<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 20, 1996
REGISTRATION NO. 333-07645
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IMMUSOL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 2834 33-0502473
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
3050 SCIENCE PARK ROAD
SAN DIEGO, CALIFORNIA 92121
(619) 677-0182
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
TSVI GOLDENBERG, PH.D.
CHIEF EXECUTIVE OFFICER
IMMUSOL, INC.
3050 SCIENCE PARK ROAD, 2ND FLOOR
SAN DIEGO, CALIFORNIA 92121
(619) 677-0182
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
WITH COPIES TO:
<TABLE>
<S> <C>
CRAIG S. ANDREWS, ESQ. WILLIAM H. HINMAN, JR., ESQ.
FAYE H. RUSSELL, ESQ. SHEARMAN & STERLING
MARTIN C. NICHOLS, ESQ. 555 CALIFORNIA STREET
BROBECK, PHLEGER & HARRISON LLP SAN FRANCISCO, CALIFORNIA 94101-1522
550 WEST "C" STREET, SUITE 1300 (415) 616-1100
SAN DIEGO, CALIFORNIA 92101
(619) 234-1966
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be 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 the prospectus is expected to be made pursuant to Rule 434,
please check the following box: /X/
------------------------
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 THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
IMMUSOL, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(b) OF REGULATION S-K SHOWING LOCATION
IN PROSPECTUS OF INFORMATION REQUIRED BY ITEMS OF FORM S-1
<TABLE>
<CAPTION>
ITEM NUMBER AND HEADING IN
FORM S-1 REGISTRATION STATEMENT CAPTION IN PROSPECTUS
--------------------------------------------- -------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and
Outside Front Cover Page of Prospectus..... Facing Page; Cross Reference Sheet; Outside
Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus................................. Inside Front and Outside Back Cover Pages
of Prospectus; Additional Information
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges............... Prospectus Summary; Risk Factors
4. Use of Proceeds.............................. Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.............. Underwriting
6. Dilution..................................... Dilution
7. Selling Security Holders..................... Inapplicable
8. Plan of Distribution......................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to Be Registered... Outside Front Cover Page of Prospectus;
Description of Capital Stock
10. Interests of Named Experts and Counsel....... Inapplicable
11. Information with Respect to the Registrant... Outside Front Cover Page of Prospectus;
Prospectus Summary; Risk Factors;
Dividend Policy; Capitalization; Selected
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions;
Principal Shareholders; Description of
Capital Stock; Shares Eligible for Future
Sale; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities................................ Inapplicable
</TABLE>
<PAGE> 3
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 AN 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.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 20, 1996
3,000,000 SHARES
LOGO IMMUSOL
COMMON STOCK
------------------------
All the shares of Common Stock offered hereby are being sold by Immusol,
Inc. Prior to this Offering, there has been no public market for the Common
Stock. It is currently estimated that the initial public offering price will be
between $9.00 and $11.00 per share. See "Underwriting."
Application has been made to have the Common Stock approved for quotation
on the Nasdaq National Market under the symbol IMSL.
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" AT PAGE 5.
------------------------
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.
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<TABLE>
<CAPTION>
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Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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<S> <C> <C> <C>
Per Share..................... $ $ $
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Total......................... $ $ $
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Total Assuming Full Exercise
of Over-Allotment
Option(3)................... $ $ $
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</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $600,000, which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Company to the
Underwriters to purchase up to 450,000 additional shares, on the same terms,
solely to cover over-allotments. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
the delivery of the Common Stock will be made in New York City on or about
, 1996.
------------------------
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS IS , 1996.
<PAGE> 4
[DRAWING DESCRIBING IMMUSOL'S APPROACH TO USE VIRAL VECTORS (IN A VIAL) TO
DELIVER THERAPEUTIC RIBOZYME GENES BY INJECTION INTO THE PATIENT.]
Immusol HIVase has been tested only in preclinical studies for the
treatment of HIV-infected individuals.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
The Company intends to furnish to its shareholders annual reports
containing audited financial statements certified by an independent public
accounting firm and quarterly reports containing unaudited interim financial
information for the first three quarters of each year.
HIVase I(TM) is a trademark of the Company. This Prospectus also includes
names and trademarks of companies other than the Company.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus has been adjusted to reflect the conversion into one share of
Common Stock of each share of the Company's outstanding preferred stock (the
"Preferred Stock") and assumes no exercise of the Underwriters' over-allotment
option and no purchase of shares by Pfizer Inc. in connection with the Offering.
The shares of Common Stock offered hereby involve a high degree of risk. See
"Risk Factors" and "Business -- Strategic Alliances and Licenses -- Pfizer Inc."
THE COMPANY
Immusol, Inc. ("Immusol" or the "Company") is a biopharmaceutical company
dedicated to the discovery, development and commercialization of products based
on proprietary technologies in the areas of ribozyme gene therapy and
ribozyme-mediated gene functional analysis. Ribozymes are naturally occurring
ribonucleic acid ("RNA") molecules that can be engineered to cleave and
inactivate other RNA molecules in a specific, sequence-dependent fashion. Thus,
ribozymes can be designed to selectively inactivate RNA molecules and their
corresponding proteins that play a role in human disease. The Company intends to
initiate a Phase I clinical trial with its lead compound, HIVase I(TM), in 1996.
HIVase I is being developed through a collaboration with Pfizer Inc. ("Pfizer")
for the treatment of HIV-infected individuals. In addition, the Company has
three other ribozyme gene therapy programs in various stages of research and
preclinical development for the prevention of coronary restenosis and the
treatment of hepatitis C and hepatitis B viral infections.
Ribozyme therapies can be based on (i) ribozyme gene therapy which involves
inserting specific sequences that lead to the production of ribozymes within the
patient's cells or (ii) synthetic, chemically-modified ribozymes administered as
drugs. The gene therapy approach to ribozyme therapy utilizes the patient's own
cellular machinery to produce a constant and continuous supply of ribozymes
inside the cell where the disease-causing gene is produced. The Company has
utilized a number of different viral vectors (gene delivery vehicles), including
retroviral, adeno-associated viral ("AAV") and adenoviral vectors, to provide
optimal periods of in vivo production of ribozymes. The Company believes that
ribozyme gene therapy is a new, versatile modality which will be applicable in
the treatment of a wide range of viral diseases, coronary disease, genetic
diseases, cancers and other medical conditions.
The Company believes its ribozyme gene therapy technology will have certain
advantages over conventional drug development, including: (i) the high
specificity of ribozymes can be used to inactivate certain undesirable target
genes whose sequences are known; (ii) ribozymes can have application to a broad
spectrum of human diseases; (iii) ribozymes can be highly potent due to their
natural catalytic activity by which one ribozyme can inactivate many target
molecules; and (iv) ribozymes can result in fewer side effects due to their high
degree of target specificity. The Company believes its ribozyme gene therapy
technology has several advantages over synthetic ribozymes, including: (i)
efficient intracellular delivery and potential lack of immune response; (ii)
providing a constant and continuous supply of ribozymes inside the cell; and
(iii) the ability to deliver multiple ribozymes on one vector.
In May 1995, the Company and Pfizer entered into a research collaboration
for the discovery and development of products for ribozyme-based gene therapy
useful in treating or preventing HIV infection. In preclinical studies to date,
the Company has demonstrated potent activity of its multi-ribozyme gene therapy
against all strains of HIV known to the Company isolated from HIV-infected
individuals. In addition, the Company has found no evidence of
ribozyme-resistant mutants of HIV to date. The Company intends to initiate a
Phase I clinical trial with its first generation compound, HIVase I, in 1996 in
HIV-infected individuals.
Immusol believes that its ribozyme technology can be useful in drug
discovery in conjunction with gene sequence knowledge to characterize the
function of recently discovered genes that may be suitable therapeutic targets.
Since ribozymes can be designed to act on specific target genetic sequences,
ribozymes may be useful to identify the function of these sequences. As a
result, the Company believes its ribozyme technology can provide an important
link between gene dysfunction and disease.
The Company was incorporated in the State of California in March 1992. The
Company's principal executive offices are located at 3050 Science Park Road, San
Diego, California 92121, and its telephone number is (619) 677-0182.
3
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered by the Company................... 3,000,000 shares
Common Stock to be Outstanding after this
Offering(1)......................................... 13,024,477 shares
Use of Proceeds....................................... To fund research and development and
for working capital and general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol................ IMSL
</TABLE>
- ---------------
(1) Does not include (i) 2,002,500 shares of Common Stock issuable upon exercise
of options outstanding at a weighted average exercise price of $0.10 per
share pursuant to the Company's stock option plans at June 30, 1996 and (ii)
1,354 shares of Common Stock issued upon exercise of options subsequent to
June 30, 1996 and 11,500 shares of Common Stock issuable upon exercise of
options granted subsequent to June 30, 1996. See "Capitalization,"
"Management -- Benefit Plans," "Certain Transactions" and "Shares Eligible
for Future Sale."
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue................. $ -- $ 204,475 $3,174,515 $ 621,937 $2,941,489
Costs and expenses:
Research and development.... 157,101 492,513 2,831,860 1,246,189 1,982,939
General and
administrative........... 47,948 127,360 487,234 238,491 396,571
--------- --------- ---------- --------- ----------
Total costs and
expenses............... 205,049 619,873 3,319,094 1,484,680 2,379,510
Income (loss) from
operations.................. (205,049) (415,398) (144,579) (862,743) 561,979
Interest income............... 50,743 57,798 275,564 99,230 200,795
Interest expense.............. -- -- (5,343) (2,326) (3,386)
--------- --------- ---------- --------- ----------
Net income (loss)............. $(154,306) $(357,600) $ 125,642 $(765,839) 759,388
========= ========= ========== ========= ==========
Pro forma net income (loss)
per share(1)................ $ (0.02) $ (0.05) $ 0.01 $ (0.10) $ 0.06
========= ========= ========== ========= ==========
Shares used in computing pro
forma net income (loss) per
share(1).................... 7,342,653 7,471,420 11,830,427 7,479,860 12,404,535
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
-----------------------------
ACTUAL AS ADJUSTED(2)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................. $7,684,784 $ 34,984,784
Working capital................................................... 6,724,715 34,024,715
Total assets...................................................... 8,439,891 35,739,891
Long-term liabilities, less current portion....................... 185,047 185,047
Accumulated deficit............................................... (12,105) (12,105)
Total shareholders' equity........................................ 7,154,642 34,454,642
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of pro forma net income (loss) per share and shares used in
computing pro forma net income (loss) per share.
(2) As adjusted to reflect the sale of the Common Stock offered hereby and the
application of the net proceeds of this Offering, based on an assumed public
offering price of $10.00 per share (the midpoint of the range set forth on
the cover page of this Prospectus). See "Use of Proceeds."
4
<PAGE> 7
RISK FACTORS
An investment in the shares being offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus,
before purchasing the shares of Common Stock offered hereby. This Prospectus
contains forward-looking statements that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in the following risk factors and in "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business," as well as those discussed elsewhere in this Prospectus.
EARLY STAGE OF DEVELOPMENT; NO COMMERCIAL PRODUCTS; NO ASSURANCE OF SUCCESSFUL
PRODUCT DEVELOPMENT
Immusol's programs are at an early stage of development and, to date, none
of the Company's potential products has been the subject of any human clinical
testing. Since the Company's inception in 1992, substantially all of the
Company's resources have been dedicated to the research and development of
potential products based on ribozyme technology, and no revenues have been
generated from product sales. Products, if any, resulting from the Company's
research and development efforts are not expected to be commercially available
for a number of years. There can be no assurance that any of the Company's
potential products will prove safe and effective in clinical trials, meet
applicable regulatory standards, be capable of being produced in commercial
quantities at acceptable cost or be successfully commercialized. In addition,
there can be no assurance that preclinical or clinical testing will accurately
predict safety or efficacy in broader human use, or that delays in the
regulatory approval process will not delay commercialization of any potential
product. Even if any of the Company's products proves to be safe and effective
and is approved for marketing by the United States Food and Drug Administration
("FDA") and other regulatory authorities, there can be no assurance that health
care providers, payors and patients will accept such product. Any failure by the
Company to achieve technical feasibility, demonstrate safety and efficacy,
obtain regulatory approval or, either alone or together with any collaborator,
successfully market products would have a material adverse effect on the
Company. See "Government Regulation; Uncertainty of Obtaining Regulatory
Approval" and "Business -- Government Regulation."
TECHNOLOGICAL UNCERTAINTY; RISKS ASSOCIATED WITH RIBOZYME GENE THERAPY; RISKS
ASSOCIATED WITH THE USE OF VIRAL VECTORS; NO RIBOZYME PRODUCTS IN CLINICAL
TRIALS
Drug discovery and development based upon ribozymes is relatively new, and
there can be no assurance that this approach will lead to the discovery or
development of commercial pharmaceutical products, that the Company will be able
to employ these methods of drug development successfully or that ribozyme
products will be deliverable, safe or efficacious in humans. While the Company
has demonstrated the utility of ribozyme technology in in vitro model systems
and in preclinical models, no ribozyme-based compound has been tested in humans.
As a result, it is unclear as to whether the FDA will apply the same standards
for the review of ribozyme gene therapy products that it applies to traditional
therapeutics. There can be no assurance that any of the Company's potential
products will enter clinical trials. A significant amount of additional research
and development, requiring many years and substantial resources, will be
required to determine the potential of the Company's ribozyme technology for
therapeutic products. The Company's technology may, during the course of further
research, prove to be ineffective in the treatment of human disease or in other
areas. The Company must conduct significant additional research and development
on determining safe and effective methods of delivering ribozymes into the human
body for each indication for the Company's potential therapeutic products and
must overcome a number of other technological challenges, such as enhancing the
activity and stability of ribozymes and manufacturing ribozyme-based therapeutic
products on a commercial scale.
A significant amount of additional research and development is required to
determine whether ribozymes can be delivered systemically, including research
and development directed toward improving the delivery of ribozymes to specific
tissues and improving cellular uptake. There can be no assurance that effective
systemic delivery of ribozyme-based products can be achieved.
5
<PAGE> 8
Safety concerns have been raised by the use of retroviral and adenoviral
vectors since both are derived from pathogenic viruses. During the manufacture
of these vectors, there is a possibility of generating a small amount of natural
virus. Although considered a low risk, such a possibility necessitates
additional costly product testing. In addition, the Company's use of vector
delivery of ribozymes will require that the Company overcome concerns relating
to mutagenicity (permanent DNA alteration) or inflammatory responses. Retroviral
vectors randomly integrate genetic material into the target cell and AAV vectors
may do the same. Any gene therapy approach that involves the random integration
of genetic material into the target cell's DNA could, theoretically, cause the
activation of an undesirable gene or the inactivation of a beneficial gene,
although it is generally believed that such events would be rare.
Many of the technological and developmental challenges associated with
ribozyme gene therapy may be significantly greater than those typically
associated with traditional drug development, and may never be overcome. There
can be no assurance that even if the Company's potential products are found to
be safe and effective, or otherwise have utility, the Company will be able to
manufacture them on a commercial scale or market them in an economical way.
Further, it is possible that the proprietary rights of third parties will
preclude the Company or its collaborative partners from marketing products or
that third parties will market superior or equivalent products. As a result,
there can be no assurance that the Company's research and development activities
will result in any commercially viable products.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company incurred an accumulated deficit of $12,000 through June 30,
1996. The Company anticipates that it will incur substantial and increasing
losses over at least the next several years as the Company's research and
development efforts, preclinical and clinical testing activities and
manufacturing scale-up efforts expand. All of the Company's revenues to date
have consisted of contract revenues, grant revenues and interest income. No
revenues have been generated from product sales. There can be no assurance that
the Company can generate sufficient product or contract revenue to achieve
sustained profitability. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The development and commercialization of the Company's products will
require substantial funds to conduct research and development and preclinical
and clinical testing of products and to manufacture and commercialize any
products that are approved for commercial sale. The Company's future capital
requirements will depend on many factors, including the scope and results of
preclinical testing and clinical trials, the time and costs involved in
obtaining regulatory approvals, the costs involved in preparing, filing,
prosecuting, maintaining and enforcing patent claims, competing technological
and market developments, changes in existing collaborative research
relationships, the ability of the Company to establish additional collaborative
arrangements, the cost of manufacturing scale-up and effective commercialization
activities and arrangements, continued scientific progress in its research and
development programs and the magnitude of such programs.
The Company anticipates that its existing available cash, cash equivalents
and short-term investments, combined with the anticipated proceeds of this
Offering, its committed future contract revenue and interest income, will be
adequate to satisfy its capital requirements and fund anticipated operating
losses through 1999. There can be no assurance that the underlying assumed
levels of revenue and expense will prove to be accurate. The Company will need
to raise substantial additional capital to fund its operations. The Company
intends to seek additional funding through collaborative arrangements, contract
research or through public or private financings. There can be no assurance that
additional financing will be available on acceptable terms, or at all. If
additional funds are raised by issuing equity securities, further dilution to
then existing shareholders could result. If adequate funds are not available,
the Company could be required to delay, scale back or eliminate one or more of
its research and development programs or obtain funds through arrangements with
collaborative partners or others that could require the Company to relinquish
certain rights to certain of its technologies or products that the Company would
not otherwise relinquish. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
6
<PAGE> 9
UNCERTAINTY OF PRODUCT DEVELOPMENT
Before obtaining regulatory approval for the commercial sale of any of its
potential products, the Company must demonstrate, through preclinical studies
and clinical trials, that a potential product is safe and efficacious for use in
each target indication. The Company has not commenced clinical testing of any
products for safety or efficacy in humans. There can be no assurance that
results generated by preclinical animal testing will be indicative of results of
clinical testing in humans when, and if, those tests are conducted. There can be
no assurance that the Company will be permitted to undertake human clinical
testing of any of the Company's potential products, or, if permitted, that such
potential products will be demonstrated to be safe and efficacious or will
receive necessary regulatory approvals.
The Company may also experience delays in the clinical trial process due to
a variety of factors, including preclinical study results, delays or
difficulties in patient enrollment, delays in regulatory approvals and other
factors. The Company's potential products may prove to have undesirable and
unintended side effects or other characteristics that may prevent or limit their
commercial use. In addition, there can be no assurance that any of the Company's
potential products will ultimately obtain FDA, other regulatory or foreign
marketing approval for any indication, that an approved product will be capable
of being produced in commercial quantities at reasonable cost or that any
approved product will achieve market acceptance. The Company will also be
dependent on the efforts of others to advance the development of certain of its
products. See "Dependence Upon Collaborators."
GOVERNMENT REGULATION; UNCERTAINTY OF OBTAINING REGULATORY APPROVAL
The FDA and comparable agencies in foreign countries impose substantial
requirements on biotechnology and pharmaceutical companies prior to the
introduction of therapeutic products. These requirements include lengthy and
detailed laboratory and clinical testing procedures, sampling activities and
other costly and time-consuming procedures. Satisfaction of these requirements
typically takes a number of years and varies substantially based on the type,
complexity and novelty of the pharmaceutical. The Company cannot accurately
predict when it might submit product applications or submissions for FDA or
other regulatory review. Governmental regulation also affects the manufacture
and marketing of pharmaceutical products.
Any future FDA or other governmental approval of products developed by the
Company may entail limitations on the indicated uses for which such products may
be marketed. Approved products may be subject to additional testing and
surveillance programs as required by regulatory agencies. In addition, product
approvals may be withdrawn or limited for noncompliance with regulatory
standards or the occurrence of unforeseen problems following initial marketing.
In the event that the Company were to manufacture therapeutic products for
commercial sale, it would be required to adhere to applicable standards for
manufacturing practices and to engage in extensive record keeping and reporting,
and its manufacturing facilities would be subject to periodic inspections by
state and federal agencies, including the FDA and comparable agencies in foreign
countries. See "Business -- Governmental Regulation."
The effect of governmental regulation may be to delay marketing new
products for a considerable period of time, to impose costly requirements on the
Company's activities or to provide a competitive advantage to other companies
that compete with the Company. There can be no assurance that FDA or other
regulatory approval for any products developed by the Company will be granted on
a timely basis, if at all. Adverse clinical results by others could have a
negative impact on the regulatory process and timing. A delay in obtaining or
failure to obtain regulatory approvals could adversely affect the marketing of
the Company's products and the Company's liquidity and capital resources. The
extent of potentially adverse governmental regulation that might arise from
future legislation or administrative action cannot be predicted.
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 its research
work. The extent and character of governmental regulation that might result from
future legislation or administrative action cannot be accurately predicted.
7
<PAGE> 10
DEPENDENCE ON COLLABORATORS
The Company does not currently possess the resources necessary to develop,
complete the FDA approval process for and commercialize any of its potential
therapeutic products. The Company intends to enter into collaborative
arrangements with other companies to fund research, development and clinical
trials, to assist in obtaining regulatory approvals in the United States and
internationally and to commercialize certain of its products. While the Company
has entered into a collaboration with Pfizer, there can be no assurance that the
Company will be able to enter into additional collaborations to develop
commercial applications of its ribozyme technology. In addition, there can be no
assurance that the Company will be able to enter into or maintain existing or
future collaborations or that such collaborations will be successful. The
failure to enter into or maintain existing or future collaborations would have a
material adverse effect on the Company.
The Company's collaborators may pursue parallel development of other
products or technologies that may compete with the Company's ribozyme
technology. Continued collaborator participation will depend not only on the
achievement of research objectives by the Company and its collaborators, which
cannot be assured, but also on each collaborator's own financial, competitive,
marketing and strategic considerations, which are outside the Company's control.
Such strategic considerations may include the relative advantages of alternative
products being marketed or developed by others, including relevant patent and
proprietary positions. There can be no assurance that the interests and
motivations of the Company's collaborators are, or will remain, aligned with
those of the Company or that such collaborators will successfully perform their
development, regulatory compliance, manufacturing or marketing functions or that
current or future collaborations will continue. Any parallel development by a
collaborator of alternate technologies, preclusion from entering into
competitive arrangements, failure to obtain timely regulatory approvals,
premature termination of a collaborative agreement or failure by a collaborator
to devote sufficient resources to the development and commercialization of the
Company's products could have a material adverse effect on the Company. In
addition, definitive agreements negotiated with such collaborators may provide
that these collaborators may terminate the collaboration at any time without
significant penalty. Further, the failure of the Company to attract and retain
qualified personnel, consultants and advisers could negatively impact the
Company's relationships with such collaborators. Pfizer has the ability to
terminate the collaboration at certain intervals and with advance notice.
Termination of the collaboration with Pfizer would have a material adverse
effect on the Company. See "Business -- Strategic Alliances and Licenses."
RAPID TECHNOLOGICAL CHANGE
Immusol is engaged in a field characterized by extensive research efforts
and rapid technological change. Other products and therapies that may compete
directly with the products that the Company is seeking to develop currently
exist or are being developed. Many other companies are actively seeking to
develop products, including ribozymes and other products designed to modulate
gene expression, such as antisense oligonucleotides, that have disease targets
similar to those being pursued by the Company. Some of these competitive
products are in clinical trials. There can be no assurance that the Company's
competitors will not succeed in developing products based on ribozyme or other
technologies, existing or new, that are more effective than any that are being
developed by the Company or that would render the Company's ribozyme
technologies obsolete and noncompetitive.
HIGHLY COMPETITIVE FIELD
The Company is engaged in a highly competitive field. There currently are
commercially available products for the treatment of certain disease targets
being pursued by the Company, including reverse transcriptase inhibitors and
protease inhibitors for the treatment of HIV and Intron(R)A for both hepatitis B
and hepatitis C. ReoPro(R) and coronary stents are being evaluated for the
prevention of coronary restenosis.
Competition from pharmaceutical and biotechnology companies is intense and
is expected to increase. Most of these companies have significantly greater
financial resources and expertise in research and development, manufacturing,
preclinical studies and clinical trials, obtaining regulatory approvals and
marketing than the Company. Smaller companies may also prove to be significant
competitors, particularly
8
<PAGE> 11
through collaborative arrangements with large pharmaceutical and biotechnology
companies. Many of these competitors have products that have been approved or
are in development and operate large, well funded research and development
programs. Academic institutions, governmental agencies and other public and
private research organizations also conduct research, seek patent protection and
establish collaborative arrangements for products and clinical development and
marketing. These companies and institutions compete with the Company in
recruiting and retaining highly qualified scientific and management personnel.
In addition to the above factors, Immusol faces competition based on product
efficacy, safety, timing and scope of regulatory approvals, availability of
supply, marketing and sales capability, reimbursement coverage, price and patent
position. There can be no assurance that the Company's competitors will not
develop more effective or more affordable products, achieve earlier product
commercialization or have, or will achieve, a patent position superior to that
of the Company. See "Business -- Competition."
LIMITED CLINICAL TESTING, REGULATORY, MANUFACTURING AND SALES CAPABILITIES
Because of the relatively early stage of the Company's research and
development programs, the Company has not yet invested significantly in
clinical, regulatory, manufacturing, marketing, distribution or product sales
resources. The Company currently has only limited in-house clinical and
regulatory capabilities. Although the Company intends to develop clinical,
regulatory, manufacturing and other resources in the future, there can be no
assurance that the Company will be able to develop such resources successfully.
See "Business -- Manufacturing" and "Business -- Human Resources."
PATENTS AND PROPRIETARY TECHNOLOGY; RELIANCE UPON LICENSES
Immusol relies on a combination of technical leadership, patents, trade
secrets and nondisclosure agreements to protect its proprietary rights. There
can be no assurance that the Company will be issued any patents or that, if any
patents are issued, they will provide the Company with significant protection or
will not be challenged. Even if such patents are enforceable, the Company
anticipates that any attempt to enforce its patents would be time consuming and
costly. Moreover, the laws of some foreign countries do not protect the
Company's proprietary rights in the products to the same extent as do the laws
of the United States. The United States Patent and Trademark Office ("PTO") has
instituted changes to the United States patent law including changing the term
to 20 years from the date of filing for applications filed after June 8, 1995.
Certain of the patent applications under which the Company is developing its
products were filed after June 8, 1995. The Company cannot predict the effect
that such changes on the patent laws may have on its business, or on the
Company's ability to protect its proprietary information and sustain the
commercial viability of its products.
The patent positions of pharmaceutical, biotechnology and gene therapy
companies, including Immusol, can be uncertain and involve complex legal and
factual issues. Additionally, the coverage claimed in a patent application can
be significantly reduced before the patent is issued. As a consequence, there
can be no assurance that any of the Company's patent applications will result in
the issuance of patents or, if any patents issue, that they will provide
significant proprietary protection or will not be circumvented or invalidated.
Because patent applications in the United States are maintained in secrecy until
patents issue and publication of discoveries in the scientific or patent
literature often lag behind actual discoveries, the Company cannot be certain
that it was the first inventor of inventions covered by its pending patent
applications or that it was the first to file patent applications for such
inventions. Moreover, the Company may have to participate in interference
proceedings declared by the PTO to determine priority of invention that could
result in substantial cost to the Company, even if the eventual outcome is
favorable to the Company. There can be no assurance that the Company's patents,
if issued, would be held valid by a court of competent jurisdiction. An adverse
outcome could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from or to third parties or require the
Company to cease using the technology in dispute.
Specifically, the Company is aware of issued patents and patent
applications in the area of ribozymes which may affect the Company's ability to
make, use and sell its products. In particular, the Company is aware of a series
of patents that purport to cover the production and use of enzymatic RNA.
Immusol has investigated the breadth and validity of these patents to determine
their impact upon the Company's product
9
<PAGE> 12
development programs. Based on its review of these patents and advice of outside
patent counsel, the Company believes its technology does not infringe any valid
claims of such patents and that these patents will not impede the advancement of
the Company's programs. There can be no assurance that third parties will not
assert infringement claims against the Company in the future with respect to
these patents or otherwise, or that any such assertions will not result in
costly litigation or require the Company to obtain a license to intellectual
property rights of such parties. There can be no assurance that any such
licenses would be available on terms acceptable to the Company, if at all.
Furthermore, parties making such claims may be able to obtain injunctive or
other equitable relief that could effectively block the Company's ability to
further develop or commercialize its products in the United States and abroad
and could result in the award of substantial damages. Defense of any lawsuit or
failure to obtain any such license could have a material adverse affect on the
Company. Finally, litigation, regardless of outcome, could result in substantial
cost to and a diversion of efforts by the Company.
In December 1993, the Company entered into an Exclusive License Agreement
with the Regents of the University of California ("The Regents"), pursuant to
which The Regents exclusively licensed rights to certain intellectual property
relating to the use of ribozyme technology in HIV and AIDS, including the
corresponding patents and patent applications for such property (the "UC
Technology"). As consideration for the exclusive license of the UC Technology,
Immusol will pay The Regents an earned royalty on net sales by Immusol of
products incorporating the UC Technology and prior to sales of such products
will pay a license maintenance fee. In addition, beginning the year of the first
commercial sale of a FDA approved product, Immusol will pay The Regents a
minimum annual royalty. The Regents retain the right to terminate the agreement
or to reduce the exclusive license to a nonexclusive license in the event that
the Company does not satisfy certain milestone obligations and minimum research
and development funding levels. Additional termination events include an uncured
breach of the agreement by Immusol. The termination of the Exclusive License
Agreement or the conversion of its exclusivity to a nonexclusive agreement would
have a material adverse effect on the Company.
As part of its confidentiality procedures, the Company generally enters
into nondisclosure agreements with its employees and suppliers, and limits
access to and distribution of its proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's technology without authorization. Accordingly, there can
be no assurance that the Company will be successful in protecting its
proprietary technology or that Immusol's proprietary rights will preclude
competitors from developing products or technology equivalent or superior to
that of the Company.
The Company may require additional technology to which the Company
currently does not have rights. If the Company determines that this additional
technology is relevant to the development of future products and further
determines that a license to this additional technology is needed, there can be
no assurance that the Company can obtain a license from the relevant party or
parties on commercially reasonable terms, if at all. There can be no assurance
that the Company can obtain any license to any technology that the Company
determines it needs, on reasonable terms, if at all, or that the Immusol could
develop or otherwise obtain alternate technology. The failure of the Company to
obtain licenses, if needed, would have a material adverse affect on the Company.
See "Business -- Patents and Proprietary Rights."
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on its corporate officers and principal
members of its scientific and management staff, the loss of any of whose
services might have an adverse impact on the Company. In addition, the Company
relies on consultants and advisors, including the members of its Scientific
Advisory Board, to assist the Company in its research and development efforts.
Since May 1995, the Company has employed a consultant as acting chief financial
officer. The Company is actively seeking to hire a permanent chief financial
officer and intends to make such hire as soon as practicable after the Offering.
Retaining and attracting qualified personnel, consultants and advisors is
critical to the Company's success. In order to pursue its product development
and marketing plans, the Company may be required to hire additional qualified
scientific personnel to perform research and development, as well as personnel
with expertise in clinical testing, regulatory affairs, manufacturing and
marketing. These requirements are also expected to demand the
10
<PAGE> 13
addition of management personnel and the development of additional expertise by
existing management personnel. Competition for qualified individuals is intense
and the Company faces competition for qualified people 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, and the failure to
do so could have a material adverse effect on the Company, including its ability
to conclude collaborations with additional corporate partners. See "Management."
PRODUCT LIABILITY; LIMITED INSURANCE
The design, development and manufacture of therapeutic products involve an
inherent risk of product liability claims and associated adverse publicity. The
Company has arranged for clinical trial product liability insurance for its
anticipated Phase I human clinical trial and intends to obtain insurance for
future clinical trials of other products under development and for potential
product liability associated with the manufacture and commercial sale of the
Company's products. There can be no assurance, however, that the Company will be
able to obtain or maintain insurance for any of its clinical trials or
commercial products. Although the Company currently maintains general liability
insurance, there can be no assurance that the coverage limits of the Company's
insurance policies will be adequate. Such insurance is expensive, difficult to
obtain and may not be available in the future on acceptable terms or at all. A
successful claim brought against the Company in excess of the Company's
insurance coverage would have a material adverse effect on the Company.
HAZARDOUS MATERIALS
The Company's research and development involves the controlled use of
hazardous materials, chemicals and various radioactive compounds. Although the
Company believes that its safety procedures for handling and disposing of such
materials comply with the standards prescribed by state and federal 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 incur substantial cost to comply with
environmental regulations.
UNCERTAIN AVAILABILITY OF THIRD-PARTY REIMBURSEMENT AND PRODUCT PRICING
The Company's ability to commercialize products successfully will depend
substantially on reimbursement of the costs of such products and related
treatments at acceptable levels from government authorities, private health
insurers and other organizations, such as health maintenance organizations
("HMOs"). There can be no assurance that reimbursement in the United States or
foreign countries will be available for any products the Company may develop or,
if available, will not be decreased in the future, or that reimbursement amounts
will not reduce the demand for, or the price of, the Company's products, thereby
adversely affecting its business.
Third-party payors are increasingly challenging the prices charged for
medical products and services. Also, the trend toward managed healthcare in the
United States and the concurrent growth of organizations, such as HMOs, which
can control or significantly influence the purchase of health care products and
services, as well as legislative proposals to reform healthcare or reduce
government insurance programs, may result in lower prices for therapeutic
products. The cost-containment measures that healthcare providers are
instituting, including practice protocols and guidelines and clinical pathways,
and the effect of any healthcare reform could materially adversely affect the
Company's ability to sell products if successfully developed and approved.
Moreover, the Company is unable to predict what additional legislation or
regulation, if any, relating to the healthcare industry or third-party coverage
and reimbursement may be enacted in the future or what effect such legislation
or regulation would have on the Company's business.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of the Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock. Upon completion of this Offering, the
11
<PAGE> 14
Company will have outstanding 13,024,477 shares of Common Stock (without taking
into account shares of Common Stock issuable upon exercise of outstanding
options). As of June 30, 1996, 2,002,500 shares of Common Stock are subject to
outstanding options and 473,500 additional shares are reserved for issuance
under the Company's stock option plans. See "Management -- Benefit Plans."
The 3,000,000 shares of Common Stock sold in this Offering will be freely
tradeable without restrictions under the Securities Act of 1933, as amended (the
"Securities Act"), except for any such shares held by an "affiliate" of the
Company, which will be subject to the resale limitations of Rule 144 under the
Securities Act. The remaining 10,024,477 shares held by existing shareholders
were issued by the Company in private transactions in reliance upon one or more
exemptions under the Securities Act, are "restricted securities" as that term is
defined in Rule 144 promulgated under the Securities Act and may be sold in
compliance with such Rule, pursuant to registration under the Securities Act or
pursuant to an exemption therefrom. Of the outstanding shares, 7,045,000 shares
are currently freely tradeable without limitation under Rule 144, subject to the
lock-up period described below. Future sales of shares by existing shareholders
pursuant to Rule 144 of the Securities Act or through the exercise of
outstanding registration rights could have an adverse effect on the market price
of the Common Stock and could impair the Company's efforts to obtain additional
capital in the future.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701 under the Securities
Act. An aggregate of 124,000 shares of Common Stock issued on exercise of stock
options will be tradeable pursuant to Rule 701, subject to the lock-up period
described below. Such options were exercised at prices below the initial public
offering price. Shareholders owning an aggregate of 9,574,477 shares of Common
Stock, representing approximately 96% of the total shares outstanding (and
1,887,500 shares issuable upon exercise of outstanding options), including
shares held by all employees, officers and directors and certain other
shareholders of the Company, have agreed not to directly or indirectly offer or
sell, contract to sell, grant any option to purchase, transfer or otherwise
dispose of or make a distribution of any of their shares or securities
convertible or exchangeable for Common Stock for a period of 180 days from the
date of this Prospectus without the prior written consent of PaineWebber
Incorporated ("PaineWebber"). See "Shares Eligible for Future Sale."
REGISTRATION RIGHTS
Holders of 2,915,477 shares of Common Stock are entitled to certain demand
and other registration rights with respect to such shares of Common Stock. Any
sales under such registration rights may have an adverse effect on the Company's
ability to raise needed capital and may adversely affect the market price of the
Common Stock. Such registration rights are not exercisable prior to 180 days
after this Offering. See "Description of Capital Stock -- Amended Shareholder
Rights Agreement."
IMMEDIATE AND SUBSTANTIAL DILUTION
The initial public offering price of the Common Stock is substantially
higher than the net tangible book value per share of the Common Stock. Assuming
an initial offering price of $10.00 per share (the midpoint of the range set
forth on the cover page of this Prospectus), investors participating in this
Offering will incur an immediate, substantial dilution in net tangible book
value of $7.35 per share and may incur additional dilution upon exercise of
outstanding stock options. See "Dilution."
ABSENCE OF DIVIDENDS
The Company currently intends to retain any and all earnings for use in its
business and does not anticipate paying any dividends within the foreseeable
future. The Company has never declared or paid dividends on its capital stock.
See "Dividend Policy."
12
<PAGE> 15
CONCENTRATION OF OWNERSHIP
Following this Offering, the present officers and directors of the Company
and their affiliates will beneficially own approximately 74% of the outstanding
shares of Common Stock (assuming exercise of all stock options beneficially
owned by officers and directors). Accordingly, they will have the ability to
exercise significant influence over the management and policies of the Company.
BROAD DISCRETION IN USE OF PROCEEDS
The net proceeds of the Offering will be used to fund the Company's
research and development and will be added to the Company's working capital.
Other than those outlined in this Prospectus, the Company cannot set forth with
certainty additional research and development programs or other uses for the net
proceeds. Accordingly, management will have broad discretion in the application
of such net proceeds. See "Use of Proceeds" and "Management's Discussion and
Analysis of Financial Conditions and Results of Operations."
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS AND AUTHORIZED
PREFERRED STOCK
Amendments to the Company's Articles of Incorporation have been approved,
effective upon the closing of this Offering, which may discourage certain types
of transactions involving an actual or potential change in control of the
Company, including transactions in which the shareholders might otherwise
receive a premium for their shares over then current market prices, and may
limit the ability of the shareholders to approve transactions that they may deem
to be in their best interests. The Board of Directors also has the authority to
issue up to 5,000,000 shares of Preferred Stock in one or more series and to fix
the rights, priorities, preferences, qualifications, limitations and
restrictions, including the dividend rates, conversion rights, voting rights,
terms of redemption, terms of sinking funds, liquidation preferences and the
number of shares constituting any series, without any further vote or action by
the shareholders, which could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
rights and powers, including voting rights, of the holders of the Common Stock.
The issuance of Preferred Stock may have the effect of delaying or preventing a
change in control of the Company and may adversely affect the rights of the
holders of Common Stock. In October 1996, Pfizer is obligated to purchase
264,600 shares of B-2 Preferred Stock at a price per share of $7.56. In April
1998, Pfizer is obligated to purchase 304,300 shares of B-3 Preferred Stock at a
price per share of $9.86, subject to Pfizer's ability to terminate the
Collaboration Agreement (as defined herein) and its obligations thereunder. See
"Business -- Strategic Alliances and Licenses," "Management," "Principal
Shareholders," "Description of Capital Stock -- Preferred Stock" and
"Description of Capital Stock -- Possible Anti-Takeover Effect of Certain
Charter Provisions."
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to this Offering, there has been no public market for the Common
Stock and there can be no assurance that an active trading market will develop
or be sustained after this Offering. The initial public offering price for the
Common Stock was determined by negotiations between the Company and PaineWebber,
Needham & Company, Inc. and Sutro & Co. Incorporated. See "Underwriting." There
can be no assurance that an active public market will develop or be sustained
after the Offering or that the market price of the Common Stock will not decline
below the public offering price. Factors such as the announcements of
technological innovations or new products by the Company, its competitors and
other third parties, as well as variations in the Company's results of
operations, market conditions, analysts' estimates and the stock market may
cause the market price of the Common Stock to fluctuate significantly. Also,
future sales of shares by existing shareholders pursuant to Rule 144 of the
Securities Act or through the exercise of outstanding registration rights, could
have an adverse effect on the price of the Common Stock. See "Description of
Capital Stock -- Amended Shareholder Rights Agreement" and "Shares Eligible for
Future Sale."
13
<PAGE> 16
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 3,000,000 shares of
Common Stock offered hereby are estimated to be approximately $27,300,000
($31,400,000 if the Underwriters' over-allotment option is exercised in full),
based on an assumed public offering price of $10.00 per share (the midpoint of
the range set forth on the cover page of this Prospectus), and after deducting
underwriting discounts and commissions and other estimated offering expenses.
The Company expects to use the net proceeds, including the interest
thereon, (i) to fund research and development programs (approximately 80%) and
(ii) for general corporate purposes, including capital expenditures and working
capital (approximately 20%). The amounts actually used for each purpose may vary
significantly depending upon numerous factors, including the progress of the
Company's research and development programs, the results of preclinical and
clinical trials, the timing of regulatory approvals, technological advances, the
commercial potential of proposed compounds and the status of competitive
products. In addition, expenditures will also depend upon the establishment of
collaborative research agreements with other companies, the availability of
additional financing and other factors. The Company believes that its existing
cash, cash equivalents and short-term investments, combined with the anticipated
proceeds of this Offering and its committed future contract revenue and interest
income, will be adequate to satisfy its capital requirements and to fund
anticipated operating losses through 1999. Pending application of the proceeds
as described above, the Company intends to invest the net proceeds of this
Offering in investment-grade securities.
Other than those outlined in this Prospectus, the Company cannot set forth
with certainty additional research and development programs or other uses for
the net proceeds. Accordingly, management will have broad discretion in the
application of such net proceeds. The Company believes that it will need to
raise substantial additional capital to fund its future operations. The Company
intends to seek additional funding through collaborative arrangements, contract
research or through public or private financings. See "Risk Factors -- Future
Capital Needs; Uncertainty of Additional Funding."
DIVIDEND POLICY
The Company has never declared or paid dividends on its capital stock. The
Company currently intends to retain any and all earnings for use in the
operation and expansion of its business. The Company does not anticipate paying
any dividends within the foreseeable future.
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<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company (i) as of
June 30, 1996 and (ii) as adjusted to give effect to the sale by the Company of
3,000,000 shares of Common Stock offered hereby at an assumed public offering
price of $10.00 per share (the midpoint of the range set forth on the cover page
of this Prospectus), less underwriting discounts and commissions and other
estimated expenses of this Offering:
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Long-term liabilities, less current portion........................ $ 185,047 $ 185,047
Shareholders' equity:
Convertible Preferred Stock, $.001 par value: 3,491,700 shares
authorized, 2,915,477 issued and outstanding actual; 5,000,000
shares authorized, none issued and outstanding as
adjusted(1)................................................... 2,915 --
Common Stock, $.001 par value: 20,000,000 shares authorized,
7,109,000 shares issued and outstanding actual; 30,000,000
shares authorized, 13,024,477 shares issued and outstanding as
adjusted(2)................................................... 7,109 13,024
Deferred compensation related to stock options................... (1,445,377) (1,445,377)
Additional paid-in capital....................................... 8,602,100 35,899,100
Accumulated deficit.............................................. (12,105) (12,105)
---------- -----------
Total shareholders' equity(2)................................. 7,154,642 34,454,642
---------- -----------
Total capitalization........................................ $7,339,689 $34,639,689
========== ===========
</TABLE>
- ---------------
(1) Shares of Preferred Stock may be issued to Pfizer under its collaboration
with the Company. See "Business -- Strategic Alliances and Licenses" and
"Description of Capital Stock."
(2) Does not include (i) 2,002,500 shares of Common Stock issuable upon exercise
of options outstanding at a weighted average exercise price of $0.10 per
share pursuant to the Company's stock option plans at June 30, 1996 and (ii)
1,354 shares of Common Stock issued upon exercise of options subsequent to
June 30, 1996 and 11,500 shares of Common Stock issuable upon exercise of
options granted subsequent to June 30, 1996. See "Management -- Benefit
Plans," "Certain Transactions" and "Shares Eligible for Future Sale."
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<PAGE> 18
DILUTION
The net tangible book value of the Company at June 30, 1996 was $7,154,642,
or $0.71 per share. Net tangible book value per share represents the amount of
total tangible assets of the Company less total liabilities divided by the
number of shares of Common Stock outstanding, after giving effect to the
conversion of the outstanding shares of Preferred Stock into shares of Common
Stock. After giving effect to the sale of the 3,000,000 shares of Common Stock
offered hereby at an assumed initial public offering price of $10.00 per share
(the midpoint of the range set forth on the cover page of this Prospectus) and
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company, the Company's net tangible book value as of
June 30, 1996 would have been $34,454,642, or $2.65 per share. This represents
an immediate increase in net tangible book value per share of $1.94 to existing
holders and immediate dilution in net tangible book value of $7.35 per share to
new investors purchasing Common Stock in this Offering. The following table
illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed public offering price....................................... $ 10.00
Net tangible book value before the Offering....................... $ 0.71
Increase attributable to new investors............................ 1.94
-----
Net tangible book value after this Offering......................... 2.65
------
Dilution of net tangible book value to new investors................ $ 7.35
======
</TABLE>
The following table summarizes, as of June 30, 1996, the number of shares
of Common Stock purchased from the Company, the total consideration paid and the
average price per share paid by the existing shareholders and by new investors
(before deduction of underwriting discounts and commissions and estimated
offering expenses):
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
---------------------- ----------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
----------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing shareholders................. 10,024,477 77.0% $ 7,116,824 19.2% $ 0.71
New investors......................... 3,000,000 23.0% 30,000,000 80.8% $ 10.00
---------- ----- ----------- -----
Total....................... 13,024,477 100.0% $37,116,824 100.0%
========== ===== =========== =====
</TABLE>
All of the above computations assume no exercise of outstanding options. As
of June 30, 1996, options to purchase 2,002,500 shares of Common Stock were
outstanding at a weighted average exercise price of approximately $0.10 per
share under the Company's stock option plans. 1,354 shares of Common Stock were
issued upon exercise of options subsequent to June 30, 1996 and 11,500 shares of
Common Stock are issuable upon the exercise of options granted subsequent to
June 30, 1996. To the extent these options become vested and are exercised,
there will be further dilution to new investors. As of June 30, 1996, the
Company also has an additional 473,500 shares of Common Stock reserved for
issuance pursuant to the Company's stock option plans. See "Capitalization,"
"Management -- Benefit Plans," "Certain Transactions" and "Shares Eligible for
Future Sale."
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<PAGE> 19
SELECTED FINANCIAL 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, 1995, and with respect to the Company's balance sheets at December
31, 1994 and 1995, are derived from the financial statements of the Company that
have been audited by Ernst & Young LLP, independent auditors, which are included
elsewhere herein and are qualified by reference to such Financial Statements and
Notes related thereto. The statement of operations data for the period from
inception to December 31, 1992, and the balance sheet data at December 31, 1992
and 1993, have been derived from financial statements that have been audited by
Ernst & Young LLP which are not included herein. The statement of operations
data for the six months ended June 30, 1995 and 1996 and the balance sheet data
at June 30, 1996 have been derived from unaudited financial statements; however,
management believes such financial statements include all adjustments,
consisting only of normal recurring adjustments, that the Company considers
necessary for a fair presentation of the financial position and results of
operations for these periods. Operating results for the six months ended June
30, 1996 are not necessarily indicative of the results that may be expected for
the entire year ending December 31, 1996. The selected financial data set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the Company's Financial
Statements and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PERIOD FROM SIX MONTHS ENDED
MARCH 6, 1992 YEARS ENDED DECEMBER 31, JUNE 30,
(INCEPTION) THROUGH ----------------------------------- -----------------------
DECEMBER 31, 1992 1993 1994 1995 1995 1996
------------------- --------- --------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue............... $ -- $ -- $ 204,475 $ 3,174,515 $ 621,937 $2,941,489
Costs and expenses:
Research and
development............. 376,753 157,101 492,513 2,831,860 1,246,189 1,982,939
General and
administrative.......... 32,761 47,948 127,360 487,234 238,491 396,571
--------- --------- --------- ---------- --------- ----------
Total costs and
expenses............. 409,514 205,049 619,873 3,319,094 1,484,680 2,379,510
Income (loss) from
operations................ (409,514) (205,049) (415,398) (144,579) (862,743) 561,979
Interest income............. 24,285 50,743 57,798 275,564 99,230 200,795
Interest expense............ -- -- -- (5,343) (2,326) (3,386)
--------- --------- --------- ---------- --------- ----------
Net income (loss)........... $(385,229) $(154,306) $(357,600) $ 125,642 $ (765,839) $ 759,388
========= ========= ========= ========== ========= ==========
Pro forma net income (loss)
per share(1).............. $ (0.06) $ (0.02) $ (0.05) $ 0.01 $ (0.10) $ 0.06
========= ========= ========= ========== ========= ==========
Shares used in computing pro
forma net income (loss)
per share(1).............. 6,413,620 7,342,653 7,471,420 11,830,427 7,479,860 12,404,535
========= ========= ========= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- JUNE 30,
1992 1993 1994 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments............................ $1,814,472 $1,739,197 $1,113,904 $6,867,245 $7,684,784
Working capital.......................... 1,674,364 1,548,896 1,049,333 6,048,413 6,724,715
Total assets............................. 1,817,879 1,741,874 1,484,911 7,343,737 8,439,891
Long-term liabilities, less current
portion................................ -- -- -- 37,874 185,047
Accumulated deficit...................... (385,229) (539,535) (897,135) (771,493) (12,105)
Total shareholders' equity............... 1,677,771 1,551,573 1,215,865 6,341,331 7,154,642
</TABLE>
- ---------------
(1) See Note 1 of Notes to Financial Statements for information concerning the
computation of net income (loss) per share and shares used in computing net
income (loss) per share.
17
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following should be read in conjunction with "Selected Financial Data"
and the Company's Financial Statements and Notes thereto appearing elsewhere in
this Prospectus. This Management's Discussion and Analysis of Financial
Condition and Results of Operations and other parts of this Prospectus contain
forward-looking statements that 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 in "Risk Factors."
OVERVIEW
Since inception in March 1992, Immusol has devoted substantially all of its
resources to the development of its ribozyme gene therapy technology. Although
Immusol was profitable in 1995, to date the Company has not received any
revenues from the sale of products and does not expect to receive revenues from
the sale of products for several years. The Company has incurred an accumulated
deficit of approximately $12,000 through June 30, 1996. While the Company could
report a profit in 1996, it anticipates that it will incur substantial and
increasing losses over at least the next several years as the Company's research
and development efforts, preclinical and clinical testing activities and
manufacturing scale-up efforts expand. All of the Company's revenues to date
have consisted of contract revenues, grant revenues and interest income. No
revenues have been generated from product sales. There can be no assurance that
the Company can generate sufficient product or contract revenue to achieve
sustained profitability.
In May 1995, the Company and Pfizer entered into a Collaboration Agreement,
a License and Royalty Agreement and a Preferred Stock Purchase Agreement
(together, the "Pfizer Agreements") for the discovery and development of
ribozyme-based gene therapy useful in treating or preventing HIV infection.
Under the Pfizer Agreements, Pfizer has agreed to provide research support, make
milestone payments and equity investments which could total up to $49 million
through May 2000. In addition, Pfizer has agreed to fund certain clinical trial,
patent filing and patent maintenance costs. The milestone payments are based
upon the achievement of specific development and regulatory milestones, which
depend in part on the Company's ability, alone and/or with Pfizer, to advance
the development of its HIV ribozyme gene therapy product candidates. There can
be no assurance that the Company will achieve such development or regulatory
milestones. Amounts received by Immusol under the Pfizer Agreements totalled
approximately $11.2 million through June 30, 1996. See "Business -- Strategic
Alliances and Licenses-Pfizer Inc."
In September 1994, the National Institutes of Health ("NIH") awarded the
University of California at San Diego ("UCSD"), Immusol and its collaborators a
Strategic Program for Innovative Research on AIDS Treatment ("SPIRAT") grant
totaling $4.6 million over the next four years for the development and clinical
evaluation of gene therapy for HIV, of which Immusol is entitled to receive up
to $508,000. Through June 30, 1996, the Company had received $439,000 under the
SPIRAT grant. The Company expects to receive an additional $69,000 during fiscal
year 1996 which would complete its participation in the SPIRAT grant.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
The Company had total revenues of $2.9 million for the six months ended
June 30, 1996 compared to revenues of $622,000 for the same period in 1995. The
1996 revenues were primarily derived from the Company's collaborative
arrangement with Pfizer. Revenues may fluctuate from period to period depending
on the achievement of milestones under the Collaboration Agreement.
Research and development expenses increased to $1,983,000 for the six
months ended June 30, 1996 from $1,246,000 for the same period in 1995 primarily
due to a significant increase in research and development activities, including
additions to research and development personnel and the expansion of laboratory
facilities. Research and development expenses are expected to continue to
increase through 1996 due to the increased activities associated with the
anticipated commencement of a Phase I clinical trial for
18
<PAGE> 21
HIVase I in the United States and the expansion of preclinical and clinical
testing of existing and new product development programs. General and
administrative expenses increased to $397,000 during this period from $238,000 a
year earlier primarily due to increases in staffing, facilities and business
development expenses. General and administrative expenses are expected to
continue to increase through 1996.
Interest income was $201,000 for the six months ended June 30, 1996
compared to $99,000 for the same period in 1995 due to higher average cash
investment balances. Interest expense was $3,400 for the six months ended June
30, 1996 compared to $2,300 for the same period in 1995 due to obligations under
capital leases and long-term debt in 1996.
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
The Company had revenues of $3.2 million for the year ended December 31,
1995 compared to $204,000 in the same period in 1994. The Company had no
revenues in 1993. The increase in revenues resulted primarily from the Company's
collaborative arrangement with Pfizer.
Research and development expenses increased to $2.8 million in 1995 from
$493,000 in 1994 and $157,000 in 1993. Factors contributing to these increases
include substantial increases in research and development expenditures,
including additions to research and development personnel, the purchase of
additional laboratory supplies, technology acquisition and maintenance costs,
the expansion of laboratory facilities and increases in equipment depreciation.
General and administrative expenses increased to $487,000 in 1995 from $127,000
in 1994 and $48,000 in 1993. These increases were due primarily to expansion in
staffing, facilities and higher business development expenses.
Interest income increased to $276,000 in 1995 from $58,000 in 1994 and
$51,000 in 1993 due to interest earned on the higher average cash investment
balances. Interest expense increased to $5,000 in 1995 from none in 1994 and
1993 due to obligations under capital leases.
At December 31, 1995, the Company had federal tax net operating loss
carryforwards of approximately $592,000, which expire beginning in 2008 unless
previously utilized. Pursuant to Internal Revenue Code Sections 382 and 383, use
of the Company's net operating loss carryforwards may be limited because of
cumulative changes of ownership of more than 50% which occurred within a
three-year period. The Company does not believe, however, that such limitation
will have a material impact on the utilization of the carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, Immusol has financed its operations primarily through
private placements of equity securities, which provided aggregate proceeds of
approximately $7.0 million through June 30, 1996, and to a lesser extent, grant
funding of $531,000 under the SPIRAT and other NIH grants. Under its agreements
with Pfizer, the Company has received $11.2 million in funding and could receive
up to $49 million in total through May 2000.
Working capital increased to $6.7 million as of June 30, 1996 compared to
$6.0 million as of December 31, 1995. The increase in working capital primarily
reflects net cash generated from operations of $991,000. The increase in working
capital during this period may not be indicative of changes in working capital
for future periods as the Company expects to use cash and working capital to
fund anticipated operating losses. As of June 30, 1996, Immusol had cash, cash
equivalents and short-term investments totaling $7.7 million.
Through June 30, 1996, the Company has invested an aggregate of $714,000 in
leasehold improvements, laboratory and office equipment and other assets, of
which $58,000 has been funded through capital leases. The Company has funded the
majority of its office and research and development facilities and related
leasehold improvements through operating lease arrangements. In addition, the
Company has in place a term loan with Silicon Valley Bank in an aggregate amount
of up to $500,000 to be used by the Company to fund the purchase of laboratory,
research and development and office equipment of which the Company has received
proceeds of $153,000. As of June 30, 1996, the Company had no significant
commitments for capital
19
<PAGE> 22
expenditures. The Company expects its cash needs will increase significantly in
future periods due to expansion of research and development programs, increased
clinical testing activities, growth of research and development and
administrative activities and their related equipment and space needs.
The Company's operations to date have consumed substantial amounts of cash,
which is expected to continue over the foreseeable future. It is the Company's
intention to fund certain product research and development costs through
additional collaborative relationships with suitable corporate collaborators for
different disease indications other than that excluded under the Pfizer
Agreements. The Pfizer Agreements restrict the Company from entering into
collaborations with others with respect to research or development of ribozyme
gene therapy products for treatment of AIDS/HIV infection. There can be no
assurance that any such agreements will successfully reduce the Company's
funding requirements. Additional equity or debt financing will be required, and
there can be no assurance that such financing will be available on favorable
terms, if at all. If adequate funds are not available, the Company may be
required to delay, scale back or eliminate one or more of its product
development programs or obtain funds through arrangements with collaborative
partners or others that may require the Company to relinquish rights to certain
of its technologies, product candidates or products that the Company would not
otherwise relinquish.
Immusol anticipates that its existing available cash, cash equivalents and
short-term investments, combined with the anticipated net proceeds of this
Offering and its committed future contract revenue and interest income, will be
adequate to satisfy its capital requirements and fund anticipated operating
losses through 1999. The Company's future capital requirements will depend on
many factors, including continued scientific progress in its products and
process development programs, progress with preclinical testing and clinical
trials, the time and costs involved in obtaining regulatory approvals, the costs
involved in filing patents, competing technological and market developments,
changes in existing collaborative relationships, the ability of the Company to
establish development arrangements, the cost of manufacturing scale-up and the
establishment of effective sales and marketing arrangements.
20
<PAGE> 23
BUSINESS
SUMMARY
Immusol is a biopharmaceutical company dedicated to the discovery,
development and commercialization of products based on proprietary technologies
in the areas of ribozyme gene therapy and ribozyme-mediated gene functional
analysis. Ribozymes are naturally occurring ribonucleic acid (RNA) molecules
that can be engineered to cleave and inactivate other RNA molecules in a
specific, sequence-dependent fashion. Thus, ribozymes can be designed to
selectively inactivate RNA molecules and their corresponding proteins that play
a role in human disease. The Company intends to initiate a Phase I clinical
trial with its lead compound, HIVase I, in 1996. HIVase I is being developed
through a collaboration with Pfizer for the treatment of HIV-infected
individuals. In addition, the Company has three other ribozyme gene therapy
programs in various stages of research and preclinical development for the
prevention of coronary restenosis and the treatment of hepatitis C and hepatitis
B viral infections.
Ribozyme therapies can be based on (i) ribozyme gene therapy which involves
inserting specific sequences that lead to the production of ribozymes within the
patient's cells or (ii) synthetic, chemically-modified ribozymes administered as
drugs. The gene therapy approach to ribozyme therapy utilizes the patient's own
cellular machinery to produce a constant and continuous supply of ribozymes
inside the cell where the disease-causing gene is produced. The Company has
utilized a number of different viral vectors (gene delivery vehicles), including
retroviral, adeno-associated viral (AAV) and adenoviral vectors, to provide
optimal periods of in vivo production of ribozymes. The Company believes that
ribozyme gene therapy is a new, versatile modality which will be applicable in
the treatment of a wide range of viral diseases, coronary disease, genetic
diseases, cancers and other medical conditions.
The Company believes its ribozyme gene therapy technology will have certain
advantages over conventional drug development, including: (i) the high
specificity of ribozymes can be used to inactivate certain undesirable target
genes whose sequences are known; (ii) ribozymes can have application to a broad
spectrum of human diseases; (iii) ribozymes can be highly potent due to their
natural catalytic activity by which one ribozyme can inactivate many target
molecules; and (iv) ribozymes can result in fewer side effects due to their high
degree of target specificity. The Company believes its ribozyme gene therapy
technology has several advantages over synthetic ribozymes, including: (i)
efficient intracellular delivery and potential lack of immune response; (ii)
providing a constant and continuous supply of ribozymes inside the cell; and
(iii) the ability to deliver multiple ribozymes on one vector.
In May 1995, the Company and Pfizer entered into a research collaboration
for the discovery and development of products for ribozyme-based gene therapy
useful in treating or preventing HIV infection. In preclinical studies to date,
the Company has demonstrated potent activity of its multi-ribozyme gene therapy
against all strains of HIV known to the Company isolated from HIV-infected
individuals. In addition, the Company has found no evidence of
ribozyme-resistant mutants of HIV to date. The Company intends to initiate a
Phase I clinical trial with its first generation compound, HIVase I, in 1996 in
HIV-infected individuals.
Immusol believes that its ribozyme technology can be useful in drug
discovery in conjunction with gene sequence knowledge to characterize the
function of recently discovered genes that may be suitable therapeutic targets.
Since ribozymes can be designed to act on specific target genetic sequences,
ribozymes may be useful to identify the function of these sequences. As a
result, the Company believes its ribozyme technology can provide an important
link between gene dysfunction and disease.
The Company was incorporated in the State of California in March 1992.
BACKGROUND
GENE EXPRESSION AND PROTEIN SYNTHESIS
Genes are regions of DNA that contain instructions that direct cells to
produce proteins, one of the basic building blocks of all cells. Genes produce,
or express, proteins in a two-step process. First, information from the DNA of
the gene is transcribed to ribonucleic acid ("RNA"). Second, RNA and the
information
21
<PAGE> 24
contained therein is translated into a protein. The production of a particular
protein requires specific DNA and RNA molecules.
Many disease states are caused by abnormal production or function of gene
products such as proteins. The abnormality may be due to an inborn defective
gene, due to excessive or inappropriate production of a protein by a normal gene
or due to the expression of exogenous genes from infectious agents, such as
viruses. Such abnormal or excessive production of a protein may have direct
effects on the cells within the body or it may initiate a cascade of events
involving other proteins within the body, in each case leading to disease.
GENE THERAPY
Gene therapy is an approach to the treatment of certain inherited and
acquired diseases in which genes are delivered into a patient's cells in order
to direct the cells to produce therapeutic proteins or to disrupt the production
of harmful proteins. The development of vectors that can practically,
efficiently and safely deliver genes into cells is one of the most critical
factors for the success of gene therapy. The process of gene transfer may be
accomplished either in vivo by administering the vector directly to patients or
ex vivo by removing patients' cells and combining them with the vector. There
are primarily two types of vectors used in gene therapy: viral vectors derived
from naturally occurring viruses and non-viral vectors produced by standard
recombinant DNA techniques.
Viral vectors take advantage of the natural efficiency with which viruses
transport their own genetic material into cells. Viral vectors are constructed
by removing some or all of the harmful viral genes from the viral genome and
replacing them with the desired therapeutic gene which directs RNA production by
the cell. As a result of the removal of the harmful viral genes, viral vectors
are capable of efficient delivery and expression of a gene, but are not capable
of replication. Viral vectors have been extensively studied and most gene
therapy applications involve the use of viral vectors.
Drawing depicting delivery and expression of a ribozyme gene into a cell
22
<PAGE> 25
Viral vectors have limitations that may affect their safety or efficacy.
For example, viral vectors based on retroviruses (retroviral vectors) require
that target cells be dividing or multiplying in order to achieve gene delivery.
Because most cells in the body are not dividing or divide very slowly, and
because retroviral vectors become rapidly inactivated in the blood, most
clinical applications currently under evaluation employing retroviral vectors
involve a complex and expensive procedure whereby patient cells are removed, are
stimulated to divide and the gene is delivered to these cells ex vivo. The cells
are subsequently returned to the patient.
Another type of viral vector is derived from the adenovirus. Adenoviral
vectors are exceptionally efficient at delivering and expressing genes to
dividing and non-dividing cells for a short period of time. Adenoviral vectors,
however, retain and express some genes from the naturally-occurring virus and,
as a result, the body's immune system is triggered following their
administration. Based on numerous preclinical animal studies and several human
clinical trials in the gene therapy area performed by others, it is generally
accepted that the immune response limits the length of time that gene expression
can be maintained in the target cell and may lead to inflammatory responses.
Safety concerns have been raised by the use of retroviral and adenoviral
vectors since both vectors are derived from pathogenic viruses. During the
manufacture of these viruses, there is a possibility of generating a small
amount of natural virus. Although considered a low risk, such a possibility
necessitates additional costly product testing.
Adeno-associated virus (AAV) vectors are derived from a non-pathogenic
human virus. In spite of its name, AAV is genetically unrelated to adenovirus.
AAV, as it exists in nature, can only reproduce in the presence of another
virus. AAV vectors are derived from the wild type virus by removing all of the
viral genes and replacing them with the appropriate genetic material.
Retroviral vectors randomly integrate genetic material into the target cell
and AAV vectors may do the same. Any gene therapy approach that involves the
random integration of genetic material into the target cell's DNA could,
theoretically, cause the activation of an undesirable gene or the inactivation
of a beneficial gene, although it is generally believed that such events would
be rare. To the Company's knowledge, such events have not demonstrably occurred
in human clinical trials using retroviral vectors.
Non-viral vectors are produced by standard recombinant DNA techniques and
are delivered to target cells either unmodified (naked DNA) or combined with
lipids (for example, liposomes) or proteins designed to facilitate the entry of
DNA into cells. Because they lack components derived from viruses, they are
perceived to be safer. In addition, non-viral vectors are capable of delivering
large segments of DNA to target cells. Non-viral vectors, however, are
relatively inefficient at delivering genes to cells and, in general, have
resulted in temporary or low levels of gene expression in target cells.
Immusol believes that AAV vectors offer several potential advantages over
other viral and non-viral vectors. These advantages include: (i) efficient
delivery of genes to both dividing and non-dividing target cells; (ii) absence
of viral genes that may be responsible for causing an undesirable immune
response; (iii) capacity for long-term gene expression; (iv) capacity for in
vivo administration to patients; (v) higher levels of gene expression; and (vi)
improved stability allowing AAV vectors to be manufactured, stored and handled
like more traditional pharmaceutical products. AAV vectors are also less complex
than other viral vector systems which makes them more amenable to genetic
engineering of such enabling advancements as targeting to a specific cell type.
IMMUSOL RIBOZYME GENE THERAPY TECHNOLOGY
Ribozymes are RNA molecules that were originally discovered in certain
viruses and other organisms. Naturally-occurring ribozymes normally function to
catalyze their own cleavage but can be engineered to cleave and inactivate other
RNA molecules in a specific, sequence-dependent fashion. By cleaving a target
RNA, ribozymes inhibit the translation of RNA into protein, thus stopping the
expression of a specific gene. Ribozymes can be chemically synthesized in the
laboratory and structurally modified to increase their stability and catalytic
activity. Synthetic ribozymes may also be able to be formulated so that
injectable administration is feasible.
The Company's approach to ribozyme therapy employs a ribozyme referred to
as a "hairpin" ribozyme, so named because of its shape. The Company believes
hairpin ribozymes have advantages over other types of ribozymes. Unlike smaller
ribozymes that may only assume a stable shape upon binding to their substrates,
the larger-sized hairpin ribozymes are believed by the Company to assume such
stable shape immediately after synthesis and therefore may be more resistant to
ribonucleases (enzymes that degrade RNA) in the
23
<PAGE> 26
cellular environment. In addition, unlike other ribozymes whose optimal cleavage
conditions may require high temperature and high concentrations of certain
cellular co-factors, the hairpin ribozyme works best under near-physiological
conditions. The Company believes hairpin ribozymes to be a better choice as a
human therapeutic than other ribozymes.
Ribozyme gene therapy involves engineering a gene into a vector which, when
delivered to the patient's cells, will direct the synthesis of a specific
ribozyme. The ribozyme gene vector is then delivered in vivo by injection. The
ribozyme genes are then transcribed in the patient's target cells to generate
the ribozymes which in turn cleave the target RNA, inhibiting synthesis of a
specific protein. The gene therapy approach to ribozyme therapy utilizes the
patient's own cellular machinery to produce a constant and continuous supply of
ribozymes inside the cell where the disease-causing gene is produced.
The Company has utilized a number of different viral vectors to provide
optimal periods of in vivo production of ribozymes. For instance, the Company's
adenovirus vector does not integrate into the host genome and promotes protein
expression for only a short period of time, measured in weeks. The Company's
retrovirus and AAV vectors, on the other hand, integrate into the host cell
genome and promote gene expression for months to years in animal models, and
such expression is expected to be longer in humans due to the construction of
the vector containing the human gene-controlling element.
ADVANTAGES OF IMMUSOL RIBOZYME GENE THERAPY
The Company believes its ribozyme technology will have certain advantages
over conventional drug development:
- RIBOZYMES CAN BE ENGINEERED TO INACTIVATE CERTAIN UNDESIRABLE TARGET
GENES WHOSE SEQUENCES ARE KNOWN. Numerous genes and their expressed
proteins have been identified as having causative roles in human
diseases. Once a gene has been identified, ribozymes can generally be
engineered to inhibit the expression of the associated RNA of a target
gene, thereby preventing protein production. In addition, identification
of new genes is rapidly increasing and it is expected that all of the
genes which comprise the human genome will be identified within the
current decade.
- RIBOZYMES CAN HAVE APPLICATION TO A BROAD SPECTRUM OF HUMAN
DISEASES. All diseases for which a causative inappropriately-expressed
protein or gene target can be identified present a potential application
for the Company's ribozyme technology. The Company believes that its
ribozyme technology is an important bridge between the growing body of
knowledge regarding the sequence of the human genome and the development
of human therapeutics.
- RIBOZYMES CAN BE HIGHLY POTENT DUE TO THEIR NATURAL CATALYTIC
ACTIVITY. Ribozymes are not consumed in the act of cleaving the target
RNA, but are catalytically-active enzymes. Therefore, one ribozyme
molecule can inactivate many target RNA molecules. The Company believes
that the dosage requirements for ribozymes may be reduced by engineering
ribozymes to increase their rate of catalytic activity.
- RIBOZYMES CAN RESULT IN FEWER SIDE EFFECTS DUE TO THEIR HIGH DEGREE OF
TARGET SPECIFICITY. The mechanism by which traditional drugs act on a
target gene or protein often is not well understood. Consequently, side
effect profiles of such drugs are often difficult to predict and
characterize. The Company believes that side effects may be reduced or
avoided with ribozymes due to their high selectivity in cleaving a
specific RNA target sequence. The Company believes ribozymes may be
constructed with a nucleotide binding sequence that will match only one
corresponding target RNA, thereby offering a high degree of specificity.
In addition, the Company believes that its ribozyme gene therapy has
several advantages over the direct application of synthetic ribozymes as a
therapeutic:
- EFFICIENT INTRACELLULAR DELIVERY AND POTENTIAL LACK OF IMMUNE
RESPONSE. In order to effectively inactivate a gene for therapeutic
purposes, the ribozyme must be able to penetrate into the cells of the
24
<PAGE> 27
body. The chemical properties of ribozymes, however, do not allow the
ribozymes to freely pass into the cell. Immusol has shown in preclinical
studies that ribozymes can be efficiently delivered into a cell by
introducing ribozyme genes with the Company's viral vectors. The cell
itself then utilizes the ribozyme gene to direct the production of
ribozymes. In this way, the ribozyme is present only inside cells where
it can carry out its desired effect, which should prevent undesirable
side effects, such as immunogenicity, that could occur if a synthetic
ribozyme were directly injected into the body.
- BENEFICIAL PHARMACOLOGICAL PROPERTIES. Ribozymes directly injected as a
drug would be highly unstable due to the ubiquitous presence of enzymes
(ribonucleases) that rapidly degrade RNA. The Company's proprietary
ribozyme gene delivery and expression technology, however, should provide
a constant and continuous supply of ribozymes inside the patients' cells.
Therefore, ribozymes that become degraded will be replaced by newly
synthesized ribozymes. As a result of this persistent synthesis and
subsequent degradation, the level of ribozymes should remain constant.
Direct injection of synthetic ribozymes, on the other hand, would result
in variable systemic levels of the drug, with high levels present
immediately after dosing followed by decreasing levels as the drug is
degraded. Constant levels of ribozymes are particularly important in
anti-viral therapies, where transient decreases in the ribozyme, like any
drug, would favor the production of drug-resistant viruses. Additionally,
the relatively stable production of ribozymes by ribozyme gene therapy
should require less frequent dosing than with directly injected synthetic
ribozymes.
- UTILIZATION OF MULTI-RIBOZYME VECTORS. The efficacy of many therapeutic
applications of ribozymes would be improved by administering multiple
ribozymes, each directed against a different region of the target gene.
For instance, ribozymes directed against two different sites in a virus,
such as HIV, would decrease the chance of generating a ribozyme-resistant
mutant virus, since such a virus would have to simultaneously contain a
mutation at both sites in order to replicate. The Company has
demonstrated in tissue culture that a viral vector expressing ribozyme
genes directed against two different regions of the HIV RNA more
effectively inhibits HIV replication than a viral vector that expresses
either single ribozyme gene alone. The Company plans to test the multiple
ribozyme approach with a two ribozyme gene vector in its Phase I clinical
trial for HIVase I, to be initiated in 1996. The Company plans to
incorporate four ribozyme genes into its second generation HIV
therapeutic product.
The Company's proprietary technology allows multiple ribozymes to be
expressed from a single vector. HIVase I, the Company's two ribozyme gene
product, which was submitted to the FDA by Dr. Flossie Wong-Staal as a
physician-sponsored IND, was allowed to proceed by the FDA to Phase I
clinical trials as a single product. The Company believes multi-ribozyme
gene products can be evaluated and licensed for sale more easily than a
combination of synthetic ribozymes which the Company believes should be
evaluated individually as drugs.
PRODUCT DEVELOPMENT PROGRAMS
Immusol is focusing its efforts on the development of proprietary ribozyme
gene therapy products. The Company is currently pursuing the following
development programs:
<TABLE>
<CAPTION>
PROGRAM REGULATORY STATUS(1) COLLABORATOR
------- ------------------------- ------------
<S> <C> <C>
HIV Phase I to begin in 1996 Pfizer
Prevention of coronary restenosis Preclinical none
Hepatitis C virus Research none
Hepatitis B virus Research none
</TABLE>
- ---------------
(1) Phase I means initial human studies designed to establish the safety, dose
tolerance and pharmacokinetics of a compound.
Preclinical means pharmacology and toxicology testing in in vitro and in
vivo models, product formulation, dosage studies and manufacturing scale-up
for submission of the necessary data to comply with applicable regulations
prior to commencement of human clinical trials. Research means drug
optimization and testing in in vitro models. See "Government Regulation."
25
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HIV
The Center for Disease Control estimates that as of December 1995, there
were one million HIV-infected individuals and over 500,000 cases of AIDS in the
United States. HIV, the cause of AIDS, is spread by a transfer of bodily fluids,
primarily through sexual contact, blood transfusions, sharing intravenous
needles, accidental needle sticks or transmission from infected mothers to
newborns.
HIV is a retrovirus containing an RNA genome which is "reverse transcribed"
into DNA and integrated into the host cell chromosome ("early" events in the
viral life cycle). The viral DNA then generates RNA which directs the synthesis
of viral proteins and ultimately more viral particles ("late" events in the
viral life cycle).
There are several therapies approved for the treatment of HIV infection.
Reverse transcriptase inhibitors, such as AZT, inhibit early events in HIV
replication. Protease inhibitors, such as Saquinavir, inhibit late events in HIV
replication. Combining both types of anti-HIV drugs may be the most effective
mode of treatment. The issue of drug-resistant mutations, however, remains.
Immusol is developing drugs to treat HIV-infected individuals through the
inhibition of both early- and late-stage HIV replication. The Company believes
that both genomic RNA (present during early events) and protein-coding RNA
(present during late events) of HIV should be degraded by ribozyme gene therapy
and, as a result, HIV infection may be inhibited over the long-term.
Drawing illustrating the HIV infectious cycle divided into early events
(pre-integration) and late events (post integration) and indicates how ribozymes
can inactivate both events.
The Company has developed ribozymes directed against highly conserved
regions seen in different strains of HIV. Furthermore, the Company's
multi-ribozyme gene therapy approach will target several of these conserved
sequences simultaneously in the HIV genome, minimizing the possibility of drug
resistant HIV mutations.
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Drawing demonstrating how multiple ribozyme genes, delivered with a single
vector product, can effectively cleave and inactivate HIV RNA in an infected
cell.
In preclinical studies conducted to date, the Company has demonstrated
potent activity of its first generation multi-ribozyme gene therapy product,
HIVase I, against all tested strains of HIV isolated from HIV-infected
individuals. In addition, the Company has found no evidence of
ribozyme-resistant mutants of HIV to date.
In May 1995, the Company and Pfizer entered into a research collaboration
for the discovery and development of products for ribozyme-based gene therapy
useful in treating or preventing HIV infection. The Company intends to initiate
a Phase I clinical trial with HIVase I in 1996 in HIV-infected individuals.
HIVase I utilizes retroviral vectors to deliver two of the Company's proprietary
HIV inhibitory ribozyme genes to cells ex vivo which are then returned to the
patient. The Company contemplates that its second generation multi-ribozyme gene
therapy products will utilize the Company's proprietary AAV vectors for in vivo
delivery of ribozyme genes for relatively long-term expression in non-dividing
cells.
Under the terms of the collaboration, Pfizer is responsible for conducting
and funding all future clinical trial activities, if any. In addition, Pfizer
will commercialize the resulting products, if any. The Company will receive
royalties on the net sales of products resulting from the collaborative efforts
with Pfizer and payments upon the completion of certain milestones. The Company
has retained certain manufacturing rights, allowing it to co-manufacture any
products resulting from the collaborative efforts with Pfizer. See "Strategic
Alliances and Licenses -- Pfizer Inc."
In conjunction with the Phase I clinical trial, the Company is producing
clinical grade retroviral vector and gene-modified T cells under current good
manufacturing practices ("cGMP"). The Company will also evaluate patients
enrolled in the Phase I clinical trial for resistance to HIV replication using
internally-developed technology. The Phase 1 clinical trial is a safety study
that does not exclude individuals based upon sex, age or weight.
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The Company is aware of other companies pursuing ribozyme approaches to
treating HIV infections. See "Competition" and "Risk Factors -- Competition;
Rapid Technological Change."
PREVENTION OF CORONARY RESTENOSIS
Angioplasty is a procedure performed on coronary artery disease patients as
a less invasive and more economical alternative to open-heart bypass surgery. In
the United States, over 300,000 angioplasty procedures are performed annually.
Restenosis, or narrowing of the coronary arteries, affects between 30% and 50%
of angioplasty patients within six months of their procedure. Restenosis is
caused in part by smooth muscle cell proliferation following angioplasty. As a
result, repeat angioplasty and coronary artery bypass graft surgery procedures
are estimated to cost over $1 billion annually in the United States.
Currently, there are no approved drugs in the United States for the
treatment of vascular smooth muscle cell proliferation in coronary restenosis.
Stents, artificial bridges installed in the patient's clogged coronary artery,
may reduce restenosis by approximately one-third. In addition, ReoPro, a
monoclonal antibody, was recently approved by the FDA for inhibition of platelet
aggregation. The Company believes ReoPro is currently under investigation as a
potential therapy for coronary restenosis. Intravascular radiation therapy is
also being evaluated for the prevention of coronary restenosis. Other new
therapeutic regimes are in preclinical and clinical development by other
companies.
The Company is currently pursuing the application of its ribozyme gene
therapy technology to the prevention of coronary restenosis. The goal of the
Company's program is to develop ribozyme gene therapy products aimed at
inactivating certain critical genes involved in the proliferation of smooth
muscle cells following angioplasty. The Company is pursuing this goal through
two approaches: (i) ribozyme genes delivered by viral vectors and (ii)
chemically modified synthetic ribozymes delivered by lipids. The Company
believes that synthetic ribozymes may represent a viable alternative to ribozyme
gene therapy for the specific instance of coronary restenosis since: (1)
delivery will be localized to the arterial wall during angioplasty; (2)
long-term persistence of the ribozyme may not be necessary; and (3)
multi-ribozymes may not be necessary since normal cellular genes, which are not
highly mutagenic, are targeted.
To date, the Company has successfully engineered ribozyme genes into viral
vectors and synthesized chemically-modified ribozymes to treat restenosis. In
preclinical studies, these synthetic ribozymes reduced restenosis in a rat
carotid artery restenosis model. The Company is currently optimizing ribozymes
and the appropriate delivery vehicle and intends to evaluate the
pharmacokinetics and toxicology of these optimized ribozymes and ribozyme
vectors in a porcine model as part of its preclinical evaluation. The Company is
collaborating with Frank Litvack, M.D., Co-Director of Cardiovascular
Intervention Center, at Cedars-Sinai Medical Center, Los Angeles
("Cedars-Sinai") and a member of the Company's Board of Directors, on this
program and retains all commercial rights to any ribozyme therapy for the
prevention of restenosis.
HEPATITIS C VIRUS
Between 1% and 2% of the worldwide population is infected with hepatitis C.
In the United States, 3 to 4 million people are infected with hepatitis C.
Approximately 150,000 new cases are diagnosed annually in the United States.
Currently, interferon-alpha-2b (Intron A) is the only approved therapy in the
United States for treatment of hepatitis C. Intron A, however, is effective in
less than 25% of those treated and often does not prevent recurrences.
Additional formulations of interferon-alpha are currently in clinical trials and
other new therapeutic regimes are in preclinical and clinical development by
other companies.
Immusol's hepatitis C program intends to inhibit viral infection using the
Company's proprietary ribozyme gene therapy technology by targeting the genes
necessary for the hepatitis viral life cycle. The Company intends to develop
several ribozymes targeted against conserved regions of the viral genome, and
intends to deliver its ribozymes genes in vivo to hepatocytes. The Company
believes that the hepatitis C virus will be particularly amenable to ribozyme
gene therapy since the virus replicates entirely through RNA intermediates that
therefore should be susceptible to ribozyme cleavage.
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To date, the Company has successfully engineered ribozyme genes directed
against conserved sequences in the hepatitis C virus genome. Ribozymes produced
from these genes cleave the appropriate RNA targets in vitro and the ribozyme
genes inhibit gene expression in tissue culture model systems. The Company is
currently formulating ribozyme genes for intracellular delivery in collaboration
with Cedars-Sinai and UCSD, and retains all commercial rights to any ribozyme
therapy for the prevention of hepatitis C virus.
HEPATITIS B VIRUS
Approximately 40% of the worldwide population has been exposed to hepatitis
B, with over 300 million chronically-infected carriers worldwide. Prevalence of
hepatitis B is less than 2% in developed countries. Despite the existence of an
FDA approved hepatitis B vaccine, approximately 150,000 new cases are diagnosed
annually in the United States. Currently, interferon-alpha-2b (Intron A) is the
only approved therapy in the United States for treatment of hepatitis B. Intron
A, however, is effective in less than 50% of those treated and often does not
prevent recurrences. Additional formulations of interferon-alpha are currently
in clinical trials and other new therapeutic regimes are in preclinical and
clinical development by pharmaceutical companies.
Immusol's hepatitis B program intends to inhibit virus replication using
the Company's proprietary ribozyme gene therapy technology by targeting the
genes necessary for the hepatitis viral life cycle. The Company is developing
several ribozymes targeted against conserved regions of the viral genome, and
intends to deliver its ribozyme genes in vivo to liver cells.
To date, the Company has successfully engineered ribozyme genes directed
against conserved sequences in the hepatitis B virus genome. Ribozymes produced
from these genes cleave the appropriate RNA targets in vitro and the ribozyme
genes inhibit viral particle production in tissue culture model systems. The
Company is currently formulating ribozyme genes for intracellular delivery in
collaboration with Cedars-Sinai and UCSD, and retains all commercial rights to
any ribozyme therapy for the prevention of hepatitis B virus.
OTHER IMMUSOL TECHNOLOGIES
HEMATOPOIETIC STEM CELL BIOLOGY
Hematopoietic stem cells are unspecialized (pluripotent) cells in the blood
that give rise to differentiated blood cells. The capacity of hematopoietic stem
cells for self-renewal, proliferation and differentiation into all the lineages
of blood cells offers an ideal and easily accessible target for ribozyme gene
therapy. Advances in the characterization, isolation, culture, gene delivery and
gene expression in pluripotent stem cells can allow long-term expression of
therapeutic genes in multiple cell types.
The Company is developing technology for delivery and expression of genes
in hematopoietic stem cells without the loss of the cells' ability to
differentiate into multiple cell types. The Company believes that its
proprietary ribozyme gene therapy technology can be combined with its stem cell
biology capabilities to develop a new application of ribozyme gene therapy. To
date, the Company has generated human stem cells transduced with anti-HIV
ribozyme genes in tissue culture. Macrophages differentiated from the stem cell
progenitors have proven resistant to HIV infection, indicating that ribozyme
genes can be active throughout the maturation process of blood cells from stem
cells.
RIBOZYME-MEDIATED GENE FUNCTIONAL ANALYSIS
Over the last decade, there has been an increasing awareness and growing
recognition that many major diseases and health problems have a genetic basis,
at least in part. The existence of genes that play an important role in cancer,
cardiovascular disease, psychiatric disorders, obesity and metabolic disorders
is now well-established. The goal of the human genome project is to sequence,
map and identify all of the genes in the human genome. These developments have
increased the number of genes discovered. Commercial application, however,
necessitates the determination of the functionality of these genes.
Immusol is utilizing the technologies developed for its ribozyme gene
therapy to form the basis of a gene functional analysis program, Ribozyme
Mediated Gene Functional Analysis ("RiMGFA"). Immusol's
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expertise in ribozyme target site identification, ribozyme enzymatic
optimization, polyribozyme design and ribozyme gene delivery and expression can
be used to inhibit expression of target genes whose sequences have been
identified but whose functions are not known. This type of analysis can help to
determine gene function by identifying cellular changes that occur as a result
of sequence-specific inhibition of gene expression with ribozymes in tissue
culture model assay systems. The Company believes that its unique combination of
efficient and stable gene delivery and the catalytic efficiency of ribozymes to
inhibit gene expression can be useful in determining gene function.
Immusol plans to partner its RiMGFA technology with gene discovery
companies and pharmaceutical and biotechnology companies that have gene sequence
information, but that need information regarding the function of the gene
sequences for potential therapeutic purposes. Information gained may potentially
be used by the Company for future ribozyme gene therapies.
Diagram showing schematically how RIMGFA can be used to determine gene function
from a gene whose sequence is known
STRATEGIC ALLIANCES AND LICENSES
The Company has entered into, and expects to enter into in the future,
strategic alliances to facilitate the development and marketing of certain of
its products. The Company seeks partners whose interests, development and
marketing capabilities are complementary to those of the Company or partners
that wish to pursue areas the Company would otherwise not develop. The Company
expects to market and sell certain of its products, if successfully developed,
directly and through co-promotion or other licensing arrangements with third
parties, including its collaborative partners.
PFIZER INC.
In May 1995, the Company and Pfizer entered into the Collaboration
Agreement, a License and Royalty Agreement ("License Agreement") and a Preferred
Stock Purchase Agreement ("Stock Purchase Agreement") (together, the "Pfizer
Agreements") for the discovery and development of ribozyme-based gene therapy
useful in treating or preventing HIV infection. Under the Pfizer Agreements,
Pfizer has agreed to provide research support, and make milestone payments and
equity investments which could total up to $49 million through May 2000. In
addition, Pfizer has agreed to fund certain clinical trial, patent filing and
patent maintenance costs. Amounts received by Immusol under the Pfizer
Agreements totalled approximately $11.2 million through June 30, 1996.
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Pursuant to the License Agreement, Immusol granted to Pfizer an exclusive,
worldwide license to manufacture, use and sell human therapeutic products aimed
at the treatment of HIV in consideration of the payment of certain milestone
payments and royalties based on net sales. Pfizer is responsible for funding
expenses associated with clinical trials under the collaboration. In addition,
the License Agreement provides that if Immusol or its designee has a cGMP
facility of ample size to manufacture Pfizer's requirements of the products in
certain countries, Immusol may, upon notice to Pfizer, elect to manufacture such
products for commercialization in such countries itself or through a designee.
The collaboration may be terminated by Pfizer or Immusol in the event of a
material uncured breach of the terms of the contract. In addition, the
Collaboration Agreement may be terminated by Pfizer if a key consultant's
association with Immusol terminates and the parties are unable to agree on a
mutually acceptable successor within a certain number of days. Pfizer also has
the right to terminate the Collaboration Agreement after the agreement has been
in effect for a certain period of months (and again a certain number of months
later), upon a payment of a predetermined amount of funding to Immusol.
In May 1995, Pfizer purchased 915,477 shares of Series B-1 Preferred Stock
pursuant to the terms of the Stock Purchase Agreement. The Series B-1 Preferred
Stock will be converted to Common Stock immediately prior to Closing of the
Offering. In November 1996, Pfizer is obligated to purchase 264,600 shares of
Series B-2 Preferred Stock at a price per share of $7.56. In May 1998, Pfizer is
obligated to purchase 304,300 shares of Series B-3 Preferred Stock at a price
per share of $9.86, subject to Pfizer's ability to terminate the Collaboration
Agreement and its obligations to purchase Series B-3 Preferred Stock.
In addition to the Pfizer Agreements, Pfizer is a party to an Amended
Shareholders' Agreement (as defined) with the Company pursuant to which it is
obligated, under certain circumstances, to purchase Common Stock from the
Company concurrent with the closing of this Offering. The Amended Shareholders'
Agreement provides that if the valuation of the Company upon the close of this
Offering is greater than $150 million and this Offering raises at least $15
million in the aggregate, then concurrently with the closing of this Offering,
Pfizer is obligated to purchase from the Company a pro rata number of shares of
Common Stock based upon Pfizer's original holdings. See "Description of Capital
Stock -- Amended Shareholder Rights Agreement."
UNIVERSITY OF CALIFORNIA
In December 1993, the Company entered into an Exclusive License Agreement
with The Regents (the "Exclusive License Agreement"), pursuant to which The
Regents exclusively licensed rights to the UC Technology. As consideration for
the exclusive license of the UC Technology, Immusol will pay The Regents an
earned royalty on net sales by Immusol of products incorporating the UC
Technology and prior to sales of such products will pay to the Regents a license
maintenance fee. In addition, beginning the year of the first commercial sale of
a FDA approved product incorporating the UC Technology, Immusol will pay The
Regents a minimum annual royalty. The Regents retain the right to terminate the
agreement or to reduce the exclusive license to a nonexclusive license in the
event that the Company does not satisfy certain development and regulatory
milestone obligations and minimum research and development funding levels.
Additional termination events include an uncured breach of the agreement by
Immusol. The termination of the Exclusive License Agreement or the conversion of
its exclusivity to a nonexclusive agreement would have a material adverse effect
on the Company's ability to continue utilizing this technology and could permit
competitors to utilize the technology.
SPIRAT
In September 1994, the NIH awarded UCSD, Immusol and its collaborators a
SPIRAT grant totaling $4.6 million over the next four years for the development
and clinical evaluation of gene therapy for HIV, of which Immusol is entitled to
receive up to $508,000. Through June 30, 1996, the Company had received $439,000
under the SPIRAT grant. The Company expects to receive an additional $69,000
during fiscal year 1996 which would complete its participation in the SPIRAT
grant.
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MANUFACTURING
As part of its strategy, the Company intends to retain certain
manufacturing rights for products developed through collaborative arrangements.
Consequently, the Company will be required to build and scale-up a commercial
manufacturing facility. The Company currently has a clean room in its facilities
that it uses to manufacture clinical grade material for clinical trials. A
larger cGMP manufacturing facility will need to be developed if any Company
product progresses to its first Phase II clinical trial. To date, the Company
has manufactured its products only on the small scale needed for clinical trials
of certain potential therapeutic products and has no experience manufacturing
products for commercial purposes. The Company will need to scale-up
significantly its current manufacturing processes and comply with cGMPs and
other regulations prescribed by various regulatory agencies in the United States
and other countries to achieve the required levels of production of such
products.
GOVERNMENT REGULATION
Regulation by governmental authorities in the United States and foreign
countries is a significant factor in the manufacture and marketing of the
Company's potential products and in its ongoing research and product development
activities. Virtually all the Company's products will require regulatory
approval by governmental agencies prior to commercialization. In particular,
human therapeutic products are subject to rigorous preclinical and clinical
testing and other approval requirements by the FDA and comparable agencies in
foreign countries. The time required for completing such testing and obtaining
such approvals is uncertain. Any delay in testing may delay product development.
In addition, delays or rejections may be encountered based on changes in FDA or
foreign regulatory policy during the period of product development and testing.
Various federal statutes and regulations also regulate the manufacturing,
safety, labeling, storage, record keeping and marketing of such products. The
lengthy process of obtaining regulatory approvals and ensuring compliance with
appropriate federal statutes and regulations requires the expenditure of
substantial resources. Any delay or failure by the Company or its collaborators
or licensees to obtain regulatory approval could adversely affect the
commercialization of products being developed by the Company, its ability to
receive product or royalty revenue and its liquidity and capital resources.
Immusol will also be subject to regulations under the food and drug statutes and
regulations of the State of California.
Preclinical studies are generally conducted in the laboratory to evaluate
the potential efficacy and the safety of a therapeutic product. The results of
these studies are submitted to the FDA as part of an IND application, which must
be reviewed by FDA personnel before clinical testing can begin. Once the FDA is
satisfied with the submission, the clinical trial process can commence.
Typically, clinical evaluation involves three sequential phases, which may
overlap. During Phase I, clinical trials are conducted with a relatively small
number of subjects to determine the early safety profile of a drug, as well as
the pattern of drug distribution and drug metabolism by the subject. The Phase
II, trials are conducted with groups of patients afflicted by a specific target
disease to determine preliminary efficacy, dosage tolerance and optimal dosages,
and to gather additional safety data. In Phase III, large-scale, multicenter
comparative trials are conducted with patients afflicted with a specific target
disease to provide data for the statistical proof of efficacy and safety as
required by the FDA and others. The FDA, the clinical trial sponsor or the
investigator may suspend clinical trials at any time if it believes that
clinical subjects are being exposed to an unacceptable health risk.
The results of preclinical and clinical testing are presently required to
be submitted to the FDA in the form of a New Drug Application ("NDA") for small
molecule products or a Product License Application ("PLA") accompanied by an
Establishment License Application ("ELA") for biological products. In responding
to an NDA, PLA or ELA, the FDA may grant marketing approval, request additional
information, or deny the application if the FDA determines that the application
does not satisfy its regulatory approval criteria. There can be no assurance
that approvals will be granted on a timely basis, if at all. The failure to
obtain timely permission for clinical testing or timely approval for product
marketing would materially affect the Company. Product approvals may
subsequently be withdrawn if compliance with regulatory standards is not
maintained or if problems occur after the product reaches the market. The FDA
may require testing and surveillance programs to monitor the effect of a new
product and may prevent or limit future marketing of the product based on the
results of these postmarketing programs.
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In addition to regulations enforced by the FDA and the State of California,
the Company also is subject to regulation under the Occupational Safety and
Health Act, the Environmental Protection Act, the Toxic Substances Control Act,
the Resource Conservation and Recovery Act and other similar federal, state and
local regulations governing permissible laboratory activities, waste disposal
handling of toxic, dangerous or radioactive materials and other matters. The
Company believes that it is in compliance with such regulations. These
regulations are subject to change, however, and may, in the future, require
substantial effort and cost to the Company to comply with each of the
regulations, and may possibly restrict the Company's business activities.
For marketing outside the United States before FDA approval to market, the
Company must submit an export permit application to the FDA. The Company also
will be subject to foreign regulatory requirements governing human clinical
trials and marketing approval for drugs. The requirements relating to the
conduct of clinical trials, product licensing, pricing and reimbursement vary
widely from country to country.
PATENTS AND PROPRIETARY RIGHTS
Immusol relies on a combination of technical leadership, patent, trade
secret and nondisclosure agreements to protect its proprietary rights. The
Company has exclusive rights under its license agreement with UCSD to pending
patent applications in the areas of ribozyme gene therapy for AIDS and ribozyme
gene therapy for HIV infection and AIDS. In its own name, the Company has
pending patent applications in the areas of viral vectors, ribozyme therapy for
hepatitis B, ribozyme therapy for restenosis and hepatitis C virus ribozymes.
The Company intends to file additional patent applications in the future. There
can be no assurance that the Company will be issued any patents or that, if any
patents are issued, they will provide the Company with significant protection or
will not be challenged. Even if such patents are enforceable, the Company
anticipates that any attempt to enforce its patents would be time consuming and
costly. Moreover, the laws of some foreign countries do not protect the
Company's proprietary rights in the products to the same extent as do the laws
of the United States. The PTO has instituted changes to the United States patent
law including changing the term to 20 years from the date of filing for
applications filed after June 8, 1995. Certain of the above applications were
filed after June 8, 1995. The Company cannot predict the effect that such
changes on the patent laws may have on its business, or on the Company's ability
to protect its proprietary information and sustain the commercial viability of
its products.
The patent positions of pharmaceutical, biotechnology and gene therapy
companies, including Immusol, can be uncertain and involve complex legal and
factual issues. Additionally, the coverage claimed in a patent application can
be significantly reduced before the patent is issued. As a consequence, there
can be no assurance that any of the Company's patent applications will result in
the issuance of patents or, if any patents issue, that they will provide
significant proprietary protection or will not be circumvented or invalidated.
Because patent applications in the United States are maintained in secrecy until
patents issue and publication of discoveries in the scientific or patent
literature often lag behind actual discoveries, the Company cannot be certain
that it was the first inventor of inventions covered by its pending patent
applications or that it was the first to file patent applications for such
inventions. Moreover, the Company may have to participate in interference
proceedings declared by the PTO to determine priority of invention that could
result in substantial cost to the Company, even if the eventual outcome is
favorable to the Company. There can be no assurance that the Company's patents,
if issued, would be held valid by a court of competent jurisdiction. An adverse
outcome could subject the Company to significant liabilities to third parties,
require disputed rights to be licensed from or to third parties or require the
Company to cease using the technology in dispute.
Specifically, the Company is aware of issued patents and patent
applications in the area of ribozymes which may affect the Company's ability to
make, use and sell its products. In particular, the Company is aware of a series
of issued patents that purport to cover the production and use of enzymatic RNA.
Immusol has investigated the breadth and validity of this series of patents to
determine their impact upon the Company's product development programs. Based on
its review of these patents and advice of outside patent counsel, the Company
believes it does not infringe any valid claims of such patents and that these
patents will not impede the advancement of the Company's programs. There can be
no assurance that third parties will not assert infringement claims against the
Company in the future with respect to these patents or otherwise or that
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any such assertions will not result in costly litigation or require the Company
to obtain a license to intellectual property rights of such parties. There can
be no assurance that any such licenses would be available on terms acceptable to
the Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to further develop or commercialize its products in the United
States and abroad and could result in the award of substantial damages. Defense
of any lawsuit or failure to obtain any such license could have a material
adverse affect on the Company. Finally, litigation, regardless of outcome, could
result in substantial cost to and a diversion of efforts by the Company.
As part of its confidentiality procedures, the Company generally enters
into nondisclosure agreements with its employees and suppliers, and limits
access to and distribution of its proprietary information. Despite these
precautions, it may be possible for a third party to copy or otherwise obtain
and use the Company's technology without authorization. Accordingly, there can
be no assurance that the Company will be successful in protecting its
proprietary technology or that Immusol's proprietary rights will preclude
competitors from developing products or technology equivalent or superior to
that of the Company.
The Company may require additional technology to which the Company
currently does not have rights. If the Company determines that this additional
technology is relevant to the development of future products and further
determines that a license to this additional technology is needed, there can be
no assurance that the Company can obtain a license from the relevant party or
parties on commercially reasonable terms, if at all. There can be no assurance
that the Company can obtain any license to any technology that the Company
determines it needs, on reasonable terms, if at all, or that the Immusol could
develop or otherwise obtain alternate technology. The failure of the Company to
obtain licenses, if needed, could have a material adverse affect on the Company.
COMPETITION
Immusol is engaged in a rapidly changing, highly competitive field. Other
products and therapies that may compete directly with the products that the
Company is seeking to develop and market currently exist or are being developed.
Many other companies are actively seeking to develop products, including
ribozymes and other products designed to modulate gene expression, such as
antisense oligonucleotides, that have disease targets similar to those being
pursued by the Company. Some of these competitive products are in clinical
trials. There can be no assurance that the Company's competitors will not
succeed in developing products based on ribozyme or other technologies, existing
or new, that are more effective than any that are being developed by the
Company, or that would render the Company's ribozyme technologies obsolete and
noncompetitive.
Moreover, there currently are commercially available products for the
treatment of certain disease targets being pursued by the Company, including
protease inhibitors and reverse transcriptase inhibitors for the treatment of
HIV and Intron A for both hepatitis B and hepatitis C. ReoPro, coronary stents
and intravascular radiation therapy are being evaluated for the prevention of
coronary restenosis.
Competition from pharmaceutical and biotechnology companies is intense and
is expected to increase. Most of these companies have significantly greater
financial resources and expertise in research and development, manufacturing,
preclinical studies and clinical trials, obtaining regulatory approvals and
marketing than the Company. Smaller companies may also prove to be significant
competitors, particularly through collaborative arrangements with large
pharmaceutical and biotechnology companies. Many of these competitors have
products that have been approved or are in development and operate large, well
funded research and development programs. Academic institutions, governmental
agencies and other public and private research organizations also conduct
research, seek patent protection and establish collaborative arrangements for
products and clinical development and marketing. These companies and
institutions compete with the Company in recruiting and retaining highly
qualified scientific and management personnel. In addition to the above factors,
Immusol faces competition based on product efficacy, safety, timing and scope of
regulatory approvals, availability of supply, marketing and sales capability,
reimbursement coverage, price and patent position. There can be no assurance
that the Company's competitors will not develop more
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effective or more affordable products, achieve earlier product commercialization
or have, or will achieve, a patent position superior to that of the Company.
HUMAN RESOURCES
As of July 31, 1996, Immusol had approximately 39 full-time employees,
including 34 in research, development and operations, and five in finance and
administration. Of these employees, 19 hold advanced degrees, of which 16 are
M.D.s or Ph.D.s. The Company's employees are not represented by any collective
bargaining agreements, and the Company has never experienced a work stoppage.
The Company believes that its employee relations are good.
FACILITIES
The Company currently maintains its headquarters in leased facilities in
San Diego, California, that contain all research, development and administrative
functions in 19,345 square feet of space. The Company leases this space under an
operating lease that lasts through June 2001. The Company believes that the
existing facility will be sufficient to meet its needs through at least 1998.
LEGAL PROCEEDINGS
As of the date of this Prospectus, the Company is not a party to any legal
proceedings. From time to time, however, Immusol may be involved in litigation
relating to claims arising out of its operations in the normal course of
business.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The executive officers, directors and key employees of the Company as of
July 31, 1996, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Tsvi Goldenberg, Ph.D. ...... 46 Co-founder, Chairman of the Board and Chief
Executive Officer
Jack R. Barber, Ph.D. ....... 40 Vice President, Research and Development
Flossie Wong-Staal, Ph.D. ... 49 Co-Founder, Director and Chairperson of the
Scientific Advisory Board
Mang Yu, Ph.D. .............. 39 Scientific co-founder and Director of HIV Gene
Therapy
J. Stanhope Blackburn........ 40 Director of Finance and Acting Chief Financial
Officer
Anchie Kuo, M.D. ............ 36 Director
Frank Litvack, M.D. ......... 40 Co-Founder and Director
Melvin Perelman, Ph.D. ...... 65 Director
</TABLE>
TSVI GOLDENBERG, PH.D. Dr. Goldenberg is a co-founder of the Company and
has served as the Company's Chairman of the Board and Chief Executive Officer
since April 1994. From October 1986 through April 1994, Dr. Goldenberg served as
Vice President of Research and Development at Advanced Interventional Systems, a
vascular disease products company, with primary responsibility for clinical
trials. Beginning in 1981, Dr. Goldenberg founded and managed a series of
companies involved in the diagnosis and therapy of cardiovascular diseases,
including the use of digital subtraction angiography in interventional
radiology. Dr. Goldenberg received a B.S. in minerals from the Israel Institute
of Technology and a Ph.D. in material science from Ohio State.
JACK R. BARBER, PH.D. Dr. Barber joined the Company in September 1994 as
Senior Director of Research and Development. Since January 1996, Dr. Barber has
served as Vice-President, Research and Development. Prior to joining Immusol,
Dr. Barber served, from February 1988 through September 1994, as Associate
Director of Oncology at Viagene, Inc., a gene therapy company, where he led a
team investigating various cancer therapeutics and was involved in the first
clinical application of gene therapy for HIV infection. Dr. Barber received a
B.S. and Ph.D. in biochemistry from the University of California, Los Angeles
("UCLA").
FLOSSIE WONG-STAAL, PH.D. Dr. Wong-Staal is a co-founder of the Company
and has served as a member of the Company's Board of Directors since September
1994. Dr. Wong-Staal has served as a Professor of Medicine and Biology at UCSD
since January 1990. Dr. Wong-Staal received a Ph.D. in molecular biology and a
B.A. in bacteriology from UCLA.
MANG YU, PH.D. Dr. Yu is a scientific co-founder of the Company and
currently serves as director of HIV gene therapy. Dr. Yu established ribozyme
gene therapy in Dr. Wong-Staal's laboratory from January 1992 until joining
Immusol in September 1994. Dr. Yu received a Ph.D. in molecular biology from
Indiana University, School of Medicine, an M.S. in biochemistry from Shanghai
Medical University and a B.S. in biochemistry from Fudan University, China.
J. STANHOPE BLACKBURN. Mr. Blackburn joined the Company in May 1995 as its
director of finance and acting chief financial officer. Mr. Blackburn is a
principal of RCG Management ("RCG"), a management services company providing
financial and accounting services. Mr. Blackburn has been associated with RCG
since January 1989. From October 1985 through August 1988, Mr. Blackburn was
controller of Western Pacific Data Systems ("Western Pacific"), a software
developer and re-seller. Prior to joining Western Pacific, he was with Arthur
Andersen & Co., LLP, for eight years. Mr. Blackburn received a B.S. in
accounting from the University of Illinois.
ANCHIE KUO, M.D. Dr. Kuo has served as a member of the Company's Board of
Directors since May 1996. Since November 1994, Dr. Kuo has served as a Managing
Director of BankAmerica Ventures, a venture
36
<PAGE> 39
capital firm. From September 1990 through November 1994, Dr. Kuo served as a
general partner at Ventures Medical, a venture capital firm. Currently Dr. Kuo
is Chairman of the Board of Collegiate Healthcare, Inc., a privately-held
healthcare service company, as well as being a director of several other
privately-held companies. Dr. Kuo received an M.D. from Dartmouth Medical School
and an A.B. in economics from Dartmouth College.
FRANK LITVACK, M.D. Dr. Litvack is a co-founder of the Company and has
served as a member of the Company's Board of Directors since March 1992. Dr.
Litvack has served as the co-director of the Cardiovascular Intervention Center
at Cedars-Sinai since July 1987 and as an Associate Professor of Medicine at
UCLA. Currently he is Chairman of the Board of Progressive Angioplasty Systems
Inc., a privately-held medical device company. Dr. Litvack received an M.D. and
D.C.S. from McGill University.
MELVIN PERELMAN, PH.D. Dr. Perelman has served as a member of the
Company's Board of Directors since May 1996. From December 1986 until his
retirement in December 1993, Dr. Perelman served as executive vice president of
Eli Lilly & Co. ("Lilly") and president of Lilly Research Laboratories. Prior to
1986, he served in a number of capacities with Lilly, beginning his career in
1957 as an organic chemist and subsequently serving as president of Lilly
International. Currently, Dr. Perelman is a director of three publicly-held
companies: Cinergy, Inc., an electric and gas utility company, Immune Response
Corp., a biotech company and Inhale Therapeutics Systems, Inc., a drug delivery
system company, as well as several privately-held companies. Dr. Perelman
received a B.S. in chemistry from Northwestern University and a Ph.D. in organic
chemistry from Rice University.
Members of the Board of Directors hold office and serve until the next
annual meeting of the shareholders of the Company or until their respective
successors have been elected and qualified. The Company's By-laws authorize the
Board of Directors to be comprised of not less than five nor more than nine
directors. The number of directors is currently fixed at five. Executive
officers are appointed by and serve at the discretion of the Board of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company does not currently have standing Audit or Compensation
Committees and the functions of those committees are performed by the entire
Board of Directors. Dr. Goldenberg, the Company's Chief Executive Officer,
participated in the deliberations of the Board of Directors regarding executive
compensation since his hiring in 1994, but did not take part in the
deliberations regarding his own compensation. Following this Offering, the Board
of Directors will have two standing committees: a Compensation Committee and an
Audit Committee. The Compensation Committee, consisting of Drs. Kuo, Litvack and
Perelman, will provide recommendations concerning salaries and incentive
compensation for executive officers and key personnel, including stock options.
The Audit Committee, consisting of Drs. Kuo and Litvack, will recommend the
Company's independent auditors and will review the results and scope of audit
and other services provided by such auditors.
37
<PAGE> 40
SCIENTIFIC ADVISORY BOARD
The Company relies upon its scientific advisory board (the "SAB") to
provide it with strategic and analytic support in developing and expanding the
scope of its technologies. The SAB is composed of leading scientists who meet
several times each year to review the Company's research and development
activities. The following individuals are members of the SAB:
<TABLE>
<S> <C>
Flossie Wong-Staal, Ph.D. ... Chairperson of the Scientific Advisory Board,
Professor of Medicine and Biology, UCSD
Ken Berns, M.D., Ph.D. ...... R.A. Rees Pritchett Professor and Chairman, Department
of Microbiology, Cornell University Medical College
James Forrester, M.D. ....... Chief of Research in Cardiology, Cedars-Sinai Medical
Center
Anthony Ho, M.D. ............ Director of Stem Cell Transplantation, UCSD
David Ho, M.D. .............. Director of Aaron Diamond AIDS Research Center,
New York
Frank Litvack, M.D. ......... Co-Director of Cardiovascular Intervention Center at
Cedars-Sinai Medical Center and Associate Professor of
Medicine at UCLA
Arun Srivastava, Ph.D. ...... Professor, Department of Microbiology & Immunology,
Indiana University School of Medicine
James Trempe, Ph.D. ......... Associate Professor, Department of Biochemistry and
Molecular Biology, Medical College of Ohio
</TABLE>
Each member of the SAB has entered into an exclusive scientific advisory
board agreement, or similar agreement, with Immusol in the fields of HIV, AAV,
coronary restonosis, Hepatitis B, Hepatitis C and ribozyme gene therapy
("Specialty Area"), whereby the member agrees to provide research, investigation
and consultation services to the Company in exchange for the grant of stock
options. The scientific advisors are employed by employers other than the
Company and may have commitments to, or consulting contracts with, other
entities that may limit their availability to the Company. Although generally
each scientific advisor agrees not to perform services for another person or
entity which would create a conflict of interest with the scientific advisor's
services for the Company, there can be no assurance that such a conflict will
not arise. Inventions or processes discovered by a scientific advisor in the
above areas will become the property of the Company. The scientific advisory
board agreements contain confidentiality and non-disclosure provisions.
38
<PAGE> 41
EXECUTIVE COMPENSATION
Summary of Cash and Certain Other Compensation
The following table sets forth the aggregate compensation paid by the
Company to the current Chief Executive Officer and to the one additional most
highly compensated executive officer (the "Named Executive Officers") for
services rendered in all capacities to the Company for the year ended December
31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------
ANNUAL COMPENSATION SECURITIES
---------------------------------- UNDERLYING
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS OPTIONS/SARS(#)
- ------------------------------------------- ------- -------- ------- ---------------
<S> <C> <C> <C> <C>
Tsvi Goldenberg, Ph.D. .................... 1995 $150,000(2) $35,000 -0-
Chief Executive Officer and Director
Jack R. Barber, Ph.D. ..................... 1995 $100,000(3) $15,000 15,000
Vice President, Research and Development
</TABLE>
- ---------------
(1) Pursuant to Instruction to Item 402(b) of Regulation S-K promulgated by the
Securities and Exchange Commission (the "Commission"), information with
respect to fiscal years prior to 1995 has not been included as the Company
was not a reporting company pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
information has not been previously reported to the Commission in response
to a filing requirement.
(2) Effective January 1, 1996, Dr. Goldenberg's annual salary was increased to
$200,000.
(3) Effective January 1, 1996, Dr. Barber's annual salary was increased to
$120,000.
Stock Options
The following table sets forth information concerning stock option grants
made to each of the Named Executive Officers for the year ended December 31,
1995. The Company granted no stock appreciation rights ("SARs") to Named
Executive Officers during 1995. See "Benefit Plans."
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR ($/SH)(2) DATE 5%($) 10%($)
- --------------------------- ---------- ------------ ----------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Tsvi Goldenberg............ -0- 0.0% -0- -- -0- -0-
Jack R. Barber(4).......... 15,000 1.8% $0.30 7/7/2005 $ 239,835 $ 384,600
</TABLE>
- ---------------
(1) All of the options were granted under the Prior Plan (as defined below). All
such options have been incorporated into the Plan (as defined below) but
will continue to be governed by the terms and conditions of the specific
instruments evidencing those options. The shares subject to each option will
immediately vest in the event the Company is acquired by a merger or asset
sale, unless the Company's repurchase rights with respect to those shares
are transferred to the acquiring entity. The grant dates for the above
options are as follows:
<TABLE>
<CAPTION>
NAME OPTIONS GRANTED(#) GRANT DATE
--------------- ------------------ ----------
<S> <C> <C>
Jack R. Barber 15,000 7/7/95
</TABLE>
(2) The exercise price per share of options granted represented the fair market
value of the underlying shares of Common Stock on the dates the respective
options were granted as determined by the Board of
39
<PAGE> 42
Directors. The exercise price may be paid in cash or in shares of Common
Stock valued at fair market value on the exercise date or a combination of
cash or shares or any other form of consideration approved by the Board of
Directors. The fair market value of shares of Common Stock has been
determined in the past by the Company's Board of Directors considering all
relevant factors, including the Company's book value, financial condition,
the perceived markets for its products, the status of its collaborations and
prospects for future business. After the effective date of the Registration
Statement of which this Prospectus is a part, the fair market value of
shares of Common Stock will be determined in accordance with certain
provisions of the Plan based on the closing selling price per share of a
share of Common Stock on the date in question on the primary exchange on
which the Company's common stock is listed or reported. If shares of the
Common Stock are not listed or admitted to trading on any stock exchange nor
traded on the Nasdaq National Market, then the fair market value shall be
determined by the Plan Administrator (as defined below) after taking into
account such factors as the Plan Administrator shall deem appropriate.
(3) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the 10-year option term will be at the assumed 5% or 10% levels or at any
other defined level. Unless the market price of the Common Stock does in
fact appreciate over the option term, no value will be realized from the
option grants made to the executive officers. Assuming the fair market value
of the Common Stock at the date of grant is equal to an assumed initial
public offering price of $10 (the midpoint of the range set forth on the
cover page of this Prospectus), the potential realizable value of these
options (a) at a 5% assumed annual rate of stock price appreciation would be
$239,835 and (b) at a 10% assumed annual rate of stock price appreciation
would be $384,600.
(4) Options to purchase 3,750 shares became exercisable on August 23, 1995 and
the remainder of options held by optionee become exercisable in 48 equal
monthly installments upon completion of each month of service beginning
August 23, 1995.
Option Exercises and Holdings
The following table provides information concerning option exercises during
1995 by the Named Executive Officers and the value of unexercised options held
by each of the Named Executive Officers as of December 31, 1995. No SARs were
exercised during 1995 or outstanding as of December 31, 1995.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1995(#) DECEMBER 31, 1995(1)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE(#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Tsvi Goldenberg.......... -0- -0- -0- -0- $ -0- $ -0-
Jack R. Barber........... -0- -0- 45,313 99,687 $ 109,845 $ 241,655
</TABLE>
- ---------------
(1) Value is defined as fair market price of the Common Stock at fiscal
year-end, less exercise price.
EMPLOYMENT ARRANGEMENTS
Dr. Goldenberg is employed by the Company at will under the terms of an
offer letter dated April 26, 1994. Such offer letter provides, however, that in
the event Dr. Goldenberg's employment is terminated as a result of mutual
agreement or if the Company terminates his employment for any reason, he will
receive a severance payment in an amount equal to nine months of his then-annual
salary. He will also receive the Company's standard vacation, family medical and
dental benefits and other benefits enjoyed by the Company's officers for a
period of nine months following termination under the circumstances discussed
above.
40
<PAGE> 43
Dr. Barber is employed by the Company at will under the terms of an offer
letter dated August 23, 1994. Such offer letter provides that he will receive
the Company's standard vacation, family medical and dental benefits and other
benefits enjoyed by the Company's officers. In addition, the offer letter
entitles Dr. Barber to certain stock option grants, of which 20,000 are
conditioned upon the completion of certain milestones.
DIRECTOR COMPENSATION
Directors are not currently compensated for serving on the Board of
Directors. Dr. Wong-Staal is a party to a consulting agreement with the Company.
Outside directors will also be eligible to receive stock options under the
Company's 1996 Stock Option/Stock Issuance Plan following the closing of this
Offering. See"-- Benefit Plans -- 1996 Stock Option/Stock Issuance Plan." See
"Scientific Advisory Board" and "Certain Transactions."
BENEFIT PLANS
1996 Stock Option/Stock Issuance Plan
The Company's 1996 Stock Option/Stock Issuance Plan (the "Plan") was
adopted by the Board of Directors and shareholders on June 27, 1996. The Plan
will become effective on the effective date of a Registration Statement on Form
S-8 covering the shares of Common Stock issuable under the Plan (which the
Company intends to file with the Commission on the effective date of this
Offering). The Plan will serve as the successor equity incentive program to the
Company's 1992 Stock Plan (the "Prior Plan"), and no further option grants or
stock issuances will be made under the Prior Plan following the effective date
of the Plan. All outstanding stock options and unvested share issuances under
the Prior Plan have been incorporated into the Plan but will continue to be
governed by the terms and conditions of the specific instruments evidencing
those options and issuances. In general, the Plan altered the provisions of the
Prior Plan by: (1) increasing the number of authorized shares by 300,000 shares
to a total of 2,600,000 authorized shares; (2) adding a Stock Issuance Program,
allowing eligible individuals to purchase shares from the Company at discounts
of up to 15% from the fair market value of such shares; and (3) adding other
miscellaneous provisions relating to corporate changes, loans, guarantees, and
tax withholding.
A total of 2,600,000 shares of Common Stock are authorized for issuance
under the Plan, including 2,300,000 shares available under the Prior Plan plus
an additional 300,000 shares. Under the Prior Plan, 2,009,000 shares were
reserved for issuance under options outstanding on July 31, 1996, leaving
465,646 shares available for future option grants or share issuances on such
date. Shares reserved for issuance under granted options which are not actually
issued will again become available for option grants under the terms of the
Plan.
The total number of shares authorized, as well as shares subject to
outstanding options, will be appropriately adjusted in the event of certain
changes to the Company's capital structure, such as stock dividends, stock
splits or other recapitalizations.
The Plan is divided into two separate programs: the option grant program
and the stock issuance program. The Plan will be administered by the Board or by
a committee of two or more Board members appointed by the Board (the "Plan
Administrator"). The Plan Administrator will have complete discretion under the
option grant program and the stock issuance program to determine which eligible
individuals are to receive option grants or stock issuances, the number of
shares subject to each such grant or issuance, the status of any granted option
as either an incentive option (which potentially qualify for certain favorable
treatment under federal tax law) or a non-statutory option, the vesting schedule
to be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. Participation in such
programs is limited to employees (including officers), directors and consultants
of the Company or its subsidiary corporations.
The exercise price for each incentive stock option must be at least 100% of
the fair market value of the stock on the date of the option grant. The exercise
price for each non-statutory option or for any share issuance under the Plan
must be at least 85% of the fair market value of the shares on the date of the
option grant or stock issuance. The purchase price for any shares may be paid in
cash, by delivery of shares of Common Stock or through a same-day sale program
pursuant to which the purchased shares will be sold immediately and a
41
<PAGE> 44
portion of the sale proceeds applied to the payment of the purchase price. The
Plan Administrator may also permit a participant to deliver a promissory note in
payment of the purchase price and any tax liability incurred in connection with
the purchase.
Options granted under the option grant program may be immediately
exercisable for all the option shares, on either a vested or unvested basis, or
may become exercisable for shares in one or more installments over the
participant's period of service. Shares issued under the stock issuance program
may either be fully-vested or subject to a vesting schedule tied to future
service. All unvested shares will be subject to repurchase by the Company, at
the original purchase price paid for such shares, upon the participant's
cessation of service prior to vesting in the shares. However, the Plan
Administrator will have full discretionary authority to accelerate the
exercisability of any outstanding option grant or the vesting of any issued
shares.
Each option granted under the Plan will have a maximum term of ten years
and will be subject to earlier termination in the event of the optionee's
cessation of service. Incentive stock options are not assignable or transferable
by the optionee except in connection with the participant's death. Other options
are not assignable or transferable without the consent of the Plan
Administrator. The participant will have no shareholder rights with respect to
the shares subject to his or her outstanding options until such options are
exercised and the purchase price is paid for the shares. The participant will,
however, have full shareholder rights with respect to any shares issued under
the Plan.
Participants subject to federal or state tax withholding in connection with
any issuance of shares under the Plan may be permitted to apply a portion of the
shares issuable upon the exercise of their outstanding options to the
satisfaction of the federal and state withholding taxes incurred in connection
with such exercise. Alternatively, such participants may be permitted to deliver
existing shares of Common Stock in satisfaction of such tax liability. In either
case, the Company will pay cash to the appropriate government authority equal to
the fair market value of the stock as a deposit of taxes withheld.
Officers and directors of the Company may also be granted special stock
appreciation rights in connection with their options under which the outstanding
options can be surrendered for cancellation upon a hostile take-over of the
Company in return for a cash distribution from the Company, based on the excess
of the price per share paid by the acquiring entity in effecting the take-over
above the option exercise price. The limited stock appreciation rights may be
given to officers and directors receiving option grants. The Plan Administrator
may grant other stock appreciation rights with respect to option grants. The
other stock appreciation rights would provide the holders with the right to
receive an appreciation distribution from the Company equal to the excess of the
fair market value (on the date such right is exercised) of the shares of Common
Stock in which the optionee is at the time vested under the surrendered option
over the aggregate exercise price payable for such shares. Such appreciation
distribution would be able to be made, at the Plan Administrator's discretion,
in shares of Common Stock valued at fair market value on the exercise date, in
cash or in a combination of cash and Common Stock.
In the event the Company is acquired, whether by merger or asset sale, each
outstanding option which is not to be assumed by the successor corporation or
replaced with a comparable option to purchase the capital stock of the successor
corporation will automatically accelerate in full, and all unvested shares will
automatically vest, except to the extent such accelerated vesting is precluded
by the terms of the agreements evidencing those unvested shares. The Plan
Administrator can apply this acceleration to options outstanding under the Prior
Plan.
The Plan provides for the automatic acceleration of outstanding options and
the vesting of unvested shares upon the following change in control events: (i)
the acquisition of more than 50% of the Company's voting stock by hostile tender
offer or (ii) a change in the composition of the Board effected through one or
more contested Board elections, except that the Plan Administrator may at the
time of a option grant or stock issuance, provide that no such acceleration
shall occur. However, no unvested options or stock issuances under the Prior
Plan will accelerate in connection with any such change in control unless the
Plan Administrator has determined to grant such acceleration.
42
<PAGE> 45
To the extent outstanding options terminate prior to exercise, the shares
subject to those options will be available for subsequent grant. In addition,
the Plan Administrator may effect cancellation/regrant programs pursuant to
which outstanding options under the option grant program (including options
incorporated from the Prior Plan) are cancelled and new options are granted for
the same or different number of option shares at an exercise price per share not
less than 85% of the fair market value of the Common Stock on the new grant
date.
The Board may amend or modify the Plan at any time, and may make any such
amendment subject to shareholder approval. The Plan will terminate ten years
from the date on which shares of the Company's Common Stock are first registered
under the Exchange Act, unless sooner terminated by the Board.
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Articles of Incorporation that
eliminate to the fullest extent permissible under California law the liability
of its directors to the Company for monetary damages. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission.
The Company's Articles of Incorporation and Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted under
California law. In addition the Company has entered into indemnification
agreements with its officers and directors which provide for indemnification in
circumstances in which indemnification is otherwise discretionary under
California law. In particular, such indemnification agreements contain
provisions that may require the Company, among other things, to indemnify the
officers and directors against certain liabilities that may arise by reason of
their status or service as directors or officers (other than liabilities arising
from intentional or knowing and culpable violations of law) and to advance their
expenses incurred as a result of any proceeding against them as to which they
could be indemnified. The Company has obtained an insurance policy covering
officers and directors for claims made that such officers or directors may
otherwise be required to pay or for which the Company is required to indemnify
them, subject to certain exclusions.
There is no pending litigation or proceeding involving a director or
officer of the Company as to which indemnification is being sought, nor is the
Company aware of any pending or threatened litigation that may result in claims
for indemnification by any director or officer.
43
<PAGE> 46
CERTAIN TRANSACTIONS
Since its incorporation in March 1992, the Company sold Preferred Stock in
private financings as follows: 2,000,000 shares of Series A Preferred Stock at a
price of $1.00 per share; and 915,477 shares of Series B-1 Preferred Stock at a
price of $5.46 per share. As of July 31, 1996, the purchasers of Preferred Stock
included the following holders of more than 5% of the Company's outstanding
stock (all shares of Preferred Stock are convertible into Common Stock on a
one-for-one basis):
<TABLE>
<CAPTION>
PREFERRED STOCK
EXECUTIVE OFFICERS, DIRECTORS ------------------------ TOTAL
AND 5% SHAREHOLDERS SERIES A SERIES B-1 CONSIDERATION
------------------------------------------------- --------- ---------- -------------
<S> <C> <C> <C>
BankAmerica Ventures............................. 2,000,000 -0- $ 2,000,000
Pfizer Inc....................................... -0- 915,477 $ 4,998,504
</TABLE>
In May 1995, Immusol and Pfizer entered into the Pfizer Agreements. In May
1995, Pfizer purchased 915,477 shares of Series B-1 Preferred Stock pursuant to
the terms of the Stock Purchase Agreement. The Series B-1 Preferred Stock will
be converted to Common Stock immediately prior to closing of the Offering. In
October 1996, Pfizer is obligated to purchase 264,600 shares of Series B-2
Preferred Stock at a price per share of $7.56. In April 1998, Pfizer is
obligated to purchase 304,300 shares of Series B-3 Preferred Stock at a price
per share of $9.86, subject to Pfizer's ability to terminate the Collaboration
Agreement and its obligations to purchase Series B-3 Preferred Stock. See
"Business -- Strategic Alliances and Licenses" and "Description of Capital
Stock."
Holders of Preferred Stock are entitled to certain registration rights with
respect to the Common Stock issued or issuable upon conversion thereof. See
"Description of Capital Stock -- Amended Shareholder Rights Agreement."
The Company has entered into certain additional transactions with its
directors and officers, as described under the captions,
"Management -- Executive Compensation", "Management -- Employment Arrangements"
and "Management -- Scientific Advisory Board."
44
<PAGE> 47
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of July 31, 1996, and as adjusted to reflect
the sale of the shares of the Common Stock offered hereby by the Company by (i)
all those known by the Company to be beneficial owners of more than 5% of its
outstanding Common Stock, (ii) each director and each of the Named Executive
Officers of the Company and (iii) all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED (2)
NUMBER OF ------------------------------------
OFFICERS, DIRECTORS AND 5% SHAREHOLDERS (1) SHARES (2) PRIOR TO OFFERING AFTER OFFERING
- ---------------------------------------------------- ---------- ----------------- --------------
<S> <C> <C> <C>
BankAmerica Ventures (3)............................ 2,000,000 20.0% 15.4%
950 Tower Lane
Suite 700
Foster City, CA 94404
Pfizer Inc. ........................................ 915,477 9.1% 7.0%
Eastern Point Road
Groton, CT 06340
Anchie Kuo (3)...................................... 2,000,000 20.0% 15.4%
Frank Litvack (4)................................... 2,777,000 27.7% 21.3%
Melvin Perelman (5)................................. 3,333 * *
Flossie Wong-Staal (6).............................. 1,432,916 13.5% 10.5%
Tsvi Goldenberg (7)................................. 2,822,000 28.1% 21.7%
Jack R. Barber (8).................................. 74,583 * *
All directors and executive officers as a group (6
persons) (9)...................................... 9,109,832 85.3% 66.6%
</TABLE>
- ---------------
* Less than 1%
(1) Except as otherwise indicated, the address of all individuals listed below
is: 3050 Science Park Road, San Diego, California 92121.
(2) Unless otherwise indicated in the footnotes to this table and subject to the
community property laws where applicable, each of the shareholders named in
this table has sole voting and investment power with respect to the shares
shown as beneficially owned by them. Share ownership in each case includes
shares issuable on exercise of certain outstanding options held by the
particular beneficial owners as described in the footnotes below. See
"Certain Transactions."
(3) Dr. Kuo, a director of the Company, is a Managing Director of BankAmerica
Ventures. Dr. Kuo disclaims beneficial ownership of these shares.
(4) Dr. Litvack is the trustee of one trust for the benefit of his children.
(5) Includes 3,333 shares issuable upon exercise of stock options that are
exercisable within 60 days of July 31, 1996.
(6) Dr. Wong-Staal is the trustee of two trusts for the benefit of her children.
Also includes 572,916 shares issuable upon exercise of stock options
exercisable within 60 days of July 31, 1996.
(7) Dr. Goldenberg is the custodian of three accounts for the benefit of his
children.
(8) Includes 74,583 shares issuable upon exercise of stock options that are
exercisable within 60 days of July 31, 1996.
(9) Includes 8,459,000 shares and 650,832 shares issuable upon exercise of stock
options that are exercisable within 60 days of July 31, 1996.
45
<PAGE> 48
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this Offering, the authorized capital stock of the
Company will consist of 30,000,000 shares of Common Stock, par value $0.001 per
share ("Common Stock"), and 5,000,000 shares of Preferred Stock, par value
$0.001 per share ("Preferred Stock").
COMMON STOCK
At June 30, 1996, there were 10,024,477 shares of Common Stock outstanding
(as adjusted to reflect the conversion of all outstanding shares of Series A and
Series B-1 Preferred Stock into Common Stock immediately prior to this Offering)
and held of record by approximately 17 shareholders. 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 shares of 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. See "Dividend Policy."
Effective immediately prior to the closing of this Offering, holders of
Preferred Stock will no longer have a liquidation preference. All outstanding
shares of Common Stock are fully paid and nonassessable. See "Possible
Anti-Takeover Effect of Certain Charter Provisions."
PREFERRED STOCK
Effective immediately prior to the closing of this Offering, the Board of
Directors will have the authority to issue up to 5,000,000 shares of the
Preferred Stock in one or more series and to fix the rights, priorities,
preferences, qualifications, limitations and restrictions, including the
dividend rates, conversion rights, voting rights, terms of redemption, terms of
sinking funds, liquidation preferences and the number of shares constituting any
series or the designation of such series, without any further vote or action by
the shareholders, which could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
rights and powers, including voting rights, of the holders of the Common Stock.
The Company anticipates that the Board of Directors, pursuant to its authority
to issue Preferred Stock as described above, will authorize the filing of a
certificate of determination following the closing of this Offering setting
forth the rights and preferences of the Series B-2 and Series B-3 Preferred
Stock, which will include among other things the right to convert such Preferred
Stock into Common Stock. The issuance of Preferred Stock may have the effect of
delaying or preventing a change in control of the Company and may adversely
affect the rights of the holders of Common Stock.
In May 1995, Pfizer purchased 915,477 shares of Series B-1 Preferred Stock
pursuant to the terms of the Stock Purchase Agreement. The Series B-1 Preferred
Stock will be converted to Common Stock immediately prior to Closing of the
Offering. In October 1996, Pfizer is obligated to purchase 264,600 shares of
Series B-2 Preferred Stock at a price per share of $7.56. In April 1998, Pfizer
is obligated to purchase 304,300 shares of Series B-3 Preferred Stock at a price
per share of $9.86, subject to Pfizer's ability to terminate the Collaboration
Agreement and its obligations to purchase Series B-3 Preferred Stock.
Effective immediately prior to the closing of this Offering, there will be
no shares of Preferred Stock outstanding.
AMENDED SHAREHOLDER RIGHTS AGREEMENT
The Company, BankAmerica Ventures and Pfizer are parties to an Amended and
Restated Shareholder Rights Agreement dated as of May 3, 1995 (the "Amended
Shareholders' Agreement"). Pursuant to the terms of the Amended Shareholders'
Agreement, Pfizer and BankAmerica Ventures, which as of the date of this
Prospectus are the holders of approximately 2,915,477 shares of Common Stock
(the "Registrable Securities"), or their permitted transferrees (the "Holders")
are entitled to certain rights with respect to the registration of such
Registrable Securities under the Securities Act. The Amended Shareholders'
Agreement provides that if the Company proposes to register any of its
securities under the Securities Act for its own account, the Holders are
entitled to notice of such registration and are entitled to include shares of
such
46
<PAGE> 49
Common Stock therein, provided, among other conditions, that the underwriters of
any such offering have the right to limit the number of shares included in such
registration. The Amended Shareholders' Agreement further provides that the
Holders at least 500,000 shares of outstanding Registrable Securities have the
right to demand on two occasions at any time after 180 days following the
effective date of the Registration Statement of which this Prospectus is a part
that the Company register all or a portion of such shares under the Securities
Act for resales by such Holders. The Holders of approximately 2,915,477 shares
of Registrable Securities may also request the Company to register such shares
on Form S-3 when such registration form becomes available for use by the Company
provided the shares registered have an aggregate market value of at least
$1,000,000. Generally, the Company is required to bear the expense of all such
registrations. The registration rights of the Holders expire on the date five
years from the closing of this Offering.
The Amended Shareholders' Agreement provides that if the valuation of the
Company upon the close of this Offering is greater than $150 million and this
Offering raises at least $15 million in the aggregate, then concurrently with
the closing of this Offering, Pfizer is obligated to purchase from the Company a
pro rata number of shares of Common Stock based upon Pfizer's original holdings.
Should such pro rata purchase by Pfizer occur, the Company intends to use the
proceeds consistent with the use of the net proceeds of this Offering as
described under "Use of Proceeds." The Amended Shareholders' Agreement does not
define a specific method for valuation of the Company. The Company expects such
valuation to be made using the then current industry standards, which would
likely require the Company to multiply the number of outstanding shares by the
price paid by the public in this Offering.
POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS
The holders of Common Stock are currently entitled to one vote for each
share held of record on all matters submitted to a vote of the shareholders
other than the election of directors, in which event any holder may demand
cumulative voting. Under cumulative voting, the holders of Common Stock are
entitled to cast for each share held the number of votes equal to the number of
directors to be elected, which is currently five. A holder may cast all of his
or her votes for one nominee or distribute them among any number of nominees for
election. Effective immediately prior to the closing of this Offering, the
Company's Articles of Incorporation will be amended to provide that the
shareholders' right to cumulative voting will terminate when the Company's
shares are qualified for trading on the Nasdaq National Market if the Company
has at least 800 shareholders as of the record date for the most recent annual
meeting of shareholders. The Company presently expects that upon consummation of
this Offering, the Common Stock will be qualified for trading on Nasdaq National
Market and the Company will have at least 800 shareholders. The absence of
cumulative voting may have the effect of limiting the ability of minority
shareholders to effect changes in the Board of Directors and, as a result, may
have the effect of deterring hostile takeovers or delaying or preventing changes
in control or management of the Company.
Effective immediately prior to the closing of this Offering, the Company's
Articles of Incorporation also will be amended to require that any action
required or permitted to be taken by shareholders of the Company must be
effected at a duly called annual or special meeting of shareholders and may not
be effected by written consent. The Company's Articles of Incorporation and
Bylaws, as amended, will further provide that newly created directorships
resulting from any increase in the authorized number of directors may only be
filled by a majority vote of the directors then in office. In addition, the
Articles of Incorporation and Bylaws of the Company, as amended, will require
that shareholders give advance notice to the Company's secretary of any
directorship nominations or other business to be brought by shareholders at any
shareholders' meeting. These provisions may have the effect of deterring hostile
takeovers or delaying changes in control or management of the Company. See "Risk
Factors -- Concentration of Ownership; Possible Anti-Takeover Effect of Certain
Charter Provisions" and "Management."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's Common Stock is
Continental Stock Transfer.
47
<PAGE> 50
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock. Future sales of substantial amounts of Common Stock in the public market
could adversely affect prevailing market prices. Upon completion of this
Offering, the Company will have outstanding 13,024,477 shares of Common Stock
(without taking into account shares of Common Stock issuable upon exercise of
outstanding options).
The 3,000,000 shares of Common Stock sold in this Offering will be freely
tradeable without restriction under the Securities Act, except for any shares
held by an "affiliate" of the Company, which will be subject to the resale
limitations of Rule 144 under the Securities Act. The remaining 10,024,477
shares held by existing shareholders were issued by the Company in private
transactions in reliance upon one or more exemptions under the Securities Act,
are "restricted securities" as that term is defined in Rule 144 promulgated
under the Securities Act and may be sold in compliance with such Rule, pursuant
to registration under the Securities Act or pursuant to an exemption therefrom.
Generally, under Rule 144, each person holding restricted securities for a
period of two years may, every three months after such two-year holding period,
sell in ordinary brokerage transactions or to market makers an amount of shares
equal to the greater of one percent of the Company's then outstanding Common
Stock (approximately 130,000 shares immediately after this Offering) or the
average weekly trading volume during the four weeks prior to the proposed sale.
In addition, sales under Rule 144 may be made only through unsolicited "broker's
transactions" or to a "market maker" and are subject to various other
conditions. The limitation on the number of shares which may be sold under the
Rule and the "broker's transaction" requirement do not apply to restricted
securities sold for the account of a person who is not and has not been an
"affiliate" of the Company (as that term is defined in the Act) during the three
months prior to the proposed sale and who has beneficially owned the securities
for at least three years. Of the outstanding shares, 7,045,000 shares are
currently freely tradeable without limitation under Rule 144, subject to the
lock-up period described below.
Shareholders owning an aggregate of 9,574,477 shares of Common Stock,
representing approximately 96% of the total shares outstanding (and 1,847,500
shares issuable upon exercise of outstanding options), including shares held by
all employees, officers and directors and certain other shareholders of the
Company, have agreed not to directly or indirectly offer, sell, contract to
sell, grant any option to purchase, transfer or otherwise dispose of or make a
distribution of any of their shares or securities exercisable or convertible
into or exchangeable for the Common Stock without the prior written consent of
PaineWebber for a period of 180 days after the date of this Prospectus.
Any employee, officer or director of or consultant to the Company who
purchased his or her shares pursuant to a written compensatory plan or contract
is entitled to rely on the resale provisions of Rule 701, which permits
nonaffiliates to sell their Rule 701 shares without having to comply with the
public information, holding period, volume limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding period restrictions. An aggregate of 124,000
shares of Common Stock issued on exercise of stock options will be tradeable
pursuant to Rule 701 subject to the lock-up period described above. Such options
were exercised at prices below the initial public offering price.
As of June 30, 1996, 124,000 shares are outstanding under the Prior Plan,
2,002,500 shares of Common Stock are subject to outstanding options and 473,500
additional shares are reserved for issuance under the Company's stock option
plans. See "Management -- Benefit Plans." The Company intends to file a
registration statement under the Securities Act on Form S-8 covering an
aggregate of approximately 2,600,000 shares of Common Stock reserved for
issuance under the Plan. Such registration statement is expected to be filed on
the effective date of this Offering and will automatically become effective upon
filing. Accordingly, shares registered under such registration statement will be
available for resale by nonaffiliates in the public market, subject to any
vesting restrictions with the Company or any contractual restrictions.
48
<PAGE> 51
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom PaineWebber
Incorporated, Needham & Company, Inc. and Sutro & Co. Incorporated are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the Underwriting Agreement among the Company and the
Underwriters (the "Underwriting Agreement"), to purchase from the Company, and
the Company has agreed to sell to the Underwriters, the number of shares of
Common Stock set forth opposite their names below at the price per share set
forth on the cover page of this Prospectus under "Proceeds to Company":
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
------------------------------------------------------------------ ----------
<S> <C>
PaineWebber Incorporated..........................................
Needham & Company, Inc............................................
Sutro & Co. Incorporated..........................................
---------
Total................................................... 3,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters to purchase the shares of Common Stock listed above are subject to
certain conditions. The Underwriters are committed to purchase all of the shares
of Common Stock offered by this Prospectus (other than those covered by the
over-allotment option described below), if any are purchased. The Underwriting
Agreement provides that, in the event of a default by an Underwriter, in certain
circumstances, the purchase commitments of non-defaulting Underwriters may be
increased or the Underwriting Agreement may be terminated.
The Representatives have advised the Company that the Underwriters propose
to offer the shares of Common Stock to the public at the initial public offering
price set forth on the cover page of this Prospectus and to selected dealers at
such price less a concession not in excess of $ per share, and that the
Underwriters and such dealers may reallow a concession to other dealers,
including the Underwriters, not in excess of $ per share. After the
commencement of the public offering of the shares of Common Stock, the initial
public offering price, the concessions to selected dealers and the discount to
other dealers may be changed by the Representatives.
The Company has granted the Underwriters an option, expiring at the close
of 30 business days after the date of this Prospectus, to purchase up to 450,000
additional shares of Common Stock from the Company at the initial public
offering price set forth on the cover page of this Prospectus less the
underwriting discounts and commissions. 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 of Common
Stock as the percentage it was obligated to purchase pursuant to the
Underwriting Agreement. The Underwriters may exercise the option only to cover
over-allotments, if any, made in connection with the offering of the shares of
Common Stock offered hereby.
The Company, its directors and all employees and certain of the Company's
current shareholders have agreed not to offer, sell or otherwise dispose of any
shares of Common Stock for a period of 180 days after the date of this
Prospectus without the prior written consent of PaineWebber. See "Shares
Eligible for Future Sale."
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
49
<PAGE> 52
The Underwriters do not intend to confirm sales of the Common Stock offered
hereby to any accounts over which they exercise discretionary authority.
Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price of the Common Stock was determined by
negotiations between the Company and the Representatives. Among the factors
considered in determining the initial public offering price were the technology
base of the Company, the quality and experience of the Company's scientific
talent, the previous experience of the Company's executive officers, the medical
and research applications and potential markets to be addressed by the Company's
product development programs, the market prices of publicly traded stock of
comparable companies in recent periods and the general condition of the
securities markets at the time of the Offering.
The initial public offering price set forth on the cover page of this
Prospectus should not be considered an indication of the actual value of the
Common Stock. Such price is subject to change as a result of market conditions
and other factors and no assurance can be given that the Common Stock can be
sold.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California. Certain legal
matters will be passed upon for the Underwriters by Shearman & Sterling, San
Francisco, California.
EXPERTS
The financial statements of Immusol, Inc. at December 31, 1994 and 1995 and
for each of the three years in the period ended December 31, 1995 appearing in
this Prospectus have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon appearing elsewhere herein and are included in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (the "Registration Statement") under the Securities Act, with respect to the
Common Stock offered hereby. This Prospectus, which is part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules filed therewith. For further
information with respect to the Company and the Common Stock offered hereby,
reference is hereby made to such Registration Statement and to the exhibits and
schedules filed therewith. Statements contained in this Prospectus regarding the
contents of any contract or other document are not necessarily complete, and in
each instance reference is made to the copy of such contract or document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the principal
office of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the regional offices of the Commission located at Seven World Trade Center,
Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and copies of all or any part
thereof may be obtained at prescribed rates from the Commission's Public
Reference Section at such addresses. Also, the Commission maintains a World Wide
Web site on the Internet at http://www.sec.gov that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Upon approval of the Common Stock for
quotation on the Nasdaq National Market, such reports, proxy and information
statements and other information also can be inspected at the office of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
50
<PAGE> 53
IMMUSOL, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors...................................... F-2
Balance Sheets at December 31, 1994 and 1995 and at June 30, 1996 (Unaudited).......... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and for
the six months ended June 30, 1995 and 1996 (Unaudited).............................. F-4
Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995
and for the six months ended June 30, 1996 (Unaudited)............................... F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994 and 1995 and for
the six months ended June 30, 1995 and 1996 (Unaudited).............................. F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>
F-1
<PAGE> 54
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Immusol, Inc.
We have audited the accompanying balance sheets of Immusol, Inc. as of
December 31, 1994 and 1995, and the related statements of operations,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. 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 Immusol, Inc. at December
31, 1994 and 1995, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
San Diego, California
June 27, 1996
F-2
<PAGE> 55
IMMUSOL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED PRO
FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY AT
------------------------- JUNE 30,
1994 1995 1996
---------- ---------- JUNE 30, -------------------
1996
-----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $1,113,904 $1,414,163 $ 1,628,235
Short-term investments (Note 3)... -- 5,453,082 6,056,549
Other current assets.............. 204,475 145,700 140,133
---------- ---------- ----------
Total current assets................ 1,318,379 7,012,945 7,824,917
Property and equipment, net (Note
4)................................ 56,011 282,135 302,023
Other assets........................ 110,521 48,657 312,951
---------- ---------- ----------
$1,484,911 $7,343,737 $ 8,439,891
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................. $ 269,046 $ 499,783 $ 557,506
Accrued expenses.................. -- 18,113 95,533
Deferred contract revenue (Note
2)............................. -- 436,330 436,330
Current portion of capital lease
obligations.................... -- 10,306 10,833
---------- ---------- ----------
Total current liabilities........... 269,046 964,532 1,100,202
Capital lease obligations, less
current portion (Note 5).......... -- 37,874 32,322
Long-term debt (Note 5)............. -- -- 152,725
Commitments (Note 5)
Shareholders' equity (Note 6):
Preferred stock, $.001 par value;
3,491,700 shares authorized
(5,000,000 shares pro forma),
issuable in series:
Series A convertible; 2,000,000
shares authorized, issued and
outstanding (no shares pro
forma), liquidation preference
of $2,000,000.................. 2,000 2,000 2,000 $ --
Series B-1 convertible; 1,491,700
shares authorized; 915,477
shares issued and outstanding
(no shares pro forma),
liquidation preference of
$4,998,504..................... -- 915 915 --
Common stock, $.001 par value;
20,000,000 shares authorized,
7,045,000, 7,069,000 and
7,109,000 shares issued and
outstanding at December 31,
1994 and 1995 and June 30,
1996, respectively (30,000,000
shares authorized and
10,024,477 shares issued and
outstanding pro forma)......... 7,045 7,069 7,109 10,024
Deferred compensation............. -- -- (1,445,377) (1,445,377)
Additional paid-in capital........ 2,103,955 7,102,840 8,602,100 8,602,100
Accumulated deficit............... (897,135) (771,493) (12,105) (12,105)
---------- ---------- ---------- ----------
Total shareholders' equity.......... 1,215,865 6,341,331 7,154,642 $ 7,154,642
==========
---------- ---------- ----------
$1,484,911 $7,343,737 $ 8,439,891
========== ========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 56
IMMUSOL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- --------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total revenue (Note 2)..... $ -- $ 204,475 $ 3,174,515 $ 621,937 $ 2,941,489
Costs and expenses:
Research and
development......... 157,101 492,513 2,831,860 1,246,189 1,982,939
General and
administrative...... 47,948 127,360 487,234 238,491 396,571
--------- --------- ----------- --------- -----------
Total costs and expenses... 205,049 619,873 3,319,094 1,484,680 2,379,510
--------- --------- ----------- --------- -----------
Income (loss) from
operations............... (205,049) (415,398) (144,579) (862,743) 561,979
Interest income............ 50,743 57,798 275,564 99,230 200,795
Interest expense........... -- -- (5,343) (2,326) (3,386)
--------- --------- ----------- --------- -----------
Net income (loss).......... $(154,306) $(357,600) $ 125,642 $(765,839) $ 759,388
========= ========= =========== ========= ===========
Pro forma net income (loss)
per share................ $ (0.02) $ (0.05) $ 0.01 $ (0.10) $ 0.06
========= ========= =========== ========= ===========
Shares used in computing
pro forma net income
(loss) per share......... 7,342,653 7,471,420 11,830,427 7,479,860 12,404,535
========= ========= =========== ========= ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 57
IMMUSOL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
PREFERRED STOCK
-------------------------------------
SERIES A SERIES B COMMON STOCK ADDITIONAL
------------------ ---------------- ------------------ PAID-IN NOTE DEFERRED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION
--------- ------ ------- ------ --------- ------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992... 2,000,000 $2,000 -- $ -- 6,045,000 $6,045 $2,054,955 $ -- $ --
Issuance of common stock..... -- -- -- 1,000,000 1,000 49,000 (50,000) --
Reduction in note
receivable................. -- -- -- -- -- -- -- 28,108 --
Net loss..................... -- -- -- -- -- -- -- -- --
--------- ------ ------- ---- --------- ------ ---------- -------- ---------
Balance at December 31, 1993... 2,000,000 2,000 -- -- 7,045,000 7,045 2,103,955 (21,892) --
Reduction in note
receivable................. -- -- -- -- -- -- -- 21,892 --
Net loss..................... -- -- -- -- -- -- -- -- --
--------- ------ ------- ---- --------- ------ ---------- -------- ---------
Balance at December 31, 1994... 2,000,000 2,000 -- -- 7,045,000 7,045 2,103,955 -- --
Issuance of common stock..... -- -- -- -- 24,000 24 1,296 -- --
Issuance of Series B
convertible preferred
stock...................... -- -- 915,477 915 -- -- 4,997,589 -- --
Net income................... -- -- -- -- -- -- -- -- --
--------- ------ ------- ---- --------- ------ ---------- -------- ---------
Balance at December 31, 1995... 2,000,000 2,000 915,477 915 7,069,000 7,069 7,102,840 -- --
Issuance of common stock
(unaudited)................ -- -- -- -- 40,000 40 3,960 -- --
Deferred compensation related
to issuance of stock
options (unaudited)........ -- -- -- -- -- -- 1,495,300 -- (1,495,300)
Amortization of deferred
compensation (unaudited)... -- -- -- -- -- -- -- -- 49,923
Net income (unaudited)....... -- -- -- -- -- -- -- -- --
--------- ------ ------- ---- --------- ------ ---------- -------- ---------
Balance at June 30, 1996
(unaudited).................. 2,000,000 $2,000 915,477 $915 7,109,000 $7,109 $8,602,100 $ -- $(1,445,377)
========= ====== ======= ==== ========= ====== ========== ======== =========
<CAPTION>
TOTAL
ACCUMULATED SHAREHOLDERS'
DEFICIT EQUITY
----------- -------------
<S> <C> <C>
Balance at December 31, 1992... $(385,229) $ 1,677,771
Issuance of common stock..... -- --
Reduction in note
receivable................. -- 28,108
Net loss..................... (154,306) (154,306)
--------- ----------
Balance at December 31, 1993... (539,535) 1,551,573
Reduction in note
receivable................. -- 21,892
Net loss..................... (357,600) (357,600)
--------- ----------
Balance at December 31, 1994... (897,135) 1,215,865
Issuance of common stock..... -- 1,320
Issuance of Series B
convertible preferred
stock...................... -- 4,998,504
Net income................... 125,642 125,642
--------- ----------
Balance at December 31, 1995... (771,493) 6,341,331
Issuance of common stock
(unaudited)................ -- 4,000
Deferred compensation related
to issuance of stock
options (unaudited)........ -- --
Amortization of deferred
compensation (unaudited)... -- 49,923
Net income (unaudited)....... 759,388 759,388
--------- ----------
Balance at June 30, 1996
(unaudited).................. $ (12,105) $ 7,154,642
========= ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 58
IMMUSOL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30
------------------------------------- -----------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)................... $ (154,306) $ (357,600) $ 125,642 $ (765,839) $ 759,388
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization..... 730 7,917 50,395 15,212 40,942
Stock issued for consulting
services..................... 28,108 21,892 -- -- --
Stock compensation expense..... -- -- -- -- 49,923
Changes in operating assets and
liabilities:
Other current assets......... -- (204,475) 58,775 (65,899) 5,567
Accounts payable............. 50,193 78,745 230,737 186,120 57,724
Accrued expenses............. -- -- 18,113 115,887 77,420
Deferred contract revenue.... -- -- 436,330 773,438 --
------- ------- ------- ------ ------
Net cash provided by (used in)
operating activities.............. (75,275) (453,521) 919,992 258,919 990,964
INVESTING ACTIVITIES
Purchases of property and
equipment......................... -- (62,282) (219,012) (24,106) (60,648)
Purchases of short-term
investments....................... -- -- (6,453,082) (2,405,265) (1,903,467)
Proceeds from maturities of
short-term investments............ -- -- 1,000,000 -- 1,300,000
Other assets........................ -- (109,490) 61,864 (1,000) (264,476)
------- ------- ------- ------ ------
Net cash used in investing
activities........................ -- (171,772) (5,610,230) (2,430,371) (928,591)
FINANCING ACTIVITIES
Payments on capital lease
obligations....................... -- -- (9,327) -- (5,026)
Proceeds from long-term debt........ -- -- -- -- 152,725
Proceeds from issuance of Series B
convertible preferred stock....... -- -- 4,998,504 4,998,504 --
Proceeds from issuance of common
stock............................. -- -- 1,320 1,320 4,000
------- ------- ------- ------ ------
Net cash provided by financing
activities........................ -- -- 4,990,497 4,995,277 151,699
------- ------- ------- ------ ------
Net increase (decrease) in cash and
cash equivalents.................. (75,275) (625,293) 300,259 2,823,825 214,072
Cash and cash equivalents at
beginning of period............... 1,814,472 1,739,197 1,113,904 1,113,904 1,414,163
------- ------- ------- ------ ------
Cash and cash equivalents at end of
period............................ $1,739,197 $1,113,904 $ 1,414,163 $3,937,729 $1,628,235
======= ======= ======= ====== ======
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING
ACTIVITIES:
Property and equipment acquired
under capital lease obligations... $ -- $ -- $ 57,507 $ 57,507 $ --
======= ======= ======= ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid....................... $ -- $ -- $ 5,343 $ 2,326 $ 3,386
======= ======= ======= ====== ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 59
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND FOR THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Immusol, Inc. (the "Company") was incorporated in California on March 6,
1992. The Company is a biopharmaceutical company dedicated to the discovery,
development and commercialization of products based on its proprietary
technologies in the area of ribozyme gene therapy and ribozyme-mediated gene
functional analysis.
INTERIM FINANCIAL INFORMATION
The financial statements at June 30, 1996 and for the six-month periods
ended June 30, 1995 and 1996 are unaudited, but include all adjustments
(consisting only of normal recurring adjustments) which management considers
necessary for a fair statement of the financial position at such dates and the
operating results and cash flows for those periods. Results for interim periods
are not necessarily indicative of results for the entire year or any future
periods.
CONCENTRATION OF CREDIT RISK
The Company invests its excess cash in U.S. Government securities and debt
instruments of corporations with strong credit ratings. The Company has
established guidelines relative to diversification of its cash investments and
their maturities that should maintain liquidity and safety. The Company has not
experienced any losses on these investments.
In 1995, 92% of the Company's revenue was related to a single collaborative
research and development agreement with Pfizer, Inc., a related party (Note 2).
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of
three months or less from the date of purchase that are readily convertible into
cash to be cash equivalents.
SHORT-TERM INVESTMENTS
The Company accounts for its short-term investments in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for
Certain Investments in Debt and Equity Securities. In accordance with SFAS No.
115, available-for-sale securities are carried at fair value, with unrealized
gains and loses, net of tax, reported in shareholders' equity. At December 31,
1995 and June 30, 1996, the net unrealized losses were not material.
The amortized cost of debt securities in this category is adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in investment income. Realized gains and losses and
declines in value judged to be other-than-temporary on available-for-sale
securities are included in investment income. The cost of securities sold is
based on the specific identification method. Interest on securities classified
as available-for-sale is included in interest income.
PROPERTY AND EQUIPMENT
Property and equipment consist primarily of laboratory and office equipment
and leasehold improvements and are stated at cost. Depreciation and amortization
are calculated using the straight-line method over an estimated useful life of
five years, or the lease term, as appropriate.
F-7
<PAGE> 60
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
ACCOUNTING STANDARD ON IMPAIRMENT OF LONG-LIVED ASSETS
In March 1995, the Financial Accounting Standards Board issued SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which requires impairment losses to be recorded on
long-lived assets used in operations when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the assets' carrying amount. SFAS No. 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted SFAS No. 121 effective January 1, 1996 and such adoption had no
effect on the financial statements.
RESEARCH AND DEVELOPMENT REVENUE
Revenue under collaborative research agreement is recognized over the term
of the agreement or upon the achievement of certain milestones. Payments
received in excess of amounts earned are classified as deferred revenue.
STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, Accounting for Stock Issued to Employees (APB 25) and related
Interpretations in accounting for its employee stock options. Under APB 25,
because the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.
HISTORICAL NET INCOME (LOSS) PER SHARE
Except as noted below, historical net income (loss) per share is computed
using the weighted average number of common shares outstanding. Common
equivalent shares from stock options, warrants and convertible preferred stock
are also included in the shares used in computing net income per share. Such
common equivalent shares are excluded from the computation of net loss per share
as their effect is antidilutive. In addition, pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins, common and common equivalent
shares issued during the period beginning twelve months prior to the initial
filing of the proposed public offering at prices substantially below the initial
public offering price have been included in the calculation of historical net
income (loss) per share as if they were outstanding for all periods presented
(using the treasury stock method and the assumed public offering price for stock
options and warrants and the if-converted method for convertible preferred
stock).
Historical net income (loss) per share information is as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net income (loss) per share................... $(0.02) $(0.05) $0.01 $(0.10) $0.06
====== ====== ======= ====== =======
Shares used in computing net income (loss) per
share (in thousands)........................ 7,343 7,471 11,830 7,480 12,405
====== ====== ======= ====== =======
</TABLE>
PRO FORMA NET INCOME (LOSS) PER SHARE AND UNAUDITED PRO FORMA SHAREHOLDERS'
EQUITY
Pro forma net income per share is unchanged from historical net income per
share as described above. Pro forma net loss per share has been computed as
described above and also gives effect to the conversion of the preferred shares,
which will automatically convert upon completion of the Company's initial
offering, using the if-converted method from the original date of issuance. If
the offering contemplated by this Prospectus is consummated, all of the
convertible preferred stock outstanding as of the closing date will
automatically be
F-8
<PAGE> 61
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
converted into 2,915,477 shares of common stock, based on the shares of
convertible preferred stock outstanding at June 30, 1996. Unaudited pro forma
shareholders' equity at June 30, 1996, as adjusted for the conversion of
preferred stock, is disclosed in the accompanying balance sheet.
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.
2. COLLABORATIVE RESEARCH AND DEVELOPMENT AGREEMENT
In May 1995, the Company and Pfizer, Inc. ("Pfizer") entered into a
Collaborative Agreement, a License and Royalty Agreement and a Preferred Stock
Agreement (together, the "Pfizer Agreements") for ribozyme-based gene therapy
useful in treating or preventing HIV infection. Pursuant to the Preferred Stock
Agreement, Pfizer purchased 915,477 shares of the Company's Series B-1 Preferred
Stock at $5.46 per share. In addition, the Pfizer Agreements provide for
additional purchases of Series B-2 Preferred Stock of 264,600 shares at $7.56
per share and Series B-3 Preferred Stock of 304,300 shares at $9.86 per share in
October 1996 and April 1998, respectively. Under the Pfizer Agreements, Pfizer
has agreed to provide research support, make milestone payments and equity
investments which could total up to $49 million through May 2000. In addition,
Pfizer has agreed to fund certain clinical trial and patent filing and
maintenance costs. Amounts received by Immusol under the Pfizer Agreements
totalled approximately $11.2 million through June 30, 1996.
The agreement may be terminated at certain intervals with advance notice
upon payment of a predetermined amount to the Company.
3. SHORT-TERM INVESTMENTS
Investments consist of debt securities with maturities greater than three
months at the date of purchase.
The following is a summary of available-for-sale securities at cost (which
approximates market):
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
U.S. treasury notes........................................ $ 801,215 $ --
Corporate debt securities.................................. 4,651,867 6,056,549
---------- ----------
Short-term investments................................ $5,453,082 $6,056,549
========== ==========
</TABLE>
Maturities of short-term investments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1995 1996
------------ ----------
<S> <C> <C>
1996....................................................... $3,054,414 $ 755,747
1997....................................................... 2,398,668 3,788,297
1998....................................................... -- 1,512,505
---------- ----------
$5,453,082 $6,056,549
========== ==========
</TABLE>
F-9
<PAGE> 62
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Laboratory equipment................................ $60,249 $294,101 $338,149
Office equipment.................................... 3,864 27,448 44,049
Leasehold improvements.............................. -- 18,719 18,719
------- -------- --------
64,113 340,268 400,917
Less accumulated depreciation and amortization...... (8,102) (58,133) (98,894)
------- -------- --------
$56,011 $282,135 $302,023
======= ======== ========
</TABLE>
Included in laboratory equipment is $57,507 of equipment under a capital
lease. Accumulated depreciation related to this asset at December 31, 1995 and
June 30, 1996 amounted to $12,459 and $17,253, respectively.
5. COMMITMENTS
LEASE OBLIGATIONS
The Company leased its offices and laboratory facility under a
noncancellable operating lease which expired in June, 1996. Thereafter, the
Company entered into a new facilities noncancellable operating lease which
expires in June, 2001. These leases require the Company to pay for all
maintenance, insurance and property taxes. The Company has the option to
terminate the lease after two years with prior notice.
The Company leases equipment under both capital and operating lease
agreements.
Future minimum payments at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CAPITAL LEASE OPERATING
OBLIGATIONS LEASES
------------- ---------
<S> <C> <C>
Year ending December 31,
1996.................................................... $ 14,670 $192,526
1997.................................................... 14,670 61,626
1998.................................................... 14,670 22,586
1999.................................................... 14,670 --
----- ------
58,680 $276,738
======
Less amount representing interest......................... (10,500)
-----
Present value of net minimum payments..................... 48,180
Less current portion...................................... (10,306)
-----
Long-term capital lease obligations....................... $ 37,874
=====
</TABLE>
Rent expense was approximately $67,000 and $318,000 for the years ended
December 31, 1994 and 1995, respectively, and $151,000 and $178,000 for the six
months ended June 30, 1995 and 1996, respectively.
LICENSING AND RESEARCH AGREEMENT
The Company has entered into a licensing agreement with a university under
which it has obtained exclusive licenses to technology, or technology claimed,
in certain patents or patent applications. The Company is required to make
payments of royalties on future sales of products which employ the technology,
F-10
<PAGE> 63
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
or technology claimed, under this agreement. Upon commercial sale of licensed
products, the Company is required to pay certain minimum royalty payments.
LONG-TERM DEBT
In April 1996, the Company executed an equipment term loan with a financial
institution. The Company can borrow up to $500,000 through December 31, 1996 at
the Prime Rate plus 1.5% (9.75% at June 30, 1996), when the balance at that date
converts to a 42 month term loan with monthly installments including interest at
a fixed rate determined at the U.S. Treasury Note rate plus 4.25%. The note
payable is fully collateralized by the related equipment. As of June 30, 1996,
the Company had borrowings of $152,725 against this facility.
6. SHAREHOLDERS' EQUITY
COMMON STOCK
The majority of the outstanding shares of common stock have been issued to
founders and directors of, and consultants to, the Company. In connection with a
certain stock purchase agreement, the Company has the option to repurchase, at
the original issue price, the unvested shares in the event of termination of
services. Shares issued under this agreement vest over a period no longer than
five years. At December 31, 1995 and June 30, 1996, 395,833 and 333,333 shares,
respectively, were subject to repurchase by the Company.
CONVERTIBLE PREFERRED STOCK
The holders of Series A and Series B-1 preferred stock are entitled to
receive noncumulative dividends at the rate of $0.08 and $0.44 per share,
respectively, per annum, or if greater, an amount equal to that paid on any
other outstanding shares of the Company, payable when, as and if, declared by
the Board of Directors. As of December 31, 1995, no dividends have been
declared. The Series A and Series B-1 preferred stock, which have equal priority
over any other stock issuance, have liquidation preferences of $1.00 and $5.46
per share, respectively, plus any declared but unpaid dividends. The Company
currently does not anticipate paying any dividends within the foreseeable
future.
At the option of the holder, the Series A and Series B-1 preferred stock
are convertible into common shares on a one-for-one basis, subject to adjustment
for antidilution, and will automatically convert into common shares concurrent
with the closing of qualified underwritten public offering of common stock. The
preferred shareholders have voting rights equal to the common shares they would
own upon conversion. The Company has reserved 2,915,477 shares of common stock
for issuance upon the conversion of the Series A and Series B convertible
preferred stock.
1996 STOCK OPTION PLAN/STOCK ISSUANCE PLAN
In 1992, the Company adopted the 1992 Stock Plan. During 1995, the Plan was
amended to increase the number of shares available under the Plan to 2,300,000.
The Company's 1996 Stock Option/Stock Issuance Plan (the "Plan") was adopted by
the Board of Directors and shareholders on June 27, 1996. The Plan will serve as
the successor equity incentive program to the Company's 1992 Stock Plan (the
"Prior Plan"), and no further option grants or stock issuances will be made
under the Prior Plan following the effective date of the Plan. All outstanding
stock options and unvested share issuances under the Prior Plan have been
incorporated into the Plan but will continue to be governed by the terms and
conditions of the specific instruments evidencing those options and issuances. A
total of 2,600,000 shares of Common Stock are authorized for issuance under the
Plan, including 2,300,000 shares available under the Prior Plan plus an
additional 300,000 shares.
The Plan provides for the grant of incentive and nonstatutory stock
options, stock bonuses and rights to purchase stock to employees, directors or
consultants of the Company. The Plan provides that incentive stock
F-11
<PAGE> 64
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
options will be granted only to employees at no less than the fair value of the
Company's common stock (no less than 85% of the fair value for nonstatutory
stock options), as determined by the Board of Directors at the date of the
grant. Options expire no more than ten years after the date of grant, or earlier
if the employment terminates.
The purchase price under each stock purchase agreement resulting from stock
bonuses and purchase rights granted will be at no less than 85% of the fair
value of the Company's common stock on the award date. Shares of stock sold or
awarded under the Plan may be subject to a repurchase option by the Company as
determined by the Board of Directors.
The options vest over a period not to exceed five years. The following
table summarizes stock option activity:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AVERAGE
NUMBER OF PRICE PER EXERCISE
SHARES SHARE PRICE
--------- ------------- --------
<S> <C> <C> <C>
Outstanding at December 31, 1992................. 30,000 $.10 $.10
Granted.......................................... 60,000 $.05 $.07
---------
Outstanding at December 31, 1993................. 90,000 $.05 - $.10 $.07
Granted.......................................... 1,024,000 $.05 - $.055 $.05
---------
Outstanding at December 31, 1994................. 1,114,000 $.05 - $.055 $.05
Granted.......................................... 835,000 $.05 - $.30 $.10
Exercised........................................ (24,000) $.055 $.09
Cancelled........................................ (170,000) $.05 - $.10 $.09
---------
Outstanding at December 31, 1995................. 1,755,000 $.05 - $.30 $.09
Granted.......................................... 287,500 $.60 $.10
Exercised........................................ (40,000) $.10 $.10
---------
Outstanding at June 30, 1996..................... 2,002,500 $.05 - $.60 $.10
=========
</TABLE>
At December 31, 1995, options exercisable and available for future grant
totalled 586,208 and 461,000, respectively. At June 30, 1996, options
exercisable and available for future grant totalled 781,656 and 473,500,
respectively.
DEFERRED COMPENSATION
The Company records and amortizes over the related vesting periods deferred
compensation representing the difference between the exercise price of stock
options granted and the deemed fair value (for accounting purposes) of the
Company's common stock at the date of grant. Stock options vest over a period
not to exceed five years. Shares included in the computation of deferred
compensation include option grants to employees, directors and consultants of
the Company from November 1995 through May 1996.
7. INCOME TAXES
Significant components of the Company's deferred tax assets are shown
below. A valuation allowance of $269,000 has been recognized to offset the
deferred tax assets as realization of such assets is uncertain.
F-12
<PAGE> 65
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards........................... $ 240,000 $ 290,000
Research and development credits........................... 35,000 35,000
Other -- net............................................... (6,000) (3,000)
------ ------
Net deferred tax assets...................................... 269,000 322,000
Valuation allowance for deferred tax assets.................. (269,000) (322,000)
------ ------
Total deferred tax assets.................................... $ -- $ --
====== ======
</TABLE>
A reconciliation between the amount of tax computed by multiplying income
(loss) before taxes by the applicable statutory rates and the amount of reported
taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1993 1994 1995
-------- --------- --------
<S> <C> <C> <C>
Federal income taxes at 34%....................... $(52,000) $(122,000) $ 43,000
State income taxes, net of federal tax benefit.... (9,000) (21,000) 8,000
Nondeductible expenses............................ -- 10,000 2,000
-------- --------- --------
(61,000) (133,000) 53,000
Change in valuation allowance..................... 61,000 133,000 (53,000)
-------- --------- --------
$ -- $ -- $ --
======== ========= ========
</TABLE>
At December 31, 1995, the Company had federal and California tax net
operating loss carryforwards of approximately $592,000 and $646,000,
respectively. The federal and California tax loss carryforwards will begin
expiring in 2008 and 1999, respectively, unless previously utilized. The Company
also has federal and California research and development tax credit
carryforwards totalling $28,000 and $11,000, respectively, which will expire
beginning in 2009 unless previously utilized.
Pursuant to Internal Revenue Code Sections 382 and 383, use of the
Company's net operating loss and credit carryforwards may be limited because of
cumulative changes in ownership of more than 50% which occurred within a three
year period. However, the Company does not believe such limitation will have a
material impact upon the utilization of these carryforwards.
8. PROFIT SHARING AND 401(k) PLAN
All employees of the Company are eligible to participate in the profit
sharing and 401(k) Plan. Profit sharing contributions, if any, are based on a
discretionary amount determined by the Company and are allocated to each
participant based on the relative compensation of the participant, subject to
certain limitations, to the compensation of all participants. The 401(k)
matching contributions, if any, are determined by the Company in its sole
discretion. To date, there have been no Company contributions under the Plan.
F-13
<PAGE> 66
- ------------------------------------------------------------
- ------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY
OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 5
Use of Proceeds............................ 14
Dividend Policy............................ 14
Capitalization............................. 15
Dilution................................... 16
Selected Financial Data.................... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 18
Business................................... 21
Management................................. 36
Certain Transactions....................... 44
Principal Shareholders..................... 45
Description of Capital Stock............... 46
Shares Eligible for Future Sale............ 48
Underwriting............................... 49
Legal Matters.............................. 50
Experts.................................... 50
Additional Information..................... 50
Index to Financial Statements.............. F-1
</TABLE>
------------------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES 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.
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
3,000,000 SHARES
LOGO IMMUSOL
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
------------------------
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 67
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the Common Stock being registered. All the amounts shown are estimates,
except for the registration fee, the Nasdaq National Market filing fee and the
NASD fee.
<TABLE>
<S> <C>
Registration fee.................................................. $ 13,087
Nasdaq National Market fee........................................ 22,250
NASD fee.......................................................... 4,295
Blue Sky fees and expenses........................................ 22,500
Printing and engraving expenses................................... 100,000
Legal fees and expenses........................................... 250,000
Accounting fees and expenses...................................... 100,000
Transfer Agent and Registrar fees................................. 5,000
Miscellaneous expenses............................................ 82,868
--------
Total................................................... $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) Section 317 of the California General Corporation Law provides for the
indemnification of officers and directors of the Company against expenses,
judgments, fines and amounts paid in settlement under certain conditions and
subject to certain limitations.
(b) Article VI of the Bylaws of the Company provides that the Company shall
have power to indemnify any person who is or was an agent of the Company as
provided in Section 317 of the California General Corporation Law. The rights to
indemnity thereunder continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred by a
director or officer in defending a civil or criminal action, suit or proceeding
by reason of the fact that he or she is or was a director or officer of the
Company (or was serving at the Company's request as a director or officer of
another corporation) shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that he or she is not entitled to be indemnified by the
Company as authorized by the relevant section of the California General
Corporation Law.
(c) Article IV of the Company's Articles of Incorporation provides that the
liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Accordingly,
a director will not be liable for monetary damages for breach of duty to the
Company or its shareholders in any action brought by or in the right of the
Company. However, a director remains liable to the extent required by law (i)
for acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) for acts or omissions that a director believes
to be contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) for any
transaction from which a director derived an improper personal benefit, (iv) for
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders, (v) for
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the Company or its
shareholders, (vi) for any act or omission occurring prior to the date when the
exculpation provision became effective and (vii) for any act or omission as an
officer, notwithstanding that the officer is also a director or that his or her
actions, if negligent or improper, have been ratified by the directors. The
effect of the provisions in the Articles of Incorporation is to eliminate the
rights of the Company and its shareholders (through shareholders' derivative
suits on behalf of the Company) to recover monetary damages against a director
for
II-1
<PAGE> 68
breach of duty as a director, including breaches resulting from negligent
behavior in the context of transactions involving a change of control of the
Company or otherwise, except in the situations described in clauses (i) through
(vii) above. These provisions will not alter the liability of directors under
federal securities laws.
(d) Pursuant to authorization provided under the Articles of Incorporation,
in connection with this Offering, the Company will enter into indemnification
agreements with each of its directors and officers. Generally, the
indemnification agreements attempt to provide the maximum protection permitted
by California law as it may be amended from time to time. Moreover, the
indemnification agreements provide for certain additional indemnification. Under
such additional indemnification provisions, however, an individual will not
receive indemnification for judgments, settlements or expenses if he or she is
found liable to the Company (except to the extent the court determines he or she
is fairly and reasonably entitled to indemnity for expenses), for settlements
not approved by the Company or for settlements and expenses if the settlement is
not approved by the court. The indemnification agreements provide for the
Company to advance to the individual any and all reasonable expenses (including
legal fees and expenses) incurred in investigating or defending any such action,
suit or proceeding. In order to receive an advance of expenses, the individual
must submit to the Company copies of invoices presented to him or her for such
expenses. Also, the individual must repay such advances upon a final judicial
decision that he or she is not entitled to indemnification. The Company's Bylaws
contain a provision of similar effect relating to advancement of expenses to a
director or officer, subject to an undertaking to repay if it is ultimately
determined that indemnification is unavailable.
(e) The Underwriting Agreement (Exhibit 1.1 hereto) contains provisions by
which the Underwriters have agreed to indemnify the Company, each person, if
any, who controls the Company within the meaning of Section 15 of the Securities
Act, each director of the Company, and each officer of the Company who signs
this Registration Statement, with respect to information furnished in writing by
or on behalf of the Underwriters for use in the Registration Statement.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since May 31, 1993, the Company has sold and issued the following
unregistered securities:
(1) From May 31, 1993 to May 31, 1996, the Company issued an aggregate
of 2,036,500 options to purchase shares of Common Stock under the Prior
Plan and an aggregate of 64,000 shares of Common Stock were issued through
the exercise of options granted under the Prior Plan. For additional
information concerning these transactions, reference is made to the
information contained under the caption "Management -- Benefit Plans" in
the form of the Prospectus included herein.
(2) On May 3, 1995, the Company issued an aggregate of 915,477 shares
of Series B-1 Preferred Stock to Pfizer Inc. for an aggregate consideration
of $4,998,504.
The sales and issuances of securities in the above transactions were deemed
to be exempt under the Act by virtue of Section 4(2) thereof and/or Regulation D
and Rule 701 promulgated thereunder as transactions not involving any public
offering. The purchasers in each case represented their intention to acquire the
securities for investment only and not with a view to the distribution thereof.
Appropriate legends were affixed to the stock certificates issued in such
transactions. Similar representations of investment intent were obtained and
similar legends imposed in connection with any subsequent transfers of any such
securities. The Company believes that all recipients had adequate access,
through employment or other relationships, to information about the Company to
make an informed investment decision.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
+1.1 Form of Underwriting Agreement.
+3.1 Amended and Restated Articles of Incorporation of the Company.
</TABLE>
II-2
<PAGE> 69
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
+3.2 Form of Second Amended and Restated Articles of Incorporation of the Company to be
effective immediately prior to this Offering.
+3.3 Bylaws of the Company, as amended.
+3.4 Form of Amended and Restated Bylaws of the Company to be effective upon completion
of this Offering.
+4.1 Form of Certificate for Common Stock.
+5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common Stock being
registered.
+10.1 Waiver of Registration Rights by BankAmerica Ventures, effective June 25, 1996.
+10.2 Amended and Restated Shareholder Rights Agreement among the Company and certain
shareholders of the Company, dated May 3, 1995.
+10.3 Immusol, Inc. Preferred Stock Purchase Agreement among the Company and the
purchasers identified on Exhibit A to the Agreement, dated May 3, 1995.
+10.4 Loan and Security Agreement between the Company and Silicon Valley Bank dated April
3, 1996.
+10.5 Amendment to Loan and Security Agreement between the Company and Silicon Valley
Bank dated May 15, 1996.
+10.6 Sublease for the Company's facilities at 3050 Science Park Road, dated March 11,
1996.
+10.7 First Amendment to Sublease for the Company's facilities at 3050 Science Park Road,
dated June 6, 1996.
*10.8 Exclusive License Agreement between the Company and The Regents of the University
of California, dated December 7, 1993.
*10.9 Collaborative Research Agreement between the Company and Pfizer Inc., dated May 3,
1995.
*10.10 License and Royalty Agreement between the Company and Pfizer Inc., dated May 3,
1995.
+10.11 Co-Founder Agreement between the Company and Flossie Wong-Staal, Ph.D., dated
February 16, 1993.
+10.12 Offer Letter to Dr. Tsvi Goldenberg dated April 26, 1994.
+10.13 Offer Letter to Jack Barber dated August 23, 1994.
+10.14 Pfizer Letter dated July 1, 1996.
+10.15 The Company's 1992 Stock Plan, as amended.
+10.16 1992 Stock Option Plan Form of Incentive Stock Option Agreement and Exercise
Notice.
+10.17 1992 Stock Option Plan Form of Nonstatutory Option Agreement and Exercise Notice.
+10.18 1996 Stock Option/Stock Issuance Plan.
+10.19 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant.
+10.20 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
+10.21 Form of Proprietary Information Agreement.
+10.22 Form of Scientific Advisory Board Agreement.
+10.23 Form of Indemnification Agreements between the Company and each of its directors.
+10.24 Form of Indemnification Agreement between the Company and each of its officers.
11.1 Computation of pro forma net income (loss) per share.
+14.1 List of Material Foreign Patents.
+23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion filed as
Exhibit 5.1).
</TABLE>
II-3
<PAGE> 70
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
- -------
<C> <S>
23.2 Consent of Ernst & Young LLP, Independent Auditors (see Page II-6).
+24.1 Power of Attorney (See Page II-5).
27.1 Financial Data Schedule
</TABLE>
- ---------------
+ To be filed by Amendment.
* Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
+ Previously filed.
(b) Financial Statement Schedules included separately in the Registration
Statement. All other schedules are omitted because they are not required, are
not applicable or the information is included in the Financial Statements or
Notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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 Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, 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, 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 of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 71
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Diego, County of San
Diego, State of California, on the 19th day of September, 1996.
IMMUSOL, INC.
By: /s/ TSVI GOLDENBERG, PH.D.
------------------------------------
Tsvi Goldenberg, Ph.D.
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ----------------------------------- -------------------
<C> <S> <C>
/s/ TSVI GOLDENBERG Chairman of the Board, Chief September 19, 1996
- ------------------------------------- Executive Officer and Director
Tsvi Goldenberg (Principal Executive Officer)
* Director of Finance and Acting September 19, 1996
- ------------------------------------- Chief Financial Officer
J. Stanhope Blackburn (Principal Financial and
Accounting Officer)
Director September 19, 1996
- -------------------------------------
Anchie Kuo
* Director September 19, 1996
- -------------------------------------
Frank Litvack
* Director September 19, 1996
- -------------------------------------
Melvin Perelman
* Director September 19, 1996
- -------------------------------------
Flossie Wong-Staal
*By: /s/ TSVI GOLDENBERG
- -------------------------------------
Tsvi Goldenberg
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 72
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Selected Financial Data" and to the use of our report dated June 27, 1996 in
Amendment No. 3 to the Registration Statement (Form S-1) and the related
prospectus of Immusol, Inc. for the registration of shares of its common stock.
ERNST & YOUNG LLP
San Diego, California
September 19, 1996
II-6
<PAGE> 73
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
+3.1 Amended and Restated Articles of Incorporation of the Company.
+3.2 Form of Second Amended and Restated Articles of Incorporation of the
Company to be effective immediately prior to this Offering.
+3.3 Bylaws of the Company, as amended.
+3.4 Form of Amended and Restated Bylaws of the Company to be effective upon
completion of this Offering.
4.1 Form of Certificate for Common Stock.
5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common
Stock being registered.
10.1 Waiver of Registration Rights by BankAmerica Ventures, effective June 25,
1996.
+10.2 Amended and Restated Shareholder Rights Agreement among the Company and
certain shareholders of the Company, dated May 3, 1995.
+10.3 Immusol, Inc. Preferred Stock Purchase Agreement among the Company and
the purchasers identified on Exhibit A to the Agreement, dated May 3,
1995.
+10.4 Loan and Security Agreement between the Company and Silicon Valley Bank
dated April 3, 1996.
+10.5 Amendment to Loan and Security Agreement between the Company and Silicon
Valley Bank dated May 15, 1996.
+10.6 Sublease for the Company's facilities at 3050 Science Park Road, dated
March 11, 1996.
+10.7 First Amendment to Sublease for the Company's facilities at 3050 Science
Park Road, dated June 6, 1996.
*10.8 Exclusive License Agreement between the Company and The Regents of the
University of California, dated December 7, 1993.
*10.9 Collaborative Research Agreement between the Company and Pfizer Inc.,
dated May 3, 1995.
*10.10 License and Royalty Agreement between the Company and Pfizer Inc., dated
May 3, 1995.
+10.11 Co-Founder Agreement between the Company and Flossie Wong-Staal, Ph.D.,
dated February 16, 1993.
+10.12 Offer Letter to Dr. Tsvi Goldenberg dated April 26, 1994.
+10.13 Offer Letter to Jack Barber dated August 23, 1994.
+10.15 The Company's 1992 Stock Plan, as amended.
+10.16 1992 Stock Option Plan Form of Incentive Stock Option Agreement and
Exercise Notice.
+10.17 1992 Stock Option Plan Form of Nonstatutory Option Agreement and Exercise
Notice.
+10.18 1996 Stock Option/Stock Issuance Plan.
+10.19 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant.
+10.20 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
+10.21 Form of Proprietary Information Agreement.
+10.22 Form of Scientific Advisory Board Agreement.
+10.23 Form of Indemnification Agreements between the Company and each of its
directors.
+10.24 Form of Indemnification Agreement between the Company and each of its
officers.
+11.1 Computation of pro forma net income (loss) per share.
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
filed as Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors (see Page II-6).
+24.1 Power of Attorney (See Page II-5).
+27.1 Financial Data Schedule
</TABLE>
- ---------------
* Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
+ Previously filed.
<PAGE> 1
Exhibit 1.1
S&S Draft
9/20/96
3,000,000 Shares
IMMUSOL, INC.
Common Stock
UNDERWRITING AGREEMENT
_______, 1996
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
As Representatives of the
several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Immusol, Inc., a California corporation (the "Company"),
proposes to sell an aggregate of 3,000,000 shares (the "Firm Shares") of the
Company's Common Stock, par value $0.001 per share (the "Common Stock"), to you
and to the other underwriters named in Schedule I (collectively, the
"Underwriters"), for whom you are acting as representatives (the
"Representatives"). The Company has also agreed to grant to you and the other
Underwriters an option (the "Option") to purchase up to an additional 450,000
shares of Common Stock (the "Option Shares") on the terms and for the purposes
set forth in Section 1(b). The Firm Shares and the Option Shares are hereinafter
collectively referred to as the "Shares."
The initial public offering price per share for the Shares and
the purchase price per share for the Shares to be paid by the several
Underwriters shall be agreed upon by the Company and the Representatives, acting
on behalf of the several Underwriters, and such agreement shall be set forth in
a separate written instrument substantially in the form of Exhibit A hereto (the
"Price Determination Agreement"). The Price Determination Agreement may take the
form of an exchange of any standard form of written telecommunication among the
Company and the Representatives and shall specify such applicable information as
is indicated in Exhibit A hereto. The offering of the Shares will be governed by
this Agreement, as supplemented by the Price Determination Agreement. From and
after the date of the execution and delivery of the Price Determination
Agreement, this
<PAGE> 2
2
Agreement shall be deemed to incorporate, and, unless the context otherwise
indicates, all references contained herein to "this Agreement" and to the phrase
"herein" shall be deemed to include the Price Determination Agreement.
The Company confirms as follows its agreements with the
Representatives and the several other Underwriters.
1. Agreement to Sell and Purchase.
(a) On the basis of the representations, warranties
and agreements of the Company herein contained and subject to all the terms and
conditions of this Agreement, the Company agrees to sell to each Underwriter
named below, and each Underwriter, severally and not jointly, agrees to purchase
from the Company at the purchase price per share for the Firm Shares to be
agreed upon by the Representatives and the Company in accordance with Section
1(c) and set forth in the Price Determination Agreement, the aggregate number of
Firm Shares set forth opposite the name of such Underwriter in Schedule I, plus
such additional number of Firm Shares which such Underwriter may
become obligated to purchase pursuant to Section 8 hereof. Schedule I may be
attached to the Price Determination Agreement.
(b) Subject to all the terms and conditions of this
Agreement, the Company grants the Option to the several Underwriters to
purchase, severally and not jointly, up to 450,000 Option Shares from the
Company at the same price per share as the Underwriters shall pay for the Firm
Shares. The Option may be exercised only to cover over-allotments in the sale of
the Firm Shares by the Underwriters and may be exercised in whole or in part at
any time (but not more than once) on or before the 30th day after the date of
this Agreement (or, if the Company has elected to rely on Rule 430A, on or
before the 30th day after the date of the Price Determination Agreement), upon
written or telegraphic notice (the "Option Shares Notice") by the
Representatives to the Company no later than 12:00 noon, New York City time, at
least two and no more than five business days before the date specified for
closing in the Option Shares Notice (the "Option Closing Date") setting forth
the aggregate number of Option Shares to be purchased and the time and date for
such purchase. On the Option Closing Date, the Company will issue and sell to
the Underwriters the number of Option Shares set forth in the Option Shares
Notice, and each Underwriter will purchase such percentage of the Option Shares
as is equal to the percentage of Firm Shares that such Underwriter is
purchasing, as adjusted by the Representatives in such manner as they deem
advisable to avoid fractional shares.
(c) If the Company has elected to rely on Rule 430A,
the initial public offering price per share for the Firm Shares and the purchase
price per share for the Firm Shares to be paid by the several Underwriters shall
be agreed upon and set forth in the Price Determination Agreement. In the event
such price has not been agreed upon and the
<PAGE> 3
3
Price Determination Agreement has not been executed by the close of business on
the fourteenth business day following the date on which the Registration
Statement becomes effective, this Agreement shall terminate forthwith, without
liability of any party to any other party except that Section 6 shall remain in
effect.
2. Delivery and Payment. Delivery of the Firm Shares shall be
made to the Representatives for the accounts of the Underwriters against payment
of the purchase price by certified or official bank check or by wire transfer to
an account designated by the Company in Federal (same-day) funds. Such payments
shall be made at 10:00 a.m., New York City time, on the fourth business day
after the date on which the first bona fide offering of the Shares to the public
is made by the Underwriters or at such time on such other date, not later than
ten business days after such date, as may be agreed upon by the Company and the
Representatives (such date is hereinafter referred to as the "Closing Date").
(a) To the extent the Option is exercised, delivery
of the Option Shares against payment by the Underwriters (in the manner
specified above) will take place at the offices specified above for the Closing
Date at the time and date (which may be the Closing Date) specified in the
Option Shares Notice.
(b) The cost of original issue tax stamps, if any, in
connection with the issuance and delivery of the Firm Shares and Option Shares
by the Company to the respective Underwriters shall be borne by the Company. The
Company will pay and save each Underwriter and any subsequent holder of the
Shares harmless from any and all liabilities with respect to or resulting from
any failure or delay in paying Federal and state stamp and other transfer taxes,
if any, which may be payable or determined to be payable in connection with the
original issuance or sale to such Underwriter of the Firm Shares and Option
Shares.
3. Representations and Warranties of the Company. The Company
represents, warrants and covenants to each Underwriter that:
(a) A registration statement (Registration No.
______) on Form S-1 relating to the Shares, including a preliminary prospectus
and such amendments to such registration statement as may have been required to
the date of this Agreement, has been prepared by the Company under the
provisions of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations (collectively referred to as the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") thereunder, and has been
filed with the Commission. The term "preliminary prospectus" as used herein
means a preliminary prospectus as contemplated by Rule 430 or Rule 430A ("Rule
430A") of the Rules and Regulations included at any time as part of the
registration statement. Copies of such registration statement and amendments and
of each related preliminary prospectus
<PAGE> 4
4
have been delivered to the Representatives. The term "Registration Statement"
means the registration statement as amended at the time it becomes or became
effective (the "Effective Date"), including financial statements and all
exhibits and any information deemed to be included by Rule 430A or Rule 434 of
the Rules and Regulations. If the Company files a registration statement to
register a portion of the Shares and relies on Rule 462(b) of the Rules and
Regulations for such registration statement to become effective upon filing with
the Commission (the "Rule 462 Registration Statement"), then any reference to
the "Registration Statement" shall be deemed to include the Rule 462
Registration Statement, as amended from time to time. The term "Prospectus"
means the prospectus as first filed with the Commission pursuant to Rule 424(b)
of the Rules and Regulations or, if no such filing is required, the form of
final prospectus included in the Registration Statement at the Effective Date.
(b) On the Effective Date, the date the Prospectus is
first filed with the Commission pursuant to Rule 424(b) (if required), at all
times subsequent to and including the Closing Date and, if later, the Option
Closing Date and when any post-effective amendment to the Registration Statement
becomes effective or any amendment or supplement to the Prospectus is filed with
the Commission, the Registration Statement and the Prospectus (as amended or as
supplemented if the Company shall have filed with the Commission any amendment
or supplement thereto), including the financial statements included in the
Prospectus, did or will comply with all applicable provisions of the Act and the
Rules and Regulations and will contain all statements required to be stated
therein in accordance with the Act and the Rules and Regulations. On the
Effective Date and when any post-effective amendment to the Registration
Statement becomes effective, no part of the Registration Statement or any such
amendment did or will contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein not misleading. At the Effective Date, the date the
Prospectus or any amendment or supplement to the Prospectus is filed with the
Commission and at the Closing Date and, if later, the Option Closing Date, the
Prospectus did not or will not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading. The
foregoing representations and warranties in this Section 3(b) do not apply to
any statements or omissions made in reliance on and in conformity with
information relating to any Underwriter furnished in writing to the Company by
the Representatives specifically for inclusion in the Registration Statement or
Prospectus or any amendment or supplement thereto. For all purposes of this
Agreement, the amounts of the selling concession and reallowance set forth in
the Prospectus constitute the only information relating to any Underwriter
furnished in writing to the Company by the Representatives specifically for
inclusion in the Registration Statement, the preliminary prospectus or the
Prospectus. The Company has not distributed any offering material in connection
with the offering or sale of the Shares other than the Registration Statement,
the preliminary prospectus, the Prospectus or any other materials, if any,
permitted by the Act.
<PAGE> 5
5
(c) The Company is, and at the Closing Date will be,
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. The Company has, and at the Closing
Date will have, full power and authority to conduct all the activities conducted
by it, to own or lease all the assets owned or leased by it and to conduct its
business as described in the Registration Statement and the Prospectus. The
Company is, and at the Closing Date will be, duly licensed or qualified to do
business and in good standing as a foreign corporation in all jurisdictions in
which the nature of the activities conducted by it or the character of the
assets owned or leased by it makes such licensing or qualification necessary.
Except as disclosed in the Registration Statement, the Company does not own, and
at the Closing Date will not own, directly or indirectly, any shares of stock or
any other equity or long-term debt securities of any corporation or have any
equity interest in any firm, partnership, joint venture, association or other
entity. Complete and correct copies of the articles of incorporation and of the
by-laws of the Company and all amendments thereto have been delivered to the
Representatives, and no changes therein will be made subsequent to the date
hereof and prior to the Closing Date or, if later, the Option Closing Date.
(d) The outstanding shares of Common Stock have been,
and the Shares to be issued and sold by the Company upon such issuance will be,
duly authorized, validly issued, fully paid and nonassessable and will not be
subject to any preemptive or similar right. The description of the Common Stock
in the Registration Statement and the Prospectus is, and at the Closing Date
will be, complete and accurate in all respects. Except as set forth in the
Prospectus, the Company does not have outstanding, and at the Closing Date will
not have outstanding, any options to purchase, or any rights or warrants to
subscribe for, or any securities or obligations convertible into, or any
contracts or commitments to issue or sell, any shares of Common Stock or any
such warrants, convertible securities or obligations.
(e) The financial statements and schedules included
in the Registration Statement or the Prospectus present fairly the financial
condition of the Company as of the respective dates thereof and the results of
operations and cash flows of the Company for the respective periods covered
thereby, all in conformity with generally accepted accounting principles applied
on a consistent basis throughout the entire period involved, except as otherwise
disclosed in the Prospectus. The pro forma financial statements and other pro
forma financial information included in the Registration Statement or the
Prospectus (i) present fairly in all material respects the information shown
therein, (ii) have been prepared in accordance with the Commission's rules and
guidelines with respect to pro forma financial statements and (iii) have been
properly computed on the bases described therein. The assumptions used in the
preparation of the pro forma financial statements and other pro forma financial
information included in the Registration Statement or the Prospectus are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein. No other financial
statements or
<PAGE> 6
6
schedules of the Company are required by the Act or the Rules and Regulations to
be included in the Registration Statement or the Prospectus. Ernst & Young LLP
(the "Accountants") who have reported on such financial statements and
schedules, are independent public accountants with respect to the Company as
required by the Act and the Rules and Regulations. The statements included in
the Registration Statement with respect to the Accountants pursuant to Rule
509 of Regulation S-K of the Rules and Regulations are true and correct in all
material respects.
(f) The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance 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 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
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(g) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus and prior
to the Closing Date, except as set forth in or contemplated by the Registration
Statement and the Prospectus, (i) there has not been and will not have been any
change in the capitalization of the Company, or in the business, properties,
business prospects, condition (financial or otherwise) or results of operations
of the Company, arising for any reason whatsoever, (ii) the Company has not
incurred nor will it incur any material liabilities or obligations, direct or
contingent, nor has it entered into nor will it enter into any material
transactions other than pursuant to this Agreement and the transactions referred
to herein and (iii) the Company has not and will not have paid or declared any
dividends or other distributions of any kind on any class of its capital stock.
(h) The Company is not an "investment company" or an
"affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940, as amended.
(i) Except as set forth in the Registration Statement
and the Prospectus, there are no actions, suits or proceedings pending or, to
the Company's knowledge, threatened against or affecting the Company or any of
its officers in their capacity as such, before or by any Federal or state court,
commission, regulatory body, administrative agency or other governmental body,
domestic or foreign, wherein an unfavorable ruling, decision or finding might
materially and adversely affect the Company or its business, properties,
business prospects, condition (financial or otherwise) or results of operations.
<PAGE> 7
7
(j) The Company has, and at the Closing Date will
have, (i) all governmental licenses, permits, consents, orders, approvals and
other authorizations necessary to carry on its business as contemplated in the
Prospectus, (ii) complied in all respects with all laws, regulations and orders
applicable to it or its business and (iii) performed all its obligations
required to be performed by it, and is not, and at the Closing Date will not be,
in default, under any indenture, mortgage, deed of trust, voting trust
agreement, loan agreement, bond, debenture, note agreement, lease, contract or
other agreement or instrument (collectively, a "contract or other agreement") to
which it is a party or by which its property is bound or affected. To the best
knowledge of the Company, no other party under any contract or other agreement
to which it is a party is in default in any respect thereunder. The Company is
not, nor at the Closing Date will be, in violation of any provisions of its
articles of incorporation or by-laws.
(k) No consent, approval, authorization or order of,
or any filing or declaration with, any court or governmental agency or body is
required in connection with the authorization, issuance, transfer, sale or
delivery of the Shares by the Company, in connection with the execution,
delivery and performance of this Agreement by the Company or in connection with
the taking by the Company of any action contemplated hereby, except such as have
been obtained under the Act or the Rules and Regulations and such as may be
required under state securities or Blue Sky laws or the by-laws and rules of the
National Association of Securities Dealers, Inc. (the "NASD") in connection with
the purchase and distribution by the Underwriters of the Shares.
(l) The Company has full corporate power and
authority to enter into this Agreement. This Agreement has been duly authorized,
executed and delivered by the Company and constitutes a valid and binding
agreement of the Company and is enforceable against the Company in accordance
with the terms hereof. The performance of this Agreement and the consummation of
the transactions contemplated hereby and the application of the net proceeds
from the offering and sale of the Shares in the manner set forth in the
Prospectus under "Use of Proceeds" will not result in the creation or imposition
of any lien, charge or encumbrance upon any of the assets of the Company
pursuant to the terms or provisions of, or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, or give any
other party a right to terminate any of its obligations under, or result in the
acceleration of any obligation under, the articles of incorporation or by-laws
of the Company, any contract or other agreement to which the Company is a party
or by which the Company or any of its properties is bound or affected, or
violate or conflict with any judgment, ruling, decree, order, statute, rule or
regulation of any court or other governmental agency or body applicable to the
business or properties of the Company.
(m) The Company has good and marketable title to all
properties and assets described in the Prospectus as owned by it, free and clear
of all liens, charges,
<PAGE> 8
8
encumbrances or restrictions, except such as are described in the Prospectus or
are not material to the business of the Company. The Company has valid,
subsisting and enforceable leases for the properties described in the Prospectus
as leased by it, with such exceptions as are not material and do not materially
interfere with the use made and proposed to be made of such properties by the
Company.
(n) There is no document or contract of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as an exhibit to the Registration Statement which is not described or
filed as required. All such contracts to which the Company is a party have been
duly authorized, executed and delivered by the Company, constitute valid and
binding agreements of the Company and are enforceable against the Company in
accordance with the terms thereof.
(o) No statement, representation, warranty or
covenant made by the Company in this Agreement or made in any certificate or
document required by this Agreement to be delivered to the Representatives was
or will be, when made, inaccurate, untrue or incorrect.
(p) Neither the Company nor any of its directors,
officers or controlling persons has taken, directly or indirectly, any action
intended, or which might reasonably be expected, to cause or result, under the
Act or otherwise, in, or which has constituted, stabilization or manipulation of
the price of any security of the Company to facilitate the sale or resale of the
Shares.
(q) Except as disclosed in the Prospectus, no holder
of securities of the Company has rights to the registration of any securities
of the Company because of the filing of the Registration Statement.
(r) The Shares have been approved for quotation on
the Nasdaq National Market.
(s) The Company is not involved in any material labor
dispute nor, to the knowledge of the Company, is any such dispute threatened.
(t) The Company nor, to the Company's knowledge, any
employee or agent of the Company has made any payment of funds of the Company or
received or retained any funds in violation of any law, rule or regulation or of
a character required to be disclosed in the Prospectus.
(u) The Company has complied, and until the
completion of the distribution of the Shares will comply, with all of the
provisions of (including, without limitation, filing all forms required by)
Section 517.075 of the Florida Securities and Investor
<PAGE> 9
9
Protection Act and regulation 3E-900.001 issued thereunder with respect to the
offering and sale of the Shares.
(v) The Company owns or possesses adequate licenses
or other rights to use all patents, trademarks, service marks, trade names,
copyrights, mask works, technology and know-how necessary to conduct the
business now or proposed to be conducted by it as described in the Prospectus
and the Company has not received any notice of infringement of or conflict with
(and knows of no such infringement of or conflict with) asserted rights of
others with respect to any patents, trademarks, service marks, trade names,
copyrights, mask works, technology or know-how which could result in any
material adverse effect upon the Company; and the Company's discoveries,
inventions, products or processes referred to in the Prospectus do not, to the
knowledge of the Company, infringe or conflict with any right or patent, or any
discovery, invention, product or process which is the subject of a patent
application known to the Company, which infringement or conflict could result in
any material adverse effect upon the Company.
(w) The Company has obtained any permits, consents
and authorizations required to be obtained by it under laws or regulations
relating to the protection of the environment or concerning the handling,
storage, disposal or discharge of toxic materials (collectively "Environmental
Laws"), and any such permits, consents and authorizations remain in full force
and effect. The Company is in compliance with the Environmental Laws in all
material respects, and there is no pending or, to the Company's knowledge,
threatened, action or proceeding against the Company alleging violations of the
Environmental Laws.
(x) Except as disclosed in the Registration Statement
or the Prospectus, the Company maintains insurance of the types and in amounts
generally deemed adequate for its businesses and consistent with insurance
coverage maintained by similar companies and businesses, all of which insurance
is in full force and effect.
(y) There are no subsidiaries of the Company.
4. Agreements of the Company. The Company agrees with the
several Underwriters as follows:
(a) The Company will not, prior to the Effective Date
or thereafter during such period as the Prospectus is required by law to be
delivered in connection with sales of the Shares by an Underwriter or dealer,
file any amendment or supplement to the Registration Statement or the
Prospectus, unless a copy thereof shall first have been submitted to the
Representatives within a reasonable period of time prior to the filing thereof
and the Representatives shall not have objected thereto in good faith.
<PAGE> 10
10
(b) The Company will use its best efforts to cause
the Registration Statement to become effective, and will notify the
Representatives promptly, and will confirm such advice in writing, (1) when the
Registration Statement has become effective and when any post-effective
amendment thereto becomes effective, (2) of any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus or for
additional information, (3) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the initiation of
any proceedings for that purpose, or the threat thereof, (4) of the happening of
any event during the period mentioned in the second sentence of Section 4(e)
that in the judgment of the Company makes any statement made in the Registration
Statement or the Prospectus untrue or that requires the making of any changes in
the Registration Statement or the Prospectus in order to make the statements
therein, in light of the circumstances in which they are made, not misleading
and (5) of receipt by the Company, its counsel or auditors or any representative
of the Company of any other communication from the Commission relating to the
Company, the Registration Statement, any preliminary prospectus or the
Prospectus. If at any time the Commission shall issue any order suspending the
effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible moment. The Company will use its best efforts to comply with the
provisions of and make all requisite filings with the Commission pursuant to
Rule 430A and to notify the Representatives promptly of all such filings.
(c) The Company will furnish to the Representatives,
without charge, two signed copies of the Registration Statement and of any
post-effective amendment thereto, including financial statements and schedules,
and all exhibits thereto and will furnish to the Representatives, without
charge, for transmittal to each of the other Underwriters, a copy of the
Registration Statement and any post-effective amendment thereto, including
financial statements and schedules but without exhibits.
(d) The Company will comply with all the provisions
of the undertakings contained in the Registration Statement.
(e) On the Effective Date, and thereafter from time
to time, the Company will deliver to each of the Underwriters, without charge,
as many copies of the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request. The Company consents to the use of the
Prospectus or any amendment or supplement thereto by the several Underwriters
and by all dealers to whom the Shares may be sold, both in connection with the
offering or sale of the Shares and for any period of time thereafter during
which the Prospectus is required by law to be delivered in connection therewith.
If during such period of time any event shall occur which in the judgment of the
Company or counsel to the Underwriters should be set forth in the Prospectus in
order to make any statement therein, in the light of the circumstances under
which it was made, not misleading, or if it is necessary to supplement or amend
the Prospectus to comply with law,
<PAGE> 11
11
the Company will forthwith prepare and duly file with the Commission an
appropriate supplement or amendment thereto, and will deliver to each of the
Underwriters, without charge, such number of copies thereof as the
Representatives may reasonably request.
(f) Prior to any public offering of the Shares by the
Underwriters, the Company will cooperate with the Representatives and counsel to
the Underwriters in connection with the registration or qualification of the
Shares for offer and sale under the securities or Blue Sky laws of such
jurisdictions as the Representatives may request; provided, that in no event
shall the Company be obligated to qualify to do business in any jurisdiction
where it is not now so qualified or to take any action which would subject it to
general service of process in any jurisdiction where it is not now so subject.
(g) During the period of five years commencing on the
Effective Date, the Company will furnish to the Representatives and each other
Underwriter who may so request copies of such financial statements and all
annual reports, quarterly reports and current reports filed with the Commission
on Forms 10-K, 10-Q and 8-K, or such other similar forms as may be designated by
the Commission, and such other documents, reports and information as shall be
furnished by the Company to its stockholders or security holders generally.
(h) The Company will make generally available to
holders of its securities as soon as may be practicable but in no event later
than the last day of the fifteenth full calendar month following the calendar
quarter in which the Effective Date falls, an earnings statement (which need not
be audited but shall be in reasonable detail) for a period of 12 months ended
commencing after the Effective Date, and satisfying the provisions of Section
11(a) of the Act (including Rule 158 of the Rules and Regulations).
(i) Whether or not the transactions contemplated by
this Agreement are consummated or this Agreement is terminated, the Company will
pay, or reimburse if paid by the Representatives, all costs and expenses
incident to the performance of the obligations of the Company under this
Agreement, including but not limited to costs and expenses of or relating to (1)
the preparation, printing and filing of the Registration Statement and exhibits
to it, each preliminary prospectus, the Prospectus and any amendment or
supplement to the Registration Statement or the Prospectus, (2) the preparation
and delivery of certificates representing the Shares, (3) the printing of this
Agreement, the Agreement Among Underwriters, any Dealer Agreements and any
Underwriters' Questionnaire, (4) furnishing (including costs of shipping,
mailing and courier) such copies of the Registration Statement, the Prospectus
and any preliminary prospectus, and all amendments and supplements thereto, as
may be requested for use in connection with the offering and sale of the Shares
by the Underwriters or by dealers to whom Shares may be sold, (5) the listing
and quotation of the Shares on the Nasdaq National Market, (6) any filings
required to be made by the Underwriters with the NASD, and the fees,
disbursements
<PAGE> 12
12
and other charges of counsel for the Underwriters in connection therewith, (7)
the registration or qualification of the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions designated pursuant
to Section 4(f), including the fees, disbursements and other charges of
counsel to the Underwriters in connection therewith, and the preparation and
printing of preliminary, supplemental and final Blue Sky memoranda, (8) counsel
to the Company, (9) the transfer agent for the Shares and (10) the Accountants.
(j) If this Agreement shall be terminated by the
Company pursuant to any of the provisions hereof (otherwise than pursuant to
Section 8) or if for any reason the Company shall be unable to perform its
obligations hereunder, the Company will reimburse the several Underwriters for
all out-of-pocket expenses (including the fees, disbursements and other charges
of counsel to the Underwriters) reasonably incurred by them in connection
herewith.
(k) The Company will not at any time, directly or
indirectly, take any action intended, or which might reasonably be expected, to
cause or result in, or which will constitute, stabilization of the price of the
shares of Common Stock to facilitate the sale or resale of any of the Shares.
(l) The Company will apply the net proceeds from the
offering and sale of the Shares to be sold by the Company in the manner set
forth in the Prospectus under "Use of Proceeds" and shall file such reports with
the Commission with respect to the sale of the Shares and the application of the
proceeds therefrom as may be required in accordance with Rule 463 under the Act.
(m) During the period of 180 days commencing at the
Closing Date, the Company will not, without the prior written consent of
PaineWebber Incorporated, directly or indirectly, sell, offer to sell, grant any
option for the sale of, or otherwise dispose of, any Common Stock or securities
convertible into Common Stock, other than to the Underwriters pursuant to this
Agreement and other than pursuant to employee benefit plans, provided, that the
Company will not grant options to purchase shares of Common Stock pursuant to
such employee benefit plans at a price less than the initial public offering
price.
(n) The Company will not, and will cause each of its
executive officers, directors, employees and each beneficial owner of
outstanding securities of the Company to enter into agreements with the
Representatives in the form set forth in Exhibit B to the effect that they will
not, for a period of 180 days after the commencement of the public offering of
the Shares, without the prior written consent of PaineWebber Incorporated, sell,
contract to sell or otherwise dispose of any shares of Common Stock or rights to
acquire such shares (other than pursuant to employee stock option plans or in
connection with other employee incentive compensation arrangements).
<PAGE> 13
13
5. Conditions of the Obligations of the Underwriters. In
addition to the execution and delivery of the Price Determination Agreement, the
obligations of each Underwriter hereunder are subject to the following
conditions:
(a) Notification that the Registration Statement has
become effective shall be received by the Representatives not later than 5:00
p.m., New York City time, on the date of this Agreement or at such later date
and time as shall be consented to in writing by the Representatives and all
filings required by Rule 424 of the Rules and Regulations and Rule 430A shall
have been made.
(b) (i) No stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceedings for that
purpose shall be pending or threatened by the Commission, (ii) no order
suspending the effectiveness of the Registration Statement or the qualification
or registration of the Shares under the securities or Blue Sky laws of any
jurisdiction shall be in effect and no proceeding for such purpose shall be
pending before or threatened or contemplated by the Commission or the
authorities of any such jurisdiction, (iii) any request for additional
information on the part of the staff of the Commission or the authorities of any
jurisdiction shall have been complied with to the satisfaction of the staff of
the Commission or such authorities and (iv) after the date hereof no amendment
or supplement to the Registration Statement or the Prospectus shall have been
filed unless a copy thereof was first submitted to the Representatives and the
Representatives did not object thereto in good faith, and the Representatives
shall have received certificates, dated the Closing Date and the Option Closing
Date and signed by the Chief Executive Officer or the Chairman of the Board of
Directors of the Company and the Chief Financial Officer of the Company (who
may, as to proceedings threatened, rely upon the best of their information and
belief), to the effect of clauses (i), (ii) and (iii).
(c) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, (i) there
shall not have been a material adverse change in the general affairs, business,
business prospects, properties, management, condition (financial or otherwise)
or results of operations of the Company, taken as a whole, whether or not
arising from transactions in the ordinary course of business, in each case other
than as set forth in or contemplated by the Registration Statement and the
Prospectus and (ii) the Company shall not have sustained any material loss or
interference with its business or properties from fire, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor dispute
or any court or legislative or other governmental action, order or decree, which
is not set forth in the Registration Statement and the Prospectus, if in the
judgment of the Representatives any such development makes it impracticable or
inadvisable to consummate the sale and delivery of the Shares by the
Underwriters at the initial public offering price.
<PAGE> 14
14
(d) Since the respective dates as of which
information is given in the Registration Statement and the Prospectus, there
shall have been no litigation or other proceeding instituted against the Company
or any of its officers or directors in their capacities as such, before or by
any Federal, state or local court, commission, regulatory body, administrative
agency or other governmental body, domestic or foreign, in which litigation or
proceeding an unfavorable ruling, decision or finding would materially and
adversely affect the business, properties, business prospects, condition
(financial or otherwise) or results of operations of the Company.
(e) Each of the representations and warranties of the
Company contained herein shall be true and correct in all material respects at
the Closing Date and, with respect to the Option Shares, at the Option Closing
Date, as if made at the Closing Date and, with respect to the Option Shares, at
the Option Closing Date, and all covenants and agreements herein contained to be
performed on the part of the Company and all conditions herein contained to be
fulfilled or complied with by the Company at or prior to the Closing Date and,
with respect to the Option Shares, at or prior to the Option Closing Date, shall
have been duly performed, fulfilled or complied with.
(f) The Representatives shall have received an
opinion, dated the Closing Date and, with respect to the Option Shares, the
Option Closing Date, and satisfactory in form and substance to counsel for the
Underwriters, from Brobeck, Phleger & Harrison LLP, counsel to the Company, to
the effect set forth in Exhibit C.
(g) The Representatives shall have received an
opinion, dated the Closing Date, and with respect to the Option Shares, the
Option Closing Date, and satisfactory in form and substance to counsel for the
Underwriters, from Townsend and Townsend and Crew, patent counsel to the
Company, to the effect set forth in Exhibit D.
(h) The Representatives shall have received an
opinion, dated the Closing Date and the Option Closing Date, from Shearman &
Sterling, counsel to the Underwriters, with respect to the Registration
Statement, the Prospectus and this Agreement, which opinion shall be
satisfactory in all respects to the Representatives.
(i) On the date of the Prospectus, the Accountants
shall have furnished to the Representatives a letter, dated the date of its
delivery, addressed to the Representatives and in form and substance
satisfactory to the Representatives, confirming that they are independent public
accountants with respect to the Company as required by the Act and the Rules and
Regulations and with respect to the financial and other statistical and
numerical information contained in the Registration Statement. At the Closing
Date and, as to the Option Shares, the Option Closing Date, the Accountants
shall have furnished to the Representatives a letter, dated the date of its
delivery, which shall confirm, on the basis of a review in accordance with the
procedures set forth in the letter from the Accountants, that
<PAGE> 15
15
nothing has come to their attention during the period from the date of the
letter referred to in the prior sentence to a date (specified in the letter) not
more than five days prior to the Closing Date and the Option Closing Date which
would require any change in their letter dated the date of the Prospectus, if it
were required to be dated and delivered at the Closing Date and the Option
Closing Date.
(j) At the Closing Date and, as to the Option Shares,
the Option Closing Date, there shall be furnished to the Representatives an
accurate certificate, dated the date of its delivery, signed by each of the
Chief Executive Officer and the Chief Financial Officer of the Company, in form
and substance satisfactory to the Representatives, to the effect that:
(i) Each signer of such certificate has
carefully examined the Registration Statement and the Prospectus and
(A) as of the date of such certificate, such documents are true and
correct in all material respects and do not omit to state a material
fact required to be stated therein or necessary in order to make the
statements therein not untrue or misleading and (B) since the Effective
Date, no event has occurred as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein not untrue or misleading in any material respect.
(ii) Each of the representations and
warranties of the Company contained in this Agreement were, when
originally made, and are, at the time such certificate is delivered,
true and correct in all material respects.
(iii) Each of the covenants required herein
to be performed by the Company on or prior to the delivery of such
certificate has been duly, timely and fully performed and each
condition herein required to be complied with by the Company on or
prior to the date of such certificate has been duly, timely and fully
complied with.
(k) On or prior to the Closing Date, the
Representatives shall have received the executed agreements referred to in
Section 4(n).
(l) The Shares shall be qualified for sale in such
states as the Representatives may reasonably request, each such qualification
shall be in effect and not subject to any stop order or other proceeding on the
Closing Date and the Option Closing Date.
(m) Prior to the Closing Date, the Shares shall have
been qualified for quotation on the Nasdaq National Market.
<PAGE> 16
16
(n) The Company shall have furnished to the
Representatives such certificates, in addition to those specifically mentioned
herein, as the Representatives may have reasonably requested as to the accuracy
and completeness at the Closing Date and the Option Closing Date of any
statement in the Registration Statement or the Prospectus as to the accuracy at
the Closing Date and the Option Closing Date of the representations and
warranties of the Company herein, as to the performance by the Company of its
obligations hereunder, or as to the fulfillment of the conditions concurrent and
precedent to the obligations hereunder of the Representatives.
6. Indemnification.
(a) The Company will indemnify and hold harmless each
Underwriter, the directors, officers, employees and agents of each Underwriter
and each person, if any, who controls each Underwriter within the meaning of
Section 15 of the Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") from and against any and all losses, claims,
liabilities, expenses and damages (including any and all investigative, legal
and other expenses reasonably incurred in connection with, and any amount paid
in settlement of, any action, suit or proceeding between any of the indemnified
parties and any indemnifying parties or between any indemnified party and any
third party, or otherwise, or any claim asserted), to which they, or any of
them, may become subject under the Act, the Exchange Act or other Federal or
state statutory law or regulation, at common law or otherwise, insofar as such
losses, claims, liabilities, expenses or damages arise out of or are based on
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, the Registration Statement or the Prospectus or any
amendment or supplement to the Registration Statement or the Prospectus, or the
omission or alleged omission to state in such document a material fact required
to be stated in it or necessary to make the statements in it not misleading,
provided that the Company will not be liable to the extent that such loss,
claim, liability, expense or damage arises from the sale of the Shares in the
public offering to any person by an Underwriter and is based on an untrue
statement or omission or alleged untrue statement or omission made in reliance
on and in conformity with information relating to any Underwriter furnished in
writing to the Company by the Representatives on behalf of any Underwriter
expressly for inclusion in the Registration Statement, any preliminary
prospectus or the Prospectus. This indemnity agreement will be in addition to
any liability that the Company might otherwise have.
(b) Each Underwriter will indemnify and hold harmless
the Company, each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, each director of the
Company and each officer of the Company who signs the Registration Statement to
the same extent as the foregoing indemnity from the Company to each Underwriter,
but only insofar as losses, claims, liabilities, expenses or damages arise out
of or are based on any untrue statement or omission or alleged untrue statement
or omission made in reliance on and in conformity with
<PAGE> 17
17
information relating to any Underwriter furnished in writing to the Company by
the Representatives on behalf of such Underwriter expressly for use in the
Registration Statement, the Preliminary Prospectus or the Prospectus.
(c) Any party that proposes to assert the right to be
indemnified under this Section 6 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim is to
be made against an indemnifying party or parties under this Section 6, notify
each such indemnifying party of the commencement of such action, enclosing a
copy of all papers served, but the omission so to notify such indemnifying party
will not relieve it from any liability that it may have to any indemnified party
under the foregoing provisions of this Section 6 unless, and only to the extent
that, such omission results in the forfeiture of substantive rights or defenses
by the indemnifying party. If any such action is brought against any indemnified
party and it notifies the indemnifying party of its commencement, the
indemnifying party will be entitled to participate in and, to the extent that it
elects by delivering written notice to the indemnified party promptly after
receiving notice of the commencement of the action from the indemnified party,
jointly with any other indemnifying party similarly notified, to assume the
defense of the action, with counsel satisfactory to the indemnified party, and
after notice from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be liable to the
indemnified party for any legal or other expenses except as provided below and
except for the reasonable costs of investigation subsequently incurred by the
indemnified party in connection with the defense. The indemnified party will
have the right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense of such
indemnified party unless (1) the employment of counsel by the indemnified party
has been authorized in writing by the indemnifying party, (2) the indemnified
party has reasonably concluded (based on advice of counsel) that there may be
legal defenses available to it or other indemnified parties that are different
from or in addition to those available to the indemnifying party, (3) a conflict
or potential conflict exists (based on advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in which case
the indemnifying party will not have the right to direct the defense of such
action on behalf of the indemnified party) or (4) the indemnifying party has not
in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other charges
will be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not be liable for any settlement of any action or claim
effected without its written consent (which consent will not be unreasonably
withheld). No
<PAGE> 18
18
indemnifying party shall, without the prior written consent of each indemnified
party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding relating to the matters
contemplated by this Section 6 (whether or not any indemnified party is a party
thereto), unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising or
that may arise out of such claim, action or proceeding.
(d) In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in the
foregoing paragraphs of this Section 6 is applicable in accordance with its
terms but for any reason is held to be unavailable from the Company or the
Underwriters, the Company and the Underwriters will contribute to the total
losses, claims, liabilities, expenses and damages (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amount
paid in settlement of, any action, suit or proceeding or any claim asserted, but
after deducting any contribution received by the Company from persons other than
the Underwriters, such as persons who control the Company within the meaning of
the Act, officers of the Company who signed the Registration Statement and
directors of the Company, who also may be liable for contribution) to which the
Company and any one or more of the Underwriters may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and the Underwriters on the other. The relative
benefits received by the Company on the one hand and the Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from the offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by the Underwriters,
in each case as set forth in the table on the cover page of the Prospectus. If,
but only if, the allocation provided by the foregoing sentence is not permitted
by applicable law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative benefits referred
to in the foregoing sentence but also the relative fault of the Company, on the
one hand, and the Underwriters, on the other, with respect to the statements or
omissions which resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Representatives on behalf of the
Underwriters, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 6(d) were to be determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take into account
the equitable considerations referred to herein. The amount paid or payable by
an indemnified party as a result of the loss, claim, liability, expense or
damage, or action in respect thereof, referred to above in this Section 6(d)
shall be deemed to include, for purpose of this Section 6(d), any legal or
<PAGE> 19
19
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no Underwriter shall be required to contribute
any amount in excess of the underwriting discounts received by it and no person
found guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) will be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Underwriters' obligations to
contribute as provided in this Section 6(d) are several in proportion to their
respective underwriting obligations and not joint. For purposes of this Section
6(d), any person who controls a party to this Agreement within the meaning of
the Act will have the same rights to contribution as that party, and each
officer of the Company who signed the Registration Statement will have the same
rights to contribution as the Company, subject in each case to the provisions
hereof. Any party entitled to contribution, promptly after receipt of notice of
commencement of any action against such party in respect of which a claim for
contribution may be made under this Section 6(d), will notify any such party or
parties from whom contribution may be sought, but the omission so to notify will
not relieve the party or parties from whom contribution may be sought from any
other obligation it or they may have under this Section 6(d). No party will be
liable for contribution with respect to any action or claim settled without its
written consent (which consent will not be unreasonably withheld).
(e) The indemnity and contribution agreements
contained in this Section 6 and the representations and warranties of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any investigation made by or on behalf of the
Underwriters, (ii) acceptance of the Shares and payment therefor or (iii) any
termination of this Agreement.
7. Termination. The obligations of the several Underwriters
under this Agreement may be terminated at any time on or prior to the Closing
Date (or, with respect to the Option Shares, on or prior to the Option Closing
Date), by notice to the Company from the Representatives, without liability on
the part of any Underwriter to the Company, if, prior to delivery and payment
for the Shares (or the Option Shares, as the case may be), in the sole judgment
of the Representatives, (i) trading in any of the equity securities of the
Company shall have been suspended by the Commission, the NASD, by an exchange
that lists the Shares or by the Nasdaq Stock Market, (ii) trading in securities
generally on the New York Stock Exchange or in the Nasdaq Stock Market shall
have been suspended or limited or minimum or maximum prices shall have been
generally established on such exchange or over-the-counter market, or additional
material governmental restrictions, not in force on the date of this Agreement,
shall have been imposed upon trading in securities generally by such exchange or
over-the-counter market or by order of the Commission or the NASD or any court
or other governmental authority, (iii) a general banking moratorium shall have
been declared by either Federal or New York State or California State
authorities or (iv) any material adverse change in the financial or securities
markets in the United States or
<PAGE> 20
20
in political, financial or economic conditions in the United States or any
outbreak or material escalation of hostilities or declaration by the United
States of a national emergency or war or other calamity or crisis shall have
occurred the effect of any of which is such as to make it, in the sole judgment
of the Representatives, impracticable or inadvisable to market the Shares on the
terms and in the manner contemplated by the Prospectus.
8. Substitution of Underwriters. If any one or more of the
Underwriters shall fail or refuse to purchase any of the Firm Shares which it or
they have agreed to purchase hereunder, and the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of Firm Shares,
the other Underwriters shall be obligated, severally, to purchase the Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase, in the proportions which the number of Firm Shares which
they have respectively agreed to purchase pursuant to Section 1 bears to the
aggregate number of Firm Shares which all such non-defaulting Underwriters have
so agreed to purchase, or in such other proportions as the Representatives may
specify; provided that in no event shall the maximum number of Firm Shares which
any Underwriter has become obligated to purchase pursuant to Section 1 be
increased pursuant to this Section 8 by more than one-ninth of the number of
Firm Shares agreed to be purchased by such Underwriter without the prior written
consent of such Underwriter. If any Underwriter or Underwriters shall fail or
refuse to purchase any Firm Shares and the aggregate number of Firm Shares which
such defaulting Underwriter or Underwriters agreed but failed or refused to
purchase exceeds one-tenth of the aggregate number of the Firm Shares and
arrangements satisfactory to the Representatives and the Company for the
purchase of such Firm Shares are not made within 48 hours after such default,
this Agreement will terminate without liability on the part of any
non-defaulting Underwriter or the Company for the purchase or sale of any Shares
under this Agreement. In any such case either the Representatives or the Company
shall have the right to postpone the Closing Date, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and in the Prospectus or in any other documents or arrangements may be
effected. Any action taken pursuant to this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
9. Miscellaneous. Notice given pursuant to any of the
provisions of this Agreement shall be in writing and, unless otherwise
specified, shall be mailed or delivered (a) if to the Company, at the office of
the Company, 3050 Science Park Road, San Diego, California 92121, Attention:
Tsvi Goldenberg, Ph.D., or (b) if to the Underwriters, to the Representatives at
the offices of PaineWebber Incorporated, 1285 Avenue of the Americas, New York,
New York 10019, Attention: Corporate Finance Department. Any such notice shall
be effective only upon receipt. Any notice under Section 7 or 8 may be made by
telex or telephone, but if so made shall be subsequently confirmed in writing.
<PAGE> 21
21
This Agreement has been and is made solely for the benefit of
the several Underwriters and the Company and of the controlling persons,
directors and officers referred to in Section 6, and their respective successors
and assigns, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" as used in this
Agreement shall not include a purchaser, as such purchaser, of Shares from any
of the several Underwriters.
All representations, warranties and agreements of the Company
contained herein or in certificates or other instruments delivered pursuant
hereto, shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any Underwriter or any of its controlling
persons and shall survive delivery of and payment for the Shares hereunder.
Any action required or permitted to be taken by the
Representatives under this Agreement may be taken by them jointly or by
PaineWebber Incorporated.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICT
OF LAWS PRINCIPLES OF SUCH STATE.
This Agreement may be signed in two or more counterparts with
the same effect as if the signatures thereto and hereto were upon the same
instrument.
In case any provision in this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
The Company and the Underwriters each hereby irrevocably waive
any right they may have to a trial by jury in respect of any claim based upon or
arising out of this Agreement or the transactions contemplated hereby.
This Agreement may not be amended or otherwise modified or any
provision hereof waived except by an instrument in writing signed by the
Representatives and the Company.
<PAGE> 22
22
Please confirm that the foregoing correctly sets forth the
agreement among the Company and the several Underwriters.
Very truly yours,
IMMUSOL, INC.
By:
------------------------------
Name:
Title:
Confirmed as of the date first
above mentioned:
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
Acting on behalf of themselves
and as the Representatives of the
other several Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By:
-----------------------------------
Name:
Title:
<PAGE> 23
SCHEDULE I
UNDERWRITERS
<TABLE>
<CAPTION>
Number of
Name of Firm Shares
Underwriters to be Purchased
- ------------ ---------------
PaineWebber Incorporated
Needham & Company, Inc.
Sutro & Co. Incorporated
<S> <C>
Total ................................................... ---------
3,000,000
=========
</TABLE>
<PAGE> 24
EXHIBIT A
IMMUSOL, INC.
---------------------
PRICE DETERMINATION AGREEMENT
_______, 1996
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
As Representatives of the several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
Reference is made to the Underwriting Agreement, dated _______, 1996
(the "Underwriting Agreement"), among Immusol, Inc., a California corporation
(the "Company"), and the several Underwriters named in Schedule I thereto or
hereto (the "Underwriters"), for whom PaineWebber Incorporated, Needham &
Company, Inc. and Sutro & Co. Incorporated are acting as representatives (the
"Representatives"). The Underwriting Agreement provides for the purchase by the
Underwriters from the Company, subject to the terms and conditions set forth
therein, of an aggregate of 3,000,000 shares (the "Firm Shares") of the
Company's common stock, par value $.001 per share. This Agreement is the Price
Determination Agreement referred to in the Underwriting Agreement.
Pursuant to Section 1 of the Underwriting Agreement, the undersigned
agree with the Representatives as follows:
The initial public offering price per share for the Firm Shares shall
be $_______.
<PAGE> 25
2
The purchase price per share for the Firm Shares to be paid by the
several Underwriters shall be $_______ representing an amount equal to the
initial public offering price set forth above, less $______ per share.
The Company represents and warrants to each of the Underwriters that
the representations and warranties of the Company set forth in Section 3 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof.
As contemplated by the Underwriting Agreement, attached as Schedule I
is a completed list of the several Underwriters, which shall be a part of this
Agreement and the Underwriting Agreement.
THIS AGREEMENT SHALL BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE CONFLICT OF LAWS PRINCIPLES OF SUCH STATE.
If the foregoing is in accordance with your understanding of the
agreement among the Underwriters and the Company, please sign and return to the
Company a counterpart hereof, whereupon this instrument along with all
counterparts and together with the Underwriting Agreement shall be a binding
agreement among the Underwriters and the Company in accordance with its terms
and the terms of the Underwriting Agreement.
Very truly yours,
IMMUSOL, INC.
By: _______________________
Name:
Title:
<PAGE> 26
3
Confirmed as of the date first above mentioned:
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
Acting on behalf of themselves
and as the Representatives of the
other several Underwriters
named in Schedule I hereof.
By: PAINEWEBBER INCORPORATED
By: ____________________________
Name:
Title:
<PAGE> 27
EXHIBIT B
June ___ , 1996
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
As Representatives of the
several Underwriters
c/o PaineWebber Incorporated
1285 Avenue of the Americas
New York, New York 10019
Dear Sirs:
In consideration of the agreement of the several Underwriters, pursuant
to which PaineWebber Incorporated, Needham & Company, Inc. and Sutro & Co.
Incorporated (the "Representatives") intend to act as Representatives to
underwrite a proposed public offering (the "Offering") of shares of Common
Stock, par value $0.001 per share (the "Common Stock"), of Immusol, Inc., a
California corporation, as contemplated by a registration statement (the
"Registration Statement") with respect to such shares to be filed with the
Securities and Exchange Commission on Form S-1, the undersigned hereby agrees
that the undersigned will not, directly or indirectly, for a period of 180 days
after the commencement of the Offering, without the prior written consent of
PaineWebber Incorporated, (1) sell, transfer or otherwise dispose of, or offer,
contract or grant an option to sell, transfer or otherwise dispose of, or
require the Company to file with the Securities and Exchange Commission a
registration statement under the Securities Act of 1933, as amended, to
register, any shares of Common Stock or securities convertible into or
exchangeable for Common Stock or warrants or other rights to acquire shares of
Common Stock of which the undersigned is now, or may in the future become, the
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934, as amended [(other than pursuant to employee stock option plans or
in connection with other employee incentive compensation arrangements)](1)) or
(2) enter into any swap or similar agreement that transfers, in whole or in
part, any of the economic consequences of the ownership of the
- -------------------
(1) Insert if this letter agreement will be signed by an employee of the
Company.
<PAGE> 28
2
Common Stock, whether any such transaction described in clause (1) or (2) above
is to be settled by delivery of Common Stock or such other securities, in cash
or otherwise.
The undersigned acknowledges that the Representatives are relying on
the agreements of the undersigned contained herein in carrying out the
Offering and in entering underwriting agreements with respect thereto.
Very truly yours,
By: _______________________
Print
Name: _____________________
<PAGE> 29
EXHIBIT C
Form of Opinion of
Brobeck, Phleger & Harrison LLP*
1. The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of California and has full
corporate power and authority to conduct all the activities conducted by it, to
own or lease all the assets and properties owned or leased by it and to conduct
its business as described in the Registration Statement and the Prospectus.
2. The Company is duly qualified to transact business as a foreign
corporation and is in good standing in each other jurisdiction in which it owns
or leases property of a nature, or transacts business of a type, that would make
such qualification necessary, except to the extent that the failure to so
qualify or be in good standing would not have a material adverse effect on the
Company.
3. All of the outstanding shares of Common Stock have been, and the
Shares, when paid for by the Underwriters in accordance with the terms of the
Agreement, will be, duly authorized, validly issued, fully paid and
nonassessable and will not be subject to any preemptive or similar right under
(i) the statutes, judicial and administrative decisions, and the rules and
regulations of the governmental agencies of the State of California, (ii) the
Company's articles of incorporation or by-laws or (iii) any instrument,
document, contract or other agreement referred to in the Registration Statement
or any instrument, document, contract or agreement filed as an exhibit to the
Registration Statement. Except as described in the Registration Statement or the
Prospectus, to the best of our knowledge, there is no commitment or arrangement
to issue, and there are no outstanding options, warrants or other rights calling
for the issuance of, any share of capital stock of the Company to any person or
any security or other instrument that by its terms is convertible into,
exercisable for or exchangeable for capital stock of the Company.
4. No consent, approval, authorization or order of, or any filing or
declaration with, any court or governmental agency or body is required in
connection with the authorization, issuance, transfer, sale or delivery of the
Shares by the Company, in connection with the execution, delivery and
performance of the Agreement by the Company or in connection with the taking by
the Company of any action contemplated thereby, except such as have been
obtained under the Act and the Rules and Regulations and such as may be
- --------------------
* All references in this opinion to the Agreement shall include the Price
Determination Agreement. Capitalized terms used herein and not
otherwise defined have the same meanings as in the Underwriting
Agreement.
<PAGE> 30
2
required under state securities or "Blue Sky" laws or by the by-laws and rules
of the NASD in connection with the purchase and distribution by the Underwriters
of the Shares to be sold by the Company.
5. The authorized, issued and outstanding capital stock of the
Company is as set forth in the Registration Statement and the Prospectus under
the caption "Capitalization." The description of the Common Stock contained in
the Prospectus is complete and accurate in all material respects. The form of
certificate used to evidence the Common Stock is in due and proper form and
complies with all applicable statutory requirements.
6. The Registration Statement and the Prospectus comply in all
material respects as to form with the requirements of the Act and the Rules and
Regulations (except that we express no opinion as to financial statements,
schedules and other financial data contained in the Registration Statement or
the Prospectus). To the best of our knowledge, any instrument, document, lease,
license, contract or other agreement (collectively, "Documents") required to be
described or referred to in the Registration Statement or the Prospectus has
been properly described or referred to therein and any Document required to be
filed as an exhibit to the Registration Statement has been filed as an exhibit
thereto or has been incorporated as an exhibit by reference in the Registration
Statement; and no default exists in the due performance or observance of any
material obligation, agreement, covenant or condition contained in any Document
filed or required to be filed as an exhibit to the Registration Statement.
7. To the best of our knowledge, except as disclosed in the
Registration Statement or the Prospectus, no person or entity has the right to
require the registration under the Act of shares of Common Stock or other
securities of the Company by reason of the filing or effectiveness of the
Registration Statement.
8. To the best of our knowledge, the Company is not in violation of,
or in default with respect to, any law, rule, regulation, order, judgment or
decree, except as may be described in the Prospectus or such as in the aggregate
do not now have and will not in the future have a material adverse effect upon
the business, properties, business prospects, condition (financial or otherwise)
or results of operations of the Company.
9. All descriptions in the Prospectus of statutes, regulations or
legal or governmental proceedings are accurate and fairly present the
information required to be shown.
10. The Company has full corporate power and authority to enter into
the Agreement, and the Agreement has been duly authorized, executed and
delivered by the Company, is a valid and binding agreement of the Company and,
except for the
<PAGE> 31
3
indemnification and contribution provisions thereof, as to which we express no
opinion, is enforceable against the Company in accordance with the terms
thereof.
11. The execution and delivery by the Company of, and the
performance by the Company of its agreements in, the Agreement do not and will
not (i) violate the certificate of articles or by-laws of the Company, (ii)
breach or result in a default under, cause the time for performance of any
obligation to be accelerated under, or result in the creation or imposition of
any lien, charge or encumbrance upon any of the assets of the Company pursuant
to the terms of, (x) any indenture, mortgage, deed of trust, loan agreement,
bond, debenture, note agreement, capital lease or other evidence of indebtedness
of which we have knowledge, (y) any voting trust arrangement or any contract or
other agreement to which the Company is a party that restricts the ability of
the Company to issue securities and of which we have knowledge or (z) any
Document filed as an exhibit to the Registration Statement, (iii) breach or
otherwise violate any existing obligation of the Company under any court or
administrative order, judgment or decree of which we have knowledge or (iv)
violate applicable provisions of any statute or regulation in the State of
California or of the United States. Delivery of certificates for the Shares will
transfer valid and marketable title thereto to each Underwriter that has
purchased such Shares in good faith and without notice of any adverse claim with
respect thereto.
12. The Company is not an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company," as such terms are defined in the Investment Company Act of 1940, as
amended.
13. The Shares have been duly approved for quotation on the Nasdaq
National Market.
14. We hereby confirm to you that we have been advised by the
Commission that the Registration Statement has become effective under the Act
and that no order suspending the effectiveness of the Registration Statement has
been issued and no proceeding for that purpose has been instituted or is
pending, threatened or contemplated.
15. Any required filing of the Prospectus or any supplement thereto
pursuant to Rule 424(b) has been made in the manner and within the time period
required by Rule 424(b).
16. We hereby further confirm to you that there are no actions,
suits, proceedings or investigations pending or, to our knowledge, overtly
threatened in writing against the Company, or any of its officers or directors
in their capacities as such, before or by any court, governmental agency or
arbitrator which (i) seek to challenge the legality or enforceability of the
Agreement, (ii) seek to challenge the legality or enforceability of any of the
Documents filed, or required to be filed, as exhibits to the Registration
Statement, (iii)
<PAGE> 32
4
seek damages or other remedies with respect to any of the Documents filed, or
required to be filed, as exhibits to the Registration Statement, (iv) except as
set forth in or contemplated by the Registration Statement and the Prospectus,
seek money damages or seek to impose criminal penalties upon the Company or any
of its officers or directors in their capacities as such and of which we have
knowledge or if determined adversely to the Company, would individually or in
the aggregate, have a material adverse effect on the Company or its business,
properties, business prospects, condition (financial or otherwise) or results of
operations, taken as a whole, or (v) seek to enjoin any of the business
activities of the Company or the transactions described in the Prospectus and of
which we have knowledge.
17. We have participated in the preparation of the Registration
Statement and the Prospectus and, without assuming any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or in any amendment or supplement
thereto, nothing has come to our attention that causes us to believe that, both
as of the Effective Date and as of the Closing Date and the Option Closing Date,
the Registration Statement or any amendment thereto contained or contains any
untrue statement of a material fact or omitted or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading or that any Prospectus or any amendment or supplement thereto, at the
time such Prospectus was issued, at the time any such amended or supplemented
Prospectus was issued, at the Closing Date and the Option Closing Date,
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary in order to make the statements
therein, in the light of the circumstances in which they were made, not
misleading (except that we express no opinion as to financial statements,
schedules and other financial data contained in the Registration Statement or
the Prospectus.
Opinion 11 is subject to the qualification that the enforceability
of the Agreement may be: (i) subject to bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally; and (ii)
subject to general principles of equity (regardless of whether such
enforceability is considered in a proceeding at law or in equity) including
principles of commercial reasonableness or conscionability and an implied
covenant of good faith and fair dealing.
This letter is furnished by us solely for your benefit in connection
with the transactions referred to in the Agreement and may not be circulated to,
or relied upon by, any other person, except that this letter may be relied upon
by your counsel in connection with the opinion letter to be delivered to you
pursuant to Section 5(h).
In rendering the foregoing opinion, counsel may rely, to the extent
they deem such reliance proper, on the opinions (in form and substance
reasonably satisfactory to Underwriters' counsel) of other counsel reasonably
acceptable to Underwriters' counsel as to matters governed by the laws of
jurisdictions other than the United States and the State of
<PAGE> 33
5
California, and as to matters of fact, upon certificates of officers of the
Company and of government officials; provided that such counsel shall state that
the opinion of any other counsel is in form satisfactory to such counsel. Copies
of all such opinions and certificates shall be furnished to counsel to the
Underwriters on the Closing Date.
<PAGE> 34
EXHIBIT D
Form of Opinion of
Townsend and Townsend and Crew
1. The portions of the Registration Statement and the Prospectus
entitled "Risk Factors--Patents and Proprietary Technology; Reliance Upon
Licenses" and "Business--Patents and Proprietary Rights," (together, the "Patent
Paragraphs") are accurate and complete statements or summaries of the matters
set forth therein.
2. There are no legal or governmental proceedings, other than patent
applications pending, relating to patent rights of the Company, to which the
Company is a party, and, to our knowledge, no such proceedings are threatened or
contemplated by governmental authorities or others and no basis for any such
proceedings exist.
3. To our knowledge, the Company has not received any communication
in which it is alleged that the Company is infringing or violating patent rights
of third parties.
4. The Company owns or possesses licenses or other rights to use all
patents, trade secrets, trademarks, service marks or other proprietary
information or materials necessary to conduct the business now being or proposed
to be conducted by the Company as described in the Prospectus.
5. Although we have not independently verified the accuracy and
completeness of the statements contained in the Registration Statement and the
Prospectus, nothing has come to our attention that would cause us to believe
that, at the time the Registration Statement became effective under the
Securities Act of 1933, as amended, the description and statements in the Patent
Paragraphs of the Registration Statement contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein not misleading; or as of the
date of the Prospectus or the date of this opinion, the description and
statements in the Patent Paragraphs of the Prospectus contained or contain any
untrue statement of a material fact or omitted or omit to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
<PAGE> 1
EXHIBIT 4.1
I
<TABLE>
<S> <C> <C>
IMMUSOL, INC.
COMMON STOCK INCORPORATED UNDER THE LAWS OF THE STATE OF CALIFORNIA CUSIP 45253N 10 8
SEE REVERSE FOR CERTAIN DEFINITIONS
</TABLE>
This Certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
IMMUSOL, INC.
transferable on the books of the Corporation by the holder hereof in person
or by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
Secretary Chairman and CEO
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, N.J.)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE> 2
IMMUSOL, INC.
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of each preference and/or rights. Such requests shall be made to
the Corporation s Secretary at the principal office of the Corporation.
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:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT- ................ Custodian .............
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ....................................
in common (State)
UNIF TRF MIN ACT- ......... Custodian (until age ........)
(Cust)
.................under Uniform Transfers
(Minor)
to Minors Act ..........................
(State)
</TABLE>
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
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
X
X
THE SIGNATURE TO 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.
Signature(s) Guaranteed:
By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15
<PAGE> 1
EXHIBIT 5.1
September 20, 1996
Immusol, Inc.
3050 Science Park Road
San Diego, California 92121
Re: 3,000,000 Shares of Common Stock of Immusol, Inc.
Ladies and Gentlemen:
We have acted as counsel to Immusol, Inc., a California corporation (the
"Company"), in connection with the proposed issuance and sale by the Company of
3,000,000 shares of the Company's Common Stock (the "Shares"), pursuant to the
Company's Registration Statement on Form S-1 filed on July 3, 1996, as amended
by Amendment No. 1 filed on July 8, 1996, Amendment No. 2 filed on August 20,
1996, Amendment No. 3 filed on September 20, 1996, and the 462(b) Registration
Statement filed in September 1996 (the "Registration Statement").
In connection with this opinion, we have examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Articles of Incorporation, as amended, the further amendment and
restatement of the Amended and Restated Articles of Incorporation which the
Registration Statement contemplates will be filed before the sale and issuance
of the shares, the Company's bylaws, and originals, or copies certified to our
satisfaction, of such records, documents, certificates, memoranda and other
instruments as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares, if, as and when sold and issued in accordance with the
Registration Statement and Prospectus (as amended and supplemented through the
date of issuance), will be validly issued, fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters"
in the Registration Statement and related Prospectus and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 10.1
WAIVER OF REGISTRATION RIGHTS
Immusol, Inc.
3050 Science Park Road
San Diego, CA 92121
Attention: Tsvi Goldenberg
Re: Public Offering of Common Stock of Immusol, Inc.
Dear Mr. Goldenberg:
In consideration of the proposed initial underwritten public offering of
Common Stock of Immusol, Inc., a California corporation (the "Company"), to be
managed by PaineWebber Incorporated, Needham & Company, Inc. and Sutro & Co.
Incorporated (collectively, the "Representatives"), expected to be consummated
on or prior to the end of August 1996 (the "Public Offering"), the undersigned
hereby waives, solely with respect to the Public Offering, (i) the Investors'
rights under that certain Amended and Restated Shareholder Rights Agreement
dated May 3, 1995, between the Company and the Investors listed on Exhibit A
thereto (the "Shareholder Agreement") to register and sell Registrable
Securities, as defined in the Shareholder Agreement, as part of the Public
Offering, and (ii) the requirement to notify the Investors of the Public
Offering as set forth in the Shareholder Agreement.
Dated: June 25, 1996 Very truly yours,
BANKAMERICA VENTURES
By: /s/ Anchie Kuo
---------------------------------
Name
Managing Director
----------------------------------
Title
<PAGE> 1
EXHIBIT 10.8
* CONFIDENTIAL *
TREATMENT REQUESTED
EXCLUSIVE LICENSE AGREEMENT
BETWEEN
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
AND
IMMUSOL, INCORPORATED
FOR
USE OF HIV-1 TARGETED RIBOZYME TO INHIBIT HIV-1 GENE EXPRESSION
*_______________*
NOVEL HIV-2
*_______________*
MULTIPLE DELETION HIV MUTANTS
*____________________*
RIBOZYME GENE THERAPY FOR AIDS
*________________*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. LIFE OR PATENT EXCLUSIVE GRANT . . . . . . . . . . . . . . . . . . . 4
3. SUBLICENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
4. LICENSE-ISSUE FEE . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. ROYALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. DUE DILIGENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
7. PROGRESS AND ROYALTY REPORTS . . . . . . . . . . . . . . . . . . . . 9
8. BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9. LIFE OF THE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 11
10. TERMINATION BY THE REGENTS . . . . . . . . . . . . . . . . . . . . . 11
11. TERMINATION BY LICENSEE . . . . . . . . . . . . . . . . . . . . . . 12
12. DISPOSITION OF LICENSED PRODUCTS ON HAND
UPON TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13. USE OF NAMES AND TRADEMARKS . . . . . . . . . . . . . . . . . . . . 12
14. LIMITED WARRANTY . . . . . . . . . . . . . . . . . . . . . . . . . . 12
15. PATENT PROSECUTION AND MAINTENANCE . . . . . . . . . . . . . . . . . 13
16. PATENT MARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17. PATENT INFRINGEMENT . . . . . . . . . . . . . . . . . . . . . . . . 15
18. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . 16
19. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
20. ASSIGNABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
21. LATE PAYMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
22. WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
23. FAILURE TO PERFORM . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. GOVERNING LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
25. PREFERENCE FOR UNITED STATES INDUSTRY . . . . . . . . . . . . . . . 18
26. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION . . . . . . . . . . . . 18
27. EXPORT CONTROL LAWS . . . . . . . . . . . . . . . . . . . . . . . . 18
28. SECRECY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
29. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 3
* CONFIDENTIAL *
TREATMENT REQUESTED
*______________________________________*
EXCLUSIVE LICENSE AGREEMENT
FOR
USE OF HIV-1 TARGETED RIBOZYME TO INHIBIT HIV-1 GENE EXPRESSION;
NOVEL HIV-2;
MULTIPLE DELETION HIV MUTANTS; AND
RIBOZYME GENE THERAPY FOR AIDS
THIS LICENSE AGREEMENT (the "Agreement") is made and is effective this
7 day of December, 1993 (the "Effective Date") by and between THE REGENTS OF
THE UNIVERSITY OF CALIFORNIA, a California corporation having its statewide
administrative offices at 300 Lakeside Drive, 22nd Floor, Oakland, California
94612-3550, hereinafter referred to as "The Regents", and IMMUSOL,
INCORPORATED, a California corporation having a principal place of business at
5052 Berean Lane, Irvine, California 92715, hereinafter referred to as the
"Licensee".
RECITALS
WHEREAS, certain inventions, generally characterized as Use Of HIV-1
Targeted Ribozyme To Inhibit HIV-1 Gene Expression (*_________________*), Novel
HIV-2 *________________*, Multiple Deletion HIV Mutants and Ribozyme Gene
Therapy For AIDS *_________________*, hereinafter
collectively referred to as the "Invention", were made in the course of
research at the University of California, San Diego by Drs. Rappaport,
Wong-Staal, Kraus, Talbott, Looney, Yu, Ojwang, Yamada and Steffy, and are
covered by Regents' Patent Rights as defined below;
WHEREAS, the Licensee entered into the following Secrecy Agreements
for the purpose of evaluating the Invention:
*___* Control No. *________*, effective *_______________*, pertaining
to *________________*;
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 4
* CONFIDENTIAL *
TREATMENT REQUESTED
*___* Control No. *________*, effective *_______________*, pertaining
to *________________*; and
*___* Control No. *________*, effective *_______________*,
pertaining to *________________*;
WHEREAS, the development of the Invention was sponsored as follows:
*________________*: UCSD start-up funds;
*________________*: NIH grant
*________________*: NIH grant; and
*________________*: NIH and U.S. Army grant
and as a consequence this license is subject to overriding obligations to the
Federal Government as set forth in 35 U.S.C. 200-212 and applicable
governmental implementing regulations;
WHEREAS, the inventorship of *________________* may be changed in the
U.S. Patent and Trademark Office (USPTO) to include a UC inventor, and will be
assigned to The Regents unless additional employment obligations required this
inventor to assign the application to a third party;
WHEREAS, the Licensee is a"small business firm" as defined in 15
U.S.C. 632;
WHEREAS, inasmuch as David Looney (named inventor on *_______*) is an
employee of the Veterans Administration Medical Center, The Regents will ask
Dr. Looney to have the Veterans Administration release its rights to Dr.
Looney; if the Veterans Administration releases its rights to Dr. Looney, then
Dr. Looney will assign his rights to The Regents;
WHEREAS, The Regents is desirous that the Invention be developed and
utilized to the fullest extent so that the benefits can be enjoyed by the
general public;
WHEREAS, the parties hereto entered into a Letter of Intent dated
*___________*, covering *_________________________________* ("the LOI");
WHEREAS, the Licensee is desirous of obtaining certain rights from The
Regents for the commercial development, use, and sale of the Invention, and The
Regents is willing to grant such rights; and
WHEREAS, both parties recognize and agree that royalties due hereunder
will be paid
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
2
<PAGE> 5
* CONFIDENTIAL *
TREATMENT REQUESTED
on both pending patent application and issued patents;
--oo 0 oo--
The parties agree as follows:
1. DEFINITIONS
1.1 "Regents' Patent rights" means patent rights to any subject
matter claimed in or covered by any of the following U.S. patent applications
that are assigned to The Regents, as well as continuing applications thereof
including divisions, substitutions and continuation- in-part (c-i-p)
applications (to the extent that such continuation-in-part applications contain
claims supported in the original application) and re-examinations; any patents
issuing on said applications or continuing applications including reissues; and
any corresponding foreign applications or patents:
1.1(a) U.S. patent application Serial No. 07/703,427, filed on
*___________* on behalf of the Biotechnology Research and Development Company
(BRDC).
1.1(a)(i) *________*
1.1(b) a patent application now in preparation, covering subject
matter for *_________* and to be assigned to The Regents and to be paid for by
Licensee under the LOI;
1.1(c) pending U.S. Patent Application Serial No. *__________*
entitled "Multiple Gene Mutants of Immunodeficiency Virus (HIV) for Vaccine
Use", filed *_______________* by Drs. Looney and Wong-Staal and assigned to The
Regents and covered by the LOI *________________*; and
1.1(d) pending U.S. Patent Application Serial No. *_________* entitled
"Ribozyme Gene Therapy For HIV Infection and AIDS", filed *___________* by Drs.
Yu, Yamada, Owjang, Levitt, Ho and Wong-Staal, assigned to The Regents
*__________*.
1.2 "Licensed Products" means any product that is covered by
Regents' Patent Rights,
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
3
<PAGE> 6
that is produced by a Licensed method, or that the use of which would
constitute, but for the license granted to the Licensee pursuant to this
Agreement, an infringement of any claim within Regents' Patent Rights.
1.3 "Licensed Method" means any method that is covered by Regents'
Patent Rights, the use of which would constitute, but for the license granted
to the Licensee pursuant to this Agreement, an infringement of any claim within
Regents' Patent Rights.
1.4 "Net Sales" means the total of the gross invoice prices of
Licensed Products sold by Licensee, an Affiliate, or a sublicensee, less the
sum of the following actual and customary deductions where applicable and
actually taken: cash, trade, or quantity discounts; sales, value added, use,
tariffs, import/export duties or other excise taxes imposed upon particular
sales; transportation and insurance charges and allowances or credits to
customers because of rejections or returns.
1.5 "Affiliate" means any corporation or other business entity in
which the Licensee owns or controls, directly or indirectly, at least fifty
percent (50%) of the outstanding stock or other voting rights entitled to elect
directors; provided, however, that in any country where the local law shall not
permit foreign equity participation of at least 50%, then an "Affiliate" shall
include any company in which the Licensee shall own or control, directly or
indirectly, the maximum percentage of such outstanding stock or voting rights
permitted by local law.
1.6 "Shareholders Agreement" means the Shareholders Agreement
attached hereto as Appendix A. This Shareholders Agreement shall be fully
executed and effective as of the execution of this Agreement.
1.7 "Ribozymen Products" means Licensed Products and Licensed methods
for delivering to human patients in need thereof biologically active material
which includes an RNA molecule having catalytic activity (commonly known as a
ribozyme). Ribozymen products include the RNA molecule, its vector and
delivery system, its formulation and packaging for commercial sale, and
services, in connection with the treatment of the patient with the ribozyme
product. A "Not Ribozyme Product" is a Licensed Product that is not a Ribozyme
Product as defined herein, such as a vaccine.
2. LIFE OR PATENT EXCLUSIVE GRANT
2.1 Subject to the limitations set forth in this Agreement, The
Regents hereby grants to the Licensee a world-wide license under Regents'
Patent Rights to make, have made, use, and sell Licensed Products and to
practice License Methods.
2.2 Except as otherwise provided herein, the license granted in
section 2.1 shall be exclusive for the life of the Agreement.
4
<PAGE> 7
* CONFIDENTIAL *
TREATMENT REQUESTED
2.3 The license granted hereunder shall be subject to all the
applicable provisions of any License to the United States Government executed
by The Regents. The license granted hereunder shall be subject to the
overriding obligations to the U.S. Government set forth in 35 U.S.C. 200-212
and applicable governmental implementing regulations.
2.4 The Licenses granted in paragraphs 2.1 and 2.2 to make, use and
sell Licensed Products throughout the world shall be limited, in the case of
Ribozyme Products, to products that are sold for use in human health care. For
other Licensed Products that are ribozymes (for example ribozymes useful for
agricultural purposes), Licensee shall have no license hereunder.
2.5 The Regents expressly reserve the right to make and use the
Invention and Licensed Products and to practice the Licensed Method under
Regents' Patent Rights for educational and research purposes.
3. SUBLICENSES
3.1 The Regents also grants to the Licensee the right to issue
sublicenses to third parties to make, have made, use, and sell Licensed
Products and to practice Licensed Methods, provided the Licensee has current
exclusive rights thereto under this Agreement. To the extent applicable, such
sublicenses shall include all of the rights of and obligations due to The
Regents (and, if applicable, the United States Government) that are contained
in this Agreement.
3.2 Licensee shall provide The Regents with a copy of each sublicense
issued hereunder; collect and guarantee payment of all royalties due The
Regents from sublicensees; and summarize and deliver all reports due The
Regents from sublicensees.
3.3 Upon termination of this Agreement for any reason, The Regents,
at its sole discretion, shall determine whether any or all sublicenses shall be
canceled or assigned to The Regents.
4. LICENSE-ISSUE FEE
4.1 The Licensee shall pay to The Regents a LICENSE-ISSUE FEE of
*___________________________________* within *_____* days after the execution of
this Agreement.
4.2 Also as a LICENSE ISSUE FEE, The Licensee shall transfer to The
Regents Immusol preferred stock having a value of *____________________________*
as set forth in the Shareholders Agreement.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
5
<PAGE> 8
* CONFIDENTIAL *
TREATMENT REQUESTED
4.3 Both LICENSE ISSUE FEES are non-refundable and not an advance
against royalties.
5. ROYALTIES
5.1 During the term of this Agreement the Licensee shall also pay to
The Regents (a) an EARNED ROYALTY of *________________* of Net Sales of Licensed
Products which are Not Ribozyme Products, and (b) an EARNED ROYALTY of
*_______________* of Net Sales of Licensed Products which are Ribozyme Products.
5.2 Paragraphs 1.1, 1.2, and 1.3 define Regents' Patent Rights,
Licensed Products and License Methods so that royalties shall be payable on
products and methods covered by both pending patent applications and issued
patents. Earned royalties shall accrue in each country for the duration of
Regents' Patent Rights in that country and shall be payable to The Regents when
Licensed Products are invoiced, or if not invoiced, when delivered to a third
party.
5.3 Royalties accruing to The Regents shall be paid to The Regents
quarterly on or before the following dates of each calendar year:
February 28
May 31
August 31
November 30
Each such payment will be for royalties which accrued within the Licensee's
most recently completed calendar quarter.
5.4 During the term of this Agreement the Licensee shall pay to The
Regents a MINIMUM ANNUAL ROYALTY in the amounts defined below for the life of
Regents' Patent Rights, beginning with the year of the first commercial sale of
a FDA approved Licensed Product. For the first year of applicable commercial
sales, Licensee's obligation to pay the applicable minimum annual royalties
shall be pro-rated for the number of months remaining in that calendar year
when commercial sales commence and shall be due the following February 28. For
subsequent years, the applicable minimum annual royalty shall be paid to The
Regents by February 28 of each year and shall be credited against the
applicable earned royalty (for either a Ribozyme Product or a Not Ribozyme
Product) due and owing for the calendar year in which the minimum payment was
made. The minimum annual royalties shall be in the following amounts: (a) for
Ribozyme Products: *____________________________________* per year for the first
*_______* years, and *________________________________________________* per year
thereafter; and (b) for Not Ribozyme Products: *______________________________*
per year
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
6
<PAGE> 9
* CONFIDENTIAL *
TREATMENT REQUESTED
for the first *__________* years and *_________________________________________*
per year thereafter.
5.5 The Licensee shall pay to The Regents an annual license
MAINTENANCE FEE in the amounts recited below, beginning on the one-year
anniversary date of the Effective Date of this Agreement and continuing
annually on each anniversary date of the Effective Date of this Agreement. This
license maintenance fee shall not be due and payable as to a particular
licensed product (Ribozyme Product or Not Ribozyme product) on any anniversary
date of the Effective Date of this Agreement if on said date Licensee is
commercially selling that FDA approved Licensed Product and paying an earned
royalty to The Regents on the sales of that Licensed Product. This license
maintenance fee is non-refundable and not an advance against royalties. The
license maintenance fees shall be as follows: (a) for Ribozyme Products, *____*
per year, going to *_____________________* per year on initiation of a clinical
trial intended to show efficacy which is significant enough to support filing
for marketing approval (NDA, PLA or equivalent), i.e., a Phase II or Phase
II/III clinical trial; and (b) For a Not Ribozyme Product, *_________* per year,
going to *_________________________________________* per year on initiation of a
clinical trial intended to show efficacy which is significant enough to support
filing for marketing approval (NDA, PLA, or equivalent).
5.6 All monies due The Regents shall be payable in United States
funds collectible at par in San Francisco, California. When Licensed Products
are sold for monies other than United States dollars, the earned royalties will
first be determined in the foreign currency of the country in which such
Licensed Products were sold and then converted into equivalent United States
funds. The exchange rate will be that rate quoted in the Wall Street Journal
on the last business day of the reporting period.
5.7 Royalties earned with respect to sales occurring in any country
outside the United States shall not be reduced by any taxes, fees, or other
charges imposed by the government of such country on the remittance of royalty
income. The Licensee shall also be responsible for all bank transfer charges.
Notwithstanding this, all payments made by the Licensee in fulfillment of The
Regents' tax liability in any particular country shall be credited against
earned royalties, royalties or fees due The Regents for that country.
5.8 If at any time legal restrictions prevent the prompt remittance
of part or all royalties by the Licensee with respect to any country where a
Licensed Product is sold, the Licensee may deposit such royalties in local
currency in a local bank on other depository designated by The Regents. The
Licensee shall use its best efforts to transfer such funds to its U.S. account.
If it cannot do so after one year, it shall pay such royalties out of its U.S.
source of funds.
5.9 In the event that any patent or any claim thereof included within
The Regents' Patent Rights shall be held invalid on unenforceable in an
unappealed or unappealable decision by a court of competent jurisdiction, any
obligation to pay royalties based on such patent or claim, or any claim
patentably indistinct therefrom, shall cease as of the date of such decision.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
7
<PAGE> 10
* CONFIDENTIAL *
TREATMENT REQUESTED
The Licensee shall not, however, be relieved from paying any royalties that
accrued before such decision or that are based on another patent or claim with
The Regents' Patent Rights not involved in such decision.
5.10 No royalties shall be collected or paid hereunder on Licensed
Products sold to the account of the U.S. Government, any agency thereof, or any
state or domestic municipal government as provided for in the License to the
Government.
6. DUE DILIGENCE
6.1 The Licensee, upon execution of this Agreement, shall diligently
proceed with the development, manufacture and sale of Licensed Products and
shall diligently endeavor to market the same within a reasonable time after
execution of this Agreement and in quantities sufficient to meet the market
demands therefor. Licensee shall have the right to negotiate an extension of
time for any milestone based on its use of reasonably diligent efforts to meet
the milestone dates.
6.2 The Licensee shall be entitled to exercise prudent and reasonable
business judgment in meeting its due diligence obligations hereunder.
6.3 The Licensee shall endeavor to obtain all necessary governmental
approvals for the manufacture, use and sale of Licensed Products.
6.4 If the Licensee is unable to perform any of the following:
(6.4a) submit an IUD covering a Ribozyme product to the
United States FDA within *________* from the
Effective Date of this Agreement; or
(6.4b) submit an IND covering a Licensed Product that is a
Not Ribozyme Product to the United States FDA within
*_____________* from the Effective Date of this
Agreement; or
(6.4c) submit an application for marketing approval to the
U.S. FDA for a Ribozyme Product within *__________*
from the Effective Date of this Agreement; or
(6.4d) submit an application for marketing approval to the
U.S. FDA for a Licensed Product that is a Not
Ribozyme Product within *_____________* from the
Effective Date of this Agreement; or
(6.4e) market any Licensed Product in the United States
within *____________* of receiving marketing approval
from the U.S. FDA for such Licensed Product; or
(6.4f) reasonably fill the market demand for Licensed
Products following commencement of marketing at any
time during the exclusive period of this Agreement;
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
8
<PAGE> 11
* CONFIDENTIAL *
TREATMENT REQUESTED
then The Regents shall have the right and option either to terminate this
Agreement or to reduce the Licensee's exclusive license to a nonexclusive
license. This right, if exercised by The Regents, supersedes the rights
granted in Article 2 (GRANT).
6.5 In addition to the obligations set forth above, the Licensee
shall spend an aggregate of not less than *____________________________*
per year for the development of Licensed Products during the
first *____________* of this Agreement.
6.6 Either party to this Agreement may refer a dispute arising under
Article 6 of this Agreement to binding arbitration. Such referral to
arbitration shall be made by so notifying the other party in writing in
accordance with the provisions of Article 19 hereto (NOTICES), stating the
nature of the dispute to be resolved. Any such arbitration shall be conducted
by three arbitrators controlled by the provisions of the Commercial Arbitration
Rules of the American Arbitration Association then in effect, with the proviso
that the arbitrators shall not be employees of the parties and shall establish
an arbitration timetable resulting in a hearing in San Francisco, California
within 120 days of the original request to arbitrate. The parties shall be
entitled to discovery in like manner as if the arbitration were a civil suit in
the California Superior Court; provided, however, the arbitrator may limit the
scope, time and/or issues involved in discovery. The decision of the
arbitrators shall be enforceable, but not appealable, in any court of competent
jurisdiction. The parties agree that any provision or applicable law
notwithstanding, they will not request and the arbitrators shall have no
authority to award punitive or exemplary damages against any party. The costs
of the arbitration, including administrative fees and fees of the arbitrators
shall be shared equally by the parties. Each party shall bear the cost of its
own attorneys' fees and expert fees.
7. PROGRESS AND ROYALTY REPORTS
7.1 Beginning *_______________* and *___________* thereafter, the
Licensee shall submit to The Regents a detailed progress report covering the
Licensee's activities related to the development and testing of all Licensed
Products and the obtaining of the governmental approvals necessary for
marketing. These progress reports shall be made for each Licensed Product
until the first commercial sale of that Licensed Product occurs in the United
States.
7.2 The progress reports submitted under section 7.1 should include,
but not be limited to, the following topics:
- summary of work completed
- key scientific discoveries
- summary of work in progress
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
9
<PAGE> 12
* CONFIDENTIAL *
TREATMENT REQUESTED
- current schedule of anticipated events or milestones
- market plans for introduction of Licensed Products, and
- a summary of resources (dollar value) spent in the reporting period
7.3 The Licensee shall have a continuing responsibility to keep The
Regents informed of the large/small entity status (as defined by the United
States Patent and Trademark Office) of itself and its sublicensees and
Affiliates.
7.4 The Licensee also agrees to report to The Regents the date of
first commercial sale of a Licensed Product in each country.
7.5 After the first commercial sale of a Licensed Product anywhere in
the world, the Licensee will make quarterly royalty reports to The Regents on
or before each February 28, May 31, August 31 and November 30 of each year.
Each such royalty report will cover the Licensee's most recently completed
calendar quarter and will show (a) the gross sales and Net Sales of Licensed
Products sold by the Licensee during the most recently completed calendar
quarter; (b) the number of each type of Licensed Product sold; (c) the
royalties, in U.S. dollars, payable hereunder with respect to such sales; (d)
the method used to calculate the royalty; and (e) the exchange rates used.
7.6 If no sales of Licensed Products has been made during any
reporting period, a statement to this effect shall be required.
8. BOOKS AND RECORDS
8.1 The Licensee shall keep books and records accurately showing all
Licensed Products manufactured, used, and/or sold under the terms of this
Agreement. Such books and records shall be preserved for at least *__________*
from the date of the royalty payment to which they pertain and shall be
open to inspection by representatives or agents of The Regents at reasonable
times *____* per calendar year during the term of this Agreement, for the sole
purpose of verifying the reports and royalty payments made by Licensee. Such
examination shall be made at Licensee's place of business during ordinary
business hours with at least *___________* days prior written notice. The
representative of the Regents shall report to The Regents only whether there
has been a royalty underpayment and, if so, the amount thereof.
8.2 The fees and expenses of The Regents' representatives performing
such an examination shall be borne by The Regents. However, if an error in
royalties of more than *_________________* of the total royalties due for any
year is discovered, then the fees and expenses of these representatives shall
be borne by the Licensee.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
10
<PAGE> 13
* CONFIDENTIAL *
TREATMENT REQUESTED
9. LIFE OF THE AGREEMENT
9.1 Unless otherwise terminated by operation of law or by acts of the
parties in accordance with the terms of this Agreement, this Agreement shall be
in force from the Effective Date and shall remain in effect for the life of the
last-to-expire patent licensed under this Agreement; or for *___________*
from the Effective Date of this Agreement if no patent issues; or until the
last patent application licensed under this Agreement is abandoned and no
patent in Regents' Patent Rights ever issues, whichever occurs first.
9.2 Any termination of this Agreement shall not affect the rights and
obligations set forth in the following Articles:
<TABLE>
<S> <C>
Article 8 Books and Records
Article 12 Disposition of Licensed Products
on Hand Upon Termination
Article 13 Use of Names and Trademarks
Article 18 Indemnification
Article 23 Failure to Perform
Article 28 Secrecy
Appendix A Shareholders Agreement
</TABLE>
10. TERMINATION BY THE REGENTS
10.1 If the Licensee should violate or fail to perform any term or
covenant of this Agreement, then The Regents may give written notice of such
default (Notice of Default) to the Licensee. If the Licensee should fail to
repair such default within *__________* days of receipt of such notice, The
Regents shall have the right to terminate this Agreement and the licenses
herein by a second written notice (Notice of Termination) to the Licensee. If
a Notice of Termination is sent to the Licensee, this Agreement shall
automatically terminate on the effective date of such notice. Such termination
shall not relieve the Licensee of its obligation to pay any royalty or license
fees owing at the time of such termination and shall not impair any accrued
right of The Regents. These notices shall be subject to Article 19 (Notices).
11. TERMINATION BY LICENSEE
11.1 The Licensee shall have the right at any time to terminate this
Agreement in whole or as to any patent application or patent within The
Regents' Patent Rights by giving notice in writing to The Regents. Such notice
of termination shall be subject to Article 19
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
11
<PAGE> 14
* CONFIDENTIAL *
TREATMENT REQUESTED
(Notices) and termination of this Agreement shall be effective ninety (90) days
from the effective date of such notice.
11.2 Any termination pursuant to the above paragraph shall not
relieve the Licensee of any obligation or liability accrued hereunder prior to
such termination or rescind anything done by the Licensee or any payments made
to The Regents hereunder prior to the time such termination becomes effective,
and such termination shall not affect in any manner any rights of The Regents
arising under this Agreement prior to such termination.
12. DISPOSITION OF LICENSED PRODUCTS
ON HAND UPON TERMINATION
12.1 Upon termination of this Agreement the Licensee shall have the
privilege of disposing of all previously made or partially made Licensed
Products, but no more, within a period of *_______________________________*,
provided, however, that the sale of such Licensed Products shall be subject to
the terms of this Agreement including, but not limited to, the payment of
royalties at the rate and at the time provided herein and the rendering of
reports thereon.
13. USE OF NAMES AND TRADEMARKS
13.1 Nothing contained in this Agreement shall be construed as
conferring any right to use in advertising, publicity, or other promotional
activities any name, trade name, trademark, or other designation of either
party hereto (including contraction, abbreviation or simulation of any of the
foregoing). Unless required by law, the use by Licensee of the name, "The
Regents of the University of California" or the name of any campus of the
University of California is expressly prohibited.
14. LIMITED WARRANTY
14.1 The Regents warrants to the Licensee that it has the lawful
right to grant this license.
14.2 This license and the associated Invention are provided WITHOUT
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY
THAT THE LICENSED PRODUCTS OR LICENSED METHODS WILL NOT INFRINGE ANY PATENT OR
OTHER PROPRIETARY RIGHT.
14.3 IN NO EVENT WILL THE REGENTS BE LIABLE FOR ANY INCIDENTAL,
SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM EXERCISE OF THIS LICENSE OR THE
USE OF THE INVENTION OR LICENSED PRODUCTS.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
12
<PAGE> 15
14.4 Nothing in this Agreement shall be construed as:
** (14.4a) a warranty or representation by The Regents as to the
validity or scope of any Regents' Patent Rights; or
(14.4b) a warranty or representation that anything made,
used, sold or otherwise disposed of under any license
granted in this Agreement is or will be free from
infringement of patents of third parties; or
(14.4c) an obligation to bring or prosecute actions or suits
against third parties for patent infringement except
as provided in Article 17; or
(14.4d) conferring by implication, estoppel or otherwise any
license or rights under any patents of The Regents
other than Regents' Patent Rights as defined herein,
regardless of whether such patents are dominant or
subordinate to Regent's Patent Rights; or
(14.4e) an obligation to furnish any know-how not provided in
Regents' Patent Rights.
15. PATENT PROSECUTION AND MAINTENANCE
15.1 The Regents shall diligently prosecute and maintain the United
States and foreign patents comprising Regents' Patent Rights using counsel of
its choice reasonably acceptable to Licensee. The Regents shall provide the
Licensee with copies of all relevant documentation so that the Licensee may be
informed and apprised of the continuing prosecution and the Licensee agrees to
keep this documentation confidential. The Regents' counsel will take
instructions only from The Regents.
15.2 The Regents shall use all reasonable efforts to amend any patent
application to include claims reasonably requested by the Licensee to protect
any processes or products contemplated to be used or sold under this Agreement.
15.3 Licensee shall apply for an extension of the term of any patent
included within Regents' Patent Rights if appropriate under the Drug Price
Competition and Patent Term Restoration Act of 1984, and/or Japanese and
European counterparts of this law. The Licensee shall prepare all such
documents, and The Regents agrees to execute such documents and to take such
additional action as the Licensee may reasonably request in connection
therewith.
15.4 In the event either party receives notice pertaining to
infringement or potential infringement of any issued patent included within
Regents' Patent Rights pursuant to the Drug Price Competition and Patent Term
Restoration Act of 1984, such party shall notify the other party within ten
(10) days after receipt of such notice.
15.5 The reasonable costs of preparing, filing, prosecuting and
maintaining all United
13
<PAGE> 16
* CONFIDENTIAL *
TREATMENT REQUESTED
States patent applications contemplated by this Agreement shall be borne by
Licensee. This includes patent prosecution costs for this Invention incurred
by The Regents prior to the execution of this Agreement. Such prior costs will
be approximately *_______* and will be due upon execution of this Agreement and
billing by The Regents.
15.6 The Licensee shall have the continuing responsibility to notify
The Regents if Licensee or any of its sublicensees is not a small entity under
the provisions of 35 U.S.C. 41(h).
15.7 The Licensee shall have the right to obtain patent protection on
the Invention in foreign countries if available and if it so desires. The
Licensee must notify The Regents within *_____________* of the filing of the
corresponding United States application of its decision to obtain foreign
patents. This notice concerning foreign filing shall be in writing, must
identify the countries desired, and reaffirm Licensee's obligation to
underwrite the costs thereof. The absence of such a notice from the Licensee
to The Regents shall be considered an election not to secure foreign rights.
15.8 The preparation, filing and prosecuting of all foreign patent
applications filed at the Licensee's request, as well as the maintenance of all
resulting patents, shall be at the sole expense of the Licensee. Such patents
shall be held in the name of The Regents and shall be obtained using counsel of
The Regents' choice.
15.9 The Licensee's obligation to underwrite and to pay patent
prosecution costs shall continue for so long as this Agreement remains in
effect, provided, however, that the Licensee may terminate its obligations with
respect to any given patent application or patent upon *______________* written
notice to The Regents. The Regents will use its best efforts to curtail patent
costs when such a notice is received from the Licensee. The Regents may
continue prosecution and/or maintenance of such application(s) or patent(s) at
its sole discretion and expense; provided, however, that the Licensee shall
have no further right or licenses thereunder.
15.10 The Regents shall have the right to file patent applications at
its own expense in any country in which the Licensee has not elected to secure
patent rights, and such applications and resultant patents shall not be subject
to this Agreement.
16. PATENT MARKING
16.1 The Licensee agrees to mark all Licensed Products made, used or
sold under the terms of this Agreement, or their containers, in accordance with
the applicable patent marking laws.
17. PATENT INFRINGEMENT
17.1 In the event that the Licensee shall learn of the substantial
infringement of any
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
14
<PAGE> 17
* CONFIDENTIAL *
TREATMENT REQUESTED
patent licensed under this Agreement, the Licensee shall call The Regents'
attention thereto in writing and shall provide The Regents with reasonable
evidence of such infringement. Both parties to this Agreement agree that
during the period and in a jurisdiction where the Licensee has exclusive rights
under this Agreement, neither will notify a third party of the infringement of
any of Regents' Patent Rights without first obtaining consent of the other
party, which consent shall not be unreasonably denied. Both parties shall use
their best efforts in cooperation with each other to terminate such
infringement without litigation.
17.2 The Licensee may request that The Regents take legal action
against the infringement of Regents' Patent Rights. Such request shall be made
in writing and shall include reasonable evidence of such infringement and
damages to the Licensee. If the infringing activity has not been abated within
*______________* following the effective date of such request, The Regents
shall have the right to:
(17.2a) commence suit on its own account; or
(17.2b) refuse to participate in such suit,
and The Regents shall give notice of its election in writing to the Licensee by
the end of the *___________________* day after receiving notice of such request
from the Licensee. The Licensee may thereafter bring suit for patent
infringement if and only if The Regents elects not to commence suit and if the
infringement occurred during the period and in a jurisdiction where the
Licensee had exclusive rights under this Agreement. However, in the event the
Licensee elects to bring suit in accordance with this paragraph, The Regents
may thereafter join such suit at its own expense.
17.3 Such legal action as is decided upon shall be at the expense of
the party on account of whom suit is brought and all recoveries recovered
thereby shall belong to such party, provided, however, that legal action
brought jointly by The Regents and the Licensee and fully participated in by
both shall be at the joint expense of the parties and all recoveries shall be
shared jointly by them in proportion to the share of expense paid by each
party.
17.4 Each party agrees to cooperate with the other in litigation
proceedings instituted hereunder but at the expense of the party on account of
whom suit is brought. Such litigation shall be controlled by the party
bringing the suit, except that The Regents may be represented by counsel of its
choice and at its expense in any suit brought by the Licensee.
18. INDEMNIFICATION
18.1 The Licensee agrees to indemnify, hold harmless and defend The
Regents, its officers, employees, and agents; the sponsors of the research that
led to the Invention; and the inventors of the patents and patent applications
in Regents' Patent Rights and their employers against any and all claims,
suits, losses, damage, costs, fees, and expenses resulting from or arising out
of exercise of this license or any sublicense. This indemnification will
include, but
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
15
<PAGE> 18
* CONFIDENTIAL *
TREATMENT REQUESTED
will not be limited to, any product liability.
18.2 The Licensee, at its sole cost and expense, shall insure its
activities in connection with the work under this Agreement and obtain, keep in
force and maintain insurance or an equivalent program of self insurance, said
insurance to have the following limits, as of the date when a Licensed Product
is first used on a human being:
Comprehensive or Commercial Form General Liability Insurance
(contractual liability included) with limits as follows:
(a) Each Occurrence *__________*
(b) Products/Completed Operations Aggregate *__________*
(c) Personal and Advertising Injury *__________*
(d) General Aggregate (commercial form only) *__________*
It should be expressly understood, however, that the coverages and
limits referred to under the above shall not in any way limit the liability of
Licensee. Licensee shall furnish The Regents with certificates of insurance
evidencing compliance with all requirements. Such certificates shall:
(a) Provide for *__________* advance written notice to University
of any modification.
(b) Indicate that The Regents has been endorsed as an additional
Insured under the coverages referred to under the above.
(c) Include a provision that the coverages will be primary and will
not participate with nor will be excess over any valid and collectable
insurance or program of self-insurance carried or maintained by The Regents.
18.3 The Regents shall promptly notify Licensee in writing of any
claim or suit brought against The Regents in respect of which The Regents
intends to invoke the provisions of this Article 18. Licensee will keep The
Regents informed on a current basis of its defense of any claims pursuant to
this Article 18.
19. NOTICES
19.1 Any notice or payment required to be given to either party shall
be deemed to have been properly given and to be effective (a) on the date of
delivery if delivered in person or (b) *_______* days after mailing if mailed by
first-class certified mail, postage paid, to the respective addresses given
below, or to such other address as it shall designate by written notice given
to the other party.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
16
<PAGE> 19
* CONFIDENTIAL *
TREATMENT REQUESTED
In the case of the Licensee: Immusol, Incorporated
5052 Berean Lane
Irvine, California 92715
Attention: President
In the case of The Regents: THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
1320 Harbor Bay Parkway
Suite 150
Alameda, California 94501
Attention: Director;
Office of Technology Transfer
Referring to: *__________________________*
20. ASSIGNABILITY
20.1 This Agreement is binding upon and shall inure to the benefit of
The Regents, its successors and assigns, but shall be personal to the Licensee
and assignable by the Licensee only with the written consent of The Regents,
which consent shall not be unreasonably withheld; provided, however, the
Licensee may assign the Agreement to a successor of all or substantially all
its assets without the consent of The Regents.
21. LATE PAYMENTS
21.1 In the event royalty payments or fees are not received by The
Regents when due, the Licensee shall pay to The Regents interest charges at a
rate of *____________* per annum. Such interest shall be calculated from the
date payment was due until actually received by The Regents.
22. WAIVER
22.1 It is agreed that no waiver by either party hereto of any breach
or default of any of the covenants or agreements herein set forth shall be
deemed a waiver as to any subsequent and/or similar breach or default.
23. FAILURE TO PERFORM
23.1 In the event of a failure of performance due under the terms of
this Agreement and if it becomes necessary for either party to undertake legal
action against the other on account thereof, then the prevailing party shall be
entitled to reasonable attorney's fees in addition to costs and necessary
disbursements.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
17
<PAGE> 20
24. GOVERNING LAWS
24.1 THIS AGREEMENT SHALL BE INTERPRETED AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any
patent or patent application shall be governed by the applicable laws of the
country of such patent or patent application.
25. PREFERENCE FOR UNITED STATES INDUSTRY
25.1 Because this Agreement grants the exclusive right to use or sell
the Invention in the United States, the Licensee agrees that any products
embodying this Invention or product through the use thereof will be
manufactured substantially in the United States.
26. FOREIGN GOVERNMENT APPROVAL OR REGISTRATION
26.1 If this Agreement or any associated transaction is required by
the law of any nation to be either approved or registered with any governmental
agency, the Licensee shall assume all legal obligations to do so.
27. EXPORT CONTROL LAWS
27.1 The Licensee shall observe all applicable United States and
foreign laws with respect to the transfer of Licensed Products and related
technical data to foreign countries, including, without limitation, the
International Traffic in Arms Regulations (ITAR) and the Export Administration
Regulations.
28. SECRECY
28.1 With regard to confidential information ("Data"), which can be
oral or written or both, received from The Regents regarding this Invention,
the Licensee agrees:
(1) not to use the Data except for the sole purpose of performing
under the terms of this Agreement;
(2) to safeguard Data against disclosure to others with the same
degree of care as it exercises with its own data of a nature;
(3) not to disclose Data to others (except to its employees,
agents or consultants who are bound to Licensee by a like
obligation of confidentiality) without the express written
permission of The Regents, except that Licensee shall not be
prevented from using or disclosing any of the Data:
(a) which Licensee can demonstrate by written records or
other evidence was previously known to it;
(b) which is now, or becomes in the future, public
knowledge other than through acts or omissions of
Licensee;
(c) which is lawfully obtained by Licensee from sources
independent of The Regents;
(d) is disclosed pursuant to law or the order or
requirement of a court, administrative agency, or
other governmental body; or
18
<PAGE> 21
* CONFIDENTIAL *
TREATMENT REQUESTED
(e) is disclosed by Licensee to accountants, banks, or
another financing source (or their advisors) or in
connection with a merger, acquisition or securities
offering, subject to a non-disclosure agreement.
(4) that the secrecy obligations of Licensee with respect to Data
shall continue for a period ending *_____* years from the
termination date of this Agreement.
With regard to biological material received from The Regents,
including any cell lines, vectors, derivatives, products progeny or material
derived therefrom ("Biological Material"), Licensee hereby agrees:
(1) not to use Biological Material except for the sole purpose of
performing under the terms of this Agreement;
(2) not to transfer Biological Material to others (except to its
employees, agents or consultants who are bound to the Licensee
by like obligations conditioning and restricting access, use
and continued use of Biological Material) without the express
written permission of The Regents, except that Licensee shall
not be prevented from transferring Biological Material which:
(a) becomes publicly available other than through acts or
omissions of Licensee, or
(b) is lawfully obtained by Licensee from sources
independent of The Regents;
(3) to safeguard Biological Material against disclosure and
transmission to others with the same degree of care as it
exercises with its own biological materials of a similar
nature.
28.2 The Regents shall use due care to maintain any confidential
business information provided by LICENSEE to the Regents, and any reports and
information provided by Licensee to The Regents pursuant to Sections 7 and 8,
in confidence and not disclose such information or reports to any third party,
except as required by law and disclosed after notice to Licensee and after
requesting confidential treatment and a protective order, if available. The
Licensee acknowledges that The Regents is a public institution and is subject
to the California Public Records Act.
29. MISCELLANEOUS
29.1 The headings of the several sections are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.
29.2 This Agreement will not be binding upon the parties until it has
been signed below on behalf of each party, in which event, it shall be
effective as of the date recited on page one.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
19
<PAGE> 22
* CONFIDENTIAL *
TREATMENT REQUESTED
29.3 No amendment or modification hereof shall be valid or binding
upon the parties unless made in writing and signed on behalf of each party.
29.4 This Agreement embodies the entire understanding of the parties
and shall supersede all previous communications, representations or
understandings, either oral or written, between the parties relating to the
subject matter hereof. The Secrecy Agreements dated *_______________*, and the
LOI are hereby terminated.
29.5 In case any of the provisions contained in this Agreement shall
be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other
provisions hereof, but this Agreement shall be construed as if such invalid or
illegal or unenforceable provisions had never been contained herein.
29.6 This Agreement includes Appendix A which is attached hereto as a
Shareholder's Agreement. As long as The Regents is a shareholder, The Regents
shall receive the same notice of all Board of Directors meetings of the Company
as it gives to its regular Board members. A representative of The Regents,
chosen by The Regents after consultation with the Licensee (i.e. the Company),
shall have the right to attend such meetings, except for executive sessions of
the Board. The Regents shall have the right to vote its shares, to inspect
books and records, and to approve corporate actions in accordance with
generally applicable laws and rules of the Company applying to preferred stock
holders.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
20
<PAGE> 23
IN WITNESS WHEREOF, both The Regents and the Licensee have executed
this Agreement, in duplicate originals, by their respective officers hereunto
duly authorized, on the day and year hereinafter written.
IMMUSOL, INCORPORATED THE REGENTS OF THE
UNIVERSITY OF CALIFORNIA
By: /s/ TSVI GOLDENBERG, Ph.D. By: /s/ William T.Davis
--------------------------- -------------------------
(Signature) (Signature)
Name: /s/ TSVI GOLDENBERG, Ph.D. Name: William T. Davis
(Please Print)
Title: Chairman & CEO Title: Associate Director;
Office of Technology
Transfer
Date: 11-19-93 Date: 12-6-93
--------------------- -----------------------
Approved as to legal form: /s/ EDWIN H. BAKER 10-22-93
---------------------------------------------
Edwin H. Baker, ASSOCIATE
OFFICE OF TECHNOLOGY TRANSFER
University OF CALIFORNIA
21
<PAGE> 24
* CONFIDENTIAL *
TREATMENT REQUESTED
APPENDIX A
SHAREHOLDERS AGREEMENT
1. The authorized and outstanding capital of the Company consists of:
(a) 2,000,000 shares of Preferred Stock (the "Preferred Stock"),
all of which are designated Series A Preferred Stock and outstanding.
(b) 20,000,000 shares. of Common Stock (the "Common Stock"), of
which 7,045,000 shares are outstanding.
(c) 400,000 shares of Common Stock reserved for issuance under the
Company's 1992 Stock Plan, of which 60,000 shares have been issued pursuant to
exercise of an option, 30,000 shares are issuable upon exercise of an
outstanding option, leaving 310,000 shares available for issuance under the
1992 Stock Plan.
2. According to the latest determination of the Company's board of
directors, the Company's Common Stock has a per share value of $*____*.
3. The Company proposes to issue and sell additional shares of capital
stock (most likely Series B Preferred Stock) as part of its next financing (the
"Financing") and anticipates that the Company's capitalization will be
increased by the number of shares of capital stock to be issued and sold
pursuant to the Financing.
4. Pursuant to Section 4.2 of the Exclusive License Agreement between the
Company and the Regents of the University of California, the Company hereby
agrees to transfer to the Regents that whole number of shares of capital stock
issued and sold pursuant to the Financing equal to an aggregate value of
*___________________________________________*.
5. (a) It is hereby agreed that the Company has delivered to The
Regents the offering documents used in connection with the most recently
completed security-based financing of the Company.
(b) Unless otherwise stated herein or in any written agreement
between the Company and the Regents, upon the issuance of the capital stock
pursuant to Section 4 above, the Regents shall have the same rights,
preferences and privileges to be granted to the investors to the Financing.
(c) A stock certificate evidencing the transfer pursuant to
Section 4 above shall be delivered to The Regents within thirty (30) days after
the close of the Financing.
6. It is hereby expressly reiterated that all provisions of the Agreement
relating to indemnification, limited warranty, and use of names apply to this
Shareholders Agreement.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
22
<PAGE> 25
* CONFIDENTIAL *
TREATMENT REQUESTED
[UNIVERSITY OF CALIFORNIA LETTERHEAD]
*____________*
IN DUPLICATE VIA FEDERAL EXPRESS
Tsvi Goldenberg, Ph.D.
Chairman and CEO
Immusol, Incorporated
3050 Science Park Road
San Diego, CA 92121
Re: USE OF HIV-1 TARGETED RIBOZYME TO INHIBIT HIV-1 GENE EXPRESSION
*____________________*
NOVEL HIV-2
*____________________*
MULTIPLE DELETION HIV MUTANTS
*_________________________*
RIBOZYME GENE THERAPY FOR HIV
*____________________*
Dear Tsvi:
The Regents acknowledges that Immusol, Inc. ("Immusol") recently issued
shares of Series B1 Preferred Stock pursuant to an equity stock financing. In
compliance with the Exclusive License Agreement *___________________________*
dated *_______________* ("License Agreement"), Immusol issued to The Regents of
the University of California ("The Regents") 7,323 shares of Series B1 Preferred
Stock, certification no. B1-2 (the "Certificate") on *___________*. The Regents
now wishes to return and cancel the Certificate and amend the License Agreement
to receive *______* in cash or check instead of such shares of Series B1
Preferred Stock. Immediately upon receipt of this letter executed by an officer
of Immusol, The Regents agrees to return the Certificate. Subject to receipt of
the Certificate, Immusol hereby agrees to the following:
1. This letter confirms our telephone conversation on *__________*, and
amends the License Agreement.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 26
* CONFIDENTIAL *
TREATMENT REQUESTED
Tsvi Goldenberg, Ph.D., Immusol Inc., June 15, 1995, page 2
2. The Regents hereby waives all existing and future rights to the
Immusol preferred stock required under Paragraph 4.2 of the License Agreement
in return for *________* in cash. To that end Paragraph 4.2 is hereby replaced
in its entirety with the following:
"4.2 Also as a license issue fee, The Licensee shall pay to The
Regents *_________________________________*, which is due on or before
*___________*."
3. In accordance with the provisions of paragraph 2 of this letter,
the following references to Immusol preferred stock and the corresponding
shareholders' agreement are removed from the License Agreement: Paragraph 1.6;
the last line of Paragraph 9.2; Paragraph 29.6; and Appendix A.
4. Immusol's obligation to pay the Cash Payment is subject to receipt
of the Certificate from The Regents at least * business days prior to payment
of the Cash Payment. Immusol shall pay the Cash Payment on the later of (i)
*___________* or (ii) *_____________* after Immusol's receipt of the
Certificate from The Regents.
If Immusol agrees with this First Amendment, please sign both originals
of this letter and return one original to me for our files.
Sincerely,
/s/ DAVID J. ASTON
David J. Aston
Assistant Director
cc: George Y. Choi - Wilson, Sonsini
- ------------------------------------------------------------------------------
ACCEPTED BY
IMMUSOL INCORPORATED
/s/ TSVI GOLDENBERG
- ---------------------------
Tsvi Goldenberg, Ph.D.
Chairman & CEO
6-27-95
- ---------------------------
Date
Approved as to legal form: /s/ SANDRA S. SCHULTZ 6/19/95
............................. ............
Sandra S. Schultz, Attorney Date
Office of Technology Transfer,
University of California
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 1
EXHIBIT 10.9
* CONFIDENTIAL *
TREATMENT REQUESTED
COLLABORATIVE RESEARCH AGREEMENT
This COLLABORATIVE RESEARCH AGREEMENT (The "Agreement") is entered into as of
the Effective Date by and between PFIZER INC, a Delaware corporation, having an
office at 235 East 42nd Street, New York, NY 10017 and its Affiliates
("Pfizer"), and IMMUSOL INCORPORATED ("Immusol"), a California corporation,
having an office at 3050 Science Park Road, La Jolla, California 92121.
WHEREAS, Immusol has expertise in * ______________________ * research; and
WHEREAS, Immusol or its licensor have filed the patent applications set forth
in Exhibit A attached to and made part of this Agreement; and
WHEREAS, the parties plan to seek patent protection for all Products which make
up the subject matter of this Agreement and the License Agreement; and
WHEREAS, the parties will also execute a License and Royalty Agreement with
respect to the commercialization of the subject matter of this Agreement on the
same date that this Agreement is executed; and
WHEREAS, Pfizer has the capability to undertake research for the discovery and
evaluation of agents for treatment of disease and also the capability for
clinical analysis, manufacturing and marketing with respect * ______________ *;
and
WHEREAS, Pfizer and Immusol are planning to develop ribozymes for use in other
applications, and to that end will discuss programs for other indications;
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 2
2
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS.
Whenever used in this Agreement, the terms defined in this Section 1 shall have
the meanings specified. The capitalized terms used in this Agreement and not
defined elsewhere in it or in this Section 1 shall have the meanings specified
in the License Agreement.
1.1. "Affiliate" means any corporation or other legal entity
owning, directly or indirectly, fifty percent (50%) or more of the voting
capital shares or similar voting securities of Pfizer or Immusol; any
corporation or other legal entity fifty percent (50%) or more of the voting
capital shares or similar voting rights of which is owned, directly or
indirectly, by Pfizer or Immusol or any corporation or other legal entity fifty
percent (50%) or more of the voting capital shares or similar voting rights of
which is owned, directly or indirectly, by a corporation or other legal entity
which owns, directly or indirectly, fifty percent (50%) or more of the voting
capital shares or similar voting securities of Pfizer or Immusol.
1.2. "Annual Commitment" means the maximum amount to be paid to
Immusol by Pfizer to fund the Research Program for any Commitment Year.
1.3. "Annual Research Plan" means the written plan describing the
research and manning in the Area to be carried out during each Commitment Year
by Pfizer and Immusol pursuant to this Agreement. Each Annual Research Plan
will be attached to and made a part of this Agreement as Exhibit C.
<PAGE> 3
* CONFIDENTIAL *
TREATMENT REQUESTED
3
1.4. "Research Program" is the collaborative research program in
the Area conducted by Pfizer and Immusol pursuant to the Annual Research Plans
in effect during the Contract Period as originally set forth *_______________*
attached to and made a part of this Agreement as Exhibit B.
1.5. "Effective Date" is *_________*.
1.6. "Contract Period" means the period beginning on the Effective
Date and ending on the date on which the Research Program terminates.
1.7. "Commitment Year" means a twelve-month period commencing on
each anniversary of the Effective Date.
1.8. "Area" means research or development with respect to gene
therapy of AIDS/HIV infection using ribozymes, the primary goal of which
*_______*.
1.9. "Technology" means and includes all materials, technology,
technical information, know-how, expertise and trade secrets within the Area.
1.10. "Immusol Technology" means technology that is or was:
(a) developed by employees of or consultants to Immusol prior to
the Effective Date; or
(b) acquired by purchase, license, assignment or other means from
third parties by Immusol prior to the Effective Date or during
the Contract Period that would not otherwise be part of Joint
Technology.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 4
4
1.11. "Joint Technology" means Technology that is or was:
(a) developed by employees of or consultants to Pfizer or Immusol
solely or jointly with each other during the Contract Period
in connection with the performance of the Research Program; or
(b) acquired by purchase, license, assignment or other means from
third parties by Immusol or Pfizer during the Contract Period
for use in the performance of the Research Program which may
be licensed by either Immusol or Pfizer, as the case may be,
to the other.
1.12. "Pfizer Technology" means Technology that is or was:
(a) developed by employees of or consultants to Pfizer alone or
jointly with third parties prior to the Effective Date or
during the Contract Period in the course of activities not
described in an Annual Research Plan; or
(b) acquired by purchase, license, assignment or to other means
from third parties by Pfizer prior to the Effective Date or
during the Contract Period that would not otherwise be part of
Joint Technology.
1.13. "Immusol Confidential Information" means all information about
any element of the Immusol or Joint Technology which is disclosed by Immusol to
Pfizer and designated "Confidential" in writing by Immusol at the time of
disclosure to Pfizer to the extent that such information is not (i) known to
Pfizer as of the date of disclosure to Pfizer as shown by its prior written
records, other than by virtue of a prior confidential disclosure to Pfizer by
Immusol; or (ii) then or thereafter disclosed in published literature, or
<PAGE> 5
5
otherwise generally known to the public through no fault or omission of Pfizer;
or (iii) obtained from a third party free from any obligation of
confidentiality to Immusol.
1.14. "Pfizer Confidential Information" means all information about
any element of Pfizer or Joint Technology which is disclosed by Pfizer to
Immusol and designated "Confidential" in writing by Pfizer at the time of
disclosure to Immusol to the extent that such information is not (i) known to
Immusol as of the date of disclosure to Immusol as shown by its prior written
records, other than by virtue of a prior confidential disclosure to Immusol by
Pfizer; or (ii) then or thereafter disclosed in published literature, or
otherwise generally known to the public through no fault or omission of
Immusol; or (iii) obtained from a third party free from any obligation of
confidentiality to Pfizer.
1.15. "Patent Rights" shall mean:
(a) Subject to the rights of the US Government pursuant to
35 USC Sections 200-212, the patents and patent applications listed in Exhibit
A hereto, and patents issuing on them, including any division, continuation,
continuation-in-part, renewal, extension, reexamination, reissue or foreign
counterpart of such patents and patent applications; and
(b) all patents and patent applications claiming
inventions within the Pfizer Technology, Immusol Technology (except to the
extent subject to Section 1.15(a) above) and Joint Technology, whether domestic
or foreign, including all continuations, continuations-in-part, divisions, and
renewals, all letters patent granted thereon, and all reissues, reexaminations
and extensions thereof.
<PAGE> 6
* CONFIDENTIAL *
TREATMENT REQUESTED
6
1.16. "Product" means * ___________________ *.
1.17. "Ex Vivo" Product means * ___________ *.
1.18. "In Vivo" Product means * ___________ *.
1.19. "UC License" means that certain License Agreement entered by
Immusol, Inc. and the Regents of the University of California, effective as of
* ____________ *.
2. COLLABORATIVE RESEARCH PROGRAM
2.1.1 Purpose. Immusol and Pfizer shall conduct the
Research Program throughout the Contract Period. * _____________*.
The objective of the Research Program is to discover,
develop and patent Products.
2.1.2 Annual Research Plan. The overall five-year research
plan is attached as Exhibit B. The Annual Research Plan for the first
Commitment Year is described in the attached Exhibit C. For each Commitment
Year after the first, the Annual Research Plan shall be prepared by the
Research Committee for submission to and approval by Pfizer and Immusol no
later than ninety (90) days before the end of the prior Commitment Year. Each
new Annual Research Plan for each succeeding Commitment Year shall be appended
to Exhibit C and made part of this Agreement. The Annual Research Plan may be
amended,
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 7
* CONFIDENTIAL *
TREATMENT REQUESTED
7
from time to time, by the Research Committee with the consent of the
managements of both parties.
2.1.3 Exclusivity. Immusol and Pfizer each agree that
neither party nor any of its Affiliates shall conduct research itself or
sponsor any other research in the Area, or engage in any such research
sponsored by any third party, without the prior written consent of the other
party hereto.
2.2. Research Committee
2.2.1. Purpose. Pfizer and Immusol shall establish a
Research Committee (the "Research Committee"):
(a) to review and evaluate progress under each Annual
Research Plan;
(b) to prepare the Annual Research Plan including Product
candidate nomination criteria for each Commitment
Year; and
(c) to coordinate and monitor publication of research
results obtained from and the exchange of information
and materials that relate to the Research Program.
(This function shall survive the termination of this
Agreement.)
2.2.2. Membership. Pfizer and Immusol each shall appoint, in
its sole discretion, *________* members to the Research Committee. Substitutes
may be appointed at any time.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 8
* CONFIDENTIAL *
TREATMENT REQUESTED
8
The members initially shall be:
Pfizer Appointees:
*
Immusol Appointees:
*
2.2.3. Chair. The Research Committee shall be chaired by
* ___________________________ *.
2.2.4. Meetings. The Research Committee shall meet at least
quarterly, at places and on dates selected by each party in turn.
Representatives of Pfizer or Immusol or both, in addition to members of the
Research Committee, may attend such meetings at the invitation of either party.
2.2.5. Minutes. The Research Committee shall keep accurate
minutes of its deliberations which record all proposed decisions and all
actions recommended or taken. Drafts of the minutes shall be delivered to all
Research Committee members within five (5) business days after each meeting.
The party hosting the meeting shall be responsible for the preparation and
circulation of the draft minutes. Draft minutes shall be edited by the
co-chairpersons and shall be issued in final form only with their approval and
agreement.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 9
* CONFIDENTIAL *
TREATMENT REQUESTED
9
2.2.6. Decisions. All technical decisions of the Research
Committee shall be made by majority of the members.
2.2.7. Expenses. Pfizer and Immusol shall each bear all
expenses of their respective members related to their participation on the
Research Committee.
2.3. Reports and Materials.
2.3.1. Reports. During the Contract Period, Pfizer and
Immusol each shall furnish to the Research Committee:
(a) summary written reports within *________* days after the end of
each *_________* period commencing on the Effective Date,
describing its progress under the Annual Research Plan; and
(b) comprehensive written reports within *________* days after the
end of each Commitment Year, describing in detail the work
accomplished by it under the Annual Research Plan during the
Commitment Year and discussing and evaluating the results of
such work.
2.3.2. Materials. Subject to any contractual obligations to
third parties, Immusol and Pfizer shall, during the Contract Period, as a
matter of course as described in the Annual Research Plan, or upon each other's
written or oral request, furnish to each other samples of biochemical,
biological or synthetic chemical materials which are part of Pfizer Technology,
Immusol Technology or Joint Technology and which are necessary for each party
to carry out its responsibilities under the Annual Research Plan. To the
extent that the quantities of materials requested by either party exceed the
quantities set forth in the
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 10
* CONFIDENTIAL *
TREATMENT REQUESTED
10
Annual Research Plan, the requesting party shall reimburse the other party for
the reasonable costs of such materials if they are furnished.
2.4. Laboratory Facilities and Personnel. Immusol shall provide
suitable laboratory facilities, equipment and personnel for the work to be done
by Immusol in carrying out the Research Program. Subject to the approval of
the Research Committee and the prospective host laboratory, employees of both
Pfizer and Immusol may be assigned to work in the other's laboratory in numbers
and at times deemed reasonable by the host laboratory.
2.5. Diligent Efforts. * _____________________________________*.
3. FUNDING THE RESEARCH PROGRAM.
3.1. The Annual Commitment for each Commitment Year is as follows:
<TABLE>
<CAPTION>
COMMITMENT YEAR ANNUAL COMMITMENT
<S> <C>
* $ *
</TABLE>
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 11
* CONFIDENTIAL *
TREATMENT REQUESTED
11
3.2. Payments by Pfizer to cover Immusol's total, actual direct and
indirect research costs (the "Funding Payments") shall not exceed the Annual
Commitment in any Commitment Year. Immusol shall have no obligation to expend
any amount or incur any financial obligation in connection with the performance
of the Research Program in excess of the aggregate Funding Payments received
from Pfizer for such quarter.
3.2.1. All Funding Payments shall be made quarterly in
advance for research and development activities scheduled to be performed by
Immusol during any three (3) month quarterly period, against Immusol's invoice
for such three (3) month quarterly period. Adjustments as necessary to reflect
the research and development activities actually performed by Immusol shall be
made within *_______________* days of the end of each three (3) month
quarterly period and shall be reflected in Immusol's next invoice.
3.2.2. Each Funding Payment shall be paid by Pfizer in U.S.
currency by wire transfer to an account designated by Immusol or by other
mutually acceptable means on the first day of the quarter or thirty (30) days
after receipt of invoice, whichever is later.
3.2.3. Immusol shall keep for *_________________* from the
conclusion of each Commitment Year complete and accurate records of its
expenditures of Funding Payments received by it. The records shall conform to
good accounting principles as applied to a similar company similarly situated.
Pfizer shall have the right at its own expense during the term of this
Agreement and during the subsequent *________* period to appoint an independent
certified public accountant reasonably acceptable to Immusol to inspect said
records to verify the accuracy of such expenditures, pursuant to each Annual
Research Plan.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 12
* CONFIDENTIAL *
TREATMENT REQUESTED
12
Upon reasonable notice by Pfizer, Immusol shall make its records available for
inspection by the independent certified public accountant during regular
business hours at the place or places where such records are customarily kept,
to verify the accuracy of the expenditures. This right of inspection shall not
be exercised more than *_______* in any calendar year and not more than *______*
with respect to records covering any specific period of time. All information
concerning such expenditures, and all information learned in the course of any
audit or inspection, shall be deemed to be Immusol Confidential Information. The
failure of Pfizer to request verification of any expenditures before or during
the *_________* period shall be considered acceptance by Pfizer of the accuracy
of such expenditures, and Immusol shall have no obligation to maintain any
records pertaining to such report or statement beyond such *____________*
period. The results of such inspection, if any, shall be binding on the
parties.
4. TREATMENT OF CONFIDENTIAL INFORMATION
4.1. Confidentiality
4.1.1. Pfizer and Immusol each recognize that the other's
Confidential Information constitutes highly valuable, confidential information.
Subject to the terms and conditions of the License and Royalty Agreement
between the parties of even date with this Agreement (the "License Agreement"),
the obligations set forth in Section 4.3 and the publication rights set forth
in Section 4.2, Pfizer and Immusol each agree that during the term of this
Agreement and for *_________* years thereafter, it will keep confidential, and
will cause its Affiliates to keep confidential, all Immusol Confidential
Information or Pfizer
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 13
* CONFIDENTIAL *
TREATMENT REQUESTED
13
Confidential Information, as the case may be, that is disclosed to it, or to
any of its Affiliates pursuant to this Agreement. Neither Pfizer nor Immusol
nor any of their respective Affiliates shall use such Confidential Information
except as expressly permitted in this Agreement.
4.1.2. Pfizer and Immusol each agree that any disclosure of
the other's Confidential Information to any officer, employee or agent of the
other party or of any of its Affiliates shall be made only if and to the extent
necessary to carry out its rights and obligations under this Agreement and
shall be limited to the maximum extent possible consistent with such
responsibilities. Pfizer and Immusol each agree not to disclose the other's
Confidential Information to any third parties under any circumstance without
written permission from the other party except to the extent necessary to
exercise its rights pursuant to this Agreement or to comply with applicable
law. Each party shall take such action, and shall cause its Affiliates to take
such action, to preserve the confidentiality of each other's Confidential
Information as it would customarily take to preserve the confidentiality of its
own Confidential Information. Each party will return all the Confidential
Information disclosed to the other party pursuant to this Agreement, including
all copies within *_______________* days of the request upon the termination
of this Agreement except for one (1) copy which may be kept for archival
purposes.
4.1.3. Immusol and Pfizer each represent that all of its
employees, and any consultants to such party, participating in the Research
Program who shall have access to Pfizer Technology, Immusol Technology or Joint
Technology and Pfizer Confidential
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 14
* CONFIDENTIAL *
TREATMENT REQUESTED
14
Information and Immusol Confidential Information are bound by agreement to
maintain such Confidential Information in confidence.
4.2. Publication. Notwithstanding any matter set forth with
particularity in this Agreement to the contrary, results obtained in the course
of the Research Program may be submitted for publication following scientific
review by the Research Committee and subsequent approval by Immusol's and
Pfizer's managements, which approval shall not be unreasonably withheld. After
receipt of the proposed publication by both Pfizer's and Immusol's managements'
written approval or disapproval shall be provided within *______________* for a
manuscript, within *_________________* for an abstract for presentation at, or
inclusion in the proceedings of a scientific meeting, and within *_________* for
a transcript of an oral presentation to be given at a scientific meeting.
4.3. Publicity. Except as required by law, neither party may
disclose the terms of this Agreement nor the research described in it without
the written consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that, upon execution of this Agreement, the
parties will issue a press release with respect to its contents; and, further
provided, that copies of this Agreement will be forwarded in confidence to the
University of California; and, further provided, that copies of this Agreement
may be disclosed in confidence by Immusol to prospective investors, banks and
other sources of financing.
4.4. Disclosure of Inventions. Each party shall promptly inform
the other about all inventions in the Area that are conceived, made or
developed in the course of carrying
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 15
* CONFIDENTIAL *
TREATMENT REQUESTED
15
out the Research Program by employees of, or consultants to, either of them
solely, or jointly with employees of, or consultants to the other.
4.5. Restrictions on Transferring Materials. Pfizer and Immusol
recognize that the biological, synthetic chemical and biochemical materials
which are part of Pfizer Technology, Immusol Technology or Joint Technology,
represent valuable commercial assets. Therefore, throughout the Contract
Period and *________________* thereafter, Immusol and Pfizer agree not to
transfer such materials to any third party for use in the Area, unless prior
written, consent for any such transfer is obtained from the other party to this
Agreement.
5. INTELLECTUAL PROPERTY RIGHTS. The following provisions relate to
rights in the intellectual property developed by Immusol or Pfizer, or both,
during the course of carrying out the Research Program.
5.1. Ownership. All Immusol Confidential Information and Immusol
Technology shall be owned by Immusol. All Pfizer Confidential Information and
Pfizer Technology shall be owned by Pfizer. *_________________________*.
All Patent Rights claiming Immusol Technology only shall be Immusol Patent
Rights. All Patent Rights claiming Pfizer Technology only shall be Pfizer
Patent Rights. *___________________________ *.
5.2. Grants of Research Licenses.
(a) Immusol and Pfizer each hereby grants to the other a
nonexclusive, worldwide, royalty-free license or sublicense, as the case may
be, including the right to
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 16
* CONFIDENTIAL *
TREATMENT REQUESTED
16
grant sublicenses to Affiliates, to make and use Confidential Information, the
Technology and Patent Rights during the term of this Agreement solely for the
performance of the Research Program.
(b) Following the Contract Period, Immusol and Pfizer
shall each have a non-exclusive license or sublicense, as the case may be, with
the right to grant sublicenses to Affiliates, to make and use all Technology
and Patent Rights solely for research purposes, excluding any use in connection
with the sale or manufacture for sale of any products or processes. Such
licenses do not state or imply any obligation on the part of either party to
provide any additional information or materials to the other after the
termination of this Agreement.
5.3. Research Outside the Area. Immusol grants Pfizer a right of
first negotiation for a period of *________* beginning on the Effective Date of
this Agreement to establish collaborative research programs in any or all of
*_______________________*. Immusol also agrees during the term of this
Agreement to use reasonable efforts to keep Pfizer informed of new
opportunities for collaborative research as they arise.
6. PROVISIONS CONCERNING THE FILING, PROSECUTION AND MAINTENANCE OF
PATENT RIGHTS. The following provisions relate to the filing, prosecution and
maintenance of Patent Rights during the term of this Agreement:
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 17
17
6.1. Filing, Prosecution and Maintenance by Immusol. With respect
to Immusol and Joint Patent Rights, subject to the terms of the UC License,
Immusol shall have the exclusive right and obligation:
(a) to file applications for letters patent on any
invention included in Patent Rights; provided, however, that Immusol shall
consult with Pfizer regarding countries in which such patent applications
should be filed and shall file patent applications in those countries where
Pfizer requests that Immusol file such applications; and, further provided,
that Immusol, at its option and expense, may file in countries where Pfizer
does not request that Immusol file such applications;
(b) to take all reasonable steps to prosecute all pending
and new patent applications included within Patent Rights;
(c) to respond to oppositions, nullity actions,
re-examinations, revocation actions and similar proceedings filed by third
parties against the grant of letters patent for such applications;
(d) to maintain in force any letters patent included in
Patent Rights by duly filing all necessary papers and paying any fees required
by the patent laws of the particular country in which such letters patent were
granted; and
(e) to cooperate fully with, and take all necessary
actions requested by, Pfizer in connection with the preparation, prosecution
and maintenance of any letters patent included in Patent Rights.
<PAGE> 18
* CONFIDENTIAL *
TREATMENT REQUESTED
18
Immusol shall notify Pfizer in a timely manner of any decision to
abandon a pending patent application or an issued patent included in Patent
Rights. Thereafter, Pfizer shall have the option, at its expense, of
continuing to prosecute any such pending patent application or of keeping the
issued patent in force.
6.1.1. Copies of Documents. With the prior consent of the
University of California with respect to Patent Rights which are subject to the
terms of the UC License, Immusol shall provide to Pfizer copies of all patent
applications that are part of Patent Rights prior to filing, for the purpose of
obtaining substantive comment of Pfizer patent counsel and for the inclusion of
all reasonable claims suggested by such counsel. With the prior consent of the
Regents of the University of California with respect to Patent rights which are
subject to the UC License, Immusol shall also provide to Pfizer copies of all
documents relating to prosecution of all such patent applications in a timely
manner and shall provide to Pfizer every *____________* a report detailing
their status. Pfizer shall provide to Immusol *__________________* a report
detailing the status of all patent applications that are a part of Pfizer
Patent Rights.
6.1.2. Reimbursement of Costs for Filing Prosecuting and
Maintaining Patent Rights. Within *______________* of receipt of invoices from
Immusol, Pfizer shall reimburse Immusol for all the costs of filing,
prosecuting, responding to opposition and maintaining patent applications and
patents in countries where Pfizer requests that patent applications be filed,
prosecuted and maintained. Such reimbursement shall be in addition to Funding
Payments. However, Pfizer may, upon *_____________* notice, request that
Immusol
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 19
* CONFIDENTIAL *
TREATMENT REQUESTED
19
discontinue filing or prosecution of patent applications in any country and
discontinue reimbursing Immusol for the costs of filing, prosecuting,
responding to opposition or maintaining such patent application or patent in
any country. If Pfizer requests Immusol to discontinue filing in any of the
key countries listed below and Immusol agrees, Pfizer's license with respect to
such patent applications or patents shall terminate concurrently in any such
country. *________________________*. Immusol shall pay all costs in those
countries in which Pfizer does not request that Immusol file, prosecute or
maintain patent applications and patents, but in which Immusol, at its option,
elects to do so.
6.1.3. Pfizer shall have the right to file on behalf of and
as an agent for Immusol all applications and take all actions necessary to
obtain patent extensions pursuant to 35 USC Section 156 and foreign
counterparts for Patent Rights described in this Section 6.1 licensed to
Pfizer; provided, with respect to those Patent Rights described in Section
1.15(a), Pfizer may only conduct such activities with the prior consent of the
University of California. Immusol agrees, to sign, at Pfizer's expense, such
further documents and take such further actions as may be requested by Pfizer
in this regard.
6.2. Filing, Prosecution and Maintenance by Pfizer. With respect
to Pfizer Patent Rights, Pfizer shall have those rights and duties ascribed to
Immusol in Section 6.1; provided, Immusol shall have no obligation to reimburse
Pfizer for the payment of any expenses incurred in connection with the Pfizer
Patent Rights.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 20
* CONFIDENTIAL *
TREATMENT REQUESTED
20
6.3. Disclaimer. Neither party may disclaim a claim within Patent
Rights without the consent of the other.
7. ACQUISITION OF RIGHTS FROM THIRD PARTIES. During the Contract Period,
Immusol and Pfizer shall each promptly notify each other of any and all
opportunities to acquire in any manner from third parties, technology or
patents or information which may be useful in or may relate to the Research
Program. In each case, Pfizer shall decide if such rights should be acquired
in connection with the Research Program and, if so, whether by Immusol, Pfizer
or both. If acquired such rights shall become part of the Confidential
Information, Technology or Patent Rights, whichever is appropriate, of the
acquiring party or Joint Technology, as the case may be. Pfizer shall pay all
costs of acquiring and maintaining rights to such intellectual property, at
Pfizer's sole discretion.
8. OTHER AGREEMENTS. Concurrently with the execution of this Agreement,
Immusol and Pfizer shall enter into the License Agreement appended to and made
part of this Agreement as Exhibit D. This Agreement, the License Agreement and
the Confidentiality Agreements between the parties of *_______________*
are the sole agreements with respect to the subject matter and supersede all
other agreements and understandings between the parties with respect to same.
9. TERM, TERMINATION AND DISENGAGEMENT.
9.1. Term. Unless sooner terminated or extended, the Contract
Period and this Agreement shall expire on May 2, 2000.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 21
* CONFIDENTIAL *
TREATMENT REQUESTED
21
9.2. Events of Termination. The following events shall constitute
events of termination ("Events of Termination"):
(a) any written representation or warranty by Immusol or
Pfizer, or any of their respective officers, made under or in connection with
this Agreement shall prove to have been incorrect in any material respect when
made and concerning which the declaring party knew or should have known the
correct version.
(b) Immusol or Pfizer shall fail in any material respect
to perform or observe any term, covenant or understanding contained in this
Agreement or in any of the other documents or instruments delivered pursuant
to, or concurrently with, this Agreement, and any such failure shall remain
unremedied for *________* days after written notice to the failing party
provided, in the case of a failure to pay any amount due hereunder, any failure
to pay such amount within *_______________________* after written notice to the
failing party shall be an event of termination.
(c) Dr. Wong-Staal's association with Immusol terminates
or is terminated and the parties are unable to agree on a mutually acceptable
successor within *______________________* days.
9.3. Termination.
9.3.1. Upon the occurrence of any Event of Termination, the
party not responsible may, by *______________* notice to the other party,
terminate this Agreement.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 22
* CONFIDENTIAL *
TREATMENT REQUESTED
22
9.3.2. If Pfizer terminates this Agreement pursuant to
Section 9.3.1, the License Agreement shall continue according to its terms. If
Immusol terminates this Agreement pursuant to Section 9.3.1, the License
Agreement shall terminate immediately.
9.4. Termination by Pfizer.
9.4.1. *_____________*
9.5. Termination of this Agreement by either party, with or without
cause, will not terminate such portions of the Research Licenses granted
pursuant to Section 5.2(b) which by their terms extend beyond termination of
this Agreement.
9.6. Termination of this Agreement for any reason shall be without
prejudice to:
(a) the rights and obligations of the parties provided in
Sections 2.21(c), 3.2.3, 4, 5.1, 5.2, 6 with respect to Joint Patent Rights and
12;
(b) Immusol's right to receive all payments accrued under
Section 3; or
(c) any other remedies which either party may otherwise
have.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 23
23
10. REPRESENTATIONS AND WARRANTIES. Immusol and Pfizer each represents
and warrants as follows:
10.1. It is a corporation duly organized, validly existing and is in
good standing under the laws of the State of California and Delaware,
respectively, is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which the conduct of its business or the
ownership of its properties requires such qualification and has all requisite
power and authority, corporate or otherwise, to conduct its business as now
being conducted, to own, lease and operate its properties and to execute,
deliver and perform this Agreement.
10.2. The execution, delivery and performance by it of this
Agreement have been duly authorized by all necessary corporate action and do
not (a) require any consent or approval of its stockholders, (b) violate any
provision of any law, rule, regulations, order, writ, judgment, injunctions,
decree, determination award presently in effect having applicability to it or
any provision of its certificate of incorporation or bylaws, or (c) as of the
Effective Date, result in a breach of or constitute a material default under
any material agreement, mortgage, lease, license, permit or other instrument or
obligation to which it is a party or by which it or its properties may be bound
or affected.
10.3. This Agreement is a legal, valid and binding obligation of it
enforceable against it in accordance with its terms and conditions, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws, from time to time in effect,
affecting creditor's rights generally.
<PAGE> 24
24
10.4. It is not under any obligation to any person, or entity,
contractual or otherwise, that is conflicting or inconsistent in any respect
with the terms of this Agreement or that would impede the diligent and complete
fulfillment of its obligations.
10.5. To the best of its knowledge and belief as of the Effective
Date, it has good and marketable title to or valid leases or licenses for, all
of its properties, rights and assets necessary for the fulfillment of its
responsibilities under the Research Program.
11. COVENANTS OF IMMUSOL AND PFIZER OTHER THAN REPORTING REQUIREMENTS.
Throughout the Contract Period, Immusol and Pfizer each shall:
11.1. maintain and preserve its corporate existence, rights,
franchises and privileges in the jurisdiction of its incorporation, and qualify
and remain qualified as a foreign corporation in good standing in each
jurisdiction in which such qualification is from time to time necessary or
desirable in view of their business and operations or the ownership of their
properties.
11.2. comply in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any government authority to
the extent necessary to conduct the Research Program, except for those laws,
rules, regulations, and orders it may be contesting in good faith.
12. INDEMNIFICATION. Pfizer will indemnify, defend and hold Immusol and
its Affiliates and their respective directors, officers, employees and agents
(the "Immusol Indemnitees") harmless from and against any damages, liabilities,
settlements, costs, legal fees and other
<PAGE> 25
25
expenses incurred in connection with a claim against the Immusol Indemnitees
based on any action or omission of Pfizer, its agents or employees related to
the obligations of Pfizer under this Agreement, provided, however, that the
foregoing shall not apply (i) if the claim is found in a final judgment to be
based upon the negligence, recklessness or willful misconduct of Immusol,
Indemnitees, or (ii) if Immusol Indemnitees fail to give Pfizer prompt notice
of any claim it receives within fifteen (15) days of such receipt and such
failure materially prejudices Pfizer with respect to any claim or action to
which Pfizer's obligation pursuant to this Section applies. Pfizer, in its
sole discretion, shall choose legal counsel, shall control the defense of such
claim or action and shall have the right to settle same on such terms and
conditions it deems advisable; provided, however, that an Immusol Indemnitee
shall have the right to retain its own counsel, with the fees and expenses to
be paid by Pfizer, if representation of such Immusol Indemnitee by the counsel
retained by Pfizer would be inappropriate due to actual or potential differing
interests between Pfizer and any other party represented by such counsel in
such proceeding.
13. NOTICES. All notices shall be in writing mailed via certified mail,
return receipt requested, courier, or facsimile transmission addressed as
follow, or to such other address as may be designated from time to time:
If to Pfizer: To Pfizer at its address as set forth at the
beginning of this Agreement.
Attention: President, Central Research with
copy to: Office of the General Counsel.
If to Immusol: Immusol at its address as set forth at the beginning
of this Agreement.
Attention: Chief Executive Officer
Notices shall be deemed given as of the date received.
<PAGE> 26
26
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
15. MISCELLANEOUS.
15.1. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective legal representatives,
successors and permitted assigns.
15.2. Headings. Paragraph headings are inserted for convenience of
reference only and do not form a part of this Agreement.
15.3. Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original.
15.4. Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms may be waived, only by a written
instrument executed by each party or, in the case of waiver, by the party or
parties waiving compliance. The delay or failure of any party at any time or
times to require performance of any provisions shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of any
condition or of the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed to be, or
considered as, a further or continuing waiver of any such condition or of the
breach of such term or any other term of this Agreement.
<PAGE> 27
27
15.5. No Third Party Beneficiaries. No third party, including any
employee of any party to this Agreement, shall have or acquire any rights by
reason of this Agreement. Nothing contained in this Agreement shall be deemed
to constitute the parties partners with each other or any third party.
15.6. Assignment and Successors. This Agreement may not be assigned
by either party, except that each party may assign this Agreement and the
rights and interests of such party, in whole or in part, to any of its
Affiliates, any purchaser of all or substantially all of its assets or to any
successor corporation resulting from any merger or consolidation of such party
with or into such corporations.
15.7. Force Majeure. Neither Pfizer nor Immusol shall be liable for
failure of or delay in performing obligations set forth in this Agreement, and
neither shall be deemed in breach of its obligations, if such failure or delay
is due to natural disasters or any causes reasonably beyond the control of
Pfizer or Immusol.
15.8. Severability. If any provision of this Agreement is or
becomes invalid or is ruled invalid by any court of competent jurisdiction or
is deemed unenforceable, it is the intention of the parties that the remainder
of the Agreement shall not be affected.
15.9. Disclaimer of Warranties. Pfizer and Immusol specifically
disclaim any guarantee that the Research Program will be successful, in whole
or part. Pfizer and Immusol expressly disclaim any warranties or conditions,
express, implied, statutory or otherwise, with respect to the Research Program.
IMMUSOL AND PFIZER MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OR
CONDITIONS OF ANY
<PAGE> 28
28
KIND, EITHER EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR VALIDITY OF THE IMMUSOL
TECHNOLOGY, PFIZER TECHNOLOGY AND JOINT TECHNOLOGY, PATENTED OR UNPATENTED,
INCLUDING WITHOUT LIMITATION THE PATENT RIGHTS OR WARRANTIES OF
NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
15.10. No Implied Licenses. No rights or licenses with respect to
the Immusol Technology, Pfizer Technology and Joint Technology, including
without incitation the Patent Rights, are granted or deemed granted pursuant to
this Agreement, other than those rights and licenses expressly granted in is
Agreement.
15.11. Compliance with Law. In exercising their rights under this
Agreement, the parties shall fully comply with the requirements of any and all
applicable laws, regulations, rules and orders of any governmental body having
jurisdiction over the exercise of rights under this Agreement.
15.12. Compliance by Pfizer with Immusol's Obligations Pursuant to
the UC License Agreement. During the term of this Agreement and the License
Agreement, Pfizer agrees to perform in all respects Immusol's obligations due
the Regents of the University of California pursuant to the following
provisions of the UC License Agreement with respect to the subject matter of
this Agreement: Articles 6, 7, 13, 15, 17, 18, 25, 26 and 27. At Pfizer's
request, Immusol shall provide any reasonable assistance in assuring such
compliance.
<PAGE> 29
29
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
PFIZER INC.
By /s/ GEORGE M. M. (illegible)
---------------------------------
IMMUSOL INCORPORATED
By /s/ T. GOLDENBERG
---------------------------------
<PAGE> 30
* CONFIDENTIAL *
TREATMENT REQUESTED
EXHIBIT A
*
*
*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
<PAGE> 31
EXHIBIT B
* CONFIDENTIAL *
TREATMENT REQUESTED
IMMUSOL INCORPORATED
GENE THERAPY FOR HIV INFECTION USING
ANTI-VIRAL RIBOZYMES
PFIZER/IMMUSOL
* _____ * RESEARCH AND DEVELOPMENT PLAN
* _________ *
*
*
*
36 consecutive pages have been omitted pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
1
<PAGE> 32
EXHIBIT C
* CONFIDENTIAL *
TREATMENT REQUESTED
GENE THERAPY FOR HIV INFECTION USING
ANTI-VIRAL RIBOZYMES
PFIZER/IMMUSOL
* _____ * RESEARCH AND DEVELOPMENT PLAN
* _________ *
*
*
*
34 consecutive pages have been omitted pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
1
<PAGE> 1
EXHIBIT 10.10
* CONFIDENTIAL *
TREATMENT REQUESTED
LICENSE AND ROYALTY AGREEMENT
This LICENSE AND ROYALTY AGREEMENT (the "Agreement") is entered into
as of May 3, 1995 (the "Effective Date") by and between PFIZER INC, a Delaware
corporation, having an office at 235 East 42nd Street, New York, NY 10017 and
its Affiliates ("Pfizer") and IMMUSOL INCORPORATED ("Immusol"), a California
corporation, having an office at 3050 Science Park Road, La Jolla, California
92121.
WHEREAS, Pfizer desires to obtain an exclusive license and sublicense
to Immusol's right, title and interest in the Patent Rights so that Pfizer can
manufacture, use and sell the Licensed Products; and
WHEREAS, Immusol is willing to grant such license and sublicense;
Therefore, in consideration of the mutual covenants and promises set
forth in this Agreement, the parties agree as follows:
1. Definitions.
The capitalized terms used in this Agreement and not defined elsewhere
in it shall have the meanings specified for such terms in this Section 1 and in
the Research Agreement.
1.1 "Research Agreement" means the Collaborative Research
Agreement between Pfizer and Immusol effective May 3, 1995.
1.2 "Net Sales" means the gross amount invoiced by Pfizer and any
sublicensee of Pfizer for sales to a third party or parties of Licensed
Products, less normal and customary trade discounts actually allowed, rebates,
returns, credits, taxes the legal incidence of which is on the purchaser and
separately shown on Pfizer's or any sublicensee of Pfizer's invoices and
transportation, insurance and postage charges, if prepaid by Pfizer or any
sublicensee of Pfizer and billed on Pfizer's or any sublicensee of Pfizer's
invoices as a separate item.
1.3 "Licensed Product" means any Product, *____________________*,
the manufacture, use or sale of which is covered by Patent Rights or
would infringe the Patent Rights in the absence of a license or sublicense or
employs Immusol Technology, Pfizer Technology or Joint Technology in its
manufacture.
2. Grant of License, Term, Rights and Obligations.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
<PAGE> 2
* CONFIDENTIAL *
TREATMENT REQUESTED
2.1 License Granted to Pfizer under the Patent Rights. Subject to
the terms and conditions of this Agreement, Immusol grants to Pfizer the
exclusive, worldwide license or sublicense, as the case may be, including the
right to grant sublicenses, to manufacture, use and sell Licensed Products in
the Area under all Immusol's right, title and interest in the Patent Rights
(the "License").
2.2 Term of License Grant and Payment of Royalties. Unless
terminated earlier as provided below, the License shall commence on the
Effective Date and shall terminate on a country-by-country basis on the
expiration of the last to expire of the Patent Rights in each such country.
2.3 Pfizer Obligations.
2.3.1 Pfizer shall use reasonably diligent efforts to
exploit Licensed Products commercially, including conducting clinical trials
and obtaining regulatory approvals at its sole expense. Immusol may offer
advice and assistance in the conduct of clinical trials.
2.3.2 If Pfizer grants a sublicense pursuant to Section 2,
Pfizer shall guarantee that any sublicensee fulfills all of Pfizer's
obligations under this Agreement; provided, however, that Pfizer shall not be
relieved of its obligations pursuant to this Agreement. Pfizer shall provide
Immusol a copy of any such sublicense promptly following execution thereof.
2.4 Technical Assistance. Immusol shall provide to Pfizer or any
sublicensee of Pfizer, at Pfizer's request and expense, any technical
assistance reasonably necessary to enable Pfizer or such sublicensee to
manufacture, use or sell each Licensed Product and to enjoy fully all the
rights granted to Pfizer pursuant to this Agreement; provided, however, that
Immusol is reasonably capable of providing that assistance, such assistance
shall be provided at mutually convenient times and locations, and such
assistance is requested during the term of the Research Agreement or within a
reasonable period after its termination.
2.5 *______________________* Manufacture
If *______________________* or its designee has a
*______________________* for *______________________* which at the time of such
manufacture are *______________________* may elect to manufacture such
*______________________* for such *______________________* itself or through a
designee. Once the *______________________* for the *______________________* is
selected by *___________________* and in any case at least *___________________*
before *______________________* with respect to such *______________________*
will notify *______________________* of its *______________________* required to
*______________________* will be based on *______________________* to be used on
*______________________* for the *______________________* whether
*______________________* must notify *______________________* of its
*______________________* within *______________________* after its receipt of
notification from *______________________* failure to so notify
*______________________* of its *______________________* with respect to any
such *______________________* shall be determinative and
*______________________* shall have no further obligations to
*______________________* with respect to *______________________* If
*______________________* notifies *______________________* that it intends to
manufacture, it must provide *____________________* with a plan that outlines:
(a) The *______________________* for such
*______________________* and its compliance with all FDA and other regulatory
requirements of *______________________* place at the time of submission to
*______________________*.
(b) The *______________________* that will ensure that
the *______________________* filed by *______________________* and the
*______________________* filed by *______________________* will occur
*______________________* will bear all costs associated with manufacture of
clinical material. *______________________* will bear all
*______________________* and other costs associated with filing and obtaining
the *______________________*.
2.6 *______________________* Option.
2.6.1 Subject to the terms and conditions set forth below,
*______________________* grants to *______________________* an option to
*______________________* or the *______________________* under all
*______________________* right, title and interest in the
*______________________*. Upon receipt of notice from *______________________*
that it has elected to exercise the option, *______________________* and
*______________________* shall negotiate in good faith *______________________*
which will include provisions addressing the following topics, among other
things:
*_________________________________________________________________*
2.6 2. The option described above shall be subject to the
following conditions:
(a) *______________________* shall be under no
obligation to grant a *______________________* of any kind to
*______________________* in an area in which *______________________* is
developing a product for the *______________________* and
(b) the *______________________* described shall
*______________________*.
2.7 Service. If an*______________________* developed which
requires an additional service for *______________________* Service"),
*______________________* or its designee will provide the Service.
*______________________* and *______________________* will
*______________________* any of *______________________* generated by providing
the Service *______________________* shall have the right to bid to provide the
Service. In no event will *______________________* charge less than the
*______________________* to be administered by means of Service.
2.8 Reversion of Rights. If Pfizer discontinues the development
of any Licensed Product; and if such discontinuance results from
*______________________*. In such event, Immusol shall have the right to
develop and commericalize such Licensed Product alone or with third parties
pursuant to the terms of a license agreement to be negotiated in good faith by
the parties. Such agreement shall grant *__________________________________*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
2
<PAGE> 3
* CONFIDENTIAL *
TREATMENT REQUESTED
2.6 *_________________*
2.7 *_________________*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
3
<PAGE> 4
* CONFIDENTIAL *
TREATMENT REQUESTED
3. Royalties, Payments of Royalties, Accounting for Royalties, Records,
Milestone Payments.
3.1 Patent Rights. Pfizer shall pay Immusol a royalty based on
the Net Sales of each Licensed Product. Such royalty shall be paid with
respect to each country of the world from the date of the first commercial sale
(the date of the invoice of Pfizer or any sublicensee of Pfizer with respect to
such sale) of such Licensed Product in each such country until the expiration
of the last Patent Right to expire with respect to each such country and each
such Licensed Product.
3.2 Royalty Rates.
3.2.1 Pfizer shall pay Immusol a royalty for the sale of
each Licensed Product under Section 2.1 as set forth in Sections 3.2.2, 3.2.3
and 3.2.4.
3.2.2 Royalties with Respect to Sales in *________________*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
4
<PAGE> 5
* CONFIDENTIAL *
TREATMENT REQUESTED
The royalty paid by Pfizer to Immusol shall be *______________* of
Net Sales; provided, however, that if Immusol exercises the right set forth in
Section 2.5 to *______________* for sale in counties which are, at the time of
such sale, *______________* will receive *______________* the form of a
percentage of Net Sales *______________* Such compensation shall be determined
by multiplying the Net Sales in each Tier by the additional compensation rate
for that Tier.
*______________* Net Sales in Compensation Rate as a
Millions of Dollars ("Tiers") Percentage of Net Sales
*______________* *______________*
*______________* *______________*
*______________* *______________*
*______________* *______________*
*______________* *______________*
3.2.3 Royalties with Respect to Sales Outside of *______________* The
royalty paid by Pfizer to Immusol with respect to sales of Licensed Products in
countries which, at the time of such sales, are not *______________* shall be
*______________*
3.2.4 In addition to the royalties described in Sections 3.2.2 and
3.2.3, Pfizer will pay to Immusol an *______________* with respect to
*______________* subject to the *______________* that Immusol may meet its
obligations in that amount to *______________* provided, however, that such
royalty shall not be assessed or paid with respect to Net Sales of Licensed
Products made to the US government or any of its agencies or licensees.
3.3 Sales of *______________*
If Pfizer sell, in any country in the world, a Licensed Product
*______________* Pfizer will pay Immusol on *______________* a royalty of
*______________* of Net Sales of each such Licensed Product beginning
*______________*
3.4 Payment Dates. Royalties shall be paid by Pfizer on Net Sales
within *______________* after the end of each calendar quarter in which such Net
Sales are made. Such payments shall be accompanied by a statement showing the
Net Sales of each Licensed Product by Pfizer and any sublicensee of Pfizer in
each country, the applicable royalty rate for such Licensed Product, and a
calculation of the amount of royalty due.
3.5 Accounting. The Net Sales used for computing the royalties
payable to Immusol by Pfizer shall be computed and paid in U.S. dollars by
wire transfer to an account designated by Immusol or other mutually acceptable
means. For purposes of determining the amount of royalties due, the amount of
Net Sales in any foreign currency shall be computed by (a) converting such
amount into dollars at the prevailing commercial
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
5
<PAGE> 6
* CONFIDENTIAL *
TREATMENT REQUESTED
rate of exchange for purchasing dollars with such foreign currency as quoted by
Citibank in New York on the last business day of the calendar quarter for which
the relevant royalty payment is to be made by Pfizer and (b) deducting the
amount of any governmental tax, duty, charge, or other fee actually paid in
respect of such conversion into, and remittance of dollars.
3.6 Records. Pfizer shall keep for three (3) years from the date
of each payment of royalties complete and accurate records of sales by Pfizer
of each Licensed Product in sufficient detail to allow the accruing royalties
to be determined accurately. Immusol shall have the right for a period of
three (3) years after receiving any report or statement with respect to
royalties due and payable to appoint at its expense an independent certified
public accountant reasonably acceptable to Pfizer to inspect the relevant
records of Pfizer to verify such report or statement. Pfizer shall make its
records available for inspection by such independent certified public
accountant during regular business hours at such place or places where such
records are customarily kept, upon reasonable notice from Immusol, to verify
the accuracy of the reports and payments. Such inspection right shall not be
exercised more than once in any calendar year nor more than once with respect
to sales in any given period. Immusol agrees to hold in strict confidence all
information concerning royalty payments and reports, and all information
learned in the course of any audit or inspection. The failure of Immusol to
request verification of any report or statement during said three-year period
shall be considered acceptance of the accuracy of such report, and Pfizer shall
have no obligation to maintain records pertaining to such report or statement
beyond said three-year period. The results of each inspection, if any, shall
be binding on both parties. *_________________*.
3.7 Milestone Payments. Pfizer shall pay Immusol, within *______*
of the completion of each respective event set forth below ("Event"),
the payment listed opposite that Event. Payments shall be made in U.S. dollars
by wire transfer or other mutually acceptable means. *____________*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
6
<PAGE> 7
* CONFIDENTIAL *
TREATMENT REQUESTED
4. Legal Action.
4.1 Actual or Threatened Disclosure or Infringement. When
information comes to the attention of Pfizer to the effect that any Patent
Rights relating to a Licensed Product have been or are threatened to be
unlawfully infringed in the Area. Pfizer shall promptly notify Immusol and
Pfizer shall have the right (subject in the case of Patent Rights within the
scope of Section 1.15(a) of the Research Agreement, to the UC License
Agreement), at Pfizer's expense, to take such action as it may deem necessary
to prosecute or prevent such unlawful infringement, including the right to
bring or defend any suit, action or proceeding involving any such infringement.
Pfizer shall notify Immusol promptly of the receipt of any such information and
of the commencement of any such suit, action or proceeding. If Pfizer
determines that it is necessary or desirable for Immusol to join any such suit,
action or proceeding, Immusol shall, at Pfizer's expense, execute all papers
and perform such other acts as may be reasonably required to permit Pfizer to
act in Immusol's name and Pfizer shall hold Immusol free, clear harmless from
any and all costs and expenses of such litigation, including attorneys fees.
If Pfizer determines that it is necessary or desirable for the University of
California to join in any such suit, action, or proceeding, Immusol shall, at
Pfizer's expense, join Pfizer in requesting that the University, at Pfizer's
expense, execute all papers and perform such other acts as may be reasonably
required to permit Pfizer to act in the University of California's name. If
Pfizer brings a suit, it shall have the right first to reimburse itself out of
any sums recovered in such suit or in its settlement for all costs and
expenses, including attorney's fees, related to such suit or settlement, and
subject to the terms and conditions of Article 17 of the UC License Agreement,
*_________________________* of any funds that shall remain from said recovery
shall be paid to Immusol or to the University of California or both, as the
case may be, and the balance of such funds shall be retained by Pfizer. If
Pfizer does not, within one hundred twenty (120) days after giving notice to
Immusol of the above-described information, notify Immusol of Pfizer's intent
to bring suit against any infringer, Immusol shall have the right to bring suit
for such alleged infringement, but it shall not be obligated to do so, and may
join Pfizer as party plaintiff, if appropriate, in which event Immusol shall
hold Pfizer free, clear and harmless from any and all costs and expenses of
such litigation, including attorney's fees, and any sums recovered in any such
suit or in its settlement shall belong to Immusol.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
7
<PAGE> 8
* CONFIDENTIAL *
TREATMENT REQUESTED
However, *________________________* of any such sums received by Immusol, after
deduction of all costs and expenses related to such suit or settlement,
including attorney's fees paid, shall be paid to Pfizer; provided, Immusol
shall have no obligation to pay Pfizer any amount recovered in any action which
does not relate to an infringement of the Patent Rights in the Area. Each
party shall always have the right to be represented by counsel of its own
selection and at its own expense in any suit instituted by the other for
infringement under the terms of this Section. If Pfizer lacks standing and
Immusol or the University of California has standing to bring any such suit,
action or proceeding, then Immusol shall do so or shall join Pfizer in
requesting that the University do so at the request of Pfizer and at Pfizer's
expense.
4.2 Defense of Infringement Claims. Immusol will cooperate with
Pfizer at Pfizer's expense in the defense of any suit, action or proceeding
against Pfizer or any sublicensee of Pfizer alleging the infringement of the
intellectual property rights of a third party by reason of the manufacture, use
or sale of the Licensed Product. Pfizer shall give Immusol prompt written
notice of the commencement of any such suit, action or proceeding or claim of
infringement and will furnish Immusol a copy of each communication relating to
the alleged infringement. Immusol shall give to Pfizer all authority
(including the right to exclusive control of the defense of any such suit,
action or proceeding and the exclusive right after consultation with Immusol,
to compromise, litigate, settle or otherwise dispose of any such suit, action
or proceeding), information and assistance necessary to defend or settle any
such suit, action or proceeding; provided, Pfizer shall not make any admission
regarding the invalidity or unenforceability of any aspect of the Immusol
Patent Rights or Joint Patent Rights without the prior written consent of
Immusol. If the parties agree that Immusol should institute or join any suit,
action or proceeding pursuant to this Section, Pfizer may, at Pfizer's expense,
join Immusol as a defendant if necessary or desirable, and Immusol shall
execute all documents and take all other actions, including giving testimony,
which may reasonably be required in connection with the prosecution of such
suit, action or proceeding.
4.3 Hold Harmless. Immusol agrees to defend, protect, indemnify
and hold harmless Pfizer and any sublicensee of Pfizer, from and against any
loss or expense arising from any proved claim (i.e., established in a final
judgment by a court of competent jurisdiction, which judgment is unappealed or
unappealable) of a third party that it has been granted rights by Immusol that
Pfizer or any sublicensee of Pfizer in exercising their rights granted to
Pfizer by Immusol pursuant to this Agreement, has infringed upon such rights
granted to such third party by Immusol.
4.4 Third Party Licenses. If the manufacture, use or sale by
Pfizer of a Licensed Product in any country would, in the opinion of both
Pfizer and Immusol, infringe the patent rights owned by a third party, Pfizer
will attempt to obtain a license under such patent rights or other intellectual
property and shall pay all costs, expenses and royalties
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
8
<PAGE> 9
* CONFIDENTIAL *
TREATMENT REQUESTED
due with respect to the acquisition and maintenance of rights under any such
third party license.
5. Representation and Warranty.
5.1 Immusol represents and warrants to Pfizer that it has the
right to grant the License granted pursuant to this Agreement, and that the
License so granted does not conflict with or violate the terms of any agreement
between Immusol and any third party.
5.2 Immusol represents and warrants to Pfizer that the royalties
to be paid by Pfizer to the Regents of the University of California pursuant to
Section 3 are the sole royalties owed by Immusol as of the Effective Date to
any third party with respect to Immusol Technology or Immusol Patent Rights.
6. Treatment of Confidential Information.
6.1 Confidentiality.
6.1.1 Pfizer and Immusol each recognize that the other's
Confidential Information constitutes highly valuable, confidential information.
Subject to Pfizer's rights and obligations pursuant to this Agreement, Pfizer
and Immusol each agree that during the term of the Research Agreement and for
*____________* thereafter, it will keep confidential, and will cause its
Affiliates to keep confidential, all Immusol Confidential Information or Pfizer
Confidential Information, as the case may be, that is disclosed to it or to any
of its Affiliates pursuant to this Agreement.
6.1.2 Pfizer and Immusol each agree that any disclosure of
the other's Confidential Information to any officer, employee or agent of the
other party or of any of its Affiliates shall be made only if and to the extent
necessary to carry out its rights and obligations under this Agreement and
shall be limited to the maximum extent possible consistent with such
responsibilities. Subject to Pfizer's rights and obligations pursuant to this
Agreement, Pfizer and Immusol each agree not to disclose the other's
Confidential Information to any third parties under any circumstance without
written permission from the other party except to the extent necessary to
exercise its rights pursuant to this Agreement or to comply with applicable
law. Each party shall take such action, and shall cause its Affiliates to take
such action, to preserve the confidentiality of each other's Confidential
Information as it would customarily take to preserve the confidentiality of its
own Confidential Information. Each party will return all the Confidential
Information disclosed to the other party pursuant to this Agreement, including
all copies of documents, within sixty (60) days of the request upon the
termination of this Agreement except for one (1) copy which may be kept for
archival purposes.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
9
<PAGE> 10
6.2 Publicity. Except as required by law, neither party may
disclose the terms of this Agreement nor the research described in it without
the written consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that, upon execution of this Agreement, the
parties will issue a press release with respect to its contents; and, further
provided, that copies of this Agreement will be forwarded in confidence to the
University of California; and, further provided, that copies of this Agreement
may be disclosed in confidence by Immusol to prospective investors, banks and
other sources of financing.
7. Provisions Concerning the Filing, Prosecution and Maintenance of
Patent Rights.
The following provisions relate to the filing, prosecution and
maintenance of Patent Rights during the term of this Agreement:
7.1 Filing, Prosecution and Maintenance by Immusol. With respect
to Immusol and Joint Patent Rights, subject to the terms of the UC License,
Immusol shall have the exclusive right and obligation:
(a) to file applications for letters patent on any
patentable invention included in Patent Rights;
provided, however, that Immusol shall consult with
Pfizer regarding countries in which such patent
applications should be filed and shall file patent
applications in those countries where Pfizer requests
that Immusol file such applications; and, further
provided, that Immusol, at its option and expense,
may file in countries where Pfizer does not request
that Immusol file such applications;
(b) to prosecute all pending and new patent applications
included within Patent Rights;
(c) to respond to oppositions, nullity actions,
re-examinations, revocation actions and similar
proceedings filed by third parties against the grant
of letters patent for such applications; and
(d) to maintain in force any letters patent included in
Patent Rights by duly filing all necessary papers and
paying any fees required by the patent laws of the
particular country in which such letters patent were
granted.
Immusol shall notify Pfizer in a timely manner of any decision to
abandon a pending patent application or an issued patent included in Patent
Rights. Thereafter, Pfizer shall
10
<PAGE> 11
* CONFIDENTIAL *
TREATMENT REQUESTED
have the option, at its expense, of continuing to prosecute any such pending
patent application or of keeping the issued patent in force.
7.1.1 Copies of Documents. With the prior consent of the
University of California with respect to Patent Rights subject to the terms of
the UC License, Immusol shall provide to Pfizer copies of all patent
applications that are part of Patent Rights prior to filing, for the purpose of
obtaining substantive comment of Pfizer patent counsel and inclusion of
reasonable claims suggested by such counsel. Immusol shall also provide to
Pfizer copies of all documents relating to prosecution of all such patent
applications in a timely manner and shall provide to Pfizer every *__________*
a report detailing their status. Pfizer shall provide to Immusol every
*____________* a report detailing the status of all patent applications that
are a part of Patent Rights in which Pfizer employees or consultants alone are
named as inventors.
7.1.2 Reimbursement of Costs for Filing, Prosecuting and
Maintaining Patent Rights. Within thirty (30) days of receipt of invoices from
Immusol, Pfizer shall reimburse Immusol for all the costs of filing,
prosecuting, responding to opposition and maintaining patent applications and
patents in countries where Pfizer requests that patent applications be filed,
prosecuted and maintained. Such reimbursement shall be in addition to Funding
Payments. However, Pfizer may, upon sixty (60) days notice, request that
Immusol discontinue filing or prosecution of patent applications in any country
and discontinue reimbursing Immusol for the costs of filing, prosecuting,
responding to opposition or maintaining such patent application or patent in
any country. If Pfizer requests Immusol to discontinue filing in any of the
key countries listed below and Immusol agrees, Pfizer's license with respect to
such patent applications or patents shall terminate concurrently in any such
country. The key countries are the members of NAFTA, the members of the
European Union, Japan, Australia, China, Taiwan, Brazil, Argentina, Finland,
Switzerland, Hungary, and Russia. Immusol shall pay all costs in those
countries in which Pfizer does not request that Immusol file, prosecute or
maintain patent applications and patents, but in which Immusol, at its option,
elects to do so.
7.1.3 Pfizer Right to Prosecute. Pfizer shall have the
right to file on behalf of and as an agent for Immusol all applications and
take all actions necessary to obtain patent extensions pursuant to 35 USC
Section 156 and foreign counterparts for Patent Rights described in this
Section 6.1 licensed to Pfizer; provided, with respect to those Patent Rights
described in Section 1.15(a) of the Research Agreement, Pfizer may only conduct
such activities with the prior consent of the Regents of the University of
California. Immusol agrees to sign, at Pfizer's expense, such further
documents and take such further actions as may be requested by Pfizer in this
regard.
7.2 Filing, Prosecution and Maintenance by Pfizer. With respect
to Pfizer Patent Rights, Pfizer shall have those rights and duties ascribed to
Immusol in Section 7.1,
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
11
<PAGE> 12
* CONFIDENTIAL *
TREATMENT REQUESTED
provided, Immusol shall have no obligation to reimburse Pfizer for the payment
of any expenses incurred in connection with the Pfizer Patent Rights.
7.3 Disclaimer. Neither party may disclaim a claim within Patent
Right without the consent of the other.
8. Other Agreements.
Concurrently with the execution of this Agreement, Immusol and Pfizer
shall enter into the Research Agreement. This Agreement, the Research
Agreement and the Confidentiality Agreements of July 20 and September 14, 1994
are the sole agreements with respect to the subject matter and supersede all
other agreements and understanding between the parties with respect to same.
*____________________________*.
9. Termination and Disengagement.
9.1 Events of Termination. The following events shall constitute
events of termination ("Events of Termination"):
(a) Any written representation or warranty by Immusol or
Pfizer, or any of its officers, made under or in
connection with this Agreement shall prove to have
been incorrect in any material respect when made and
concerning which the declaring party knew or should
have known the correct version.
(b) Immusol or Pfizer shall fail in any material respect
to perform or observe any term, covenant or
understanding contained in this Agreement or in any
of the other documents or instruments delivered
pursuant to, or concurrently with, this Agreement,
and any such failure shall remain unremedied for
sixty (60) days after written notice to the failing
party; provided, in the case of a failure to pay any
amount due hereunder, any failure to pay such amount
within twenty (20) business days after written notice
to the failing party shall be an event of
termination.
9.2 Termination. Upon the occurrence of any Event of Termination,
the party not responsible may, by thirty (30) days notice to the other party,
terminate this Agreement.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
12
<PAGE> 13
9.3 Termination of this Agreement by either party, with or without
cause, will not terminate the licenses granted pursuant to Section 5.2(b) of
the Research Agreement.
9.4 Pfizer shall have the right at any time to terminate this
Agreement in whole or as to any portion of Immusol Patent Rights or Joint
Patent Rights upon ninety (90) days notice.
9.5 Termination of this Agreement for any reason shall be without
prejudice to:
(a) the rights and obligations of the parties provided in
Sections 3, 6, 7 with respect to Joint Patent Rights,
10, 12 and 13;
(b) Immusol's right to receive all royalty payments and
other payments accrued hereunder; or
(c) any other remedies which either party may otherwise
have.
10. Indemnification.
Pfizer will indemnify, defend and hold Immusol and its Affiliates and
their respective directors, officers, employees and agents (the "Immusol
Indemnitees") harmless from and against any damages, liabilities, settlements,
costs, legal fees and other expenses incurred in connection with any claim
against the Immusol Indemnitees based on any action or omission of Pfizer or
its sublicensee and their respective agents or employees related to
manufacture, use, sale or other distribution of Licensed Products or other
exercise of the rights granted Pfizer under this Agreement including, without
limitation, any product liability claims; provided, however, that the foregoing
shall not apply (i) if the claim is found in a final judgment to be based upon
the negligence, recklessness or willful misconduct of Immusol, Indemnitees or
(ii) if Immusol Indemnitees fail to give Pfizer prompt notice of any claim it
receives within fifteen (15) days of such receipt and such failure materially
prejudices Pfizer with respect to any claim or action to which Pfizer's
obligation pursuant to this Section applies. Pfizer, in its sole discretion,
shall choose legal counsel, shall control the defense of such claim or action,
and shall have the right to settle same on such terms and conditions it deems
advisable; provided, however, that an Immusol Indemnitee shall have the right
to retain its own counsel, with the fees and expenses to be paid by Pfizer, if
representation of such Immusol Indemnitee by the counsel retained by Pfizer
would be inappropriate due to actual or potential differing interests between
Pfizer and any other party represented by such counsel in such proceeding.
11. Notices.
13
<PAGE> 14
All notices shall be in writing mailed via certified mail, return
receipt requested, courier, or facsimile transmission addressed as follows, or
to such other address as may be designated from time to time:
If to Pfizer: To Pfizer at its address as set forth at the
beginning of this Agreement
Attention: President, Central Research
with copy to: Office of the General Counsel
If to Immusol: Immusol at its address as set forth at the beginning
of this Agreement
Attention: Chief Executive Officer
Notices shall be deemed given as of the date received.
12. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
13. Miscellaneous.
13.1 Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective legal representatives,
successors and permitted assigns.
13.2 Headings. Paragraph headings are inserted for convenience of
reference only and do not form a part of this Agreement.
13.3 Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original.
13.4 Amendment; Waiver. This Agreement may be amended, modified,
superseded or canceled, and any of the terms may be waived, only by a written
instrument executed by each party or, in the case of waiver, by the party or
parties waiving compliance. The delay or failure of any party at any time or
times to require performance of any provisions shall in no manner affect the
rights at a later time to enforce the same. No waiver by any party of any
condition or of the breach of any term contained in this Agreement, whether by
conduct, or otherwise, in any one or more instances, shall be deemed to be, or
considered as, a further or continuing waiver of any such condition or of the
breach of such term or any other term of this Agreement.
14
<PAGE> 15
13.5 No Third Party Beneficiaries. Except for the Regents of the
University of California, no third party including any employee of any party to
this Agreement, shall be a third party beneficiary of this Agreement or have or
acquire any rights by reason of this Agreement. Nothing contained in this
Agreement shall be deemed to constitute the parties partners with each other or
any third party.
13.6 Assignment and Successors. This Agreement may not be assigned
by either party, except that each party may assign this Agreement and the
rights and interests of such party, in whole or in part, to any of its
Affiliates, any purchaser of all or substantially all of its assets or to any
successor corporation resulting from any merger or consolidation of such party
with or into such corporations.
13.7 Force Majeure. Neither Pfizer nor Immusol shall be liable for
failure of or delay in performing obligations set forth in this Agreement, and
neither shall be deemed in breach of its obligations, if such failure or delay
is due to natural disasters or any causes reasonably beyond the control of
Pfizer or Immusol.
13.8 Severability. If any provision of this Agreement is or
becomes invalid or is ruled invalid by any court of competent jurisdiction or
is deemed unenforceable, it is the intention of the parties that the remainder
of the Agreement shall not be affected.
13.9 Disclaimer of Warranties. IMMUSOL AND PFIZER MAKE NO
REPRESENTATIONS AND EXTEND NO WARRANTIES OR CONDITIONS OF ANY KIND, EITHER
EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR VALIDITY OF THE IMMUSOL
TECHNOLOGY, PFIZER TECHNOLOGY AND JOINT TECHNOLOGY, PATENTED OR UNPATENTED,
INCLUDING, WITHOUT LIMITATION, THE PATENT RIGHTS OR WARRANTIES OF
NON-INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES.
13.10 Patent Marking. Pfizer agrees to mark and have its
sublicensees mark all Products they sell or distribute pursuant to this
Agreement in accordance with the applicable statute or regulations in the
country or countries of their manufacture and sale.
13.11 No Implied Licenses. No rights or licenses with respect to
the Immusol Technology, Pfizer Technology and Joint Technology, including
without limitation the Patent Rights, are granted or deemed granted hereunder
or in connection herewith, other than those rights and licenses expressly
granted in this Agreement.
13.12 Compliance with Law. In exercising their rights under this
Agreement, the parties shall fully comply with the requirements of any and all
applicable laws, regulations, rules and orders of any governmental body having
jurisdiction over the exercise of rights under this Agreement.
15
<PAGE> 16
13.13 Compliance by Pfizer with Immusol's Obligations Pursuant to
the Agreement between Immusol and the University of California of December 7,
1993. During the term of this Agreement and the Research Agreement, Pfizer
agrees to perform in all respects Immusol's obligations due the Regents of the
University of California pursuant to the following provisions of the UC License
Agreement with respect to the subject matter of this Agreement: Articles 6, 7,
13, 15, 17, 18, 25, 26 and 27. At Pfizer's request, Immusol shall provide any
reasonable assistance in assuring such compliance.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives.
PFIZER INC IMMUSOL INCORPORATED
By: /s/ [illegible] By: /s/ TSVI GOLDENBERG
--------------------------------- -------------------------------
Title: Title: Chairman & CEO
------------------------------ ----------------------------
Date: Date:
------------------------------- -----------------------------
cc: Pfizer Inc, Legal Division, Groton, CT 06340
16
<PAGE> 17
* CONFIDENTIAL *
TREATMENT REQUESTED
EXHIBIT 1
*
*
*
5 Consecutive pages have been omitted pursuant to the Company's
Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.
<PAGE> 18
* CONFIDENTIAL *
TREATMENT REQUESTED
EXHIBIT 2
*
*
*
Certain confidential portions of this Exhibit were omitted by means of marking
such portions with an asterisk (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to the
Company's Application Requesting Confidential Treatment under Rule 406 under the
Securities Act.
