<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 3, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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/
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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AMOUNT PROPOSED PROPOSED
TITLE OF EACH CLASS OF TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PRICE PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per
share................................ 3,450,000 shares $11.00 $37,950,000 $13,087
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</TABLE>
(1) Includes 450,000 shares of Common Stock that the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the registration
fee.
------------------------
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 JULY 3, 1996
3,000,000 SHARES
IMMUSOL LOGO
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>
<S> <C> <C> <C>
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Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
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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
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
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
[DRAWING DESCRIBING IMMUSOL'S APPROACH TO USE VIRAL VECTORS (IN A VIAL) TO
DELIVER THERAPEUTIC RIBOZYME GENES BY INJECTION INTO THE PATIENT.]
------------------------
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.
2
<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"). Unless otherwise indicated, the information in this
Prospectus 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 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. 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 the 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)......................................... 12,984,477 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) 1,810,000 shares of Common Stock issuable upon exercise
of options outstanding at a weighted average exercise price of $0.11 per
share pursuant to the Company's stock option plans at March 31, 1996 and
(ii) 40,000 shares of Common Stock issued upon exercise of options
subsequent to March 31, 1996 and 232,500 shares of Common Stock issuable
upon exercise of options granted subsequent to March 31, 1996. See
"Capitalization," "Management -- Benefit Plans," "Certain Transactions" and
"Shares Eligible for Future Sale."
SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenue................. $ -- $ 204,475 $3,174,515 $ 58,723 $1,505,860
Costs and expenses:
Research and development.... 157,101 492,513 2,831,860 315,416 988,814
General and
administrative........... 47,948 127,360 487,234 81,690 177,326
--------- --------- ---------- --------- ----------
Total costs and
expenses............... $ 205,049 $ 619,873 $3,319,094 $ 397,106 $1,166,140
Income (loss) from
operations.................. (205,049) (415,398) (144,579) (338,383) 339,720
Interest income............... 50,743 57,798 275,564 14,907 102,583
Interest expense.............. -- -- (5,343) -- (1,187)
--------- --------- ---------- --------- ----------
Net income (loss)............. $(154,306) $(357,600) $ 125,642 $(323,476) $ 441,116
========= ========= ========== ========= ==========
Pro forma net income (loss)
per share(1)................ $ (0.02) $ (0.05) $ 0.01 $ (0.04) $ 0.04
========= ========= ========== ========= ==========
Shares used in computing pro
forma net income (loss) per
share(1).................... 7,103,728 7,232,495 11,591,502 7,232,495 11,961,972
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
-----------------------------
ACTUAL AS ADJUSTED(2)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments................. $7,323,925 $ 34,623,925
Working capital................................................... 6,463,123 33,731,123
Total assets...................................................... 7,851,663 35,151,663
Obligations under capital leases, less current portion............ 35,133 35,133
Accumulated deficit............................................... (330,377) (330,377)
Total shareholders' equity........................................ 6,782,447 34,082,447
</TABLE>
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(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. 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 below and 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 has incurred an accumulated deficit of $330,000 through March
31, 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."
COMPETITION; RAPID TECHNOLOGICAL CHANGE
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 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
reverse transcriptase inhibitors and protease inhibitors for the treatment of
HIV, 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 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
8
<PAGE> 11
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 development programs. Based on its
review 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
9
<PAGE> 12
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.
The Company currently employs a consultant as acting chief financial officer and
is seeking to hire a permanent chief financial officer. 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 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
10
<PAGE> 13
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 Company will have
outstanding 12,984,477 shares of Common Stock (without taking into account
shares of Common Stock issuable upon exercise of outstanding options). As of
March 31, 1996, 1,810,000 shares of
11
<PAGE> 14
Common Stock are subject to outstanding options and 406,000 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 9,984,477 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. 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 84,000 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 1,675,000 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
such sales 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."
DILUTION; NO DIVIDENDS
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 $7.38 per share and may incur additional dilution upon exercise of
outstanding stock options. 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. See "Dilution" and "Dividend Policy."
CONCENTRATION OF OWNERSHIP; POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER
PROVISIONS
Following this Offering, the present officers and directors of the Company
and their affiliates will beneficially own approximately 72% 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.
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,
12
<PAGE> 15
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 November
1996, Pfizer is obligated to purchase 264,400 shares of B-2 Preferred Stock at a
price per share of $7.56. In May 1988, 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.
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
March 31, 1996 and (ii) as adjusted to give effect to the sale by the Company of
3,000,000 shares of Common Stock offered hereby, less underwriting discounts and
commissions and other estimated expenses of this Offering:
<TABLE>
<CAPTION>
MARCH 31, 1996
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
<S> <C> <C>
Obligations under capital leases, less current portion............. $ 35,133 $ 35,133
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,
7,069,000 shares issued and outstanding actual; 30,000,000
shares authorized, 12,984,477 shares issued and outstanding as
adjusted(2)................................................... 7,069 12,984
Deferred compensation related to stock options................... (239,800) (239,800)
Additional paid-in capital....................................... 7,342,640 34,639,640
Accumulated deficit.............................................. (330,377) (330,377)
---------- -----------
Total shareholders' equity(2)................................. 6,782,447 34,082,447
---------- -----------
Total capitalization........................................ $6,817,580 $34,117,580
========== ===========
</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) 1,810,000 shares of Common Stock issuable upon exercise
of options outstanding at a weighted average exercise price of $0.11 per
share pursuant to the Company's stock option plans at March 31, 1996 and
(ii) 40,000 shares of Common Stock issued upon exercise of options
subsequent to March 31, 1996 and 232,500 shares of Common Stock issuable
upon exercise of options granted subsequent to March 31, 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 March 31, 1996 was
$6,782,447, or $0.68 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
March 31, 1996 would have been $34,082,447, or $2.62 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 $7.38 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....................... $ 0.68
Increase attributable to new investors............................ 1.94
-----
Net tangible book value after this Offering......................... 2.62
------
Dilution of net tangible book value to new investors................ $ 7.38
======
</TABLE>
The following table summarizes, as of March 31, 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................. 9,984,477 76.9% $ 7,142,842 19.2% $ 0.72
New investors......................... 3,000,000 23.1% 30,000,000 80.8% $ 10.00
---------- ----- ----------- -----
Total....................... 12,984,477 100.0% $37,142,842 100.0%
========== ===== =========== =====
</TABLE>
All of the above computations assume no exercise of outstanding options. As
of March 31, 1996, options to purchase 1,810,000 shares of Common Stock were
outstanding at a weighted average exercise price of approximately $0.11 per
share under the Company's stock option plans. To the extent these options become
vested and are exercised, there will be further dilution to new investors. As of
March 31, 1996, the Company also has an additional 406,000 shares of Common
Stock reserved for issuance pursuant to the Company's stock option plans. See
"Management -- Benefit Plans."
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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 three months ended March 31, 1995 and 1996 and the balance sheet
data at March 31, 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 three months ended March
31, 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 THREE MONTHS ENDED
MARCH 6, 1992 YEARS ENDED DECEMBER 31, MARCH 31,
(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 $ 58,723 $1,505,860
Costs and expenses:
Research and development... 376,753 157,101 492,513 2,831,860 315,416 988,814
General and
administrative........... 32,761 47,948 127,360 487,234 81,690 177,326
--------- --------- --------- ---------- --------- ----------
Total costs and expenses..... 409,514 205,049 619,873 3,319,094 397,106 1,166,140
Income (loss) from
operations................. (409,514) (205,049) (415,398) (144,579) (338,383) 339,720
Interest income.............. 24,285 50,743 57,798 275,564 14,907 102,583
Interest expense............. -- -- -- (5,343) -- (1,187)
--------- --------- --------- ---------- --------- ----------
Pro forma net income
(loss)..................... $(385,229) $(154,306) $(357,600) $ 125,642 $(323,476) $ 441,116
========= ========= ========= ========== ========= ==========
Net income (loss) per
share(1)................... $(0.06) $(0.02) $(0.05) $0.01 $(0.04) $0.04
========= ========= ========= ========== ========= ==========
Shares used in computing pro
forma net income (loss) per
share(1)................... 6,174,695 7,103,728 7,232,495 11,591,502 7,232,495 11,961,972
========= ========= ========= ========== ========= ==========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------- MARCH 31,
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 $7,323,925
Working capital.......................... 1,674,364 1,548,896 1,049,333 6,048,413 6,463,123
Total assets............................. 1,817,879 1,741,874 1,484,911 7,343,737 7,851,663
Obligations under capital leases, less
current portion........................ -- -- -- 37,874 35,133
Accumulated deficit...................... (385,229) (539,535) (897,135) (771,493) (330,377)
Total shareholders' equity............... 1,677,771 1,551,573 1,215,865 6,341,331 6,782,447
</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 $330,000 through March 31, 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 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. Amounts received by Immusol under the
Pfizer Agreement totalled approximately $9.7 million through March 31, 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. Through March 31, 1996, the Company had
received $439,000 under the SPIRAT grant.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
The Company had total revenues of $1.5 million for the three months ended
March 31, 1996 compared to revenues of $59,000 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 $989,000 for the three
months ended March 31, 1996 from $315,000 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 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
$177,000 during this period from $82,000 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.
18
<PAGE> 21
Interest income was $103,000 for the three months ended March 31, 1996
compared to $15,000 for the same period in 1995 due to higher average cash
investment balances. Interest expense was $1,200 for the three months ended
March 31, 1996 due to obligations under capital leases.
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 March 31, 1996, and to a lesser extent, grant
funding of $490,000. Under its agreements with Pfizer, the Company has received
$9.7 million in funding and could receive up to $49 million in total through May
2000.
Working capital increased to $6.4 million as of March 31, 1996 compared to
$6.0 million as of December 31, 1995. The increase in working capital primarily
reflects net cash generated from operations of $501,000. 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 March 31, 1996, Immusol had cash, cash
equivalents and short-term investments totaling $7.3 million.
Through March 31, 1996, the Company has invested an aggregate of $382,000
in leasehold improvements, laboratory and office equipment, 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. As of March 31, 1996, the Company had no
significant commitments for capital 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.
There
19
<PAGE> 22
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 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. 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 the link
between gene dysfunction and disease.
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.]
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. 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.
22
<PAGE> 25
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.
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, higher levels of gene expression; and (v)
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 apparently assume such stable shape
immediately after synthesis and are therefore more resistant to ribonucleases
(enzymes that degrade RNA) in the 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
23
<PAGE> 26
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.
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
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
24
<PAGE> 27
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. Consequently, 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 "Business -- Government
Regulations."
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
25
<PAGE> 28
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.
[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
26
<PAGE> 29
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 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") on this program and retains all commercial rights to any
ribozyme therapy for the prevention of restenosis.
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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.
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
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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 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.
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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 $9.7 million through March 31, 1996.
In connection with the execution of the Collaboration Agreement, Pfizer and
the Company entered into the License Agreement, under which 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 concurrent 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 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 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.
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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. Through March 31, 1996, the
Company had received $439,000 under the SPIRAT grant.
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
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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.
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. As of
June 1, 1996, 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.
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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 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
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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.
HUMAN RESOURCES
As of May 31, 1996, Immusol had approximately 35 full-time employees,
including 31 in research, development and operations, and 4 in finance and
administration. Of these employees, 16 hold advanced degrees, of which 14 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
May 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, he 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
35
<PAGE> 38
capital firm. From September 1990 through November 1994, Dr. Kuo served as a
general partner at Ventures Medical, a venture capital firm. 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. Dr. Perelman received a B.S. in chemistry from Northwestern
University and a Ph.D. in organic chemistry from Rice University. 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.
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.
36
<PAGE> 39
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.
37
<PAGE> 40
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
38
<PAGE> 41
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 $10,156 $22,344
</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.
39
<PAGE> 42
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.
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 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.
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, 2,002,500 shares were
reserved for issuance under options outstanding on May 31, 1996, leaving 173,500
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 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.
40
<PAGE> 43
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.
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
41
<PAGE> 44
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.
42
<PAGE> 45
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 March 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
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. 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 Shareholders' 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."
43
<PAGE> 46
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of May 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%
Bank of America Capital Corporation
650 Town Center Drive
Costa Mesa, California 92626
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..................................... -0- * *
Flossie Wong-Staal (5).............................. 1,391,250 13.2% 10.3%
Tsvi Goldenberg (6)................................. 2,822,000 28.2% 21.6%
Jack R. Barber (7).................................. 67,291 * *
All directors and executive officers as a group (6
persons) (8)...................................... 9,057,541 85.3% 66.5%
</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 other than
to the extent of his individual partnership interest.
(4) Dr. Litvack is the trustee of one trust for the benefit of his children.
(5) Dr. Wong-Staal is the trustee of two trusts for the benefit of her children.
Also includes 531,250 shares issuable upon exercise of stock options
exercisable within 60 days of May 31, 1996.
(6) Dr. Goldenberg is the custodian of three accounts for the benefit of his
children.
(7) Includes 67,291 shares issuable upon exercise of stock options that are
exercisable within 60 days of May 31, 1996.
(8) Includes 8,459,000 shares and 598,541 shares issuable upon exercise of stock
options that are exercisable within 60 days of May 31, 1996.
44
<PAGE> 47
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 March 31, 1996, there were 9,984,477 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 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 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.
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 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
45
<PAGE> 48
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.
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.
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 12,984,477 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 9,984,477 shares
held by existing
46
<PAGE> 49
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 1,675,000
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 84,000
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 March 31, 1996, 84,000 shares are outstanding under the Prior Plan,
1,810,000 shares of Common Stock are subject to outstanding options and 406,000
additional shares are reserved for issuance under the Prior Plan. 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.
47
<PAGE> 50
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.
48
<PAGE> 51
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.
49
<PAGE> 52
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 March 31, 1996 (Unaudited)......... F-3
Statements of Operations for the years ended December 31, 1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 (Unaudited)........................... F-4
Statements of Shareholders' Equity for the years ended December 31, 1993, 1994 and 1995
and for the three months ended March 31, 1996 (Unaudited)............................ F-5
Statements of Cash Flows for the years ended December 31,1993, 1994 and 1995 and for
the three months ended March 31, 1995 and 1996 (Unaudited)........................... F-6
Notes to Financial Statements.......................................................... F-7
</TABLE>
F-1
<PAGE> 53
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
June 27, 1996
F-2
<PAGE> 54
IMMUSOL, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED PRO
FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY AT
------------------------- MARCH 31, MARCH 31,
1994 1995 1996 1996
---------- ---------- ---------- -------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $1,113,904 $1,414,163 $ 832,533
Short-term investments (Note 3).... -- 5,453,082 6,491,392
Other current assets............... 204,475 145,700 173,281
---------- ---------- ----------
Total current assets................. 1,318,379 7,012,945 7,497,206
Property and equipment, net (Note
4)................................. 56,011 282,135 303,391
Other assets......................... 110,521 48,657 51,066
---------- ---------- ----------
$1,484,911 $7,343,737 $7,851,663
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 269,046 $ 499,783 $ 567,215
Accrued expenses................... -- 18,113 19,972
Deferred contract revenue (Note
2).............................. -- 436,330 436,330
Current portion of capital lease
obligations..................... -- 10,306 10,566
---------- ---------- ----------
Total current liabilities............ 269,046 964,532 1,034,083
Capital lease obligations, less
current portion (Note 5)........... -- 37,874 35,133
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
7,069,000 shares issued and
outstanding at December 31, 1994
and 1995 and March 31, 1996,
respectively (30,000,000 shares
authorized and 9,984,477 shares
issued and outstanding pro
forma).......................... 7,045 7,069 7,069 9,984
Deferred compensation.............. -- -- (239,800) (239,800)
Additional paid-in capital......... 2,103,955 7,102,840 7,342,640 7,342,640
Accumulated deficit................ (897,135) (771,493) (330,377) (330,377)
---------- ---------- ---------- ----------
Total shareholders' equity........... 1,215,865 6,341,331 6,782,447 $ 6,782,447
==========
---------- ---------- ----------
$1,484,911 $7,343,737 $7,851,663
========== ========== ==========
</TABLE>
See accompanying notes.
F-3
<PAGE> 55
IMMUSOL, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
--------------------------------------- -------------------------
1993 1994 1995 1995 1996
--------- --------- ----------- --------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Total revenue (Note 2)..... $ -- $ 204,475 $ 3,174,515 $ 58,723 $ 1,505,860
Costs and expenses:
Research and
development......... 157,101 492,513 2,831,860 315,416 988,814
General and
administrative...... 47,948 127,360 487,234 81,690 177,326
--------- --------- ----------- --------- -----------
Total costs and expenses... 205,049 619,873 3,319,094 397,106 1,166,140
--------- --------- ----------- --------- -----------
Income (loss) from
operations............... (205,049) (415,398) (144,579) (338,383) 339,720
Interest income............ 50,743 57,798 275,564 14,907 102,583
Interest expense........... -- -- (5,343) -- (1,187)
--------- --------- ----------- --------- -----------
Net income (loss).......... $(154,306) $(357,600) $ 125,642 $(323,476) $ 441,116
========= ========= =========== ========= ===========
Pro forma net income (loss)
per share................ $ (0.02) $ (0.05) $ 0.01 $ (0.04) $ 0.04
========= ========= =========== ========= ===========
Shares used in computing
pro forma net income
(loss) per share......... 7,103,728 7,232,495 11,591,502 7,232,495 11,961,972
========= ========= =========== ========= ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 56
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 -- --
Deferred compensation related
to issuance of stock
options (unaudited)........ -- -- -- -- -- -- 239,800 -- (239,800)
Net income (unaudited)....... -- -- -- -- -- -- -- -- --
--------- ------ ------- ---- --------- ------ ---------- -------- ---------
Balance at March 31, 1996
(unaudited).................. 2,000,000 $2,000 915,477 $915 7,069,000 $7,069 $7,342,640 $ -- $ (239,800)
========= ====== ======= ==== ========= ====== ========== ======== =========
<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
Deferred compensation related
to issuance of stock
options (unaudited)........ -- --
Net income (unaudited)....... 441,116 441,116
--------- ----------
Balance at March 31, 1996
(unaudited).................. $(330,377) $ 6,782,447
========= ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 57
IMMUSOL, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................... $ (154,306) $ (357,600) $ 125,642 $ (323,476) $ 441,116
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization...... 730 7,917 50,395 3,297 20,722
Stock issued for consulting
services...................... 28,108 21,892 -- -- --
Changes in operating assets and
liabilities:
Other current assets.......... -- (204,475) 58,775 91,317 (27,581)
Other assets.................. -- (109,490) 61,864 -- (2,500)
Accounts payable.............. 50,193 78,745 230,737 -- 67,433
Accrued expenses................ -- -- 18,113 -- 1,859
Deferred contract revenue....... -- -- 436,330 -- --
------- ------- ------- ------ ------
Net cash provided by (used in)
operating activities............... (75,275) (563,011) 981,856 (228,862) 501,049
INVESTING ACTIVITIES
Purchases of property and
equipment.......................... -- (62,282) (219,012) (9,551) (41,887)
Purchases of short-term
investments........................ -- -- (6,453,082) -- (1,438,310)
Proceeds from maturities of
short-term investments............. -- -- 1,000,000 -- 400,000
------- ------- ------- ------ ------
Net cash used in investing
activities......................... -- (62,282) (5,672,094) (9,551) (1,080,197)
FINANCING ACTIVITIES
Payments on capital lease
obligations........................ -- -- (9,327) -- (2,482)
Proceeds from issuance of Series B
convertible preferred stock........ -- -- 4,998,504 -- --
Proceeds from issuance of common
stock.............................. -- -- 1,320 -- --
------- ------- ------- ------ ------
Net cash provided by (used in)
financing activities............... -- -- 4,990,497 -- (2,482)
------- ------- ------- ------ ------
Net increase (decrease) in cash and
cash equivalents................... (75,275) (625,293) 300,259 (238,413) (581,630)
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 $ 875,491 $ 832,533
======= ======= ======= ====== ======
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Property and equipment acquired under
capital lease obligations.......... $ -- $ -- $ 57,507 $ -- $ --
======= ======= ======= ====== ======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid........................ $ -- $ -- $ 5,343 $ -- $ 1,187
======= ======= ======= ====== ======
</TABLE>
See accompanying notes.
F-6
<PAGE> 58
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO DECEMBER 31, 1995 AND FOR THE THREE MONTHS
ENDED MARCH 31, 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 March 31, 1996 and for the three-month periods
ended March 31, 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 March 31, 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> 59
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>
THREE MONTHS
YEARS ENDED DECEMBER 31, ENDED MARCH 31,
---------------------------- -----------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net income (loss) per share................... $(0.02) $(0.05) $0.01 $(0.04) $0.04
====== ====== ======= ====== =======
Shares used in computing net income (loss) per
share (in thousands)........................ 7,104 7,232 11,592 7,232 11,962
====== ====== ======= ====== =======
</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> 60
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 March 31, 1996. Unaudited pro forma
shareholders' equity at March 31, 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 $9.7 million through March 31, 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, MARCH 31,
1995 1996
------------ ----------
<S> <C> <C>
U.S. treasury notes........................................ $ 801,215 $ 405,750
Corporate debt securities.................................. 4,651,867 6,085,642
---------- ----------
Short-term investments................................ $5,453,082 $6,491,392
========== ==========
</TABLE>
Maturities of short-term investments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ ----------
<S> <C> <C>
1996....................................................... $3,054,414 $2,664,689
1997....................................................... 2,398,668 3,826,703
---------- ----------
$5,453,082 $6,491,392
========== ==========
</TABLE>
F-9
<PAGE> 61
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
4. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, MARCH
-------------------- 31,
1994 1995 1996
------- -------- --------
<S> <C> <C> <C>
Laboratory equipment................................ $60,249 $294,101 $325,584
Office equipment.................................... 3,864 27,448 37,853
Leasehold improvements.............................. -- 18,719 18,719
------- -------- --------
64,113 340,268 382,156
Less accumulated depreciation and amortization...... (8,102) (58,133) (78,765)
------- -------- --------
$56,011 $282,135 $303,391
======= ======== ========
</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
March 31, 1996 amounted to $12,459 and $14,377, respectively.
5. COMMITMENTS
LEASE OBLIGATIONS
The Company leases its offices and laboratory facility under a
noncancellable operating lease which expires in 1996. The lease requires the
Company to pay for all maintenance, insurance and property taxes. The Company
subleases approximately 50% of the space to a tenant and, accordingly, shares
rent and other costs on a prorated basis. The Company is scheduled to receive
sublease rent of $129,000 in 1996. In June, 1996 the Company entered into a new
facilities noncancellable operating lease which expires in June, 2001. 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 $74,000 and $85,000 for the three months
ended March 31, 1995 and 1996, respectively.
F-10
<PAGE> 62
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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,
or technology claimed, under this agreement. Upon commercial sale of licensed
products, the Company is required to pay certain minimum royalty payments.
LONG-TERM NOTE PAYABLE
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 April 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.
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 March 31, 1996, 395,833 and 364,583 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.
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
F-11
<PAGE> 63
IMMUSOL, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
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 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.......................................... 55,000 $.60 $.11
---------
Outstanding at March 31, 1996.................... 1,810,000 $.05 - $.60 $.11
=========
</TABLE>
At December 31, 1995, options exercisable and available for future grant
totaled 586,208 and 461,000, respectively. At March 31, 1996, options
exercisable and available for future grant totalled 654,250 and 406,000,
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 February 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> 64
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 totaling $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> 65
- ------------------------------------------------------------
- ------------------------------------------------------------
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
The Company................................ 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................................. 35
Certain Transactions....................... 43
Principal Shareholders..................... 44
Description of Capital Stock............... 45
Shares Eligible for Future Sale............ 46
Underwriting............................... 48
Legal Matters.............................. 49
Experts.................................... 49
Additional Information..................... 49
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
[IMMUSOL LOGO]
COMMON STOCK
------------------------
PROSPECTUS
------------------------
PAINEWEBBER INCORPORATED
NEEDHAM & COMPANY, INC.
SUTRO & CO. INCORPORATED
------------------------
, 1996
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 66
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>
- ---------------
* To be filed by Amendment
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
II-1
<PAGE> 67
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 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 1,886,500 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 $4,998,594.
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.
II-2
<PAGE> 68
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.
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).
23.2 Consent of Ernst & Young LLP, Independent Auditors (see Page II-6).
24.1 Power of Attorney (See Page II-5).
</TABLE>
II-3
<PAGE> 69
- ---------------
+ To be filed by Amendment.
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (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.
(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> 70
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 3rd day of July, 1996.
IMMUSOL, INC.
By: /s/ TSVI GOLDENBERG, PH.D.
------------------------------------
Tsvi Goldenberg, Ph.D.
Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Tsvi Goldenberg and Jack Barber, or either of
them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and any registration statement
related to this Registration Statement and filed pursuant to Rule 462 under the
Securities Act of 1933, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.
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 Executive July 3, 1996
- ------------------------------------- Officer and Director (Principal
Tsvi Goldenberg Executive Officer)
/s/ J. STANHOPE BLACKBURN Director of Finance and Acting Chief July 3, 1996
- ------------------------------------- Financial Officer (Principal Financial
J. Stanhope Blackburn and Accounting Officer)
/s/ ANCHIE KUO Director July 3, 1996
- -------------------------------------
Anchie Kuo
/s/ FRANK LITVACK Director July 3, 1996
- -------------------------------------
Frank Litvack
/s/ MELVIN PERELMAN Director July 3, 1996
- -------------------------------------
Melvin Perelman
/s/ FLOSSIE WONG-STAAL Director July 3, 1996
- -------------------------------------
Flossie Wong-Staal
</TABLE>
II-5
<PAGE> 71
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
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
July 2, 1996
II-6
<PAGE> 72
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........................
+10.14 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.....................
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------- ------------
<C> <S> <C>
+14.1 List of Material Foreign Patents.........................................
+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)........................................
</TABLE>
- ---------------
+ To be filed by Amendment.
* Certain confidential portions of this Exhibit were omitted by means of
blacking out the text (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 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF IMMUSOL, INC.
The undersigned, Tsvi Goldenberg, Ph.D. and J. Casey McGlynn hereby
certify that:
ONE: Dr. Goldenberg is the duly elected Chairman of the Board and
Chief Executive Officer and Mr. McGlynn is the duly elected Secretary of the
corporation.
TWO: The Amended and Restated Articles of Incorporation of the
corporation shall be amended and restated to read in full as follows:
I.
The name of this corporation is Immusol, Inc.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is 23,491,700
shares. 20,000,000 shares shall be Common Stock, with a par value of $0.001
per share. 3,491,700 shares shall be Preferred Stock, with a par value of
$0.001 per share, 2,000,000 of which are designated Series A Preferred Stock,
922,800 of which are designated Series B1 Preferred Stock, 264,600 of which are
designated Series B2 Preferred Stock, and 304,300 of which are designated
Series B3 Preferred Stock.
-1-
<PAGE> 2
IV.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The dividends shall be payable when, as
and if declared by the Board of Directors, and shall not be cumulative. The
dividends on the outstanding shares of Series A, Series B1, Series B2, and
Series B3 Preferred Stock shall be paid out of any funds legally available
therefor at the rate of $0.08, $0.44, $0.60, and $0.79 per share, respectively,
per annum (as determined on a per annum basis and on an as converted basis for
the Preferred Stock). As long as shares of Preferred Stock are outstanding, no
dividends shall be payable on the Common Stock.
2. Liquidation Preference.
(a) Preferred Preference. In the event of any
liquidation, dissolution or winding up of this corporation, either voluntary or
involuntary, the holders of Preferred Stock shall be entitled to receive, out
of the assets of this corporation available to distribution to its
shareholders, whether such assets are capital, surplus, or earnings, and prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to $1.00, $5.46, $7.56, and $9.86 for each outstanding share of
Series A, Series B1, Series B2, and Series B3 Preferred Stock, respectively,
plus an amount equal to any declared but unpaid dividends on such shares up to
the date fixed for distribution (such amounts being referred to herein as the
"Premium"). If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full Premium, then the entire assets
and funds of this corporation legally available for distribution shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the full amount each such holder is otherwise entitled to receive.
After the payment in full or the setting apart in trust by the
corporation of payment to the holders of Preferred Stock of the preferential
amounts so payable to them, each share of Common Stock shall receive pro rata
the remaining assets of the corporation.
(b) Mergers. A merger, or any consolidation of this
corporation with or into any other corporation or other entity or person, or
any other corporate reorganization or
-2-
<PAGE> 3
transaction or series of related transactions by this corporation in which the
shareholders of this corporation immediately prior to the merger, consolidation
or reorganization possess less than fifty percent (50%) of the voting power of
the surviving entity (or its parent) immediately after the merger,
consolidation or reorganization or a sale or other disposition of all or
substantially all of the assets of this corporation shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 2.
Any securities or other property to be delivered to the
holders of the Preferred Stock and Common Stock upon merger, consolidation,
reorganization or sale of substantially all the assets of the corporation shall
be valued as follows:
(i) Securities not subject to investment letter or
other similar restrictions on free marketability:
(A) if traded on a securities
exchange, the value shall be deemed to be the average of the closing prices of
the securities on such exchange over the 30-day period ending three (3)
business days prior to the closing;
(B) if actively traded
over-the-counter, the value shall be deemed to be the average of the closing
bid prices over the 30-day period ending three (3) business days prior to the
closing; and
(C) if there is no active public
market, the value shall be the fair market value thereof as mutually determined
by the corporation and the holders of not less than a majority of the
outstanding shares of Preferred Stock, provided that if the corporation and the
holders of a majority of the outstanding shares of Preferred Stock are unable
to reach agreement, then by independent appraisal by an investment banker hired
and paid by the corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(ii) The method of valuation of securities subject
to investment letter or other restrictions on free marketability shall be to
make an appropriate discount from the market value determined as provided in
Sections 2(b)(i)(A), (B) or (C) to reflect the approximate fair market value
thereof, as mutually determined by the corporation and the holders of a
majority of the outstanding shares of Preferred Stock.
(iii) All other securities or other property shall
be valued at the fair market value thereof, as mutually determined by this
corporation and the holders of a majority of the outstanding shares of
Preferred Stock.
(iv) If the holders of a majority of the
outstanding shares of the Preferred Stock and the corporation are unable to
reach agreement on any valuation matter,
-3-
<PAGE> 4
such valuation shall be submitted to and determined by a nationally recognized
independent investment banking firm selected by this corporation's board of
directors and the holders of a majority of the outstanding shares of the
Preferred Stock (or, if such selection cannot be made, by a nationally
recognized independent investment banking firm selected by the American
Arbitration Association in accordance with its rules.)
(c) In the event the requirements of Section 2(b) hereof
are not complied with, this corporation shall forthwith either: (i) cause such
closing to be postponed until such time as the requirements of this Section 2
shall be complied with; or (ii) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Preferred Stock shall
revert to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in Section 2(d)
hereof.
(d) Not later than thirty (30) days before any event of
liquidation, dissolution or winding up under this Section 2, the corporation
shall deliver a notice to each holder of the Preferred Stock announcing such
proposed liquidation, dissolution or winding up. Such notice shall include a
description of the amounts that would be paid to the holders of the Preferred
Stock under this Section 2 and of the consideration that such holders would
receive if they exercised their rights to convert their shares of Preferred
Stock into shares of Common Stock. Not later than 10 days after delivery of
such notice, each holder of the Preferred Stock may deliver an election to the
corporation notifying the corporation that the holder desires that such
holder's shares of Preferred Stock be treated as if such shares had been
converted into shares of Common Stock. If such election is delivered, such
shares of Preferred Stock subject to such holder's notice shall be treated for
purposes of the liquidation, dissolution or winding up as if such shares had
been converted into Common Stock in accordance with the provisions of Section
4. If no such election is delivered, such holder shall receive the amounts as
provided for the holders of Preferred Stock under this Section 2.
(e) Consent for Certain Repurchase. Each holder of an
outstanding share of Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the California General Corporation
Law, to distributions made by the corporation in connection with the repurchase
of shares of Common Stock issued to or held by employees or consultants upon
termination of their employment or services pursuant to agreements providing
for the right of said repurchase between the corporation and such persons.
-4-
<PAGE> 5
3. Voting Rights.
(a) The holder of each share of Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws
of the corporation and shall vote with holders of the Common Stock upon the
election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote and except as otherwise set forth herein. The holder of each share of
Preferred Stock shall be entitled to that number of votes equal to the number
of shares of Common Stock into which each share of Preferred Stock could be
converted on the record date for the vote or consent of shareholders.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of
Preferred Stock held by each holder) shall be disregarded.
(b) (i) Notwithstanding the foregoing, as long as
more than 500,000 shares of Series A Preferred Stock are outstanding, the
holders of Series A Preferred Stock, voting as a separate class, shall have the
right to elect one member of the corporation's board of directors. The holders
of Common Stock and Series B1, Series B2, and Series B3 Preferred Stock, voting
together as a single class, shall have the right to elect all other members of
the corporation's board of directors.
(ii) If there are less than or equal to 500,000
shares of Series A Preferred Stock outstanding, the holders of Common Stock,
Series A Preferred Stock, and Series B1, Series B2, Series B3 Preferred Stock,
voting together as a single class, shall have the right to elect all members of
the corporation's board of directors.
(iii) Notwithstanding any Bylaw provisions to the
contrary, the shareholders entitled to elect a particular director shall be
entitled to remove such director or to fill a vacancy in the seat formerly held
by such director, all in accordance with the applicable provisions provided in
the California Corporations Code.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible into fully paid and nonassessable shares of Common Stock
without the payment of any additional consideration by the holder thereof and,
at the option of the holder thereof, at any time after the date of issuance of
such share, at the office of the corporation or any transfer agent for the
Preferred Stock. Each share of Preferred Stock shall be convertible into the
number of fully paid and nonassessable shares of Common Stock which results
from dividing the Conversion Price (as hereinafter defined) per share in effect
for each series of Preferred Stock at the time of conversion into the per share
Conversion Value (as hereinafter defined) of such series. The initial
Conversion Price per share of Series A, Series B1, Series B2, and Series B3
Preferred
-5-
<PAGE> 6
Stock shall be $1.00, $5.46, $7.56, and $9.86, respectively. The per share
Conversion Value of the Series A, Series B1, Series B2, and Series B3 Preferred
Stock shall be $1.00, $5.46, $7.56, and $9.86, respectively. The initial
Conversion Prices of Preferred Stock shall be subject to adjustment from time
to time as provided below. The number of shares of Common Stock into which a
share of a series of Preferred Stock is convertible is hereinafter referred to
as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the corporation in which (a) the public
offering price equals or exceeds $5.50 per share (adjusted to reflect
subsequent stock dividends, stock splits or recapitalization) and (b) the
aggregate proceeds raised by the corporation, equals or exceeds $7,500,000.
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate(s) therefor, duly endorsed,
at the office of the corporation or of any transfer agent for the Preferred
Stock and shall give written notice to the corporation at such office that he
elects to convert the same (except that no such written notice of election to
convert shall be necessary in the event of an automatic conversion pursuant to
Section 4(b) hereof). The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock
certificate(s) for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with cash for all declared and unpaid
dividends on the shares of Preferred Stock being converted, to and including
the time of conversion, and, if less than all of the shares of stock
represented by such Preferred Stock certificate(s) are converted, a certificate
representing the shares of Preferred Stock not converted. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted
(except that in the case of an automatic conversion pursuant to Section 4(b)
hereof such conversion shall be deemed to have been made immediately prior to
the closing of the offering referred to in Section 4(b)) and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares
to which the holder of Preferred Stock would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock as reasonably determined by the board of
directors of the corporation. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of
-6-
<PAGE> 7
Preferred Stock of each holder to be converted at such time into Common Stock
and the number of shares of Common Stock issuable upon such conversion.
(e) Adjustment of Conversion Price. The Conversion
Prices of each series of Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) If the corporation shall issue or
sell, any Common Stock other than "Excluded Stock," as defined below, for a
consideration per share less than the Conversion Price of the Series A
Preferred Stock in effect immediately prior to the issuance of such Common
Stock (excluding stock dividends, subdivisions, split-ups, combinations,
dividends or recapitalizations which are covered by Sections 4(e)(iii), (iv),
(v), and (vi)), the Conversion Price of the Series A Preferred Stock in effect
after each such issuance shall thereafter (except as provided in this Section
4(e)) be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of
shares of Common Stock outstanding (including any shares of Common Stock
issuable upon conversion of the Preferred Stock, or deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii) below)
immediately prior to such issuance multiplied by the Conversion Price of the
Series A Preferred Stock in effect immediately prior to such issuance, plus
(y) the consideration
received by the corporation upon such issuance, by
(B) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance plus the additional shares of Common Stock issued in such
issuance (but not including any additional shares of Common Stock deemed to be
issued as a result of any adjustment in the Conversion Price of the Series A
Preferred Stock resulting from such issuance).
For purposes of any adjustment of the
Conversion Price of the Series A Preferred Stock pursuant to this clause (i),
the following provisions shall be applicable:
-7-
<PAGE> 8
(1) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor after deducting any discounts or commissions paid or
incurred by the corporation in connection with the issuance and sale thereof.
(2) In the case of the issuance of
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined by the board of directors of the corporation, in
accordance with generally accepted accounting treatment; provided, however,
that if, at the time of such determination, the corporation's Common Stock is
traded in the over-the-counter market or on a national or regional securities
exchange, such fair market value as determined by the board of directors of the
corporation shall not exceed the aggregate "Current Market Price" (as defined
below) of the shares of Common Stock being issued.
(3) In the case of the issuance of
(i) options to purchase or rights to subscribe for Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for Common Stock (other than Excluded Stock), or (iii) options to
purchase or rights to subscribe for such convertible or exchangeable
securities:
(A) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subdivisions (1) and (2)
above), if any, received by the corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such options or rights
for the Common Stock covered thereby;
(B) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration received by the
corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus
the minimum additional consideration, if any, to be received by the corporation
upon the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be determined in
the manner provided in subdivisions (1) and (2) above);
(C) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or
-8-
<PAGE> 9
exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities, other than a
change resulting from the antidilution provisions of such options, rights or
securities, the Conversion Price of the Series A Preferred Stock shall
forthwith be readjusted to such Conversion Price as would have obtained had the
adjustment made upon (x) the issuance of such options, rights or securities not
exercised, converted or exchanged prior to such change, as the case may be,
been made upon the basis of such change or (y) the options or rights related to
such securities not converted or exchanged prior to such change, as the case
may be, been made upon the basis of such change; and
(D) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A Preferred Stock
shall forthwith be readjusted to such Conversion Price as would have obtained
had the adjustment made upon the issuance of such options, rights, convertible
or exchangeable securities or options or rights related to such convertible or
exchangeable securities, as the case may be, been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
convertible or exchangeable securities or upon the exercise of the options or
rights related to such convertible or exchangeable securities, as the case may
be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock
issued or issuable to officers, directors, consultants or employees of the
corporation pursuant to any plan or arrangement approved by the board of
directors of the corporation; and
(B) all shares of Series A
Preferred Stock and the Common Stock into which the shares of Series A
Preferred Stock are convertible.
(C) all shares of Series B1, Series
B2, and Series B3 Preferred Stock and the Common Stock into which the shares of
Series B1, Series B2, and Series B3 Preferred Stock are convertible.
All outstanding shares of Excluded
Stock (including any shares issuable upon conversion of the Preferred Stock but
excluding shares reserved for issuance for option plans for which options have
not yet been granted) shall be deemed to be outstanding for all purposes of the
computations of Section 4(e)(i) above.
(iii) If the number of shares of Common
Stock outstanding at any time after the date hereof is increased by a stock
dividend payable in shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, on the date such
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<PAGE> 10
payment is made or such change is effective, the Conversion Price of each
series of Preferred Stock shall be appropriately decreased so that the number
of shares of Common Stock issuable on conversion of any shares of such series
of Preferred Stock shall be increased in proportion to such increase of
outstanding shares.
(iv) If the number of shares of Common
Stock outstanding at any time after the date hereof is decreased by a
combination of the outstanding shares of Common Stock, then, on the effective
date of such combination, the Conversion Price of each series of Preferred
Stock shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of any shares of such series of Preferred Stock
shall be decreased in proportion to such decrease in outstanding shares.
(v) In case the corporation shall
declare a cash dividend upon its Common Stock payable otherwise than out of
retained earnings or shall distribute to holders of its Common Stock shares of
capital stock (other than Common Stock), stock or other securities of other
persons, evidences of indebtedness issued by the corporation or other persons,
assets (excluding cash dividends) or options or rights (excluding options to
purchase and rights to subscribe for Common Stock or other securities of the
corporation convertible into or exchangeable for Common Stock), then, in each
such case, the holders of shares of Preferred Stock shall, concurrent with the
distribution to holders of Common Stock, receive a like distribution based upon
the number of shares of Common Stock into which each series of Preferred Stock
is convertible.
(vi) In case, at any time after the date
hereof, of any capital reorganization, or any reclassification of the stock of
the corporation (other than as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
corporation with or into another person (other than a consolidation or merger in
which the corporation is the continuing entity and which does not result in any
change in the Common Stock), or of the sale or other disposition of all or
substantially all the properties and assets of the corporation, the shares of
Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the corporation
or otherwise to which such holder would have been entitled if immediately prior
to such reorganization, reclassification, consolidation, merger, sale or other
disposition he had converted his shares of Preferred Stock into Common Stock.
The provisions of this clause (vi) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales or other
dispositions.
(vii) All calculations under this Section
4 shall be made to the nearest cent or to the nearest one hundredth (1/100) of
a share, as the case may be.
(viii) For the purpose of any computation
pursuant to this Section 4(e), the "Current Market Price" at any date of one
share of Common Stock, shall be
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<PAGE> 11
deemed to be the average of the highest reported bid and the lowest reported
offer prices on the preceding business day as furnished by the National
Quotation Bureau, Incorporated (or equivalent recognized source of quotations);
provided, however, that if the Common Stock is not traded in such manner that
the quotations referred to in this clause (viii) are available for the period
required hereunder, Current Market Price shall be determined in good faith by
the board of directors of the corporation, but if challenged by the holders of
more than 50% of the outstanding Preferred Stock, then as determined by an
independent appraiser selected by the board of directors of the corporation,
the cost of such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts
to an adjustment of $0.01 or more in the Conversion Price. At no time,
however, shall the Conversion Price be adjusted upward for subsequent issuances
or sales for a consideration per share higher than the then current conversion
price.
(g) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 4
and in the taking of all such action as may be necessary or appropriate in
order to protect the Conversion Rights of the holders of Preferred Stock
against impairment.
(h) Certificate as to Adjustments. Upon the occurrence
of each adjustment or readjustment of the Conversion Rate pursuant to this
Section 4, the corporation at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Rate of such series at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversions of
such holder's shares of Preferred Stock.
(i) Notices of Record Date. In the event of any taking
by the corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of
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<PAGE> 12
any class or any other securities or property or to receive any other right,
the corporation shall mail to each holder of Preferred Stock at least twenty
(20) days prior to such record date, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or distribution or
right, and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of
this Section 4 to be given to the holder of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
(l) Reissuance of Converted Shares. No shares of
Preferred Stock which have been converted into Common Stock after the original
issuance thereof shall ever again be reissued and all such shares so converted
shall upon such conversion cease to be a part of the authorized shares of the
corporation.
5. Protective Provisions. So long as shares of Preferred Stock
are outstanding, this corporation shall not, and shall not permit any
subsidiary to, without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Preferred Stock:
(a) sell, lease, convey, assign or otherwise dispose of
or encumber all or substantially all of its property, assets or business or of
any of its subsidiaries' property, assets or business or merge into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of the corporation is disposed of or
effect any reclassification or other change of any stock, or any
recapitalization or dissolution, liquidation or winding up of the corporation
or make any agreement to become obligated to do so;
(b) repurchase, redeem or otherwise acquire for value any
shares of Common Stock except repurchases of Common Stock at the original
issuance price from employees, officers, directors and consultants pursuant to
the terms of the agreement between the Company
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<PAGE> 13
and such purchasers pursuant to which the corporation has the option to
repurchase such shares upon the occurrence of certain events, including the
termination of employment by or service to the corporation or any subsidiary of
the corporation;
(c) change or alter the rights, preferences, privileges
or restrictions of the Preferred Stock;
(d) increase or decrease the aggregate number of
authorized shares of Preferred Stock, other than an increase as provided in
either subdivision (b) of Section 405 or subdivision (c) of Section 902 of the
California Corporations Code;
(e) create a new class or series of shares having rights,
preferences or privileges prior to or on parity with the Preferred Stock or
increase the rights, preferences or privileges or the number of authorized
shares of any class having rights, preferences or privileges prior to or on
parity with the Preferred Stock; for purposes of this subsection, any
indebtedness convertible into or exchangeable for a new class or series of
shares of capital stock of the corporation shall be considered to be a new
class or series of shares having rights, preferences, privileges or
restrictions prior to the Preferred Stock;
(f) increase or decrease the corporation's authorized
capitalization;
(g) declare or pay any dividends on or declare or make
any other distribution, direct or indirect, (other than a dividend payable
solely in shares of Common Stock) on account of the Common Stock or any other
shares of the corporation or set apart any sum for any such purpose; or
(h) amend this Amended and Restated Articles of
Incorporation.
6. Status of Converted Stock. In the event any shares of
Preferred Stock shall be converted, the shares so converted shall be canceled
and shall not be issuable by the corporation, and the Articles of
Incorporation, as amended, of this corporation shall be appropriately amended
to effect the corresponding reduction in the corporation's authorized capital
stock.
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<PAGE> 14
V.
1. Limitation of Directors' Liability. The liability of the
directors of this corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
2. Indemnification of Corporate Agents. This corporation is
authorized to indemnify its agents to the fullest extent permissible under
California law. For purposes of this provision the term "agent" has the
meaning set forth in Section 317 of the California Corporations Code.
3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification.
THREE: The foregoing amendment and restatement of the Amended and
Restated Articles of Incorporation has been approved by the Board of Directors.
FOUR: The foregoing amendment and restatement of the Amended and
Restated Articles of Incorporation has been duly approved by the required vote
of the shareholders in accordance with Section 902 of the Corporations Code.
The total number of outstanding shares entitled to vote with respect to the
amendment is 7,045,000 shares of Common Stock and 2,915,477 shares of Preferred
Stock. The number of shares voting in favor of the amendment equaled or
exceeded the vote required. The percentage vote required was a majority of the
outstanding shares of Common Stock and a majority of the outstanding shares of
Preferred Stock.
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<PAGE> 15
We declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge. Executed at San Diego, California on June 15, 1995.
/s/ TSVI GOLDENBERG
--------------------------------
Tsvi Goldenberg, Ph.D.,
Chairman of the Board and
Chief Executive Officer
/s/ J. CASEY MCGLYNN
-------------------------------
J. Casey McGlynn, Secretary
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<PAGE> 1
EXHIBIT 3.2
SECOND AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF IMMUSOL, INC.
A CALIFORNIA CORPORATION
Tsvi Goldenberg, Ph.D. and Faye H. Russell certify that:
1. They are the Chief Executive Officer and the Secretary,
respectively, of Immusol, Inc. a California corporation (the "corporation").
2. The Amended and Restated Articles of Incorporation of the
corporation are amended and restated to read as follows:
ARTICLE I
The name of the corporation is Immusol, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
Section 1. Classes of Stock. The corporation is authorized to issue
two classes of stock to be designated, respectively, "Common Stock" and
"Preferred Stock." The total number of shares which the corporation is
authorized to issue is Thirty Million (30,000,000) shares of Common Stock and
Five Million (5,000,000) shares of Preferred Stock.
Section 2. Powers, Preferences and Rights and Qualifications,
Limitations and Restrictions of Preferred Stock. The Preferred Stock may be
issued from time to time in one or more series. The Board of Directors is
hereby authorized to fix or alter from time to time the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions thereof, including without limitation the dividend
rights, dividend rate, conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions), redemption price or prices, and
the liquidation preferences of any wholly unissued series of Preferred Stock,
and to establish from time to time the number of shares constituting any such
series and the designation thereof, or any of them (a "Preferred Stock
Designation"); and to increase or decrease the number of shares of any series
subsequent to the issuance of shares of that series, but not below the number of
shares of such series then outstanding. In case the number of shares
<PAGE> 2
of any series shall be decreased in accordance with the foregoing sentence, the
shares constituting such decrease shall resume the status that they had prior to
the adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE IV
Section 1. Liability of Directors. The liability of the directors of
the corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
Section 2. Indemnity of Directors, Officers and Agents. The
corporation is authorized to indemnify the directors and officers of the
corporation to the fullest extent permissible under California law. The
corporation is authorized to provide indemnification of agents (as defined in
Section 317 of the California Corporations Code) through bylaw provisions,
agreements with agents, vote of shareholders or disinterested directors or
otherwise, in excess of the indemnification otherwise permitted by Section 317
of the California Corporations Code, subject only to the applicable limits set
forth in Section 204 of the California Corporations Code with respect to
actions for breach of duty to the corporation and its shareholders.
Section 3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article IV shall be prospective and shall not
adversely affect any right of indemnification or liability of a director,
officer or agent of the corporation relating to acts or omissions occurring
prior to such repeal or modification.
ARTICLE V
Newly created directorships resulting from any increase in the
authorized number of directors shall, unless the Board of Directors determines
by resolution that any such newly created directorship shall be filled by the
shareholders, be filled only by the affirmative vote of a majority of the
directors then in office, even though less than a quorum of the Board of
Directors; provided, however, that the ability of the Board of Directors to
fill any such vacancy shall terminate at the next annual meeting of the
shareholders at which directors are elected following the creation of any such
vacancy. Any director elected in accordance with the preceding sentence shall
hold office until such director's successor shall have been elected and
qualified.
ARTICLE VI
No action shall be taken by the shareholders of the corporation except
at an annual or special meeting of shareholders called in accordance with the
bylaws, and no action shall be taken by the shareholders by written consent.
ARTICLE VII
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<PAGE> 3
Advance notice of shareholder nominations for the election of
directors and of business to be brought by shareholders before any meeting of
the shareholders of the corporation shall be given in the manner provided in
the bylaws of the corporation.
ARTICLE VIII
The election of directors by the shareholders shall not be by
cumulative voting. At each election of directors, each shareholder entitled
to vote may vote all the shares held by that shareholder for each of the
several nominees for director up to the number of directors to be elected.
The shareholder may not cast more votes for any single nominee than the number
of shares held by that shareholder. This Article VIII shall become effective
only when the Corporation becomes a "listed corporation" within the meaning of
the California Corporations Code Section 301.5(d).
ARTICLE IX
[Intentionally Omitted]
ARTICLE X
Amendment or Rescission of Articles. The corporation reserves the
right to repeal, alter, amend or rescind any provision contained in the
articles of incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred on shareholders herein are granted subject to
this reservation.
* * *
3. The foregoing Second Amendment and Restatement of Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing Second Amendment and Restatement of Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Sections 902 and 903 of the Corporations Code. As of the time
shareholder approval for these restated articles was obtained, the total number
of outstanding Common shares of the Corporation was 7,109,000, the total number
of outstanding Series A Preferred shares of the Corporation was 2,000,000, and
the total number of outstanding Series B-1 Preferred shares of the Corporation
was 915,477. No other shares were outstanding. The number of shares voting in
favor of the amendment equaled or exceeded the vote required. The percentage
vote required was (i) more than 50% of the Common Stock voting as a separate
class, (ii) more than 50% of the Preferred Stock voting as a separate class,
(iii) more than 50% of the Series A Preferred Stock voting as a separate class,
(iv) more than 50% of the
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<PAGE> 4
Series B-1 Preferred Stock voting as a separate class, and (v) more than 50% of
the Common Stock and Preferred Stock voting together as a single class.
5. Subsequent to the shareholder approval, all outstanding shares
of Preferred Stock were converted to Common Stock.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 5
We further declare under penalty of perjury under the laws of the
State of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Date: ______________________, 1996
----------------------------------------
Tsvi Goldenberg, Ph.D., President
----------------------------------------
Faye H. Russell, Secretary
[SIGNATURE PAGE TO SECOND AMENDED AND RESTATED
ARTICLES OF INCORPORATION OF IMMUSOL, INC.]
<PAGE> 1
EXHIBIT 3.3
BYLAWS
OF
IMMUSOL, INC.
<PAGE> 2
BYLAWS OF
IMMUSOL, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
ARTICLE I - CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II - MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 VALIDATION OF MEETINGS: WAIVER OF NOTICE; CONSENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS . . . . . . . . . . . . . . . . . . . . . . . 7
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.13 INSPECTORS OF ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III - DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.10 ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.14 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE IV - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.5 VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.7 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.8 VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.10 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . 18
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.3 PAYMENT OF EXPENSES IN ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 INDEMNITY NOT EXCLUSIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.5 INSURANCE INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII - RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.2 MAINTENANCE AND INSPECTION OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.4 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.6 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE VIII - GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
8.4 CERTIFICATES FOR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.5 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.6 CONSTRUCTION: DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IX - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 AMENDMENT BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 AMENDMENT BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
IMMUSOL, INC.
ARTICLE I
CORPORATE OFFICES
1.1 PRINCIPAL OFFICE
The board of directors shall fix the location of the principal
executive office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state
and the corporation has one or more business offices in such state, then the
board of directors shall fix and designate a principal business office in the
State of California.
1.2 OTHER OFFICES
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
2.1 PLACE OF MEETINGS
Meetings of shareholders shall be held at any place within or outside
the State of California designated by the board of directors. In the absence
of any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of shareholders shall be held each year on a date
and at a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the second
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
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<PAGE> 5
2.3 SPECIAL MEETING
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the
general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these
bylaws, that a meeting will be held at the time requested by the person or
persons calling the meeting, so long as that time is not less than thirty-five
(35) nor more than sixty (60) days after the receipt of the request. If the
notice is not given within twenty (20) days after receipt of the request, then
the person or persons requesting the meeting may give the notice. Nothing
contained in this paragraph of this Section 2.3 shall be construed as limiting,
fixing or affecting the time when a meeting of shareholders called by action of
the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
All notices of meetings of shareholders shall be sent or otherwise
given in accordance with Section 2.5 of these bylaws not less than ten (10)
(or, if sent by third-class mail pursuant to Section 2.5 of these bylaws,
thirty (30)) nor more than sixty (60) days before the date of the meeting. The
notice shall specify the place, date, and hour of the meeting and (i) in the
case of a special meeting, the general nature of the business to be transacted
(no business other than that specified in the notice may be transacted) or (ii)
in the case of the annual meeting, those matters which the board of directors,
at the time of giving the notice, intends to present for action by the
shareholders (but subject to the provisions of the next paragraph of this
Section 2.4 any proper matter may be presented at the meeting for such action).
The notice of any meeting at which directors are to be elected shall include
the name of any nominee or nominees who, at the time of the notice, the board
intends to present for election.
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If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to
Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to
Section 1201 of the Code, (iv) a voluntary dissolution of the corporation,
pursuant to Section 1900 of the Code, or (v) a distribution in dissolution
other than in accordance with the rights of outstanding preferred shares,
pursuant to Section 2007 of the Code, then the notice shall also state the
general nature of that proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of shareholders shall be given either
(i) personally or (ii) by first-class mail or (iii) by third-class mail but
only if the corporation has outstanding shares held of record by five hundred
(500) or more persons (determined as provided in Section 605 of the Code) on
the record date for the shareholders' meeting, or (iv) by telegraphic or other
written communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the shareholder at the address of that
shareholder appearing on the books of the corporation or given by the
shareholder to the corporation for the purpose of notice. If no such address
appears on the corporation's books or is given, notice shall be deemed to have
been given if sent to that shareholder by mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other
means of written communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, then all future notices or reports shall be deemed to have
been duly given without further mailing if the same shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one (1) year from the date of the
giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
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<PAGE> 7
2.6 QUORUM
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
Any shareholders' meeting, annual or special, whether or not a quorum
is present, may be adjourned from time to time by the vote of the majority of
the shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at the meeting at which the
adjournment is taken. However, if a new record date for the adjourned meeting
is fixed or if the adjournment is for more than forty-five (45) days from the
date set for the original meeting, then notice of the adjourned meeting shall
be given. Notice of any such adjourned meeting shall be given to each
shareholder of record entitled to vote at the adjourned meeting in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws. At any adjourned
meeting the corporation may transact any business which might have been
transacted at the original meeting.
2.8 VOTING
The shareholders entitled to vote at any meeting of shareholders shall
be determined in accordance with the provisions of Section 2.11 of these
bylaws, subject to the provisions of Sections 702 through 704 of the Code
(relating to voting shares held by a fiduciary, in the name of a corporation or
in joint ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as
may be otherwise provided in the articles of
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<PAGE> 8
incorporation, each outstanding share, regardless of class, shall be entitled
to one vote on each matter submitted to a vote of the shareholders. Any
shareholder entitled to vote on any matter may vote part of the shares in favor
of the proposal and refrain from voting the remaining shares or, except when
the matter is the election of directors, may vote then against the proposal;
but, if the shareholder fails to specify the number of shares which the
shareholder is voting affirmatively, it will be conclusively presumed that the
shareholder's approving vote is with respect to all shares which the
shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the
shares represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote
by classes is required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder
normally is entitled to cast) if the candidates' names have been placed in
nomination prior to commencement of the voting and the shareholder has given
notice prior to commencement of the voting of the shareholder's intention to
cumulate votes. If any shareholder has given such a notice, then every
shareholder entitled to vote may cumulate votes for candidates in nomination
either (i) by giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which that
shareholder's shares are normally entitled or (ii) by distributing the
shareholder's votes on the same principle among any or all of the candidates,
as the shareholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.
2.9 VALIDATION OF MEETINGS: WAIVER OF NOTICE; CONSENT
The transactions of any meeting of shareholders, either annual or
special, however called and noticed, and wherever held, shall be as valid as
though they had been taken at a meeting duly held after regular call and
notice, if a quorum be present either in person or by proxy, and if, either
before or after the meeting, each person entitled to vote, who was not present
in person or by proxy, signs a written waiver of notice or a consent to the
holding of the meeting or an approval of the minutes thereof. The waiver of
notice or consent or approval need not specify either the business to be
transacted or the purpose of
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<PAGE> 9
any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or
consent or approval shall state the general nature of the proposal. All such
waivers, consents, and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be
effective only if signed by the holders of all outstanding shares entitled to
vote for the election of directors. However, a director may be elected at any
time to fill any vacancy on the board of directors, provided that it was not
created by removal of a director and that it has not been filled by the
directors, by the written consent of the holders of a majority of the
outstanding shares entitled to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of
shares required to authorize the proposed action have been filed with the
secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the unanimous written consent of all such
shareholders has not been received, then the secretary shall give prompt notice
of the corporate action
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<PAGE> 10
approved by the shareholders without a meeting. Such notice shall be given to
those shareholders entitled to vote who have not consented in writing and shall
be given in the manner specified in Section 2.5 of these bylaws. In the case
of approval of (i) a contract or transaction in which a director has a direct
or indirect financial interest, pursuant to Section 310 of the Code, (ii)
indemnification of a corporate "agent," pursuant to Section 317 of the Code,
(iii) a reorganization of the corporation, pursuant to Section 1201 of the
Code, and (iv) a distribution in dissolution other than in accordance with the
rights of outstanding preferred shares, pursuant to Section 2007 of the Code,
the notice shall be given at least ten (10) days before the consummation of any
action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled
to notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day on which notice is given
or, if notice is waived, at the close of business on the business day next
preceding the day on which the meeting is held; and
(b) the record date for determining shareholders entitled
to give consent to corporate action in writing without a meeting, (i) when no
prior action by the board has been taken, shall be the day on which the first
written consent is given, or (ii) when prior action by the board has been
taken, shall be at the close of business on the day on which the board adopts
the resolution relating to that action, or the sixtieth (60th) day before the
date of such other action, whichever is later.
The record date for any other purpose shall be as provided in Article
VIII of these bylaws.
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<PAGE> 11
2.12 PROXIES
Every person entitled to vote for directors, or on any other matter,
shall have the right to do so either in person or by one or more agents
authorized by a written proxy signed by the person and filed with the secretary
of the corporation. A proxy shall be deemed signed if the shareholder's name
is placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration
of eleven (11) months from the date of the proxy, unless otherwise provided in
the proxy. The dates contained on the forms of proxy presumptively determine
the order of execution, regardless of the postmark dates on the envelopes in
which they are mailed. The revocability of a proxy that states on its face
that it is irrevocable shall be governed by the provisions of Sections 705(e)
and 705(f) of the Code.
2.13 INSPECTORS OF ELECTION
Before any meeting of shareholders, the board of directors may appoint
an inspector or inspectors of election to act at the meeting or its
adjournment. If no inspector of election is so appointed, then the chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint an inspector or inspectors of election to act at the meeting.
The number of inspectors shall be either one (1) or three (3). If inspectors
are appointed at a meeting pursuant to the request of one (1) or more
shareholders or proxies, then the holders of a majority of shares or their
proxies present at the meeting shall determine whether one (1) or three (3)
inspectors are to be appointed. If any person appointed as inspector fails to
appear or fails or refuses to act, then the chairman of the meeting may, and
upon the request of any shareholder or a shareholder's proxy shall, appoint a
person to fill that vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the
voting power of each, the number of shares represented at the meeting, the
existence of a quorum, and the authenticity, validity, and effect of proxies;
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(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in
any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the
election or vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the Code and any limitations in the
articles of incorporation and these bylaws relating to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation shall be not less than five
(5) nor more than seven (7). The exact number of directors shall be five (5)
until changed, within the limits specified above, by a bylaw amending this
Section 3.2, duly adopted by the board of directors or by the shareholders.
The indefinite number of directors may be changed, or a definite number may be
fixed without provision for an indefinite number, by a duly adopted amendment
to the articles of incorporation or by an amendment to this bylaw duly adopted
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that an amendment reducing the
fixed number or the minimum number of directors to a number less than five (5)
cannot be adopted if the votes cast against its adoption at a meeting, or the
shares not consenting in the case of an action by written consent, are equal to
more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares
entitled to vote thereon. No amendment may change the stated maximum number of
authorized directors to a number greater than two (2) times the stated minimum
number of directors minus one (1).
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No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
Directors shall be elected at each annual meeting of shareholders to
hold office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote
or written consent of the shareholders or by court order may be filled only by
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum), or by the
unanimous written consent of all shares entitled to vote thereon. Each
director so elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist (i) in the event of the death, resignation or removal of any director,
(ii) if the board of directors by resolution declares vacant the office of a
director who has been declared of unsound mind by an order of court or
convicted of a felony, (iii) if the authorized number of directors is
increased, or (iv) if the shareholders fail, at any meeting of shareholders at
which any director or directors are elected, to elect the number of directors
to be elected at that meeting.
The shareholders may elect a director or directors at any time to fill
any vacancy or vacancies not filled by the directors, but any such election
other than to fill a vacancy created by removal, if by written consent, shall
require the consent of the holders of a majority of the outstanding shares
entitled to vote thereon.
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3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
Regular meetings of the board of directors may be held at any place
within or outside the State of California that has been designated from time to
time by resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the
State of California that has been designated in the notice of the meeting or,
if not stated in the notice or if there is no notice, at the principal
executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone
or similar communication equipment, so long as all directors participating in
the meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice
if the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.
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3.8 QUORUM
A majority of the authorized number of directors shall constitute a
quorum for the transaction of business, except to adjourn as provided in
Section 3.10 of these bylaws. Every act or decision done or made by a majority
of the directors present at a duly held meeting at which a quorum is present
shall be regarded as the act of the board of directors, subject to the
provisions of Section 310 of the Code (as to approval of contracts or
transactions in which a director has a direct or indirect material financial
interest), Section 311 of the Code (as to appointment of committees), Section
317(e) of the Code (as to indemnification of directors), the articles of
incorporation, and other applicable law.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 WAIVER OF NOTICE
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
A majority of the directors present, whether or not constituting a
quorum, may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not
be given unless the meeting is adjourned for more than twenty- four (24) hours.
If the meeting is adjourned for more than twenty-four (24) hours, then notice
of the time and place of the adjourned meeting shall be given before the
adjourned meeting takes place, in the manner specified in Section 3.7 of these
bylaws, to the directors who were not present at the time of the adjournment.
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3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors
may be taken without a meeting, provided that all members of the board
individually or collectively consent in writing to that action. Such action by
written consent shall have the same force and effect as a unanimous vote of the
board of directors. Such written consent and any counterparts thereof shall be
filed with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if
any, for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.
3.14 APPROVAL OF LOANS TO OFFICERS*
The corporation may, upon the approval of the board of directors
alone, make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or subsidiary, whether or not a
director, or adopt an employee benefit plan or plans authorizing such loans or
guaranties provided that (i) the board of directors determines that such a loan
or guaranty or plan may reasonably be expected to benefit the corporation, (ii)
the corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by
a vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to
_______________________________
* This section is effective only if it has been approved by the
shareholders in accordance with Sections 315(b) and 152 of the Code.
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serve at the pleasure of the board. The board may designate one (1) or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. The appointment of members or
alternate members of a committee requires the vote of a majority of the
authorized number of directors. Any committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, except with
respect to:
(a) the approval of any action which, under the Code,
also requires shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or
in any committee;
(c) the fixing of compensation of the directors for
serving on the board or any committee;
(d) the amendment or repeal of these bylaws or the
adoption of new bylaws;
(e) the amendment or repeal of any resolution of the
board of directors which by its express terms is not so amendable or
repealable;
(f) a distribution to the shareholders of the
corporation, except at a rate or in a periodic amount or within a price range
determined by the board of directors; or
(g) the appointment of any other committees of the board
of directors or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws,
Section 3.5 (place of meetings), Section 3.6 (regular meetings), Section 3.7
(special meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of
notice), Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and
Section 3.12 (action without meeting), with such changes in the context of
those bylaws as are necessary to substitute the committee and its members for
the board of directors and its members; provided, however, that the time of
regular meetings of committees may be determined either by resolution of the
board of directors or by resolution of the committee, that special meetings of
committees may also be called by resolution of the board of directors, and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee.
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The board of directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Section 5.3 or Section 5.5 of
these bylaws, shall be chosen by the board, subject to the rights, if any, of
an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and
perform such duties as are provided in these bylaws or as the board of
directors may from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
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rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the
board of directors to the chairman of the board, if there be such an officer,
the president shall be the chief executive officer of the corporation and
shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. He shall preside at all meetings of the shareholders and, in the
absence or nonexistence of a chairman of the board, at all meetings of the
board of directors. He shall have the general powers and duties of management
usually vested in the office of president of a corporation, and shall have such
other powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform
all the duties of the president and when so acting shall have all the powers
of, and be subject to all the restrictions upon, the president. The vice
presidents shall have such other powers and perform such other duties as from
time to time may be prescribed for them respectively by the board of directors,
these bylaws, the president or the chairman of the board.
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5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the board of
directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show
the time and place of each meeting, whether regular or special (and, if
special, how authorized and the notice given), the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at shareholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names
of all shareholders and their addresses, the number and classes of shares held
by each, the number and date of certificates evidencing such shares, and the
number and date of cancellation of every certificate surrendered for
cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law
or by these bylaws. He shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or these bylaws.
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ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the Code, indemnify each of its directors and officers against
expenses (as defined in Section 317(a) of the Code), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding (as defined in Section 317(a) of the Code), arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Article VI, a "director" or "officer" of the corporation
includes any person (i) who is or was a director or officer of the corporation,
(ii) who is or was serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was a director or officer of a corporation which was a
predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other
than directors and officers) against expenses (as defined in Section 317(a) of
the Code), judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the Code), arising by reason of the fact that such person is or was
an agent of the corporation. For purposes of this Article VI, an "employee" or
"agent" of the corporation (other than a director or officer) includes any
person (i) who is or was an employee or agent of the corporation, (ii) who is
or was serving at the request of the corporation as an employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was an employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.
6.3 PAYMENT OF EXPENSES IN ADVANCE
Expenses incurred in defending any civil or criminal action or
proceeding for which indemnification is required pursuant to Section 6.1 or for
which indemnification is permitted pursuant to Section 6.2 following
authorization thereof by the Board of Directors shall be paid by the
corporation in advance of the
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final disposition of such action or proceeding upon receipt of an undertaking
by or on behalf of the indemnified party to repay such amount if it shall
ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Articles of
Incorporation.
6.5 INSURANCE INDEMNIFICATION
The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation against any liability asserted against or incurred
by such person in such capacity or arising out of such person's status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
6.6 CONFLICTS
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(1) That it would be inconsistent with a provision of the Articles
of Incorporation, these bylaws, a resolution of the shareholders or an
agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.
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ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
The corporation shall keep either at its principal executive office or
at the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its
shareholders listing the names and addresses of all shareholders and the number
and class of shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least
five percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and
has filed a Schedule 14B with the Securities and Exchange Commission relating
to the election of directors, may (i)inspect and copy the records of
shareholders' names, addresses, and shareholdings during usual business hours
on five (5) days' prior written demand on the corporation, (ii) obtain from the
transfer agent of the corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the names and addresses
of the shareholders who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. Such list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or five (5) days after the date specified in the demand as the date as
of which the list is to be compiled.
The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate.
Any inspection and copying under this Section 7.1 may be made in
person or by an agent or attorney of the shareholder or holder of a voting
trust certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
The corporation shall keep at its principal executive office or, if
its principal executive office is not in the State of California, at its
principal business office in California the original or a copy of these bylaws
as amended to date, which bylaws shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive
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office of the corporation is outside the State of California and the
corporation has no principal business office in such state, then the secretary
shall, upon the written request of any shareholder, furnish to that shareholder
a copy of these bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
form, and the accounting books and records shall be kept either in written form
or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to
inspection upon the written demand of any shareholder or holder of a voting
trust certificate, at any reasonable time during usual business hours, for a
purpose reasonably related to the holder's interests as a shareholder or as the
holder of a voting trust certificate. The inspection may be made in person or
by an agent or attorney and shall include the right to copy and make extracts.
Such rights of inspection shall extend to the records of each subsidiary
corporation of the corporation.
7.4 INSPECTION BY DIRECTORS
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal
year and in the manner specified in Section 2.5 of these bylaws for giving
notice to shareholders of the corporation.
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The annual report shall contain (i) a balance sheet as of the end of
the fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.
The foregoing requirement of an annual report shall be waived so long
as the shares of the corporation are held by fewer than one hundred (100)
holders of record.
7.6 FINANCIAL STATEMENTS
If no annual report for the fiscal year has been sent to shareholders,
then the corporation shall, upon the written request of any shareholder made
more than one hundred twenty (120) days after the close of such fiscal year,
deliver or mail to the person making the request, within thirty (30) days
thereafter, a copy of a balance sheet as of the end of such fiscal year and an
income statement and statement of changes in financial position for such fiscal
year.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
chief financial officer, the secretary or
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assistant secretary of this corporation, or any other person authorized by the
board of directors or the president or a vice president, is authorized to vote,
represent, and exercise on behalf of this corporation all rights incident to
any and all shares of any other corporation or corporations standing in the
name of this corporation. The authority herein granted may be exercised either
by such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by such person having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the shareholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a
meeting), the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days before any such action. In that case,
only shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except
as otherwise provided in the Code.
If the board of directors does not so fix a record date, then the
record date for determining shareholders for any such purpose shall be at the
close of business on the day on which the board adopts the applicable
resolution or the sixtieth (60th) day before the date of that action, whichever
is later.
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts,
other orders for payment of money, notes or other evidences of indebtedness
that are issued in the name of or payable to the corporation, and only the
persons so authorized shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in
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the name of and on behalf of the corporation; such authority may be general or
confined to specific instances. Unless so authorized or ratified by the board
of directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
8.4 CERTIFICATES FOR SHARES
A certificate or certificates for shares of the corporation shall be
issued to each shareholder when any of such shares are fully paid. The board
of directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice
president and by the chief financial officer or an assistant treasurer or the
secretary or an assistant secretary, certifying the number of shares and the
class or series of shares owned by the shareholder. Any or all of the
signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed on a certificate ceases to be that
officer, transfer agent or registrar before that certificate is issued, it may
be issued by the corporation with the same effect as if that person were an
officer, transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
8.6 CONSTRUCTION: DEFINITIONS
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Code
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shall govern the construction of these bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
ARTICLE IX
AMENDMENTS
9.1 AMENDMENT BY SHAREHOLDERS
New bylaws may be adopted or these bylaws may be amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote; provided, however, that if the articles of
incorporation of the corporation set forth the number of authorized directors
of the corporation, then the authorized number of directors may be changed only
by an amendment of the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
Subject to the rights of the shareholders as provided in Section 9.1
of these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing
the authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors),
may be adopted, amended or repealed by the board of directors.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
IMMUSOL, INC.
Adoption by Incorporator
The undersigned person appointed in the Articles of Incorporation to
act as the Incorporator of Immusol, Inc. hereby adopts the foregoing bylaws,
comprising twenty-five (25) pages, as the Bylaws of the corporation.
Executed this 6th day of March, 1992.
/s/ Christopher D. Mitchell
______________________________________
Christopher D. Mitchell
Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected,
qualified, and acting Secretary of Immusol, Inc. and that the foregoing Bylaws,
comprising twenty-five (25) pages, were adopted as the Bylaws of the
corporation on March 6, 1992, by the person appointed in the Articles of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and
affixed the corporate seal this 6th day of March, 1992.
/s/ J. Casey McGlynn
___________________________________
J. Casey McGlynn
Secretary
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EXHIBIT 3.4
AMENDED AND RESTATED
BYLAWS
OF
IMMUSOL, INC.
ARTICLE I.
OFFICES
Section 1. - Principal Offices. The board of directors shall fix the
location of the principal executive office of the corporation at any place
within or outside the State of California. If the principal executive office
is located outside this state, and the corporation has one or more business
offices in this state, the board of directors shall fix and designate a
principal business office in the State of California.
Section 2. - Other Offices. The board of directors may at any time
establish branch or subordinate offices at any place or places where the
corporation is qualified to do business.
ARTICLE II.
MEETINGS OF SHAREHOLDERS
Section 1. - Place of Meetings. Meetings of shareholders shall be
held at any place within or outside the State of California designated by the
board of directors. In the absence of any such designation, shareholders'
meetings shall be held at the principal executive office of the corporation.
Section 2. - Annual Meetings of Shareholders.
(a) The annual meeting of shareholders shall be held each year on
a date and at a time designated by the board of directors. At each annual
meeting directors shall be elected and any other proper business may be
transacted.
(b) At an annual meeting of the shareholders, only such business
shall be conducted as shall have been properly brought before the meeting. To
be properly brought before an annual meeting, business must be: (A) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (B) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (C) otherwise
properly brought before the meeting by a shareholder. For business to be
properly brought before an annual meeting by a shareholder, the shareholder
must have
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given timely notice thereof in writing to the secretary of the corporation. To
be timely, a shareholder's notice must be delivered to or mailed and received
at the principal executive offices of the corporation not less than one hundred
twenty (120) calendar days in advance of the date specified in the
corporation's proxy statement released to shareholders in connection with the
previous year's annual meeting of shareholders; provided, however, that in the
event that no annual meeting was held in the previous year or the date of the
annual meeting has been changed by more than thirty (30) days from the date
contemplated at the time of the previous year's proxy statement, notice by the
shareholder to be timely must be so received a reasonable time before the
solicitation is made. A shareholder's notice to the secretary shall set forth
as to each matter the shareholder proposes to bring before the annual meeting:
(i) a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting,
(ii) the name and address, as they appear on the corporation's books, of the
shareholder proposing such business, (iii) the class and number of shares of
the corporation which are beneficially owned by the shareholder, (iv) any
material interest of the shareholder in such business and (v) any other
information that is required to be provided by the shareholder pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the "1934
Act"), in his capacity as a proponent to a shareholder proposal.
Notwithstanding the foregoing, in order to include information with respect to
a shareholder proposal in the proxy statement and form of proxy for a
shareholders' meeting, shareholders must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this paragraph (b), and, if he
should so determine, he shall so declare at the meeting that any such business
not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the board of directors of
the corporation may be made at a meeting of shareholders by or at the direction
of the board of directors or by any shareholder of the corporation entitled to
vote in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the board of directors, shall be made pursuant
to timely notice in writing to the secretary of the corporation in accordance
with the provisions of paragraph (b) of this Section 2. Timely notice shall
also be given of any shareholder's intention to cumulate votes in the election
of directors at a meeting if cumulative voting is available. Such
shareholder's notice shall set forth (i) as to each person, if any, whom the
shareholder proposes to nominate for election or re-election as a director:
(A) the name, age, business address and residence address of such person, (B)
the principal occupation or employment of such person, (C) the class and number
of shares of the corporation which are beneficially owned by such person, (D) a
description of all arrangements or
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understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are
to be made by the shareholder and (E) any other information relating to such
person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the 1934 Act (including without limitation such person's
written consent to being named in the proxy statement, if any, as a nominee and
to serving as a director if elected); and (ii) as to such shareholder giving
notice, the information required to be provided pursuant to paragraph (b) of
this Section 2 and, if cumulative voting is available to such shareholder,
whether such shareholder intends to request cumulative voting in the election
of directors at the meeting. At the request of the board of directors, any
person nominated by a shareholder for election as a director shall furnish to
the Secretary of the corporation that information required to be set forth in
the shareholder's notice of nomination which pertains to the nominee. No
person shall be eligible for election as a director of the corporation unless
nominated in accordance with the procedures set forth in this paragraph (c).
The chairman of the meeting shall, if the facts warrant, determine and declare
at the meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he should so determine, he shall so declare
at the meeting, and the defective nomination shall be disregarded.
Section 3. - Special Meeting. A special meeting of the shareholders
may be called at any time by the board of directors, or by the chairman of the
board, or by the president, or by one or more shareholders holding shares in
the aggregate entitled to cast not less than ten percent (10%) of the votes at
that meeting.
Section 4. - Notice of Shareholders' Meetings. All notices of
meetings of shareholders shall be sent or otherwise given in accordance with
Section 5 of this Article II not less than ten (10) nor more than sixty (60)
days before the date of the meeting. The notice shall specify the place, date
and hour of the meeting and (a) in the case of a special meeting, the general
nature of the business to be transacted, or (b) in the case of the annual
meeting, those matters which the board of directors, at the time of giving the
notice, intends to present for action by the shareholders. The notice of any
meeting at which directors are to be elected shall include the name of any
nominee or nominees whom, at the time of the notice, management intends to
present for election.
If action is proposed to be taken at any meeting for approval of (A) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California, (B)
an amendment of the articles of incorporation, pursuant to Section 902 of that
Code, (C) a reorganization of the corporation, pursuant to Section 1201 of that
Code, (D) a voluntary dissolution of the corporation, pursuant to Section 1900
of that Code, or (E) a distribution in dissolution other than in accordance
with the rights of outstanding preferred shares, pursuant to Section 2007 of
that Code, the notice shall also state the general nature of that proposal.
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Section 5. - Manner of Giving Notice; Affidavit of Notice. Notice of
any meeting of shareholders shall be given either personally or by first-class
mail or telegraphic or other written communication, charges prepaid, addressed
to the shareholder at the address of that shareholder appearing on the books of
the corporation or given by the shareholder to the corporation for the purpose
of notice. If no such address appears on the corporation's books or is given,
notice shall be deemed to have been given if sent to that shareholder by
first-class mail or telegraphic or other written communication to the
corporation's principal executive office, or if published at least once in a
newspaper of general circulation in the county where that office is located.
Notice shall be deemed to have been given at the time when delivered personally
or deposited in the mail or sent by telegraph or other means of written
communication.
If any notice addressed to a shareholder at the address of that
shareholder appearing on the books of the corporation is returned to the
corporation by the United States Postal Service marked to indicate that the
United States Postal Service is unable to deliver the notice to the shareholder
at that address, all future notices or reports shall be deemed to have been
duly given without further mailing if these shall be available to the
shareholder on written demand of the shareholder at the principal executive
office of the corporation for a period of one year from the date of giving of
the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting shall be executed by the secretary, assistant secretary
or any transfer agent of the corporation giving the notice, and shall be filed
and maintained in the minute book of the corporation.
Section 6. - Quorum. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at any meeting of
shareholders shall constitute a quorum for the transaction of business. The
shareholders present at a duly called or held meeting at which a quorum is
present may continue to do business until adjournment, notwithstanding the
withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum.
Section 7. - Adjourned Meeting; Notice. Any shareholders' meeting,
annual or special whether or not a quorum is present, may be adjourned from
time to time by the vote of the majority of the shares represented at that
meeting, either in person or by proxy, but in the absence of a quorum, no other
business may be transacted at that meeting, except as provided in Section 6 of
this Article II.
When any meeting of shareholders, either annual or special, is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place are announced at a meeting at which the
adjournment is taken, unless a new record date for the adjourned meeting is
fixed, or unless the adjournment is for more than forty-five (45) days
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from the date set for the original meeting, in which cases the board of
directors shall set a new record date. Notice of any such adjourned meeting
shall be given to each shareholder of record entitled to vote at the adjourned
meeting in accordance with the provisions of Section 4 and 5 of this Article
II. At any adjourned meeting the corporation may transact any business which
might have been transacted at the original meeting.
Section 8. - Voting. The shareholders entitled to vote at any meeting
of shareholders shall be determined in accordance with the provisions of
Section 11 of this Article II, subject to the provisions of Sections 702 to
704, inclusive, of the California General Corporation Law (relating to voting
shares held by a fiduciary, in the name of a corporation or in joint
ownership). The shareholders' vote may be by voice vote or by ballot;
provided, however, that any election for directors must be by ballot if
demanded by any shareholder before the voting has begun. On any matter other
than elections of directors, any shareholder may vote part of the shares in
favor of the proposal and refrain from voting the remaining shares or vote them
against the proposal, but, if the shareholder fails to specify the number of
shares which the shareholder is voting affirmatively, it will be conclusively
presumed that the shareholder's approving vote is with respect to all shares
that the shareholder is entitled to vote. If a quorum is present, the
affirmative vote of the majority of the shares represented at the meeting and
entitled to vote on any matter (other than the election of directors) shall be
the act of the shareholders, unless the vote of a greater number or voting by
classes is required by California General Corporation Law or by the articles of
incorporation.
Prior to the Record Date (as defined below), at a shareholders'
meeting at which directors are to be elected, no shareholder shall be entitled
to cumulate votes (i.e., cast for any one or more candidates a number of votes
greater than the number of the shareholder's shares) unless the candidates'
names have been placed in nomination prior to commencement of the voting and a
shareholder has given notice prior to commencement of the voting of the
shareholder's intention to cumulate votes. If any shareholder has given such a
notice, then every shareholder entitled to vote may cumulate votes for
candidates in nomination and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
that shareholder's shares are entitled, or distribute the shareholder's votes
on the same principle among any or all of the candidates, as the shareholder
thinks fit. The candidates receiving the highest number of votes, up to the
number of directors to be elected, shall be elected.
The election of directors by the shareholders shall not be by
cumulative voting. At each election of directors, each shareholder entitled to
vote may vote all the shares held by that shareholder for each of the several
nominees for director up to the number of directors to be elected. The
shareholder may not cast more votes for any single nominee than the number of
shares held by that shareholder. This paragraph shall become effective only
when the corporation becomes a "listed corporation" within the meaning of
Section 301.5 of the California General Corporation Law (the "Record Date").
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Section 9. - Waiver of Notice or Consent by Absent Shareholders. The
transactions of any meeting of shareholders, either annual or special, however
called and noticed, and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to a holding of the meeting, or an approval of
the minutes. The waiver of notice or consent need not specify either the
business to be transacted or the purpose of any annual or special meeting of
shareholders, except that if action is taken or proposed to be taken for
approval of any of those matters specified in the second paragraph of Section 4
of this Article II, the waiver of notice or consent shall state the general
nature of the proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object to the consideration of matters not included in the notice
of the meeting if that objection is expressly made at the meeting.
Section 10. - Shareholder Action By Written Consent Without a Meeting.
No action shall be taken by the shareholders of the corporation except at an
annual or special meeting of the shareholders called in accordance with these
Bylaws, and no action shall be taken by the shareholders by written consent.
Section 11. - Record Date for Shareholder Notice and Voting. For
purposes of determining the shareholders entitled to notice of or to vote at
any meeting, the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days nor less than ten (10) days before the
date of any such meeting, and in this event only shareholders of record on the
date so fixed are entitled to notice and to vote, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date, except as otherwise provided in the California General
Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining shareholders entitled to notice of or to vote at a meeting
of shareholders shall be at the close of business on the business day next
preceding the day on which notice is given or, if notice is waived, at the
close of business on the business day next preceding the day on which the
meeting is held.
Section 12. - Proxies. Every person entitled to vote for directors or
on any other matter shall have the right to do so either in person or by one or
more agents authorized by a written proxy signed by the person and filed with
the secretary of the corporation. A proxy shall be deemed signed if the
shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or
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the shareholder's attorney-in-fact. A validly executed proxy which does not
state that it is irrevocable shall continue in full force and effect unless (a)
revoked by the person executing it, before the vote pursuant to that proxy, by
a writing delivered to the corporation stating that the proxy is revoked, or by
a subsequent proxy executed by, or attendance at the meeting and voting in
person by, the person executing the proxy; or (b) written notice of the death
or incapacity of the maker of that proxy is received by the corporation before
the vote pursuant to that proxy is counted; provided, however, that no proxy
shall be valid after the expiration of eleven (11) months from the date of the
proxy, unless otherwise provided in the proxy. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Sections 705(e) and 705(f) of the California General Corporations
Law.
Section 13. - Inspectors of Election. Before any meeting of
shareholders, the board of directors may appoint any persons other than
nominees for office to act as inspectors of election at the meeting or its
adjournment. If no inspectors of election are so appointed, the chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be either one (1) or three (3). If inspectors are appointed at a meeting
on the request of one or more shareholders or proxies, the holders of a
majority of shares or their proxies present at the meeting shall determine
whether one (1) or three (3) inspectors are to be appointed. If any person
appointed as inspector fails to appear or fails or refuses to act, the chairman
of the meeting may, and upon the request of any shareholder or a shareholder's
proxy shall, appoint a person to fill that vacancy.
These inspectors shall: (a) determine the number of shares
outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, and the authenticity, validity, and effect
of proxies; (b) receive votes, ballots or consents; (c) hear and determine all
challenges and questions in any way arising in connection with the right to
vote; (d) count and tabulate all votes or consents; (e) determine when the
polls shall close; (f) determine the result; and (g) do any other acts that may
be proper to conduct the election or vote with fairness to all shareholders.
ARTICLE III.
DIRECTORS
Section 1. - Powers. Subject to the provisions of the California
General Corporation Law and any limitations in the articles of incorporation
and these Bylaws relating to action required to be approved by the shareholders
or by the outstanding shares, the business and affairs of the corporation shall
be managed and all corporate powers shall be exercised by or under the
direction of the board of directors.
Section 2. - Number and Qualification of Directors. The authorized
number of
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directors shall not be less than five (5) nor more than nine (9) until changed
by amendment of the articles of incorporation or by a bylaw amending this
Section 2 duly adopted by the vote of holders of a majority of the outstanding
shares entitled to vote or by the Board of Directors, provided that a proposal
to reduce the authorized number or the minimum number of directors below five
(5) cannot be adopted if the votes cast against its adoption at a meeting are
equal to more than 16-2/3 percent of the outstanding shares entitled to vote.
The exact number of directors shall be fixed from time to time, within the
limits specified in the articles of incorporation or in this Section 2, by a
bylaw or amendment thereof duly adopted by the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present or by the board of directors.
Subject to the foregoing provisions for changing the number of
directors, the number of directors of this corporation has been fixed at five
(5).
Section 3. - Vacancies. Any vacancies on the board of directors
resulting from death, resignation, disqualification, removal or other causes
shall be filled by either (i) the affirmative vote of the holders of a majority
of the outstanding shares entitled to vote; or (ii) by the affirmative vote of
a majority of the remaining directors then in office, even though less than a
quorum of the board of directors.
Newly created directorships resulting from any increase in the number
of directors shall, unless the board of directors determines by resolution that
any such newly created directorship shall be filled by the shareholders, be
filled only by the affirmative vote of a majority of the directors then in
office, even though less than a quorum of the board of directors. Any director
elected in accordance with the preceding sentence shall hold office until such
director's successor shall have been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to
exist in the event of the death, resignation or removal of any director, or if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, or if the authorized number of directors is increased, or if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be voted for at that
meeting.
Any director may resign effective on giving written notice to the
chairman of the board, the president, the secretary or the board of directors,
unless the notice specifies a later time for that resignation to become
effective. If the resignation of a director is effective at a future time, the
board of directors may elect a successor to take office when the resignation
becomes effective.
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office expires.
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Section 4. - Place of Meetings and Meetings by Telephone. Regular
meetings of the board of directors may be held at any place within or outside
of the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board shall be held at any place within or outside the
State of California that has been designated in the notice of the meeting or,
if not stated in the notice or there is no notice, at the principal executive
office of the corporation. Any meeting, regular or special, may be held by
conference telephone or similar communication equipment, so long as all
directors participating in the meeting can hear one another, and all such
directors shall be deemed to be present in person at the meeting.
Section 5. - Annual Meeting. Immediately following each annual
meeting of shareholders, the board of directors shall hold a regular meeting
for the purpose of organization, any desired election of officers and the
transaction of other business. Notice of this meeting shall not be required.
Section 6. - Other Regular Meetings. Other regular meetings of the
board of directors shall be held without call at such time as shall from time
to time be fixed by the board of directors. Such regular meetings may be held
without notice.
Section 7. - Special Meetings. Special meetings of the board of
directors for any purpose or purposes may be called at any time by the chairman
of the board or the president or any vice president or secretary or any two
directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. In case the notice
is mailed, it shall be deposited in the United States mail at least four (4)
days before the time of the holding of the meeting. In case the notice is
delivered personally or by telephone or telegram, it shall be delivered
personally or by telephone or to the telegraph company at least forty-eight
(48) hours before the time of the holding of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director or
to a person at the office of the director who the person giving the notice has
reason to believe will promptly communicate it to the director. The notice
need not specify the purpose of the meeting nor the place if the meeting is to
be held at the principal executive office of the corporation.
Section 8. - Quorum. A majority of the authorized number of directors
shall constitute a quorum for the transaction of business, except to adjourn as
provided in Section 10 of this Article III. Every act or decision done or made
by a majority of the directors present at a meeting duly held at which a quorum
is present shall be regarded as the act of the board of directors, subject to
the provisions of Section 310 of the California General Corporations Law (as to
approval of contracts or transactions in which a director has a
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direct or indirect material financial interest), Section 311 of that Code (as
to appointment of committees) and Section 317(e) of that Code (as to
indemnification of directors). A meeting at which a quorum is initially
present may continue to transact business notwithstanding the withdrawal of
directors, if any action taken is approved by at least a majority of the
required quorum for that meeting.
Section 9. - Waiver of Notice. The transaction of any meeting of the
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present and if, either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding
the meeting or an approval of the minutes. The waiver of notice or consent
need not specify the purpose of the meeting. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting. Notice of a meeting shall also be deemed given to any
director who attends the meeting without protesting, before or at its
commencement, the lack of notice to that director.
Section 10. - Adjournment. A majority of the directors present,
whether or not constituting a quorum, may adjourn any meeting to another time
and place.
Section 11. - Notice of Adjournment. Notice of the time and place of
holding an adjourned meeting need not be given, unless the meeting is adjourned
for more than twenty-four (24) hours, in which case notice of the time and
place shall be given before the time of the adjourned meeting, in the manner
specified in Section 7 of this Article III, to the directors who were not
present at the time of the adjournment.
Section 12. - Action Without Meeting. Any action required or
permitted to be taken by the board of directors may be taken without a meeting,
if all members of the board shall individually or collectively consent in
writing to that action. Such action by written consent shall have the same
force and effect as a unanimous vote of the board of directors. Such written
consent or consents shall be filed with the minutes of the proceedings of the
board.
Section 13. - Fees and Compensation of Directors. Directors and
members of committees may receive such compensation, if any, for their
services, and such reimbursement of expenses, as may be fixed or determined by
resolution of the board of directors. This Section 13 shall not be construed
to preclude any director from serving the corporation in any other capacity as
an officer, agent, employee or otherwise, and receiving compensation for those
services.
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ARTICLE IV.
COMMITTEES
Section 1. - Committees of Directors. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate one or more committees, each consisting of two or more directors, to
serve at the pleasure of the board. The board may designate one or more
directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Any committee, to the extent provided
in the resolution of the board, shall have all the authority of the board,
except with respect to:
(a) the approval of any action which, under the California General
Corporation Law, also requires shareholders' approval or approval of the
outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by it express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except
at a rate or in a periodic amount or within a price range determined by the
board of directors; or
(g) the appointment of any other committees of the board of
directors or the members of these committees.
Section 2. - Meetings and Action of Committees. Meetings and action
of committees shall be governed by, and held and taken in accordance with, the
provisions of Article III of these bylaws, and specifically, Sections 4 (place
of meetings), 6 (regular meetings), 7 (special meetings and notice), 8
(quorum), 9 (waiver of notice), 10 (adjournment), 11 (notice of adjournment)
and 12 (action without meeting), with such changes in the context of those
bylaws as are necessary to substitute the committee and its members for the
board of directors and its members, except that the time of regular meetings of
committees may be determined either by resolution of the board of directors or
by resolution of the committee; special meetings of committees may also be
called by resolution of the board of directors; and notice of special meetings
of committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The board of directors may
adopt rules for the government of any committee
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not inconsistent with the provisions of these bylaws.
ARTICLE V.
OFFICERS
Section 1. - Officers. The officers of the corporation shall be a
chairman of the board or president, a secretary and a chief financial officer.
The corporation may also have, at the discretion of the board of directors, a
chairman of the board, one or more vice presidents, one or more assistant
secretaries, one or more assistant treasurers and such other officers as may be
appointed in accordance with the provisions of Section 3 of this Article V.
Any number of offices may be held by the same person.
Section 2. - Election of Officers. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 5 of this Article V, shall be chosen by the board of
directors, and each shall serve at the pleasure of the board, subject to the
rights, if any, of an officer under any contract of employment.
Section 3. - Subordinate Officers. The board of directors may
appoint, and may empower the president to appoint, such other officers as the
business of the corporation may require, each of whom shall hold office for
such period, have such authority and perform such duties as are provided in the
bylaws or as the board of directors may from time to time determine.
Section 4. - Removal and Resignation of Officers. Subject to the
rights, if any, of an officer under any contract of employment, any officer may
be removed, either with or without cause, by the board of directors, at any
regular or special meeting of the board, or, except in case of an officer
chosen by the board of directors, by an officer upon whom such power of removal
may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
Section 5. - Vacancies In Offices. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be
filled in the manner prescribed in these bylaws for regular appointments to
that office.
Section 6. - Chairman Of The Board. The chairman of the board, if
such an officer
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be elected, shall, if present, preside at meetings of the board of directors
and exercise and perform such other powers and duties as may be from time to
time assigned to him by the board of directors or prescribed by the bylaws. If
there is no president, the chairman of the board shall in addition be the chief
executive officer of the corporation and shall have the powers and duties
prescribed in Section 7 of this Article V.
Section 7. - President. Subject to such supervisory powers, if any,
as may be given by the board of directors to the chairman of the board, if
there be such an officer, the president shall be the chief executive officer of
the corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and the
officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence of the chairman of the board, or if there be
none, at all meetings of the board of directors. He shall have the general
powers and duties of management usually vested in the office of president of a
corporation, and shall have such other powers and duties as may be prescribed
by the board of directors or the bylaws.
Section 8. - Vice Presidents. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
board of directors or, if not ranked, a vice president designated by the board
of directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by
the board of directors or the bylaws, and the president or the chairman of the
board.
Section 9. - Secretary. The secretary shall keep or cause to be kept,
at the principal executive office or such other place as the board of directors
may direct, a book of minutes of all meetings and actions of directors,
committees of directors and shareholders, with the time and place of holding,
whether regular or special, and, if special, how authorized, the notice given,
the names of those present at directors' meetings or committee meetings, the
number of shares present or represented at shareholders' meetings and the
proceedings.
The secretary shall keep, or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates issued for the same and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required by the bylaws or by
law to be given, and he shall keep the seal of the corporation if one be
adopted, in safe custody, and shall have such other powers and perform such
other duties as may be prescribed by the board of directors or by the bylaws.
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Section 10. - Chief Financial Officer. The chief financial officer
shall keep and maintain, or cause to be kept and maintained, adequate and
correct books and records of accounts of the properties and business
transactions of the corporation, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, retained earnings and shares.
The books of account shall at all reasonable times be open to inspection by any
director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositaries as may be designated by the board of directors. He shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the president and directors, whenever they request it, an account of
all of his transactions as chief financial officer and of the financial
condition of the corporation, and shall have other powers and perform such
other duties as may be prescribed by the board of directors or the bylaws.
ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS
EMPLOYEES AND OTHER AGENTS
The corporation shall have power to indemnify any person who is or was
an agent of the corporation as provided in Section 317 of the California
General Corporation Law. The indemnification provided by this Section shall
not be deemed exclusive of any rights to which those seeking indemnification
may be entitled under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, both as to action in an official capacity
and as to action in another capacity while holding such office, to the extent
such additional rights to indemnification are authorized in the articles of
incorporation of the corporation. The rights to indemnity hereunder shall
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.
Expenses incurred by a director of the corporation in defending a
civil or criminal action, suit or proceeding by reason of the fact that he is
or was a director of the corporation (or was serving at the corporation's
request as a director or officer of another corporation) shall be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified by the corporation as authorized by relevant sections of the
California General Corporation Law.
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ARTICLE VII.
RECORDS AND REPORTS
Section 1. - Maintenance and Inspection of Share Register. The
corporation shall keep at its principal executive office, or at the office of
its transfer agent or registrar, if either be appointed and as determined by
resolution of the board of directors, a record of its shareholders, giving the
names and addresses of all shareholders and the number of classes of shares
held by each shareholder.
A shareholder or shareholders of the corporation holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation may (a) inspect and copy the records of shareholders' names and
addresses and shareholdings during usual business hours on five (5) days prior
written demand on the corporation, and (b) obtain from the transfer agent of
the corporation, on written demand and on the tender of such, shareholders'
names and addresses who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. This list shall be made available to any shareholder by the transfer
agent on or before the later of five (5) days after the demand is received or
the date specified in the demand as the date as of which the list is to be
compiled. The record of shareholders shall also be open to inspection on the
written demand of any shareholder or holder of a voting trust certificate, at
any time during usual business hours, for a purpose reasonably related to the
holder's interests as a shareholder or as the holder of a voting trust
certificate. Any inspection and copying under this Section 1 may be made in
person or by an agent or attorney for the shareholder or holder of a voting
trust certificate making the demand.
Section 2. - Maintenance and Inspection of Bylaws. The corporation
shall keep at its principal executive office, or if its principal executive
office is not in the State of California, at its principal business office in
this state, the original or a copy of the bylaws as amended to date, which
shall be open to inspection by the shareholders at all reasonable times during
office hours. If the principal executive office of the corporation is outside
the State of California and the corporation has no principal business office in
this state, the Secretary shall, upon the written request of any shareholder,
furnish to that shareholder a copy of the bylaws as amended to date.
Section 3. - Maintenance and Inspection of Other Corporate Records.
The accounting books and records and minutes of proceedings of the shareholders
and the board of directors and any committee or committees of the board of
directors shall be kept at such place or places designated by the board of
directors, or, in the absence of such designation, at the principal executive
office of the corporation. The minutes shall be kept in written form and the
accounting books and records shall be kept either in written form or in any
other form capable of being converted into written form. The minutes and
accounting books and records shall be open to inspection upon the written
demand of any shareholder or holder of a voting trust certificate, at any
reasonable time during usual business hours,
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for a purpose reasonably related to the holder's interests as a shareholder or
as the holder of a voting trust certificate. The inspection may be made in
person or by an agent or attorney, and shall include the right to copy and make
extracts. These rights of inspection shall extend to the records of each
subsidiary corporation of the corporation.
Section 4. - Inspection by Directors. Every director shall have the
absolute right at any reasonable time to inspect all books, records and
documents of every kind and the physical properties of the corporation and each
of its subsidiary corporations. This inspection by a director may be made in
person or by an agent or attorney and the right of inspection includes the
right to copy and make extracts of documents.
Section 5. - Annual Report to Shareholders. The annual report to
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly dispensed with, but nothing herein shall be interpreted as
prohibiting the board of directors from issuing annual or other periodic
reports to the shareholders of the corporation as they consider appropriate.
Section 6. - Financial Statements. A copy of any annual financial
statement and any income statement of the corporation for each quarterly period
of each fiscal year, and any accompanying balance sheet of the corporation as
of the end of each such period, that has been prepared by the corporation shall
be kept on file in the principal executive office of the corporation for twelve
(12) months and each such statement shall be exhibited at all reasonable times
to any shareholder demanding an examination of any such statement or a copy
shall be mailed to any such shareholder.
If a shareholder or shareholders holding at least five percent (5%) of
the outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month, or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and a balance
sheet of the corporation as of the end of that period, the chief financial
officer shall cause that statement to be prepared, if not already prepared, and
shall deliver personally or mail that statement or statements to the person
making the request within thirty (30) days after the receipt of the request.
If the corporation has not sent to the shareholders its annual report for the
last fiscal year, this report shall likewise be delivered or mailed to the
shareholder or shareholders within sixty (60) days after the request.
The corporation shall also, on the written request of any shareholder,
mail to the shareholder a copy of the last annual, semi-annual or quarterly
income statement which it has prepared, and a balance sheet as of the end of
that period.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or the certificate of an authorized
officer of the corporation that the financial
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statements were prepared without audit from the books and records of the
corporation.
Section 7. - Annual Statement of General Information. The corporation
shall, by the end of the calendar month of the anniversary date of its
incorporation of each year, file with the Secretary of State of the State of
California, on the prescribed form, a statement setting forth the authorized
number of directors, the names and complete business or residence addresses of
all incumbent directors, the names and complete business or residence addresses
of the chief executive officer, secretary and chief financial officer, the
street address of its principal executive officer, the street address of its
principal office or principal business office in this state, and the general
type of business constituting the principal business activity of the
corporation, together with a designation of the agent of the corporation for
the purpose of service of process, all in compliance with Section 1502 of the
California General Corporation Law.
ARTICLE VIII.
GENERAL CORPORATE MATTERS
Section 1. - Record Date for Purposes Other Than Notice and Voting.
For purposes of determining the shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, the board of
directors may fix, in advance, a record date, which shall not be more than
sixty (60) days before any such action, and in that case only shareholders of
record on the date so fixed are entitled to receive the dividend, distribution
or allotment, or rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation
after the record date so fixed, except as otherwise provided in the California
General Corporation Law.
If the board of directors does not so fix a record date, the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
Section 2. - Checks, Drafts, Evidences of Indebtedness. All checks,
drafts or other orders for payment of money, notes or other evidences of
indebtedness, issued in the name of or payable to the corporation, shall be
signed or endorsed by such person or persons and in such manner as from time to
time shall be determined by resolution of the board of directors.
Section 3. - Corporate Contracts and Instruments; How Executed. The
board of directors, except as otherwise provided in these bylaws, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of
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and on behalf of the corporation, and this authority may be general or confined
to specific instances; and, unless so authorized or ratified by the board of
directors or within the agency power of an officer, no officer, agent or
employee shall have any power or authority to bind the corporation by any
contract or engagement or to pledge its credit or to render it liable for any
purpose or for any amount.
Section 4. - Certificate for Shares. A certificate or certificates
for shares of the capital stock of the corporation shall be issued to each
shareholder when any of these shares are fully paid, and the board of directors
may authorize the issuance of certificates or shares as partly paid provided
that these certificates shall state the amount of consideration to be paid for
them and the amount paid. All certificates shall be signed in the name of the
corporation by the chairman of the board or vice chairman of the board or the
president or vice president and by the chief financial officer or an assistant
treasurer or the secretary or any assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any or all
of the signatures on the certificate may be facsimile. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has
been placed on a certificate shall have ceased to be that officer, transfer
agent or registrar before that certificate is issued, it may be issued by the
corporation with the same effect as if that person were an officer, transfer
agent or registrar at the date of issue.
Section 5. - Lost Certificates. Except as provided in this Section 5,
no new certificates for shares shall be issued to replace an old certificate
unless the latter is surrendered to the corporation and cancelled at the same
time. The board of directors may, in case any share certificate or certificate
for any other security is lost, stolen or destroyed, authorize the issuance of
a replacement certificate on such terms and conditions as the board may
require, including provision for indemnification of the corporation secured by
a bond or other adequate security sufficient to protect the corporation against
any claim that may be made against it, including any expense or liability, on
account of the alleged loss, theft or destruction of the certificate or the
issuance of the replacement certificate.
Section 6. - Representation of Shares of Other Corporations. The
chairman of the board, the president or any vice president, or any other person
authorized by resolution of the board of directors or by any of the foregoing
designated officers, is authorized to vote on behalf of the corporation any and
all shares of any other corporation or corporations, foreign or domestic,
standing in the name of the corporation. The authority granted to these
officers to vote or represent on behalf of the corporation any and all shares
held by the corporation in any other corporation or corporations may be
exercised by any of these officers in person or by any person authorized to do
so by a proxy duly executed by these officers.
Section 7. - Construction and Definitions. Unless the context
requires otherwise, the general provision, rules of construction and
definitions in the California General Corporation Law shall govern the
construction of these bylaws. Without limiting the
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generality of this provision, the singular number includes the plural, the
plural number includes the singular, and the term "person" includes both a
corporation and a natural person.
ARTICLE IX.
AMENDMENTS
Section 1. - Amendment by Shareholders. New bylaws may be adopted or
these bylaws may be amended or repealed by the vote of holders of a majority
of the outstanding shares entitled to vote; provided, however, that if the
articles of incorporation of the corporation set forth the number of authorized
directors of the corporation, the authorized number of directors may be
changed only by an amendment of the articles of incorporation.
Section 2 - Power of Directors. Subject to the right of shareholders
as provided in Section 1 of this Article IX to adopt, amend or repeal bylaws,
bylaws may be adopted, amended or repealed by the board of directors, provided,
however, that a bylaw or amendment thereof changing the authorized number of
directors may be adopted, amended or repealed by the board of directors only
for the purpose of fixing the exact number of directors within the limits
specified in the articles of incorporation or in Section 2 of Article III of
these bylaws.
ARTICLE X.
LOANS OF OFFICERS AND OTHERS
If the corporation has outstanding shares held of record by 100 or
more persons on the date of approval by the Board of Directors, the corporation
may make loans of money or property to, or guarantee the obligations of, any
officer of the corporation or its parent or any subsidiary, whether or not a
director of the corporation or its parent or any subsidiary, or adopt an
employee benefit plan or plans authorizing such loans or guaranties, upon the
approval of the Board of Directors alone, by a vote sufficient without counting
the vote of any interested director or directors, if the Board of Directors
determines that such a loan or guaranty or plan may reasonably be expected to
benefit the corporation.
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CERTIFICATE OF ADOPTION OF BYLAWS
I DO HEREBY CERTIFY AS FOLLOWS:
That I am the duly elected, qualified and acting Secretary of Immusol,
Inc.; that the foregoing Bylaws were adopted as the bylaws of said corporation
by the unanimous written consent of the Board of Directors dated as of June 27,
1996; and that the foregoing Bylaws were approved as the bylaws of said
corporation by the shareholders of the corporation by written consent action
dated as of June 27, 1996 to be effective immediately prior to the closing of
the initial underwritten public offering.
IN WITNESS WHEREOF, I have hereunto set my hand this ____ day of
_________, 1996.
---------------------------------------
Faye H. Russell
<PAGE> 1
EXHIBIT 10.2
AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT
This Amended and Restated Shareholder Rights Agreement (the
"Agreement") is effective as of May 3, 1995 by and between Immusol, Inc. (the
"Company") and the investors designated on Exhibit A attached hereto (the
"Investors"). This Agreement amends and restates the Shareholder Rights
Agreement dated July 27, 1992 (the "Prior Agreement"), and such amendment and
restatement is effective upon the execution of this Agreement by the Company
and the Holders of at least a majority of the Registrable Securities under the
Prior Agreement.
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The terms "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act including
any pre-effective or post-effective amendments necessary thereto, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (1)
the Common Stock issuable or issued upon conversion of the Series A, Series B1,
Series B2, and Series B3 Preferred Stock (together, the "Preferred Stock") and
(2) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such Preferred Stock or Common Stock, excluding in all cases,
however, (i) any Registrable Securities sold by a person in a transaction in
which his rights under this Section 1 are not assigned, or (ii) any Registrable
Securities sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.
(c) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof; and
(e) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the
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Securities and Exchange Commission (the "SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
(f) The term "Act" shall mean the Securities Act
of 1933, as amended.
(g) The term "Purchase Agreements" shall mean the
Series A Preferred Stock Purchase Agreement dated July 27, 1992 and the
Preferred Stock Purchase Agreement of even date herewith.
1.2 Request for Registration.
(a) If the Company shall receive at any time
after the earlier of (i) December 31, 1997 or (ii) six (6) months after the
effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a
written request from the Holders of at least 500,000 shares of the outstanding
Registrable Securities (including securities convertible into Registrable
Securities) that the Company file a registration statement under the Act
covering the registration of at least forty percent (40%) of the Registrable
Securities then held by the Holders, or a lesser number if the anticipated
aggregate offering price, net of underwriting discounts and commissions,
exceeds $7,500,000, then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of Section 1.2(b), effect as soon as practicable, and in any
event within ninety (90) days of the receipt of such request, the registration
under the Act of all Registrable Securities which the Holders request to be
registered within thirty (30) days of the mailing of such written notice by the
Company; provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 1.2(a):
(i) During the period starting with the
date ninety (90) days prior to the Company's estimated date of filing of, and
ending on the date one hundred eighty (180) days immediately following the
effective date of, any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(ii) After the Company has effected two
(2) such registrations pursuant to this Section 1.2(a), and such registrations
have been declared or ordered effective, provided that a request for
registration under this Section 1.2(a) shall not be counted for such purpose
unless the Registrable Securities included in such registration as of the time
of the pertinent registration statement became effective were in fact
registered and distributed in accordance with the intended method of
distribution; or
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(iii) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed at such time, then the Company's obligation to use its best efforts to
register, qualify or comply under this Section 1.2(a) shall be deferred for a
period not to exceed one hundred eighty (180) days from the date of receipt of
written request from the Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.
(b) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event, the right of any Holder
to include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 1.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder.
1.3 Company Registration. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities under the Act in connection with the
public offering of such securities solely for cash (other than a registration
relating solely to the sale of securities to participants in a Company stock
plan, or a registration on any form which does not include substantially the
same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within thirty (30) days after
mailing of written notice by the Company, the Company shall, subject to the
provisions of Section 1.8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
However, the Company shall not be obligated to take any action to effect the
registration of the Registrable Securities of the Holders pursuant to this
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Section 1.3 after the Company has effected three (3) such registrations
pursuant to this Section 1.3, and such registrations have been declared or
ordered effective.
1.4 Obligations of the Company. Whenever required under
this Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
twenty (120) days.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, and do any and all other acts and things reasonably
necessary or advisable to enable the sale or disposition in such jurisdictions
of the shares covered by the registration statement, provided that the Company
shall not be required in connection therewith or as a condition thereto to
qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform such Holder's obligations under such an agreement provided that
such underwriting agreement shall not provide for indemnification or
contribution obligations on the part of the Holders greater than the
obligations set forth in Section 1.9(b).
(f) Cooperate with the selling Holders, to
facilitate the timely preparation and delivery of certificates representing
shares to be sold and not bearing any restrictive legends, and enable such
shares to be in such denominations and registered in such
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names as the prospective underwriters may request at least two (2) business
days prior to any sale of shares to the prospective underwriters.
(g) Cause all shares covered by any registration
statement to be listed on each securities exchange on which similar securities
issued by the Company are then listed if requested by the Holders of a majority
of the Registrable Securities. The Company further agrees to provide a
transfer agent and registrar for such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement.
(h) Provide a CUSIP number of all shares of
stock, not later than the effective date of the registration statement.
(i) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(j) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering,
addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities, if possible.
1.5 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that
such holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications
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<PAGE> 6
pursuant to Section 1.2, including (without limitation) all registration,
filing and qualification fees, printers' and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders (not to exceed $25,000)
shall be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to a demand registration pursuant to Section 1.2; provided further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall
bear and pay all expenses incurred in connection with any registration, filing
or qualification of Registrable Securities with respect to all registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.12), including (without limitation) all registration,
filing, and qualification fees, printers and accounting fees relating or
apportionable thereto and the fees and disbursements of one counsel for the
selling Holders selected by them (not to exceed $25,000), but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any
offering involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company; provided
that such underwriting agreement is in customary form and is reasonably
acceptable to the Holders of a majority of the Registrable Securities requested
to be included in such registration and does not provide for indemnification or
contribution obligations on the part of the Holders greater than the
obligations set forth in Section 1.9(b). If the total amount of securities,
including Registrable Securities, requested by shareholders to be included in
such offering exceeds the amount of securities sold other than by the Company
that the underwriters reasonably believe compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders) but in no event
shall any shares being sold by a shareholder exercising a demand registration
right similar to that granted in
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<PAGE> 7
Section 1.2 be excluded from such offering. For purposes of apportionment, any
selling shareholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall
be deemed to be a single "selling shareholder", and any pro rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder", as defined in this sentence.
1.9 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, each of it officers, directors
and agents, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Act or the Securities Exchange Act of 1934, amended (the "1934 Act"),
against any losses, claims, damages, or liabilities (joint or several) to which
they may become subject under the Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Act, the 1934
Act, any state securities law or any rule or regulation promulgated under the
Act, the 1934 Act or any state securities law; and the Company will pay to each
such Holder, each of its officers, directors and agents, underwriter or
controlling person, as incurred, any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this Section 1.9(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such case
for any such loss, claim, damage, liability, or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, its officers, directors
and agents, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within
the meaning of the Act, any underwriter, any other Holder selling securities in
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<PAGE> 8
such registration statement and any controlling person of any such underwriter
or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal
or other expenses reasonably incurred by any person intended to be indemnified
pursuant to this Section 1.9(b), in connection with investigating or defending
any such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this Section 1.9(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this Section 1.9(b) exceed the gross proceeds from the offering received
by such Holder.
(c) Promptly after receipt by an indemnified
party under this Section 1.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
1.9, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.9, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.9.
(d) The obligations of the Company and Holders
under this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With
a view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the
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<PAGE> 9
Company to the public without registration or pursuant to a registration on
Form S-3, the Company agrees to:
(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after
the end of the fiscal year in which the first registration statement filed by
the Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company) or the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), or that
it qualifies as a registrant whose securities may be resold pursuant to Form
S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.11 Form S-3 Registration. In case the Company shall
receive from any Holder or Holders who hold in excess of 500,000 shares of the
Company's Registrable Securities, a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities
of any other Holder or Holders joining in such request as are specified in a
written request
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<PAGE> 10
given within twenty (20) days after receipt of such written notice from the
Company; provided, however, that the Company shall not be obligated to effect
any such registration, qualification or compliance, pursuant to this Section
1.11: (1) if Form S-3 is not available for such offering by the Holders; (2) if
the Holders, together with the holders of any other securities of the Company
entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$1,000,000; (3) if the Company shall furnish to the Holders a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such Form S-3 Registration to be effected
at such time, in which event the Company shall have the right to defer the
filing of the Form S-3 registration statement for a period of not more than 120
days after receipt of the request of the Holder or Holders under this Section
1.11; provided, however, that the Company shall not utilize this right more
than once in any twelve (12) month period; (4) if the Company has already
effected three registrations on Form S-3 for the Holders pursuant to this
Section 1.11; or (5) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to
service of process in effecting such registration, qualification or compliance.
(c) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request made pursuant to this
Section 1.11 and the Company shall include such information in the written
notice referred to in Section 1.11(a). In such event, the right of any Holder
to include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 1.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.11, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder.
(d) Subject to the foregoing, the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All expenses
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<PAGE> 11
incurred in connection with a registration requested pursuant to Section 1.11,
including (without limitation) all registration, filing, qualification,
printer's and accounting fees and the reasonable fees and disbursements of
counsel for the selling Holder or Holders and counsel for the Company, but
excluding any underwriters' discounts or commissions associated with
Registrable Securities, shall be borne by the Company. Registrations effected
pursuant to this Section 1.11 shall not be counted as demands for registration
or registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.12 Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned by a Holder to a transferee or assignee who acquires at least
500,000 shares of Registrable Securities, provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be
assigned by a Holder to a limited partner, general partner or other affiliate
of an Investor (the "Transferee") regardless of the number of shares acquired
by such Transferee.
1.13 Limitations on Subsequent Registration Rights. From
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder to include such securities in any registration filed under
Section 1.2 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included.
1.14 "Market Stand-Off" Agreement. Each holder of
securities which are Registrable Securities (or which are convertible into
Registrable Securities) hereby agrees that, during a period not to exceed 180
days, following the effective date of a registration statement of the Company
filed under the Act, it shall not, to the extent requested by the Company and
reasonably required by the underwriter in a firm commitment underwriting, sell
or otherwise transfer or dispose of (other than to donee who agree to be
similarly bound) any Common Stock of the Company held by it at any time during
such period except Common Stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to
the first such registration statement of the Company which covers Common Stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering; and
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<PAGE> 12
(b) all officers and directors of the Company
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.15 Amendment of Registration Rights. Any provision of
this Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this section shall be binding
upon each holder of any securities which are or at one time were Registrable
Securities (or which are or were convertible into Registrable Securities), each
future holder of all such securities, and the Company.
1.16 Termination of Registration Rights. No shareholder
shall be entitled to exercise any right provided for in this Section 1 after
five (5) years following the consummation of the sale of securities pursuant to
a registration statement filed by the Company under the Act in connection with
the initial firm commitment underwritten offering of its securities to the
general public for a total offering of more than $7,500,000.
2. Right of First Offer.
2.1 Grant of Right. Subject to the terms and conditions
specified in this Section 2, the Company hereby grants to each Investor who
holds at least 500,000 shares of Registrable Securities (a "Major Investor") a
right of first offer with respect to future sales by the Company of its Future
Shares (as hereinafter defined). Each time the Company proposes to offer any
shares of, or securities convertible into or exercisable for any shares of, any
class of its Future Shares, the Company shall first make an offering of such
Future Shares to each Major Investor in accordance with the provisions listed
below.
2.2 Future Shares. "Future Shares" shall mean shares of
any capital stock of the Company, whether now authorized or not, and any
rights, options or warrants to purchase such capital stock, and securities of
any type that are, or may become, convertible into such capital stock; provided
however, that "Future Shares" do not include (i) the shares of Preferred Stock
purchased or to be purchased under the Purchase Agreements or the Common Stock
issued or issuable upon the conversion of such Preferred Stock, (ii) securities
offered pursuant to a registration statement filed under the Securities Act, as
hereinafter defined, (iii) securities issued pursuant to the acquisition of
another corporation by the Company by merger of, purchase of substantially all
of the assets or other reorganization, and (iv) all shares of
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<PAGE> 13
Common Stock hereafter issued or issuable to officers, directors, employees or
consultants of the Company pursuant to any employee or consultant stock
offering, plan or arrangement approved by the Board of Directors of the
Company.
2.3 Notice. In the event the Company proposes to
undertake an issuance of Future Shares, the Company shall deliver a notice by
certified mail (the "Notice") to the Major Investors stating (i) its bona fide
intention to offer such Future Shares, (ii) the number of such Future Shares to
be offered and (iii) the price, if any, for which it proposes to offer such
Future Shares. Within 30 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Future Shares which equals
the proportion that the number of Registrable Securities held by such Major
Investor bears to the total number of shares of Common Stock issued and
outstanding, including shares issuable upon conversion of convertible
securities issued and outstanding.
2.4 Sale after Notice. If all such Future Shares
referred to in the Notice are not elected to be obtained as provided in Section
2.3 hereof, the Company may, during the 90-day period following the expiration
of the period provided in Section 2.3 hereof, offer the remaining unsubscribed
Future Shares to any person or persons at a price not less than, and upon terms
no more favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Future Shares
within such period, or if such agreement is not consummated within 90 days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such Future Shares shall not be offered unless first reoffered to
the Major Investors in accordance herewith.
2.5 Assignment. The right of first offer granted under
this Section 2 is assignable by the Major Investors to any transferee of a
minimum of 500,000 shares of Registrable Securities.
2.6 Termination of Rights. No shareholder shall be
entitled to exercise any right provided for in this Section 2 (i) upon the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public of a
firm commitment underwritten public offering for a total offering of more than
$7,500,000 or (ii) when the Company first becomes subject to the periodic
reporting requirements of Section 12(g) or 15(d) of the Securities Exchange Act
of 1934, whichever event shall first occur.
3. Obligation to Participate. Pfizer, Inc. ("Pfizer") and its
assignees of Registrable Securities shall purchase securities offered by the
Company in its initial public offering. Pfizer and its assignees shall
purchase such proportion of securities, that the number of Registrable
Securities held by Pfizer and its assignees bears to the total number of shares
of Common Stock then issued and outstanding, including shares issuable upon
conversion of convertible
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<PAGE> 14
securities then issued and outstanding; provided, however, the valuation of the
Company upon the close of such initial public offering must be greater than
$150,000,000 and the initial public offering raises at least $15,000,000 in the
aggregate.
4. Waiver of Right of First Offer. The Right of First Offer
under Section 2 of the Prior Agreement to purchase shares of Series B1, Series
B2, and Series B3 Preferred Stock to be sold pursuant to the Preferred Stock
Purchase Agreement of even date herewith is hereby waived. This waiver is
effective upon the execution of this agreement by First Small Business
Investment Corporation of California, the sole Major Investor under the Prior
Agreement.
5. Miscellaneous Provisions.
5.1 Waivers and Amendments. Except as provided in
Section 1.15 of this Agreement, any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of at least a majority of
the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 5.1 shall be binding upon each Investor or its assignee and
the Company
5.2 Notices. All notices and other communications
required or permitted hereunder shall be in writing and, except as otherwise
noted herein, shall be deemed effectively given upon personal delivery,
delivery by nationally recognized courier or upon deposit with the United
States Post Office, (by first class mail, postage prepaid) addressed: (a) if
to the Company, at 3050 Science Park Road, San Diego, California 92121 (or at
such other address as the Company shall have furnished to the Holders in
writing) attention of President and (b) if to a Holder, at the latest address
of such person shown on the Company's records.
5.3 Descriptive Headings. The descriptive headings
herein have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provisions hereof.
5.4 Governing Law. This Agreement shall be governed by
and interpreted under the laws of the State of New York.
5.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
5.6 Expenses. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable
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<PAGE> 15
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
5.7 Successors and Assigns. Except as otherwise
expressly provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.
5.8 Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject matter of this Agreement.
5.9 Separability; Severability. Unless expressly
provided in this Agreement, the rights of each Investor under this Agreement
are several rights, not rights jointly held with any other Investors. Any
invalidity, illegality or limitation on the enforceability of this Agreement
with respect to any Investor shall not affect the validity, legality or
enforceability of this Agreement with respect to the other Investors. If any
provision of this Agreement is judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be affected or impaired.
5.10 Stock Splits. All references to numbers of shares
in this Agreement shall be appropriately adjusted to reflect any stock
dividend, split, combination or other recapitalization of shares by the Company
occurring after the date of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above.
IMMUSOL, INC.
/s/ TSVI GOLDENBERG
--------------------------------------
Tsvi Goldenberg, Ph.D., Chairman
of the Board and Chief Executive
Officer
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<PAGE> 16
BankAmerica Ventures
By: _______________________________
Title: ____________________________
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<PAGE> 17
PFIZER, INC.
By: _______________________________
Title: ____________________________
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<PAGE> 18
THE REGENTS OF THE UNIVERSITY OF CALIFORNIA
By: _______________________________
Title: ____________________________
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<PAGE> 1
EXHIBIT 10.3
IMMUSOL, INC.
PREFERRED STOCK
PURCHASE AGREEMENT
May 3, 1995
Immusol, Inc.
PREFERRED STOCK PURCHASE AGREEMENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Purchase and Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Sale of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Closing and Delivery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Representations and Warranties of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Organization, Good Standing and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.5 Shares and Conversion Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Governmental Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Proprietary Information Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.9 Patents and Other Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 Compliance with Other Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.11 Agreements; Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.12 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.14 Corporate Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.15 Title to Property and Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.16 No Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.17 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.18 Material Agreements of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.20 Licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.21 Minute Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3. Representations and Warranties of each Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.1 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Purchase Entirely for Own Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Disclosure of Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 Investment Experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 Restricted Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Further Limitations on Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Conditions of Investors' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.2 Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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5.3 Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.4 Qualifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.5 Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 Opinion of Company Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 Shareholder Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Conditions of the Company's Obligations at Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.2 Payment of Purchase Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.3 Restated Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6.4 Shareholder Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.1 Maintain Corporate Rights and Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7.2 Maintain Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Pay Taxes and Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.5 Notice of Litigation and Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 Delivery of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.7 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.8 Market Stand-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
7.9 Restrictive Agreements Prohibited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.10 Proprietary Information Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
7.11 Termination of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.3 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.5 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.6 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.9 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
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EXHIBIT A Schedule of Investors
EXHIBIT B Amended and Restated Articles of Incorporation
EXHIBIT C Schedule of Exceptions
EXHIBIT D Proprietary Information Agreement
EXHIBIT E Legal Opinion
EXHIBIT F Amended and Restated Shareholder Rights Agreement
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PREFERRED STOCK PURCHASE AGREEMENT
THIS PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as
of the 3rd day of May, 1995 by and between Immusol, Inc., a California
corporation located at 3050 Science Park Road, San Diego, CA 92121 (the
"Company"), and the investors listed on Exhibit A hereto, herein referred to as
the "Investors."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Shares.
1.1 Sale of Shares.
(a) The Company shall adopt and file with the
Secretary of State of California on or before the Initial Closing (as defined
below) Amended and Restated Articles of Incorporation in the form attached
hereto as Exhibit B (the "Restated Articles").
(b) Subject to the terms and conditions of this
Agreement, the Investors agree to purchase at each Closing and the Company
agrees to sell and issue to the Investor at each Closing, that number of shares
of the Company's Preferred Stock set forth next to each Investor's name at the
purchase price set forth in Exhibit A attached hereto.
(c) The shares of Series B1, Series B2, and
Series B3 Preferred Stock sold to the Investors pursuant to this Agreement are
hereinafter referred to as the "Shares." The total amount of Common Stock and
other securities issuable upon conversion of the Shares is hereinafter referred
to as the "Conversion Stock." The Shares and the Conversion Stock are
hereinafter collectively referred to as the "Securities."
1.2 Closing and Delivery.
(a) The initial purchase and sale of the Shares
shall take place at the offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California ("WSGR"), at 1:00 p.m., on May 3, 1995 or at
such other time and place as the Company and the Investors purchasing the
majority of the Shares at such time mutually agree upon (which time and place
are designated specifically as the "Initial Closing" and generally as the
"Closing"). At the Initial Closing the Company shall deliver to the Investors
a certificate representing the Shares which such Investor is purchasing against
delivery to the Company by such Investor of a check, wire transfer or
cancellation of indebtedness in the aggregate amount of the purchase price
therefor payable to the Company's order.
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(b) The second purchase and sale of the Shares
shall take place at WSGR on September 3, 1996 or at such other time and place
as the Company and the Investors purchasing the majority of the Shares at such
time mutually agree upon (also, a "Closing"). At such Closing, the Investors
shall purchase the number of Shares as stated in Exhibit A. At such Closing,
the Company shall deliver to the Investors a certificate representing the
Shares which each Investor is purchasing against delivery to the Company by
such Investor of a check, or transfer or cancellation of indebtedness in the
aggregate amount of the purchase price therefor payable to the Company's order.
(c) (i) Subject to Section 1.2(c)(ii), the
third purchase and sale of the Shares shall take place at WSGR on May 3, 1998
or at such other time and place as the Company and the Investors purchasing the
majority of the Shares at such time mutually agree upon (also, a "Closing").
At such Closing, the Investors shall purchase the number of Shares as stated in
Exhibit A. At such Closing, the Company shall deliver to the Investors a
certificate representing the Shares which each Investor is pur chasing against
delivery to the Company by such Investor of a check, or transfer or
cancellation of indebtedness in the aggregate amount of the purchase price
therefor payable to the Company's order.
(ii) Thirty (30) months from the Initial
Closing, Pfizer, Inc. ("Pfizer") may terminate this Agreement, with or without
cause, with at least thirty (30) days' prior written notice to the Company. If
Pfizer terminates this Agreement, the purchase and sale of the Shares outlined
in Section 1.2(c)(i) shall not occur.
2. Representations and Warranties of the Company. As of the date
of the Initial Closing, the Company hereby represents and warrants to the
Investors that, except as set forth on a Schedule of Exceptions attached hereto
as Exhibit C, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The
Company is a corporation duly organized, validly existing and in good standing
under the laws of the State of California and has all requisite corporate power
and authority to carry on its business as now conducted, to own its properties
and assets, to enter into and perform this Agreement and the Shareholder Rights
Agreement, to issue the Securities and to carry out the provisions thereof and
of the Restated Articles of Incorporation (the "Restated Articles"). The
Company is duly qualified to transact business and is in good standing in each
jurisdiction in which the failure so to qualify would have a material adverse
effect on its business or properties.
2.2 Capitalization. The authorized capital of the
Company consists of:
(a) 3,491,700 shares of Preferred Stock (the
"Preferred Stock"), 2,000,000 of which have been designated Series A Preferred
Stock and 922,800, 264,600, and 304,300 of which have been designated Series
B1, Series B2, and Series B3 Preferred Stock,
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respectively. Immediately prior to the Initial Closing, 2,000,000 shares of
Series A Preferred Stock are outstanding and no shares of Series B1, Series B2,
and Series B3 Preferred Stock are outstanding. Up to 915,477, 264,600, and
304,300 shares of Series B1, Series B2, and Series B3 Preferred Stock,
respectively, will be sold pursuant to this Agreement. The rights,
preferences, privileges and restrictions of the Shares will be as stated in the
Restated Articles.
(b) 20,000,000 shares of Common Stock (the
"Common Stock"). Immediately prior to the Initial Closing, 7,045,000 shares of
Common Stock are outstanding.
(c) 2,000,000 shares of Common Stock are reserved
under the Company's 1992 Stock Plan (the "Plan"), of which 60,000 shares have
been issued pursuant to exercise of options granted under the Plan, 1,783,000
shares may be issued upon exercise of outstanding options granted under the
Plan, and 157,000 shares remain available for issuance upon exercise of future
option grants.
(d) Except for (i) the conversion privileges of
the Preferred Stock and (ii) the rights of first offer set forth in the Amended
and Restated Shareholder Rights Agreement attached hereto as Exhibit F
("Shareholder Rights Agreement"), there are no other outstanding options,
warrants, rights (including conversion or preemptive rights) or agreements for
the purchase or acquisition from the Company of any shares of its capital stock
or any other debt or equity securities.
(e) Neither the offer nor the issuance or the
sale of the Securities constitutes or will constitute an event, under any
anti-dilution or similar provision of any agreement or instrument to which the
Company is a party or by which it is bound or affected.
(f) The Company has no indebtedness for borrowed
money.
2.3 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity.
2.4 Authorization. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the Shareholder Rights
Agreement and the Restated Articles, the performance of all obligations of the
Company hereunder and the authorization, issuance (or reservation for
issuance) and delivery of the Shares being sold hereunder and the Conversion
Stock has been taken or will be taken prior to the Initial Closing, and this
Agreement, the Shareholder Rights Agreement and the Restated Articles
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their terms.
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2.5 Shares and Conversion Stock.
(a) The Shares which are being purchased by the
Investors hereunder, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and, based in part upon the
representations of the Investors in this Agreement, will be issued in
compliance with all applicable federal and state securities laws. The
Conversion Stock has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Restated Articles, shall be duly
and validly issued, fully paid and nonassessable, free and clear of all liens
and restrictions, other than liens created by the Investor or state or federal
securities laws, and shall be issued in compliance with all applicable
securities laws, as presently in effect, of the United States and each of the
states whose securities laws govern the issuance of any of the Shares
hereunder. Neither the issuance, sale or delivery of the Shares or the
Conversion Shares is subject to any preemptive right of shareholders of the
Company or to any rights of first refusal or other right in favor of any
person.
(b) The outstanding shares of Series A Preferred
Stock and Common Stock are all duly and validly authorized and issued, fully
paid and nonassessable, and were issued in compliance with all applicable
federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order
or authorization of, or registration, qualification, designation, declaration
or filing with, any federal, state, local or provincial governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement, except for the filing pursuant
to Section 25102(f) of the California Corporate Securities law of 1968, as
amended, and the rules thereunder, which filing will be effected within 15 days
of the sale of the Shares hereunder.
2.7 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement or the right of the Company to enter
into it, or to consummate the transactions contemplated hereby, or which might
result, either individually or in the aggregate, in any material adverse
changes in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company, nor is the Company aware that there is any basis for the foregoing.
The foregoing includes, without limitation, actions pending or threatened (or
any basis therefor known to the Company) involving the prior employment of any
of the Company's employees, their use in connection with the Company's business
of any information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
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2.8 Proprietary Information Agreements. Each employee
and officer of the Company has executed a Proprietary Information Agreement in
the form attached hereto as Exhibit D, and no exceptions have been taken by
any such employee or officer to the terms of such agreement. The Company,
after reasonable investigation, is not aware that any of its employees are in
violation thereof, and the Company will use its best efforts to prevent any
such violation.
2.9 Patents and Other Intangible Assets.
(a) The Company (i) owns or has the right to use,
free and clear of all liens, claims and restrictions, all patents, trademarks,
service marks, trade names, copyrights, licenses and rights with respect to the
foregoing, used in or necessary for the conduct of its business as now
conducted or proposed to be conducted, (ii) is not infringing upon or
otherwise acting adversely to the right or claimed right of any person under or
with respect to any patent, trademark, service mark, trade name, copyright or
license with respect thereto, and (iii) is not obligated or under any liability
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service
mark, trade name, copyright or other intangible asset, with respect to the use
thereof or in connection with the conduct of its business or otherwise.
(b) The Company owns and has the unrestricted
right to use all product rights, manufacturing rights, trade secrets, including
know-how, negative know-how, formulas, patterns, compilations, programs,
devices, methods, techniques, processes, inventions, designs, computer programs
and technical data and all information that derives independent economic value,
actual or potential, from not being generally known or known by competitors and
which the Company has taken reasonable steps to maintain in secret (all of the
foregoing of which are collectively referred to herein as "intellectual
property") required for or incident to the development, manufacture, operation
and sale of all products and services sold or proposed to be sold by the
Company, free and clear of any right, lien or claim of others, including
without limitation former employers of its employees, provided however, the
possibility exists that other persons, completely independently of the Company
or its employees or agents, could have developed trade secrets or items of
technical information similar or identical to those of the Company. The
Company is not aware of any such development of similar or identical trade
secrets or technical information by others.
(c) The Company has not sold, transferred,
assigned, licensed or subjected to any lien, any intellectual property, trade
secret, know-how, invention, design, process, computer program or technical
data, or any interest therein, necessary or useful for the development,
manufacture, use, operation or sale of any product or service presently under
development or manufactured, sold or rendered by the Company.
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(d) No director, officer, employee, agent or
shareholder of the Company owns or has any right in the intellectual property
of the Company, or any patents, trademarks, service marks, trade names,
copyrights, licenses or rights with respect to the foregoing, or any
inventions, developments or discoveries used in or necessary for the conduct of
the Company's business as now conducted or as proposed to be conducted.
(e) The Company has not received any
communication alleging or stating that the Company or any employee has violated
or infringed, or by conducting business as proposed, would violate or infringe,
any patent, trademark, service mark, trade name, copyright, trade secret,
proprietary right, process or other intellectual property of any other person.
2.10 Compliance with Other Instruments.
(a) The Company is not in violation or default of
any provisions of its articles of incorporation, as amended, or bylaws or of
any instrument, agreement, judgment, order, writ, decree or contract to which
it is a party or by which it is bound or, to its knowledge after due inquiry,
of any provision of federal, state or local law, statue, rule, ordinance,
regulation or other pronouncement applicable to the Company. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(b) The Company has avoided every condition, and
has not performed any act, the occurrence of which would result in the
Company's loss of any right granted under any license, distribution agreement
or other agreement.
2.11 Agreements; Action.
(a) Except for agreements explicitly contemplated
hereby and stock purchase agreements, option agreements or consulting
agreements existing as of even date herewith, there are no agreements,
understandings or proposed transactions between the Company and any of its
officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or payments to the
Company in excess of $50,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company.
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(c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $50,000 or
in excess of $100,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.
(d) The Company is not a party to and is not
bound by any contract, agreement or instrument, or subject to any restriction
under its articles of incorporation, as amended, or bylaws, which materially
adversely affects its business as now conducted and as proposed to be
conducted.
(e) The Company has not engaged in the past
twelve (12) months in any discussion (i) with any representative of any
corporation or corporations regarding the consolidation or merger of the
Company with or into any such corporation or corporations, (ii) with any
corporation, partnership, association or other business entity or any
individual regarding the sale, conveyance or disposition of all or
substantially all of the assets of the Company, or a transaction or series of
related transactions in which more than fifty percent (50%) of the voting power
of the Company will be disposed of, or (iii) regarding any other form of
liquidation, dissolution or winding up of the Company.
(f) Except as provided in the Shareholder Rights
Agreement, the Company is not a party to or aware of any voting trust or
agreement, shareholders' agreement, pledge agreement, buy-sell agreement or
first refusal or preemptive rights agreement relating to securities of the
Company.
2.12 Disclosure. The Company has fully provided the
Investors with all the information which each such Investor has requested for
deciding whether to purchase the Shares and all information which the Company,
after due inquiry, believes is reasonably necessary to enable such Investor to
make such decision. Neither this Agreement nor any other statements or
certificates made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to
make the statements herein or therein not misleading.
2.13 Registration Rights. Except as provided in the
Shareholder Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.14 Corporate Documents. Except for the amendments
necessary to satisfy representations and warranties conditioned herein (the
form of which amendments has been
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<PAGE> 12
approved by the Investor), the Articles of Incorporation and Bylaws of the
Company are in the form previously provided to the Investor.
2.15 Title to Property and Assets. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to its knowledge, holds a
valid leasehold interest free of any liens, claims or encumbrances.
2.16 No Brokers or Finders. No person has, or as a result
of the transactions contemplated herein will have, any right or valid claim
against the Company or any Investor for any commission, fee or other
compensation as a finder or broker, or in any similar capacity.
2.17 Absence of Undisclosed Liabilities. The Company has
no material obligation or liability (whether due or to become due) arising out
of any transaction entered into at or prior to the Initial Closing or any act
or omission to act at or prior to the Initial Closing, including taxes with
respect to or based upon the transactions or events occurring at or prior to
the Initial Closing.
2.18 Material Agreements of the Company. The Company has
furnished to the Investors true and complete copies of all agreements,
instruments and other documents requested by any Investor or its authorized
representative. The Company is in substantial compliance with all material
contractual arrangements.
2.19 Tax Returns. The Company has filed or obtained
extensions for all federal, state and other tax returns and reports which are
required to be filed and has paid all taxes and assessments which have become
due and payable. The Company has not been advised that any of its returns,
federal, state or other, have been or are being audited as of the date thereof.
None of the Company's federal income tax returns and none of its state income
or franchise tax or sales or use tax returns has ever been audited by
governmental authorities. The Company has withheld or collected from each
payment made to each of its employees, the amount of all taxes required to be
withheld or collected therefrom, and has paid the same to proper tax receiving
officers of authorized depositaries.
2.20 Licenses. The Company possesses from the appropriate
agency, commission, board and governmental body and authority, whether state,
local or federal, all licenses, permits, authorizations, approvals, franchises
and rights which are necessary for the Company to engage in the business
currently conducted by it and proposed to be conducted, including without
limitation the development, manufacture, use, sale and marketing of its
existing and proposed products and services; and all such certificates,
licenses, permits, authorizations and rights have been lawfully and validly
issued, are in full force and effect, will
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<PAGE> 13
not be revoked, canceled, withdrawn, terminated or suspended and have a term of
perpetual existence.
2.21 Minute Books. If requested, the minute books of the
Company has been provided to special counsel for the Investors. Such minute
books contain all resolutions adopted by directors and shareholders since the
incorporation of the Company and fairly and accurately reflect, in all material
respects, all matters and transactions referred to in such minutes.
3. Representations and Warranties of each Investor. Each
Investor hereby represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid
and legally binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is
made with the Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Shares will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. The Investor represents that it has full power and authority to
enter into this Agreement.
3.3 Disclosure of Information. It believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. The Investor further represents that it has
had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Shares. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Section 2 of this Agreement or the right of the Investor to
rely thereon.
3.4 Investment Experience. The Investor is an investor
in securities of companies in the development stage and acknowledges that it
is able to fend for itself, and bear the economic risk of its investment and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares. If
other than an individual, Investor also represents it has not been organized
for the purpose of acquiring the Shares.
3.5 Restricted Securities. The Investor understands that
the Shares it is purchasing are characterized as "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the
Company in a transaction not involving a public offering
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<PAGE> 14
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act") only in certain limited circumstances. In this connection, the Investor
represents that it is familiar with Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any
way limiting the representations set forth above, the Investor further agrees
not to make any disposition of all or any portion of the Shares (or the
Conversion Stock) unless and until:
(a) There is then in effect a Registration
Statement under the Act covering such proposed disposition and such
disposition is made in accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified
the Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if requested by the Company, such Investor shall have
furnished the Company with an opinion of counsel, reasonably satisfactory to
the Company, that such disposition will not require registration of such
shares under the Act. It is agreed that the Company will not require opinions
of counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(c) Notwithstanding the provisions of subsections
(a) and (b) above, no such registration statement or opinion of counsel shall
be necessary for a transfer by an Investor which is a corporation to its direct
or indirect parent corporation or its direct or indirect subsidiary corporation
or for the transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or the
transfer by gift, will or intestate succession of any partner to his spouse or
lineal descendants or ancestors, if the transferee agrees in writing to be
subject to the terms hereof to the same extent as if he were an original
Investor hereunder.
3.7 Legends. It is understood that the certificates
evidencing the Shares (and the Conversion Stock) may bear one or all of the
following legends:
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT
WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT."
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<PAGE> 15
(b) Any legend required by the laws of the State
of California or any other applicable state, including any legend required by
the California Department of Corporations and Sections 417 and 418 of the
California Corporations Code.
4. California Commissioner of Corporations. THE SALE OF THE
SECURITIES THAT IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, AND THE ISSUANCE
OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE OF THE
SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE
CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE
EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS
SO EXEMPT.
5. Conditions of Investors' Obligations. The obligations of the
Investors under this Agreement are subject to the fulfillment on or before the
Initial Closing of each of the following conditions, the waiver of which shall
not be effective against any Investor who does not consent in writing thereto:
5.1 Representations and Warranties. The representations
and warranties of the Company contained in Section 2 shall be true on and as of
the Initial Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Initial Closing.
5.2 Performance. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Initial Closing.
5.3 Compliance Certificate. The Chief Executive Officer
of the Company shall deliver to the Investor at the Initial Closing a
certificate certifying that the conditions specified in Sections 5.1 and 5.2
have been fulfilled.
5.4 Qualifications. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and
sale of the Shares and the Conversion Stock to the Investors pursuant to this
Agreement, or such offer and sale shall be exempt from such qualification under
the California Corporate Securities Law of 1968, as amended.
5.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Initial
Closing and all documents incident thereto shall be reasonably satisfactory in
form and substance to each Investor and counsel to
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<PAGE> 16
any of such Investor, and they shall have received all such counterpart
original and certified or other copies of such documents as they may reasonably
request.
5.6 Opinion of Company Counsel. Each Investor shall have
received from Wilson, Sonsini, Goodrich & Rosati, counsel for the Company, an
opinion, dated as of the Initial Closing, in the form attached hereto as
Exhibit E.
5.7 Shareholder Rights Agreement. The Company and the
Investors shall have executed and delivered the Shareholder Rights Agreement of
even date herewith.
5.8 Restated Articles. The Restated Articles shall
have been accepted for filing by the California Secretary of State.
6. Conditions of the Company's Obligations at Closing. The
obligations of the Company to the Investors under this Agreement are subject to
the fulfillment on or before the Initial Closing of each of the following
conditions, the waiver of which shall not be effective unless consented to in
writing by the Company:
6.1 Representations and Warranties. The representations
and warranties of the Investors contained in Section 3 shall be true on and as
of the Initial Closing with the same effect as though such representations and
warranties had been made on and as of the Initial Closing.
6.2 Payment of Purchase Prices. The Investors shall have
delivered the purchase prices specified in Section 1.1(b).
6.3 Restated Articles. The Restated Articles of
Incorporation attached hereto as Exhibit B shall have been accepted for filing
by the California Secretary of State.
6.4 Shareholder Rights Agreement. The Company and the
Investors shall have executed and delivered the Shareholder Rights Agreement of
even date herewith.
7. Covenants of the Company.
7.1 Maintain Corporate Rights and Facilities. The
Company shall maintain and preserve its corporate existence and all rights,
franchises and other authority adequate for the conduct of its business;
maintain its properties, equipment and facilities in good order and repair; and
conducts its business in an orderly manner without voluntary interruption.
7.2 Maintain Insurance. The Company shall maintain in
full force and effect a policy or policies of insurance issued by insurers of
recognized responsibility, insuring it and its properties and business against
such losses and risks, and in such amounts, as are
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<PAGE> 17
customary in the case of corporations of established reputation engaged in the
same or a similar business and similarly situated.
7.3 Pay Taxes and Other Liabilities. The Company shall
pay and discharge, before the same become delinquent and before penalties
accrue thereon, all taxes, assessments and governmental charges upon or against
it or any of its properties, and all its other material liabilities at any time
existing, except to the extent and so long as (i) the same are being contested
in good faith and by appropriate proceedings in such manner as not to cause any
materially adverse effect upon its financial condition or the loss of any right
of redemption from any sale thereunder, and (ii) it shall have set aside on its
books reserves (segregated to the extent required by generally accepted
accounting principles) deemed by it adequate with respect thereto.
7.4 Records. The Company shall accurately and fairly
maintain its books of account in accordance with generally accepted accounting
principles, as approved from time to time by a majority of the Board and its
independent certified public accountants; employ a firm of independent
certified public accountants, which firm is either one of the six largest
national accounting firms or which is approved by a majority of the Preferred
Stock, to make annual audits of its accounts in accordance with generally
accepted auditing standards.
7.5 Notice of Litigation and Disputes. The Company shall
promptly notify the Investor which holds together with its affiliates, an
aggregate of 250,000 shares of the Securities, of each legal action, suit,
arbitration or other administrative or governmental investigation or proceeding
(whether federal, state, local or foreign) instituted or threatened against the
Company which could materially and adversely affect its condition (financial or
otherwise), properties, assets, liabilities, business, operations or prospects,
or of any occurrence or dispute which involves a reasonable likelihood of any
such action, suit, arbitration, investigation or proceeding being instituted.
7.6 Delivery of Financial Statements. The Company shall
deliver to each Investor which holds, together with its affiliates, an
aggregate of 250,000 shares of the Securities:
(a) as soon as practicable, but in any event
within ninety (90) days after the end of each fiscal year of the Company
commencing with the fiscal year ending December 31, 1995, a balance sheet, and
statements of operations and cash flow for such fiscal year. Such year-end
financial reports to be in reasonable detail, prepared in accordance with
generally accepted accounting principles ("GAAP"), and audited and certified by
independent public accountants of nationally recognized standing selected by
the Company;
(b) within thirty (30) days of the end of each
month, and until a public offering of Common Stock of the Company, an unaudited
statement of operations and
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<PAGE> 18
balance sheet for and as of the end of such month, in reasonable detail and
prepared in accordance with GAAP, subject to year end audit adjustments and the
absence of footnotes;
(c) within thirty (30) days of the end of each
fiscal quarter, a report on financial and operational highlights of the Company
during the fiscal quarter just ended;
(d) within forty-five (45) days prior to the end
of each fiscal year, a budget and business plan for the next fiscal year,
prepared on a monthly basis, including a balance sheet and statement of
operations for such months and, as soon as prepared, any other budgets or
revised budgets prepared by the Company;
(e) with respect to the financial statements
called for in subsection (b) of this Section 7.6, an instrument executed by the
Chief Financial Officer, President or Chairman of the Company and certifying
that such financials were prepared in accordance with GAAP consistently
applied with prior practice for earlier periods and fairly present the
financial condition of the Company and its results of operation for the period
specified, subject to year-end audit adjustments and the absence of footnotes;
(f) such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
an Investor or any assignee of such Investor may from time to time request,
provided, however, that the Company shall not be obligated to provide
information which it deems in good faith to be proprietary.
7.7 Inspection. The Company shall permit each Investor
which holds, together with its affiliates, an aggregate of 250,000 shares of
the Securities, at such Investor's expense to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 7.7 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information unless such Investor agrees in writing to hold
such information in confidence.
7.8 Market Stand-Off. So long as each Investor is, or
may be, bound by the provisions of Section 1.15 of the Shareholder Rights
Agreement, the Company shall obtain from each employee who is a purchaser of
shares of the Company's Common Stock, a market stand-off provision similar to
or more restrictive than Section 1.15 of the Shareholder Rights Agreement.
7.9 Restrictive Agreements Prohibited. Neither the
Company nor any of its subsidiaries shall become a party to any agreement which
by its terms restricts the Company's performance of this Agreement, the
Shareholder Rights Agreement or the Restated Articles of Incorporation.
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<PAGE> 19
7.10 Proprietary Information Agreements. The Company
shall use its best efforts to obtain, and shall cause its subsidiaries to use
their best efforts to obtain, a Proprietary Information Agreement in
substantially the form of Exhibit D from all future officers, key employees and
other employees who will have access to confidential information of the Company
or any of its subsidiaries, upon their employment by the Company or any of its
subsidiaries.
7.11 Termination of Covenants. The covenants set forth in
this Section 7 shall terminate and be of no further force or effect when the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the firm commitment underwritten offering of
its securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the Securities Exchange Act of 1934, whichever event shall first
occur.
8. Miscellaneous.
8.1 Survival of Warranties. The warranties,
representations and covenants of the Company and Investor contained in or made
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of the Investors or the
Company.
8.2 Successors and Assigns. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
8.3 Governing Law. This Agreement shall be governed by
and construed under the laws of the State of New York.
8.4 Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.5 Titles and Subtitles. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
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<PAGE> 20
8.6 Notices. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
or upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party in Exhibit A or in the case of the Company on the
first page of this Agreement, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
8.7 Amendments and Waivers. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Investors
holding at least a majority of the Shares or Conversion Stock. Any amendment
or waiver effected in accordance with this Section shall be binding upon each
holder of any securities purchased under this Agreement at the time out-
standing (including securities into which such securities are convertible),
each future holder of all such securities, and the Company; provided, however,
that no condition set forth in Section 5 hereof may be waived with respect to
any Investor who does not consent thereto.
8.8 Severability. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
8.9 Aggregation of Stock. All Shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
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<PAGE> 21
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
IMMUSOL, INC.
By: /s/ Tsvi Goldenberg
----------------------------
Tsvi Goldenberg, Ph.D.,
Chairman of the Board and
Chief Executive Officer
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<PAGE> 22
PFIZER LTD.
By: /s/ George M. (Not legible)
-------------------------------
Title: ____________________________
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<PAGE> 23
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Type of
Investor Preferred Stock No. of Shares Closing Date Purchase Price
- ------------------------ ----------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Pfizer, Inc. Series B1 915,477 05/03/95 $4,998,504.42
Series B2 264,600 11/03/96 $2,000,376.00
Series B3 304,300 05/03/98 $3,000,398.00
UC Regents Series B1 7,323 05/03/95 39,983.58
</TABLE>
<PAGE> 24
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF IMMUSOL, INC.
The undersigned, Tsvi Goldenberg, Ph.D. and J. Casey McGlynn hereby
certify that:
ONE: Dr. Goldenberg is the duly elected Chairman of the Board and
Chief Executive officer and Mr. McGlynn is the duly elected Secretary of the
corporation.
TWO: The Restated Articles of Incorporation of the corporation
shall be amended and restated to read in full as follows:
I.
The name of this corporation is Immusol, Inc.
II.
The purpose of this corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business
or the practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the corporation is authorized to issue is 23,491,700
shares. 20,000,000 shares shall be Common Stock, with a par value of $0.001 per
share. 3,491,700 shares shall be Preferred Stock, with a par value of $0.001
per share, 2,000,000 of which are designated Series A Preferred Stock, 922,800
of which are designated Series B1 Preferred Stock, 264,600 of which are
designated Series B2 Preferred Stock, and 304,300 of which are designated
Series B3 Preferred Stock.
<PAGE> 25
IV.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The dividends shall be payable when,
as and if declared by the Board of Directors, and shall not be cumulative. The
holders of shares of Preferred Stock shall be entitled to receive cash
dividends, prior and in preference to any declaration or payment of any
dividend (payable other than in Common stock or other securities and rights
convertible into additional shares of Common Stock of this corporation) on the
outstanding shares of Common Stock of this corporation. The dividends on the
outstanding shares of Series A, Series B1, Series B2, and Series B3 Preferred
Stock shall be paid out of any funds legally available therefor at the rate of
$0.08, $0.44, $0.60, and $0.79 per share, respectively, per annum (as
determined on a per annum basis and on an as converted basis for the Preferred
Stock). If the rate of dividends declared or paid on each outstanding share of
common Stock is greater than any of the rates specified above, the corporation
shall pay, on a share of each relevant series of Preferred Stock, a rate equal
to the higher rate declared and paid on each share of Common Stock this
corporation.
2. Liquidation Preference.
(a) Preferred Preference. In the event of any
liquidation, dissolution or winding up of this corporation, either voluntary or
involuntary, the holders of Preferred Stock shall be entitled to receive, out
of the assets of this corporation available to distribution to its
shareholders, whether such assets are capital, surplus, or earnings, and prior
and in preference to any distribution of any of the assets of this corporation
to the holders of Common Stock by reason of their ownership thereof, an amount
per share equal to $1.00, $5.46, $7.56, and $9.86 for each outstanding share of
series A, Series B1, Series B2, and Series B3 Preferred Stock, respectively,
plus an amount equal to any declared but unpaid dividends on such shares up to
the date fixed for distribution (such amounts being referred to herein as the
"Premium") . If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Preferred Stock shall be insufficient to
permit the payment to such holders of the full Premium, then the entire assets
and funds of this corporation legally available for distribution shall be
distributed ratably among the holders of the Preferred Stock in proportion to
the full amount each such holder is otherwise entitled to receive.
After the payment in full or the setting apart in trust by the
corporation of payment to the holders of Preferred Stock of the preferential
amounts so payable to them, each share of Common
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<PAGE> 26
Stock shall receive pro rata the remaining assets of the corporation.
(b) Mergers. A merger, or any consolidation of this
corporation with or into any other corporation or other entity or person, or
any other corporate reorganization or transaction or series of related
transactions by this corporation in which the shareholders of this corporation
immediately prior to the merger, consolidation or reorganization possess less
than fifty percent (50%) of the voting power of the surviving entity (or its
parent) immediately after the merger, consolidation or reorganization or a sale
or other disposition of all or substantially all of the assets of this
corporation shall be deemed to be a liquidation, dissolution or winding up
within the meaning of this Section 2.
Any securities or other property to be delivered to the
holders of the Preferred Stock and Common Stock upon merger, consolidation,
reorganization or sale of substantially all the assets Of the corporation shall
be valued as follows:
(i) Securities not subject to investment letter
or other similar restrictions on free marketability:
(A) if traded on a securities exchange,
the value shall be deemed to be the average of the closing prices of the
securities on such exchange over the 30-day period ending three (3) business
days prior to the closing;
(B) if actively traded over-the-counter,
the value shall be deemed to be the average of the closing bid prices over the
30-day period ending three (3) business days prior to the closing; and
(C) if there is no active public market,
the value shall be the fair market value thereof as mutually determined by the
corporation and the holders of not less than a majority of the outstanding
shares of Preferred Stock, provided that if the corporation and the holders of
a majority of the outstanding shares of Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the corporation, but acceptable to the holders of a majority of the
outstanding shares of Preferred Stock.
(ii) The method of valuation of securities subject
to investment letter or other restrictions on free marketability shall be to
make an appropriate discount from the market value determined as provided in
Sections 2(b)(i)(A), (B) or (C) to reflect the approximate fair market value
thereof, as mutually determined by the corporation and the holders of a
majority of the outstanding shares of Preferred Stock.
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<PAGE> 27
(iii) All other securities or other property shall
be valued at the fair market value thereof, as mutually determined by this
corporation and the holders of a majority of the outstanding shares of
Preferred Stock.
(iv) If the holders of a majority of the
outstanding shares of the Preferred Stock and the corporation are unable to
reach agreement on any valuation matter, such valuation shall be submitted to
and determined by a nationally recognized independent investment banking firm
selected by this corporation's board of directors and the holders of a majority
of the outstanding shares of the Preferred Stock (or, if such selection cannot
be made, by a nationally recognized independent investment banking firm
selected by the American Arbitration Association in accordance with its rules.)
(c) In the event the requirements of Section 2(b) hereof
are not complied with, this corporation shall forthwith either: (i) cause such
closing to be postponed until such time as the requirements of this Section 2
shall be complied with; or (ii) cancel such transaction, in which event the
rights, preferences and privileges of the holders of the Preferred Stock shall
revert to and be the same as such rights, preferences and privileges existing
immediately prior to the date of the first notice referred to in Section 2(d)
hereof.
(d) Not later than thirty (30) days before any event of
liquidation, dissolution or winding up under this Section 2, the corporation
shall deliver a notice to each holder of the Preferred Stock announcing such
proposed liquidation, dissolution or winding up. Such notice shall include a
description of the amounts that would be paid to the holders of the Preferred
Stock under this Section 2 and of the consideration that such holders would
receive if they exercised their rights to convert their shares of Preferred
Stock into shares of Common Stock. Not later than 10 days after delivery of
such notice, each holder of the Preferred Stock may deliver an election to the
corporation notifying the corporation that the holder desires that such
holder's shares of Preferred Stock be treated as if such shares had been
converted into shares of Common Stock. If such election is delivered, such
shares of Preferred Stock subject to such holder's notice shall be treated for
purposes of the liquidation, dissolution or winding up as if such shares had
been converted into Common Stock in accordance with the provisions of Section
4. If no such election is delivered, such holder shall receive the amounts as
provided for the holders of Preferred Stock under this Section 2.
(e) Consent for Certain Repurchase. Each holder of an
outstanding share of Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the California General Corporation
Law, to distributions made by the corporation
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in connection with the repurchase of shares of Common Stock issued to or by
employees or consultants upon termination of their employment or services
pursuant to agreements providing for the right of said repurchase between the
corporation and such persons.
3. Voting Rights.
(a) The holder of each share of Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws
of the corporation and shall vote with holders of the Common Stock upon the
election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote and except as otherwise set forth herein. The holder of each share of
Preferred stock shall be entitled to that number of votes equal to the number
of shares of Common Stock into which each share of Preferred Stock could be
converted on the record date for the vote or consent of shareholders.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of
Preferred Stock held by each holder) shall be disregarded.
(b) (i) Notwithstanding the foregoing, as long as
more than 500,000 shares of Series A Preferred Stock are outstanding, the
holders of Series A Preferred Stock, voting as a separate class, shall have the
right to elect one member of the corporation's board of directors. The holders
of Common Stock and Series B1, Series B2, and Series B3 Preferred Stock,
voting together as a single class, shall have the right to elect all other
members of the corporation's board of directors.
(ii) If there are less than or equal to 500,000
shares of Series A Preferred Stock outstanding, the holders of Common Stock,
Series A Preferred Stock, and Series B1, Series B2, Series B3 Preferred Stock,
voting together as a single class, shall have the right to elect all members of
the corporation's board of directors.
(iii) Notwithstanding any Bylaw provisions to the
contrary, the shareholders entitled to elect a particular director shall be
entitled to remove such director or to fill a vacancy in the seat formerly held
by such director, all in accordance with the applicable provisions provided in
the California Corporations Code.
4. Conversion. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock
shall be convertible into fully paid and nonassessable shares of Common Stock
without the payment of any additional consideration by the holder thereof and,
at the option of the holder thereof, at any
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time after the date of issuance of such share, at the office of the corporation
or any transfer agent for the Preferred Stock. Each share of Preferred Stock
shall be convertible into the number of fully paid and nonassessable shares of
Common Stock which results from dividing the Conversion Price (as hereinafter
defined) per share in effect for each series of Preferred Stock at the time of
conversion into the per share Conversion Value (as hereinafter defined) of such
series. The initial Conversion Price per share of Series A, Series B1, Series
B2, and Series B3 Preferred Stock shall be $1.00, $5.46, $7.56, and $9.86,
respectively. The per share Conversion Value of the Series A, Series B1,
series B2, and Series B3 Preferred Stock shall be $1.00, $5.46, $7.56, and
$9.86, respectively. The initial Conversion Prices of Preferred Stock shall be
subject to adjustment from time to time as provided below. The number of
shares of Common Stock into which a share of a series of Preferred Stock is
convertible is hereinafter referred to as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the corporation in which (a) the public
offering price equals or exceeds $5.50 per share (adjusted to reflect
subsequent stock dividends, stock splits or recapitalization) and (b) the
aggregate proceeds raised by the corporation, equals or exceeds $7,500,000.
(c) Mechanics of Conversion. Before any holder of
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate(s) therefor, duly endorsed,
at the office of the corporation or of any transfer agent for the Preferred
Stock and shall give written notice to the corporation at such office that he
elects to convert the same (except that no such written notice of election to
convert shall be necessary in the event of an automatic conversion pursuant to
Section 4(b) hereof). The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock
certificate(s) for the number of shares of Common Stock to which such holder
shall be entitled as aforesaid, together with cash for all declared and unpaid
dividends on the shares of Preferred Stock being converted, to and including
the time of conversion, and, if less than all of the shares of stock
represented by such Preferred Stock certificate(s) are converted, a certificate
representing the shares of Preferred Stock not converted. Such conversion
shall be deemed to have been made immediately prior to the close of business on
the date of such surrender of the shares of Preferred Stock to be converted
(except that in the case of an automatic conversion pursuant to
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Section 4 (b) hereof such conversion shall be deemed to have been made
immediately prior to the closing of the offering referred to in Section 4 (b))
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
(d) Fractional Shares. In lieu of any fractional shares
to which the holder of Preferred Stock would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the fair market
value of one share of Common Stock as reasonably determined by the board of
directors of the corporation. Whether or not fractional shares are issuable
upon such conversion shall be determined on the basis of the total number of
shares of Preferred stock of each holder to be converted at such time into
Common Stock and the number of shares of Common Stock issuable upon such
conversion.
(e) Adjustment of Conversion Price. The Conversion
Prices of each series of Preferred Stock shall be subject to adjustment from
time to time as follows:
(i) If the corporation shall issue or sell, any
Common Stock other than "Excluded Stock," as defined below, for a
consideration per share less than the Conversion Price of the Series A
Preferred Stock in effect immediately prior to the issuance of such Common
Stock (excluding stock dividends, subdivisions, split-ups, combinations,
dividends or recapitalizations which are covered by Sections 4(e)(iii), (iv),
(v), and (vi)), the Conversion Price of the Series A Preferred Stock in effect
after each such issuance shall thereafter (except as provided in this Section
4(e)) be adjusted to a price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of shares of
Common Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock, or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance multiplied by the Conversion Price of the Series A Preferred
Stock in effect immediately prior to such issuance, plus
(y) the consideration received by
the corporation upon such issuance, by
(B) the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon
conversion of the Preferred Stock or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to
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<PAGE> 31
clause (ii) below) immediately prior to such issuance plus the additional
shares of Common Stock issued in such issuance (but not including any
additional shares of Common Stock deemed to be issued as a result of any
adjustment in the Conversion Price of the Series A Preferred Stock resulting
from such issuance).
For purposes of any adjustment of the conversion Price
of the Series A Preferred Stock pursuant to this clause (i), the following
provisions shall be applicable:
(1) In the case of the issuance of
Common Stock for cash, the consideration shall be deemed to be the amount of
cash paid therefor after deducting any discounts or commissions paid or
incurred by the corporation in connection with the issuance and sale thereof.
(2) In the case of the issuance of
Common Stock for a consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair market value
thereof as determined by the board of directors of the corporation, in
accordance with generally accepted accounting treatment; provided, however,
that if, at the time of such determination, the corporation's Common Stock is
traded in the over-the-counter market or on a national or regional securities
exchange, such fair market value as determined by the board of directors of the
corporation shall not exceed the aggregate "Current Market Price" (as defined
below) of the shares of Common Stock being issued.
(3) In the case of the issuance of (i)
options to purchase or rights to subscribe for Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible into or
exchangeable for Common Stock (other than Excluded Stock), or (iii) options to
purchase or rights to subscribe for such convertible or exchangeable
securities:
(A) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subdivisions (1) and (2)
above), if any, received by the corporation upon the issuance of such options
or rights plus the minimum purchase price provided in such options or rights
for the Common Stock covered thereby;
(B) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent con-
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<PAGE> 32
version or exchange thereof, shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration received by the corporation for any
such securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the corporation upon the conversion or
exchange of such securities or the exercise of any related options or rights
(the consideration in each case to be determined in the manner provided in
subdivisions (1) and (2) above);
(C) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or exchange for such convertible or exchangeable securities,
or on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price of the Series A
Preferred Stock shall forthwith be readjusted to such Conversion Price as would
have obtained had the adjustment made upon (x) the issuance of such options,
rights or securities not exercised, converted or exchanged prior to such
change, as the case may be, been made upon the basis of such change or (y) the
options or rights related to such securities not converted or exchanged prior
to such change, as the case may be, been made upon the basis of such change;
and
(D) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A Preferred Stock
shall forthwith be readjusted to such Conversion Price as would have obtained
had the adjustment made upon the issuance of such options, rights, convertible
or exchangeable securities or options or rights related to such convertible or
exchangeable securities, as the case may be, been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
convertible or exchangeable securities or upon the exercise of the options or
rights related to such convertible or exchangeable securities, as the case may
be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock issued or
issuable to officers, directors, consultants or employees of the corporation
pursuant to any plan or arrangement approved by the board of directors of the
corporation; and
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(B) all shares of Series A Preferred
Stock and the Common Stock into which the shares of Series A Preferred Stock
are convertible.
(C) all shares of Series B1, Series B2,
and Series B3 Preferred Stock and the Common Stock into which the shares of
Series B1, Series B2, and Series B3 Preferred Stock are convertible.
All outstanding shares of Excluded Stock
(including any shares issuable upon conversion of the Preferred Stock but
excluding shares reserved for issuance for option plans for which options have
not yet been granted) shall be deemed to be outstanding for all purposes of the
computations of Section 4(e)(i) above.
(iii) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price of each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of any shares of such series of Preferred Stock shall be
increased in proportion to such increase of outstanding shares.
(iv) If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price of each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable
on conversion of any shares of such series of Preferred Stock shall be
decreased in proportion to such decrease in outstanding shares.
(v) In case the corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of capital stock
(other than Common Stock), stock or other securities of other persons,
evidences of indebtedness issued by the corporation or other persons, assets
(excluding cash dividends) or options or rights (excluding options to purchase
and rights to subscribe for Common Stock or other securities of the corporation
convertible into or exchangeable for Common Stock), then, in each such case,
the holders of shares of Preferred Stock shall, concurrent with the
distribution to holders of Common Stock, receive a like distribution based upon
the number of shares of Common Stock into which each series of Preferred Stock
is convertible.
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<PAGE> 34
(vi) In case, at any time after the date hereof,
of any capital reorganization, or any reclassification of the stock of the
corporation (other than as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of the
corporation with or into another person (other than a consolidation or merger
in which the corporation is the continuing entity and which does not result in
any change in the Common Stock), or of the sale or other disposition of all or
substantially all the properties and assets of the corporation, the shares of
Preferred Stock shall, after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the
corporation or otherwise to which such holder would have been entitled if
immediately prior to such reorganization, reclassification, consolidation,
merger, sale or other disposition he had converted his shares of Preferred
Stock into Common Stock. The provisions of this clause (vi) shall similarly
apply to successive reorganizations, reclassifications, consolidations,
mergers, sales or other dispositions.
(vii) All calculations under this Section 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
(viii) For the purpose of any computation pursuant
to this section 4(e), the "Current Market Price" at any date of one share of
Common Stock, shall be deemed to be the average of the highest reported bid and
the lowest reported offer prices on the preceding business day as furnished by
the National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the board of directors of the corporation, but if challenged by the
holders of more than 50% of the outstanding Preferred Stock, then as determined
by an independent appraiser selected by the board of directors of the
corporation, the cost of such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion
Price need be made if such adjustment would result in a change in the
Conversion Price of less than $0.01. Any adjustment of less than $0.01 which
is not made shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, on a cumulative basis, amounts
to an adjustment of $0.01 or more in the Conversion Price. At no time,
however, shall the Conversion Price be adjusted upward for subsequent issuances
or sales for a consideration per share higher than the then current conversion
price.
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<PAGE> 35
(g) No Impairment. The corporation will not through any
reorganization, recapitalization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Conversion Rate pursuant to this Section
4, the corporation at its expense shall promptly computed such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a Certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any time
of any holder of preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate of such series at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversions of such holder's shares of
Preferred Stock.
(i) Notices of Record Date. In the event of any taking
by the corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property or to receive any other right, the
corporation shall mail to each holder of Preferred Stock at least twenty (20)
days prior to such record date, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution or
right, and the amount and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to
effect the conversion of all then outstanding shares of Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its
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<PAGE> 36
authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of
this Section 4 to be given to the holder of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
(l) Reissuance of Converted-Shares. No shares of
Preferred stock which have been converted into Common Stock after the original
issuance thereof shall ever again be reissued and all such shares so converted
shall upon such conversion cease to be a part of the authorized shares of the
corporation.
5. Protective Provisions. So long as shares of Preferred Stock
are outstanding, this corporation shall not, and shall not permit any
subsidiary to, without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Preferred Stock:
(a) sell, lease, convey, assign or otherwise dispose of
or encumber all or substantially all of its property, assets or business or of
any of its subsidiaries' property, assets or business or merge into or
consolidate with any other corporation (other than a wholly owned subsidiary
corporation) or effect any transaction or series of related transactions in
which more than 50% of the voting power of the corporation is disposed of or
effect any reclassification or other change of any stock, or any
recapitalization or dissolution, liquidation or winding up of the corporation
or make any agreement to become obligated to do so;
(b) repurchase, redeem or otherwise acquire for value any
shares of Common Stock except repurchases of Common Stock at the original
issuance price from employees, officers, directors and consultants pursuant to
the terms of the agreement between the Company and such purchasers pursuant to
which the corporation has the option to repurchase such shares upon the
occurrence of certain events, including the termination of employment by or
service to the corporation or any subsidiary of the corporation:
(c) change or alter the rights, preferences, privileges
or restrictions of the Preferred Stock;
(d) increase or decrease the aggregate number of
authorized shares of Preferred Stock, other than an increase as provided in
either subdivision (b) of Section 405 or subdivision (c) of Section 902 of the
California Corporations Code;
(e) create a new class or series of shares having rights,
preferences or privileges prior to or on parity with the
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<PAGE> 37
Preferred Stock or increase the rights, preferences or privileges or the number
of authorized shares of any class having rights, preferences or privileges
prior to or on parity with the Preferred Stock; for purposes of this
subsection, any indebtedness convertible into or exchangeable for a new class
or series of shares of capital stock of the corporation shall be considered to
be a new class or series of shares having rights, preferences, privileges or
restrictions prior to the Preferred Stock;
(f) increase or decrease the corporation's authorized
capitalization;
(g) declare or pay any dividends on or declare or make
any other distribution, direct or indirect, (other than a dividend payable
solely in shares of Common Stock) on account of the Common Stock or any other
shares of the corporation or set apart any sum for any such purpose; or
(h) amend this Amended and Restated Articles of
incorporation.
6. Status of Converted Stock. In the event any shares of
Preferred Stock shall be converted, the shares so converted shall be canceled
and shall not be issuable by the corporation, and the Articles of
Incorporation, as amended, of this corporation shall be appropriately amended
to effect the corresponding reduction in the corporation's authorized capital
stock.
V.
1. Limitation of Directors' Liability. The liability of the
directors of this corporation for monetary damages shall be eliminated to the
fullest extent permissible under California law.
2. Indemnification of Corporate Agents. This corporation is
authorized to indemnify its agents to the fullest extent permissible under
California law. For purposes of this provision the term "agent" has the
meaning set forth in Section 317 of the California Corporations Code.
3. Repeal or Modification. Any repeal or modification of the
foregoing provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification.
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<PAGE> 38
THREE: The foregoing amendment and restatement of the Restated
Articles of Incorporation has been approved by the Board of Directors.
FOUR: The foregoing amendment and restatement of the Restated
Articles of Incorporation has been duly approved by the required vote of the
shareholders in accordance with Section 902 of the Corporations Code. The
total number of outstanding shares entitled to vote with respect to the
amendment is 7,045,000 shares of Common Stock and 2,000,000 shares of Series A
Preferred Stock. The number of shares voting in favor of the amendment equaled
or exceeded the vote required. The percentage vote required was a majority of
the outstanding shares of Common Stock and a majority of the outstanding shares
of Preferred Stock.
We declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge. Executed at San Diego, California on April ____, 1995.
-------------------------------------
Tsvi Goldenberg, Ph.D.,
Chairman of the Board and
Chief Executive Officer
-------------------------------------
J. Casey McGlynn, Secretary
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<PAGE> 39
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of May 3, 1995 is made and given
pursuant to Section 2 of the Immusol, Inc. (the ("Company") Preferred Stock
Purchase Agreement of even date herewith (the "Agreement"). The paragraph
numbers in this Schedule of Exceptions correspond to the paragraph numbers in
the Agreement; however, any information disclosed herein under any paragraph
number shall be deemed to be disclosed and incorporated into any other
paragraph number under the Agreement where such disclosure would be
appropriate. Any terms defined in the Agreement shall have the same meaning
when used in this Schedule of Exceptions as when used in the Agreement unless
the context otherwise requires.
2.2 Capitalization.
(c) The Company has granted an option exercisable for up to
10,000 shares.
(d) Under Section 4.2 of the Exclusive License Agreement with
the Regents of the University of California (the "Regents") dated December 7,
1993 ("License Agreement") and Section 4 of the Appendix A to the License
Agreement, the Company must transfer to the Regents that whole number of shares
of Series B1 Preferred Stock equal to an aggregate value of $40,000.
2.9 Patents and Other Intangible Assets.
(a) Ribozyme Pharmaceutical, Inc. ("RPI") owns patents
regarding certain enzymatic RNAs. However, Ken Weber of Townsend and Townsend
et. al. states in a letter to the Company dated April 12, 1994 that a court
would not interpret RPI's patent claims to embrace hairpin ribozymes and that
the Company does not infringe RPI's patent(s).
(b) The Company has a Patent License Agreement with the
Chinese Academy of Preventive Medicine ("CAPM") dated December 20, 1994
("Patent Agreement"). Under the Patent Agreement, CAPM grants to the Company
an exclusive, royalty-bearing license to the U.S. patent application Serial No.
08/221,380. In consideration for the Patent Agreement, the Company has paid to
CAPM a nonrefundable license fee of $50,000, and shall pay to CAPM royalties on
sales of products resulting from the licensed technology.
<PAGE> 40
2.11 Agreements; Action.
(a) The Company has an employment agreement with Tsvi
Goldenberg, Ph.D., the Chairman of the Board and Chief Executive officer of the
Company, dated April 26, 1994 ("Employment Agreement"). The Employment
Agreement is an at-will employment agreement, specifies Dr. Goldenberg's annual
salary, and provides a severance payment equal to nine months of Dr.
Goldenberg's then annual salary.
(b) The License Agreement remains in effect for the life
of the last-to-expire patent licensed under such agreement or until December
7, 2013 if no patent licensed under such agreement issues. Under the License
Agreement, the Company is obligated to pay royalty payments, with defined
annual minimums, and annual license maintenance fees. The Company must pay an
earned royalty of between 2% and 6% of nets sales of certain products defined
in the License Agreement during the term of such agreement. The minimum annual
royalty payments range between $50,000 and $200,000 beginning with the first
year the Company sells FDA approved products. The license maintenance fees,
which is not credited towards the royalty payments, range between $10,000 and
$200,000 per year.
The Company has a Master Lease Agreement dated November 18,
1994 ("Lease Agreement") with Comdisco, Inc. ("Comdisco"). The Lease Agreement
provides a lease line of up to $250,000, in the aggregate, for equipment leases
and subjects the Company to payments of between 24-60 months as lease payments
for certain equipments. As of the date herein, the Company has drawn down
approximately $85,000 from the available lease line.
The Company has a sublease agreement with Hybritech for the
Company's operations at 3050 Science Park Road, San Diego, CA 92121 which
expires on May 16, 1996. The Company subleases 23,905 square feet and
currently pays a monthly rent of $45,897.60, which will increase to $47,733.50
on June 17, 1995. The Company also pays its pro rata share of insurance, taxes
and common area expenses.
The Company subsubleases 11,987 square feet of its subleased
area to Idun Pharmaceuticals, Inc. ("Idun"). The current monthly rent payment
is $23,495, which will increase to $24,434.80 on June 17, 1995. Idun pays to
the Company its pro rata share of insurance, taxes and common area expenses.
In conjunction with the Agreement, the Company shall enter
into a License and Royalty Agreement and a Collaborative Research Agreement
with Pfizer Ltd.
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<PAGE> 41
EXHIBIT D
IMMUSOL, INC.
PROPRIETARY INFORMATION AGREEMENT
As a condition of my employment with Immusol, Inc., its subsidiaries,
affiliates, successors or assigns (together the "COMPANY"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company, I agree to the following:
I. At-Will Employment. I understand and acknowledge that my
employment with the Company is for an unspecified duration and constitutes
"at-will" employment. I acknowledge that this employment relationship may be
terminated at any time, with or without good cause or for any or no cause, at
the option either of the Company or myself, with or without notice.
II. Confidential Information.
A. Company Information. I agree at all times during the
term of my employment and thereafter, to hold in strictest confidence, and not
to use, except for the benefit of the Company, or to disclose to any person,
firm or corporation without written authorization of the Board of Directors of
the Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly in
writing, orally or by drawings or observation of parts or equipment. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of mine or of others who were under confidentiality obligations as
to the item or items involved.
B. Former Employer Information. I agree that I will
not, during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer
or other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person
<PAGE> 42
or entity unless consented to in writing by such employer, person or entity.
C. Third Party Information. I recognize that the
Company has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information and to use it only for
certain limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out my work
for the Company consistent with the Company's agreement with such third party.
III. Inventions.
A. Inventions Retained and Licensed. I have attached
hereto, as Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements, and trade secrets which were made by me
prior to my employment with the Company (collectively referred to as "PRIOR
INVENTIONS") , which belong to me, which relate to the Company's proposed
business, products or research and development, and which are not assigned to
the Company hereunder; or, if no such list is attached, I represent that there
are no such Prior Inventions. If in the course of my employment with the
Company, I incorporate into a Company product, process or machine a Prior
Invention owned by me or in which I have an interest, the Company is hereby
granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
worldwide license to make, have made, modify, use and sell such Prior Invention
as part of or in connection with such product, process or machine.
B. Assignment of Inventions. I agree that I will
promptly make full written disclosure to the Company, will hold in trust for the
sole right and benefit of the Company, and hereby assign to the Company, or its
designee, all my right, title, and interest in and to any and all inventions,
original works of authorship, developments, concepts, improvements or trade
secrets, whether or not patentable or registrable under copyright or similar
laws, which I may solely or jointly conceive or develop or reduce to practice,
or cause to be conceived or developed or reduced to practice, during the period
of time I am in the employ of the Company (collectively referred to as
"INVENTIONS"), except as provided in Section 3(f) below. I further acknowledge
that all original works of authorship which are made by me (solely or jointly
with others) within the scope of and during the period of my employment with
the Company and which are predictable by copyright are "works made for hire,"
as that term is defined in the United States Copyright Act.
-2-
<PAGE> 43
C. Inventions Assigned to the United States. I agree to
assign to the United States government all my right, title, and interest in and
to any and all Inventions whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
D. Maintenance of Records. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
E. Patent and Copyright Registrations. I agree to
assist the Company, or its designee, at the Company's expense, in every proper
way to secure the Company's rights in the Inventions and any copyrights,
patents, mask work rights or other intellectual property rights relating
thereto in any and all countries, including the disclosure to the Company of
all pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other instruments
which the Company shall deem necessary in order to apply for and obtain such
rights and in order to assign and convey to the Company, its successors,
assigns and nominees the sole and exclusive rights, title and interest in and
to such Inventions, and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto. I further agree that my
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of my mental or physical
incapacity or for any other reason to secure my signature to apply for or to
pursue any application for any United States or foreign patents or copyright
registrations covering Inventions or original works of authorship assigned to
the Company as above, then I hereby irrevocably designate and appoint the
Company and its duly authorized officers and agents as my agent and attorney in
fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by me.
F. Exception to Assignments. I understand that the
provisions of this Agreement requiring assignment of Inventions to the Company
do not apply to any invention which qualifies fully under the provisions of
California Labor Code Section 2870 (attached hereto as Exhibit B). I will
advise the Company promptly in writing of any inventions that I believe meet
the criteria in California Labor Code Section 2870 and not otherwise disclosed
on Exhibit A.
-3-
<PAGE> 44
IV. Conflicting Employment. I agree that, during the term of
my employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
V. Returning Company Documents. I agree that, at the time of
leaving the employ of the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "TERMINATION CERTIFICATION"
attached hereto as Exhibit C.
VI. Notification to New Employer. In the event that I leave the
employ of the Company, I hereby grant consent to notification by the Company to
my new employer about my rights and obligations under this Agreement.
VII. Solicitation of Employees. I agree that for a period of
twelve (12) months immediately following the termination of my relationship
with the Company for any reason, whether with or without cause, I shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for myself or for any other person or entity.
VIII. Conflict of Interest Guidelines. I agree to diligently adhere
to the Conflict of Interest Guidelines attached as Exhibit D hereto.
IX. Representations. I agree to execute any proper oath or verify
any proper document required to carry out the terms of this Agreement. I
represent that my performance of all the terms of this Agreement will not
breach any agreement to keep in confidence proprietary information acquired by
me in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
X. Arbitration and Equitable Relief.
A. Arbitration. Except as provided in Section 10(b) below,
I agree that any dispute or controversy arising out of or
-4-
<PAGE> 45
relating to any interpretation, construction, performance or breach of this
Agreement, shall be settled by arbitration to be held in Santa Clara County,
California, in accordance with the rules then in effect of the American
Arbitration Association. The arbitrator may grant injunctions or other relief
in such dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgement may
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
B. Equitable Remedies. I agree that it would be
impossible or inadequate to measure and calculate the Company's damages from
any breach of the covenants set forth in Sections 2, 3, and 5 herein.
Accordingly, I agree that if I breach any of such Sections, the Company will
have available, in addition to any other right or remedy available, the right
to obtain an injunction from a court of competent jurisdiction restraining such
breach or threatened breach and to specific performance of any such provision
of this Agreement. I further agree that no bond or other security shall be
required in obtaining such equitable relief and I hereby consent to the
issuance of such injunction and to the ordering of specific performance.
XI. General Provisions
A. Governing Law; Consent to Personal Jurisdiction.
This Agreement will be governed by the laws of the State of California. I
hereby expressly consent to the personal jurisdiction of the state and federal
courts located in California for any lawsuit filed there against me by the
Company arising from or relating to this Agreement.
B. Entire Agreement. This Agreement sets forth the
entire agreement and understanding between the Company and me relating to the
subject matter herein and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this agreement, will be effective unless in writing signed by the party
to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Agreement.
C. Severability. If one or more of the provisions in
this Agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.
-5-
<PAGE> 46
D. Successors and Assigns. This Agreement will be
binding upon my heirs, executors, administrators and other legal representatives
and will be for the benefit of the Company, its Successors, and its assigns.
Date:
----------------------
-----------------------------------
Signature
-----------------------------------
Name of Employee
(typed or printed)
- ---------------------------
Witness
-6-
<PAGE> 47
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
<TABLE>
<CAPTION>
Identifying Number
Title Date or Brief Description
- ------------------------- ---------- -------------------------------
<S> <C> <C>
</TABLE>
_____ No inventions or improvements
_____ Additional Sheets Attached
Signature of Employee: __________________________________________
Print Name of Employee: __________________________________________
Date: ______________________
<PAGE> 48
EXHIBIT B
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that
an employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee for
the employer.
(b) To the extent a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE> 49
EXHIBIT C
IMMUSOL, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Immusol, Inc. its subsidiaries, affiliates, successors or
assigns (together, the "COMPANY") .
I further certify that I have complied with all the terms of the
Company's Employment, Confidential Information and Invention Assignment
Agreement signed by me, including the reporting of any inventions and original
works of authorship (as defined therein), conceived or made by me (solely or
jointly with others) covered by that agreement.
I further agree that, in compliance with the Proprietary Information
Agreement, I will preserve as confidential all trade secrets, confidential
knowledge, data or other proprietary information relating to products,
processes, know-how, designs, formulas, developmental or experimental work,
computer programs, data bases, other original works of authorship, customer
lists, business plans, financial information or other subject matter pertaining
to any business of the Company or any of its employees, clients, consultants or
licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:
-----------------------
------------------------------------
(Employee's Signature)
-------------------------------------
(Type/Print Employee's Name)
<PAGE> 50
EXHIBIT D
IMMUSOL, INC.
CONFLICT OF INTEREST GUIDELINES
It is the policy of Immusol, Inc. to conduct its affairs in strict
compliance with the letter and spirit of the law and to adhere to the highest
principles of business ethics. Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give
the appearance of being in conflict, with these principles and with the
interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the
President and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive
entertainment, favors or payments which may be deemed to constitute undue
influence or otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that
might involve divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or
is or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social
harassment of employees.
6. Investing or holding outside directorships in suppliers,
customers or competing companies, including financial speculation, where such
investment or directorship might influence in any manner a decision or course
of action of the Company.
7. Borrowing from or lending to employees, customers or
suppliers.
<PAGE> 51
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or
markets with competing companies or their employees.
11. Making any unlawful agreements with distributors with respect
to prices.
12. Improperly using or authorizing the use of any inventions
which are the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of
the Company.
Each officer, employee and independent contractor must take every
necessary action to ensure compliance with these guidelines and to bring
problem areas to the attention of higher management for review. Violations of
this conflict of interest policy may result in discharge without warning.
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<PAGE> 52
EXHIBIT E
May 3, 1995
To the Investors Listed in
Exhibit A to the Immusol, Inc.
Preferred Stock Purchase
Agreement Dated as of May 3, 1995
Ladies and Gentlemen:
Reference is made to the Preferred Stock Purchase Agreement of even
date herewith (the "Agreement"), complete with all listed exhibits thereto
(together, the "Agreements"), by and among Immusol, Inc., a California
corporation (the "Company"), and the persons and entities listed in Exhibit A
to the Agreement (the "Investors"), which provides for the present and future
issuances by the Company to the Investors of shares of Series B1, Series B2,
and Series B3 Preferred Stock of the Company (the "Shares"). This opinion is
rendered to you pursuant to Section 5.6 of the Agreement, and all terms used
herein have the meanings defined for them in the Agreement unless otherwise
defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreements and the issuance of the Shares. As such counsel,
we have made such legal and factual examinations and inquiries as we have
deemed advisable or necessary for the purpose of rendering this opinion. In
addition, we have examined originals or copies of such corporate records of the
Company, certificates of public officials and such other documents which we
consider necessary or advisable for the purpose of rendering this opinion. In
such examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us
as originals, the conformity to original documents of all copies submitted to
us and the due execution and delivery of all documents (except as to due
execution and delivery by the Company) where due execution and delivery are a
prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to
us" or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge",
"known to
<PAGE> 53
WILSON SONSINI GOODRICH & ROSATI
us" or similar language with reference to matters of fact refers to the current
actual knowledge of the attorneys of this firm who have worked on matters for
the Company. Except to the extent expressly set forth herein or as we
otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact,
and no inference as to our knowledge of the existence or absence of any fact
should be drawn from our representation of the Company or the rendering of the
opinion set forth below.
For purposes of this opinion, we are assuming the following:
(a) Each Investor has all requisite power and authority, and has
taken any and all necessary corporate or partnership action, to execute and
deliver the Agreements;
(b) The representations and warranties made by the Investors in
the Agreement and pursuant thereto are true and correct;
(c) The Investors have purchased and will be purchasing the Shares
for value, in good faith and without notice of any adverse claims within the
meaning of the California Uniform Commercial Code; and
(d) The representations and warranties made by the Company in the
Agreement and pursuant thereto are true and correct as to matters of fact.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable remedies
(regardless of whether any such remedy is considered in a proceeding at law or
in equity);
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Section 1.9 of the Amended and Restated
Shareholder Rights Agreement, which is attached as Exhibit F to the Agreement,
to the extent the provisions thereof may be subject to limitations of public
policy and the effect of applicable statutes and judicial decisions;
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<PAGE> 54
WILSON SONSINI GOODRICH & ROSATI
this opinion addresses applicable securities laws of states other than the
State of California, we have not retained nor relied on the opinion of counsel
admitted to the bar of such states, but rather have relied on compilations of
the securities laws of such states contained in reporting services presently
available to us.
Based upon and subject to the foregoing, and except as set forth in
the Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of California and is in
good standing under such laws. The Company has requisite corporate power and
authority to own and operate its properties and assets, and to carry on its
business as presently conducted. The Company is not qualified to do business
as a foreign corporation in any jurisdiction and such qualification is not
presently required. The Company does not presently own or control, directly or
indirectly, any interest in any other corporation, association or other
business entity.
2. The Company has all requisite legal and corporate power and
authority to execute and deliver the Agreements, to sell and issue the Shares
thereunder, to issue the Common issuable upon conversion of the Shares and to
carry out and perform its obligations under the terms of the Agreements.
3. Immediately prior to the Initial Closing, the authorized
capital stock of the Company consists of 20,000,000 shares of Common Stock,
7,045,000 shares of which are issued and outstanding, and 3,491,700 shares of
Preferred Stock, of which 2,000,000 shares are designated Series A Preferred
Stock and 922,800, 264,600, and 304,300, shares are designated Series B1,
Series B2, and Series B3 Preferred Stock, respectively. Immediately prior to
the Initial Closing, 2,000,000 shares of Series A Preferred Stock and no shares
of Series B1, Series B2, and Series B3 Preferred Stock are issued and
outstanding. All such issued and outstanding shares of Common Stock and Series
A Preferred Stock have been duly authorized and validly issued and are fully
paid and nonassessable and free of any preemptive or similar rights contained
in the Restated Articles or bylaws of the Company or, to our knowledge, any
other preemptive or similar rights. The offer, issuance and sale of such
shares of Common Stock and Series A Preferred Stock were exempt from the
registration under the Act and were registered or qualified (or were exempted
from registration or qualification) under the registration or qualification
requirements of applicable state securities laws. The Common Stock issuable
upon conversion of the Shares has been duly and validly reserved for issuance,
and when issued in accordance with the Company's Restated Articles will be duly
and validly issued, fully paid and nonassessable, free and clear of all liens
and restrictions, other than liens created by Investors or by the Agreements,
and shall be issued in compliance with applicable securities laws, as presently
in effect, of the United States and each of the states who's securities laws
govern
-3-
<PAGE> 55
WILSON SONSINI GOODRICH & ROSATI
Shares has been duly and validly reserved for issuance, and when issued in
accordance with the Company's Restated Articles will be duly and validly
issued, fully paid and nonassessable, free and clear of all liens and
restrictions, other than liens created by Investors or by the Agreements, and
shall be issued in compliance with applicable securities laws, as presently in
effect, of the United States and each of the states who's securities laws
govern the issuance of the Shares hereunder. The Shares issued under the
Agreement are validly issued, fully paid and non-assessable and free and clear
of any liens or encumbrances; provided, however, that the Shares (and the
Common Stock issuable upon conversion thereof) may be subject to restrictions
on transfer under state or federal securities laws as set forth in the
Agreement. Neither the issuance, sale or delivery of the Shares (or the Common
Stock issuance upon the conversion thereof) is subject to any preemptive right
of the shareholders of the Company or to any rights of first refusal or other
rights in favor of any person. To our knowledge, except for rights described
in the Agreements, there are no other options, warrants, conversion privileges
or other rights presently outstanding to purchase or otherwise acquire any
authorized but unissued shares of capital stock or other equity or debt
securities of the Company, or any other agreements to issue any such securities
or rights. The stock certificates representing the Shares delivered to the
Investors at the Initial Closing have been duly authorized, executed and
delivered by the Company, and the form and content of such certificates comply
with all relevant provisions of the California Corporations Code.
4. All corporate action on the part of the Company, its officers,
directors and shareholders necessary for the authorization, execution and
delivery of the Agreements by the Company, the authorization, sale, issuance
and delivery of the Shares (and the Common Stock issuable upon conversion
thereof) and the performance of the Company's obligations under the Agreements
have been taken. The Agreements have been duly and validly executed and
delivered by the Company and constitute valid and binding obligations of the
Company, enforceable against the Company in accordance with its terms.
5. To our knowledge, the business and operations of the Company
have been and are being conducted in substantial compliance with applicable
federal, state and local laws and rules and regulations, except in those
instances in which failure to comply would not materially and adversely affect
the Company, its business, properties or finances. The execution, delivery and
performance of and compliance with the terms of the Agreements and the issuance
of the Shares (and the Common Stock issuable upon conversion thereof), do not
violate any provision of the Restated Articles or bylaws or any provision of
any applicable federal or state law, rule or regulation. To our knowledge, the
execution, delivery and performance of and compliance with the Agreements and
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<PAGE> 56
WILSON SONSINI GOODRICH & ROSATI
the issuance of the Shares (and the Common Stock issuable upon conversion
thereof) do not violate, or constitute a default under any material contract,
agreement, instrument, judgment or decree binding upon the Company.
6. To our knowledge, there are no actions, suits, proceedings or
investigations pending or threatened against the Company or its properties
before any court or governmental agency which, either in any case or in the
aggregate, are likely to result in any material adverse change in the business
or financial condition of the Company or any of its properties, or in any
material impairment of the right or ability of the Company to carry on its
business as now conducted, or which questions the validity of the Agreements or
any action taken or to be taken by the Company in connection therewith, and we
are not aware of any facts which might result in or form basis for any such
action, suit, proceeding or investigation. To our knowledge, the Company is
not in default with respect to any order, writ, judgement, injunction, decree,
determination or award of any court or of any government agency or
instrumentality.
7. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of the
Company is required in connection with the valid execution and delivery of the
Agreements or the offer, sale or issuance of the Shares (and the Common Stock
issuable upon conversion thereof) or the consummation of any other transaction
contemplated by the Agreements, except (a) filing of the Restated Articles in
the Office of the Secretary of State of the State of California, and (b)
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) under the California Corporate Securities Law
and other applicable blue sky laws (but excluding jurisdictions outside of the
United States) of the offer and sale of the Shares (and the Common Stock
issuable upon conversion thereof) and the modification of rights of
shareholders contemplated by the Agreements. The filing referred to in clause
(a) above has been accomplished and is effective.
8. Subject to the accuracy of the Investors' representations in
Section 3 of the Agreement and their responses (if any) to the Company's
inquiries, we are of the opinion that the offer, sale and issuance of the
Shares in conformity with the terms of the Agreements constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended and the qualification requirements of Section 25110 of the
California Corporations Code. Our opinion herein is subject to the timely and
proper completion of all filings and other actions contemplated herein where
such filings and actions are to be undertaken on or after the date hereof.
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<PAGE> 57
WILSON SONSINI GOODRICH & ROSATI
This opinion is furnished to the Investors solely for their benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
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<PAGE> 58
EXHIBIT F
AMENDED AND RESTATED SHAREHOLDER RIGHTS AGREEMENT
This Amended and Restated Shareholder Rights Agreement (the
"Agreement") is effective as of May 3, 1995 by and between Immusol, Inc. (the
"Company") and the investors designated on Exhibit A attached hereto (the
"Investors"). This Agreement amends and restates the Shareholder Rights
Agreement dated July 27, 1992 (the "Prior Agreement"), and such amendment and
restatement is effective upon the execution of this Agreement by the Company
and the Holders of at least a majority of the Registrable Securities under the
prior Agreement.
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Section 1:
(a) The terms "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act including
any pre-effective or post-effective amendments necessary thereto, and the
declaration or ordering of effectiveness of such registration statement or
document;
(b) The term "Registrable Securities" means (i)
the Common Stock issuable or issued upon conversion of the Series A, Series B1,
Series B2, and Series B3 Preferred Stock (together, the "Preferred Stock") and
(2) any Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, or in exchange for or in
replacement of, such Preferred Stock or Common Stock, excluding in all cases,
however, (i) any Registrable Securities sold by a person in a transaction in
which his rights under this Section 1 are not assigned, or (ii) any Registrable
Securities sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.
(c) The number of shares of "Registrable
Securities then outstanding" shall be determined by the number of shares of
Common Stock outstanding which are, and the number of shares of Common Stock
issuable pursuant to then exercisable or convertible securities which are,
Registrable Securities.
(d) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof; and
(e) The term "Form S-3" means such form under the
Act as in effect on the date hereof or any registration form under the Act
subsequently adopted by the Securities and Exchange Commis-
<PAGE> 59
sion (the "SEC") which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(f) The term "Act" shall mean the Securities Act
of 1933, as amended.
(g) The term "Purchase Agreements" shall mean the
series A Preferred Stock Purchase Agreement dated July 27, 1992 and the
Preferred Stock Purchase Agreement of even date herewith.
1.2 Request for Registration
(a) If the Company shall receive at any time
after the earlier of (i) December 31, 1997 or (ii) six (6) months after the
effective date of the first registration statement for a public offering of
Securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a
written request from the Holders of at least 500,000 shares of the outstanding
Registrable Securities (including securities convertible into Registrable
Securities) that the Company file a registration statement under the Act
covering the registration of at least forty percent (40%) of the Registrable
Securities then held by the Holders, or a lesser number if the anticipated
aggregate offering price, net of underwriting discounts and commissions,
exceeds $7,500,000, then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of Section 1.2(b), effect as soon as practicable, and in any
event within ninety (90) days of the receipt of such request, the registration
under the Act of all Registrable Securities which the Holders request to be
registered within thirty (30) days of the mailing of such written notice by the
Company; provided, however, that the Company shall not be obligated to take any
action to effect any such registration, qualification or compliance pursuant to
this Section 1.2(a):
(i) During the period starting with the
date ninety (90) days prior to the Company's estimated date of filing of, and
ending on the date one hundred eighty (180) days immediately following the
effective date of, any registration statement pertaining to securities of the
Company (other than a registration of securities in a Rule 145 transaction or
with respect to an employee benefit plan), provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(ii) After the Company has effected two
(2) such registrations pursuant to this Section 1.2(a), and such registrations
have been declared or ordered effective, provided
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that a request for registration under this Section 1.2(a) shall not Recounted
for such purpose unless the Registrable Securities included in such
registration as of the time of the pertinent registration statement became
effective were in fact registered and distributed in accordance with the
intended method of distribution; or
(iii) If the Company shall furnish to such
holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors it would be seriously
detrimental to the Company or its shareholders for a registration statement to
be filed at such time, then the company's obligation to use its best efforts to
register, qualify or comply under this Section 1.2(a) shall be deferred for a
period not to exceed one hundred eighty (180) days from the date of receipt of
written request from the Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.
(b) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as a part of their request made pursuant to
this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event, the right of any Holder to
include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 1.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder.
1.3 Company Registration. If (but without any obligation
to do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities under the Act in connection with the
public offering of such securities
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solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, or a registration on any
form which does not include substantially the information as would be required
to be included in a registration statement covering the sale of the Registrable
Securities) the company shall, at such time, promptly give each Holder written
notice of such registration. Upon the written request of each holer given
within thirty (30) days after mailing of written notice by the Company, the
Company shall, subject to the provisions of Section 1.8, cause to be registered
under the Act all of the Registrable Securities that each such Holder has
requested to be registered. However, the Company shall not be obligated to
take any action to effect the registration of the Registrable Securities of the
Holders pursuant to this Section 1.3 after the Company has effected three (3)
such registrations pursuant to this Section 1.3, and such registrations have
been declared or ordered effective.
1.4 Obligations of the Company. Whenever required under
this section 1 to effect the registration of any Registrable securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to one hundred
twenty (120) days.
(b) Prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply with
the provisions of the Act with respect to the disposition of all securities
covered by such registration statement.
(c) Furnish to the Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify
the securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, and do any and all other acts and things reasonably
necessary or advisable to enable the sale or disposition in such jurisdictions
of the shares covered by the registration statement, provided that the Company
shall not be required in connection therewith or as a condition thereto to
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qualify to do business or to file a general consent to service of process in
any such states or jurisdictions.
(e) In the event of any underwritten public
offering, enter into and perform its obligations under an underwriting
agreement, in usual and customary form, with the managing underwriter of such
offering. Each Holder participating in such underwriting shall also enter into
and perform such Holder's obligations under such an agreement provided that
such underwriting agreement shall not provide for indemnification or
contribution obligations on the part of the Holders greater than the
obligations set forth in Section 1.9(b).
(f) Cooperate with the selling Holders, to
facilitate the timely preparation and delivery of certificates representing
shares to be sold and not bearing any restrictive legends, and enable such
shares to be in such denominations and registered in such names as the
prospective underwriters may request at least two (2) business days prior to
any sale of shares to the prospective underwriters.
(g) Cause all shares covered by any registration
statement to be listed on each securities exchange on which similar securities
issued by the Company are then listed if requested by the Holders of a majority
of the Registrable Securities. The company further agrees to provide a
transfer agent and registrar for such Registrable Securities covered by such
registration statement not later than the effective date of such registration
statement.
(h) Provide a CUSIP number of all shares of
stock, not later than the effective date of the registration statement.
(i) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(j) Furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1,
on the date that such Registrable Securities are delivered to the underwriters
for sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an
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opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities
and (ii) a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and to the Holders
requesting registration of Registrable securities, if possible.
1.5 Furnish Information. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 1 with respect to the Registrable Securities of any selling Holder that
such holder shall furnish to the company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
1.6 Expenses of Demand Registration. All expenses other
than underwriting discounts and commissions incurred in connection with
registrations filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers,
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders (not
to exceed $25,000) shall be borne by the Company; provided, however, that the
company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to Section 1.2 if the registration request is
subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all Participating
Holders shall bear such expenses), unless the Holders of a majority of the
Registrable Securities agree to forfeit their right to a demand registration
pursuant to Section 1.2; provided further, however, that if at the time of such
withdrawal the Holders have learned of a material adverse change in the
conditions business, or prospects of the Company from that known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall
bear and pay all expenses incurred in connection with any registration, filing
or qualification of Registrable Securities with respect to all registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as
provided in Section 1.12), including (without limitation) all registration,
filing, and qualification fees, printers and accounting fees relating or
apportionable thereto and the fees and disbursements of one counsel for the
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selling Holders selected by them (not to exceed $25,000), but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.8 underwriting Requirements. In connection with any
offering involving an underwriting of shares being issued by the Company, the
Company shall not be required under Section 1.3 to include any of the Holders,
securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the company and the underwriters selected
by it, and then only in such quantity as will not, in the opinion of the
underwriters, jeopardize the success of the offering by the Company; provided
that such underwriting agreement is in customary form and is reasonably
acceptable to the Holders of a majority of the Registrable Securities requested
to be included in such registration and does not provide for indemnification or
contribution obligations on the part of the Holders greater than the
obligations set forth in Section 1.9(b). If the total amount of securities,
including Registrable Securities, requested by shareholders to be included in
such offering exceeds the amount of securities sold other than by the company
that the underwriters reasonably believe compatible with the success of the
offering, then the Company shall be required to include in the offering only
that number of such securities , including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling
shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder or in such other proportions
as shall mutually be agreed to by such selling shareholders) but in no event
shall any shares being sold by a shareholder exercising a demand registration
right similar to that granted in Section 1.2 be excluded from such offering.
For purposes of apportionment, any selling shareholder which is a Holder of
Registrable Securities and which is a partnership or corporation, the partners,
retired partners and shareholders of such Holder, or the estates and family
members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing persons shall be deemed to be a single "selling
shareholder", and any pro rata reduction with respect to such "selling
shareholder" shall be based upon the aggregate amount of shares carrying
registration rights owned by all entities and individuals included in such
"selling shareholder", as defined in this sentence.
1.9 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company
will indemnify and hold harmless each Holder, each of it officers, directors
and agents, any underwriter (as defined in the Act) for
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such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, amended
(the 1934 Act") , against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
or action in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation") :
(i) any untrue statement or alleged untrue statement of a material fact
contained in such registration statement, including any preliminary prospectus
or final prospectus contained therein or any amendments or supplements thereto,
(ii) the omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading or (iii) any violation or alleged violation by the Company of the
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities law; and the
Company will pay to each such Holder, each of its officers, directors and
agents, underwriter or controlling person, as incurred, any legal or other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this Section 1.9(a) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability, or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld), nor shall the
Company be liable in any such case for any such loss, claim, damage, liability,
or action to the extent that it arises out of or is based upon a Violation
which occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such
Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling
Holder will indemnify and hold harmless the Company, its officers, directors
and agents, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within
the meaning of the Act, any underwriter, any other Holder selling securities in
such registration statement and any controlling person of any such underwriter
or other Holder, against any losses, claims, damages, or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of or
are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal
or other expenses reasonably incurred by any
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person intended to be indemnified pursuant to this Section 1.9(b), in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this Section 1.9(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this Section
1.9(b) exceed the gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified
party under this Section 1.9 of notice of the commencement of any action
(including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section
1.9, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and,
to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party shall have the right to retain its own counsel, with the fees
and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party
within a reasonable time of the commencement of any such action, if prejudicial
to its ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party under this Section 1.9, but the omission
so to deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.9.
(d) The obligations of the Company and Holders
under this Section 1.9 shall survive the completion of any offering of
Registrable Securities in a registration statement under this Section 1, and
otherwise.
1.10 Reports Under Securities Exchange Act of 1934. With
a view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available,
as those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first
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registration statement filed by the Company for the offering of its securities
to the general public;
(b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after
the end of the fiscal year in which the first registration statement filed by
the Company for the offering of its securities to the general public is
declared effective;
(c) file with the SEC in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(d) furnish to any Holder, so long as the Holder
owns any Registrable Securities, forthwith upon request (i) a written statement
by the Company that it has complied with the reporting requirements of SEC Rule
144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company) or the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements) , or that
it qualifies as a registrant whose securities may be resold pursuant to Form
S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual
or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.11 Form S-3 Registration. In case the Company shall
receive from any Holder or Holders who hold in excess of 500,000 shares of the
Company's Registrable Securities, a written request or requests that the
Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(b) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities
of any other Holder or Holders joining in such request as are specified in a
written request given within twenty (20) days after receipt of such
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written notice from the Company; provided, however, that the Company shall not
be obligated to effect any such registration, qualification or compliance,
pursuant to this Section 1.11: (1) if Form S-3 is not available for such
offering by the Holders; (2) if the Holders, together with the holders of any
other securities of ,he company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters, discounts or
commissions) of less than $1,000,000; (3) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 120 days after receipt of the request of the Holder or
Holders under this Section 1.11; provided, however, that the Company shall not
utilize this right more than once in any twelve (12) month period; (4) if the
Company has already effected three registrations on Form S-3 for the Holders
pursuant to this Section 1.11; or (5) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance.
(c) If the Holders initiating the registration
request hereunder (the "Initiating Holders") intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise the Company as part of their request made pursuant to this
Section 1.11 and the Company shall include such information in the written
notice referred to in Section 1.11(a). In such event, the right of any Holder
to include such Holder's Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting (unless
otherwise mutually agreed by a majority in interest of the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in Section 1.4(e)) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.11, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be 'underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating
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Holders, in proportion (as nearly as practicable) to the amount of Registrable
securities of the Company owned by each Holder.
(d) Subject to the foregoing the Company shall
file a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders. All expenses incurred in connection
with a registration requested pursuant to Section 1.11, including (without
limitation) all registration, filing, qualification, printer's and accounting
fees and the reasonable fees and disbursements of counsel for the selling
Holder or Holders and counsel for the Company, but excluding any underwriters,
discounts or commissions associated with Registrable Securities, shall be borne
by the Company. Registrations effected pursuant to this Section 1.11 shall not
be counted as demands for registration or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.12 Assignment of Registration Rights. The rights to
cause the Company to register Registrable Securities pursuant to this Section 1
may be assigned by a Holder to a transferee or assignee who acquires at least
500,000 shares of Registrable Securities, provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. Notwithstanding the above, such rights may be
assigned by a Holder to a limited partner, general partner or other affiliate
of an Investor (the "Transferee") regardless of the number of shares acquired
by such Transferee.
1.13 Limitations on Subsequent Registration Rights. From
and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least a majority of the outstanding
Registrable Securities, enter into any agreement with any holder or prospective
holder of any securities of the Company which would allow such holder or
prospective holder to include such securities in any registration filed under
Section 1.2 hereof, unless under the terms of such agreement, such holder or
prospective holder may include such securities in any such registration only to
the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included.
1.14 "Market Stand-Off" Agreement. Each holder of
securities which are Registrable Securities (or which are convertible into
Registrable Securities) hereby agrees that, during a period not to exceed 180
days, following the effective date of a
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registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and reasonably required by the underwriter in a
firm commitment underwriting, sell or otherwise transfer or dispose of (other
than to donee who agree to be similarly bound) Any Common Stock of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to
the first such registration statement of the Company which covers common Stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company
enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.15 Amendment of Registration Rights. Any provision of
this Section 1 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this section shall be binding
upon each holder of any securities which are or at one time were Registrable
Securities (or which are or were convertible into Registrable securities), each
future holder of all such securities, and the Company.
1.16 Termination of Registration Rights. No shareholder
shall be entitled to exercise any right provided for in this Section 1 after
five (5) years following the consummation of the sale of securities pursuant to
a registration statement filed by the Company under the Act in connection with
the initial firm commitment underwritten offering of its securities to the
general public for a total offering of more than $7,500,000.
2. Right of First Offer.
2.1 Grant of Right. Subject to the terms and conditions
specified in this Section 2, the Company hereby grants to each Investor who
holds at least 500,000 shares of Registrable Securities (a "Major Investor") a
right of first offer with respect to future sales by the Company of its Future
Shares (as hereinafter defined). Each time the Company proposes to offer any
shares of, or securities convertible into or exercisable for any shares of,
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any class of its Future Shares, the Company shall first make an offering of
such Future Shares to each Major Investor in accordance with the provisions
listed below.
2.2 Future Shares. "Future Shares" shall mean shares of
any capital stock of the Company, whether now authorized or not, and any
rights, options or warrants to purchase such capital stock, and securities of
any type that are, or may become, convertible into such capital stock; Provided
however, that "Future Shares" do not include (i) the shares of Preferred Stock
purchased or to be purchased under the Purchase Agreements or the Common Stock
issued or issuable upon the conversion of such Preferred Stock, (ii) securities
offered pursuant to a registration statement filed under the Securities Act, as
hereinafter defined, (iii) securities issued pursuant to the acquisition of
another corporation by the Company by merger of, purchase of substantially all
of the assets or other reorganization, and (iv) all shares of Common Stock
hereafter issued or issuable to officers, directors, employees or consultants
of the Company pursuant to any employee or consultant stock offering, plan or
arrangement approved by the Board of Directors of the Company.
2.3 Notice. In the event the Company proposes to
undertake an issuance of Future Shares, the Company shall deliver a notice by
certified mail (the "Notice") to the Major Investors stating (i) its bona fide
intention to offer such Future Shares, (ii) the number of such Future Shares to
be offered and (iii) the price, if any, for which it proposes to offer such
Future Shares. within 30 calendar days after receipt of the Notice, the Major
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Future Shares which equals
the proportion that the number of Registrable Securities held by such Major
Investor bears to the total number of shares of Common Stock issued and
outstanding, including shares issuable upon conversion of convertible
securities issued and outstanding.
2.4 Sale after Notice. If all such Future Shares
referred to in the Notice are not elected to be obtained as provided in Section
2.3 hereof, the Company may, during the 90-day period following the expiration
of the period provided in Section 2.3 hereof, offer the remaining unsubscribed
Future Shares to any person or persons at a price not less than, and upon terms
no more favorable to the offeree than those specified in the Notice. If the
Company does not enter into an agreement for the sale of the Future Shares
within such period, or if such agreement is not consummated within 90 days of
the execution thereof, the right provided hereunder shall be deemed to be
revived and such Future Shares shall not be offered unless first reoffered to
the Major Investors in accordance herewith.
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<PAGE> 72
2.5 Assignment. The right of first offer granted under
this section 2 is assignable by the Major Investors to any transferee of a
minimum of 500,000 shares of Registrable Securities.
2.6 Termination of Rights. No shareholder shall be
entitled to exercise any right provided for in this Section 2 (i) upon the
consummation of the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public of a
firm commitment underwritten public offering for a total offering of more than
$7 , 500,000 or (ii) when the Company first becomes subject to the periodic
reporting requirements of Section 12(g) or 15(d) of the securities Exchange Act
of 1934, whichever event shall first occur.
3. Obligation to Participate. Pfizer, Inc. ("Pfizer") and its
assignees of Registrable Securities shall purchase securities offered by the
Company in its initial public offering. Pfizer and its assignees shall
purchase such proportion of securities, that the number of Registrable
Securities held by Pfizer and its assignees bears to the total number of shares
of Common Stock then issued and outstanding, including shares issuable upon
conversion of convertible securities then issued and outstanding; provided,
however, the valuation of the Company upon the close of such initial public
offering must be greater than $150,000,000 and the initial public offering
raises at least $15,000,000 in the aggregate.
4. Waiver of Right of First Offer. The Right of First offer
under Section 2 of the Prior Agreement to purchase shares of Series B1, Series
B2, and Series B3 Preferred Stock to be sold pursuant to the Preferred Stock
Purchase Agreement of even date herewith is hereby waived. This waiver is
effective upon the execution of this agreement by First Small Business
Investment corporation of California, the sole Major Investor under the Prior
Agreement.
5. Miscellaneous Provisions.
5.1 Waivers and Amendments. Except as provided in
Section 1.15 of this Agreement, any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and the Holders of at least a majority of
the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 5.1 shall be binding upon each Investor or its assignee and
the Company
5.2 Notices. All notices and other communications
required or permitted hereunder shall be in writing and, except as
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<PAGE> 73
otherwise noted herein, shall be deemed effectively given upon personal
delivery by nationally recognized courier or upon deposit with the United
States Post office, (by first class mail, postage prepaid) addressed: (a) if
to the Company, at 3050 Science Park Road, San Diego, California 92121 (or at
such other address as the Company shall have furnished to the Holders in
writing) attention of President and (b) if to a Holder, at the latest address
of such person shown on the Company's records.
5.3 Descriptive Headings. The descriptive headings
herein have been inserted for convenience only and shall not be deemed to limit
or otherwise affect the construction of any provisions hereof.
5.4 Governing Law. This Agreement shall be governed by
and interpreted under the laws of the State of New York.
5.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
5.6 Expenses. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
5.7 Successors and Assigns. Except as otherwise
expressly provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.
5.8 Entire Agreement. This Agreement constitutes the
full and entire understanding and agreement between the parties with regard to
the subject matter of this Agreement.
5.9 Separability; Severability. Unless expressly
provided in this Agreement, the rights of each Investor under this Agreement
are several rights, not rights jointly held with any other Investors. Any
invalidity, illegality or limitation on the enforceability of this Agreement
with respect to any Investor shall not affect the validity, legality or
enforceability of this Agreement with respect to the other Investors. If any
provision of this Agreement is judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not be affected or impaired.
5.10 Stock Splits. All references to numbers of shares in
this Agreement shall be appropriately adjusted to reflect any
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<PAGE> 74
stock dividend, split, combination or other recapitalization of shares by the
Company occurring after the date of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first set forth above
IMMUSOL, INC.
/s/ TSVI GOLDENBERG
-----------------------------------------------
Tsvi Goldenberg, Ph.D., Chairman
of the Board and Chief Executive
officer
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<PAGE> 75
PFIZER INC
By: /s/ GEORGE M. MILNE, JR.
----------------------------------------------
George M. Milne, Jr.
Vice President
<PAGE> 76
BankAmerica Ventures
By: /s/ ????????
--------------------------
Title: Principal
-----------------------
<PAGE> 1
EXHIBIT 10.4
SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: IMMUSOL, INC.
ADDRESS: 3050 SCIENCE PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
DATE: APRIL 3, 1996
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3003 Tasman Drive, Santa
Clara, California 95054 and the borrower named above (the "Borrower"), whose
chief executive office is located at the above address ("Borrower's Address").
1. LOANS.
1.1 LOANS. Silicon, in its reasonable discretion, will make loans
to the Borrower (the "Loans") in amounts determined by Silicon in its reasonable
discretion up to the amount (the "Credit Limit") shown on the Schedule to this
Agreement (the "Schedule"), provided no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default has
occurred. The Borrower is responsible for monitoring the total amount of Loans
and other Obligations outstanding from time to time, and Borrower shall not
permit the same, at any time, to exceed the Credit Limit. If at any time the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, the Borrower shall immediately pay the amount of the excess to Silicon,
without notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations * shall
bear interest at the rate shown on the Schedule hereto. Interest shall be
payable monthly, on the due date shown on the monthly billing from Silicon to
the Borrower. Silicon may, in its discretion, charge interest to Borrower's
deposit accounts maintained with Silicon.
* (OTHER THAN ACCRUED BUT UNPAID INTEREST)
1.3 FEES. The Borrower shall pay to Silicon a loan origination fee
in the amount shown on the Schedule hereto concurrently herewith. This fee is in
addition to all interest and other sums payable to Silicon and is not
refundable.
1.4 LETTERS OF CREDIT. [Not Applicable]
2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement
means the following: the obligation to pay all Loans and all interest thereon
when due, and to pay and perform when due all other present and future
indebtedness, liabilities, obligations, guarantees, covenants, agreements,
warranties and representations of the Borrower to Silicon, whether joint or
several, monetary or non-monetary, and whether created pursuant to this
Agreement or any other present or future agreement or otherwise. Silicon may,
in its discretion, require that Borrower pay monetary Obligations in cash to
Silicon, or charge them to Borrower's Loan account, in which event they will
bear interest at the same rate applicable to the Loans. Silicon may also, in
its discretion, charge any monetary Obligations to Borrower's deposit accounts
maintained with Silicon. Silicon will notify the Borrower of any such charges
to Borrower's deposit accounts. Such charges shall not be deemed to be a setoff
for any purpose.
2.2 COLLATERAL. As security for all Obligations, the Borrower
hereby grants Silicon a continuing security interest in all of the Borrower's
interest in the types of property described below, whether now owned or
hereafter acquired, and wherever located (collectively, the "Collateral"): (a)
All accounts, contract rights, chattel paper, letters of credit, documents,
securities, money, and instruments, and all other obligations now or in the
future owing to the Borrower; (b) All inventory, goods, merchandise, materials,
raw materials, work in process, finished goods, farm products, advertising,
packaging and shipping materials, supplies, and all other tangible personal
property which is held for sale or lease or furnished under contracts of service
or consumed in the Borrower's business, and all warehouse receipts and other
documents; and (c) All equipment, including without limitation all machinery,
fixtures, trade fixtures, vehicles, furnishings, furniture, materials, tools,
machine tools, office equipment, computers and peripheral devices, appliances,
apparatus, parts, dies, and jigs; (d) All general intangibles * including, but
not limited to, deposit accounts, goodwill, names, trade names, trademarks and
the goodwill of the business symbolized thereby, trade secrets, drawings,
blueprints, customer lists, copyrights, security deposits, loan commitment fees,
federal, state and local tax refunds and claims, all rights in all litigation
presently or hereafter pending for any cause or claim (whether in contract, tort
<PAGE> 2
or otherwise), and all judgments now or hereafter arising therefrom, all claims
of Borrower against Silicon, all rights to purchase or sell real or personal
property, all rights as a licensor or licensee of any kind, all royalties,
licenses, processes, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), and all other rights,
privileges and franchises of every kind; (e) All books and records, whether
stored on computers or otherwise maintained; and (f) All substitutions,
additions and accessions to any of the foregoing, and all products, proceeds and
insurance proceeds of the foregoing, and all guaranties of and security for the
foregoing; and all books and records relating to any of the foregoing. Silicon's
security interest in any present or future technology * (including trade
secrets, and other technology *) shall be subject to any licenses or rights now
or in the future granted by the Borrower to any third parties in the ordinary
course of Borrower's business; provided that if the Borrower proposes to sell,
license or grant any other rights with respect to any technology * in a
transaction that, in substance, conveys a major part of the economic value of
that technology, Silicon shall first be requested to release its security
interest in the same, and Silicon may withhold such release in its discretion.
* (EXCLUDING ALL PATENTS AND PATENT APPLICATIONS)
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the Borrower
covenants that the following representations will continue to be true, and that
the Borrower will comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower, if a
corporation, is and will continue to be, duly authorized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation. The
Borrower is and will continue to be qualified and licensed to do business in
all jurisdictions in which any failure to do so would have a material adverse
effect on the Borrower. The execution, delivery and performance by the
Borrower of this Agreement, and all other documents contemplated hereby have
been duly and validly authorized, are enforceable against the Borrower in
accordance with their terms, and do not violate any law or any provision of,
and are not grounds for acceleration under, any agreement or instrument which
is binding upon the Borrower. Borrower has no subsidiaries except as set forth
on the Schedule.
3.2 NAME; TRADE NAMES AND STYLES. The name of the Borrower set
forth in the heading to this Agreement is its correct name. Listed on the
Schedule hereto are all prior names of the Borrower and all of Borrower's
present and prior trade names. The Borrower shall give Silicon 15 days' prior
written notice before changing its name or doing business under any other name.
The Borrower has complied, and will in the future comply, with all laws
relating to the conduct of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set
forth in the heading to this Agreement is the Borrower's chief executive
office. In addition, the Borrower has places of business and Collateral is
located only at the locations set forth on the Schedule to this Agreement. The
Borrower will give Silicon at least 15 days prior written notice before
changing its chief executive office or locating the Collateral at any other
location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and
will at all times in the future be, the sole owner of all the Collateral, except
for items of equipment which are leased by the Borrower. The Collateral * will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for the following ("Permitted Liens"):
(i) purchase money security interests in specific items of equipment; (ii)
leases of specific items of equipment; (iii) liens for taxes not yet payable**;
(iv) additional security interests and liens consented to in writing by Silicon
in its reasonable discretion, which consent shall not be unreasonably withheld;
(v) security interests being terminated substantially concurrently with this
Agreement ***. Silicon will have the right to require, as a condition to its
consent under subparagraph (iv) above, that the holder of the additional
security interest or lien sign an intercreditor agreement on Silicon's then
standard form, acknowledge that the security interest is subordinate to the
security interest in favor of Silicon, and agree not to take any action to
enforce its subordinate security interest so long as any Obligations remain
outstanding, and that the Borrower agree that any uncured default in any
obligation secured by the subordinate security interest shall also constitute an
Event of Default under this Agreement. Silicon now has, and will continue to
have, a perfected and enforceable security interest in all of the Collateral,
subject only to the Permitted Liens, and the Borrower will at all times defend
Silicon and the Collateral against all claims of others. None of the Collateral
now is or will be affixed to any real property in such a manner, or with such
intent, as to become a fixture.
* AND THE PATENTS AND PATENT APPLICATIONS OF BORROWER NOW ARE
** OR BEING CONTESTED IN GOOD FAITH
*** (VI) LIENS WITH RESPECT TO THE INTELLECTUAL PROPERTY ASSETS OF THE BORROWER
OTHER THAN WITH RESPECT TO LIENS IN FAVOR OF LENDERS; (VII) LIENS OF
MATERIALMEN,
<PAGE> 3
MECHANICS, WAREHOUSEMEN, CARRIERS, OR OTHER SIMILAR LIENS ARISING IN THE
ORDINARY COURSE OF BUSINESS AND SECURING OBLIGATIONS WHICH ARE NOT MORE THAN 30
DAYS DELINQUENT; (VIII) LIENS IN FAVOR OF CUSTOMS AND REVENUE AUTHORITIES WHICH
SECURE PAYMENT OF CUSTOMS DUTIES IN CONNECTION WITH THE IMPORTATION OF GOODS;
(IX) ANY JUDGMENT, ATTACHMENT OR SIMILAR LIEN, UNLESS THE JUDGMENT IT SECURES
IS NOT FULLY COVERED BY INSURANCE AND HAS NOT BEEN DISCHARGED OR EXECUTION
THEREOF EFFECTIVELY STAYED AND BONDED AGAINST PENDING APPEAL WITHIN 30 DAYS OF
THE ENTRY THEREOF, PROVIDED THAT, IF THE JUDGMENT IS NOT FULLY COVERED BY
INSURANCE OR EXECUTION THEREOF HAS NOT BEEN SO STAYED AND BONDED, SILICON SHALL
NOT BE REQUIRED TO MAKE ANY LOANS OR OTHERWISE EXTEND CREDIT TO OR FOR THE
BENEFIT OF BORROWER; (X) EASEMENTS, RIGHTS OF WAY, SERVITUDES OR ZONING OR
BUILDING RESTRICTIONS AND OTHER MINOR ENCUMBRANCES ON REAL PROPERTY AND
IRREGULARITIES IN THE TITLE TO SUCH PROPERTY WHICH DO NOT IN THE AGGREGATE
MATERIALLY IMPAIR THE USE OR VALUE OF SUCH PROPERTY OR RISK THE LOSS OR
FORFEITURE OF TITLE THERETO; (XI) LIENS WHICH CONSTITUTE BANKER'S LIENS, RIGHTS
OF SET-OFF OR SIMILAR RIGHTS AND REMEDIES AS TO DEPOSIT ACCOUNTS OR OTHER FUNDS
MAINTAINED WITH ANY BANK OR OTHER FINANCIAL INSTITUTION, WHETHER ARISING BY
OPERATION OF LAW OR PURSUANT TO CONTRACT; PROVIDED THAT SUCH DEPOSIT ACCOUNT
(A) IS NOT A DEDICATED CASH COLLATERAL ACCOUNT, OR (B) IS NOT INTENDED BY THE
BORROWER TO PROVIDE COLLATERAL TO THE DEPOSITORY INSTITUTION; AND (XII) LIENS
INCURRED IN CONNECTION WITH THE EXTENSION, RENEWAL OR REFINANCING OF THE
INDEBTEDNESS SECURED BY LIENS OF THE TYPE DESCRIBED IN CLAUSES (I) THROUGH (XI)
ABOVE.
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the
Collateral in good working condition, and the Borrower will not use the
Collateral for any unlawful purpose. The Borrower will immediately advise
Silicon in writing of any material loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. The Borrower has maintained and will
maintain at the Borrower's Address complete and accurate books and records,
comprising an accounting system in accordance with generally accepted
accounting principles.
3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements
now or in the future delivered to Silicon have been, and will be, prepared in
conformity with generally accepted accounting principles and now and in the
future will completely and accurately reflect the financial condition of the
Borrower, at the times and for the periods therein stated. Since the last date
covered by any such statement, there has been no material adverse change in the
financial condition or business of the Borrower. The Borrower is now and will
continue to be solvent. The Borrower will provide Silicon: (i) within 30 days
after the end of each month, a monthly financial statement prepared by the
Borrower, and a Compliance Certificate in such form as Silicon shall reasonably
specify, signed by the Chief Financial Officer of the Borrower, certifying that
as of the end of such month the Borrower was in full compliance with all of the
terms and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth on the Schedule and such
other information as Silicon shall reasonably request; and (ii) within 120 days
following the end of the Borrower's fiscal year, complete annual financial
statements, certified by independent certified public accountants acceptable to
Silicon and accompanied by the unqualified report thereon by said independent
certified public accountants.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower
has timely filed, and will timely file, all tax returns and reports required by
foreign, federal, state and local law, and the Borrower has timely paid, and
will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by the Borrower. The
Borrower may, however, defer payment of any contested taxes, provided that the
Borrower (i) in good faith contests the Borrower's obligation to pay the taxes
by appropriate proceedings promptly and diligently instituted and conducted,
(ii) notifies Silicon in writing of the commencement of, and any material
development in, the proceedings, and (iii) posts bonds or takes any other steps
required to keep the contested taxes from becoming a lien upon any of the
Collateral. The Borrower is unaware of any claims or adjustments proposed for
any of the Borrower's prior tax years which could result in additional taxes
becoming due and payable by the Borrower. The Borrower has paid, and shall
continue to pay all amounts necessary to fund all present and future pension,
profit sharing and deferred compensation plans in accordance with their terms,
and the Borrower has not and will not withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any such plan which could result in any liability of the
Borrower, including, without limitation, any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
3.9 COMPLIANCE WITH LAW. The Borrower has complied, and will
comply, in all material respects, with all provisions of all foreign, federal,
state and local laws and regulations relating to the Borrower, including, but
not limited to, those relating to the Borrower's ownership of real or personal
property, conduct and licensing of the Borrower's business, and environmental
matters.
<PAGE> 4
3.10 LITIGATION. Except as disclosed in the Schedule, there is no
claim, suit, litigation, proceeding or investigation pending or (to best of the
Borrower's knowledge) threatened by or against or affecting the Borrower in any
court or before any governmental agency (or any basis therefor known to the
Borrower) which may result, either separately or in the aggregate, in any
material adverse change in the financial condition or business of the Borrower,
or in any material impairment in the ability of the Borrower to carry on its
business in substantially the same manner as it is now being conducted. The
Borrower will promptly inform Silicon in writing of any claim, proceeding,
litigation or investigation in the future threatened or instituted by or
against the Borrower involving amounts in excess of $100,000.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used
solely for lawful business purposes.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 FINANCIAL AND OTHER COVENANTS. The Borrower shall at all
times comply with the financial and other covenants set forth in the Schedule
to this Agreement.
4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, without limiting Silicon's other remedies, and whether or not Silicon
declares an Event of Default, Borrower shall remit to Silicon all checks and
other proceeds of Borrower's accounts and general intangibles, in the same form
as received by Borrower, within one day after Borrower's receipt of the same,
to be applied to the Obligations in such order as Silicon shall determine in
its discretion.
4.3 INSURANCE. The Borrower shall, at all times insure all of the
tangible personal property Collateral and carry such other business insurance,
with insurers reasonably acceptable to Silicon, in such form and amounts as
Silicon may reasonably require. All such insurance policies shall name Silicon
as an additional loss payee, and shall contain a lenders loss payee endorsement
in form reasonably acceptable to Silicon. Upon receipt of the proceeds of any
such insurance, Silicon shall apply such proceeds in reduction of the
Obligations as Silicon shall determine in its sole and absolute discretion,
except that, provided no Event of Default has occurred, Silicon shall release
to the Borrower insurance proceeds with respect to equipment totaling less than
$100,000, which shall be utilized by the Borrower for the replacement of the
equipment with respect to which the insurance proceeds were paid. Silicon may
require reasonable assurance that the insurance proceeds so released will be so
used. If the Borrower fails to provide or pay for any insurance, Silicon may,
but is not obligated to, obtain the same at the Borrower's expense. The
Borrower shall promptly deliver to Silicon copies of all reports made to
insurance companies.
4.4 REPORTS. The Borrower shall provide Silicon with such written
reports with respect to the Borrower (including without limitation budgets,
sales projections, operating plans and other financial documentation), as
Silicon shall from time to time reasonably specify.
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable
times, and upon one business day notice, Silicon, or its agents, shall have the
right to inspect the Collateral, and the right to audit and copy the Borrower's
accounting books and records and Borrower's books and records relating to the
Collateral. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have
the right to disclose any such information to its auditors, regulatory
agencies, and attorneys, and pursuant to any subpoena or other legal process.
The foregoing audits shall be at Silicon's expense, except that the Borrower
shall reimburse Silicon for its reasonable out of pocket costs for semi-annual
accounts receivable audits by third parties retained by Silicon, and Silicon
may debit Borrower's deposit accounts with Silicon for the cost of such
semi-annual accounts receivable audits (in which event Silicon shall send
notification thereof to the Borrower). Notwithstanding the foregoing, after
the occurrence of an Event of Default all audits shall be at the Borrower's
expense.
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule
hereto, the Borrower shall not, without Silicon's prior written consent, do any
of the following: (i) merge or consolidate with another corporation, except
that the Borrower may merge or consolidate with another corporation if the
Borrower is the surviving corporation in the merger; (ii) acquire any assets
outside the ordinary course of business for an aggregate purchase price
exceeding 25% of Borrower's Tangible Net Worth (as defined in the Schedule) as
of the end of the month prior to the effective date of the acquisition; (iv)
sell or transfer any Collateral, except for the sale of finished inventory in
the ordinary course of the Borrower's business, except for the sale of obsolete
or unneeded equipment in the ordinary course of business*; (v) make any loans of
any money or any
<PAGE> 5
other assets; (vi) incur any debts, outside the ordinary course of business,
which would have a material, adverse effect on the Borrower or on the prospect
of repayment of the Obligations; (vii) guarantee or otherwise become liable
with respect to the obligations of another party or entity; (viii) pay or
declare any dividends on the Borrower's stock (except for dividends payable
solely in stock of the Borrower); (ix) redeem, retire, purchase or otherwise
acquire, directly or indirectly, any of the Borrower's stock; (x) make any
change in the Borrower's capital structure which has a material adverse effect
on the Borrower or on the prospect of repayment of the Obligations; or (xi)
dissolve or elect to dissolve. Transactions permitted by the foregoing
provisions of this Section are only permitted if no Event of Default and no
event which (with notice or passage of time or both) would constitute an Event
of Default would occur as a result of such transaction.
* AND EXCEPT FOR THE SALE OF COLLATERAL FOR FAIR VALUE WHERE THE
PURCHASE PRICE DOES NOT EXCEED 25% OF CONSOLIDATED TANGIBLE NET WORTH PROVIDED
THAT THE BORROWER PROVIDES SILICON WITH PRIOR WRITTEN NOTICE THEREOF AND
BORROWER APPLIES ALL PROCEEDS OF ANY SUCH SALE TO REDUCE THE OBLIGATIONS
4.7 LITIGATION COOPERATION. Should any third-party suit or
proceeding be instituted by or against Silicon with respect to any Collateral
or in any manner relating to the Borrower, the Borrower shall, without expense
to Silicon, make available the Borrower and its officers, employees and agents
and the Borrower's books and records to the extent that Silicon may deem them
reasonably necessary in order to prosecute or defend any such suit or
proceeding.
4.8 VERIFICATION. Silicon may, from time to time, following prior
notification to Borrower, verify directly with the respective account debtors
the validity, amount and other matters relating to the Borrower's accounts, by
means of mail, telephone or otherwise, either in the name of the Borrower or
Silicon or such other name as Silicon may reasonably choose, provided that no
prior notification to Borrower shall be required following an Event of Default.
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its
expense, on request by Silicon, to execute all documents in form satisfactory
to Silicon, as Silicon, may deem reasonably necessary or useful in order to
perfect and maintain Silicon's perfected security interest in the Collateral,
and in order to fully consummate all of the transactions contemplated by this
Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until
the maturity date set forth on the Schedule hereto (the "Maturity Date").
5.2 EARLY TERMINATION. This Agreement may be terminated, prior to
the Maturity Date as follows: (i) by the Borrower, effective three business
days after written notice of termination is given to Silicon; or (ii) by Silicon
at any time after the occurrence * of an Event of Default, without notice,
effective immediately. **
* AND DURING THE CONTINUANCE
** AT ANY TIME THAT THIS AGREEMENT IS TERMINATED PRIOR TO THE MATURITY DATE,
BORROWER SHALL PAY TO SILICON THE TERMINATION FEE (AS DEFINED IN THE SCHEDULE
HERETO).
5.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any
earlier effective date of termination, the Borrower shall pay and perform in
full all Obligations, whether evidenced by installment notes or otherwise, and
whether or not all or any part of such Obligations are otherwise then due and
payable. Without limiting the generality of the foregoing, if on the Maturity
Date, or on any earlier effective date of termination, there are any
outstanding letters of credit issued by Silicon or issued by another
institution based upon an application, guarantee, indemnity or similar
agreement on the part of Silicon, then on such date Borrower shall provide to
Silicon cash collateral in an amount equal to the face amount of all such
letters of credit plus all interest, fees and cost due or to become due in
connection therewith, to secure all of the Obligations relating to said letters
of credit, pursuant to Silicon's then standard form cash pledge agreement.
Notwithstanding any termination of this Agreement, all of Silicon's security
interests in all of the Collateral and all of the terms and provisions of this
Agreement shall continue in full force and effect until all Obligations have
been paid and performed in full; provided that, without limiting the fact that
Loans are subject to the reasonable discretion of Silicon, Silicon may, in its
sole discretion, refuse to make any further Loans after termination. No
termination shall in any way affect or impair any right or remedy of Silicon,
nor shall any such termination relieve the Borrower of any Obligation to
Silicon, until all of the Obligations have been paid and performed in full.
Upon payment and performance in full of all the Obligations, Silicon shall
promptly deliver to the Borrower termination statements, requests for
reconveyances and such other documents as may be required to fully terminate
any of Silicon's security interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following
events shall constitute an "Event of Default" under this Agreement, and the
Borrower shall give Silicon immediate written notice thereof: (a) Any warranty,
representation, statement, report or certificate made or delivered to Silicon
by the Borrower or any of the Borrower's officers, employees or agents, now or
in
<PAGE> 6
the future, shall be untrue or misleading in any material respect; or (b) the
Borrower shall fail to pay when due any Loan or any interest thereon or any
other monetary Obligation; or (c) the total Loans and other Obligations
outstanding at any time exceed the Credit Limit*; or (d) the Borrower shall fail
to comply with any of the financial covenants set forth in the Schedule or shall
fail to perform any other non-monetary Obligation which by its nature cannot be
cured; or (e) the Borrower shall fail to pay or perform any other non-monetary
Obligation, which failure is not cured within ** business days after the date
due; or (f) Any levy, assessment, attachment, seizure, lien or encumbrance is
made on all or any part of the Collateral *** which is not cured within 10 days
after the occurrence of the same; or (g) Dissolution, termination of existence,
insolvency or business failure of the Borrower; or appointment of a receiver,
trustee or custodian, for all or any part of the property of, assignment for the
benefit of creditors by, or the commencement of any proceeding by the Borrower
under any reorganization, bankruptcy, insolvency, arrangement, readjustment of
debt, dissolution or liquidation law or statute of any jurisdiction, now or in
the future in effect; or (h) the commencement of any proceeding against the
Borrower or any guarantor of any of the Obligations under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect,
which is not cured by the dismissal thereof within 30 days after the date
commenced; (i) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing; or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or (j) revocation or
termination of, or limitation or denial of liability upon, any pledge of any
certificate of deposit, securities or other property or asset of any kind
pledged by any third party to secure any or all of the Obligations, or any
attempt to do any of the foregoing; or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law; or (k) the Borrower
makes any payment on account of any indebtedness or obligation which has been
subordinated to the Obligations other than as permitted in the applicable
subordination agreement or if any person who has subordinated such indebtedness
or obligations terminates or in any way limits his subordination agreement; or
(l) there shall be a change in the record or beneficial ownership of an
aggregate of more than **** of the outstanding shares of stock of the Borrower,
in one or more transactions, compared to the ownership of outstanding shares of
stock of the Borrower in effect on the date hereof, without the prior written
consent of Silicon; or (m) a material adverse change occurs in the business,
operations, or financial or other condition of the Borrower, or a material
impairment occurs in the prospect of payment of the Obligations, or there is a
material impairment of the value or priority of Silicon's security interest in
the Collateral; or (n) the Borrower shall generally not pay its debts as they
become due; or the Borrower shall conceal, remove or transfer any part of its
property, with intent to hinder, delay or defraud its creditors, or make or
suffer any transfer of any of its property which may be fraudulent under any
bankruptcy, fraudulent conveyance or similar law. Silicon may cease making any
Loans hereunder during any of the above cure periods, and thereafter if an Event
of Default has occurred.
* AND SUCH CONDITION SHALL CONTINUE TO EXIST FOR 3 DAYS
** 10
*** OTHER THAN PERMITTED LIENS
**** 49%
6.2 REMEDIES. Upon the occurrence * of any Event of Default, and
at any time thereafter, Silicon, at its option, and without notice or demand of
any kind (all of which are hereby expressly waived by the Borrower), may do any
one or more of the following: (a) Cease making Loans and cease extending
letters of credit or other credit facilities to or for the benefit of the
Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose the Borrower hereby authorizes Silicon without judicial
process to enter onto any of the Borrower's premises without interference to
search for, take possession of, keep, store, or remove any of the Collateral,
and remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof without charge for so long as Silicon deems it
reasonably necessary in order to complete the enforcement of its rights under
this Agreement or any other agreement; provided, however, that should Silicon
seek to take possession of any or all of the Collateral by Court process, the
Borrower hereby irrevocably waives: (i) any bond and any surety or security
relating thereto required by any statute, court rule or otherwise as an
incident to such possession; (ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of and not dispose of any such
Collateral until after trial or final judgment; (d) Require the Borrower to
assemble any or all of the Collateral and make it available to Silicon at
<PAGE> 7
places designated by Silicon which are reasonably convenient to Silicon and the
Borrower, and to remove the Collateral to such locations as Silicon may deem
advisable; (e) Require Borrower to deliver to Silicon, in kind, all checks and
other payments received with respect to all accounts and general intangibles,
together with any necessary indorsements, within one day after the date
received by the Borrower; (f) Complete the processing, manufacturing or repair
of any Collateral prior to a disposition thereof and, for such purpose and for
the purpose of removal, Silicon shall have the right to use the Borrower's
premises, vehicles, hoists, lifts, cranes, equipment and all other property
without charge; (g) Sell, lease or otherwise dispose of any of the Collateral
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at any one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on the Borrower's premises without charge, for such
time or times as Silicon deems reasonable, or on Silicon's premises, or
elsewhere and the Collateral need not be located at the place of disposition.
Silicon may directly or through any affiliated company purchase or lease any
Collateral at any such public disposition, and if permissible under applicable
law, at any private disposition. Any sale or other disposition of Collateral
shall not relieve the Borrower of any liability the Borrower may have if any
Collateral is defective as to title or physical condition or otherwise at the
time of sale; (h) Demand payment of, and collect any accounts and general
intangibles comprising Collateral and, in connection therewith, the Borrower
irrevocably authorizes Silicon to endorse or sign the Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to the Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Silicon's
sole discretion, to grant extensions of time to pay, compromise claims and
settle accounts and the like for less than face value; (i) Offset against any
sums in any of Borrower's general, special or other deposit accounts with
Silicon; and (j) Demand and receive possession of any of the Borrower's federal
and state income tax returns and the books and records utilized in the
preparation thereof or referring thereto. All reasonable attorneys' fees,
expenses, costs, liabilities and obligations incurred by Silicon with respect
to the foregoing shall be added to and become part of the Obligations, shall be
due on demand, and shall bear interest at a rate equal to the highest interest
rate applicable to any of the Obligations. Without limiting any of Silicon's
rights and remedies, from and after the occurrence of any Event of Default, the
interest rate applicable to the Obligations shall be increased by an additional
five percent per annum.
* AND DURING THE CONTINUANCE
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The
Borrower and Silicon agree that a sale or other disposition (collectively,
"sale") of any Collateral which complies with the following standards will
conclusively be deemed to be commercially reasonable: (i) Notice of the sale is
given to the Borrower at least seven days prior to the sale, and, in the case
of a public sale, notice of the sale is published at least seven days before
the sale in a newspaper of general circulation in the county where the sale is
to be conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect
to any sale of any of the Collateral, Silicon may (but is not obligated to)
direct any prospective purchaser to ascertain directly from the Borrower any
and all information concerning the same. Silicon may employ other methods of
noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.
6.4 POWER OF ATTORNEY. Upon the occurrence * of any Event of
Default, without limiting Silicon's other rights and remedies, the Borrower
grants to Silicon an irrevocable power of attorney coupled with an interest,
authorizing and permitting Silicon (acting through any of its employees,
attorneys or agents) at any time, at its option, but without obligation, with
or without notice to the Borrower, and at the Borrower's expense, to do any or
all of the following, in the Borrower's name or otherwise: (a) Execute on
behalf of the Borrower any documents that Silicon may, in its sole and absolute
discretion, deem advisable in order to perfect and maintain Silicon's security
interest in the Collateral, or in order to exercise a right of the Borrower or
Silicon, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements; (b) Execute
on behalf of the Borrower any document exercising, transferring or assigning
any option to purchase, sell or otherwise dispose of or to lease (as lessor or
lessee) any real or personal property which is part of Silicon's Collateral or
in which Silicon has an interest; (c) Execute on behalf of the Borrower, any
invoices relating to any account, any draft against any account debtor and any
notice to any account debtor, any proof of claim in bankruptcy, any Notice of
Lien, claim of mechanic's, materialman's or
<PAGE> 8
other lien, or assignment or satisfaction of mechanic's, materialman's or other
lien; (d) Take control in any manner of any cash or non-cash items of payment
or proceeds of Collateral; endorse the name of the Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Silicon's possession; (e) Endorse all checks and other forms of remittances
received by Silicon; (f) Pay, contest or settle any lien, charge, encumbrance,
security interest and adverse claim in or to any of the Collateral, or any
judgment based thereon, or otherwise take any action to terminate or discharge
the same; (g) Grant extensions of time to pay, compromise claims and settle
accounts and general intangibles for less than face value and execute all
releases and other documents in connection therewith; (h) Pay any sums required
on account of the Borrower's taxes or to secure the release of any liens
therefor, or both; (i) Settle and adjust, and give releases of, any insurance
claim that relates to any of the Collateral and obtain payment therefor; (j)
Instruct any third party having custody or control of any books or records
belonging to, or relating to, the Borrower to give Silicon the same rights of
access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of the Borrower
pursuant to this Agreement and any other present or future agreements. Silicon
shall exercise the foregoing powers in a commercially reasonable manner. Any
and all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon with respect
to the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall
Silicon's rights under the foregoing power of attorney or any of Silicon's
other rights under this Agreement be deemed to indicate that Silicon is in
control of the business, management or properties of the Borrower.
* AND DURING THE CONTINUANCE
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result
of any sale of the Collateral shall be applied by Silicon first to the costs,
expenses, liabilities, obligations and attorneys' fees incurred by Silicon in
the exercise of its rights under this Agreement, second to the interest due
upon any of the Obligations, and third to the principal of the Obligations, in
such order as Silicon shall determine in its sole discretion. Any surplus
shall be paid to the Borrower or other persons legally entitled thereto; the
Borrower shall remain liable to Silicon for any deficiency. If, Silicon, in
its sole discretion, directly or indirectly enters into a deferred payment or
other credit transaction with any purchaser at any sale or other disposition of
Collateral, Silicon shall have the option, exercisable at any time, in its sole
discretion, of either reducing the Obligations by the principal amount of
purchase price or deferring the reduction of the Obligations until the actual
receipt by Silicon of the cash therefor.
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies
set forth in this Agreement, Silicon shall have all the other rights and
remedies accorded a secured party under the California Uniform Commercial Code
and under all other applicable laws, and under any other instrument or
agreement now or in the future entered into between Silicon and the Borrower,
and all of such rights and remedies are cumulative and none is exclusive.
Exercise or partial exercise by Silicon of one or more of its rights or
remedies shall not be deemed an election, nor bar Silicon from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Silicon to exercise any rights or remedies shall not operate as a
waiver thereof, but all rights and remedies shall continue in full force and
effect until all of the Obligations have been fully paid and performed.
7. GENERAL PROVISIONS.
7.1 CREDITING PAYMENTS. Payments shall not be applied to the
Obligations until received by Silicon in immediately available federal funds,
and any wire transfer or other payment so received after 12:00 noon Pacific
time shall be deemed to have been received by Silicon as of the opening of
business on the next business day.
7.2 NOTICES. All notices to be given under this Agreement shall be
in writing and shall be given either personally or by regular first-class mail,
or certified mail return receipt requested, addressed to Silicon or the
Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. All
notices shall be deemed to have been given upon delivery in the case of notices
personally delivered to the Borrower or to Silicon, or at the expiration of two
business days following the deposit thereof in the United States mail, with
postage prepaid.
7.3 SEVERABILITY. Should any provision of this Agreement be held
by any court of competent jurisdiction to be void or unenforceable, such defect
shall not affect the remainder of this Agreement, which shall continue in full
force and effect.
7.4 INTEGRATION. This Agreement and such other written
agreements, documents and instruments as may be executed in connection herewith
are the final, entire and complete agreement between the Borrower and Silicon
and supersede all prior and contemporaneous negotiations and oral
representations and agreements, all of which are merged and integrated in this
Agreement. There are no oral understandings, representations or
<PAGE> 9
agreements between the parties which are not set forth in this Agreement or in
other written agreements signed by the parties in connection herewith.
7.5 WAIVERS. The failure of Silicon at any time or times to
require the Borrower to strictly comply with any of the provisions of this
Agreement or any other present or future agreement between the Borrower and
Silicon shall not waive or diminish any right of Silicon later to demand and
receive strict compliance therewith. Any waiver of any default shall not waive
or affect any other default, whether prior or subsequent thereto. None of the
provisions of this Agreement or any other agreement now or in the future
executed by the Borrower and delivered to Silicon shall be deemed to have been
waived by any act or knowledge of Silicon or its agents or employees, but only
by a specific written waiver signed by an officer of Silicon and delivered to
the Borrower. The Borrower waives demand, protest, notice of protest and notice
of default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
general intangible, document or guaranty at any time held by Silicon on which
the Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
7.6 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor
any of its directors, officers, employees, agents, attorneys or any other
person affiliated with or representing Silicon shall be liable for any claims,
demands, losses or damages, of any kind whatsoever, made, claimed, incurred or
suffered by the Borrower or any other party through the ordinary negligence of
Silicon, or any of its directors, officers, employees, agents, attorneys or any
other person affiliated with or representing Silicon.
7.7 AMENDMENT. The terms and provisions of this Agreement may not
be waived or amended, except in a writing executed by the Borrower and a duly
authorized officer of Silicon.
7.8 TIME OF ESSENCE. Time is of the essence in the performance by
the Borrower of each and every obligation under this Agreement.
7.9 ATTORNEYS FEES AND COSTS. The Borrower shall reimburse Silicon
for all reasonable attorneys' fees and all filing, recording, search, title
insurance, appraisal, audit, and other reasonable costs incurred by Silicon,
pursuant to, or in connection with, or relating to this Agreement (whether or
not a lawsuit is filed), including, but not limited to, any reasonable
attorneys' fees and costs Silicon incurs in order to do the following: prepare
and negotiate this Agreement and the documents relating to this Agreement;
obtain legal advice in connection with this Agreement; enforce, or seek to
enforce, any of its rights; prosecute actions against, or defend actions by,
account debtors; commence, intervene in, or defend any action or proceeding;
initiate any complaint to be relieved of the automatic stay in bankruptcy; file
or prosecute any probate claim, bankruptcy claim, third-party claim, or other
claim; examine, audit, copy, and inspect any of the Collateral or any of the
Borrower's books and records; protect, obtain possession of, lease, dispose of,
or otherwise enforce Silicon's security interest in, the Collateral; and
otherwise represent Silicon in any litigation relating to the Borrower. In
satisfying Borrower's obligation hereunder to reimburse Silicon for attorneys
fees, Borrower may, for convenience, issue checks directly to Silicon's
attorneys, Levy, Small & Lallas, but Borrower acknowledges and agrees that
Levy, Small & Lallas is representing only Silicon and not Borrower in
connection with this Agreement. If either Silicon or the Borrower files any
lawsuit against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
costs and attorneys' fees, including (but not limited to) reasonable attorneys'
fees and costs incurred in the enforcement of, execution upon or defense of any
order, decree, award or judgment. All attorneys' fees and costs to which
Silicon may be entitled pursuant to this Paragraph shall immediately become
part of the Borrower's Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations.
7.10 BENEFIT OF AGREEMENT. The provisions of this Agreement shall
be binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of the parties hereto; provided,
however, that the Borrower may not assign or transfer any of its rights under
this Agreement without the prior written consent of Silicon, and any prohibited
assignment shall be void. No consent by Silicon to any assignment shall release
the Borrower from its liability for the Obligations.
7.11 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more
than one person, their liability shall be joint and several, and the compromise
of any claim with, or the release of, any Borrower shall not constitute a
compromise with, or a release of, any other Borrower.
7.12 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only
used in this Agreement for convenience. The Borrower acknowledges that the
headings may not describe completely the subject matter of the applicable
paragraph, and the headings shall not be used in any manner to construe, limit,
define or interpret any term or provision of this Agreement. This Agreement
has been fully reviewed and negotiated between the parties and no uncertainty
or ambiguity in any term or provision of this Agreement shall be construed
strictly against Silicon or the Borrower under
<PAGE> 10
any rule of construction or otherwise.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all
acts and transactions hereunder and all rights and obligations of Silicon and
the Borrower shall be governed by, and in accordance with, the laws of the State
of California. Any undefined term used in this Agreement that is defined in the
California Uniform Commercial Code shall have the meaning assigned to that term
in the California Uniform Commercial Code. As a material part of the
consideration to Silicon to enter into this Agreement, the Borrower (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall,
at Silicon's option, be litigated in courts located within California, and that
the exclusive venue therefor shall be San Diego County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights the Borrower may have to object to
the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
7.14 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT
OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH SILICON OR THE BORROWER. THIS WAIVER OF THE RIGHT TO JURY
TRIAL APPLIES TO ALL CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS,
COMMON LAW CLAIMS, STATUTORY CLAIMS AND ALL OTHER CLAIMS AND CAUSES OF ACTION
OF EVERY KIND. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING JURY TRIAL
WAIVER CONSTITUTES A MATERIAL INDUCEMENT TO THE OTHER PARTY TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS JURY
TRIAL WAIVER WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY
WAIVES ITS JURY TRIAL RIGHTS FOLLOWING ITS CONSULTATION WITH ITS LEGAL COUNSEL.
BORROWER:
IMMUSOL, INC.
BY /s/ S. Goldenberg
-------------------------------
CHAIRMAN AND CEO
BY /s/ (illegible)
-------------------------------
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY /s/ R (illegible)
-------------------------------
TITLE VP
------------------------------
<PAGE> 11
SCHEDULE TO LOAN AND SECURITY AGREEMENT -.S.
<PAGE> 12
SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: IMMUSOL, INC.
ADDRESS: 3050 SCIENCE PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
DATE: APRIL __, 1996
THIS SCHEDULE is an integral part of the Loan and Security Agreement
between Silicon Valley Bank ("Silicon") and the above-named borrower
("Borrower") of even date.
CREDIT LIMIT
(Section 1.1): An amount up to $500,000 for the purchase by the
Borrower of lab and research and development
equipment, which is to be utilized by the Borrower on
or before December 31, 1996 (the earlier of the date
that the Borrower has utilized the full amount of the
Credit Limit for such purchases or December 31, 1996
is referred to as the "Amortization Date"). Once
amounts hereunder are repaid, such amounts may not
be reborrowed.
Each requested Loan for purchases of equipment shall
be in an amount not less than $50,000 and shall not
exceed either (a) 100% of the invoice amount of new
items of equipment that the Borrower purchases after
the date of this Agreement or (b) 50% of the original
invoice amount of items of equipment that the
Borrower has purchased not more than one year prior
to the date of the requested Loan. In connection
with the foregoing, and prior to the making of any
Loan, Borrower shall supply to Silicon lists of
invoices (including serial numbers) relating to the
equipment subject of the requested Loan and shall
supply such other information relating thereto as
Silicon requests.
Borrower shall repay to Silicon the outstanding
aggregate principal amount of the Loans in 48 equal
consecutive monthly installments commencing on the
fifth (5th) day of the month following the
Amortization Date (the "Payment Start Date") and
continuing on the fifth (5th) day of each month
thereafter, provided that in any event, all Loans,
all accrued and unpaid interest thereon and all other
Obligations relating thereto shall be paid in full no
later than December 31, 2000.
Borrower hereby further promises to pay interest to
Silicon on the unpaid principal balance of the Loans
at the applicable interest rate (as referred to
below). Such interest shall be paid each month in
accordance with the terms of the Loan Agreement.
INTEREST RATE
(Section 1.2): Prior to the Amortization Date: An interest rate
equal to the "Prime Rate" in effect from time to
time, plus 1.50% per annum. Interest shall be
calculated on the basis of a 360-day year for the
actual number of days elapsed. "Prime Rate" means
the rate announced from time to time by Silicon as
its "prime rate;" it is a base rate upon which other
rates charged by Silicon are based, and it is not
<PAGE> 13
necessarily the best rate available at Silicon. The
interest rate applicable to the Obligations shall
change on each date there is a change in the Prime
Rate.
On and after the Amortization Date: A fixed interest
rate equal to the rate offered on a five-year U.S.
Treasury Note in effect as of the Amortization Date
plus four and one-quarter percent (4.25%) per annum.
The rate offered on a five-year U.S. Treasury Note
shall be defined as the rate shown under the column
heading "Ask Yld." For "Govt. Bonds & Notes" in the
"Treasury Bonds, Notes & Bills" Section of The Wall
Street Journal -- Western Edition published on the
Amortiztion Date, (or if the Amortization Date falls
on a day when The Wall Street Journal is not
published, then on the most recent date prior
thereto) for the government bond or note with a
maturity date in the same month and year as the
Maturity Date, or, if there are more than one
government bonds or notes with a maturity date in the
same month and year as the Maturity Date, the average
(rounded to the next highest basis point) of the
rates shown in the "Ask Yld." column for such bonds
or notes, or, if there is no government bond or note
with a maturity date in the same month and year as
the Maturity Date, the average (rounded to the next
highest basis point) of the rates shown in the "Ask
Yld." column for the bonds or notes in the months
preceding and following the month in which the
Maturity Date falls.
LOAN ORIGINATION FEE
(Section 1.3): $5,000. (Any Commitment Fee previously paid by the
Borrower in connection with this loan shall be
credited against this Fee.)
MATURITY DATE
(Section 5.1): The earlier of DECEMBER 31, 2000 or the date that is
48 months from and including the Payment Start Date.
SUBSIDIARIES OF BORROWER
(Section 3.1): NONE
PRIOR NAMES OF BORROWER
(Section 3.2): NONE
PRESENT TRADE NAMES OF BORROWER
(Section 3.2): NONE
PRIOR TRADE NAMES OF BORROWER
(Section 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(Section 3.3): NONE
MATERIAL ADVERSE LITIGATION
(Section 3.10): NONE
NEGATIVE COVENANTS-EXCEPTIONS
(Section 4.6): Without Silicon's prior written consent, Borrower may
do the following, provided that, after giving effect
thereto, no Event of Default has occurred and no
event has occurred which, with notice or passage of
time or both, would constitute an Event of Default,
and provided that the following are done in
compliance with all applicable laws, rules and
regulations: (i) repurchase shares of Borrower's
stock pursuant to any employee stock purchase or
benefit plan, provided that the total amount paid by
Borrower for such stock does not exceed $250,000 in
any fiscal year; and (ii) incur recruiting expenses
in an amount not to exceed $250,000 in any fiscal
year.
FINANCIAL COVENANT
(Section 4.1): Borrower shall at the end of each month maintain the
greater of the Six Months Burn Amount (as defined
below) OR cash and marketable securities (valued at
<PAGE> 14
market value) in an aggregate amount of not less than
$2,500,000.
The end of each month is referred to herein as the
"Computation Date". As used herein, "Six Months Burn
Amount" means all cash expenditures and payments made
by Borrower, of every kind whatsoever, determined on
a cash basis (but excluding expenditures for the
purchase of capital assets if, and only if, such
assets are financed), during the three-month period
ending on the Computation Date, multiplied by two
(2).
Within 30 days after each Computation Date, in
addition to the monthly financial statements as of
the Computation Date which the Borrower is required
to provide to Silicon, Borrower shall provide Silicon
with a computation showing compliance with the above
financial covenant (the "Covenant"), and showing in
reasonable detail the manner in which it was
computed.
If any such monthly financial statement of Borrower
shows that the Borrower has failed to comply with the
Covenant, then Borrower shall immediately deposit
with and pledge to Silicon cash in the amount of
Credit Limit to secure the Obligations, and in
connection therewith, Borrower shall execute and
deliver to Silicon a cash pledge agreement on
Silicon's standard form, provided, however, if
Borrower subsequently demonstrates compliance with
the Covenant, then Silicon agrees to terminate such
pledge agreement and return the pledged cash to the
Borrower as long as Borrower remains in compliance
therewith.
OTHER COVENANTS
(Section 4.1): Borrower shall at all times comply with all of the
following additional covenants:
1. BANKING RELATIONSHIP.
Borrower shall at all times maintain its primary
banking relationship with Silicon.
2. INDEBTEDNESS. Without limiting any of the
foregoing terms or provisions of this Agreement,
Borrower shall not in the future incur indebtedness
for borrowed money, except for (i) indebtedness to
Silicon, and (ii) indebtedness incurred in the future
for the purchase price of or lease of equipment in an
aggregate amount not exceeding $250,000 at any time
outstanding.
3. TERMINATION FEE. Upon any early termination
by Borrower or any termination of this Agreement by
Silicon upon the occurrence of an Event of Default,
then, and in any such event, Borrower shall pay to
Silicon upon the effective date of such termination a
fee (the "Termination Fee") in an amount equal to the
following percentage of the average daily outstanding
balance of the Obligations for the 180-day period (or
lesser period if applicable) preceding the date of
termination:
(i) Two percent (2%), if such early termination
occurs on or prior to the first anniversary of the
date of this Agreement; and
(ii) One percent (1%), if such early termination
occurs after the first anniversary of the date of
this Agreement and on or prior to the second
anniversary of the date of this Agreement.
BORROWER:
IMMUSOL, INC.
BY_______________________________
<PAGE> 15
President or Vice President
BY_______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY_______________________________
TITLE______________________________
<PAGE> 16
Silicon Valley Bank
Loan and Security Agreement
CERTIFIED RESOLUTION -.R
<PAGE> 17
SILICON VALLEY BANK
CERTIFIED RESOLUTION
LOGO
SILICON VALLEY BANK
CERTIFIED RESOLUTION
BORROWER: IMMUSOL, INC., A CORPORATION ORGANIZED UNDER
THE LAWS OF THE STATE OF CALIFORNIA
ADDRESS: 3050 SCIENCE PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
DATE: APRIL __, 1996
I, the undersigned, Secretary or Assistant Secretary of the
above-named borrower, a corporation organized under the laws of the state set
forth above, do hereby certify that the following is a full, true and correct
copy of resolutions duly and regularly adopted by the Board of Directors of
said corporation as required by law, and by the by-laws of said corporation,
and that said resolutions are still in full force and effect and have not been
in any way modified, repealed, rescinded, amended or revoked.
RESOLVED, that this corporation borrow from Silicon Valley Bank
("Silicon"), from time to time, such sum or sums of money as, in the
judgment of the officer or officers hereinafter authorized hereby,
this corporation may require.
RESOLVED FURTHER, that any officer of this corporation be, and he or
she is hereby authorized, directed and empowered, in the name of this
corporation, to execute and deliver to Silicon, and Silicon is
requested to accept, the loan agreements, security agreements, notes,
financing statements, and other documents and instruments providing
for such loans and evidencing and/or securing such loans, with
interest thereon, and said authorized officers are authorized from
time to time to execute renewals, extensions and/or amendments of said
loan agreements, security agreements, and other documents and
instruments.
RESOLVED FURTHER, that said authorized officers be and they are hereby
authorized, directed and empowered, as security for any and all
indebtedness of this corporation to Silicon, whether arising pursuant
to this resolution or otherwise, to grant, transfer, pledge, mortgage,
assign, or otherwise hypothecate to Silicon, or deed in trust for its
benefit, any property of any and every kind, belonging to this
corporation, including, but not limited to, any and all real property,
accounts, inventory, equipment, general intangibles, instruments,
documents, chattel paper, notes, money, deposit accounts, furniture,
fixtures, goods, and other property of every kind, and to execute and
deliver to Silicon any and all grants, transfers, trust receipts, loan
or credit agreements, pledge agreements, mortgages, deeds of trust,
financing statements, security agreements and other hypothecation
agreements, which said instruments and the note or notes and other
instruments referred to in the preceding paragraph may contain such
provisions, covenants, recitals and agreements as Silicon may require
and said
<PAGE> 18
SILICON VALLEY BANK
CERTIFIED RESOLUTION
authorized officers may approve, and the execution thereof by said
authorized officers shall be conclusive evidence of such approval.
RESOLVED FURTHER, that Silicon may conclusively rely upon a certified
copy of these resolutions and a certificate of the Secretary or Ass't
Secretary of this corporation as to the officers of this corporation
and their offices and signatures, and continue to conclusively rely on
such certified copy of these resolutions and said certificate for all
past, present and future transactions until written notice of any
change hereto or thereto is given to Silicon by this corporation by
certified mail, return receipt requested.
<PAGE> 19
SILICON VALLEY BANK
CERTIFIED RESOLUTION
The undersigned further hereby certifies that the following persons are the
duly elected and acting officers of the corporation named above as borrower and
that the following are their actual signatures:
<TABLE>
<CAPTION>
NAMES OFFICE(S) ACTUAL SIGNATURES
- ----- --------- -----------------
<S> <C> <C>
______________________________ _________________________________ X___________________________
______________________________ _________________________________ X___________________________
______________________________ _________________________________ X___________________________
______________________________ _________________________________ X___________________________
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary or Assistant
Secretary on the date set forth above.
___________________________________
Secretary or Assistant Secretary
UCC-1 -.U
<PAGE> 20
This FINANCING STATEMENT is presented for filing and will remain effective,
with certain exceptions, for five years from the date of filing, pursuant to
Section 9403 of the California Uniform Commercial Code.
1. DEBTOR (Last Name First - If An Individual) 1A.Soc Sec No or Id No.
IMMUSOL, INC.
1B. MAILING ADDRESS 1C. CITY, STATE 1D. ZIP CODE
3050 Science Park Drive San Diego, California 92121
2. ADDITIONAL DEBTOR (IF ANY) 2A.Soc Sec No or Id No.
(Last Name First - If An Individual)
2B. MAILING ADDRESS 2C. CITY, STATE 2D. ZIP CODE
3. DEBTOR'S TRADE NAMES OR STYLES (IF ANY) 3A. FED TAX NO.
None
4. SECURED PARTY 4A.Soc Sec No or Id No.
Name: SILICON VALLEY BANK
Mailing Address: 3003 Tasman Drive
Mail Sort NC661
Santa Clara, California 95054
5. ASSIGNEE OF SECURED PARTY 5A.Soc Sec No or Id No.
Name:
Mailing Address:
6. This FINANCING STATEMENT covers the following types or items of property
(include description of real property on which located and owner of record when
required by instruction 4).
Debtor hereby grants Secured Party a security interest in all of the
following, whether now owned or hereafter acquired, and wherever located, as
collateral for the payment and performance of all present and future
indebtedness, liabilities, guarantees and obligations of Debtor to Secured
Party: All "accounts," "general intangibles" (as limited on Exhibit A hereto),
"chattel paper," "documents," "letters of credit," "instruments," "deposit
accounts," "inventory," "farm products," "fixtures" and "equipment," as such
terms are defined in Division 9 of the California Uniform Commercial Code in
effect on the date hereof, and all life and other insurance policies and
claims, and all rights in all litigation presently or hereafter pending for any
cause or claim (whether in contract, tort or otherwise), and all judgments now
or hereafter arising therefrom; and all products, proceeds and insurance
proceeds of any or all of the foregoing; including without limitation all types
and items of property described on Exhibit A hereto (but this Financing
Statement and Security Agreement shall be fully effective notwithstanding any
lack of any Exhibit A). Debtor is not authorized to sell, transfer, or further
encumber any of the foregoing collateral, except for the sale of finished
inventory in the ordinary course of business.
7. CHECK IF APPLICABLE: X-PRODUCTS OF COLLATERAL ARE ALSO COVERED.
<PAGE> 21
SIGNATURE(S) OF DEBTOR: DATE: April __, 1996
IMMUSOL, INC.
By__________________________________
Title________________________________
SIGNATURE(S) OF SECURED PARTY:
SILICON VALLEY BANK
By__________________________________
Title________________________________
RETURN COPY TO:
SILICON VALLEY BANK
3003 TASMAN DRIVE
MAIL SORT NC661
SANTA CLARA, CALIFORNIA 95054
C
O
D
E
1
2
3
4
5
6
7
8
9
0
THIS SPACE FOR USE OF FILING OFFICER
(DATE, TIME, FILE NUMBER AND FILING OFFICER)
<PAGE> 22
EXHIBIT "A"
TO FINANCING STATEMENT AND SECURITY AGREEMENT
This FINANCING STATEMENT and SECURITY AGREEMENT covers the following types or
items of property, and the undersigned, IMMUSOL, INC. ("Debtor") hereby grants
SILICON VALLEY BANK ("Secured Party") a security interest therein as collateral
for the payment and performance of all present and future indebtedness,
liabilities, guarantees and obligations of Debtor to Secured Party. Debtor
agrees that said security interest may be enforced by Secured Party in
accordance with the terms and provisions of all security and other agreements
between Secured Party and Debtor, the California Uniform Commercial Code, or
both (but this document shall be fully effective as a security agreement, even
if there is no other security or other agreement between Secured Party and
Debtor): (a) All accounts, contract rights, chattel paper, letters of credit,
documents, securities, money, and instruments, and all other obligations now or
in the future owing to the Debtor; (b) All inventory, goods, merchandise,
materials, raw materials, work in process, finished goods, farm products,
advertising, packaging and shipping materials, supplies, and all other tangible
personal property which is held for sale or lease or furnished under contracts
of service or consumed in the Debtor's business, and all warehouse receipts and
other documents; and (c) All equipment, including without limitation all
machinery, fixtures, trade fixtures, vehicles, furnishings, furniture,
materials, tools, machine tools, office equipment, computers and peripheral
devices, appliances, apparatus, parts, dies, and jigs; (d) All Specified
General Intangibles (as defined below) including, but not limited to, deposit
accounts, goodwill, names, trade names, trademarks and the goodwill of the
business symbolized thereby, trade secrets, drawings, blueprints, customer
lists, [patents], [patent applications], copyrights, security deposits, loan
commitment fees, federal, state and local tax refunds and claims, all rights in
all litigation presently or hereafter pending for any cause or claim (whether
in contract, tort or otherwise), and all judgments now or hereafter arising
therefrom, all claims of Debtor against Secured Party, all rights to purchase
or sell real or personal property, all rights as a licensor or licensee of any
kind, all royalties, licenses, processes, telephone numbers, proprietary
information, purchase orders, and all insurance policies and claims (including
without limitation credit, liability, property and other insurance), and all
other rights, privileges and franchises of every kind; (e) All books and
records, whether stored on computers or otherwise maintained; and (f) All
substitutions, additions and accessions to any of the foregoing, and all
products, proceeds and insurance proceeds of the foregoing, and all guaranties
of and security for the foregoing; and all books and records relating to any of
the foregoing.
The term "Specified General Intangibles" shall mean "general intangibles" as
defined in the California Uniform Commercial Code, excluding, however, all
patents and patent applications.
IMMUSOL, INC.
By____________________________________
Title_________________________________
<PAGE> 1
EXHIBIT 10.5
LOGO
SILICON VALLEY BANK
AMENDMENT TO LOAN AND SECURITY AGREEMENT
BORROWER: IMMUSOL, INC.
ADDRESS: 3050 SCIENCE PARK DRIVE
SAN DIEGO, CALIFORNIA 92121
DATE: MAY 15, 1996
THIS AMENDMENT TO LOAN AND SECURITY AGREEMENT is entered into between
SILICON VALLEY BANK ("Silicon") and the borrower named above (the "Borrower").
The Parties agree to amend the Loan and Security Agreement between
them, dated April 3, 1996 (the "Loan Agreement"), as follows. (Capitalized
terms used but not defined in this Amendment, shall have the meanings set forth
in the Loan Agreement.)
1. EXTENDED APPLICABLE PERIOD FOR ADVANCE RATE SCHEDULE. The
second paragraph of the "Credit Limit (Section 1.1)" as set forth in the
Schedule to Loan and Security Agreement is amended effective on the date hereof
to read as follows:
Each requested Loan for purchases of equipment shall be in an
amount not less than $50,000 and shall not exceed either (a)
100% of the invoice amount of new items of equipment that the
Borrower purchases on or after March 1, 1996 or (b) 50% of the
original invoice amount of items of equipment that the
Borrower has purchased not more than one year prior to the
date of the requested Loan. In connection with the foregoing,
and prior to the making of any Loan, Borrower shall supply to
Silicon lists of invoices (including serial numbers) relating
to the equipment subject of the requested Loan and shall
supply such other information relating thereto as Silicon
requests.
2. REPRESENTATIONS TRUE. Borrower represents and warrants to
Silicon that all representations and warranties set forth in the Loan
Agreement, as amended hereby, are true and correct.
3. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any
prior written amendments to the Loan Agreement signed by Silicon and the
Borrower, and the other written documents and agreements between Silicon and
the Borrower set forth in full all of the representations and agreements of the
parties with respect to the subject matter hereof and supersede all prior
discussions, representations, agreements and understandings between the parties
with respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement, and all other documents and
agreements between Silicon and the Borrower shall continue in full force and
effect and the same are hereby ratified and confirmed.
BORROWER: SILICON:
<PAGE> 2
IMMUSOL, INC. SILICON VALLEY BANK
By /s/ S. Goldenberg By /s/ R (illegible)
------------------------------- -------------------------------
Chairman and CEO
Title SVP
----------------------------
By _______________________________
Secretary or Ass't Secretary
<PAGE> 1
EXHIBIT 10.6
SUBLEASE
This sublease (this "Sublease"), dated March 11, 1996, for reference
purposes only, is entered into by and between Neurocrine Biosciences, Inc., a
California corporation, ("Sublandlord") and Immusol, Inc., a California
corporation ("Subtenant"), as a Sublease under that certain Office Lease for
Torrey Pines Business and Science Center dated as of June 1, 1993 by and
between Sublandlord, as tenant and Hartford Accident and Indemnity Company
("Hartford"), as landlord, as amended by that certain First Lease Amendment
dated July 8, 1993, by and between Sublandlord and Hartford, as further amended
by that Second Lease Amendment dated June 30, 1995 by and between Talcott
Realty I Limited Partnership, successor-in-interest to Hartford ("Master
Landlord") and Sublandlord, as further amended by that certain Letter Agreement
dated December 20 1995 by and between Master Landlord and Sublandlord, as
further amended by that certain Third Lease Amendment of even date herewith by
and between Sublandlord and Master Landlord (as amended, the "Master Lease").
Recitals
This Sublease is made with reference to the following facts and with
the following intentions:
A. Pursuant to the Master Lease, Master Landlord leases to
Sublandlord certain premises consisting of approximately forty-seven thousand
five hundred ninety-one (47,591) square feet (the "Master Premises") in that
certain building (the "Building") located in the state of California, city of
San Diego and commonly known as 3050 Science Park Road in that certain office
park commonly known as Torrey Pines Business and Science Center. A true,
complete and correct copy of the Master Lease, which includes all exhibits,
addenda, and amendments thereto, is attached hereto as Exhibit "A".
B. Sublandlord now desires to sublease a portion of the Master
Premises to Subtenant, and Subtenant desires to sublease a portion of the
Master Premises from Sublandlord, on the terms and conditions set forth in this
Sublease.
NOW, THEREFORE, for good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Subleased Premises:
A. Subleased Premises: Sublandlord hereby subleases to
Subtenant, and Subtenant subleases from Sublandlord, approximately nineteen
thousand three hundred forty-five (19,345) square feet of space in the
approximate location and configuration as shown on that floor plan (the "Floor
Plan") attached hereto as Exhibit "B" (the "Subleased Premises"). The parties
hereto acknowledge that as of the date hereof, the Subleased Premises is not
<PAGE> 2
completely separate from the portion of the Master Premises that will be
occupied by Sublandlord and accordingly, Sublandlord will construct a demising
wall separating the two spaces. Upon completion of the construction of such
wall, Sublandlord's architect shall determine the actual number of square feet
within the Subleased Premises using the same methodology as was used to
determine the square footage of the Master Premises and Subleased Premises as
set forth above. If the actual square footage of the Subleased Premises
differs from nineteen thousand three hundred forty-five (19,345) square feet,
then the parties shall enter into an amendment of this Sublease which amendment
shall reflect the true square footage of the Subleased Premises as determined
by Sublandlord's architect and any adjustment to Base Rent and Subtenant's
Proportionate Share resulting therefrom based upon a rental rate of Two Dollars
and Eight Cents ($2.08) per month per square foot of space in the Subleased
Premises.
B. Common Areas: Sublandlord hereby grants Subtenant,
to the extent of Sublandlord's rights under the Master Lease, the non-exclusive
right to use for Subtenant's intended purposes the entrance foyer, lobby,
stairways, elevators, shipping and receiving areas of, in and about the
Building, and outside areas of the Building.
C. Possession of Subleased Premises: Sublandlord has
not made and does not make any representations or warranties regarding the
quality or condition of the Subleased Premises or any improvements located
therein except as otherwise expressly provided herein. Sublandlord shall
deliver the Subleased Premises to Subtenant in good condition and repair and
with the building systems serving the Subleased Premises in good working order.
Notwithstanding the foregoing to the contrary, Sublandlord's obligation to
deliver the Subleased Premises in good condition and repair shall not apply to
any space that shall have been occupied by Subtenant on the date immediately
preceding the Commencement Date. At the expiration or sooner termination of
this Sublease, all improvements, additions, alterations and fixtures installed
in the Subleased Premises, other than Subtenant's trade fixtures shall be
surrendered to Sublandlord or, at Sublandlord's option, removed from the
Premises in accordance with paragraph 8 of the Master Lease as incorporated
into this Sublease.
D. Parking: Subject to the rights of Master Landlord
under Paragraph 28 of the General Terms, Covenants and Conditions of the Master
Lease, Subtenant shall have the right to the non-exclusive use with
Sublandlord, Master Landlord and other tenants in the Building and the
neighboring building located at 3040 Science Park Road, Subtenant's
Proportionate Share (as hereafter defined) of uncovered parking spaces and
Subtenant's Proportionate Share of underground parking spaces located in the
parking facility which are allocated to Sublandlord under the Master Lease as
shown on the Land and Building Plan attached to the Master Lease as Attachment
3.
2. Term: The term of this Sublease (the "Sublease Term") shall
commence on the Hybritech Space Commencement Date (as that term is defined in
the Third Lease Amendment) (the "Commencement Date") and shall expire on the
fifth (5th) anniversary of the
<PAGE> 3
Commencement Date, unless this Sublease is sooner terminated pursuant to its
terms or the Master Lease is sooner terminated pursuant to its terms. On the
Commencement Date, Sublandlord shall deliver possession to Subtenant of that
portion of the Subleased Premises not occupied by Subtenant immediately prior
to the Commencement Date, in the condition required by this Sublease. Upon
determination of the Commencement Date, the parties hereto shall execute a
written acknowledgement setting forth the Commencement Date and expiration date
of this Sublease.
3. Rent:
A. Base Monthly Rent: Commencing on the Commencement
Date and on the first (1st) day of each calendar month thereafter during the
remainder of the Sublease Term Subtenant shall pay to Sublandlord Forty
Thousand Two Hundred Thirty-Seven Dollars and Sixty Cents ($40,2.37.60) ("Base
Rent"). If the Commencement Date occurs on a day other then the first day of a
calendar month, then Base Rent and Additional Rent (hereinafter defined) for
the partial months at the beginning and end of the Sublease Term shall be
prorated on the basis of a thirty (30) day month.
B. CPI Adjustment: The Base Rent payable by Subtenant
shall be increased on each anniversary of the Commencement Date hereof (each,
an "Adjustment Date") by multiplying the initial Base Rent by a fraction, the
numerator of which is the CPI (as defined in the Third Lease Amendment)
published immediately prior to the Adjustment Date in question, and the
denominator of which is the CPI published immediately prior to the Commencement
Date hereof. In no event will the increase in Base Rent in any one year be
less than three percent (3%) of the Base Rent payable before the Adjustment
Date in question, nor more than six percent (6%) of the Base Rent payable
before the Adjustment Date in question.
C. Additional Rent: Commencing on the Commencement Date
and continuing throughout the Sublease Term Subtenant shall pay to Sublandlord
"Subtenant's Proportionate Share" (defined below) of Total Expenses (as that
term is defined in the "Expense Escalation" attachment to the Master Lease,
including, without limitation, Real Estate Taxes and Operating Expenses as
defined in said attachment) charged to Sublandlord under the Master Lease. The
term Subtenant's Proportionate Share" shall mean that amount (expressed as a
percentage) equal to the number of square feet included in the Subleased
Premises divided by the number of square feet in the Master Premises.
Accordingly, Subtenant's Proportionate Share as of the Commencement Date shall
mean forty percent (40.65%) (19,345/47,591). The payments of Additional Rent
required of Subtenant pursuant to this Subparagraph D shall be made within the
same time periods as are established by the Master Lease for the comparable
obligation of Sublandlord to make such payments to Master Landlord. All
amounts in addition to the Base Rent required to be paid by Subtenant under
this Sublease shall be deemed to be Additional Rent.
-3-
<PAGE> 4
4. Security Deposit:
A. As security for the performance by Subtenant of all
of the terms and conditions of this Sublease upon execution hereof, Subtenant
shall deliver to Sublandlord a standby, irrevocable letter of credit for the
benefit of Sublandlord in an initial amount equal to Two Hundred Forty-One
Thousand Four Hundred Twenty-Five Dollars and Sixty Cents ($241,425.60) (which
letter of credit, and any other letter of credit required to be delivered by
Subtenant pursuant to this paragraph is referred to herein as a "Letter of
Credit") and in the form attached hereto as Exhibit C. Each Letter of Credit
shall be issued by a United States commercial bank reasonably acceptable to
Sublandlord, shall provide for partial payments, shall be freely transferable
by the beneficiary, and shall otherwise be in form and substance reasonably
acceptable to Sublandlord. If Subtenant fails to pay rent or other charges due
hereunder or otherwise defaults with respect to any provision of this Sublease,
then Sublandlord may draw upon the Letter of Credit (and any other Letters of
Credit given hereunder) for the payment of any rent or other charge in default
including, without limitation, damages allocable to the unexpired term of the
Sublease in the event the Sublease is terminated, for the payment of any other
sum which Sublandlord has become obligated to pay by reason of Subtenant's
default, and for any other amount necessary to compensate Sublandlord for any
loss or damage which Sublandlord has suffered thereby. Each Letter of Credit
shall be payable at sight upon presentation of a signed statement by a duly
appointed representative of the beneficiary certifying that: "An event of
default (as that term is defined in paragraph 22 of that certain Office Lease
for Torrey Pines Business and Science Center dated as of June 1, 1993 by and
between Neurocrine Biosciences, Inc., as tenant, and Hartford Accident and
Indemnity Company, as landlord as thereafter amended, which paragraph 22 was
incorporated by reference into that certain Sublease dated March 11, 1996
between Neurocrine Biosciences, Inc. and Immusol, Inc. (the "Sublease")) by the
"Subtenant" has occurred under the Sublease." Subtenant shall renew each and
every Letter of Credit required to be given hereunder on or before the day that
is thirty (30) days prior to the day that each such Letter of Credit expires.
If Subtenant fails to so renew each such Letter of Credit, such failure shall
be deemed to be an event of default by Subtenant hereunder and Sublandlord may
draw on each and every such Letter of Credit provided by Subtenant in
accordance herewith in the sum of any theretofore undrawn amounts. If
Sublandlord draws upon any Letter of Credit required to be given hereunder in
accordance with the terms hereof, Subtenant shall immediately, upon demand,
purchase and deliver to Sublandlord an additional Letter of Credit in an amount
equal to the amount so drawn by Sublandlord. Subtenant's failure to do so
shall be deemed to be an event of default under this Sublease. Within sixty
(60) days following the expiration of this Sublease, and provided Subtenant is
not in default of this Sublease, Sublandlord shall return all Letters of Credit
given hereunder.
B. Within thirty (30) days following the end of each
fiscal quarter of Subtenant, Subtenant shall deliver to Sublandlord a copy of
Subtenant's financial statements certified by Subtenant's chief financial
officer as true, correct and complete (including balance sheet, income
statement and statement of cash flows). If at any time Subtenant's cash and
cash
-4-
<PAGE> 5
equivalent balance (which balance shall include marketable securities valued at
market value) is less that One Million Five Hundred Thousand Dollars
($1,500,000), Sublandlord shall have the right to require Subtenant to and,
Subtenant shall, within five (5) days of Sublandlord's written request, purchase
an additional Letter of Credit or provide other security acceptable to
Sublandlord in the amount equal to six (6) months' Base Rent which, as of the
date hereof, would be Two Hundred Forty-One Thousand Four Hundred Twenty-Five
Dollars and Sixty Cents ($241,425.60), so that Sublandlord shall hold, in the
aggregate, twelve months' Base Rent, which, as of the date hereof, would be Four
Hundred Eighty-Two Thousand Eight Hundred Fifty-One Dollars and Twenty Cents
($482,851.20), as security for the performance of Subtenant's obligations under
this Sublease (the "Additional Deposit") to be held pursuant to subparagraph 4.A
above. If Sublandlord's architect determines that the square footage of the
Subleased Premises does not equal nineteen thousand three hundred forty-five
(19,345) square feet in accordance with the terms of subparagraph 1.A hereof,
then the amount of the Additional Deposit shall be adjusted so that the amount
of the initial Letter of Credit given hereunder plus the Additional Deposit
equals twelve (12) months' Base Rent. If Subtenant is required to post the
Additional Deposit and if at any time thereafter, Subtenant's cash and cash
equivalent balance increases such that such balance equals or exceeds One
Million Five Hundred Thousand Dollars ($1,500,000) for one hundred eighty (180)
consecutive days as evidenced by financial statements certified by Subtenant's
chief financial officer as true, correct and complete, then unless an uncured
default or event of default by Subtenant then exists under this Sublease,
Sublandlord shall return to Subtenant the Additional Deposit.
5. Relationship to Master Lease: This Sublease is and shall
remain at all times subject and subordinate to the Master Lease and any
amendment, modification or alteration thereto subject to the terms and
conditions of paragraph 14 hereof. Upon any termination of the Master Lease
pursuant to the terms of the Master Lease, this Sublease shall also terminate.
6. Incorporated Master Lease Terms: Except to the extent
expressly provided to the contrary in this Sublease, each of the following
provisions of the Master Lease is incorporated into this Sublease as if fully
set forth herein and (i) each reference therein to "Landlord" shall be deemed
to refer to Sublandlord under this Sublease who shall perform the obligations
of the "Landlord" set forth in said paragraph contained in the Master Lease to
the extent fairly allocable to the Subleased Premises, (ii) each reference
therein to "Tenant" shall be deemed to refer to Subtenant under this Sublease
who shall perform the obligations of the "Tenant" set forth in said paragraph
in the Master Lease to the extent fairly allowable to the Subleased Premises,
(iii) each reference therein to the "Term" or "Lease Term" shall be deemed to
refer to the Sublease Term (iv) each reference therein to the "Premises" shall
be deemed to refer to the "Subleased Premises", and (v) each reference therein
to this "Lease" shall be deemed to refer to this "Sublease". The Additional
Terms which supplement and are generally incorporated into the Master Lease
shall not be incorporated into this Sublease unless specifically referenced
herein.
A. Office Lease
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(1) The following Subparagraphs in Paragraph II
entitled "Summary of Terms" of the Master Lease: II.C ("Land"); II.H ("Lease
Year"); II.R ("Normal Business Hours"); II.S ("State"); II.W ("Permitted
Use"), except that the phrase "or any other use permitted under the SR Zoning
(see Attachment 11)" shall be deleted; and II.X ("Tenant's Representatives").
(2) The following Subparagraphs in Paragraph III
entitled "Attachments" of the Master Lease: Subparagraphs 1 ("General Terms,
Covenants and Conditions") as amended herein; 2 ("Plan showing the Premises")
as amended herein; 3 ("Land and Building Plan"); 4 ("Rules and Regulations");
and 9 ("Additional Terms") and 11 ("SR Zoning"); provided however, that the
provisions of such Attachments shall only be incorporated to the extent they
are specifically incorporated by Subparagraphs 6.B or 6.C of this Sublease.
B. General Terms, Covenants and Conditions
(1) Paragraph 2 entitled "Rent"; provided however
that the reference to the "Building Manager" shall be replaced with
"Sublandlord".
(2) Paragraph 3 entitled "Late Payments".
(3) Paragraph 4 entitled "Use of the Premises".
(4) Paragraph 5 entitled "Rules and Regulations"
as modified by the corresponding paragraph in the Additional Terms of the
Master Lease (the "Additional Terms"), except that Landlord shall mean and
refer to both Sublandlord and Master Landlord.
(5) Paragraph 6 entitled "Services" as modified
by corresponding paragraph 6(e) in the Additional Terms; provided however,
that,
(a) The references to Landlord in
Subparagraphs 6(a) and 6(b) shall mean and refer to Master Landlord;
(b) The first and third reference to
Landlord in Subparagraph 6(c) shall mean and refer to Master Landlord and the
second, forth, fifth, sixth and seventh reference to Landlord in said
Subparagraph 6(c) shall mean and refer to both Master Landlord and Sublandlord;
(c) The first and third reference to
Landlord in Subparagraph 6(d) shall mean and refer to both Master Landlord and
Sublandlord;
(d) The second reference to Landlord in
paragraph 6(e) of the Additional Terms shall mean and refer to Master Landlord.
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(6) Paragraph 7 entitled "Repairs and
Maintenance" as modified by the corresponding paragraph of the Additional
Terms; provided however that Master Landlord, and not Sublandlord, shall be
responsible for those repairs within the scope of Landlord's repairs and
Sublandlord shall use reasonable efforts to enforce Master Landlord's
obligations.
(7) Subparagraph 8 entitled "Alterations";
provided however, that Landlord shall mean and refer to both Sublandlord and
Master Landlord.
(8) Paragraph 9 entitled "Insurance"; provided
however, that the first four references to Landlord shall mean and refer to
both Master Landlord and Sublandlord,
(9) Paragraph 10 entitled "Indemnification";
provided however, that
(a) The first two (2) sentences thereof
shall not be incorporated herein; and
(b) The waivers and releases made
therein for the benefit of "Landlord" shall run for the benefit of both Master
Landlord and Sublandlord.
(10) Paragraph 11 entitled "Observance of Laws" as
modified by the corresponding paragraph in the Additional Terms; provided
however, that
(a) Landlord shall mean and refer to
Master Landlord; and
(b) Sublandlord shall use reasonable
efforts to enforce Master Landlord's obligations under said Paragraph 11 of the
Master Lease.
(11) Paragraph 12 entitled "Surrender of Premises"
as modified by the corresponding paragraph in the Additional Terms.
(12) Paragraph 13 entitled "Holding Over" as
modified by the corresponding paragraph in the Additional Terms; provided
however,
(a) The words "(as such date may be
extended pursuant to Section II)" in the Additional Terms shall be deleted; and
(b) The reference to Landlord in the
Additional Terms shall mean and refer to either Master Landlord or Sublandlord.
(13) Paragraph 15 entitled "Condemnation" as
modified by the corresponding paragraphs in the Additional Terms; provided
however, that the first four references to Landlord in Subparagraph 15(a) shall
mean and refer to either Master Landlord
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<PAGE> 8
or Sublandlord and the references to Landlord in Subparagraph (b) shall mean
and refer to Master Landlord.
(14) Paragraph 17 entitled "Subordination" as
modified by the corresponding paragraph in the Additional Terms, provided,
however, that the references to Landlord shall mean and refer to either Master
Landlord or Sublandlord.
(15) Paragraph 18 entitled "Estoppel Certificate",
provided however, that Master Landlord and Subtenant, in addition to
Sublandlord, shall have the rights afforded "Landlord" in said Paragraph 18
(16) Paragraph 19 entitled "Transfer of Landlord's
Interest" as modified by the corresponding paragraph in the Additional Terms.
(17) Paragraph 20 entitled "Quiet Enjoyment".
(18) Paragraph 21 entitled "Rights Reserved to the
Landlord" as modified by the corresponding paragraph in the Additional Terms;
provided however that Master Landlord shall benefit from the rights afforded
Landlord in said Paragraph 21.
(19) Paragraph 22 entitled "Default" as modified
by the corresponding paragraph in the Additional Terms; provided however, that
the reference to "10" shall be changed to "5" and the references to "30" shall
be changed to "15".
(20) Paragraph 23 entitled "Remedies".
(21) Paragraph 25 entitled "Bankruptcy".
(22) Paragraph 26 entitled "Force Majeure".
(23) [Intentionally omitted.].
(24) [Intentionally omitted.)
(25) Paragraph 30 entitled "Brokerage Fees";
provided however, that
(a) The word "Broker" shall be deleted
and replaced with Business Real Estate; and
(b) The second sentence thereof shall be
deleted in its entirety and replaced with the following: "Sublandlord and
Subtenant shall indemnify and defend the other for, from and against any
claims, expenses, liabilities and losses (including reasonable attorneys' fees)
resulting from any compensation, or charges claimed by or owning to any other
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<PAGE> 9
party in connection with this Lease by reason of any act of the indemnifying
party, provided however, that Sublandlord shall pay to Business Real Estate and
CB Commercial pursuant to a separate agreement all brokerage commissions that
may be due such parties arising out of this Sublease.
(26) Paragraph 31 entitled "Notices"; provided
however, that
(a) Sublandlord's Mailing Address shall be: 3050 Science
Park Road, San Diego, California 92121; and
(b) Subtenant's Mailing Address shall be: 3050 Science
Park Road, San Diego, California 92121.
(27) Paragraph 32 entitled "Miscellaneous" as
modified by the corresponding paragraph in the Additional Terms and subject to
the prohibition on assignment and subletting in this Sublease.
C. Rules and Regulations: Paragraphs 1 through 21 of the
Rules and Regulation as modified by corresponding paragraphs 4, 6 and 21 of the
Additional Terms; provided however, that the references to Landlord in
Paragraph 1 through 20 shall mean and refer to both Master Landlord and
Sublandlord and the references to Landlord in Paragraph 21 shall mean and refer
to Master Landlord.
D. Third Lease Amendment: The following paragraphs of
the Third Lease Amendment are hereby incorporated into this Sublease: Paragraph
4 (provided however, that all references to "Landlord" shall mean and refer to
Master Landlord only), and paragraph 10.
7. Maintenance Responsibilities of Sublandlord, Master Landlord
and Subtenant:
A. Sublandlord and Master Landlord. The parties
acknowledge that Paragraphs 1, 6 and 7 of the General Terms, Covenants and
Conditions to the Master Lease obligate Master Landlord to provide certain
levels of maintenance, repair and replacement and Building services ("Master
Landlord's Repair and Services Obligations"), and Sublandlord and Subtenant
agree as follows with respect to this subject:
(1) Sublandlord shall use reasonable efforts to
enforce Master Landlord's Repair and Services Obligations. Subtenant shall
reimburse Sublandlord for Subtenant's Proportionate Share of all amounts
Sublandlord is required to pay pursuant to Paragraph 6(b) and 6(c) ("Utilities
and Services Charges"); provided however, that if Sublandlord, in its
reasonable discretion, determines that Subtenant's Proportionate Share of
Utilities and Service Charges does not equitably reflect Sublandlord's and
Subtenant's actual usage of such utilities and services, then the amount that
Subtenant shall be obligated to pay
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<PAGE> 10
pursuant to this subparagraph 7.A(l) shall be equitably adjusted based on
Subtenant's and Sublandlord's actual usage of such utilities and services
(2) Sublandlord shall have no maintenance or
repair obligations with respect to the Subleased Premises except for its
obligation to use reasonable efforts to enforce the obligations of Master
Landlord's Repair and Services Obligations. Subtenant hereby expressly waives
the provisions of subsection 1 of Section 1932 and Sections 1941 and 1942 of
the Civil Code of California and all rights to make repairs at the expense of
Sublandlord as provided in Section 1942 of said Civil Code.
B. Subtenant. Without limiting Subtenant's repair and
maintenance obligations pursuant to the incorporation of Paragraph 7 of the
Master Lease, Subtenant, at Subtenant's sole cost, shall repair, maintain, and
replace the heating, ventilating and air conditioning system serving the
Subleased Premises to the extent not the responsibility of Master Landlord
under the Master Lease.
8. Damage and Related Termination Rights: The parties
acknowledge that Paragraph 14 entitled "Damage" of the General Terms, Covenants
and Conditions to the Master Lease governs the rights of Master Landlord and
Sublandlord concerning damage to the Master Premises by fire or other peril,
and Sublandlord and Subtenant agree as follows with respect to this subject as
it relates to the Subleased Premises.
A. Sublandlord shall use reasonable efforts to enforce
the obligations of Master Landlord under said paragraph 14. Except to the
extent of its obligations stated in the immediate preceding sentence,
Sublandlord shall not be obligated to restore the Subleased Premises following
any damage caused by fire or other peril, and shall not be liable for any
failure by Master Landlord to perform its obligations under the Master Lease.
B. In the event of any damage to the Subleased Premises
caused by fire or other peril which does not result in a termination of the
Sublease, Subtenant shall forthwith, at Subtenant's sole expense, replace or
fully repair Trade Fixtures installed by Subtenant and existing at the time of
such damage or destruction to the extent still required by Subtenant for its
business operations in the Subleased Premises.
C. The parties acknowledge that Master Landlord has the
right to terminate the Master Lease in certain circumstances pursuant to
Subparagraph 14(b) in the Master Lease. In the event Master Landlord exercises
any such right of termination during the Sublease Term, the Sublease shall
terminate on the date the Master Lease terminates.
D. The parties acknowledge that Sublandlord has the
right to terminate the Master Lease in certain circumstances pursuant to
Subparagraph 14(c) of the Master Lease. If Sublandlord becomes entitled to
terminate the Master Lease pursuant to said Subparagraph 14(c), then it may do
so in its sole discretion, without the consent of Subtenant and if it so
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<PAGE> 11
elects to terminate the Master Lease then the Sublease shall terminate on the
date the Master Lease terminates. Notwithstanding the foregoing to the
contrary, Sublandlord shall not have the right to terminate the Master Lease
pursuant to said paragraph 14(c) if (i) there is no damage to any space
occupied by Sublandlord under the Master Lease and (ii) any repair and/or
restoration work to the Building and/or Office Park would not, in Sublandlord's
reasonable opinion, materially adversely affect the operation of Sublandlord's
business.
E. If this Sublease or the Master Lease has not been
terminated and Master Landlord does not substantially complete the repair or
restoration of the Subleased Premises within one hundred eighty (180) days
after the date of the casualty, and if such failure has a material, adverse
effect on Subtenant's business in the Subleased Premises, Subtenant may
(provided such failure is not due to any fault of Subtenant or Subtenant's
Representatives) terminate this Sublease by notice to Sublandlord given within
five (5) business days after the end of the 180-day period. Termination shall
be effective thirty (30) days after such notice is given unless Master Landlord
shall substantially complete the repair or restoration within the 30-day
period, in which case Subtenant's notice of termination shall be deemed
withdrawn.
F. If Sublandlord's rent under the Master Lease is
abated in connection with damage and destruction under such Paragraph 14,
Subtenant's Base Rent under this Sublease shall be equitably abated if and only
if Sublandlord's abatement of rent is attributable to loss of use of all or any
material part of the Subleased Premises. The parties acknowledge that
subparagraph 14(b) of the Master Lease provides "Rent" under the Master Lease
will be abated from the date of the damage to the date the damage is repaired
except that if repairs are delayed in any way by the "Tenant" under the Master
Lease, then the damage shall be deemed repaired on the date that it would have
been repaired but for such delay. Accordingly, (i) if delay caused by
Sublandlord results in the acceleration of the obligation to pay "Rent" under
the Master Lease then, notwithstanding anything to the contrary in this
subparagraph 8.F, Subtenant shall be entitled to that amount of rental
abatement that Subtenant would have been entitled to hereunder but for the
delay caused by Sublandlord; and (ii) if delay caused by Subtenant results in
the acceleration of the obligation to pay "Rent" under the Master Lease then
Subtenant shall pay to Sublandlord, as Additional Rent, the difference between
the amount of "Rent" payable by Sublandlord under the Master Lease allocable
to that period of time that "Rent" is not abated as a result of delay caused by
Subtenant and all payments of Base Rent and Additional Rent received by
Sublandlord allocable to such period of time.
G. This Paragraph 8 is intended to provide the only
remedies available to Tenant for damage caused by casualty and, therefore, to
the extent permitted by Law, Tenant waives the provisions of any Laws (defined
in the Master Lease), which would provide alternative or additional remedies in
the event of such damage.
9. Indemnity:
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<PAGE> 12
A. Subtenant's Indemnity: Subtenant shall indemnify,
defend, protect, and hold Sublandlord harmless from and against all claims,
demands, costs, liabilities, losses, attorneys' fees and damages which may be
brought or made against Sublandlord or which Sublandlord may pay or incur by
reason of (i) a breach of this Sublease by Subtenant, (ii) any act or omission
of Subtenant or Subtenant's Representatives relating to the Subleased Premises
(iii) the negligence or willful misconduct of Subtenant or Subtenant's
Representatives, or (iv) any occurrence during the Sublease Term arising out of
Subtenant's use or occupancy of the Building, but only in each case to the
extent that such Claims are not caused by the negligence or willful misconduct
of Sublandlord or Sublandlord's employees, agents, contractors or invitees.
The terms and conditions of this subparagraph 9.A shall survive the expiration
or earlier termination of this Sublease.
B. Sublandlord's Indemnity: Sublandlord shall
indemnify, defend, protect, and hold Subtenant harmless from and against all
claims, demands, costs, liabilities, losses, attorneys' fees and damages which
may be brought or made against Subtenant or which Subtenant may pay or incur by
reason of (i) a breach of this Sublease or the Master Lease by Sublandlord
(except to the extent that any breach of the Master Lease is caused by
Subtenant's breach of this Sublease), (ii) any act or omission of Sublandlord
or Sublandlord's Representatives relating to the Building, (iii) the negligence
or willful misconduct of Sublandlord or Sublandlord's Representatives, or (iv)
any occurrence during the Sublease Term arising out of Sublandlord's use or
occupancy of the Building, but only in each case to the extent that such Claims
are not the responsibility of Subtenant under this Sublease. The parties
acknowledge that Subtenant is not Sublandlord's representative. The terms and
conditions of this subparagraph 9.B shall survive the expiration or earlier
termination of this Sublease.
10. Assignment and Subletting: Neither this Sublease, nor any
interest hereunder may be assigned, subleased, mortgaged, pledged or encumbered
by Subtenant, nor may the Subleased Premises be used by any other party,
directly or indirectly, by operation of law or otherwise (a "Transfer"),
without the prior written consent of Sublandlord, which consent shall not be
unreasonably, withheld or delayed, and except in strict compliance with the
terms and conditions of the Master Lease. A consent to one Transfer shall not
be deemed to be a consent to any subsequent Transfer. Any Transfer without
such consent shall be void and shall constitute an immediate default (not
subject to notice or cure) under this Sublease. As a condition to granting its
consent to any Transfer, Sublandlord may require that Subtenant pay to
Sublandlord, as additional rent, all Excess Rents received by Subtenant. As
used herein, the term "Excess Rents" shall mean all rents and other
consideration payable by transferees to Subtenant in connection with the
Transfer (including any sums paid for the sale, rental or use of Subtenant's
property in excess of the then market value of Subtenant's property), less the
cost incurred by Subtenant after such Transfer in performing its obligations
under this Sublease and less the reasonable expenses actually paid by Subtenant
in connection with the Transfer. Sublandlord's waiver or consent to any
Transfer shall be ineffective unless set forth in writing, and Subtenant shall
not be relieved or released from any of their obligations under this Sublease,
unless such waiver or consent expressly so provides.
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11. Tenant Improvements: If Subtenant elects to construct any
improvements or alterations in the Subleased Premises ("Tenant Improvements"),
then the following shall apply:
A. Such construction shall be done in accordance with
the following:
(1) Subtenant shall deliver to Sublandlord and
Master Landlord Subtenant's proposed plans and specifications for the Subleased
Premises (the "Plans") as prepared by an architect ("Architect") approved by
Sublandlord and Master Landlord. Sublandlord's approval shall not be
unreasonably withheld or delayed. Sublandlord shall either approve or
disapprove the Plans. If Sublandlord disapproves the Plans then Sublandlord
and Subtenant shall use good faith efforts to cooperate to attempt to reach
agreement on the Plans. Sublandlord may disapprove the Plans if Sublandlord
shall reasonably determine that the Plans: (a) do not provide for a finish
consistent with finishes for comparable tenants in comparable buildings in the
area in which the Building is located; (b) would subject Sublandlord, Master
Landlord, the Building or the Subleased Premises to any liability, violation,
fine, penalty, or forfeiture or any additional cost or expense to either
Sublandlord or Master Landlord (other than as expressly provided below); (c)
would adversely affect the character or nature of the Building as a building
containing bioscience companies and wet labs; (d) would provide for or require
any installation or work which is unlawful, would create an unsound or
dangerous condition, or would require any change to the structure of the
exterior of the Premises or the Building; or (e) would materially and
adversely interfere with the use and enjoyment of any other space in the
Building. Additionally, Sublandlord may disapprove the Plans (or any other
matter requiring Sublandlord's consent or approval) and it shall be deemed
reasonable for Sublandlord to do so, if Master Landlord, for whatever reason,
disapproves the Plans (or such other matter). Any review or approval by
Sublandlord of the Plans is solely for Sublandlord's benefit, and without any
representation or warranty whatsoever to Subtenant with respect to the
adequacy, correctness or efficiency thereof or otherwise. Wherever in this
paragraph 11, Master Landlord's consent is required to any matter, Sublandlord
shall use diligent good faith efforts to obtain Master Landlord's consent in an
expeditious manner.
(2) The Plans may subsequently be modified by
Subtenant with Sublandlord's and Master Landlord's approval as set forth above.
The Plans shall be prepared at Subtenant's sole cost and expense, except as
expressly provided below.
(3) All Tenant Improvements shall be furnished
and installed by a reputable contractor, licensed in California to be selected
by Subtenant, but subject to Sublandlord's and Master Landlord's approval,
which approval shall not be unreasonably withheld ("Subtenant's Contractor")
upon the following terms and conditions:
(a) The work shall be performed and
completed by Subtenant's Contractor in a good and workmanlike manner at
Subtenant's sole cost and expense (except as otherwise expressly provided
below) and in accordance with: (a) the Plans, (b) all requirements (including
laws and regulations) of any governmental authority having jurisdiction
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and (c) such requirements and upon such conditions for performing the work as
Sublandlord and Master Landlord may reasonably impose. No fee shall be payable
to Sublandlord or Master Landlord in connection with the Tenant Improvements or
Office Improvements.
(b) No improvements shall be installed in any portion of
the Subleased Premises unless and until:
(i) Sublandlord and Master Landlord
have approved the Plans;
(ii) Subtenant has submitted to
Sublandlord and Master Landlord certificates of insurance (in addition to that
required by Section 9 of the Master Lease) evidencing that Subtenant's
Contractor has in full force and effect insurance coverage in types and amounts
and with insurers reasonably approved by Sublandlord and Master Landlord (and
which insurance Subtenant shall cause to be maintained during the period any
construction is being performed in the Subleased Premises) in accordance with
the following: (1) worker's compensation insurance covering each worker employed
at the jobsite in the performance of the contract statutory requirement, (2)
comprehensive personal injury and property damage liability insurance
(excluding motor vehicles) covering operations arising out of the performance
of the contract at the jobsite $1,000,000 combined single limit, (3)
comprehensive automobile personal injury and property damage liability
insurance covering all vehicles involved in the work, whether owned, rented or
otherwise $250,000-500,000 combined single limit, and (4) aggregate products
and completed operations insurance $1,000,000. The insurance required hereby
shall be written for not less than any limit required by law or as stated
above, whichever is greater. Sublandlord and Master Landlord shall be
additionally insured on the above-mentioned insurance policies and be provided
30 days prior written notice in the event of cancellation or modification
thereof, provided, however, that such insurance policies shall not be canceled
nor coverages thereunder reduced by Subtenant's Contractor without the written
consent of Sublandlord and Master Landlord. Such insurance policies shall
cover claims and damages arising out of the work, whether caused directly or
indirectly by Subtenant's Contractor, its employees, agents or subcontractors;
(iii) Subtenant has obtained all
permits and approvals necessary for the construction of the work and submitted
copies thereof to Sublandlord and Master Landlord; and
(iv) Subtenant shall use its best
efforts to obtain in Subtenant's agreement with Subtenant's Contractor an
indemnification of Sublandlord and Master Landlord substantially the same as
provided in subparagraph 11.A(4) hereof
(4) Subtenant shall indemnify Sublandlord and
Master Landlord and save them harmless from all claims, damages, losses,
liabilities and expenses (including
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<PAGE> 15
reasonable attorneys' fees) arising out of the Tenant Improvements or any act or
emission of Subtenant, Subtenant's Contractor or Subtenant's Representatives in
performing the work.
B. Sublandlord hereby grants to Subtenant an allowance
(the "Allowance") of Two Hundred Nine Thousand One Hundred Ten Dollars
($209,110) which may be used to construct the Tenant Improvements and applied
toward the Cost of the Work (hereinafter defined). The "Cost of the Work" shall
mean the following: (i) all amounts due to all contractors and subcontractors
engaged by Subtenant to construct or install the Tenant Improvements or to
provide supplies or materials with respect to such work, (ii) the cost of all
building permits, governmental approvals, and construction taxes; (iii)
engineering, architectural, space planning and other consultant fees; and (iv)
the cost of all utilities consumed on the Premises in connection with the
construction of the Tenant Improvements. Notwithstanding anything to the
contrary in this Sublease, the Cost of the Work shall not include, and
Sublandlord shall not be obligated to make the Allowance available for, any
portion of the Tenant Improvements work (but excluding the Office Improvements
work) not completed on or before two hundred ten (210) days following the
Commencement Date.
C. In addition to the Allowance, Sublandlord hereby
grants to Subtenant an allowance (the "Office Improvements Allowance") of
Twenty-Five Thousand Dollars ($25,000) which may only be used to construct
standard office improvements (the "Office Improvements") in the Subleased
Premises. The Office Improvements Allowance may only be applied toward the
Cost of the Work. As used herein, the term "Tenant Improvements" shall include
the Office Improvements. Sublandlord shall have the right to approve the
Office Improvements and the location thereof, which approval shall not be
unreasonably withheld or delayed. The parties hereto agree that it shall be
reasonable for Sublandlord to withhold its consent to the Office Improvements
if the design of the Office Improvements in inconsistent with Sublandlord's
anticipated use of the area to be improved. Subtenant shall have the right to
request disbursement of the Office Improvements Allowance whether or not
Subtenant shall have drawn upon the Allowance. Subtenant shall not be required
to reimburse Sublandlord for any portion of the Office Improvements Allowance
except as otherwise provided in subparagraph 12.A(2) hereof.
D. So long as no default by Subtenant under this
Sublease exists and is continuing, Sublandlord shall disburse the Allowance
and/or the Office Improvements Allowance, as applicable, within 30 days after
receipt from Subtenant of copies of the invoices for which payment is requested
together with: (i) Subtenant's certification that each invoice is true and
complete, that the full amount shown thereon is due and owing to the party
requesting payment, that Subtenant has not received nor shall it receive any
rebate, setoff or other similar consideration from the party to whom the
payment is due (other than payments to a parent, subsidiary or affiliate of
Subtenant which are not in excess of market value) and that the total amount
shown on the invoices submitted to Sublandlord represents the total amount due
and owing Subtenant under either subparagraph 11.B, with respect to the
Allowance and/or subparagraph 11.D, with respect to the Office Improvements
Allowance, (ii) lien waivers for
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all the Tenant Improvement work for which reimbursement is being sought, and
Subtenant's certification that the lien waivers represent all such work and
(iii) Subtenant's certification and the certification of Architect and
Subtenant's Contractor that the work is substantially completed in a good and
workmanlike manner, subject to normal punchlist items, and has been accepted by
Subtenant. If Sublandlord fails to disburse the Allowance or the Office
Improvements Allowance, as applicable, in accordance with this subparagraph
11.C and if such failure continues for ten (10) days after Sublandlord shall
have received written notice from Subtenant of such failure, then, without
limiting any other remedies available to Subtenant, Subtenant shall have the
right to offset the amount due and payable to Subtenant against Subtenant's
obligation to pay Base Rent under this Sublease.
E. If Sublandlord disburses all or part of the Allowance
(which Allowance, or portion thereof, as disbursed, shall be referred to herein
as "Sublandlord's TI Contribution"), then commencing on the first day of the
full calendar month next following the date that the Allowance is disbursed,
Base Rent shall be increased by that amount which, if paid in equal monthly
installments of principal and interest over the then balance of the Sublease
Term, would be sufficient to amortize Sublandlord's TI Contribution with
interest at twelve percent (12%).
12. Options to Terminate:
A. Subtenant shall have the option to terminate this
Sublease ("Subtenant's Termination Option") at any time following the second
(2nd) anniversary of the Commencement Date subject to the following terms and
conditions:
(1) Subtenant shall not have the right to
terminate this Sublease at any time that Subtenant shall have received a notice
of default under this Sublease and, where the default described in such notice
is capable of being cured, such default remains uncured.
(2) Subtenant shall give to Sublandlord written
notice of exercise of Subtenant's Termination Option which notice shall state
the date on which Subtenant desires such termination to be effective (the
"Termination Date"). In no event shall the Termination Date occur sooner than
that date which is one hundred eighty (180) days following the date that
Sublandlord receives Subtenant's notice.
(3) Subtenant shall pay to Sublandlord in cash,
with Subtenant's notice of termination, a fee (the "Termination Fee") equal to
the unamortized balance as of the Termination Date of Sublandlord's TI
Contribution and any amounts paid by Sublandlord to pay for the Office
Improvements ("Sublandlord's Office Improvements Contribution") and brokerage
commissions on account of this Sublease to CB Commercial and Business Real
Estate ("Sublandlord's Commission Contribution"). The unauthorized balance of
Sublandlord's TI Contribution shall be calculated by assuming that (i)
Sublandlord's TI Contribution is repaid and reduced during the lease term by
the payments by Subtenant of the incremental increase
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<PAGE> 17
in rent described in subparagraph 11.E hereof, (ii) the unamortized balance of
Sublandlord's TI Contribution bears interest at the rate of twelve percent
(12%) per annum, and (iii) payments of such rent increase are applied first to
repay interest and then to reduce the unamortized balance of Sublandlord's TI
Contribution. The unamortized balance of Sublandlord's Office Improvements
Contribution shall be calculated by assuming that such Contribution is
amortized without interest on a straight-line basis over the period commencing
on the date that such Contribution is paid to Subtenant and ending on the date
that this Sublease would have expired if Subtenant's Termination Option had not
been exercised. The unamortized balance of Sublandlord's Commission
Contribution shall be calculated by assuming that such Contribution is
amortized without interest on a straight-line basis over the five (5) year
Sublease Term.
(4) Provided notice is given and the Termination
Fee paid within the time period specified above, the Sublease shall terminate
on the Termination Date.
B. Sublandlord shall have the option to terminate this
Lease ("Sublandlord's Termination Option") at any time following the fourth
(4th) anniversary of the Commencement Date of this Sublease subject to the
following terms and conditions:
(1) Sublandlord shall give to Subtenant written
notice of exercise of Sublandlord's Termination Option which notice shall state
the date on which Sublandlord desires such termination to be effective
("Sublandlord's Termination Date"). In no event shall Sublandlord's
Termination Date occur sooner than that date which is two hundred seventy (270)
days following the date that Subtenant receives Sublandlord's notice.
(2) Provided notice is given within the time
period specified above, this Sublease shall terminate on Sublandlord's
Termination Date.
13. Conditions Precedent: The obligations of Sublandlord and
Subtenant under this Sublease are conditioned upon the following: (i) the
receipt by Sublandlord on or before thirty (30) days following the date that
this Sublease is executed and delivered by Sublandlord and Subtenant (the
"Effective Date") of a fully executed Third Lease Amendment in form
satisfactory to Sublandlord and (ii) the receipt by Sublandlord on or before
thirty (30) days following the Effective Date of Master Landlord's written
consent to this Sublease in form satisfactory to Sublandlord and Subtenant.
The parties acknowledge that Hybritech Corporation ("Hybritech"), the currently
leases the Subleased Premises from Master Landlord and Subtenant subleases the
Subleased Premises from Hybritech. Hybritech has advised Master Landlord that
Hybritech intends to remove certain items of improvement from the Subleased
Premises upon the expiration of the term of its lease. Master Landlord
believes that such items are leasehold improvements and may not be removed from
the Subleased Premises with Master Landlord's consent. Sublandlord and
Subtenant desire that such items be surrendered by Hybritech with the Subleased
Premises since such items are and will be used by Sublandlord and Subtenant.
Sublandlord has requested Master Landlord to add a provision to the Third Lease
Amendment
-17-
<PAGE> 18
which, in effect, would require Master Landlord to replace, at its cost, any of
such items removed by Hybritech. As of the Effective Date, Master Landlord has
not agreed to such request. Accordingly, Sublandlord and Subtenant agree that
Sublandlord shall have the right to reject a Third Lease Amendment as
unsatisfactory and, to deem the condition stated above with respect to the
Third Lease Amendment unsatisfied, if such Amendment does not contain language
requiring Master Landlord to replace, at its cost, such items of improvement or
does not otherwise address any other concerns of Sublandlord in Sublandlord's
sole opinion such as, by way of example only, the commencement of the term of
the Third Lease Amendment.
14. Sublandlord's Representations: Sublandlord represents and
warrants that (i) the document attached as Exhibit A to this Sublease is a
true, correct and complete copy of the Master Lease and represents the entire
agreement between Sublandlord and Master Landlord with respect to the lease of
the Master Premises; (ii) there is no default under the Master Lease by either
Master Landlord or Sublandlord, or both, and, to the best knowledge of
Sublandlord, there is no condition which, with the passage of time or the
giving of notice, or both, would constitute a default by either Master Landlord
or Sublandlord, or both; (iii) Sublandlord has not assigned, encumbered or
otherwise transferred any interest of the "Tenant" under the Master Lease; and
(iv) the Commencement Date of the Master Lease was January 1, 1994 and the
scheduled Termination Date (as that term is defined in the Third Lease
Amendment) of the Master Lease is the later of June 30, 2006 or the last day of
the one hundred twentieth (120th) full calendar month after the Commencement
Date. Sublandlord shall have the right to make any amendment, modification or
alteration to the Master Lease so long as any such amendment, modification or
alteration does not change the rights or obligations of Subtenant hereunder.
Sublandlord shall deliver to Subtenant copies of all notices received from
Master Landlord which would affect the Sublease or the rights and obligations of
Subtenant.
15. Obligation to Enforce: Sublandlord shall use reasonable
efforts to enforce the obligations of Master Landlord under the Master Lease
and such efforts shall include, without limitation: (i) upon Subtenant's
written request, immediately notifying Master Landlord of any nonperformance
under the Master Lease and requesting that Master Landlord perform its
obligations thereunder; and (ii) after the time by which Master Landlord must
cure a breach has expired, cooperating with Subtenant to institute legal
proceedings, in the name of Sublandlord, with legal counsel selected by
Subtenant and approved by Sublandlord, to enforce obligations required to be
performed by Master Landlord under the Master Lease (including executing such
documents as may be reasonably required by such legal counsel). Sublandlord
and Subtenant shall be entitled to jointly control the conduct of the
litigation; provided, however, that in the conduct of any litigation brought
against Master Landlord to enforce its obligations under the Master Lease for
the benefit of Subtenant, both Sublandlord and Subtenant shall have an
obligation to act in a commercially reasonable manner and with the goal of
employing the strategy which is designed to ensure that Master Landlord will
fully perform its obligations under the Master Lease, and no action may be
taken which may materially and adversely affect the other party's rights or
obligations under the Master Lease or Sublease without such other party's
consent, including settlement. All costs incurred in
-18-
<PAGE> 19
connection with any enforcement action undertaken by Sublandlord at the request
of Subtenant shall be equitably apportioned between Sublandlord and Subtenant
without waiver of any right to collect reimbursement for such cost from Master
Landlord.
16. Hazardous Materials:
A. Any handling, transportation, storage, treatment,
disposal or use of Hazardous Materials by Subtenant and Subtenant's employees,
agents, contractors, invitees and subtenants (collectively, "Agents") shall
strictly comply with all applicable Environmental Laws.
B. Subtenant shall indemnify, defend (with counsel
reasonably acceptable to Sublandlord), protect and hold harmless Sublandlord
from and against any and all liabilities, losses, claims, damages, penalties,
attorneys' fees, experts' fees, court costs, remediation costs, investigation
costs, and other expenses (collectively, "Claims") which result from or arise
out of the use, storage, treatment, transportation, release, or disposal of
Hazardous Materials on or about the Office Park by Subtenant or Subtenant's
Agents.
C. Sublandlord shall indemnify, defend (with counsel
reasonably acceptable to Sublandlord), protect and hold harmless Subtenant from
and against any and all Claims which result from or arise out of the use,
storage, treatment, transportation, release, or disposal of hazardous Materials
on or about the Office Park by Sublandlord or Sublandlord's Agents.
As used herein the term "Hazardous Material" shall mean any material or
substance that is now or hereafter prohibited or regulated by any statute, law,
rule, regulation or ordinance or that is now or hereafter designated by any
governmental authority to be radioactive, toxic, hazardous or otherwise a danger
to health, reproduction or the environment.
As used herein "Environmental Laws" shall mean all local, state, or
federal laws, statutes, ordinances, rules, regulations, judgments, injunctions,
stipulations, decrees, orders, permits, approvals, treaties, or protocols now or
hereafter enacted, issued or promulgated by any governmental authority which
relate to any Hazardous Material or the use, handling, transportation,
production, disposal, discharge, release, emission, sale, or storage of, or the
exposure of any person to, a Hazardous Material.
-19-
<PAGE> 20
IN WITNESS WHEREOF, the parties have executed this Sublease with the
intent to be legally bound thereby.
<TABLE>
<S> <C>
SUBTENANT: SUBLANDLORD:
IMMUSOL, INC. NEUROCRINE BIOSCIENCES, INC.
a a Delaware corporation
-------------------------------------
By: /s/ Tsvi Goldenberg By: /s/ [illegible]
------------------------------------ ------------------------------------
Print Name: Tsvi Goldenberg Print Name Paul W. [illegible]
---------------------------- -----------------------------
Its: Chairman & CEO Its: S.V.P. & CFO
----------------------------------- -----------------------------------
Date: 3/29/96 Date: 3/29/96
---------------------------------- ----------------------------------
</TABLE>
-20-
<PAGE> 21
EXHIBIT A
MASTER LEASE
-21-
<PAGE> 22
EXHIBIT B
FLOOR PLAN
-22-
<PAGE> 23
EXHIBIT C
FORM OF LETTER OF CREDIT
-23-
<PAGE> 1
EXHIBIT 10.7
FIRST AMENDMENT TO SUBLEASE
THIS FIRST AMENDMENT TO SUBLEASE (this "Amendment") dated June 6,
1996, for reference purposes only, is made by and between NEUROCRINE
BIOSCIENCES, INC., a California corporation ("Sublandlord") and IMMUSOL, INC.,
a California corporation ("Subtenant").
1. Recitals:
A. Sublandlord and Subtenant entered into that certain
Sublease dated March 11, 1996 for certain premises located at 3050 Science Park
Road, San Diego, California (the "Premises"). Pursuant to paragraph 13 of the
Sublease, the obligations of Sublandlord and Subtenant under the Sublease are
conditioned upon, among other things, the receipt by Sublandlord of a Third
Amendment to Lease in form satisfactory to Sublandlord. The Sublease further
provides that that Sublandlord shall have the right to reject a Third Amendment
to Lease as unsatisfactory and to deem the condition stated above as
unsatisfied if such Third Amendment did not contain language requiring Master
Landlord to replace, at its cost, any items of improvement or Personal
property, (the "Hybritech Property") removed by the present tenant, Hybritech
Incorporated ("Hybritech"), Master Landlord will not agree to be responsible
for replacing the Hybritech Property.
B. Notwithstanding the foregoing, Sublandlord is willing
to waive the condition stated above. Subtenant is also willing to waive any
condition precedent to the effectiveness of the Sublease that Subtenant may
have under the Sublease.
2. "As-is": Notwithstanding anything to the contrary in the
Sublease, including, without limitation, Subparagraph 1.C thereof, Sublandlord
makes no representations or warranties regarding the quality, condition,
suitability, safety or fitness of purpose, or otherwise, of the Hybritech
Property and, by taking possession of the Subleased Premises, Subtenant accepts
the Hybritech Property in its existing condition, "as-is", with all faults.
Notwithstanding anything to the contrary in the Sublease, in no event shall
Sublandlord be obligated to repair, maintain or replace the Hybritech Property,
or any portion thereof.
3. Waiver of Conditions: Sublandlord and Subtenant hereby
waive each and every condition set forth in paragraph 13 of the Sublease and
hereby declare that the Sublease is valid and in full force and effect
notwithstanding the fact that such waivers are made after thirty (30) days
following the Effective Date or the Sublease.
<PAGE> 2
4. Miscellaneous: Except as otherwise provided herein, the
Sublease remains unmodified and in full force and effect. All capitalized
terms used herein that are not defined herein shall have the meaning ascribed
thereto in the Sublease.
<TABLE>
<S> <C>
NEUROCRINE BIOSCIENCES, INC., IMMUSOL, INC.,
a California corporation a California corporation
By:_______________________________ By:_______________________________
Its:______________________________ Its:______________________________
Date:_____________________________ Date:_____________________________
</TABLE>
2.
<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 blackout
of the text (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 *_______*.
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 blackout
of the text (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 * _________________ *
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 blackout
of the text (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. * _________________________*
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 blackout
of the text (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
* _____ *, 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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 *_______________* 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 blackout
of the text (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 blackout
of the text (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 *_______________* 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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 *____________*.
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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
* _________ *
*
*
*
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (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
* _________ *
*
*
*
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (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 blackout
of the text (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 *______________________*
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (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 blackout
of the text (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
2.8 *________________*
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 *________________*
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (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
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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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 blackout
of the text (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
*
*
*
Certain confidential portions of this Exhibit were omitted by means of blackout
of the text (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 blackout
of the text (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 10.11
IMMUSOL, INC.
CO-FOUNDER AGREEMENT
THIS AGREEMENT, is entered into as of February 16, 1993 between DR.
FLOSSIE WONG-STAAL (the "Co-Founder") and IMMUSOL, INC., a California
corporation (the "Company").
WHEREAS, the Company has bestowed upon the Co-Founder the position of
the Chairperson of its Scientific Advisory Board ("SAB");
WHEREAS, the Company desires to retain the Co-Founder as a consultant
with respect to certain activities as described in this Agreement; and
WHEREAS, the Co-Founder desires to serve as a consultant to the
Company under the terms of this Agreement.
NOW, THEREFORE, the Co-Founder and the Company agree as follows:
1. Description of Services. The Company hereby retains the
Co-Founder as a consultant to the Company, and the Co-Founder hereby agrees to
perform the following services for the Company:
(a) The Co-Founder shall spend at least one day per month
consulting for the Company;
(b) The Co-Founder shall spend a reasonable amount of
time for informal consultations over the telephone or otherwise.
(c) The Co-Founder may from time to time be unavailable
to attend meetings or perform other consulting duties, due to other prior
obligations including but not limited to teaching and other academic duties and
attending scientific conferences, and such unavailability shall not be
considered a breach of this Agreement if the Co-Founder gives the Company
reasonable notice of such unavailability.
(d) The Co-Founder's consultation will involve the areas
related to the acquired immune deficiency syndrome ("AIDS"), other disorders of
the immune systems and related technologies (the "Specialty Area") and requires
the application of the unique, special and extraordinary skills and knowledge
that the Co-Founder possesses in this area.
(e) The Co-Founder, as the Chairperson of the SAB, will
review and advise the Company with respect to the applications of all
technologies to which the Company has
<PAGE> 2
or will have rights.
2. Term and Expiration.
(a) This Agreement shall be in effect for five (5) years
from the date hereof so long as the Co-Founder remains as a consultant to the
Company. This Agreement terminates during its term if (i) the Co-Founder
voluntarily terminates her relationship as a consultant with the Company or
(ii) the Company terminates such relationship with the Co-Founder for Cause (as
defined herein). In rendering services to the Company, the Co-Founder shall
act as an independent contractor and not as an employee or agent of the
Company.
(b) "Cause" shall mean (i) a willful failure by the
Co-Founder to substantially perform her duties required by the Company, other
than a failure resulting from the Co-Founder's death or complete or partial
incapacity due to physical or mental illness or impairment, (ii) a willful act
by the Co-Founder which constitutes gross misconduct and which is injurious to
the Company, or (iii) a material and willful violation of a federal or state
law or regulation applicable to the business of the Company. No act or failure
to act by the Co- Founder shall be considered "willful" unless committed
without good faith and without a reasonable belief that the act or omission was
in the Company's best interest.
3. Compensation.
(a) The Co-Founder shall receive $3,000 per month for her
services provided hereunder for the term of this Agreement.
(b) As added consideration for the services provided
hereunder, the Company will sell to the Co-Founder up to 1,000,000 shares of
Common Stock of the Company (the "Shares") at a purchase price of $0.05 per
share. The Shares will be subject to a repurchase option in favor of the
Company (the "Option") and other terms and conditions of the Company's Stock
Purchase Agreement attached hereto as Exhibit A.
i) 250,000 shares shall be released from the
Option immediately upon the execution of this Agreement.
ii) 500,000 shares shall be released from the
Option at the rate of one forty-eighth (1/48th) of the 500,000 shares at the
end of each full calendar month after the date of this Agreement for each month
that this Agreement continues to be in effect, up to a maximum of 48 months.
iii) The remaining 250,000 shares released from
the Option if and when the University of California assigns to the Company
exclusive rights to one or more inventions, discoveries, improvements,
processes, technology and know-how related to the Specialty Area which the
Co-Founder may conceive or make (either by herself or jointly with others)
during the term of this Agreement.
<PAGE> 3
4. Expenses. The Company will reimburse the Co-Founder for any
actual expenses incurred by the Co-Founder while rendering services under this
Agreement so long as the expenses are reasonable and necessary. Such expenses
shall include reasonable and necessary travel, lodging and meals in connection
with services performed under this Agreement. Requests for reimbursement shall
be in a form reasonably acceptable to the Company.
5. Proprietary Information.
(a) The Co-Founder recognizes that in performance under
this Agreement she will have contact with information of substantial value to
the Company that is not generally known outside the Company and that gives the
Company an advantage over its competitors who do not know or use it, including,
but not limited to, techniques, designs, drawings, processes, inventions,
developments, equipment, prototypes, slides, customer information and business
and financial information relating to the business, products, practices or
techniques of the Company. The Co-Founder agrees to regard and preserve as
confidential such information.
(b) The Co-Founder will not, at any time either during or
after her consulting relationship with the Company (except as authorized by the
Company for its benefit), divulge or disclose, directly or indirectly, to any
person, firm, association or corporation other than bona fide employees of the
Company or any affiliate of the Company, acting in that capacity, or use for
her own benefit, gain or otherwise (i) any confidential information, knowledge,
or data concerning the business or affairs of the Company or any affiliate of
the Company, whether acquired by the Co-Founder before, during, or after her
consulting relationship with the Company, or (ii) any inventions, discoveries,
improvements, products, processes, technology, trade secrets, know-how,
designs, formulas, or any other confidential material, data, information or
instructions, technical or otherwise, owned by the Company or any affiliate of
the Company, whether acquired before, during, or after her consulting
relationship with the Company, which, if disclosed, would adversely affect the
business of the Company or any of its affiliates or accord to a competitor of
the Company any competitive advantage.
(c) All documents, data, records, apparatus, equipment
and other physical property produced by the Co-Founder or others in connection
with the Co-Founder's activities pursuant to this Agreement or which are
furnished to the Co-Founder by the Company shall be and remain the sole
property of the Company and shall be returned promptly to the Company as and
when requested by the Company. Should the Company not so request, the
Co-Founder shall return and deliver all such property upon termination of her
retention as a consultant for any reason, and the Co-Founder will not retain
any such property or any reproduction of such property upon such termination.
(d) This Section 5 is not intended to restrict the
Co-Founder from disseminating or using any information which is published or
available to the general public, except where such publication or general
availability is as a result of the Co-Founder acts in violation of this
Agreement.
<PAGE> 4
6. Inventions.
(a) So long as the Co-Founder and her work and research
products are subject to the agreement between the University of California and
the Co-Founder attached hereto as Exhibit B (the "UC Agreement"), the
Co-Founder agrees to use her best efforts to have the University of California
assign to the Company exclusive rights to any inventions, discoveries,
improvements, processes, technology and know-how related to the Specialty Area
which the Co-Founder may conceive or make (either by herself or jointly with
others) during the term of this Agreement (and during the six months following
the termination of this Agreement. The Company agrees that it will not take
any action which will result in the Company knowingly and intentionally
violating the UC Agreement.
(b) Subject to Section 6(c), Co-Founder agrees that any
inventions, discoveries, improvements, processes, technology and know-how
arising directly from the performance of services under this Agreement related
to the Specialty Area and any other technology and any patents issuing thereon
shall be the property of and shall be assigned to the Company. In order to
permit the Company to claim rights to which it may be entitled under this
Section 6(b) or applicable laws and to insure that there is no conflict with
any business or activities of the Company, the Co-Founder shall promptly
disclose to the Company all inventions, discoveries, improvements, processes,
technology and know-how (whether or not patentable and whether or not reduced
to practice) which the Co-Founder may conceive or make (either by herself or
jointly with others) during the term of this Agreement with the Company and
which relate to the Specialty Area.
(c) The provisions of Section 6(b) does not apply to any
inventions, discoveries, improvements, processes, technology and know-how
arising directly from the performance of services under the UC Agreement and
from the performance of consulting arrangements with [Abbott], [Wyeth] or
[UBI].
(d) Whenever requested by the Company, the Co-Founder
shall execute patent applications and such other documents considered necessary
by the Company or its counsel to apply for and obtain letter patents in the
United States, foreign countries, or both, as the Company may deem advisable,
or to otherwise protect such inventions, discoveries, improvements, processes,
technology or know-how for the benefit of the Company. The Co-Founder shall
also make such assignments and execute such other instruments as may be
necessary to convey to the Company the ownership and exclusive right in and to
such inventions, discoveries, processes, technology, know-how, patent
applications, patents or the like. The Company shall bear all of the expenses
in connection with the obtaining of such rights. The Co-Founder further
agrees, whether or not she is still providing consulting services to the
Company, to cooperate to the extent and in the manner requested by the Company
in the prosecution or defense of any such patent claims or any litigation or
other proceeding involving any inventions, discoveries, improvements,
processes, technology or know-how covered by this Agreement in any country of
the world, but all expense thereof shall be paid by the Company. The foregoing
covenant contemplates the inclusion of any improvements of
<PAGE> 5
properties, rights, systems, inventions and the like presently held by the
Company or any affiliate thereof.
(e) The Co-Founder may freely publish any results of her
work covered under the Agreement, provided that a prior U.S. patent
application is made by the Company on any potentially patentable aspects of her
work. The Co-Founder agrees to provide the Company with sufficient disclosure
not less than sixty (60) days prior to publication, to allow the Company to
have patent applications prepared on inventions or other information made or
acquired under this Agreement. The Company agrees to keep all such disclosures
confidential prior to publication.
7. Exclusive Consulting Agreement.
(a) With the exception of the Co-Founder's existing
relationship with the University of California, ABBOTT [LABORATORIES], [WYETH]
and [UBI] during the term of this Agreement, the Co-Founder will not, directly
or indirectly, own, manage, operate, join, control, finance, consult to, advise
or participate in the ownership, management, operation, control or financing
of, or be connected as an officer, director, employee, partner, principal,
agent, representative, consultant or otherwise with, or allow her name to be
used in any Annual Report, Quarterly Report, Private Placement Memorandum or
advertisement of, or solicit or attempt to solicit business on behalf of, any
person, business or enterprise which is engaged in developing products relating
to the Specialty Area in actual or potential competition with the Company or
its affiliates, without the express prior written consent of the Company.
(b) The Co-Founder agrees to formally terminate her existing
relationship with [VIAGENE] by April 15, 1993.
8. Remedies. The Co-Founder acknowledges that the Company will
have no adequate remedy at law if the Co-Founder violates the terms of Sections
5, 6 and 7 hereof. In such event, the Company shall have the right, in
addition to any other rights it may have, to obtain in any court of competent
jurisdiction, injunctive or other relief to restrain any breach or threatened
breach of this Agreement.
9. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of California.
10. No Conflict. The Co-Founder represents that her performance
of all the terms of this Agreement and that her retention as a consultant by
the Company does not and will not breach any agreement to keep in confidence
proprietary information acquired by the Co-Founder in confidence or trust prior
to her retention as a consultant by the Company. The Co-Founder has not
entered into, and agrees she will not enter into, any agreement, either written
or oral, in conflict herewith. The Co-Founder understands as part of the
consideration for the offer to retain her as a consultant, and of her retention
as a consultant by the Company, that she has not brought and will not bring
with her to the Company or use in the performance of her responsibilities at
the Company any equipment, supplies, facility or trade secret information
<PAGE> 6
of any current or former employer which are not generally available to the
public, unless she has obtained written authorization for their possession and
use. The Co-Founder also understands that, in her retention as a consultant
with the Company, she is not to breach any obligation of confidentiality that
she has to others, and she agrees that she shall fulfill all such obligations
during her retention as a consultant with the Company.
11. Successors, etc. This Agreement shall be binding upon and
shall inure to the benefit of the Company's successors, transferees, and
assigns.
12. Execution of Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year written above.
IMMUSOL, INC.
By: /s/ TSVI GOLDENBERG, Ph.D.
-------------------------- ------------------------------
Dr. Flossie Wong-Staal
Title: Chairman
-----------------------
<PAGE> 1
EXHIBIT 10.12
IMMUSOL
5052 Berean Lane, Irvine, California 92715
(714) 854-2160
(714) 586-2912 Fax
- ------------------------------------------------------------------------------
April 26, 1994
Tsvi Goldenberg, Ph.D.
5052 Berean Lane
Irvine, CA 92715
Dear Tsvi:
On behalf of the Board of Directors of Immusol, Inc. (the
"Company"), I am pleased to offer you the position of Chairman of the Board of
the Company. In this position, you will be expected to devote your full
business time, attention and energies to the performance of your duties with
the Company. The effective date of your employment will be June 1, 1994.
The terms of this offer of employment are as follows:
1. Compensation. The Company will pay you an annual
salary of $150,000 in accordance with the Company's standard payroll policies.
Your salary will begin as of the effective date of employment. The first and
last payment by the Company to you will be adjusted, if necessary, to reflect a
commencement or termination date other than the first or last working day of a
pay period.
2. Benefits. You will be entitled during the term of
your employment to the Company's standard vacation, family medical and dental
benefits and other benefits enjoyed by officers of the Company (the
"Benefits"), as such may be in effect from time to time.
3. Relocation. Upon acceptance of offer of employment,
the Company shall pay you $15,000 in cash to prepare for your relocation.
<PAGE> 2
4. At-will Employment.
(a) You should be aware that your employment with
the Company is for no specified period and constitutes "at-will" employment.
As a result, you are free to terminate your employment at any time, for any
reason or for no reason.
(b) If your employment with the Company
terminates as a result of mutual agreement or the Company terminates your
employment for any reason, you will receive a severance payment and Benefits
from the Company (the "Severance Payment") in an amount equal to nine months of
your then annual salary.
5. Immigration Laws. For purposes of federal
immigration laws, you will be required to provide to the Company documentary
evidence of your identify and eligibility for employment in the United States.
Such documentation must be provided within 3 business days of the effective
date of your employment, or your employment relationship with the Company may
be terminated.
6. General. This offer letter, when signed by you, set
forth the terms of your employment with the company and supersede any and all
prior representations and agreements, whether written or oral. This agreement
can only be amended in a writing signed by you and an officer or a board member
of the Company. Any waiver of a right under this agreement must be in writing.
This agreement will be governed by California law.
Sincerely
/s/ FRANK LITVACK, M.D.
Frank Litvack, M.D.
Board Member
ACCEPTED:
Tsvi Goldenberg, Ph.D.
/s/ TSVI GOLDENBERG, Ph.D.
<PAGE> 1
EXHIBIT 10.13
IMMUSOL, INC.
3050 Science Park Road San Diego, California 92121
(619) 677-0182
(619) 677-0587 Fax
- ------------------------------------------------------------------------------
August 23, 1994
Mr. Jack Barber, Ph.D.
11168 Carlota Street
San Diego, CA 92129
Dear Jack:
On behalf of the Board of Directors of Immusol, Inc. (the "Company"), I
am pleased to offer you the position of Senior Director of Research and
Development. In this position, you will report to the Company's Chief Executive
Officer and be expected to devote your full business time, attention and
energies to the performance of your duties with the Company. The effective date
of your employment will be mutually agreed on.
The terms of this offer of employment are as follows:
1. Compensation: The Company will pay you an annual salary of
$100,000 in accordance with the Company's standard payroll policies. Your
salary will begin as of the effective date of employment. The first and last
payment by the Company to you will be adjusted, if necessary, to reflect a
commencement or termination date other than the first or last working day of a
pay period.
2. Benefits: You will be entitled during the term of your
employment to the Company's standard vacation, family medical and dental
benefits and other benefits enjoyed by officers of the Company (the
"Benefits"), as such may be in effect from time to time.
3. Stock Option. Subject to action by the Company's board of
directors and in compliance with applicable state and federal securities laws,
the Company will grant to you an option 1) to purchase 130,000 shares of the
Company's Common Stock pursuant to the Company's 1992 Stock Plan (the "Plan").
The exercise price of the option will be $0.06 per share. 2) Upon filing with
FDA Immusol's first phase II clinical trial, the company shall grant an
additional option for 20,000 shares. The exercise price of this option shall
be at the then current fair market value of Immusol's common stock. The
proposed option exercisable for up to a total of
<PAGE> 2
150,000 shares. The incentive stock option plan is exercisable over ten years
from first day of your employment. The option will vest over four years with
1/4 of the shares subject to the option vesting one year from the effective
date of your employment and 1/48 of the shares vesting at the end of each full
month thereafter until all shares are vested, subject to all provisions of the
Plan and your continued employment with the Company.
4. At-will Employment. You should be aware that your employment
with the Company is for no specified period and constitutes "at-will"
employment. As a result, you are free to terminate your employment at any time,
for any reason or for no reason. Similarly, the Company is free to terminate
your employment at any time, for any reason or for no reason.
5. Proprietary Information Agreement. As a condition of accepting
this offer of employment, you will be required to complete, sign and return the
Employee Proprietary Information Agreement attached hereto, along with a copy
of this offer letter.
6. Immigration Laws. For purposes of federal immigration laws, you
will be required to provide to the Company documentary evidence of your
identity and eligibility for employment in the United States. Such
documentation must be provided within 3 business days of the effective date of
your employment, or your employment relationship with the Company may be
terminated.
General. This offer letter, the Employee Proprietary Information
Agreement and the agreement(s) representing stock options granted to you under
the Plan, when signed by you, set forth the terms of your employment with the
Company and supersede any and all prior representations and agreements, whether
written or oral. This agreement can only be amended in a writing signed by you
and an officer of the Company. Any waiver of a right under this agreement must
be in writing. This agreement will be governed by California law. This offer
will expire on August 31, 1994
We look forward to you joining the Company if the foregoing terms are
agreeable, please indicate your acceptance by signing the enclosed copy of this
letter in the space provided below and returning it to me, along with your
completed and signed Employee Proprietary Information Agreement.
Accepted Sincerely
/s/ JACK BARBER /s/ TSVI GOLDENBERG
- ----------------------------- -------------------------------
Jack Barber Tsvi Goldenberg
Jack Barber, Ph.D. Tsvi Goldenberg, Ph.D.
08/30/94 Chairman and Chief Executive
Officer
Tentative Start Date
10/03/94
<PAGE> 1
EXHIBIT 10.15
IMMUSOL, INC.
1992 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Certain Definitions. As used herein, the following definitions shall
apply:
(a) "Administrator" means the Board or any of its Committees
appointed pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Immusol, Inc., a California corporation.
(g) "Consultant" means any person, including an advisor, who is
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the
Company.
(h) "Continuous Status as an Employee" means the absence of any
interruption or termination of the employment relationship by the Company or
any Subsidiary. Continuous Status as an Employee shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Board, provided that such leave is for a
period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or
(iv) in the case of transfers
<PAGE> 2
between locations of the Company or between the Company, its Subsidiaries or
its successor.
(i) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value
shall be the closing sales price for such stock (or the closing bid, if no
sales were reported, as quoted on such system or exchange for the last market
trading day prior to the time of determination) as reported in the Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ
System (but not on the National Market System thereof) or regularly quoted by a
recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean between the high and low asked prices for the
Common Stock or;
(iii) In the absence of an established market for
the Common Stock, the Fair Market Value thereof shall be determined in good
faith by the Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(m) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(n) "Option" means a stock option granted pursuant to the Plan.
(o) "Optioned Stock" means the Common Stock subject to an Option.
(p) "Optionee" means an Employee or Consultant who receives an
Option.
(q) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" means this 1992 Stock Plan.
-2-
<PAGE> 3
(s) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(t) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 2,300,000 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were
subject thereto shall, unless the Plan shall have been terminated, become
available for future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Administration With Respect to Directors and
Officers. With respect to grants of Options to Employees who are also officers
or directors of the Company, the Plan shall be administered by (A) the Board if
the Board may administer the Plan in compliance with Rule 16b-3 promulgated
under the Exchange Act or any successor thereto ("Rule 16b-3") with respect to
a plan intended to qualify thereunder as a discretionary plan, or (B) a
Committee designated by the Board to administer the Plan, which Committee shall
be constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board
may increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder
as a discretionary plan.
(ii) Multiple Administrative Bodies. If permitted
by Rule 16b-3, the Plan may be administered by different bodies with respect to
directors, non-director officers and Employees who are neither directors nor
officers.
(iii) Administration With Respect to Consultants
and Other Employees. With respect to grants of Options to Employees or
Consultants who are neither directors nor officers of the Company, the Plan
shall be administered by (A) the Board or (B) a Committee designated by the
Board, which Committee shall be constituted in such a manner as to satisfy the
legal requirements relating to the administration of incentive stock option
plans, if any, of California corporate and securities laws and of the Code (the
"Applicable Laws"). Once appointed, such Committee shall continue to serve in
its
-3-
<PAGE> 4
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies, however caused, and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the
Common Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the officers, Consultants and
Employees to whom Options may from time to time be granted hereunder;
(iii) to determine whether and to what extent
Options are granted hereunder;
(iv) to determine the number of shares of Common
Stock to be covered by each such award granted hereunder;
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder
(including, but not limited to, the share price and any restriction or
limitation or waiver of forfeiture restrictions regarding any Option or other
award and/or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine whether and under what circum-
stances an Option may be settled in cash under subsection 9(f) instead of
Common Stock; and
(c) Effect of Committee's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the written option
agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such
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<PAGE> 5
designations, to the extent that the aggregate Fair Market Value of the Shares
with respect to which Options designated as Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year (under
all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such
excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his right or the Company's
right to terminate his employment or consulting relationship at any time, with
or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that in the case of an Incentive Stock
Option, the term shall be no more than ten (10) years from the date of grant
thereof or such shorter term as may be provided in the Option Agreement.
However, in the case of an Option granted to an Optionee who, at the time the
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the
time of the grant of such Incentive Stock Option, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
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(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time
of the grant of such Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) surrender of other shares of Common Stock of the Company which (x)
in the case of Shares acquired pursuant to the exercise of an Option, have been
owned by the Optionee for more than six (6) months on the date of surrender,
and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is being
exercised; or (4) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company
of the sale or loan proceeds required to pay the exercise price, (5) any
combination of the foregoing methods of payment, or (6) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan, but in no case at a rate of less than 20% per year over five (5) years
from the date the Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Company shall issue (or
cause to be issued) such stock certificate promptly upon exercise of the
Option. No adjustment will be made for a
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<PAGE> 7
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
event that an Optionee's Continuous Status as an Employee or Consultant
terminates (but not in the event of a change of status from Employee to
Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), other
than upon the Optionee's death or disability, the Optionee may exercise his or
her Option, but only within such period of time as is determined by the
Administrator, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant).
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term
is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the day three months and one day following such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent the Optionee was entitled to
exercise the Option at the date of death. To the extent that Optionee was not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate.
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<PAGE> 8
(e) Rule 16b-3. Options granted to persons subject to Section
16(b) of the Exchange Act must comply with Rule 16b-3 and shall contain such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted, based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
10. Non-Transferability of Options. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
11. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option , which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The
Fair Market Value of the Shares to be withheld shall be determined on the date
that the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose
shall be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval
of the Administrator;
(d) if the Optionee is subject to Rule 16b-3, the election must
comply with the applicable provisions of Rule 16b-3 and shall be subject to
such additional conditions or restrictions as may be required thereunder to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect
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<PAGE> 9
to which the Option is exercised but such Optionee shall be unconditionally
obligated to tender back to the Company the proper number of Shares on the Tax
Date.
12. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration." Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Board shall notify the Optionee at least fifteen (15) days prior
to such proposed action. To the extent it has not been previously exercised,
the Option will terminate immediately prior to the consummation of such
proposed action. In the event of a merger of the Company with or into another
corporation, the Option shall be assumed or an equivalent option shall be
substituted by such successor corporation or a parent or subsidiary of such
successor corporation. In the event that such successor corporation does not
agree to assume the Option or to substitute an equivalent option, the Board
shall notify the Optionee that the Option shall be exercisable for a period of
fifteen (15) days from the date of such notice, and the Option will terminate
upon the expiration of such period.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 under
the Exchange Act or with Section 422 of the Code (or any other applicable law
or regulation, including the requirements of the NASD or
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<PAGE> 10
an established stock exchange), the Company shall obtain shareholder approval
of any Plan amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee
and the Board, which agreement must be in writing and signed by the Optionee
and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and
the issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares
may then be listed, and shall be further subject to the approval of counsel for
the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
a balance sheet and an income statement at least annually.
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<PAGE> 1
EXHIBIT 10.16
IMMUSOL, INC.
1992 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
_________________________________
_________________________________
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Date of Grant ________________________________
Vesting Commencement Date ________________________________
Exercise Price per Share ________________________________
Total Number of Shares Granted ________________________________
Total Exercise Price ________________________________
Type of Option: X Incentive Stock Option
------
______ Nonstatutory Stock Option
Term/Expiration Date: _________________________________
Vesting Schedule:
-----------------
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
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<PAGE> 2
Termination Period:
This Option may be exercised for 30 days after termination of
employment or consulting relationship, or such longer period as may be
applicable upon death or disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. Immusol, Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant subject to the terms,
definitions and provisions of the 1992 Stock Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. However, if this Option is intended to
be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule
of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
("NSO").
2. Exercise of Option. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a
fraction of a Share.
(b) In the event of Optionee's death, disability
or other termination of the employment or consulting relationship, the
exercisability of the Option is governed by Sections 6, 7 and 8 below, subject
to the limitation contained in subsection 2(i)(c).
(c) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in the
Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable
by written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares
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<PAGE> 3
of Common Stock as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price. This
Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.
4. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the
Company which (A) in the case of Shares acquired pursuant to the exercise of an
Option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the exercise price of the Shares as to which the Option is being
exercised; or
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
(v) any combination of the foregoing methods of payment;
or
(vi) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws.
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<PAGE> 4
5. Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board. As a condition
to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
6. Termination of Relationship. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the
Notice of Grant. To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, or if Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of
Section 6 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term
is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the day three months and one day following such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option
at the date of death.
9. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
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<PAGE> 5
10. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
11. Taxation Upon Exercise of Option. Optionee understands that,
upon exercising a Nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.
12. Tax Consequences. Set forth below is a brief summary as of
the date of this Option of some of the federal and California tax consequences
of exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability or California income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the exercise price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the
year of exercise.
(ii) Exercise of ISO Following Disability. If the
Optionee's Continuous Status as an Employee or Consultant terminates as a
result of disability that is not total and permanent disability as defined in
Section 22(e)(3) of the Code, to the extent permitted on the date of
termination, the Optionee must exercise an ISO within 90 days of such
termination for the ISO to be qualified as an ISO.
(iii) Exercise of Nonstatutory Stock Option. There may be
a regular federal income tax liability and California income tax liability upon
the exercise of a Nonstatutory Stock Option. The Optionee will be treated as
having received compensation income (taxable
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<PAGE> 6
at ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the exercise price. If
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(iv) Disposition of Shares. In the case of an NSO, if
Shares are held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares transferred pursuant to
the Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of
the Shares will also be treated as long-term capital gain for federal and
California income tax purposes. If Shares purchased under an ISO are disposed
of within such one-year period or within two years after the Date of Grant, any
gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between the
exercise price and the lesser of (1) the Fair Market Value of the Shares on the
date of exercise, or (2) the sale price of the Shares.
(v) Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may
be subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
Immusol, Inc.,
a California corporation
By: _____________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
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<PAGE> 7
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated: _______________ _______________________________
Optionee
Residence Address:
________________________________
________________________________
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<PAGE> 8
EXHIBIT A
1992 STOCK PLAN
EXERCISE NOTICE
Immusol, Inc.
3050 Science Park Road
San Diego, CA 92121
Attention: Tsvi Goldenberg
1. Exercise of Option. Effective as of today, ___________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "SHARES") of Immusol, Inc.
(the "COMPANY") under and pursuant to the 1992 Stock Plan, as amended (the
"PLAN") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
________, 19___ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a shareholder until such time
as Optionee disposes of the Shares or the Company and/or its assignee(s)
exercises the Right of First Refusal hereunder. Upon such exercise, Optionee
shall have no further rights as a holder of the Shares so purchased except the
right to receive payment for the Shares so purchased in accordance with the
provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.
4. Company's Right of First Refusal. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise
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<PAGE> 9
transferred (including transfer by gift or operation of law), the Company or
its assignee(s) shall have a right of first refusal to purchase the Shares on
the terms and conditions set forth in this Section (the "RIGHT OF FIRST
REFUSAL").
(a) Notice of Proposed Transfer. The Holder of the
Shares shall deliver to the Company a written notice (the "NOTICE") stating:
(i) the Holder's bona fide intention to sell or otherwise transfer such Shares;
(ii) the name of each proposed purchaser or other transferee ("PROPOSED
TRANSFEREE"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "OFFERED PRICE"), and the
Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).
(b) Exercise of Right of First Refusal. At any time
within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("PURCHASE
PRICE") for the Shares purchased by the Company or its assignee(s) under this
Section shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in
good faith.
(d) Payment. Payment of the Purchase Price shall be
made, at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale
or other transfer is consummated within 120 days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal before any
Shares held by the Holder may be sold or otherwise transferred.
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<PAGE> 10
(f) Exception for Certain Family Transfers. Anything to
the contrary contained in this Section notwithstanding, the transfer of any or
all of the Shares during the Optionee's lifetime or on the Optionee's death by
will or intestacy to the Optionee's immediate family or a trust for the benefit
of the Optionee's immediate family shall be exempt from the provisions of this
Section. "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of
First Refusal shall terminate as to any Shares 90 days after the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
5. Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN
THE
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<PAGE> 11
EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be
restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner, a copy of which is attached to Exhibit B, the Investment
Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop transfer" instruc tions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.
7. Successors and Assigns. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
8. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
9. Governing Law; Severability. This Agreement shall be governed
by and
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<PAGE> 12
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified mail, with postage and
fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.
11. Further Instruments. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
12. Delivery of Payment. Optionee herewith delivers to the
Company the full exercise price for the Shares.
13. Entire Agreement. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Option Agreement and the Investment Representation Statement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by California law except for that body
of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: Immusol, Inc.
By:____________________________
Its:___________________________
Name
Address: Address:
3050 Science Park Road
___________________________ San Diego, CA 92121
___________________________
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<PAGE> 13
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : IMMUSOL, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. Optionee is acquiring these Securities for investment for
Optionee's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the Securities. Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of
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<PAGE> 14
Corporations of the State of California and any other legend required under
applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the
Optionee, the exercise will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer period as any market stand-off agreement may
require) the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including: (1)
the resale being made through a broker in an unsolicited "broker's transaction"
or in transactions directly with a market maker (as said term is defined under
the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, (3) the amount of
Securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (4) the timely filing of a Form 144,
if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act, Optionee shall not sell or otherwise transfer any Shares or
other securities of the Company during the 180-day period following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall only apply to
the first registration statement of the Company to become effective under the
Securities Act which include securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities
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<PAGE> 15
and Exchange Commission has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee understands
that no assurances can be given that any such other registration exemption will
be available in such event.
(f) Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
___________________________
Optionee
Date:________________, 19__
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<PAGE> 16
ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant
to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferror's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferrer or the
transferror's ancestors, descendants, or spouse; or to a transferee
by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any
securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this
rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided
that no order under Section 25140 or subdivision (a) of Section
25143 is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another
state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state
if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy
of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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<PAGE> 1
EXHIBIT 10.17
IMMUSOL, INC.
1992 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
_________________________________________________
_________________________________________________
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this Option
Agreement, as follows:
Date of Grant ___________________________________
Vesting Commencement Date ___________________________________
Exercise Price per Share ___________________________________
Total Number of Shares Granted ___________________________________
Total Exercise Price ___________________________________
Type of Option: _______ Incentive Stock Option
X Nonstatutory Stock Option
-------
Term/Expiration Date: ___________________________________
Vesting Schedule:
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
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<PAGE> 2
Termination Period:
This Option may be exercised for 30 days after termination of
employment or consulting relationship, or such longer period as may be
applicable upon death or disability of Optionee as provided in the Plan, but in
no event later than the Term/Expiration Date as provided above.
II. AGREEMENT
1. Grant of Option. Immusol, Inc., a California corporation (the
"Company"), hereby grants to the Optionee named in the Notice of Grant (the
"Optionee"), an option (the "Option") to purchase the total number of shares of
Common Stock (the "Shares") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant subject to the terms,
definitions and provisions of the 1992 Stock Plan (the "Plan") adopted by the
Company, which is incorporated herein by reference. Unless otherwise defined
herein, the terms defined in the Plan shall have the same defined meanings in
this Option.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive Stock Option
as defined in Section 422 of the Code. However, if this Option is intended to
be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule
of Code Section 422(d) it shall be treated as a Nonstatutory Stock Option
("NSO").
2. Exercise of Option. This Option shall be exercisable during
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) This Option may not be exercised for a
fraction of a Share.
(b) In the event of Optionee's death, disability
or other termination of the employment or consulting relationship, the
exercisability of the Option is governed by Sections 6, 7 and 8 below, subject
to the limitation contained in subsection 2(i)(c).
(c) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in the
Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable
by written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares
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<PAGE> 3
of Common Stock as may be required by the Company pursuant to the provisions of
the Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price. This
Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by the exercise price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant
provisions of law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to the Optionee on the date on which
the Option is exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his or
her Investment Representation Statement in the form attached hereto as Exhibit
B, and shall read the applicable rules of the Commissioner of Corporations
attached to such Investment Representation Statement.
4. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:
(i) cash; or
(ii) check; or
(iii) surrender of other shares of Common Stock of the
Company which (A) in the case of Shares acquired pursuant to the exercise of an
Option, have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the exercise price of the Shares as to which the Option is being
exercised; or
(iv) delivery of a properly executed exercise notice
together with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price; or
(v) any combination of the foregoing methods of payment;
or
(vi) such other consideration and method of payment for
the issuance of Shares to the extent permitted under Applicable Laws.
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<PAGE> 4
5. Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board. As a condition
to the exercise of this Option, the Company may require Optionee to make any
representation and warranty to the Company as may be required by any applicable
law or regulation.
6. Termination of Relationship. In the event an Optionee's
Continuous Status as an Employee or Consultant terminates, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "Termination
Date"), exercise this Option during the Termination Period set out in the
Notice of Grant. To the extent that Optionee was not entitled to exercise this
Option at the date of such termination, or if Optionee does not exercise this
Option within the time specified herein, the Option shall terminate.
7. Disability of Optionee. Notwithstanding the provisions of
Section 6 above, in the event of termination of an Optionee's consulting
relationship or Continuous Status as an Employee as a result of his or her
disability, Optionee may, but only within twelve (12) months from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term
is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a
Nonstatutory Stock Option on the day three months and one day following such
termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
to the extent so entitled within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
8. Death of Optionee. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a result of the death of
Optionee, the Option may be exercised at any time within twelve (12) months
following the date of death (but in no event later than the date of expiration
of the term of this Option as set forth in Section 10 below), by Optionee's
estate or by a person who acquired the right to exercise the Option by bequest
or inheritance, but only to the extent the Optionee could exercise the Option
at the date of death.
9. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by
Optionee. The terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
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<PAGE> 5
10. Term of Option. This Option may be exercised only within the
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
11. Taxation Upon Exercise of Option. Optionee understands that,
upon exercising a Nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.
12. Tax Consequences. Set forth below is a brief summary as of
the date of this Option of some of the federal and California tax consequences
of exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
(i) Exercise of ISO. If this Option qualifies as an ISO,
there will be no regular federal income tax liability or California income tax
liability upon the exercise of the Option, although the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the exercise price
will be treated as an adjustment to the alternative minimum tax for federal tax
purposes and may subject the Optionee to the alternative minimum tax in the
year of exercise.
(ii) Exercise of ISO Following Disability. If the
Optionee's Continuous Status as an Employee or Consultant terminates as a
result of disability that is not total and permanent disability as defined in
Section 22(e)(3) of the Code, to the extent permitted on the date of
termination, the Optionee must exercise an ISO within 90 days of such
termination for the ISO to be qualified as an ISO.
(iii) Exercise of Nonstatutory Stock Option. There may be
a regular federal income tax liability and California income tax liability upon
the exercise of a Nonstatutory Stock Option. The Optionee will be treated as
having received compensation income (taxable
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<PAGE> 6
at ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Shares on the date of exercise over the exercise price. If
Optionee is an Employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(iv) Disposition of Shares. In the case of an NSO, if
Shares are held for at least one year, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an ISO, if Shares transferred pursuant to
the Option are held for at least one year after exercise and are disposed of at
least two years after the Date of Grant, any gain realized on disposition of
the Shares will also be treated as long-term capital gain for federal and
California income tax purposes. If Shares purchased under an ISO are disposed
of within such one-year period or within two years after the Date of Grant, any
gain realized on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the difference between the
exercise price and the lesser of (1) the Fair Market Value of the Shares on the
date of exercise, or (2) the sale price of the Shares.
(v) Notice of Disqualifying Disposition of ISO Shares.
If the Option granted to Optionee herein is an ISO, and if Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (1) the date two years after the Date of Grant, or (2) the
date one year after the date of exercise, the Optionee shall immediately notify
the Company in writing of such disposition. Optionee agrees that Optionee may
be subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
Immusol, Inc.,
a California corporation
By: _____________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN
WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT
WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR
SHALL IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
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<PAGE> 7
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Optionee further agrees to notify the Company upon any change in the residence
address indicated below.
Dated: _______________ ______________________________________
Optionee
Residence Address:
______________________________________
______________________________________
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<PAGE> 8
EXHIBIT A
1992 STOCK PLAN
EXERCISE NOTICE
Immusol, Inc.
3050 Science Park Road
San Diego, CA 92121
Attention: Tsvi Goldenberg
1. Exercise of Option. Effective as of today, ___________, 19__,
the undersigned ("Optionee") hereby elects to exercise Optionee's option to
purchase _________ shares of the Common Stock (the "SHARES") of Immusol, Inc.
(the "COMPANY") under and pursuant to the 1992 Stock Plan, as amended (the
"PLAN") and the [ ] Incentive [X] Nonstatutory Stock Option Agreement dated
________, 19___ (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that
Optionee has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
3. Rights as Shareholder. Until the stock certificate evidencing
such Shares is issued (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
Optionee shall enjoy rights as a shareholder until such time
as Optionee disposes of the Shares or the Company and/or its assignee(s)
exercises the Right of First Refusal hereunder. Upon such exercise, Optionee
shall have no further rights as a holder of the Shares so purchased except the
right to receive payment for the Shares so purchased in accordance with the
provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.
4. Company's Right of First Refusal. Before any Shares held by
Optionee or any transferee (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise
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<PAGE> 9
transferred (including transfer by gift or operation of law), the Company or
its assignee(s) shall have a right of first refusal to purchase the Shares on
the terms and conditions set forth in this Section (the "RIGHT OF FIRST
REFUSAL").
(a) Notice of Proposed Transfer. The Holder of the
Shares shall deliver to the Company a written notice (the "NOTICE") stating:
(i) the Holder's bona fide intention to sell or otherwise transfer such Shares;
(ii) the name of each proposed purchaser or other transferee ("PROPOSED
TRANSFEREE"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Holder proposes to transfer the Shares (the "OFFERED PRICE"), and the
Holder shall offer the Shares at the Offered Price to the Company or its
assignee(s).
(b) Exercise of Right of First Refusal. At any time
within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (c) below.
(c) Purchase Price. The purchase price ("PURCHASE
PRICE") for the Shares purchased by the Company or its assignee(s) under this
Section shall be the Offered Price. If the Offered Price includes
consideration other than cash, the cash equivalent value of the non-cash
consideration shall be determined by the Board of Directors of the Company in
good faith.
(d) Payment. Payment of the Purchase Price shall be
made, at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale
or other transfer is consummated within 120 days after the date of the Notice
and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company and/or
its assignees shall again be offered the Right of First Refusal before any
Shares held by the Holder may be sold or otherwise transferred.
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<PAGE> 10
(f) Exception for Certain Family Transfers. Anything to
the contrary contained in this Section notwithstanding, the transfer of any or
all of the Shares during the Optionee's lifetime or on the Optionee's death by
will or intestacy to the Optionee's immediate family or a trust for the benefit
of the Optionee's immediate family shall be exempt from the provisions of this
Section. "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Shares so transferred subject to
the provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of
First Refusal shall terminate as to any Shares 90 days after the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
5. Tax Consultation. Optionee understands that Optionee may
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the
Company shall cause the legends set forth below or legends substantially
equivalent thereto, to be placed upon any certificate(s) evidencing ownership
of the Shares together with any other legends that may be required by state or
federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN
THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO
THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER,
PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN
THE
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<PAGE> 11
EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF
THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF
FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS
SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY
CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
Optionee understands that transfer of the Shares may be
restricted by Section 260.141.11 of the Rules of the California Corporations
Commissioner, a copy of which is attached to Exhibit B, the Investment
Representation Statement.
(b) Stop-Transfer Notices. Optionee agrees that, in
order to ensure compliance with the restrictions referred to herein, the
Company may issue appropriate "stop transfer" instructions to its transfer
agent, if any, and that, if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Agreement
or (ii) to treat as owner of such Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Shares shall have
been so transferred.
7. Successors and Assigns. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
8. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Optionee or by the Company forthwith to
the Company's Board of Directors or the committee thereof that administers the
Plan, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Board or committee shall be final and
binding on the Company and on Optionee.
9. Governing Law; Severability. This Agreement shall be governed
by and
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<PAGE> 12
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
10. Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery
or upon deposit in the United States mail by certified mail, with postage and
fees prepaid, addressed to the other party at its address as shown below
beneath its signature, or to such other address as such party may designate in
writing from time to time to the other party.
11. Further Instruments. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
12. Delivery of Payment. Optionee herewith delivers to the
Company the full exercise price for the Shares.
13. Entire Agreement. The Plan and Notice of Grant/Option
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Option Agreement and the Investment Representation Statement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by California law except for that body
of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: Immusol, Inc.
By:_______________________________
___________________________ Its:______________________________
Name
Address: Address:
3050 Science Park Road
___________________________ San Diego, CA 92121
___________________________
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<PAGE> 13
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : IMMUSOL, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs
and financial condition and has acquired sufficient information about the
Company to reach an informed and knowledgeable decision to acquire the
Securities. Optionee is acquiring these Securities for investment for
Optionee's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
(b) Optionee acknowledges and understands that the
Securities constitute "restricted securities" under the Securities Act and have
not been registered under the Securities Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of Optionee's investment intent as expressed herein. In this
connection, Optionee understands that, in the view of the Securities and
Exchange Commission, the statutory basis for such exemption may be unavailable
if Optionee's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to
register the Securities. Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities unless they are registered or such registration is not required
in the opinion of counsel satisfactory to the Company, a legend prohibiting
their transfer without the consent of the Commissioner of
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<PAGE> 14
Corporations of the State of California and any other legend required under
applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701
and Rule 144, each promulgated under the Securities Act, which, in substance,
permit limited public resale of "restricted securities" acquired, directly or
indirectly from the issuer thereof, in a non-public offering subject to the
satisfaction of certain conditions. Rule 701 provides that if the issuer
qualifies under Rule 701 at the time of the grant of the Option to the
Optionee, the exercise will be exempt from registration under the Securities
Act. In the event the Company becomes subject to the reporting requirements of
Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days
thereafter (or such longer period as any market stand-off agreement may
require) the Securities exempt under Rule 701 may be resold, subject to the
satisfaction of certain of the conditions specified by Rule 144, including: (1)
the resale being made through a broker in an unsolicited "broker's transaction"
or in transactions directly with a market maker (as said term is defined under
the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the
availability of certain public information about the Company, (3) the amount of
Securities being sold during any three month period not exceeding the
limitations specified in Rule 144(e), and (4) the timely filing of a Form 144,
if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the later of the date the
Securities were sold by the Company or the date the Securities were sold by an
affiliate of the Company, within the meaning of Rule 144; and, in the case of
acquisition of the Securities by an affiliate, or by a non-affiliate who
subsequently holds the Securities less than three years, the satisfaction of
the conditions set forth in sections (1), (2), (3) and (4) of the paragraph
immediately above.
(d) Optionee hereby agrees that if so requested by the
Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the
Securities Act, Optionee shall not sell or otherwise transfer any Shares or
other securities of the Company during the 180-day period following the
effective date of a registration statement of the Company filed under the
Securities Act; provided, however, that such restriction shall only apply to
the first registration statement of the Company to become effective under the
Securities Act which include securities to be sold on behalf of the Company to
the public in an underwritten public offering under the Securities Act. The
Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of
the applicable requirements of Rule 701 or 144 are not satisfied, registration
under the Securities Act, compliance with Regulation A, or some other
registration exemption will be required; and that, notwithstanding the fact
that Rules 144 and 701 are not exclusive, the Staff of the Securities
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<PAGE> 15
and Exchange Commission has expressed its opinion that persons proposing to
sell private placement securities other than in a registered offering and
otherwise than pursuant to Rules 144 or 701 will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk. Optionee understands
that no assurances can be given that any such other registration exemption will
be available in such event.
(f) Optionee understands that the certificate evidencing
the Securities will be imprinted with a legend which prohibits the transfer of
the Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
Signature of Optionee:
___________________________
Optionee
Date:________________, 19__
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ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
which a restriction on transfer has been imposed pursuant to Sections
260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be
delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant
to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferror's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferrer or the
transferror's ancestors, descendants, or spouse; or to a transferee
by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either
acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the
knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any
securities law of the foreign state, territory or country
concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this
rule not required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided
that no order under Section 25140 or subdivision (a) of Section
25143 is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or
to the administrator of the unclaimed property law of another
state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or
by the administrator of the unclaimed property law of another state
if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is
restricted under this rule, (ii) delivers to each purchaser a copy
of this rule, and (iii) advises the Commissioner of the name of
each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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<PAGE> 1
EXHIBIT 10.18
IMMUSOL, INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE ONE
GENERAL
I. PURPOSE OF THE PLAN
This 1996 Stock Option/Stock Issuance Plan ("Plan") is
intended to promote the interests of Immusol, Inc., a California Corporation
(the "Corporation"), by providing (i) key employees (including officers) of the
Corporation (or its parent or subsidiary corporations) who are responsible for
the management, growth and financial success of the Corporation (or its parent
or subsidiary corporations), (ii) Directors and (iii) consultants and other
independent contractors who provide valuable services to the Corporation (or
its parent or subsidiary corporations) with the opportunity to acquire a
proprietary or increase their proprietary interest in the Corporation as an
incentive for them to remain in the service of the Corporation (or its parent
or subsidiary corporations).
II. GENERAL
A. The Plan shall become effective on the first date on
which shares of the Corporation's Common Stock are registered under Section
12(g) of the Securities Exchange Act of 1934, as amended (the "1934 Act").
Such date is hereby designated as the "Effective Date" of this Plan.
B. This Plan shall serve as the successor to all prior
stock option or stock issuance plans (together, the "Predecessor Plans"), and
no further option grants or share issuances shall be made under the Predecessor
Plans from and after the Effective Date. Each outstanding option or share
issuances under the Predecessor Plans immediately prior to the Effective Date
are hereby incorporated into this Plan and shall accordingly be treated as
outstanding options or share issuance under this Plan. However, each such
option or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and, except as
otherwise expressly provided herein, no provision of this Plan shall affect or
otherwise modify the rights or obligations of the holders of such incorporated
options or shares with respect to their acquisition of shares of the
Corporation's Common Stock or otherwise modify the rights or obligations of the
holders of such options or shares.
C. For purposes of this Plan, the following provisions
shall be applicable in determining the parent and subsidiary corporations of
the Corporation:
<PAGE> 2
Any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation shall be
considered to be a PARENT of the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) owns,
at the time of the determination, stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
Each corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation shall be
considered to be a SUBSIDIARY of the Corporation, provided each such
corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
D. Neither the grant of options nor the issuance of any
shares pursuant to this Plan shall in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital
or business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
E. The holder of an option grant under this Plan shall
have none of the rights of a shareholder with respect to any shares subject to
such option until such individual shall have exercised the option, paid the
exercise price for the purchased shares and been issued a stock certificate for
such shares.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into two components: the
Option Grant Program specified in Article Two; and the Stock Issuance Program
specified in Article Three. Under the Option Grant Program, eligible
individuals may be granted options to purchase shares of the Corporation's
Common Stock at not less than 85% of the fair market value of such shares on
the grant date. Under the Stock Issuance Program, eligible individuals may be
allowed to purchase shares of the Corporation's Common Stock at discounts from
the fair market value of such shares of up to 15%. Such shares may be issued
as fully-vested shares or as shares to vest over time.
B. The provisions of Articles One and Four of the Plan,
except as otherwise expressly provided, shall apply to the Option Grant Program
and the Stock Issuance Program and shall accordingly govern the interests of
all individuals in the Plan.
IV. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by the Board of
Directors (the "Board") or a committee ("Committee") of two (2) or more Board
members who assume full responsibility for the administration of the Plan (the
"Plan Administrator"). Members
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<PAGE> 3
of the Committee shall serve for such period of time as the Board may determine
and shall be subject to removal by the Board at any time.
B. The Plan Administrator shall have full power and
authority (subject to the express provisions of the Plan) to establish such
rules and regulations as it may deem appropriate for the proper administration
of the Plan and to make such determinations under, and issue such
interpretations of, the Plan and any outstanding option grants or stock
issuances as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any outstanding option or stock issuance.
V. OPTION GRANTS AND STOCK ISSUANCES
A. Except as set forth in paragraph B. hereof, the
persons eligible to receive stock issuances under the Stock Issuance Program
("Participant") and/or option grants pursuant to the Option Grant Program
("Optionee") are as follows:
(i) officers, directors and other employees of
the Corporation (or its parent or subsidiary corporations) who render services
which contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations);
(ii) those consultants or other independent
contractors who provide valuable services to the Corporation (or its parent or
subsidiary corporations).
B. The Plan Administrator shall have full authority to
determine, (I) with respect to the option grants made under the Option Grant
Program, which eligible individuals are to receive option grants, the number of
shares to be covered by each such grant, whether the granted option is to be an
incentive stock option ("Incentive Option") which satisfies the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code") or a non-statutory option not intended to meet such
requirements, the time or times at which and the circumstances under which each
granted option is to become exercisable and the maximum term for which the
option may remain outstanding and (II), with respect to stock issuances under
the Stock Issuance Program, the number of shares to be issued to each
Participant, the vesting schedule and conditions to vesting (if any) to be
applicable to the issued shares, and the consideration to be paid by the
individual for such shares.
C. Notwithstanding any other provision of this Plan, no
individual shall be granted options to acquire more than five hundred thousand
(500,000) shares of stock hereunder.
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<PAGE> 4
VI. STOCK SUBJECT TO THE PLAN
A. Shares of the Corporation's Common Stock shall be
available for issuance under the Plan and shall be drawn from either the
Corporation's authorized but unissued shares of Common Stock or from reacquired
shares of Common Stock, including shares repurchased by the Corporation on the
open market. The maximum number of shares of Common Stock which may be issued
over the term of the Plan shall not exceed 2,600,000 shares, subject to
adjustment from time to time in accordance with the provisions of this Section
VI. Such authorized number of shares is comprised of (i) 2,300,000 shares
previously authorized under the Predecessor Plans, (ii) an additional 300,000
shares.
B. Should one or more outstanding options under this
Plan (including outstanding options under the Predecessor Plans incorporated
into this Plan) expire or terminate for any reason prior to exercise in full
(including any option cancelled in accordance with the cancellation-regrant
provisions of Section III of Article Two of the Plan), then the shares subject
to the portion of each option not so exercised shall be available for
subsequent option grant or share issuance under this Plan. Shares subject to
any option or portion thereof surrendered or cancelled in accordance with
Section I.C. of Article Four and all shares issuances under the Plan, whether
or not such shares are subsequently repurchased by the Corporation pursuant to
its repurchase rights under the Plan or otherwise surrendered for cancellation,
shall reduce on a share-for-share basis the number of shares of the same class
of Common Stock available for subsequent option grant or stock issuance under
the Plan. In addition, should the exercise price of an outstanding option
under the Plan be paid with shares of Common Stock or should shares of Common
Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an outstanding option under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross
number of shares for which the option is exercised.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, conversion or
other change affecting the outstanding Common Stock, or any class of Common
Stock as a class, without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the number and/or class of shares
issuable under the Plan, (ii) the number and/or class of shares and price per
share in effect under each outstanding option under this Plan (including
outstanding options incorporated into this Plan from the Predecessor Plans).
Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
D. Common Stock issuable under the Option Grant Program
or the Stock Issuance Program may be subject to such restrictions on transfer,
repurchase rights or such other restrictions as determined by the Plan
Administrator.
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<PAGE> 5
ARTICLE TWO
OPTION GRANT PROGRAM
I. TERMS AND CONDITIONS OF OPTIONS
Options granted to Employees of the Corporation or its parent
or subsidiary corporations pursuant to this Article Two shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or non-statutory options. Individuals
who are not Employees of the Corporation or its parent or subsidiary
corporations may only be granted non-statutory options. Each granted option
shall be evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
the terms and conditions specified below. Each instrument evidencing an
Incentive Option shall, in addition, be subject to the applicable provisions of
Section II of this Article Two.
A. Option Price.
(i) In General. The option price per share shall
be fixed by the Plan Administrator. In no event, however, shall the
price for any share be less than eighty-five percent (85%) of the fair
market value of that share on the date of the option grant. During
the 180 day lock-up period after the effective date of the S-8
Registration Statement registering the shares issuable under the Plan
(the "Effective Date"), no options shall be granted to any employee of
the Corporation who is an employee as of the Effective Date at an
exercise price per share less than the Corporation's initial public
offering price per share.
(ii) 10% Shareholder. If any individual to whom
an option is granted is the owner of stock (as determined under
Section 424(d) of the Internal Revenue Code) possessing 10% or more of
the total combined voting power of all classes of stock of the
Corporation or any one of its parent or subsidiary corporations, then
the option price per share shall not be less than one hundred and ten
percent (110%) of the fair market value per share of Common Stock on
the grant date.
(iii) How Payable. The option price shall become
immediately due upon exercise of the option and, subject to the
provisions of Article Four, Section III and the instrument evidencing
the grant, shall be payable in one of the following alternative forms
specified below:
- full payment in cash or check drawn to the
Corporation's order;
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<PAGE> 6
- full payment in shares of Common Stock held
for at least six (6) months and valued at fair market value on the
Exercise Date (as such term is defined below);
- full payment in a combination of shares of
Common Stock held for at least six (6) months and valued at fair
market value on the Exercise Date and cash or check; or
- full payment through a broker-dealer sale and
remittance procedure pursuant to which the Optionee (I) shall provide
irrevocable written instructions to a designated brokerage firm to
effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate option price payable for
the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation in
connection with such purchase and (II) shall provide written
directives to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete
the sale transaction.
For purposes of this subparagraph (iii), the Exercise Date
shall be the date on which written notice of the option exercise is delivered
to the Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
B. Term and Exercise of Options. Each option granted
under this Article Two shall have such term as may be fixed by the Plan
Administrator, be exercisable at such time or times and during such period, and
on such conditions, as is determined by the Plan Administrator and set forth in
the stock option agreement evidencing the grant. No such option, however,
shall have a maximum term in excess of ten (10) years from the grant date and
no option granted to a 10% shareholder shall have a maximum term in excess of
five (5) years from the grant date. During the lifetime of the Optionee, the
option (together with any related stock appreciation right) shall, unless
otherwise expressly permitted by the Plan Administrator in its sole discretion,
be exercisable only by the Optionee and shall not be assignable or transferable
by the Optionee otherwise than by will or by the laws of descent and
distribution following the Optionee's death.
C. Termination of Service.
(i) Except to the extent otherwise provided
pursuant to Section V of this Article Two, the following provisions
shall govern the exercise period applicable to any outstanding options
under this Article Two which are held by the Optionee at the time of
his or her cessation of Service or death.
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<PAGE> 7
- Should an Optionee's Service terminate for any reason
(including death or permanent disability as defined in Section
22(e)(3) of the Internal Revenue Code) while the holder of one or more
outstanding options under the Plan, then none of those options shall
(except to the extent otherwise provided pursuant to Section V of this
Article Two) remain exercisable beyond the later of (i) the limited
post-Service period designated by the Plan Administrator at the time
of the option grant and set forth in the option agreement; or (ii) (A)
ninety (90) days from the date of termination if termination was
caused by other than the death or disability (as defined in Section
22(e)(3) of the Internal Revenue Code) of such Optionee or (B) twelve
(12) months from the date of termination if termination was caused by
death or disability of Optionee.
- Any option granted to an Optionee under this Article
Two and exercisable in whole or in part on the date of the Optionee's
death may be subsequently exercised, by the personal representative of
the Optionee's estate or by the person or persons to whom the option
is transferred pursuant to the Optionee's will or in accordance with
the laws of descent and distribution, provided and only if such
exercise occurs prior to the earlier of (i) the first anniversary of
the date of the Optionee's death or (ii) the specified expiration date
of the option term. Upon the occurrence of the earlier event, the
option shall terminate and cease to be exercisable.
- Under no circumstances, however, shall any such
option be exercisable after the specified expiration date of the
option term.
- During the limited post-Service period of
exercisability, the option may not be exercised for more than the
number of shares for which the option is exercisable on the date the
Optionee's Service terminates. Upon the expiration of such limited
exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be exercisable.
(ii) The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at
any time while the option remains outstanding, to permit one or more
options held by the Optionee under this Article Two to be exercised,
during the limited period of exercisability provided under
subparagraph (i) above, not only with respect to the number of shares
for which each such option is exercisable at the time of the
Optionee's cessation of Service but also with respect to one or more
subsequent installments of purchasable shares for which the option
would otherwise have become exercisable had such cessation of Service
not occurred.
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<PAGE> 8
(iii) For purposes of the foregoing provisions of this
Section I.C. of Article Two (and for all other purposes under the
Plan):
- The Optionee shall (except to the extent otherwise
specifically provided in the applicable option or issuance agreement)
be deemed to remain in the SERVICE of the Corporation for so long as
such individual renders services on a periodic basis to the
Corporation (or any parent or subsidiary corporation) in the capacity
of an Employee, a non-employee member of the Board or an independent
consultant or advisor.
- The Optionee shall be considered to be an EMPLOYEE
for so long as he or she remains in the employ of the Corporation or
one or more parent or subsidiary corporations, subject to the control
and direction of the employer entity not only as to the work to be
performed but also as to the manner and method of performance.
II. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under this Article Two. Incentive Options may
only be granted to individuals who are Employees of the Corporation. Options
which are specifically designated as "non-statutory" options when issued under
the Plan shall not be subject to such terms and conditions.
A. Option Price. The option price per share of any
share of Common Stock subject to an Incentive Option shall in no event be less
than one hundred percent (100%) of the fair market value of such share of
Common Stock on the grant date.
B. Dollar Limitation. The aggregate fair market value
(determined as of the respective date or dates of grant) of the Common Stock
for which one or more options granted to any Employee after December 31, 1986
under this Plan (or any other option plan of the Corporation or its parent or
subsidiary corporations) may for the first time become exercisable as incentive
stock options under the Federal tax laws during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two or more such options which become exercisable for the first
time in the same calendar year, the foregoing limitation on the exercisability
of such options as Incentive Options under the Federal tax laws shall be
applied on the basis of the order in which such options are granted.
C. During the lifetime of the Optionee, the incentive
stock option (together with any related stock appreciation right) shall be
exercisable only by the Optionee and shall not be assignable or transferable by
the Optionee otherwise than by will or by the laws of descent and distribution
following the Optionee's death.
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<PAGE> 9
D. Except as modified by the preceding provisions of
this Section II, the provisions of Articles One, Two and Four of the Plan shall
apply to all Incentive Options granted hereunder.
III. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two
(including outstanding options under the Predecessor Plans incorporated into
this Plan) and to grant in substitution new options under this Article Two
covering the same or different numbers of shares of Common Stock but having an
option price for each share which is not less than (i) eighty-five percent
(85%) of the fair market value of such share on the new grant date or (ii) one
hundred percent (100%) of such fair market value in the case of an Incentive
Option.
IV. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator
determines in its discretion to implement the stock appreciation right
provisions of this Section IV, one or more Optionees under the Option Grant
Program may be granted the right, exercisable upon such terms and conditions as
the Plan Administrator may establish, to surrender all or part of an
unexercised option under this Article Two in exchange for a distribution from
the Corporation in an amount equal to the excess of (i) the fair market value
(on the option surrender date) of the number of shares in which the Optionee is
at the time vested under the surrendered option (or surrendered portion
thereof) over (ii) the aggregate option price payable for such vested shares.
B. No surrender of an option shall be effective
hereunder unless it is approved by the Plan Administrator. If the surrender is
so approved, then the distribution to which the Optionee shall accordingly
become entitled under this Section IV may be made in shares of any class of
Common Stock valued at fair market value on the option surrender date, in cash,
or partly in shares and partly in cash, as the Plan Administrator shall in its
sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
(i) five (5) business days after the receipt of the rejection notice or (ii)
the last day on which the option is otherwise exercisable in accordance with
the terms of the instrument evidencing such option, but in no event may such
rights be exercised more than ten (10) years after the date of the option
grant.
D. One or more officers of the Corporation subject to
the short-swing profit restrictions of the Federal securities laws may, in the
Plan Administrator's sole discretion, be granted limited stock appreciation
rights in tandem with their outstanding
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<PAGE> 10
options under this Article Two. Upon the occurrence of a Hostile Take-Over (as
defined in Section II.B. of Article Four) effected at any time when the
Corporation's outstanding Common Stock is registered under Section 12(g) of the
1934 Act, each outstanding option with such a limited stock appreciation right
in effect for at least six (6) months shall automatically be cancelled, to the
extent such option is at the time exercisable for fully-vested shares of Common
Stock. The Optionee shall in return be entitled to a cash distribution from
the Corporation in an amount equal to the excess of (i) the Take-Over Price of
the vested shares of Common Stock at the time subject to the cancelled option
(or cancelled portion of such option) over (ii) the aggregate exercise price
payable for such shares. The cash distribution payable upon such cancellation
shall be made within five (5) days following the consummation of the Hostile
Take-Over. Neither the approval of the Plan Administrator nor the consent of
the Board shall be required in connection with such option cancellation and
cash distribution. The balance of the option (if any) shall continue to remain
outstanding and exercisable in accordance with the terms of the instrument
evidencing such grant.
E. The shares of Common Stock subject to any option
surrendered or cancelled for an appreciation distribution pursuant to this
Section IV shall NOT be available for subsequent option grant under the Plan.
V. EXTENSION OF EXERCISE PERIOD
The Plan Administrator shall have full power and authority to
extend the period of time for which any option granted under this Article Two
is to remain exercisable following the Optionee's cessation of Service or death
from the limited period in effect under Section I.C.(i) of this Article Two to
such greater period of time as the Plan Administrator shall deem appropriate;
provided, however, that in no event shall such option be exercisable after the
specified expiration date of the option term.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate purchases without any intervening stock
option grants. The issued shares shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") that complies with the terms and conditions of
this Article Three.
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<PAGE> 11
A. CONSIDERATION
Shares of Common Stock shall be issued under the Plan for one
or more of the following items of consideration, which the Plan Administrator
may deem appropriate in each individual instance:
(i) cash or cash equivalents (such as a personal
check or bank draft) paid the Corporation;
(ii) in Common Stock of the Corporation valued at
fair market value on the date of issuance;
(iii) a promissory note payable to the
Corporation's order in one or more installments, which may be subject
to cancellation in whole or in part upon terms and conditions
established by the Plan Administrator;
(iv) past services rendered to the Corporation or
any parent or subsidiary corporation;
(v) any combination of the above approved by the
Plan Administrator.
Shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one-hundred
percent (100%) of the fair market value of such shares, but in no event less
than eighty-five percent (85%) of such fair market value. Notwithstanding the
foregoing, in the case of 10% shareholders, Shares must be issued at one
hundred percent (100%) of fair market value of such shares.
B. VESTING PROVISIONS
1. Shares of Common Stock issued under this
Article Three may, in the absolute discretion of the Plan Administrator, be
fully and immediately vested upon issuance or may vest in one or more
installments over the Participant's period of Service (as such term is defined
in Section I.C.(iii) of Article Two); provided, that such vesting must be at a
rate of at least 20% per year over no more than five years from the date such
shares are issued. The elements of the vesting schedule applicable to any
unvested shares of Common Stock issued under the Plan, namely:
(i) the Service period to be completed
by the Participant or the performance objectives to be achieved by the
Corporation,
(ii) the number of installments in which
the shares are to vest,
(iii) the interval or intervals (if any)
which are to lapse between installments,
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<PAGE> 12
(iv) any conditions or contingencies to
vesting, and
(v) the effect which death, disability
or other event designated by the Plan Administrator is to have upon
the vesting schedule, shall be determined by the Plan Administrator
and incorporated into the Issuance Agreement executed by the
Corporation and the Participant at the time such unvested shares are
issued.
2. The Participant shall have full shareholder
rights with respect to any shares of Common Stock issued to him or her under
this Article Three, whether or not his or her interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares. Any new,
additional or different shares of stock or other property (including money paid
other than as a regular cash dividend) which the Participant may have the right
to receive with respect to his or her unvested shares by reason of any stock
dividend, stock split, reclassification of Common Stock or other similar change
in the Corporation's capital structure or by reason of any Corporate
Transaction under Section I of this Article Four shall be issued, subject to
(i) the same vesting requirements applicable to his or her unvested shares and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
3. Should the Participant cease to remain in
Service while holding one or more unvested shares of Common Stock under this
Article Three, then those shares shall be immediately surrendered to the
Corporation for cancellation, and the Participant shall have no further
shareholder rights with respect to those shares. The Corporation shall repay
to the Participant the cash consideration paid for the surrendered shares and
shall cancel the principal balance of any outstanding purchase-money note of
the Participant to the extent attributable to such surrendered shares. The
surrendered shares may, at the Plan Administrator's discretion, be retained by
the Corporation as Treasury Shares or may be retired to authorized but unissued
share status.
4. The Plan Administrator may in its discretion
elect to waive the surrender and cancellation of one or more unvested shares of
Common Stock (or other assets attributable thereto) which would otherwise occur
upon the non-completion of the vesting schedule applicable to such shares.
Such waiver shall result in the immediate vesting of the Participant's interest
in the shares of Common Stock as to which the waiver applies. Such waiver may
be effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
II. TRANSFER RESTRICTIONS/SHARE ESCROW
A. Unvested shares under this Article Three may, in the
Plan Administrator's discretion, be held in escrow by the Corporation until the
Participant's interest in such shares vests or may be issued directly to the
Participant with restrictive
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<PAGE> 13
legends on the certificates evidencing such unvested shares. To the extent an
escrow arrangement is utilized, the unvested shares and any securities or other
assets issued with respect to such shares (other than regular cash dividends)
shall be delivered in escrow to the Corporation to be held until the
Participant's interest in such shares (or other securities or assets) vests.
Alternatively, if the unvested shares are issued directly to the Participant,
the restrictive legend on the certificates for such shares shall read
substantially as follows:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE UNVESTED AND
ARE ACCORDINGLY SUBJECT TO (I) CERTAIN TRANSFER RESTRICTIONS
AND TO (II) CANCELLATION OR REPURCHASE IN THE EVENT THE
REGISTERED HOLDER (OR HIS/HER PREDECESSOR IN INTEREST) CEASES
TO REMAIN IN THE CORPORATION'S SERVICE. SUCH TRANSFER
RESTRICTIONS AND THE TERMS AND CONDITIONS OF SUCH CANCELLATION
OR REPURCHASE ARE SET FORTH IN A STOCK ISSUANCE AGREEMENT
BETWEEN THE CORPORATION AND THE REGISTERED HOLDER (OR HIS/HER
PREDECESSOR IN INTEREST) DATED __________, 19__, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION.
B. The Participant shall have no right to transfer any
unvested shares of Common Stock issued to him or her under this Article Three.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift, or other
disposition of such shares, whether voluntary or involuntary. Upon any such
attempted transfer, the unvested shares shall immediately be cancelled, and
neither the Participant nor the proposed transferee shall have any rights with
respect to those shares. However, the Participant shall have the right to make
a gift of unvested shares acquired under the Plan to his or her spouse or
issue, including adopted children, or to a trust established for such spouse or
issue, provided the donee of such shares delivers to the Corporation a written
agreement to be bound by all the provisions of the Plan and the Issuance
Agreement applicable to the gifted shares.
ARTICLE FOUR
MISCELLANEOUS
I. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. The treatment and rights of optionees or participants
in connection with any Corporate Transaction (as defined below) shall be
established in the option agreement governing such option, which agreement may
accelerate vesting or exercisability, or may provide that the option shall
terminate upon any such transaction.
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<PAGE> 14
B. A Corporate Transaction means:
(i) a merger or consolidation in which the
Corporation is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Corporation's
incorporation,
(ii) the sale, transfer or disposition of all
or substantially all of the assets of the Corporation in liquidation or
dissolution of the Corporation, or
(iii) any reverse merger in which the
Corporation is the surviving entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are issued to holders different
from those who held such securities immediately prior to such merger.
C. Except as otherwise provided by the Plan
Administrator in agreements governing the grant of options or stock issuances,
in connection with any Change in Control of the Corporation, the exercisability
of each option grant at the time outstanding under this Plan shall
automatically accelerate so that each such option shall, immediately prior to
the specified effective date for the Change in Control, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to such option and may be exercised for all or any portion of such
shares. Similarly, all unvested shares issued under the Plan shall
automatically vest immediately prior to the effective date of the Change in
Control. For purposes of this Article Four, a Change in Control shall be deemed
to occur in the event:
(i) any person or related group of persons
(other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the
Corporation) directly or indirectly acquires beneficial ownership
(within the meaning of Rule 13d-3 of the Securities Exchange Act of
1934, as amended) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made
directly to the Corporation's shareholders which the Board does not
recommend such shareholders to accept; or
(ii) there is a change in the composition of
the Board over a period of twenty-four (24) consecutive months or less
such that a majority of the Board members (rounded up to the next whole
number) cease, by reason of one or more proxy contests for the election
of Board members, to be comprised of individuals who either (A) have
been Board members continuously since the beginning of such period or
(B) have been elected or nominated for election as Board members during
such period by at least a
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<PAGE> 15
majority of the Board members described in clause (A) who were still
in office at the time such election or nomination was approved by the
Board.
The provisions of this Paragraph C shall apply to option grants and/or stock
issuances under the Predecessor Plans only to the extent expressly extended
thereto by the Plan Administrator.
II. CERTAIN DEFINITIONS
A. Fair Market Value. The fair market value of a share
of Common Stock shall be determined in accordance with the following
provisions:
- If shares of the Class of Common Stock to be
valued are not at the time listed or admitted to trading on any
national stock exchange but is traded on the Nasdaq National Market
System, the fair market value shall be the closing selling price per
share of a share of that class on the date in question, as such price
is reported by the National Association of Securities Dealers through
the Nasdaq National Market System or any successor system. If there
is no reported closing selling price for the series on the date in
question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of fair market
value.
- If shares of the class of Common Stock to be
valued are at the time listed or admitted to trading on any national
stock exchange, then the fair market value of a share of that class
shall be the closing selling price per share on the date in question
on the stock exchange determined by the Plan Administrator to be the
primary market for the Common Stock, as such price is officially
quoted in the composite tape of transactions on such exchange. If
there is no reported sale of a share of the class on such exchange on
the date in question, then the fair market value shall be the closing
selling price on the exchange on the last preceding date for which
such quotation exists.
- If shares of the series of Common Stock to be
valued at the time are neither listed nor admitted to trading on any
stock exchange nor traded on the Nasdaq National Market System, then
the fair market value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall
deem appropriate, which may include independent professional
appraisals, in a manner consistent with the provisions of Section
260.140.50 of the Rules of the California Corporations Commissioner.
B. Hostile Take-Over. A HOSTILE TAKE-OVER shall be
deemed to occur in the event (i) any person or related group of persons (other
than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the
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<PAGE> 16
Corporation) directly or indirectly acquires beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities pursuant to a tender or exchange offer made directly to
the Corporation's shareholders which the Board does not recommend such
shareholders to accept.
C. Take-Over Price. The Take-Over Price per share shall
be deemed to be equal to the greater of (a) the fair market value per share on
the option surrender date, as determined pursuant to the valuation provisions
of Section II.A. of this Article Four, or (b) the highest reported price per
share paid by the tender offeror in effecting such Hostile Take-Over.
III. LOANS OR GUARANTEE OF LOANS
A. The Plan Administrator may, in its discretion, assist
any Optionee or Participant (including an Optionee or Participant who is an
officer of the Corporation) in the exercise of one or more options granted to
such Optionee under the Article Two Option Grant Program or the purchase of one
or more shares issued to such Participant under the Article Three Stock
Issuance Program, including the satisfaction of any Federal and State income
and employment tax obligations arising therefrom by (i) authorizing the
extension of a loan from the Corporation to such Optionee or Participant or
(ii) permitting the Optionee or Participant to pay the option price or purchase
price for the purchased Common Stock in installments over a period of years.
The terms of any loan or installment method of payment (including the interest
rate and terms of repayment) will be upon such terms as the Plan Administrator
specifies in the applicable option or issuance agreement or otherwise deems
appropriate under the circumstances. Loans and installment payments may be
granted with or without security or collateral (other than to individuals who
are consultants or independent contractors, in which event the loan must be
adequately secured by collateral other than the purchased shares). However,
the maximum credit available to the Optionee or Participant may not exceed the
option or purchase price of the acquired shares (less the par value of such
shares) plus any Federal and State income and employment tax liability incurred
by the Optionee or Participant in connection with the acquisition of such
shares.
B. The Plan Administrator may, in its absolute
discretion, determine that one or more loans extended under this financial
assistance program shall be subject to forgiveness by the Corporation in whole
or in part upon such terms and conditions as the Plan Administrator may deem
appropriate.
IV. TAX WITHHOLDING
A. The Corporations's obligation to deliver shares or
cash upon the exercise of stock options or stock appreciation rights granted
under the Option Grant Program or upon direct issuance under the Stock Issuance
Program shall be subject to the satisfaction of all applicable Federal, State
and local income and employment tax withholding requirements.
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<PAGE> 17
B. The Plan Administrator may, in its discretion and
upon such terms and conditions as it may deem appropriate provide any or all
holders of outstanding option grants under the Option Grant Program with the
election to have the Corporation withhold, from the shares of Common Stock
otherwise issuable upon the exercise of such options, a portion of such shares
with an aggregate fair market value equal to the designated percentage (up to
100% as specified by the optionee) of the Federal and State income taxes
("Taxes") incurred in connection with the acquisition of such shares. In lieu
of such direct withholding, one or more option holders may also be granted the
right to deliver shares of Common Stock to the Corporation in satisfaction of
such Taxes.
V. AMENDMENT OF THE PLAN AND AWARDS
A. Except as herein provided, the Board has complete and
exclusive power and authority to amend or modify the Plan (or any component
thereof) in any or all respects whatsoever. No amendment or modification may
adversely affect the rights and obligations of an Optionee with respect to
options at the time outstanding under the Plan, nor adversely affect the rights
of any Participant with respect to Common Stock issued under the Plan prior to
such action, unless the Optionee or Participant consents to such amendment. In
addition, the Board may, in its discretion, condition any and all such
amendments on the Corporation obtaining approval of its shareholders.
B. Options to purchase shares of Common Stock may be
granted under the Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program, which are in both instances in excess of the
number of shares then available for issuance under the Plan, provided any
excess shares actually issued under the Option Grant Program or the Stock
Issuance Program are held in escrow until shareholder approval, if required by
the Board in connection with the amendment of the Plan, is obtained for a
sufficient increase in the number of shares available for issuance under the
Plan. If such shareholder approval is required and is not obtained within
twelve (12) months after the date the first such excess option grants or excess
share issuances are made, then (I) any unexercised excess options shall
terminate and cease to be exercisable and (II) the Corporation shall promptly
refund the purchase price paid for any excess shares actually issued under the
Plan and held in escrow, together with interest (at the applicable Short Term
Federal Rate) for the period the shares were held in escrow.
C. Shareholder approval of this Plan shall not be
construed or interpreted to require that shareholder approval shall be required
in connection with any amendment of this Plan, the adoption by the Corporation
of any other plans, or the grant of options or issuance of shares not covered
by any plan.
VI. EFFECTIVE DATE AND TERM OF PLAN
A. This Plan, as successor to the Corporation's
Predecessor Plans, shall become effective as of the Effective Date, and no
further option grants shall be made under the Option Plan nor shall any further
shares be issued under the Stock Plan from and after
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<PAGE> 18
such Effective Date. If shareholder approval of this Plan is not obtained
within twelve months after the date this Plan is adopted by the Board, then
each option granted under this Plan from and after the Effective Date shall
terminate without ever becoming exercisable for the option shares and all
shares issued hereunder shall be repurchased by the Corporation at the purchase
price paid, together with interest (at the applicable Short Term Federal Rate).
However, in the event such shareholder approval is not obtained, the
Predecessor Plans shall continue in effect in accordance with the terms and
provisions last approved by the Corporation's shareholders, and all outstanding
options and unvested stock issuances under the Predecessor Plans shall remain
in full force and effect in accordance with the instruments evidencing such
options and issuances.
B. Each outstanding option and share issuance under the
Predecessor Plans immediately prior to the Effective Date of this Plan are
hereby incorporated into this Plan and shall accordingly be treated as an
outstanding option or share issuance under this Plan. However, each such
option or share issuance shall continue to be governed solely by the terms and
conditions of the instrument evidencing such grant or issuance, and except as
otherwise expressly provided in this Plan, no provision of this Plan shall
affect or otherwise modify the rights or obligations of the holders of such
options or shares with respect to their acquisition of shares of Common Stock,
or otherwise modify the rights or obligations of the holders of such options or
shares.
C. The sale and remittance procedure authorized for the
exercise of outstanding options under this Plan shall be available for all
options granted under this Plan on or after the Effective Date and for all
non-statutory options outstanding under the Option Plan and incorporated into
this Plan. The Plan Administrator may also allow such procedure to be utilized
in connection with one or more disqualifying dispositions of Incentive Option
shares effected after the Effective Date, whether such Incentive Options were
granted under this Plan or the Option Plan.
D. The Plan shall terminate upon the earlier of (i) the
tenth anniversary of the Effective Date or (ii) the date on which all shares
available for issuance under the Plan shall have been issued or cancelled
pursuant to the exercise, surrender or cash-out of the options granted under
the Option Grant Program or the issuance of shares (whether vested or unvested)
under the Stock Issuance Program. If the date of termination is determined
under clause (i) above, then all option grants and unvested stock issuances
outstanding on such date shall thereafter continue to have force and effect in
accordance with the provisions of the instruments evidencing such grants or
issuances.
VII. USE OF PROCEEDS
Cash proceeds received by the Corporation from the sale of
shares under the Plan shall be used for general corporate purposes.
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<PAGE> 19
VIII. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any
option under the Option Grant Program, the issuance of any shares under the
Stock Issuance Program, and the issuance of Common Stock upon the exercise or
surrender of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it,
and the Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be
issued or delivered under this Plan unless and until there shall have been
compliance with all applicable requirements of Federal and State securities
laws, including the filing and effectiveness of the Form S-8 registration
statement for the shares of Common Stock issuable under the Plan, and all
applicable listing requirements of any securities exchange on which stock of
the same class is then listed.
IX. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the
Plan, nor any action taken by the Plan Administrator hereunder, nor any
provision of the Plan shall be construed so as to grant any individual the
right to remain in the employ or service of the Corporation (or any parent or
subsidiary corporation) for any period of specific duration, and the
Corporation (or any parent or subsidiary corporation retaining the services of
such individual) may terminate such individual's employment or service at any
time and for any reason, with or without cause.
X. MISCELLANEOUS PROVISIONS
A. The right to acquire Common Stock or other assets
under the Plan may not be assigned, encumbered or otherwise transferred by any
Optionee or Participant.
B. The provisions of the Plan shall inure to the benefit
of, and be binding upon, the Corporation and its successors or assigns, whether
by Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 1
EXHIBIT 10.19
IMMUSOL, INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") to purchase shares of the Common Stock of Immusol, Inc. (the
"Company"):
Optionee: _________________________________________________________
Grant Date: _______________________________________________________
Option Price: $_________________ per share
Number of Option Shares: ________________ shares
Expiration Date: __________________________________________________
Type of Option: _________ Incentive Stock Option
_________ Non-Statutory Stock Option
Exercise Schedule:
Other Special Provisions:
<PAGE> 2
Optionee agrees to be bound by the terms and conditions of the Option
as set forth in the Stock Option Agreement attached hereto as Exhibit A.
Optionee also understands that the Option is granted subject to and in
accordance with the express terms and conditions of the Immusol, Inc. 1996
Stock Option/Stock Issuance Plan (the "Plan"), a copy of which is attached
hereto as Exhibit B, and agrees to be bound by the terms and conditions of the
Plan.
Optionee hereby acknowledges receipt of a copy of the official plan prospectus.
NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in the Stock Option
Agreement or the Plan shall confer upon the Optionee the right to continue in
the Service of the Company for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Company or the
Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason whatsoever, with or without
cause.
IMMUSOL, INC.
By: __________________________
Title: _______________________
______________________________
OPTIONEE
Address: ______________________________
______________________________
Dated: _________________, 19___
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<PAGE> 1
EXHIBIT 10.20
IMMUSOL, INC.
STOCK OPTION AGREEMENT
WITNESSETH:
RECITALS
A. Immusol, Inc. (the "Company") has adopted the 1996 Stock
Option/Stock Issuance Plan (the "Plan") for the purpose of attracting and
retaining the services of selected key employees (including officers and
directors) and consultants and other independent contractors who contribute to
the financial success of the Company or its parent or subsidiary corporations.
B. Optionee is an individual who is to render valuable services
to the Company or its parent or subsidiary corporations, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Company's grant of a stock option to Optionee.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement, the Company hereby grants to Optionee,
as of the grant date (the "Grant Date") specified in the accompanying Notice of
Grant of Stock Option (the "Notice of Grant"), a stock option to purchase up to
that number of shares of the Company's Common Stock (the "Option Shares") as is
specified in the Notice of Grant. The Option Shares shall be purchasable from
time to time during the option term at the option price per share (the "Option
Price") specified in the Notice of Grant.
2. OPTION TERM. This option shall have a maximum term
of ten (10) years measured from the Grant Date and shall accordingly expire at
the close of business on the expiration date (the "Expiration Date") specified
in the Notice of Grant, unless sooner terminated in accordance with Paragraph 5
or 6.
3. LIMITED TRANSFERABILITY. This option shall be
neither transferable nor assignable by Optionee other than by will or by the
laws of descent and distribution following the Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee, unless such assignment
or transfer is expressly approved by the Plan Administrator.
4. EXERCISABILITY. This option shall become exercisable
for the Option Shares in one or more installments as specified in the Notice of
Grant. As the option becomes exercisable for the Option Shares in one or more
such installments, those
<PAGE> 2
installments shall accumulate and the option shall remain exercisable for the
accumulated installments until the Expiration Date or the sooner termination of
the option term under Paragraph 5 or 6 of this Agreement.
5. TERMINATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should one of the following provisions become
applicable:
(i) Except to the extent otherwise
provided in subparagraphs (ii) and (iii) below, should Optionee cease
to remain in the Service of the Company at any time during the option
term, then this option shall not remain exercisable for more than a
ninety (90)-day period commencing with the date of such cessation of
Service. Upon the expiration of such ninety (90)-day period or (if
earlier) upon the specified Expiration Date of the option term, this
option shall terminate and cease to be outstanding.
(ii) Should Optionee die while in Service
or within the ninety (90)-day period following his or her cessation of
Service, then the personal representative of the Optionee's estate or
the person or persons to whom this option is transferred pursuant to
the Optionee's will or in accordance with the law of descent and
distribution shall have the right to exercise this option. Such right
shall lapse, and this option shall terminate and cease to remain
exercisable, upon the earlier of (A) the expiration of the twelve
(12)-month period measured from the date of Optionee's death or (B)
the Expiration Date.
(iii) Should Optionee become permanently
disabled and cease by reason thereof to remain in Service at any time
during the option term, then this option shall not remain exercisable
for more than a twelve (12) month period commencing with the date of
such cessation of Service. Upon the expiration of such limited period
of exercisability or (if earlier) upon the Expiration Date, this
option shall terminate and cease to be outstanding.
(iv) In no event shall this option be
exercisable at any time after the specified Expiration Date of the
option term.
(v) During the limited post-Service
period of exercisability determined in accordance with subparagraphs
(i) through (iii) above, this option may not be exercised for more
than the number of Option Shares (if any) for which this option is, at
the time of the Optionee's cessation of Service, exercisable in
accordance with either the normal
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<PAGE> 3
exercise provisions specified in the Notice of Grant or the special
acceleration provisions of Paragraph 6 of this Agreement. However,
the number of Option Shares purchasable after the Optionee's death
shall be reduced for any Option Shares purchased by the Optionee after
his or her cessation of Service but prior to death.
(vi) For purposes of this Paragraph 5 and
for all other purposes under this Agreement, the following
definitional provisions shall be in effect:
A. The Optionee shall be deemed to
remain in SERVICE for so long as the Optionee continues to render
periodic services to the Company or any parent or subsidiary
corporation, whether as an Employee, a non-employee member of the
Company's Board of Directors or an independent consultant or advisor.
B. The Optionee shall be deemed to
be an EMPLOYEE and to continue in the Company's employ for so long as
the Optionee remains in the employ of the Company or one or more of
its parent or subsidiary corporations, subject to the control and
direction of the employer entity as to both the work to be performed
and the manner and method of performance.
C. The Optionee shall be deemed to
be PERMANENTLY DISABLED if the Optionee is, by reason of any medically
determinable physical or mental impairment expected to result in death
or to be of continuous duration of not less than twelve (12)
consecutive months or more, unable to perform his or her usual duties
for the Company or the parent or subsidiary corporation retaining his
or her services.
D. A corporation shall be
considered to be a SUBSIDIARY corporation of the Company if it is a
member of an unbroken chain of corporations beginning with the
Company, provided each such corporation in the chain (other than the
last corporation) owns, at the time of determination, stock possessing
50% or more of the total combined voting power of all classes of stock
in one of the other corporations in such chain.
E. A corporation shall be
considered to be a PARENT corporation of the Company if it is a member
of an unbroken chain ending with the Company, provided each such
corporation in the chain (other than the Company) owns, at the time of
determination, stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations
in such chain.
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<PAGE> 4
6. CORPORATE TRANSACTION.
A. For purposes of this paragraph, a "Corporate
Transaction" shall be one or more of the following shareholder-approved
transactions:
(i) a merger or consolidation in which
the Company is not the surviving entity, except for a transaction the
principal purpose of which is to change the State of the Company's
incorporation,
(ii) the sale, transfer or other
disposition of all or substantially all of the assets of the Company
in liquidation or dissolution of the Company, or
(iii) any reverse merger in which the
Company is the surviving entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are issued to holders different
from those who held such securities immediately prior to such merger.
B. If this option is to be assumed in connection with
the Corporate Transaction or is otherwise to continue in effect, then it shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply and pertain to the number and class of securities which would have been
issuable, in consummation of such Corporate Transaction, to an actual holder of
the same number of shares of Common Stock as are subject to such option
immediately prior to such Corporate Transaction. Appropriate adjustments shall
also be made to the option price payable per share, provided that the aggregate
option price payable for such securities shall remain the same.
C. Except to the extent that any option is to be assumed
by the acquiring or successor corporation in a Corporate Transaction (as herein
defined), each option outstanding hereunder shall expire and terminate
immediately prior to the consummation of such Corporate Transaction.
D. The exercisability of this option as an incentive
stock option under the Federal tax laws (if designated as such in the Notice of
Grant) shall, in connection with any such Corporate Transaction, be subject to
the applicable dollar limitation of Paragraph 18.
E. This Agreement shall not in any way affect the right
of the Company to adjust, reclassify, reorganize or otherwise make changes in
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
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<PAGE> 5
7. ADJUSTMENT IN OPTION SHARES.
A. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares, or other change
affecting the outstanding Common Stock as a class without the Company's receipt
of consideration, then appropriate adjustments shall be made to (i) the total
number of Option Shares subject to this option and (ii) the Option Price
payable per share in order to reflect such change and thereby preclude a
dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a
Corporate Transaction or is otherwise to continue in effect, then this option
shall, immediately after such Corporate Transaction, be appropriately adjusted
to apply and pertain to the number and class of securities which would have
been issued to the Optionee in the consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the Option Price payable per
share, provided the aggregate Option Price payable hereunder shall remain the
same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option, paid the Option Price
for the purchased shares and been issued a stock certificate for such shares.
9. MANNER OF EXERCISING OPTION.
A. In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after Optionee's death, the
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Execute and deliver to the Secretary
of the Company a written notice of exercise (the "Exercise Notice"),
in substantially the form of Exhibit I attached hereto, in which there
is specified the number of Option Shares for which the option is
exercised.
(ii) Pay the aggregate Option Price for
the purchased shares in one or more of the following alternative
forms:
1. full payment in cash or
check drawn to the Company's order;
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<PAGE> 6
2. full payment in shares of
Common Stock of the Company held by the Optionee for at least six (6)
months and valued at Fair Market Value on the Exercise Date (as such
terms are defined below);
3. full payment in a combination
of shares of Common Stock of the Company held by the Optionee for at
least six (6) months and valued at Fair Market Value on the Exercise
Date, and cash or check drawn to the Company's order;
4. full payment effected through a
broker-dealer sale and remittance procedure pursuant to which the
Optionee (I) shall provide irrevocable written instructions to a
designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Option Price payable for the purchased shares plus all
applicable Federal and State income and employment taxes required to
be withheld by the Company by reason of such purchase and (II) shall
provide written directives to the Company to deliver the certificates
for the purchased shares directly to such brokerage firm in order to
complete the sale transaction; or
5. full payment in any other form
which the Plan Administrator may, in its discretion, approve at the
time of exercise in accordance with the provisions of Paragraph 15 of
this Agreement.1/
(iii) Furnish to the Company appropriate
documentation that the person or persons exercising the option (if
other than the Optionee) have the right to exercise this option.
B. For purposes of this Agreement, the Fair Market Value
of a share of Common Stock on any relevant date shall be determined in
accordance with subparagraphs (i) and (ii) below, and the Exercise Date shall
be the date on which the executed Exercise Notice is delivered to the Company.
Except to the extent the sale and remittance procedure specified above is
utilized for the exercise of the option, payment of the Option Price for the
purchased shares must accompany the Exercise Notice. The procedure for
measuring Fair Market Value shall be as follows:
(i) If the Common Stock is not at the
time listed or admitted to trading on any national stock exchange but
is traded on the
____________________
1/ Authorization of a Company loan or installment payment pursuant
to this provision may, under currently proposed Treasury Regulations,
result in the loss of incentive stock option treatment under the
Federal tax laws.
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<PAGE> 7
Nasdaq National Market System, Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers through the Nasdaq National Market System or any successor
system. If there is no reported closing selling price for the Common
Stock on the date in question, then the closing selling price on the
last preceding date for which such quotation exists shall be
determinative of Fair Market Value.
(ii) If the Common Stock is at the time
listed or admitted to trading on any national stock exchange, then the
Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the stock exchange determined
by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common
Stock on such exchange on the date in question, then the Fair Market
Value shall be the closing selling price on the exchange on the last
preceding date for which such quotation exists.
(iii) If shares of the series of Common
Stock to be valued at the time are neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter
market, then the fair market value shall be determined by the Plan
Administrator after taking into account such factors as the Plan
Administrator shall deem appropriate, including one or more
independent professional appraisals.
C. As soon after the Exercise Date as practical, the
Company shall mail or deliver to or on behalf of the Optionee (or to any other
person or persons exercising this option) a certificate or certificates
representing the purchased shares.
D. In no event may this option be exercised for any
fractional shares.
10. COMPLIANCE WITH LAWS AND REGULATIONS.
A. The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the Company
and the Optionee with all applicable requirements of law relating thereto and
with all applicable regulations of any stock exchange on which shares of the
Option Shares may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this option,
Optionee shall execute and deliver to the Company such representations in
writing as may be requested by the Company in order for it to comply with the
applicable requirements of federal and state securities laws.
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<PAGE> 8
11. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraph 3 or 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and assigns of
the Company.
12. LIABILITY OF COMPANY.
A. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may
without shareholder approval be issued under the Plan, then this option shall
be void with respect to such excess shares, unless shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock issuable
under the Plan is obtained in accordance with the provisions of Article 4,
Section III of the Plan.
B. The inability of the Company to obtain approval from
any regulatory body having authority deemed by the Company to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Company of any liability with respect to the non-issuance or sale
of the Common Stock as to which such approval shall not have been obtained.
The Company, however, shall use its best efforts to obtain all such approvals.
13. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon the Optionee any right to continue in the
Service of the Company (or any parent or subsidiary corporation of the Company
employing or retaining Optionee) for any period of specific duration or
interfere with or otherwise restrict in any way the rights of the Company (or
any parent or subsidiary corporation of the Company employing or retaining
Optionee) or the Optionee, which rights are hereby expressly reserved by each,
to terminate the Optionee's Service at any time for any reason whatsoever, with
or without cause.
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Company in care of the Corporate Secretary at the Company's principal
corporate offices. Any notice required to be given or delivered to Optionee
shall be in writing and addressed to Optionee at the address indicated below
Optionee's signature line on the Notice of Grant. All notices shall be deemed
to have been given or delivered upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
15. LOANS. The Plan Administrator may, in its absolute discretion
and without any obligation to do so, assist the Optionee in the exercise of
this option by (i) authorizing the extension of a loan to the Optionee from the
Company or (ii) permitting the Optionee to pay the Option Price for the
purchased Common Stock in installments over a period of years. The terms of
any loan or installment method of payment (including the interest rate,
-8-
<PAGE> 9
the collateral requirements and terms of repayment) shall be established by the
Plan Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by
and subject to the express terms and provisions of the Plan. All decisions of
the Plan Administrator with respect to any question or issue arising under the
Plan or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. GOVERNING LAW. The interpretation, performance, and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In
the event this option is designated as an incentive stock option in the Notice
of Grant, the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws if (and to
the extent) this option is exercised for one or more Option Shares: (i) more
than three (3) months after the date the Optionee ceases to be an Employee for
any reason other than death or permanent disability (as defined in Paragraph 5)
or (ii) more than one (1) year after the date the Optionee ceases to be an
Employee by reason of permanent disability.
B. No installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Common Stock for which such
installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of any earlier installments of Common Stock for which this option or any
other post-1986 incentive stock options granted to the Optionee prior to the
Grant Date (whether under the Plan or any other option plan of the Company or
any parent or subsidiary corporations) first become exercisable during the same
calendar year, exceed One Hundred Thousand Dollars ($100,000) in the aggregate.
C. Should the exercisability of this option be
accelerated upon a Corporate Transaction, then this option shall qualify for
favorable tax treatment as an incentive stock option under the Federal tax laws
only to the extent the aggregate fair market value (determined at the Grant
Date) of the Common Stock for which this option first becomes exercisable at
the time the Corporate Transaction occurs does not, when added to the aggregate
fair market value (determined as of the respective date or dates of grant) of
any earlier installments of Common Stock for which this option or any other
post-1986 incentive stock options granted to the Optionee prior to the Grant
Date (whether under
-9-
<PAGE> 10
the Plan or any other option plan of the Company or any parent or subsidiary
corporations) first become exercisable during the calendar year in which the
Corporate Transaction occurs, exceed One Hundred Thousand Dollars ($100,000) in
the aggregate.
D. To the extent this option should fail to qualify as
an incentive stock option under the Federal tax laws, the Optionee will
recognize compensation income in connection with the acquisition of one or more
Option Shares hereunder, and the Optionee must make appropriate arrangements
for the satisfaction of all Federal, State or local income tax withholding
requirements and Federal social security employee tax requirements applicable
to such compensation income.
E. The Plan Administrator shall not consent to any
assignment or transfer not otherwise permitted hereunder.
19. ADDITIONAL TERMS APPLICABLE TO A NON-STATUTORY STOCK OPTION.
In the event this option is designated as a non-statutory stock option in the
Notice of Grant, Optionee hereby agrees to make appropriate arrangements with
the Company or parent or subsidiary corporation employing Optionee for the
satisfaction of any Federal, State or local income tax withholding requirements
and Federal social security employee tax requirements applicable to the
exercise of this option.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-10-
<PAGE> 11
EXHIBIT I
NOTICE OF EXERCISE OF STOCK OPTION
I hereby notify Immusol, Inc. (the "Company") that I elect to purchase
_________ shares of the Company's Common Stock (the "Purchased Shares")
pursuant to that certain option (the "Option") granted to me under the
Company's 1996 Stock Option/Stock Issuance Plan (the "Plan") on
________________, 19___ to purchase up to __________ shares of such Common
Stock at an option price of $_________ per share (the "Option Price").
Concurrently with the delivery of this Exercise Notice to the
Secretary of the Company, I shall pay to the Company the Option Price for the
Purchased Shares in accordance with the provisions of my agreement with the
Company evidencing the Option and shall deliver whatever additional documents
may be required by such agreement as a condition for exercise.
<TABLE>
<S> <C> <C>
- ------------------------------------------- ----------------------------------------------------------
Date Optionee
Address:
----------------------------------------------------------
----------------------------------------------------------
Print name in exact manner
it is to appear on the
stock certificate:
-----------------------------------------------------------
-----------------------------------------------------------
Address to which certificate
is to be sent, if different
from address above:
-----------------------------------------------------------
-----------------------------------------------------------
Social Security Number:
------------------------------------------------------------------------
</TABLE>
I-1
<PAGE> 1
EXHIBIT 10.21
IMMUSOL, INC.
PROPRIETARY INFORMATION AGREEMENT
As a condition of my employment with Immusol, Inc., its subsidiaries,
affiliates, successors or assigns (together the "Company"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by Company, I agree to the following:
I. At-Will Employment. I understand and acknowledge that my
employment with the Company is for an unspecified duration and constitutes
"at-will" employment. I acknowledge that this employment relationship may be
terminated at any time, with or without good cause for any or no cause, at the
option either of the Company or myself, with or without notice.
II. Confidential Information.
A. Company Information. I agree at all times during the
term of my employment and thereafter, to hold in strictest confidence, and not
to use, except of the benefit of the Company, or to disclose to any person, firm
or corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any Company proprietary information, technical
data, trade secrets or know-how, including, but not limited to, research,
product plans, products, services, customer lists and customers (including, but
not limited to, customers of the Company on whom I called or with whom I became
acquainted during the term of my employment), markets, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed to me by the Company either directly or indirectly in
writing, orally or by drawings or observation of parts or equipment. I further
understand that Confidential Information does not include any of the foregoing
items which has become publicly known and made generally available through no
wrongful act of mine or of others who were under confidentiality obligations as
to the item or items involved.
B. Former Employer Information. I agree that I will
not, during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer
or other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such
employer, person or entity.
C. Third Party Information. I recognize that the
Company has received and in the future will receive from third parties their
confidential or proprietary information subject to a duty on the Company's part
to maintain the confidentiality of such information
<PAGE> 2
and to use it only for certain limited purposes. I agree to hold all such
confidential or proprietary information in the strictest confidence and not to
disclose it to any person, firm or corporation or to use it except as necessary
in carrying out my work for the Company consistent with the Company's agreement
with such third party.
III. Inventions.
A. Inventions Retained and Licensed. I have attached
hereto, as Exhibit A, a list describing all inventions, original works of
authorship, developments, improvements, and trade secrets which were made by me
prior to my employment with the Company (collectively referred to as "Prior
Inventions"), which belong to me, which relate to the Company's proposed
business, products or research and development, and which are not assigned to
the Company hereunder; or, if no such list is attached, I represent that there
are no such Prior Inventions. If in the course of my employment with the
Company, I incorporate into a Company product, process or machine a Prior
Invention owned by me or in which I have an interest, the Company is hereby
granted and shall have a nonexclusive, royalty-free, irrevocable, perpetual,
worldwide license to make, have made, modify, use and sell such Prior Invention
as part of or in connection with such product, process or machine.
B. Assignment of Inventions. I agree that I will
promptly make full written disclosure to the Company, will hold in trust for
the sole right and benefit of the Company, and hereby assign to the Company, or
its designee, all my right, title, and interest in and to any and all
inventions, original works of authorship, developments, concepts, improvements
or trade secrets, whether or not patentable or registrable under copyright or
similar laws, which I may solely or jointly conceive or develop or reduce to
practice, or cause to be conceived or developed or reduced to practice, during
the period of time I am in the employ of the Company (collectively referred to
as "Inventions"), except as provided in Section 3(f) below. I further
acknowledge that all original works of authorship which are made by me (solely
or jointly with others) within the scope of and during the period of my
employment with the Company and which are protectible by copyright are "works
made for hire," as that term is defined in the United States Copyright Act.
C. Inventions Assigned to the United States. I agree to
assign to the United States government all my right, title, and interest in and
to any and all Inventions whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
D. Maintenance of Records. I agree to keep and maintain
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the terms of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
- 2 -
<PAGE> 3
E. Patent and Copyrights Registrations. I agree to
assist the Company, or its designee, at the Company's expense, in every proper
way to secure the Company's rights in the Inventions and any copyrights,
patents, mask work rights or other intellectual property rights relating
thereto in any and all countries, including the disclosure to the Company of
all pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other instruments
which the Company shall deem necessary in order to apply for and obtain such
rights and in order to assign and convey to the Company, its successors,
assigns and nominees the sole and exclusive rights, title and interest in and
to such Inventions, and any copyrights, patents, mask work rights or other
intellectual property rights relating thereto. I further agree that my
obligation to execute or cause to be executed, when it is in my power to do so,
any such instrument or papers shall continue after the termination of this
Agreement. If the Company is unable because of my mental or physical
incapacity or for any other reason to secure my signature to apply for or to
pursue any application for any United States or foreign patents or copyright
registrations covering Inventions or original works of authorship assigned to
the Company as above, then I hereby irrevocably designate and appoint the
Company and its duly authorized officers and agents as my agent and attorney in
fact, to act for and in my behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by me.
F. Exception to Assignments. I understand that the
provisions of this Agreement requiring assignment of Inventions to the Company
do not apply to any invention which qualifies fully under the provisions of
California Labor Code Section 2870 (attached hereto as Exhibit B). I will
advise the Company promptly in writing of any inventions that I believe meet
the criteria in California Labor Code Section 2870 and not otherwise disclosed
on Exhibit A.
IV. Conflicting Employment. I agree that, during the term of my
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
V. Returning Company Documents. I agree that, at the time of
leaving the employ of the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence,
specifications, drawings, blueprints, sketches, materials, equipment, other
documents or property, or reproductions of any aforementioned items developed
by me pursuant to my employment with the Company or otherwise belonging to the
Company, its successors or assigns. In the event of the termination of my
employment, I agree to sign and deliver the "Termination Certification"
attached hereto as Exhibit C.
- 3 -
<PAGE> 4
VI. Notification to New Employer. In the event that I leave the
employ of the Company, I hereby grant consent to notification by the Company to
my new employer about my rights and obligations under this Agreement.
VII. Solicitation of Employees. I agree that for a period of
twelve (12) months immediately following the termination of my relationship
with the Company for any reason, whether with or without cause, I shall not
either directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for myself or for any other person or entity.
VIII. Conflict of Interest Guidelines. I agree to diligently adhere
to the Conflict of Interest Guidelines attached as Exhibit D hereto.
IX. Representations. I agree to execute any proper oath or verify
any proper document required to carry out the terms of this Agreement. I
represent that my performance of all the terms of this Agreement will not
breach any agreement to keep in confidence proprietary information acquired by
me in confidence or in trust prior to my employment by the Company. I have not
entered into, and I agree I will not enter into, any oral or written agreement
in conflict herewith.
X. Arbitration and Equitable Relief.
A. Arbitration. Except as provided in Section 10(b)
below, I agree that any dispute or controversy arising out of or relating to
any interpretation, construction, performance or breach of this Agreement,
shall be settled by arbitration to be held in Santa Clara County, California,
in accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgement may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
B. Equitable Remedies. I agree that it would be
impossible or inadequate to measure and calculate the Company's damages from
any breach of the covenants set forth in Sections 2, 3, and 5 herein.
Accordingly, I agree that if I breach any of such Sections, the Company will
have available, in addition to any other right or remedy available, the right
to obtain an injunction from a court of competent jurisdiction restraining such
breach or threatened breach and to specific performance of any such provision
of this Agreement. I further agree that no bond or other security shall be
required in obtaining such equitable relief and I hereby consent to the
issuance of such injunction and to the ordering of specific performance.
- 4 -
<PAGE> 5
XI. General Provisions.
A. Governing Law; Consent to Personal Jurisdiction.
This Agreement will be governed by the laws of the State of California. I
hereby expressly consent to the personal jurisdiction of the state and federal
courts located in California for any lawsuit filed there against me by the
Company arising from or relating to this Agreement.
B. Entire Agreement. This Agreement sets forth the
entire agreement and understanding between the Company and me relating to the
subject matter herein and merges all prior discussions between us. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this agreement, will be effective unless in writing signed by the party
to be charged. Any subsequent change or changes in my duties, salary or
compensation will not affect the validity or scope of this Agreement.
C. Severability. If one or more of the provisions in
this Agreement are deemed void by law, then the remaining provisions will
continue in full force and effect.
D. Successors and Assigns. This Agreement will be
binding upon my heirs, executors, administrators and other legal
representatives and will be for the benefit of the Company, its successors,
and its assigns.
Date: ____________________
______________________________
Signature
______________________________
Name of Employee
(typed or printed)
_________________________
Witness
- 5 -
<PAGE> 6
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
<TABLE>
<CAPTION>
Identifying Number
Title Date or Brief Description
----- ---- --------------------
<S> <C>
____ No inventions or improvements
___ Additional Sheets Attached
</TABLE>
Signature of Employee: _________________________
Print Name of Employee: _________________________
Date: ______________________
<PAGE> 7
EXHIBIT B
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that
an employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employee shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer.
(2) Result from any work performed by the employee for
the employer.
(b) To the extent a provision in an employment agreement purports
to require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE> 8
EXHIBIT C
IMMUSOL, INC.
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I
failed to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to Immusol, Inc. its subsidiaries, affiliates, successors or
assigns (together, the "Company").
I further certify that I have complied with all the terms of the
Company's Employment, Confidential Information and Invention Assignment
Agreement signed by me, including the reporting of any inventions and original
works of authorship (as defined therein) conceived or made by me (solely or
jointly with others) covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary
information relating to products, processes, know-how, designs, formulas,
developmental or experimental work, computer programs, data bases, other
original works of authorship, customer lists, business plans, financial
information or other subject matter pertaining to any business of the Company
or any of its employees, client, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date: ____________________
______________________________
(Employee's Signature)
______________________________
(Type/Print Employee's Name)
<PAGE> 9
EXHIBIT D
IMMUSOL, INC.
CONFLICT OF INTEREST GUIDELINES
It is the policy of Immusol, Inc. to conduct its affairs in strict
compliance with the letter and spirit of the law and to adhere to the highest
principles of business ethics. Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give
the appearance of being in conflict, with these principles and with the
interests of the Company. The following are potentially compromising
situations which must be avoided. Any exceptions must be reported to the
President and written approval for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive
entertainment, favors or payments which may be deemed to constitute undue
influence or otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that
might involve divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or
is or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social
harassment of employees.
6. Investing or holding outside directorships in suppliers,
customers or competing companies, including financial speculation, where such
investment or directorship might influence in any manner a decision or course
of action of the Company.
7. Borrowing from or lending to employees, customers or
suppliers.
8. Acquiring real estate of interest to the Company.
<PAGE> 10
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or
markets with competing companies or their employees.
11. Making any unlawful agreements with distributors with respect
to prices.
12. Improperly using or authorizing the use of any inventions
which are the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of
the Company.
Each officer, employee and independent contractor must take every
necessary action to ensure compliance with these guidelines and to bring
problem areas to the attention of higher management for review. Violations of
this conflict of interest policy may result in discharge without warning.
<PAGE> 1
EXHIBIT 10.22
IMMUSOL, INC.
SCIENTIFIC ADVISORY BOARD AGREEMENT
THIS AGREEMENT is entered into as of ___________, 199__ between
______________________ (the "Advisor") and Immusol, Inc., a California
corporation (the "Company").
WHEREAS, the Advisor desires to serve as a consultant to the Company
under the terms of this Agreement.
NOW, THEREFORE, the Advisor and the Company agree as follows:
1. Description of Services. The Advisor will act as a consultant
to the Company as mutually agreed to by and between the Advisor and the
Company. The Advisor's consulting services to be rendered hereunder involve
the areas related to ribozyme technology (the "Specialty Area"). The Company
hereby retains the Advisor as a consultant to the Company, and the Advisor
hereby agrees to perform the following services related to the Specialty Area
for the Company:
(a) The Advisor shall spend at least one day per month
consulting for the Company and a reasonable amount of time for informal
consultations over the telephone or otherwise.
(b) The Advisor may from time to time be unavailable to
attend meetings or perform other consulting duties, due to other prior
obligations including but not limited to teaching and other academic duties and
attending scientific conferences, and such unavailability shall not be
considered a breach of this Agreement if the Advisor gives the Company
reasonable notice of such unavailability.
(c) The Advisor shall become a member of the Company's
Scientific Advisory Board. During the term of this Agreement, the Advisor
shall review and advise the Company concerning application of technologies with
respect to the Specialty Area.
2. Term and Expiration.
(a) This Agreement shall be in effect for five (5) years
from the date hereof unless terminated earlier in accordance with this Section
2 (the "Term"). Either party to this Agreement may terminate this Agreement
during its term with 90 days' prior written notice. In rendering services to
the Company, the Advisor shall act as an independent contractor and not as an
employee or agent of the Company.
-1-
<PAGE> 2
(b) The terms of this Agreement shall not survive the
Advisor's voluntary termination unless expressly provided herein.
3. Compensation.
(a) The Company will grant an option to the Advisor
exercisable for up to 15,000 shares of Common Stock of the Company (the
"Shares") at an exercise price of $0.30 per share. The Shares will be
exercisable, vest and released from the Company's right of repurchase according
to the terms and conditions set forth in Section 3(c) and other terms and
conditions of the Company's Stock Option Agreement, as amended, attached hereto
as Exhibit A ("Option Agreement").
(b) One-forty eighth (1/48th) of the Shares shall have
vested on the date hereof and an additional one forty-eighth (1/48th) of the
Shares shall vest at the end of each full month thereafter until all exercised
Shares are vested.
4. Expenses. The Company will reimburse the Advisor for any
actual expenses incurred by the Advisor while rendering services under this
Agreement so long as the expenses are reasonable and necessary. Such expenses
shall include reasonable and necessary travel, lodging and meals in connection
with services performed under this Agreement. Requests for reimbursement shall
be in a form reasonably acceptable to the Company.
5. Proprietary Information. The terms of this section will
survive the termination of this Agreement, and the Advisor agrees to be bound
by the following:
(a) The Advisor recognizes that in performance under this
Agreement he will have contact with information of substantial value to the
Company that is not generally known outside the Company and that gives the
Company an advantage over its competitors who do not know or use it, including,
but not limited to, techniques, designs, drawings, processes, inventions,
developments, equipment, prototypes, slides, customer information and business
and financial information relating to the business, products, practices or
techniques of the Company. The Advisor agrees to regard and preserve as
confidential such information.
(b) The Advisor will not, at any time (except as
authorized by the Company), divulge or disclose, directly or indirectly, to any
person, firm, association or corporation other than bona fide employees of the
Company or any affiliate of the Company, acting in that capacity, or use for
his own benefit, gain or otherwise any Confidential Information (as hereinafter
defined), which, if disclosed, would adversely affect the business of the
Company or
-2-
<PAGE> 3
any of its affiliates or accord to a competitor of the Company any competitive
advantage. "Confidential Information" means any knowledge, or data concerning
the business or affairs of the Company or any affiliate of the Company
including any inventions, discoveries, improvements, products, processes,
technology, trade secrets, know-how, designs, formulas, or any other
confidential material, data, information or instructions, technical or
otherwise, owned by the Company or any affiliate of the Company.
(c) All documents, data, records, apparatus, equipment
and other physical property produced by the Advisor or others in connection
with the Advisor's activities pursuant to this Agreement or which are furnished
to the Advisor by the Company shall be and remain the sole property of the
Company and shall be returned promptly to the Company as and when requested by
the Company.
(d) The limitations imposed by this Section 5 shall not
apply to (i) information which at the time of disclosure to Advisor is in the
public domain or already possessed by the Advisor, (ii) information which
becomes available to the public at any time, other than as or result of acts by
the Advisor in violation of this Agreement, (iii) information which is lawfully
required to be disclosed to any governmental agency or is otherwise required to
be disclosed by law and (iv) information disclosed to the Advisor in good faith
by a third party who has an independent right to such information and who
discloses the same to the Advisor.
6. Inventions.
(a) This Section 6 does not apply to any inventions,
discoveries, improvements, products, processes, technology, trade secrets,
know-how, designs, formulas, or any other confidential material, data,
information or instructions, technical or otherwise arising during the course
of work other than that performed specifically on behalf of the Company.
(b) Advisor agrees that any inventions, discoveries,
improvements, processes, technology and know-how arising from the performance
of services under this Agreement and related solely to the Specialty Area and
any patents issuing thereon shall be the property of the Company. Inventions,
discoveries, improvements, processes, technology and know-how, and any patents
issuing thereon, arising from the Advisor's performance of services under this
Agreement that do not relate solely to the Specialty Area shall be exclusively
licensed to the Company on a royalty-free basis for use within (but not
outside) the Specialty Area, but shall remain the property of Advisor. In
order to permit the Company to claim rights to which it may be entitled under
this Section 6(b) or applicable laws and to insure that there is no conflict
with any business or activities of the Company, to the extent he is free to do
so, the Advisor shall promptly disclose to the Company all inventions,
discoveries, improvements, processes, technology and know-how (whether or not
patentable and whether or not reduced to practice) which the Advisor may
conceive or make (either by himself or jointly with others) during the term of
this Agreement with the Company.
(c) When requested by the Company, the Advisor shall
execute patent applications and such other documents considered necessary by
the Company or its counsel to
-3-
<PAGE> 4
apply for and obtain letter patents in the United States, foreign countries, or
both, as the Company may deem advisable, or to otherwise protect such
inventions, discoveries, improvements, processes, technology or know-how for
the benefit of the Company. The Advisor shall also make such assignments and
execute such other instruments as may be necessary to convey to the Company the
ownership or exclusive right in and to such inventions, discoveries, processes,
technology, know-how, patent applications, patents or the like. The Company
shall bear all of the expenses in connection with the obtaining of such rights.
The Advisor further agrees, whether or not he is still providing consulting
services to the Company, to cooperate to the extent and in the manner requested
by the Company in the prosecution or defense of any such patent claims or any
litigation or other proceeding involving any inventions, discoveries,
improvements, processes, technology or know-how covered by this Agreement in
any country of the world, but all expense thereof shall be paid by the Company.
The foregoing covenant contemplates the inclusion of any improvements of
properties, rights, systems, inventions and the like presently held by the
Company or any affiliate thereof.
(d) The Advisor may freely publish any results of his
work covered under this Agreement, provided that a prior U.S. patent
application is made by the Company on any potentially patentable aspects of his
work. The Advisor agrees to provide the Company with a disclosure of the
subject work not less than sixty (60) days prior to publication, to allow the
Company to have patent applications prepared on inventions or other information
made or acquired under this Agreement. The Company agrees to keep all such
disclosures confidential prior to publication.
7. Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of California.
8. No Conflict.
(a) The Advisor represents that to the best of his
knowledge and belief: (a) his retention as a consultant by the Company does
not and will not breach any agreement to keep in confidence proprietary
information acquired by the Advisor in confidence or trust prior to his
retention as a consultant by the Company, (b) he has not brought and will not
bring with him to the Company or use in performance of his responsibilities at
the Company any equipment, supplies, facility or trade secret information of
any current or former employer which are not generally available to the public,
unless he has obtained written authorization for their use.
(b) The Advisor shall render his consulting services in
the Specialty Area exclusively to the Company. So long as this Agreement
remains effective, the Advisor agrees not to act as an employee or a consultant
for another company in the Specialty Area without the written consent of the
Company.
-4-
<PAGE> 5
9. Successors, etc. This Agreement shall be binding upon and
shall inure to the benefit of the Company's successors, transferees, and
assigns.
10. Execution of Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one instrument.
-5-
<PAGE> 6
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year written above.
IMMUSOL, INC.
By:______________________________
_________________________________
Advisor
Title: ____________________________
-6-
<PAGE> 7
SCIENTIFIC ADVISORY BOARD MEMBERS
Flossie Wong-Staal, Ph.D.
Ken Berns, M.D., Ph.D.
James Forrester, M.D.
Anthony Ho, M.D.
David Ho, M.D.
Frank Litvack, M.D.
Arun Srivastava, Ph.D.
James Trempe, Ph.D.
<PAGE> 1
EXHIBIT 10.23
INDEMNIFICATION AGREEMENT
THIS AGREEMENT, made and entered into this _____ day of ____________,
1996 between Immusol, Inc., a California corporation ("Corporation"), and
_________________ ("Director"),
RECITALS:
A. Director, a member of the Board of Directors of
Corporation, performs a valuable service in such capacity for Corporation; and
B. The Articles of Incorporation, as amended, of the
Corporation authorize and permit contracts between Corporation and the members
of its Board of Directors with respect to indemnification of such directors;
and
C. In accordance with the authorization as provided by
the California General Corporation Law, as amended ("Code"), Corporation may
purchase and maintain a policy or policies of Directors and Officers Liability
Insurance ("D & O Insurance"), covering certain liabilities which may be
incurred by its directors and officers in the performance as directors of
Corporation; and
D. As a result of developments affecting the terms,
scope and availability of D & O Insurance there exists general uncertainty as
to the extent of protection afforded members of the Board of Directors by such
D & O Insurance and by statutory and bylaw indemnification provisions; and
E. In order to induce Director to continue to serve as a
member of the Board of Directors of Corporation, Corporation has determined and
agreed to enter into this contract with Director;
NOW, THEREFORE, in consideration of Director's continued service as a
director after the date hereof, the parties hereto agree as follows:
1. Indemnity of Director. Corporation hereby agrees to hold
harmless and indemnify Director to the fullest extent authorized by the
provisions of the Code, as it may be amended from time to time.
2. Additional Indemnity. Subject only to the limitations set
forth in Section 3 hereof, Corporation hereby further agrees to hold harmless
and indemnify Director:
(a) against any and all expenses (including attorneys'
fees), witness fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by
<PAGE> 2
Director in connection with any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative
(including an action by or in the right of Corporation) to which Director is,
was or at any time becomes a party, or is threatened to be made a party, by
reason of the fact that Director is, was or at any time becomes a director,
officer, employee or agent of Corporation, or is or was serving or at any time
serves at the request of Corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to
Director by Corporation under the non-exclusivity provision of the Articles of
Incorporation, as amended, of Corporation and the Code.
3. Limitations on Additional Indemnity.
(a) No indemnity pursuant to Section 2 hereof shall be
paid by Corporation for any of the following:
(i) except to the extent the aggregate of losses
to be indemnified thereunder exceeds the sum of such losses for which the
Director is indemnified pursuant to Section 1 hereof or pursuant to any D & O
Insurance purchased and maintained by Corporation;
(ii) in respect to remuneration paid to Director
if it shall be determined by a final judgment or other final adjudication that
such remuneration was in violation of law;
(iii) on account of any suit in which judgment is
rendered against Director for an accounting of profits made from the purchase
or sale by Director of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar
provisions of any federal, state or local statutory law;
(iv) on account of Director's acts or omissions
that involve intentional misconduct or a knowing and culpable violation of law;
(v) on account of any action, claim or proceeding
(other than a proceeding referred to in Section 8(b) hereof) initiated by the
Director unless such action, claim or proceeding was authorized in the specific
case by action of the Board of Directors;
(vi) on account of Director's conduct which is the
subject of an action, suit or proceeding described in Section 7(c)(ii) hereof;
or
2.
<PAGE> 3
(vii) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful (and, in this respect, both Corporation and Director have been advised
that the Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should be
submitted to appropriate courts for adjudication).
(b) In addition to those limitations set forth above in
paragraph (a) of this Section 3, no indemnity pursuant to Section 2 hereof in
an action by or in the right of Corporation shall be paid by Corporation for
any of the following:
(i) on account of acts or omissions that Director
believes to be contrary to the best interests of the Corporation or its
shareholders or that involve the absence of good faith on the part of Director;
(ii) with respect to any transaction from which
Director derived an improper personal benefit;
(iii) on account of acts or omissions that show a
reckless disregard for Director's duty to the corporation or its shareholders
in circumstances in which 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 Corporation or its shareholders;
(iv) on account of acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
Director's duty to the corporation or its shareholders;
(v) to the extent prohibited by Section 310 of
the California Corporations Code, "Contracts in which director has material
financial interest;"
(vi) to the extent prohibited by Section 316 of
the California Corporations Code, "Corporate actions subjecting directors to
joint and several liability" (for prohibited distributions, loans and
guarantees);
(vii) in respect of any claim, issue or matter as
to which Director shall have been adjudged to be liable to Corporation in the
performance of Director's duty to Corporation and its shareholders, unless and
only to the extent that the court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Director is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine;
(viii) of amounts paid in settling or otherwise
disposing of a pending action without court approval; or
3.
<PAGE> 4
(ix) of expenses incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
4. Contribution. If the indemnification provided in Sections 1
and 2 hereof is unavailable by reason of a court decision described in
subsection 3(a)(vii) hereof based on grounds other than any of those set forth
in subsections 3(a)(ii) through (vi) hereof or in subsections 3(b)(i) through
(vi) hereof, then in respect of any threatened, pending or completed action,
suit or proceeding in which Corporation is jointly liable with Director (or
would be if joined in such action, suit or proceeding), Corporation shall
contribute to the amount of expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred and paid
or payable by Director in such proportion as is appropriate to reflect (i) the
relative benefits received by Corporation on the one hand and Director on the
other hand from the transaction from which such action, suit or proceeding
arose, and (ii) the relative fault of Corporation on the one hand and of
Director on the other in connection with the events which resulted in such
expenses, judgments, fines or settlement amounts, as well as any other relevant
equitable considerations. The relative fault of Corporation on the one hand
and of Director on the other shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. Corporation agrees that it would not
be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation or any other method of allocation which does
not take account of the foregoing equitable considerations.
5. Continuation of Obligations. All agreements and obligations
of Corporation contained herein shall continue during the period Director is a
director, officer, employee or agent of Corporation (or is or was serving at
the request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Director shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact
that Director was a director of Corporation or serving in any other capacity
referred to herein.
6. Notification and Defense of Claim. Not later than thirty (30)
days after receipt by Director of notice of the commencement of any action,
suit or proceeding, Director will, if a claim in respect thereof is to be made
against Corporation under this Agreement, notify Corporation of the
commencement thereof; but the omission so to notify Corporation will not
relieve it from any liability which it may have to Director otherwise than
under this Agreement. With respect to any such action, suit or proceeding as
to which Director notifies Corporation of the commencement thereof:
(a) Corporation will be entitled to participate therein
at its own expense;
4.
<PAGE> 5
(b) except as otherwise provided below, to the extent it
may wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Director. After notice from Corporation to Director
of its election so as to assume the defense thereof, Corporation will not be
liable to Director under this Agreement for any legal or other expenses
subsequently incurred by Director in connection with the defense thereof other
than reasonable costs of investigation or as otherwise provided below.
Director shall have the right to employ its counsel in such action, suit or
proceeding but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Director unless (i) the employment of counsel by Director has been authorized
by Corporation, (ii) Director shall have reasonably concluded that there may be
a conflict of interest between Corporation and Director in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Director's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to
which Director shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Director
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Director without Director's
written consent. Neither Corporation nor Director will unreasonably withhold
its consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
(a) In the event that Director employs Director's own
counsel pursuant to subsection 6(b)(i) through (iii) above, Corporation shall
advance to Director, prior to any final disposition of any threatened or
pending action, suit or proceeding, whether civil, criminal, administrative or
investigative, any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit or
proceeding within ten (10) days after receiving copies of invoices presented to
Director for such expenses; and
(b) Director agrees that Director will reimburse
Corporation for all reasonable expenses paid by Corporation in defending any
civil or criminal action, suit or proceeding against Director in the event and
only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Director is not
entitled, under applicable law, the Bylaws of Corporation, as amended, this
Agreement or otherwise, to be indemnified by Corporation for such expenses.
5.
<PAGE> 6
(c) Notwithstanding the foregoing, Corporation shall not
be required to advance such expenses to Director if Director (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by Corporation and approved by a majority of
the Board of Directors which alleges willful misappropriation of corporate
assets by Director, disclosure of confidential information in violation of
Director's fiduciary or contractual obligations to Corporation, or any other
willful and deliberate breach in bad faith of Director's duty to Corporation or
its shareholders.
8. Enforcement.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Director to continue as a director of Corporation,
and acknowledges that Director is relying upon this Agreement in continuing in
such capacity.
(b) In the event Director is required to bring any action
to enforce rights or to collect moneys due under this Agreement and is
successful in such action, Corporation shall reimburse Director for all of
Director's reasonable fees and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this Agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on Director
by this Agreement shall not be exclusive of any other right which Director may
have or hereafter acquire under any statute, provision of Corporation's
Articles of Incorporation, as amended, or Bylaws, as amended, agreement, vote
of shareholders or directors, or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office.
11. Survival of Rights. The rights conferred on Director by this
Agreement shall continue after Director has ceased to be a director, officer,
employee or other agent of Corporation and shall inure to the benefit of
Director's heirs, executors and administrators.
12. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
13. Governing Law. This Agreement shall be interpreted and
6.
<PAGE> 7
enforced in accordance with the laws of the State of California.
14. Binding Effect. This Agreement shall be binding upon Director
and upon Corporation, its successors and assigns, and shall inure to the
benefit of Director, his heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
16. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original, and all of which together shall
constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
IMMUSOL, INC.,
a California corporation
By: _________________________
_______________, President
DIRECTOR:
_____________________________
(Signature)
_____________________________
(Print Name)
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE> 9
LIST OF DIRECTORS
Tsvi Goldenberg, Ph.D.
Flossie Wong-Staal, Ph.D.
Anchie Kuo, M.D.
Frank Litvack, M.D.
Melvin Perelman, Ph.D.
<PAGE> 1
Exhibit 10.24
INDEMNIFICATION AGREEMENT
THIS AGREEMENT, made and entered into this _____ day of
__________________, 1996 between Immusol, Inc., a California corporation
("Corporation"), and ____________________ ("Officer"),
RECITALS:
A. Officer, an officer (though not currently a
director) of Corporation, performs a valuable service in such capacity for
Corporation; and
B. The Articles of Incorporation, as amended, of the
Corporation authorize and permit contracts between Corporation and the members
of its officers with respect to indemnification of such officers; and
C. In accordance with the authorization as provided by
the California General Corporation Law, as amended ("Code"), Corporation may
purchase and maintain a policy or policies of Directors and Officers Liability
Insurance ("D & O Insurance"), covering certain liabilities which may be
incurred by its directors and officers in the performance as officers of
Corporation; and
D. As a result of developments affecting the terms,
scope and availability of D & O Insurance there exists general uncertainty as
to the extent of protection afforded officers by such D & O Insurance and by
statutory and bylaw indemnification provisions; and
E. In order to induce Officer to continue to serve as an
officer of Corporation, Corporation has determined and agreed to enter into
this contract with Officer;
NOW, THEREFORE, in consideration of Officer's continued service as an
officer after the date hereof, the parties hereto agree as follows:
1. Indemnity of Officer. Corporation hereby agrees to hold
harmless and indemnify Officer to the fullest extent authorized by the
provisions of the Code, as it may be amended from time to time.
2. Additional Indemnity. Subject only to the limitations set
forth in Section 3 hereof, Corporation hereby further agrees to hold harmless
and indemnify Officer:
(a) against any and all expenses (including attorneys'
fees), witness fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by Officer
<PAGE> 2
in connection with any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (including
an action by or in the right of Corporation) to which Officer is, was or at any
time becomes a party, or is threatened to be made a party, by reason of the
fact that Officer is, was or at any time becomes a director, officer, employee
or agent of Corporation, or is or was serving or at any time serves at the
request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise; and
(b) otherwise to the fullest extent as may be provided to
Officer by Corporation under the non-exclusivity provision of the Articles of
Incorporation, as amended, of Corporation and the Code.
3. Limitations on Additional Indemnity.
(a) No indemnity pursuant to Section 2 hereof shall be
paid by Corporation for any of the following:
(i) except to the extent the aggregate of losses
to be indemnified thereunder exceeds the sum of such losses for which the
Officer is indemnified pursuant to Section 1 hereof or pursuant to any D & O
Insurance purchased and maintained by Corporation;
(ii) in respect to remuneration paid to Officer if
it shall be determined by a final judgment or other final adjudication that
such remuneration was in violation of law;
(iii) on account of any suit in which judgment is
rendered against Officer for an accounting of profits made from the purchase or
sale by Officer of securities of Corporation pursuant to the provisions of
Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar
provisions of any federal, state or local statutory law;
(iv) on account of Officer's acts or omissions
that involve intentional misconduct or a knowing and culpable violation of law;
(v) on account of any action, claim or proceeding
(other than a proceeding referred to in Section 8(b) hereof) initiated by the
Officer unless such action, claim or proceeding was authorized in the specific
case by action of the Board of Directors;
(vi) on account of Officer's conduct which is the
subject of an action, suit or proceeding described in Section 7(c)(ii) hereof;
or
2.
<PAGE> 3
(vii) if a final decision by a court having
jurisdiction in the matter shall determine that such indemnification is not
lawful (and, in this respect, both Corporation and Officer have been advised
that the Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should be
submitted to appropriate courts for adjudication).
(b) In addition to those limitations set forth above in
paragraph (a) of this Section 3, no indemnity pursuant to Section 2 hereof in
an action by or in the right of Corporation shall be paid by Corporation for
any of the following:
(i) on account of acts or omissions that Officer
believes to be contrary to the best interests of the Corporation or its
shareholders or that involve the absence of good faith on the part of Officer;
(ii) with respect to any transaction from which
Officer derived an improper personal benefit;
(iii) on account of acts or omissions that show a
reckless disregard for Officer's duty to the corporation or its shareholders in
circumstances in which Officer was aware, or should have been aware, in the
ordinary course of performing an officer's duties, of a risk of serious injury
to Corporation or its shareholders;
(iv) on account of acts or omissions that
constitute an unexcused pattern of inattention that amounts to an abdication of
Officer's duty to the corporation or its shareholders;
(v) to the extent prohibited by Section 310 of
the California Corporations Code, "Contracts in which director has material
financial interest;"
(vi) to the extent prohibited by Section 316 of
the California Corporations Code, "Corporate actions subjecting directors to
joint and several liability" (for prohibited distributions, loans and
guarantees);
(vii) in respect of any claim, issue or matter as
to which Officer shall have been adjudged to be liable to Corporation in the
performance of Officer's duty to Corporation and its shareholders, unless and
only to the extent that the court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Officer is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine;
3.
<PAGE> 4
(viii) of amounts paid in settling or otherwise
disposing of a pending action without court approval; or
(ix) of expenses incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
4. Contribution. If the indemnification provided in Sections 1
and 2 hereof is unavailable by reason of a court decision described in
subsection 3(a)(vii) hereof based on grounds other than any of those set forth
in subsections 3(a)(ii) through (vi) hereof or in subsections 3(b)(i) through
(vi) hereof, then in respect of any threatened, pending or completed action,
suit or proceeding in which Corporation is jointly liable with Officer (or
would be if joined in such action, suit or proceeding), Corporation shall
contribute to the amount of expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred and paid
or payable by Officer in such proportion as is appropriate to reflect (i) the
relative benefits received by Corporation on the one hand and Officer on the
other hand from the transaction from which such action, suit or proceeding
arose, and (ii) the relative fault of Corporation on the one hand and of
Officer on the other in connection with the events which resulted in such
expenses, judgments, fines or settlement amounts, as well as any other relevant
equitable considerations. The relative fault of Corporation on the one hand
and of Officer on the other shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent the circumstances resulting in such expenses,
judgments, fines or settlement amounts. Corporation agrees that it would not
be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation or any other method of allocation which does
not take account of the foregoing equitable considerations.
5. Continuation of Obligations. All agreements and obligations
of Corporation contained herein shall continue during the period Officer is a
director, officer, employee or agent of Corporation (or is or was serving at
the request of Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise) and shall continue thereafter so long as Officer shall be subject
to any possible claim or threatened, pending or completed action, suit or
proceeding, whether civil, criminal or investigative, by reason of the fact
that Officer was an officer of Corporation or serving in any other capacity
referred to herein.
6. Notification and Defense of Claim. Not later than thirty (30)
days after receipt by Officer of notice of the commencement of any action, suit
or proceeding, Officer will, if a claim in respect thereof is to be made
against Corporation under this Agreement, notify Corporation of the
commencement thereof; but the omission so to notify Corporation will not
relieve it from any liability which it may have to Officer otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to
which Officer notifies Corporation of the commencement thereof:
4.
<PAGE> 5
(a) Corporation will be entitled to participate therein
at its own expense;
(b) except as otherwise provided below, to the extent it
may wish, Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel
reasonably satisfactory to Officer. After notice from Corporation to Officer
of its election so as to assume the defense thereof, Corporation will not be
liable to Officer under this Agreement for any legal or other expenses
subsequently incurred by Officer in connection with the defense thereof other
than reasonable costs of investigation or as otherwise provided below. Officer
shall have the right to employ its counsel in such action, suit or proceeding
but the fees and expenses of such counsel incurred after notice from
Corporation of its assumption of the defense thereof shall be at the expense of
Officer unless (i) the employment of counsel by Officer has been authorized by
Corporation, (ii) Officer shall have reasonably concluded that there may be a
conflict of interest between Corporation and Officer in the conduct of the
defense of such action or (iii) Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Officer's separate counsel shall be at the expense of
Corporation. Corporation shall not be entitled to assume the defense of any
action, suit or proceeding brought by or on behalf of Corporation or as to
which Officer shall have made the conclusion provided for in (ii) above; and
(c) Corporation shall not be liable to indemnify Officer
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. Corporation shall be permitted to settle
any action except that it shall not settle any action or claim in any manner
which would impose any penalty or limitation on Officer without Officer's
written consent. Neither Corporation nor Officer will unreasonably withhold
its consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
(a) In the event that Officer employs his own counsel
pursuant to subsection 6(b)(i) through (iii) above, Corporation shall advance
to Officer, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses;
and
(b) Officer agrees that Officer will reimburse
Corporation for all reasonable expenses paid by Corporation in defending any
civil or criminal action, suit or proceeding against Officer in the event and
only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Officer is not entitled,
under applicable law, the Bylaws of Corporation, as amended, this Agreement or
otherwise, to be indemnified by Corporation for such expenses.
5.
<PAGE> 6
(c) Notwithstanding the foregoing, Corporation shall not
be required to advance such expenses to Officer if Officer (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by Corporation and approved by a majority of
the Board of Directors which alleges willful misappropriation of corporate
assets by Officer, disclosure of confidential information in violation of
Officer's fiduciary or contractual obligations to Corporation, or any other
willful and deliberate breach in bad faith of Officer's duty to Corporation or
its shareholders.
8. Enforcement.
(a) Corporation expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on Corporation
hereby in order to induce Officer to continue as an officer of Corporation, and
acknowledges that Officer is relying upon this Agreement in continuing in such
capacity.
(b) In the event Officer is required to bring any action
to enforce rights or to collect moneys due under this Agreement and is
successful in such action, Corporation shall reimburse Officer for all of
Officer's reasonable fees and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this Agreement,
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable
Corporation effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on
Officer by this Agreement shall not be exclusive of any other right which
Officer may have or hereafter acquire under any statute, provision of
Corporation's Articles of Incorporation, as amended, or Bylaws, as amended,
agreement, vote of shareholders or directors, or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
office.
11. Survival of Rights. The rights conferred on Officer by
this Agreement shall continue after Officer has ceased to be a director,
officer, employee or other agent of Corporation and shall inure to the benefit
of Officer's heirs, executors and administrators.
12. Separability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of California.
6.
<PAGE> 7
14. Binding Effect. This Agreement shall be binding upon Officer
and upon Corporation, its successors and assigns, and shall inure to the
benefit of Officer, his heirs, personal representatives and assigns and to the
benefit of Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
16. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original, and all of which together shall
constitute one and the same instrument.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
7.
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and as of the day and year first above written.
IMMUSOL, INC.,
a California corporation
By: ___________________________
________________, President
OFFICER:
_______________________________
(Signature)
_______________________________
(Print Name)
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
<PAGE> 9
LIST OF OFFICERS
Jack R. Barber, Ph.D.
J. Stanhope Blackburn (Acting CFO)
<PAGE> 1
EXHIBIT 11.1
COMPUTATION OF PRO FORMA NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
----------- ----------- ----------- ---------- ----------
1993 1994 1995 1995 1996
----------- ----------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income (loss) $ (154,306) $ (357,600) $ 125,642 (323,476) 441,116
Weighted average common shares outstanding 6,916,233 7,045,000 7,061,241 7,045,000 7,069,000
Adjustments to reflect stock options as common equivalents 1,738,300 1,790,000
Adjustments to reflect requirements of the Securities and
Exchange commission (Effect of SAB 83) 187,495 187,495 187,495 187,495 187,495
----------- ----------- ----------- ---------- ----------
Adjusted shares outstanding 7,103,728 7,232,495 8,987,036 7,232,495 9,046,495
Historical net income (loss) per share reflecting requirements
of the SEC $ (0.02) $ (0.05) $ 0.01 $ (0.04) $ 0.05
=========== =========== =========== ========== ==========
Effect of assumed conversion of preferred shares from date
of issuance 2,000,000 2,000,000 2,604,466 2,000,000 2,915,477
----------- ----------- ----------- ---------- ----------
Adjusted shares outstanding 9,103,728 9,232,495 11,591,502 9,232,495 11,961,972
Pro forma net income (loss) per share $ (0.02) $ (0.04) $ 0.01 $ (0.04) $ 0.04
=========== =========== =========== ========== ==========
</TABLE>
