, that APOLLON will use commercially reasonable
efforts to create and produce a commercially marketable product utilizing
Licensed Patent Rights in the Field. At one year intervals after the
Effective Date, APOLLON shall provide to [ ] and [ ] a summary of
research activities and progress relating to the development of product(s)
utilizing Licensed Patent Rights in the Field. In the event that APOLLON
fails to do so or to continue to actively market Licensed Product during the
term of this Agreement, [ ] shall have the right to terminate this Agreement
pursuant to paragraph 9.3 hereof.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 6 of 16
ARTICLE V - CONSIDERATION AND ROYALTIES
5.1 LICENSE INITIATION FEE: APOLLON shall pay to [ ] a License Initiation
Fee of [ ] ($[ ]), payable as follows: [
]($[ ]) on the [ ] and [
] ($[ ]) on the [ ].
5.2 MILESTONE PAYMENTS:APOLLON shall pay to [ ] the following Milestone
Payments, which shall constitute an advance payment [ ] creditable against
royalties owing to [ ] and [ ] hereunder; provided, however, that such
payments may be offset against no more than [ ] of the
royalties due under this Agreement in any one calendar year.
5.2.1 [ ] ($[ ]) within thirty (30)
days of the date of initiation by APOLLON of the [
]; in no event, however, shall
more than one such Milestone Payment be due for [ ]
against the same HIV Target.
5.2.2 [ ] ($[ ]) within thirty (30)
days of the date of initiation by APOLLON of the [
]; in no event, however, shall
more than one such Milestone Payment be due for any one [
].
5.3 ROYALTIES: In further consideration of the license granted hereunder,
APOLLON shall pay to [ ] the following royalties on Net Sales of Licensed
Products:
5.3.1 APOLLON shall pay to [ ] a royalty of [
] of the Net Sales in the United States of Licensed Product(s) which
incorporate a [ ] covered by a Claim of a United
States Patent of Licensed Patent Rights.
5.3.2 APOLLON shall pay to [ ] a royalty of [
] of the Net Sales in Canada of Licensed Product(s) which incorporate a
[ ] covered by a Claim of a Canadian Patent of Licensed Patent
Rights.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 7 of 16
5.3.3 APOLLON shall pay to [ ] a royalty of [
] of the Net Sales of Licensed Product(s), which are manufactured in the
U.S. by or for APOLLON and sold by or for APOLLON in countries other than the
U.S. and Canada, and which incorporate a [ ] covered
by a Claim of a United States Patent of Licensed Patent Rights. Royalties under
this paragraph 5.3.3 shall be payable for a period of three years from the date
of first commercial sale in each such country and the payment shall expire on a
country-by-country basis.
5.4 LICENSE MAINTENANCE FEE: APOLLON shall pay to [ ] an annual license
maintenance fee of [ ], due and
payable each year on the anniversary of the Effective Date; provided, however,
that after the date of first commercial sale of a Licensed Product(s) which
incorporates a [ ] covered by a Claim of a United
States Patent of Licensed Patent Rights, no further License Maintenance Fee
shall become due and payable, so long as royalties due [ ] and [ ] under
paragraph 5.3 hereof equal or exceed [ ] per
calendar year. If royalties payable to [ ] accrue under paragraph 5.3 hereof,
but are less than [ ] per calendar
year, APOLLON shall pay [ ] a total of [
] per calendar year as a combined royalty/License Maintenance Fee. [
] of all License Maintenance Fees paid hereunder shall constitute an
advance payment creditable against future royalties owing to [ ] and [ ]
under paragraph 5.3 of this Agreement; provided, however, that such payments
may be offset against no more than[ ] of the royalties due
hereunder in any one calendar year.
5.5 CREDITS CUMULATIVE: All Milestone Payments and the [ ]
of License Maintenance Fees creditable against royalties under Article 5 hereof
are cumulative and are [ ] creditable against future royalties due under
paragraph 5.3 of this Agreement; however, in no event may the total of such
credits be offset against more than [ ] of the royalties due in
any one calendar year. Such credits in excess of the royalties which may be
offset in any one calendar year may be applied against royalties due in future
years.
5.6 SUBLICENSE FEE: APOLLON shall pay to the [ ] [ ]
of any sublicense initiation fee received by APOLLON pursuant to the grant of a
sublicense hereunder, expressly excluding any consideration received by APOLLON
directly related to support for development and/or marketing of Licensed
Product. APOLLON agrees to forward to [ ] and [ ] a copy of any proposed
sublicense agreement for review and approval by [ ]. [ ]'s and [ ]'s
review shall be limited to determining consistency of any sublicense with the
terms of this license to APOLLON, and approval period shall be limited
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 8 of 16
to thirty (30) days from the date of receipt of each such proposed sublicense
agreement after which approval shall be considered given with no further
notice. In any event, such approval shall not be unreasonably withheld.
ARTICLE VI- PATENT MAINTENANCE AND REIMBURSEMENT
6.1 [ ] shall control and diligently prosecute and maintain Licensed
Patent Rights. [ ] shall consult with APOLLON in advance with respect to the
filing, prosecution, and maintenance of divisions, continuations, and
continuations-in-part of U.S. Patent No. [ ] and Canadian Patent
Application [ ].
6.2 With respect to any action taken by [ ] under paragraph 6.1 with
respect to Licensed Patent Rights and approved by APOLLON in advance, [ ] will
provide APOLLON with itemized statements reflecting patent filing, prosecution
and maintenance expenses, and APOLLON will promptly reimburse [ ] for a
proportion of the reasonable attorney's fees, expenses, official fees and other
charges which are incurred by [ ] on or after the Effective Date of this
Agreement.
6.3 The proportion of such patent filing, prosecution and maintenance
expenses payable by APOLLON under paragraph 6.2 hereof shall be based on a
fraction, A/B, where A is the number of claims of a patent or patent application
of Licensed Patent Rights which Licensed Product(s) made, used or sold by
APOLLON would infringe in the absence of this Agreement; and B is the total
number of claims in said patent or patent application. [FOR EXAMPLE, if [ ] is
prosecuting a patent application within Licensed Patent Rights having a total of
six claims (B = 6), and the making, using, or selling of a Polynucleotide
Vaccine in the Field comprising a [ ] would infringe three of said claims (A =
3), then A/B = 3/6 = 1/2, and APOLLON would pay [ ] one half of the costs and
expenses incurred by [ ] in accordance with paragraph 6.2.]
6.3.1 If [ ] licenses one or more of the claims of A, above, to
one or more third party(ies) for use outside the Field, then APOLLON's
obligation to reimburse [ ] for such patent filing, prosecution and maintenance
expenses will be further reduced in a pro rata manner.
ARTICLE VII - REPORTS, PAYMENTS AND ACCOUNTING
7.1 Within sixty (60) days following the close of each calendar quarter,
ending March 31, June 30, September 30 and December 31 each year during the term
of this Agreement, in which sales of Licensed Product are made under this
Agreement, APOLLON shall provide to [ ] and [ ] a written report setting
forth the total Net Sales
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 9 of 16
and the royalties due and payable to [ ] for such quarter and APOLLON shall
remit to [ ], for the benefit of [ ] and [ ], with such report the amount
of royalty payments shown thereby to be due. Royalties shall be payable from
the country in which they are earned and subject to foreign exchange rates then
prevailing in such country. Royalties shall be remitted in United States
dollars. For converting any royalty that accrued in another currency into
United States dollars, there shall be used the closing buying rates of exchange
published in the Wall Street Journal, or such alternate publication as is agreed
by the parties, as of the last business day of the calendar quarter in which the
royalties were earned.
7.2 APOLLON shall keep, and shall cause its Affiliates and Sublicensees to
keep, complete and accurate records for the latest three (3) years showing the
Net Sales of Licensed Product(s) made under this Agreement or any Sublicense.
Such records shall be in sufficient detail to enable the royalties payable
hereunder by APOLLON to be determined. APOLLON agrees to permit such books and
records to be examined but not more often than once in any calendar year. The
examination shall be by an independent certified public accountant designated by
[ ] and reasonably acceptable to and approved by APOLLON. Any such audit shall
be at the expense of [ ] and conducted during business hours of APOLLON and
upon reasonable notice to APOLLON. The purpose of any such audit shall solely
be for verifying the royalties payable as provided for in this Agreement and
said accountant shall only disclose Net Sales and royalties due to [ ] and [
] and payable thereon.
7.3 Any tax required to be withheld by APOLLON under the laws or
governmental regulations of any country for royalties payable to [ ] shall be
promptly paid by APOLLON for and on behalf of [ ] and [ ] to the
appropriate governmental authority. APOLLON shall furnish [ ] and [ ] with
proof of payment of such tax together with official or other appropriate
evidence issued by the appropriate government authority sufficient to enable [
] and [ ] to support a claim for any tax credit in respect of any tax so
paid.
7.4 [ ] and [ ] agree to keep any reports, information, or data
provided to [ ] and [ ] by APOLLON, its Affiliates, or Sublicensees under
this ARTICLE VII in strict
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 10 of 16
confidence and not to disclose the same to or permit access to any third party,
without the prior written permission of APOLLON, except as shall be required to
be disclosed in a judicial or administrative proceeding after legal remedies for
maintaining the confidentiality of such reports, information, or data have been
exhausted.
ARTICLE VIII - CONFIDENTIALITY
8.1 APOLLON and [ ] and [ ] each agree to maintain in confidence and
not to disclose to any third party, any confidential or proprietary information
or material(s) ("Confidential Information") of the other party received pursuant
to this Agreement, (i) in written or other tangible form and marked
"Proprietary" or "Confidential", or (ii) if disclosed orally or otherwise, but
not in tangible form, which is identified as confidential or proprietary at the
time of disclosure and which is documented in writing marked "Proprietary" or
"Confidential" to the other party within thirty (30) days of disclosure. The
foregoing obligations shall not apply to:
8.1.1 information that is known to the receiving party or
independently developed by the receiving party prior to the time of disclosure,
in each case, to the extent evidenced by written records promptly disclosed to
the furnishing party upon receipt of the Confidential Information;
8.1.2 information disclosed to the receiving party by a third
party that has a right to make such disclosure;
8.1.3 information that becomes patented, published or otherwise
part of the public domain as a result of acts by the furnishing party or a
third person obtaining such information as a matter of right; or
8.1.4 information that is required to be disclosed by order of the
FDA or similar authority or a court of competent jurisdiction or other
government authority or agency; provided that the parties shall use their best
efforts to obtain confidential treatment of such information by the agency,
authority, or court; or
8.1.5 information subsequently developed by or for the receiving
party independently of information received from the furnishing party.
8.2 Each party will take all reasonable steps to protect the Confidential
Information of the other party with the same degree of care used to protect its
own confidential or proprietary information. Without limiting the foregoing,
each party shall
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 11 of 16
ensure that all of its employees or agents having access to the Confidential
Information of the other party are obligated to abide by the receiving party's
obligations hereunder.
8.3 Nothing herein shall be construed to prevent the disclosure of
Confidential Information by Apollon or Sublicensee(s) as necessary to practice
commercially the rights granted hereunder including, without limitation, the
disclosure of Confidential Information to regulatory or other governmental
agencies as necessary to obtain marketing approval, or to obtain patent
protection, or the disclosure of Confidential Information under a
Confidentiality Agreement as appropriate to financing, development and
commercialization of products hereunder.
ARTICLE IX - TERM AND TERMINATION
9.1 This Agreement, unless terminated earlier as hereinafter provided,
shall terminate upon the expiration of the last patent of Licensed Patent
Rights, whereupon the licenses granted hereunder shall be irrevocable and fully
paid and APOLLON shall be free to make, have made, use, sell and have sold
Licensed Product(s) without further duties or responsibilities to [ ] and [
] except those described in paragraph 9.4.
9.2 APOLLON maintains the right to terminate this Agreement at any time
with sixty (60) days written notice to [ ] and [ ].
9.3 If any of the material terms or conditions of this Agreement are
breached and such breach is not corrected within sixty (60) days after written
notice thereof is given by a complaining party to the breaching party, then the
complaining party shall have the option to terminate this Agreement by giving
written notice thereof to the breaching party.
9.4 Regardless of the reason for the termination, the following rights and
obligations shall survive any termination of this Agreement:
9.4.1 APOLLON's obligation to supply any reports required under
paragraph 7.1 covering the time period through the date of termination.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 12 of 16
9.4.2 [ ]'s and [ ]'s right to receive and recover APOLLON's
obligation to pay royalties accrued or accruable for payment at the time of any
termination.
9.4.3 APOLLON's obligation to maintain records and [ ]'s right to
inspect those records as specified under paragraph 7.2.
9.4.4 Any cause of action or claim of [ ] and [ ], accrued or
to accrue, because of any breach or default by APOLLON.
9.4.5 Any cause of action or claim of APOLLON, accrued or to
accrue, because of any breach by [ ] and/or [ ].
9.4.6 APOLLON's obligation to indemnify [ ] and [ ].
9.4.7 Obligations of confidentiality of either party under Article
VIII hereof.
ARTICLE X - ASSIGNABILITY
10.1 Neither this Agreement nor any of the rights herein granted shall be
assignable or otherwise transferable by either party without the prior written
consent of the other party, except that this Agreement and the rights herein
granted to APOLLON may be assigned by APOLLON to an Affiliate at any time, or to
an entity to which APOLLON has sold or otherwise transferred all or
substantially all of the business to which this Agreement pertains and assignee
or Affiliate agrees to abide by the terms and conditions of this Agreement.
ARTICLE XI - NEGATION OF WARRANTIES AND INDEMNITY
11.1 Nothing in this Agreement shall be construed as a warranty or
representation by either party as to the validity of any patent licensed
hereunder. Neither party shall have any obligations with respect to the
abatement of infringement by third parties of patent rights licensed hereunder.
Further, nothing in this Agreement shall be construed as a warranty or
representation by either party that any product made, used, sold or imported
under any license granted under this Agreement is or will be free from
infringement of patents not licensed hereunder or patents of third parties.
11.2 Notwithstanding the foregoing, if at any time a third party shall
infringe any unexpired Licensed Patent Right in the Field licensed hereunder and
if such infringement shall come to the attention of [ ], [ ] or APOLLON,
that party shall give
notice in writing to the other party of the existence of such infringement, and
the parties
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 13 of 16
shall upon mutual consultation and agreement decide on an appropriate course of
action to take against the infringer in view of all of the circumstances then
existing.
11.2.1 Nevertheless, APOLLON, as the exclusive Licensee in the
Field, shall have the first right, after consultation with [ ] per paragraph
11.2, but not the obligation, to bring and prosecute such infringement, in its
own name or in the name of [ ] and [ ] where legally necessary, and at its
own expense, and [ ] and [ ] shall have no rights to any recovery under
such suit unless it shall, at its own expense, join the suit and prove its own
damages. The award or settlement in such litigation brought by APOLLON shall
first be used to pay the legal costs of such litigation. If APOLLON's recovery
exceeds its legal costs, APOLLON shall pay to the [ ] from the remaining
recovery an amount equal to the amount that would have been payable to the [ ]
as a royalty based on the provisions of paragraph 5.3 hereof if the infringing
sales had been made by APOLLON. Any recovered amount remaining after such
payment to the [ ] has been made in full shall be retained by APOLLON. In any
action to enforce any of the Licensed Patent Rights, either party at the request
and expense of the other, shall cooperate fully with the other; provided,
however, this provision shall not be construed to require a party to undertake
any activities, including legal discovery, at the request of any third party
except as may be required by lawful process of a court of competent
jurisdiction.
11.2.2 If APOLLON elects not to bring suit as provided in paragraph
11.2.1, [ ] and [ ] shall have the right, after consultation with APOLLON
per paragraph 11.2, but not the obligation, to prosecute such infringement at
its own expense. Financial recoveries from any such action will belong entirely
to [ ]. In any action to enforce any of the Licensed Patent Rights, either
party at the request and expense of the other, shall cooperate fully with the
other; provided, however, this provision shall not be construed to require a
party to undertake any activities, including legal discovery, at the request of
any third party except as may be required by lawful process of a court of
competent jurisdiction.
11.3 APOLLON shall defend, indemnify and hold [ ] and [ ] harmless
from and against all liability, demands, damages, expenses and losses, including
attorney's fees, for death, personal injury, illness or property damage arising
(a) out of the use by APOLLON of Licensed Patent Rights, or (b) out of the
function or malfunction of any Licensed Product manufactured and/or sold by
APOLLON. [ ] and [ ] shall promptly notify APOLLON of any claim or suit
covered by this paragraph, and if so requested, APOLLON shall defend such claim
or suit at the expense of APOLLON. As used in the preceding parts of this
paragraph, [ ] includes its Trustees, Officers, Agents and Employees.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 14 of 16
APOLLON shall provide proof of product liability insurance designating [ ] as a
party to be indemnified in accordance with the provisions of this Agreement.
APOLLON's obligation to defend, indemnify, and hold harmless hereunder shall not
apply to any liability, claim, damage, loss, cost or expense to the extent it is
attributable to the negligence or reckless or intentional misconduct of any
indemnified party hereunder.
ARTICLE XII- NOTICE
12.1 Any notice required under this Agreement shall be considered given
upon the earlier of when actually received at the address set forth below or
(ii) two business days after such notice, properly addressed and shipped
overnight service, is sent by either to the other. The proper addresses for
notice are as follows:
If to [ ]: If to APOLLON: If to [ ]:
[ ] Vincent R. Zurawski, Jr., Ph.D. [ ]
[ ] President and CEO
[ ] Apollon, Inc. [
]
[ ] One Great Valley Parkway [
]
[ ] Malvern, PA 19355-1423 [
]
Either party may change its official address upon written notice to the other
party.
ARTICLE XIII - GENERAL
13.1 APOLLON shall comply with all prevailing laws, rules and regulations
pertaining to the development, testing, manufacture, marketing, sale, use,
import or export of Licensed Products. It is understood that this Agreement may
be subject to United States laws and regulations controlling the export of
technical data, articles and information from the United States of America,
including Licensed Products or Licensed Know-how, which may be imposed from time
to time by the government of the United States of America. APOLLON will not
export, directly or indirectly, any such Licensed Products or Licensed Know-how
to any country for which such government or agency thereof requires an export
license or other governmental approval at the time of export without first
obtaining such license or approval.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 15 of 16
13.2 The failure of either party to insist at any time upon the strict
observance or performance of any of the provisions of this Agreement, or to
exercise any right or remedy as provided in this Agreement, shall not impair any
such right or remedy and shall not be construed to be a waiver or relinquishment
of such right or remedy. Furthermore, no waiver of any provision of this
Agreement by either party shall be construed as a waiver of any other provision
or as a waiver of the same provision at any subsequent time.
13.3 [ ] and [ ] and APOLLON agree that each party to this Agreement
is operating as an independent contractor and not as an agent of the other.
This Agreement shall not constitute a partnership or joint venture, and neither
party may be bound by the other to any contract, arrangement or understanding
except as specifically stated herein.
13.4 This Agreement constitutes the entire Agreement between the parties,
supersedes all written or oral prior agreements or understandings, and no
variation or other modification of this Agreement or waiver of any of its terms
or provisions shall be deemed valid unless in writing and signed by both
parties.
13.5 The captions and headings used in this Agreement are for convenience
and reference only and are not a part of this Agreement.
13.6 In the event any provision or provisions of this Agreement are
declared invalid, the remainder of this Agreement shall remain in full force and
effect as if the invalid provision or provisions had never been a part of the
Agreement.
13.7 APOLLON, [ ] or [ ] shall not use, expressly or by implication,
any trademark, trade name, or any contraction, abbreviation, simulation, or
adaptation thereof of the other party or its Affiliates, or the name of any of
the staff of the other party or its Affiliates in any news, publicity release,
policy recommendation, advertising, or any commercial communication without the
express written approval of the other party.
13.8 This Agreement shall be construed under and governed by the internal
laws of the State of [ ], except that matters involving the construction,
validity and enforceability of any patent shall be governed by and construed in
accordance with the laws of the country in which the patent has been granted.
<PAGE>
APOLLON/[ ]
LICENSE AGREEMENT
Page 16 of 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representation as of the date first set forth
above.
AGREED TO AND ACCEPTED BY
APOLLON, INC.:
By: /s/ Richard B. Ciccarelli
Name: Richard B. Ciccarelli
Title: Vice-President, R&D
Date: June 3, 1997
AGREED TO AND ACCEPTED BY
[ ]
[ ]:
By: [ ]
Name: [ ]
Title: Operations Manager
Date: June 20, 1997
AGREED TO AND ACCEPTED BY
[ ]
[ ]:
By: [ ]
Name: [ ]
Title: Executive Vice President
Date: July 9, 1997
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
Apollon, Inc. owns 100% of the issued and outstanding capital stock of
Apollon Delaware, Inc.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the registration statement on Form S-1 (File
No. 333- ) of our report, which includes an explanatory paragraph which
refers to conditions that raise substantial doubt about the Company's ability
to continue as a going concern, dated March 28, 1997, except as to the
information presented in Note 17, for which the date is September 29, 1997, on
our audits of the financial statements of Apollon, Inc. We also consent to
the references to our firm under the caption "Experts" and "Selected
Financial Data".
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
October 13, 1997
<PAGE>
Exhibit 23.3
[RATNER & PRESTIA LETTERHEAD]
October 9, 1997
Mr. James Murphy
Apollon, Inc.
One Great Valley Parkway
Malvern, PA 19355
Dear Jim,
This is to confirm that we hereby consent to the reference to our firm
in the "Expert" section of Apollon's proposed Registration Statement on Form
S-1, (a proof copy of which we received earlier today), which reference is
made in connection with the statement about certain patents of Vical in the
"Risk Factor-Patents and Proprietary Rights" section of that statement.
Very truly yours,
Ratner & Prestia
/s/ Paul Prestia
----------------
Paul Prestia
PFP/bgd
<PAGE>
[LETTERHEAD OF WOODCOCK WASHBURN
KURTZ MACKIEWICZ & NORRIS LLP]
October 13, 1997
Mr. James Murphy
Apollon, Inc.
One Great Valley Parkway, Ste. 30
Malvern, PA 19355
Dear Jim:
Pursuant to our telephone conversation this afternoon, we consent to
your including, under the "Legal Matters" section of Apollon's Registration
Statement, a statement that certain legal matters with respect to patent
matters are passed upon for Apollon by our firm.
Sincerely,
/s/ Dianne B. Elderkin
-----------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF APOLLON, INC. FOR THE YEAR ENDED DECEMBER 31, 1996 AND
THE SIX-MONTH PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 9,132 3,832
<SECURITIES> 588 170
<RECEIVABLES> 172 116
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,035 4,284
<PP&E> 4,661 4,779
<DEPRECIATION> 2,321 2,781
<TOTAL-ASSETS> 13,601 7,155
<CURRENT-LIABILITIES> 1,650 1,668
<BONDS> 0 0
29,290 30,101
0 0
<COMMON> 6 6
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 13,601 7,155
<SALES> 0 0
<TOTAL-REVENUES> 8,248 161
<CGS> 0 0
<TOTAL-COSTS> 10,360 6,759
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 123 15
<INCOME-PRETAX> (1,861) (6,412)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (1,861) (6,412)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,861) (6,412)
<EPS-PRIMARY> (.33) (1.13)
<EPS-DILUTED> (.33) (1.13)
</TABLE>
