<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-22891
CORIXA CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 91-1654387
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
1124 COLUMBIA STREET, SUITE 200
SEATTLE, WA 98104
(206) 754-5711
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of October 31, 1998, there were 12,939,439 shares of the registrant's common
stock outstanding.
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Corixa Corporation
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Page
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS.
Consolidated Balance Sheets as of September 30, 1998
(unaudited) and December 31, 1997 ................................................... 1
Consolidated Statements of Operations (unaudited) for the three
months ended September 30, 1998 and 1997 and the nine months
ended September 30, 1998 and 1997 and period from September 8,
1994 (Date of Inception) to September 30, 1998 ...................................... 2
Consolidated Statements of Cash Flows (unaudited) for the nine
months ended September 30, 1998 and 1997 and for the period from
September 8, 1994 (Date of Inception) through September 30,
1998 ................................................................................ 3
Notes to Unaudited Consolidated Financial Statements ................................ 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ............................................................... 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS ........................................................... 20
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ................................... 20
ITEM 3. DEFAULTS UPON SENIOR SECURITIES ............................................. 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ......................... 20
ITEM 5. OTHER INFORMATION ........................................................... 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................................ 20
SIGNATURES
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- -------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 4,912,179 $ 16,457,641
Securities available-for-sale ................................... 40,564,766 39,859,649
Accounts receivable - $89,434 and $61,706 from an affiliate
at September 30, 1998 and December 31, 1997, respectively .... 724,389 601,940
Interest receivable ............................................. 719,234 134,035
Prepaid expenses ................................................ 600,623 506,578
------------- -------------
Total current assets ......................................... 47,521,191 57,559,843
Property and equipment, net ....................................... 7,025,132 4,046,484
Deferred charges and deposits ..................................... 154,572 200,632
------------- -------------
Total assets ................................................. $ 54,700,895 $ 61,806,959
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ........................ $ 2,380,026 $ 1,571,023
Deferred revenue ................................................ 600,000 1,096,665
Current portion of obligations and commitments .................. 2,133,889 930,429
------------- -------------
Total current liabilities .................................... 5,113,915 3,598,117
Long-term obligations and commitments, less current portion ....... 11,707,243 6,923,786
Stockholders' equity:
Common stock, $0.001 par value:
Authorized shares -- 40,000,000
Issued and outstanding shares -- 12,907,738 at
September 30, 1998 and 11,774,214 at December 31, 1997 ..... 12,908 11,774
Additional paid-in capital ...................................... 71,885,131 66,466,994
Receivable for warrants ......................................... -- (651,565)
Deferred compensation ........................................... (1,443,885) (2,574,949)
Accumulated other comprehensive income/(loss) ................... 198,164 (5,355)
Deficit accumulated during development stage .................... (32,772,581) (11,961,843)
------------- -------------
Total stockholders' equity ................................... 37,879,737 51,285,056
------------- -------------
Total liabilities and stockholders' equity ................... $ 54,700,895 $ 61,806,959
============= =============
</TABLE>
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CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED PERIOD FROM
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 8, 1994
----------------------------- ----------------------------- (DATE OF INCEPTION)
1998 1997 1998 1997 TO SEPTEMBER 30, 1998
------------ ------------ ------------ ------------ ---------------------
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative agreements ............. $ 1,889,898 $ 3,097,335 $ 7,278,574 $ 10,036,923 $ 27,480,921
Government grants .................... 582,781 179,707 1,068,117 733,278 3,751,864
------------ ------------ ------------ ------------ ------------
Total revenue ...................... 2,472,679 3,277,042 8,346,691 10,770,201 31,232,785
Operating expenses:
Research and development ............. (6,760,991) (4,271,159) (19,661,154) (11,375,213) (53,532,733)
General and administrative ........... (597,095) (487,901) (1,765,867) (1,266,948) (5,317,127)
In-process research and development .. (9,903,250) -- (9,903,250) -- (10,331,309)
------------ ------------ ------------ ------------ ------------
Total operating expenses ........... (17,261,336) (4,759,060) (31,330,271) (12,642,161) (69,181,169)
------------ ------------ ------------ ------------ ------------
Loss from operations ................... (14,788,657) (1,482,018) (22,983,580) (1,871,960) (37,948,384)
Interest income ........................ 800,131 214,123 2,414,054 604,775 5,211,291
Interest expense ....................... (189,144) (86,074) (512,806) (241,645) (1,087,257)
Other income ........................... 22,594 124,751 271,594 312,025 1,051,769
------------ ------------ ------------ ------------ ------------
Net loss ............................... $(14,155,076) $ (1,229,218) $(20,810,738) $ (1,196,805) $(32,772,581)
============ ============ ============ ============ ============
Basic and diluted net loss
per share ............................ $ (1.18) $ (0.46) $ (1.75) $ (0.46)
============ ============ ============ ============
Shares used in computation
of basic and diluted net loss
per share ............................ 12,012,606 2,672,974 11,862,434 2,630,018
============ ============ ============ ============
Pro forma basic and diluted
net loss per share ................... $ (1.18) $ (0.16) $ (1.75) $ (0.15)
============ ============ ============ ============
Shares used in computation
of pro forma basic and diluted
net loss per share .................. 12,012,606 7,824,170 11,862,434 7,781,214
============ ============ ============ ============
</TABLE>
2
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CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED PERIOD FROM
SEPTEMBER 30, SEPTEMBER 8, 1994
----------------------------- (DATE OF INCEPTION)
1998 1997 TO SEPTEMBER 30, 1998
------------- ------------- ---------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss .................................................................... $ (20,810,738) $ (1,196,805) $ (32,772,581)
Adjustments to reconcile net loss to net cash used in operating activities:
In-process research and development ....................................... 9,903,250 -- 10,331,309
Amortization of deferred compensation ..................................... 1,131,064 850,027 2,459,910
Depreciation and amortization ............................................. 1,092,554 770,065 3,051,231
Equity instruments issued in exchange for technology and services ......... 130,877 64,981 307,161
Write-off of warrant receivable ........................................... 488,676 -- 488,676
Changes in certain assets and liabilities:
Accounts receivable ..................................................... (119,062) 491,996 (726,153)
Interest receivable ..................................................... (585,199) -- (714,083)
Prepaid expenses ........................................................ 24,696 (502,443) (480,317)
Other assets ............................................................ 47,106 (878,587) (64,008)
Accounts payable and accrued liabilities ................................ 805,671 606,499 2,152,891
Deferred revenue ........................................................ (596,665) 26,971 500,000
------------- ------------- -------------
Net cash provided by (used in) operating activities ........................ (8,487,770) 232,704 (15,465,964)
INVESTING ACTIVITIES
Purchases of securities available-for-sale .................................. (77,972,975) (9,714,584) (142,200,127)
Proceeds from maturities of securities available-for-sale ................... 56,509,999 5,531,553 80,872,149
Proceeds from sale of securities ............................................ 20,961,377 -- 20,961,377
Purchases of property and equipment ......................................... (3,267,258) (685,080) (4,997,277)
Purchase of subsidiary, net of cash acquired ................................ (4,735,441) -- (4,705,502)
------------- ------------- -------------
Net cash used in investing activities ....................................... (8,504,298) (4,868,111) (50,069,380)
FINANCING ACTIVITIES
Net proceeds from issuance of stock ........................................ 52,286 69,071 61,100,930
Proceeds from long-term debt ................................................ 4,000,000 -- 6,000,000
Advances and borrowings from collaborative agreements ....................... 2,000,000 3,000,000 5,000,000
Principal payments on capital leases ........................................ (768,569) (584,437) (2,165,561)
Payments on receivables for warrants ........................................ 162,889 348,369 651,324
Other ....................................................................... -- -- (139,170)
------------- ------------- -------------
Net cash provided by financing activities ................................... 5,446,606 2,833,003 70,447,523
Net increase (decrease) in cash and cash equivalents ........................ (11,545,462) (1,802,404) 4,912,179
Cash and cash equivalents at beginning of period ............................ 16,457,641 2,088,226 --
------------- ------------- -------------
Cash and cash equivalents at end of period .................................. $ 4,912,179 $ 285,822 $ 4,912,179
============= ============= =============
SUPPLEMENTAL DISCLOSURES
Interest paid ............................................................. $ 393,893 $ 241,645 $ 968,344
SUPPLEMENTAL SCHEDULE OF NON-CASH OPERATING, INVESTING, AND
FINANCING ACTIVITIES
Equity instruments issued-GenQuest acquisition ............................. $ 5,236,107 $ -- $ 5,236,107
Assets acquired pursuant to capital leases ................................. 308,159 1,786,321 4,615,451
Equity instruments issued in exchange for technology and services .......... 130,877 64,981 307,161
</TABLE>
3
<PAGE> 6
CORIXA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Corixa Corporation, a development stage company, is focused on the
discovery and early clinical development of products useful in preventing,
treating or diagnosing cancer and certain infectious diseases as well as
immunotherapeutic products for the treatment of certain autoimmune diseases.
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Corixa
Corporation ("Corixa" or the "Company") include the accounts of its wholly-owned
subsidiary, Chinook, a Delaware corporation (formerly known as Chinook
Acquisition Corporation) ("Chinook") created to effect the merger with GenQuest,
Inc., a Delaware corporation ("GenQuest"). Pursuant to the terms set forth in
the Agreement and Plan of Merger by and among the Company, Chinook and GenQuest
merged with and into Chinook and the separate corporate existence of GenQuest
ceased, with Chinook surviving as a wholly-owned subsidiary of Corixa. These
statements have been prepared in accordance with Generally Accepted Accounting
Principles ("GAAP") and the rules and regulations of the Securities and Exchange
Commission (the "SEC") for interim financial information. Accordingly, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with GAAP have been condensed or omitted pursuant to such
rules and regulations.
In the opinion of management, the accompanying consolidated balance
sheets and related interim consolidated statements of operations and cash flows
reflect all normal recurring adjustments necessary for their fair presentation
in conformity with GAAP. Interim results are not necessarily indicative of
results for a full year. The accompanying consolidated financial statements and
related footnotes should be read in conjunction with the audited financial
statements and footnotes thereto for the year ended December 31, 1997, included
in the Company's Form 10-K filed with the SEC.
PRINCIPLES OF CONSOLIDATION
The merger with GenQuest was accounted for as a purchase transaction.
The assets and liabilities of GenQuest have been recorded on the books of the
Company at their fair market values. The operating results of the acquired
business have been included in the consolidated statements of operations from
September 15, 1998, the effective date of the acquisition. All significant
intercompany account balances and transactions have been eliminated in
consolidation. Finalization of certain aspects of the accounting treatment of
the transaction is pending and such treatment may be subject to revision in the
fourth quarter of 1998.
SECURITIES AVAILABLE-FOR-SALE
The Company's investment portfolio is classified as available-for-sale.
The Company's main investment objectives are preservation of principal, a high
degree of liquidity and a maximum total return. The Company invests primarily in
(U.S. denominated only): commercial paper; corporate notes/bonds, with no more
than 10% of the portfolio in any one corporate issuer; and U.S. Treasury
instruments with terms not exceeding four years. Such securities are stated at
fair value, with the unrealized gains and losses reflected in stockholders'
equity. Interest earned on securities is included in interest income. The
amortized cost of investments is adjusted for amortization of premiums and
accretion of discounts to maturity. Such amortization and accretions are
included in interest income. The cost of securities sold is calculated using the
specific identification method.
4
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MANAGEMENT OF CREDIT RISK
The Company is subject to concentration of credit risk, primarily from
its cash investments. Credit risk for cash investments is managed by purchase of
investment grade securities, A1/P1 for money market instruments and A or better
for debt instruments, and diversification of the investment portfolio among
issuers and maturities.
REVENUE
Revenue under collaborative agreements typically consists of
nonrefundable up-front fees, ongoing research, development and technology access
payments, and milestone and royalty payments. Revenue from nonrefundable
up-front fees is recognized upon satisfaction of related obligations. Revenue
from ongoing research and co-development payments are recognized ratably over
the term of the agreement, as the Company believes such payments approximate the
research and development expense being incurred associated with the agreement.
Revenue from milestone, royalty, and other contingent payments will be
recognized as earned. Advance payments received under any agreements in excess
of amounts earned are recorded as deferred revenue. Revenue under cost
reimbursement contracts is recognized as the related costs are incurred. Two
collaborative partners made up 65% and 13% of the Company's revenue during the
nine month period ended September 30, 1998 and 62% and 13% during the same
period in 1997.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior year financial
statements to conform to the 1998 presentation.
2. BASIC AND DILUTED LOSS PER COMMON SHARE CALCULATION
The Company adopted Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share," in 1997. All pro forma per share amounts for all periods have been
presented to conform to the SFAS No. 128 requirements. All outstanding Corixa
preferred stock was converted to common stock at the closing of the Company's
fourth quarter 1997 initial public offering. Accordingly, pro forma basic and
diluted per share amounts for 1997 are computed on the basis of the average
number of common shares outstanding plus the effect of preferred shares using
the "if-converted" method. As of September 30, 1998, common stock equivalents
are considered anti-dilutive and are excluded from this calculation.
For the three months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Three months ended
------------------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net loss $ (14,155,076) $ (1,229,218)
Weighted average outstanding:
Common stock 12,012,606 2,672,974
Convertible preferred stock -- 5,151,196
------------- -------------
Total weighted average outstanding 12,012,606 7,824,170
Loss per share:
Basic and diluted (1.18) (0.46)
Pro forma basic and diluted (1.18) (0.16)
</TABLE>
5
<PAGE> 8
For the nine months ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
Nine months ended
------------------------------------
September 30, September 30,
1998 1997
------------- -------------
<S> <C> <C>
Net loss $ (20,810,738) $ (1,196,805)
Weighted average outstanding:
Common stock 11,862,434 2,630,018
Convertible preferred stock -- 5,151,196
------------- -------------
Total weighted average outstanding 11,862,434 7,781,214
Loss per share:
Basic and diluted (1.75) (0.46)
Pro forma basic and diluted (1.75) (0.15)
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
September December 31,
30, 1998 1997
------------- -------------
<S> <C> <C>
Laboratory equipment $ 4,422,298 $ 3,577,341
Computers and office equipment 1,741,962 1,151,114
Leasehold improvements 1,268,764 1,256,002
Construction in progress 2,621,297 --
------------- -------------
Accumulated depreciation and 10,054,321 5,984,457
amortization (3,029,189) (1,937,973)
------------- -------------
Total property and equipment $ 7,025,132 $ 4,046,484
============= =============
</TABLE>
Construction in progress includes expenditures related to leasehold
improvements on the Company's leased office and research facilities.
4. COMPREHENSIVE LOSS
As of January 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and requires reclassification of financial statements for
earlier periods to be provided for comparative purposes. Such adoption had no
effect on the Company's financial condition or results of operations. Prior year
financial statements have been restated to conform to the requirements of SFAS
No. 130. The Company's comprehensive loss includes all items which comprise net
loss plus/(minus) the unrealized holding gains/(losses) on available-for-sale
securities. For the three and nine month periods ended September 30, 1998 and
1997, the Company's comprehensive loss was as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------------------------ ------------------------------------
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Loss $ (14,155,076) $ (1,229,218) $ (20,810,738) $ (1,196,805)
Other comprehensive income:
Unrealized holding gains
arising during period 225,288 31,830 203,519 1,910
------------- ------------- ------------- -------------
Total comprehensive loss $ (13,929,788) $ (1,197,388) $ (20,607,219) $ (1,194,895)
============= ============= ============= =============
</TABLE>
6
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5. ACQUISITION OF GENQUEST
On September 15, 1998, the Company acquired all of the outstanding
shares of common stock of GenQuest. GenQuest was a development stage
biotechnology company focused on applying functional genomics technology to
discover novel genes and to develop the potential of such genes and related gene
products to be used as diagnostics, therapeutics, and drug screening targets in
the field of oncology. Prior to the acquisition, Corixa was a principal
stockholder in GenQuest, which was founded in July 1995 by Paul Fisher, Ph.D.,
Professor of Urology and Pathology at Columbia University College of Physicians
and Surgeons, and Forward Ventures, a San Diego-based venture capital firm.
Aggregate consideration for the acquisition was approximately $10.3
million, which consisted of 1,063,695 shares of Corixa common stock, with a
market value of approximately $5.2 million, approximately $4.5 million in cash,
and approximately $600,000 of acquisition costs. The aggregate purchase price
exceeded the fair value of tangible assets by approximately $9.9 million, and
this amount was allocated to in-process research and development during the
third quarter of 1998. The aggregate purchase price was allocated, based on
estimated fair values on the acquisition date, as follows (in thousands):
<TABLE>
<S> <C>
In-process research and $ 9,903
development
Net assets acquired 421
-------
Total purchase price $10,324
=======
</TABLE>
Subsequent to the issuance of the Press Release on November 9, 1998,
the Company determined that the purchase price was approximately $2.1 million
higher than above and originally recorded on September 30,1998. The SEC is
currently reviewing the purchase price allocation assigned by the Company in
recording the transaction. Upon completion of the SEC review, the Company will
finalize the total purchase price and the purchase allocation.
The following table reflects unaudited consolidated pro forma results of
operations of Corixa and GenQuest on the basis that the acquisition had taken
place at the beginning of each period presented. Such pro forma amounts are not
necessarily indicative of what the actual consolidated results of operations
might have been if the acquisitions had been effective at the beginning of the
respective periods. The pro forma information does not include the one-time
charges for purchased in-process research and development or other
transaction-related costs relating to the acquisition of GenQuest.
<TABLE>
<CAPTION>
Nine months ended
September 30, 1998
-----------------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue $ 7,507,683 $ 9,380,647
Net loss (13,118,848) (4,034,112)
Basic and diluted net loss
per share $ (1.02) $ (0.46)
</TABLE>
6. CONTRACTS
In July 1998, the Company announced that it signed an extension of its
tuberculosis vaccine collaboration research agreement with SmithKline Beecham
Biologicals S.A. ("SB Biologicals"), a division of SmithKline Beecham plc
("SmithKline Beecham"). The extension provides for additional research funding
in the area of tuberculosis antigen discovery through August 1999. The agreement
provides SB Biologicals with an exclusive option to license vaccine antigens
discovered under the Company's Mycobacterium tuberculosis ("Mtb") antigen
discovery program for use as a vaccine through August 1999. The agreement has
been in place since October 1995. See Note 8 -- Subsequent Events of the Notes
to Unaudited Consolidated Financial Statements and the Form 8-K filed by the
Company November 10, 1998 (the "SKB Form 8-K").
In July 1998, Corixa and Pasteur Merieux Connaught ("PMC") agreed to
extend PMC's option to license Corixa's proprietary adjuvant, known as LeIF, in
human vaccines, exclusively in the fields of influenza and respiratory syncitial
virus and nonexclusively in the fields of AIDS, malaria and tuberculosis. Under
the terms of the extension, the option termination date was extended to the date
that is the earlier of (i) five months following the date that Corixa receives
certain research materials from PMC and (ii) December 31, 1998.
7
<PAGE> 10
7. NEW ACCOUNTING STANDARDS
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information." SFAS No. 131 establishes standards
for the manner in which public companies report information about operating
segments in annual and interim financial statements. The statement shall be
effective for fiscal years beginning after December 15, 1997. Segment
information for earlier years that is reported with corresponding information
for the initial year of application shall be restated to conform to the
requirements of Statement No. 131 unless it is impracticable to do so. Statement
No. 131 need not be applied to interim financial statements in the initial year
of its application, but comparative information for interim periods in the
initial year of application shall be reported in financial statements for
interim periods in the second year of application. The Company does not
anticipate that Statement No. 131 will have a significant impact on its
financial statement reporting.
EMPLOYERS' DISCLOSURE ABOUT PENSIONS AND OTHER POSTRETIREMENT BENEFITS
In February 1998, the FASB issued SFAS No. 132, "Employers' Disclosure
about Pensions and Other Postretirement Benefits," which is effective for fiscal
years beginning after December 15, 1997. The statement standardizes the annual
disclosure requirements for pensions and other postretirement benefit plans by
requiring additional information on changes in the benefit obligations and fair
values of the plan assets and eliminating certain disclosures that are no longer
useful. It does not change the measurement or recognition of those plans.
Management does not expect the adoption of this statement will have a material
effect on the Company's financial condition or results of operations.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for fiscal years
beginning after June 15, 1999. Earlier application is encouraged but it is
permitted only as of the beginning of any fiscal quarter that begins after June
1998. The statement establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. The Company will be required to adopt SFAS No. 133 as of the quarter
ended March 31, 2000. The impact of the adoption of the provisions of this
statement on the Company's financial position or results of operations has not
been determined.
8. SUBSEQUENT EVENTS
SMITHKLINE BEECHAM AGREEMENT
On October 28, 1998, the Company entered into a collaboration and
license agreement with SmithKline Beecham, which superseded and significantly
expanded the scope of Company's then-existing agreements with SB Manufacturing
and SB Biologicals. The Company granted SmithKline Beecham an exclusive
worldwide license to develop, manufacture and sell vaccine products and certain
dendritic cell therapy products that incorporate antigens discovered or
in-licensed under this corporate partnership; provided that with respect to
tuberculosis, such rights are co-exclusive with Corixa in Japan. Under the
collaboration and license agreement, SmithKline Beecham agreed to provide
payment for work that is performed under the Company's existing antigen
discovery programs in tuberculosis, breast cancer and prostate cancer. In
addition, SmithKline Beecham agreed to provide payment for work that is
performed in additional programs in the following areas: (i) ovarian and colon
carcinoma vaccine discovery and development programs and (ii) vaccine discovery
programs for two chronic infectious pathogens, Chlamydia trachomatis, which
causes sexually transmitted diseases, and Chlamydia pneumoniae, which is
associated with the development of atherosclerosis. The discovery phase of the
agreement also allows for the selection of one additional disease field to be
agreed upon at a future date. The Company also granted SmithKline Beecham an
exclusive worldwide license to develop, manufacture and sell vaccine products
resulting from the Company's clinical program based on Her-2/neu for the
treatment of breast and ovarian cancer as well as the Company's preclinical
program based on Mammoglobin, a novel gene and protein associated with breast
cancer. For certain of these disease areas, the Company granted SmithKline
Beecham certain license rights to develop, manufacture and sell passive immune
products such as T cell or antibody therapeutics and therapeutic drug
monitoring products.
8
<PAGE> 11
SmithKline Beecham has committed to funding of $43.6 million for work
that is performed in such discovery programs during the next four years. The
Company and SmithKline Beecham may mutually agree to extend the research and
development programs beyond the initial four year term.
In addition, SmithKline Beecham agreed to purchase $2.5 million worth of
Corixa Common Stock at a premium to its fair market value, and Corixa has the
right to require SmithKline Beecham to purchase an additional $2.5 million of
Common Stock, at a premium in the future. The equity component combined with the
discovery program payment results in aggregate funding of $48.6 million during
the first four years of the agreement. Additionally, with respect to the $5.0
million previously paid to the Company by SmithKline Beecham under the prior
option agreement, which covered the fields of ovarian and colon cancer,
SmithKline Beecham may elect to have Corixa repay such amount to SmithKline
Beecham on September 1, 2003 or convert such amounts into the purchase of
Corixa common stock at a premium.
To the extent that certain clinical and commercial milestones in the
programs are achieved, the Company is entitled to receive payments, which in the
aggregate could exceed $150 million. The individual amounts of such payments
vary depending on the milestones achieved and the types of product sold. The
Company is also entitled to receive future royalty payments on any product
sales, which royalties vary depending on the types of products sold.
The effectiveness of the agreement is subject to the expiration or early
termination of the requisite waiting period under the Hart Scott Rodino
Antitrust Improvements Act of 1976, as amended. The Company presently expects
this will occur in the fourth quarter of 1998, although there can be no
assurance that such events will occur within such time frame, or at all. See the
SKB Form 8-K.
IMMGENICS AGREEMENT
On November 5, 1998 Corixa announced it signed an exclusive agreement
with ImmGenics Pharmaceuticals, Inc. ("ImmGenics") to utilize ImmGenics'
proprietary Selected Lymphocyte Antibody Method ("SLAM") technology to develop
high potency therapeutic and diagnostic monoclonal antibodies targeting Corixa's
proprietary antigens in cancer and infectious disease. Under the terms of the
agreement, Corixa will make research and development payments and, if certain
milestones are achieved, additional milestone payments, as well as royalty
streams on future product sales. In addition to the collaborative agreement,
Corixa invested $1.75 million in exchange for preferred stock in ImmGenics,
convertible debt and warrants, and may be required to invest an additional $1.25
million in 1999, for a total investment by Corixa of $3.0 million. Corixa may
obtain additional ownership in ImmGenics over time under certain terms of the
agreements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q, including management's discussion and analysis of
financial condition and results of operations contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended,
including, without limitation, statements regarding regulatory approvals,
operating results and capital requirements. Except for historical information,
the matters discussed in this Form 10-Q are forward-looking statements that are
subject to certain risks and uncertainties that could cause the actual results,
performance or achievements of Corixa or its corporate partners, or industry
results, to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, uncertainties related to the early stage of the Company's research and
development programs; uncertainties related to the effectiveness of the
Company's technology and the development of its products; dependence on and
management of existing and future corporate partnerships; dependence on
in-licensed technology; dependence on proprietary technology and uncertainty of
patent protection; history of operating losses; possible volatility of stock
price; future capital needs and uncertainty of additional funding; the Company's
lack of manufacturing and marketing experience and reliance on third parties to
perform such functions; existing government regulations and changes in, or the
failure to comply with, government regulations; impact of alternative
technological advances and competition on the collaborative relationships
between the Company and its corporate partners; the potential dilutive effect of
equity purchases by SmithKline Beecham to other Corixa shareholders; and the
impact of the GenQuest acquisition and other acquisitions or equity purchases of
early stage companies such as ImmGenics, as well as the risk factors discussed
below in "Factors Affecting Future Results" and those listed from time to time
in the Company's public disclosure filings with the SEC, including the Company's
Final Prospectus for its initial public offering filed with the SEC on October
2, 1997, the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997 and the Company's Registration Statement Form S-4, as amended,
filed with the SEC on August 5, 1998. The Company assumes no obligation to
update the forward-looking statements included in this Form 10-Q.
OVERVIEW
Corixa's objective is to be the leader in the discovery and
commercialization of products useful in preventing, treating or diagnosing
cancer, certain infectious diseases and certain autoimmune diseases. The
Company's strategy is to dedicate its resources to the discovery of vaccines and
other antigen-based products and to establish corporate collaborations early in
the development process for all aspects of product development and
commercialization, including research, clinical development, obtaining
regulatory approval, manufacturing and marketing. Corixa believes that this
research-and partner-driven approach creates significant scientific, operational
and financial advantages for the Company and accelerates the commercial
development of new therapeutic and prophylactic T cell vaccines and other
immunotherapeutic products. As of September 30, 1998, approximately 88% of the
Company's revenue has resulted from such collaborative agreements. In
particular, the Company has entered into significant corporate partnerships with
SB Biologicals and SB Manufacturing with respect to breast and prostate cancer
vaccine products and tuberculosis vaccine products pursuant to which the Company
may receive up to an aggregate of $78.8 million, of which up to $29.8 million is
payable under the breast cancer collaboration, up to $29.8 million is payable
under the prostate cancer collaboration and up to $19.2 million is payable under
the tuberculosis collaboration. A substantial amount of such funding is required
to be used for research and development activities pursuant to the terms of such
collaborations. Subsequent to the end of the quarter ended September 30, 1998,
Corixa and SmithKline Beecham entered into an expanded collaboration and license
agreement that superseded the previous breast cancer collaboration, prostate
cancer collaboration and tuberculosis collaboration. See Note 8 - Subsequent
Events of the Notes to Unaudited Consolidated Financial Statements and the SKB
Form 8-K. Additionally, since the Company's inception, approximately 12%
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of the Company's revenue resulted from funds awarded through government grants.
As of September 30, 1998, the Company had total stockholders' equity of $37.9
million.
Corixa has entered, and intends to continue to enter, into collaborative
agreements early in the development process. The Company believes that this
active corporate partnering strategy enables Corixa to maintain its focus on its
fundamental strengths in vaccine discovery and research, capitalizes on its
corporate partners' strengths in product development, manufacturing and
commercialization, and significantly diminishes the Company's financing
requirements. When entering into such corporate partnering relationships, the
Company seeks to cover its research and development expenses through research
funding, milestone payments and collaboration agreement credit lines, technology
or license fees, while retaining significant downstream participation in product
sales through either profit-sharing or product royalties paid on annual net
sales. Revenue recognized from inception through September 30, 1998 under the
Company's collaborative agreements was approximately $27.5 million.
Corixa remains focused on the discovery and early clinical development
of proprietary vaccine products that induce specific and potent pathogen- or
tumor-reactive T cell responses for the treatment and prevention of cancer,
infectious diseases and certain autoimmune diseases. The Company also intends to
broaden its scope to include other strategic relationships that complement its
approach to immune system based therapies for cancer, infectious diseases and
autoimmune diseases.
The Company has experienced significant operating losses in each year
since its inception. As of September 30, 1998, the Company's accumulated deficit
was approximately $32.8 million. The Company may incur substantial additional
operating losses over, at a minimum, the next several years. Such losses have
been and may continue to be principally the result of the purchase of
technology, for example the GenQuest acquisition; various costs associated with
the Company's discovery, research and development programs and preclinical and
clinical activities. Substantially all of the Company's revenue to date has
resulted from corporate partnerships, other research, development and licensing
arrangements, research grants and interest income. The Company's ability to
achieve a consistent, profitable level of operations is dependent in large part
upon entering into collaborative agreements with corporate partners for product
discovery, research, development and commercialization, obtaining regulatory
approvals for its products and successfully manufacturing and marketing
commercial products. There can be no assurance that the Company will be able to
achieve consistent profitability. In addition, payments under collaborative
agreements and licensing arrangements will be subject to significant
fluctuations in both timing and amounts, resulting in quarters of profitability
and quarters of losses by the Company. Therefore, the Company's results of
operations for any period may fluctuate significantly and may not be comparable
to the results of operations for any other period.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30,
1997
Total Revenue
Revenue decreased to $2.5 million for the three months ended September
30, 1998 from $3.3 million for the same period in 1997. Revenue for each period
consisted primarily of ongoing research and development revenue from partnership
programs. The reduction in revenue for the third quarter of 1998 from the same
period in 1997 resulted primarily from the absence of revenue from GenQuest, due
to Corixa's acquisition of GenQuest, and the termination of the Company's
ex-vivo adoptive immunotherapy collaboration with CellPro, Incorporated
("CellPro") in the first quarter of 1998. In conjunction with its collaboration
agreement with GenQuest, Corixa recognized no revenue during the third quarter
of 1998 and revenue of $500,000 during the third quarter of 1997. Revenue
decreased to $8.3 million for the nine month period ending September 30, 1998
from $10.8 million for the same period in 1997. The reduction is due mainly to a
significant technology access fee recognized in the first quarter of 1997 upon
the commencement of the Company's collaborations with SB Manufacturing in the
areas of breast cancer and prostate cancer as well as the absence of revenue
from GenQuest, due to its acquisition by Corixa. During the first nine months of
1998 and 1997, $1.0 million and $1.4 million, respectively, were recognized in
conjunction with the GenQuest
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collaboration agreement. Corixa expects that its quarterly revenue will continue
to vary depending on when and if it enters into new agreements and receives
license and /or milestones payments.
Research and Development Expenses
Research and development expenses increased to $6.8 million for the
three months ended September 30, 1998 from $4.3 million for the same period in
1997. The increase was primarily attributable to increased payroll and personnel
expenses incurred as the Company hired additional research and development
personnel, increased collaboration and patent expenses, consulting costs, and
increased purchases of laboratory supplies. In conjunction with the GenQuest
collaboration agreement, no GenQuest research and development expenses were
incurred during the three months ended September 30, 1998 and approximately
$700,000 was incurred during the same period in 1997.
Research and development expenses increased to $19.7 million for the
nine month period ended September 30, 1998 from $11.4 million for the same
period in 1997. The increase was primarily due to increased payroll and
personnel expenses, increased collaboration and patent expenses, increased
consulting costs, increased purchases of laboratory supplies and increased
deferred compensation costs associated with the amortization of certain stock
option grants. Additionally, increased research and development expense for the
nine month period ended September 30, 1998 includes the second quarter $489,000
charge to reflect a write-off of the receivable for warrants issued associated
with the GenQuest collaboration and a $330,000 charge in the first quarter to
reflect expenses associated with termination of the collaboration with CellPro.
The non-cash compensation expense associated with the stock option grant
amortization will continue to be recognized over the remaining vesting period of
such options, through June 2001. Research and development expenses of
approximately $1.2 million and $1.7 million were incurred during the nine months
ended September 30, 1998 and 1997, respectively, in conjunction with the
GenQuest collaboration agreement. The Company expects research and development
expenses to increase in the future to support the expansion of its research and
development activities.
General and Administrative Expenses
General and administrative expenses increased to $597,000 for the three
months ended September 30, 1998, from $488,000 for the same period in 1997. For
the nine months ended September 30, 1998, general and administrative expenses
increased to $1.8 million from $1.3 million for the same period in 1997. The
increases for the three and nine month periods ended September 30, 1998 are
primarily due to increased expenses related to business development, legal fees
and other costs associated with being a public company, and the general and
administrative portions of the amortized deferred compensation expense
associated with the grant of certain stock options. The Company expects general
and administrative expenses to increase in the future to support the expansion
of its business activities.
Interest Income
Interest income increased to $800,000 for the three months ended
September 30, 1998, from $214,000 for the same period in 1997. For the nine
months ended September 30, 1998, interest income increased to $2.4 million from
$605,000 for the same period in 1997. The increase for the three month and nine
month periods ended September 30, 1998 resulted from higher average cash
balances in such periods in 1998 as compared to 1997 as a result of the
completion of the Company's initial public offering during the fourth quarter of
1997.
Interest Expense
Interest expense increased to $189,000 for the three months ended
September 30, 1998 from $86,000 for the same period in 1997. For the nine months
ended September 30, 1998, interest expense increased to $513,000 from $242,000
for the same period in 1997. The increases for the three month and nine month
periods ended September 30, 1998 were the result of higher loan and capital
lease financing balances outstanding in such periods in 1998 as compared to such
periods in 1997.
Other Income
Other income decreased to $23,000 for the three months ended September
30, 1998 from $125,000 for the same period in 1997. Other income for the nine
months ended September 30, 1998 decreased to $272,000 from $312,000 in the same
period of 1997. These decreases were due
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primarily to the absence of management services revenue from GenQuest in the
third quarter of 1998, as a result of the Company's acquisition of GenQuest.
Other income consists of proceeds from management and administrative services
agreements with GenQuest and the Infectious Disease Research Institute; a
not-for-profit, grant-funded private research institute, pursuant to which the
Company provides services with respect to corporate management, record keeping,
personnel administration, human resources and treasury services as required by
such agreements.
Deferred Compensation
Deferred compensation of approximately $3.9 million was recorded in
fiscal year 1997, representing the difference between the exercise prices of
645,000 shares of common stock subject to options granted during the first half
of 1997 and the deemed fair market value of the Company's common stock on the
grant dates. Deferred compensation expense of approximately $264,000 and
$479,000 were amortized during the three months ended September 30, 1998 and
1997, respectively. Deferred compensation expense of $1.1 million and $800,000
were amortized during the nine months ended September 30, 1998 and 1997,
respectively.
Year 2000 Compliance
The Year 2000 issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Beginning in
the year 2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. If noncompliant systems
are not modified, the result could be a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. Corixa has largely completed its assessment of its internal
systems affected by the Year 2000 issue and anticipates that it will not be
required to modify or replace significant portions of its software so that its
computer systems will properly utilize dates past December 31, 1999.
The Company has initiated communications, in the form of questionnaires,
with its significant suppliers and customers to determine the extent to which
the Company is vulnerable to those third parties' failure to solve their own
Year 2000 issues. At this time, the Company cannot predict the level of Year
2000 readiness with respect to its significant suppliers and customers. The
Company intends to continue to monitor the progress of these third parties and
will develop contingency plans during the fiscal year 1999 in the event the
Company becomes aware that one or more of these third parties fails to solve
their Year 2000 issues in such a way as to materially adversely affect the
operations of the Company. The total exposure of the Year 2000 issue is
estimated to be less than $100,000 and will be funded through operating cash
flows. To date the Company has incurred no significant costs related to the
assessment of, and preliminary efforts in connection with, its Year 2000 project
and the development of a remediation plan. Management does not currently expect
the Company's financial condition or results of operations will be materially
adversely affected by the Year 2000 issue. There can be no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted, or that a failure to convert by another company, or a conversion that
is incompatible with the Company's systems, would not have a material adverse
effect on the Company.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has financed its operations primarily
through the issuance of the Company's equity securities, collaborative
agreements and debt instruments. The October 1997 initial public offering and
preceding private placements of equity securities have provided the Company with
aggregate proceeds of approximately $61.1 million. Through September 30, 1998,
the Company recognized approximately $31.2 million of revenue under corporate
partnerships and grants and has drawn $6.0 million on a bank loan and $5.0
million from credit lines under collaborative agreements. From inception through
September 30, 1998, the Company's operations have used cash of approximately
$15.5 million.
The Company has invested $5.0 million in property and equipment and has
acquired an additional $4.6 million of equipment through capital lease
financings since inception. The Company expects capital expenditures to increase
over the next year as it completes its facility expansion in the first quarter
of 1999. After that, capital expenditures should stabilize.
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During the nine month period ended September 30, 1998, net cash used in
the Company's operations was $8.5 million, an increase of $8.7 million, compared
to cash provided by operations of $233,000 for the same period of the prior
year. The increase in cash used by operations was due primarily to an increase
in research and development expenses. Investing activities used $8.5 million, an
increase of $3.6 million, compared to $4.9 million over the same period in the
prior year due primarily to the third quarter 1998 acquisition of GenQuest, as
well as an increased investment in property and equipment during the second and
third quarters of 1998, offset by an increase in the net proceeds provided by
the sale of securities. As of September 30, 1998, the Company had approximately
$45.5 million in cash, cash equivalents and securities available-for-sale.
Working capital decreased to $42.4 million at September 30, 1998 from $54.0
million at December 31, 1997.
The Company believes that its existing capital resources, committed
payments under its existing collaborative agreements and licensing arrangements,
equipment financing and interest income will be sufficient to fund its current
and planned operations until at least September 30, 1999. There is, however, no
assurance such sources of capital will be sufficient for such period of time.
The Company intends to enter into additional corporate collaborations that will
provide funding for all or a part of the Company's research and development
activities. The Company's future capital requirements will depend on many
factors, including, among others, the following: continued scientific progress
in its discovery, research and development programs; the magnitude and scope of
these activities; the ability of the Company to maintain existing, and enter
into additional, corporate partnerships and licensing arrangements; progress
with preclinical studies and clinical trials; the time and costs involved in
obtaining regulatory approvals; the costs of acquiring companies with
complementary technology; the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims; and the potential need to
develop, acquire or license new technologies and products and other factors not
within the Company's control. The Company intends to seek additional funding
through some or all of the following methods: corporate collaborations,
licensing arrangements, public or private equity or debt financings, and capital
lease transactions. There can be no assurance, however, that additional
financing will be available on acceptable terms, if at all. If sufficient
capital is not available, the Company may be required to delay, reduce the scope
of, eliminate or divest one or more of its discovery, research or development
programs, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.
FACTORS AFFECTING FUTURE RESULTS
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING
The Company will require substantial capital resources in order to
conduct its operations. If the Company were to undertake additional equity
financings, significant dilution to stockholders could result. If sufficient
capital is not available, the Company may be required to delay, reduce the scope
of, eliminate or divest one or more of its discovery, research or development
programs, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations. A substantial number of
the payments to be made by Corixa's corporate partners and other licensees are
dependent upon the achievement by the Company of development and regulatory
milestones. Failure to achieve such milestones would have a material adverse
effect on the Company's future capital needs.
DEPENDENCE ON KEY PERSONNEL
The Company is highly dependent on the principal members of its
scientific and management staff, the loss of whose services might significantly
delay or prevent the Company's achievement of its scientific or business
objectives. Competition among biotechnology and biopharmaceutical companies for
qualified employees is intense, and the ability to retain and attract qualified
individuals is critical to the Company's success. There can be no assurance that
the Company will be able to attract or retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the Company does not maintain "key person"
life insurance on any officer, employee or consultant of the Company.
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Corixa also has relationships with scientific collaborators at academic
and other institutions, some of whom conduct research at the Company's request
or assist the Company in formulating its research and development strategy.
These scientific collaborators are not employees of the Company and may have
commitments to, or consulting or advisory contracts with, other entities that
may limit their availability to the Company. The Company has limited control
over the activities of these scientific collaborators and, except as otherwise
required by its license, consulting and sponsored research agreements, can
expect only limited amounts of time to be dedicated to the Company's activities
by such individuals. Failure of any such persons to devote sufficient time and
resources to the Company's programs could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
these collaborators may have arrangements with other companies to assist such
companies in developing technologies that may prove competitive to those of
Corixa.
INTENSE COMPETITION
The biotechnology and biopharmaceutical industries are intensely
competitive. Several biotechnology and biopharmaceutical companies, as well as
certain research organizations, currently engage in or have in the past engaged
in efforts related to the development of vaccines for the treatment and
prevention of cancers and various infectious diseases, as well as the
development of diagnostic products for infectious disease indications.
Many companies, including Corixa's corporate partners, as well as
academic and other research organizations, are also developing alternative
therapies to treat cancers and infectious diseases and, in this regard, are
competitive with the Company. Moreover, technology controlled by third parties
that may be advantageous to the Company's business may be acquired or licensed
by competitors of the Company, thereby preventing the Company from obtaining
such technology on favorable terms, or at all.
Many of the companies developing competing technologies and products
have significantly greater financial resources and expertise in discovery,
research and development, manufacturing, preclinical and clinical testing,
obtaining regulatory approvals and marketing than Corixa or its corporate
partners. Other smaller companies may also prove to be significant competitors,
particularly through collaborative arrangements with large and established
companies. Academic institutions, government agencies and other public and
private research organizations may also conduct research, seek patent protection
and establish collaborative arrangements for discovery, research, clinical
development and marketing of products similar to those of the Company. These
companies and institutions compete with the Company in recruiting and retaining
qualified scientific and management personnel as well as in acquiring
technologies complementary to the Company's programs. Corixa and its corporate
partners will face competition with respect to product efficacy and safety, the
timing and scope of regulatory approvals, availability of resources,
reimbursement coverage, price and patent position, including potentially
dominant patent positions of others. There can be no assurance that competitors
will not develop more effective or more affordable products, or achieve earlier
patent protection or product commercialization than the Company and its
corporate partners, or that such competitive products will not render the
Company's products obsolete.
UNCERTAINTIES RELATED TO EARLY STAGE OF DEVELOPMENT
Corixa is at an early stage in the development of its therapeutic,
prophylactic and diagnostic products. To date, almost all of the Company's
revenue have resulted from payments made under agreements with its corporate
partners, and the Company expects that most of its revenue for the foreseeable
future will continue to result from existing corporate partnerships and future
corporate partnerships, if any. The Company has generated only minimal revenue
from diagnostic product sales and no revenue from therapeutic product sales
since inception. Immunotherapeutic products that may result from the Company's
research and development programs are not expected to be commercially available
for a number of years, if at all, and it will be a number of years, if ever,
before Corixa will receive any significant revenue from commercial sales of such
products.
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UNCERTAINTIES RELATED TO TECHNOLOGY AND PRODUCT DEVELOPMENT
The Company's technological approach to the development of
immunotherapeutic products for cancers, certain infectious diseases and certain
autoimmune diseases is unproven in humans. Products based on the Company's
technologies are currently in the discovery, preclinical or early clinical
investigation stages, and to date, neither the Company nor any of its corporate
partners have conducted any clinical trials that incorporate the Company's
proprietary microsphere delivery systems or its proprietary adjuvants. In
addition, no therapeutic vaccines or other immunotherapeutic products for
cancers, infectious diseases or other autoimmune diseases targeted by the
Company have been successfully commercialized by the Company or others. There
can be no assurance that Corixa will be able to successfully develop effective
products for such diseases in a reasonable timeframe, if ever, or that such
products will be capable of being commercialized.
A majority of Corixa's programs are currently in the discovery stage or
in preclinical development, and only three of the Company's therapeutic vaccine
products have advanced to Phase I clinical trials. The Company's vaccines have
not been demonstrated to be safe or effective in clinical settings. There can be
no assurance that any of the Company's programs will move beyond its current
stage of development. Assuming clinical trials of any product are successful and
other data are satisfactory, the Company or its applicable corporate partner
will submit an application to the U.S. Food and Drug Administration ("FDA") and
appropriate regulatory bodies in other countries to seek permission to market
the product. Typically, the review process at the FDA takes several years, and
there can be no assurance that the FDA will approve the Company's or its
corporate partner's application or will not require additional clinical trials
or other data prior to approval.
RISKS ASSOCIATED WITH ACQUISITIONS
The merger of Corixa and GenQuest involves the integration of GenQuest's
operations into Corixa's operations. The successful integration of the
operations of GenQuest and Corixa following the acquisition of GenQuest by
Corixa will require substantial effort from both companies, and no assurance can
be given that the benefits expected from such integration will be realized. The
process of integrating operations will cause a strain on Corixa's management,
and could cause an interruption of, or loss of momentum in, the activities of
Corixa's business. Difficulties encountered in connection with the acquisition
and the integration of the operations of GenQuest could have a material adverse
effect on the business, financial condition and results of operations of Corixa
and the combined company. There can be no assurance that Corixa will not incur
additional charges in subsequent quarters to reflect costs associated with the
acquisition. There can be no assurance that Corixa or the combined company will
not discover adverse information concerning GenQuest subsequent to the
completion of the acquisition, including, among other things, information with
respect to research management policies and intellectual property controls, such
as the possible inadequacy of GenQuest's patent protection and potential patent
infringement by GenQuest. Any such discovery could have a material adverse
effect on the business, financial condition and results of operations of Corixa
and the combined company.
In the future, the combined company may make additional acquisitions of
complementary companies, products or technologies. Managing acquired businesses
entails numerous operational and financial risks and strains, including
difficulties in assimilating acquired operations and scientific cultures,
diversion of management's attention to other business concerns, amortization of
acquired intangible assets and potential loss of key employees or strategic
relationships of acquired entities. There can be no assurance that the combined
company will be able to effectively manage growth, and failure to do so could
have a material adverse effect on the combined company's operating results.
POTENTIAL DILUTION
Potential dilution exists for the Company's stockholders. Such dilution
may occur upon the future issuance of the Company's common stock, which may
include, but is not limited to: the exercise of outstanding options and warrants
to purchase shares of the Company's common stock, or the election by SmithKline
Beecham to exercise either one of its options to license Corixa's early stage
antigen discovery programs in cancer, which may require Corixa to issue shares
of its common stock
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to elector. See Note 8 -- Subsequent Events of Notes to Unaudited Consolidated
Financial Statements and the SKB Form 8-K.
DEPENDENCE ON AND MANAGEMENT OF EXISTING AND FUTURE CORPORATE PARTNERSHIPS
The success of Corixa's business strategy is largely dependent on its
ability to enter into multiple corporate partnerships and to effectively manage
the numerous relationships that may exist as a result of this strategy. Corixa
has established significant relationships with several corporate partners as of
September 30, 1998. For example, to date the Company has entered into
collaboration and license agreements with SB Biologicals and SB Manufacturing
for the research, development and commercialization of vaccine products aimed at
the prevention and/or treatment of tuberculosis, breast cancer and prostate
cancer. In addition, Corixa has established corporate partnerships with Abbott
Laboratories and Pasteur Merieux Connaught, among others. To date, the Company
has derived 88% of its revenue from research and development and other funding
under such corporate partnerships. The termination of any of these corporate
partnerships would have a material adverse effect on the Company's business,
financial condition and results of operations. Certain of the Company's
corporate partners have entered into agreements granting them options to license
certain aspects of the Company's technology. There can be no assurance that any
such corporate partner will exercise its option to license such technology. The
Company has also entered into corporate partnerships with several companies for
the development, commercialization and sale of diagnostic products incorporating
the Company's proprietary antigen technology. There can be no assurance that any
such diagnostic corporate partnership will ever generate significant revenue.
Furthermore, Corixa is currently engaged in discussions with a number of
pharmaceutical and diagnostic companies with respect to potential corporate
partnering arrangements covering various aspects of the Company's technologies.
However, due in part to the early stage of Corixa's technologies, the process of
establishing corporate partnerships is difficult, time-consuming and involves
significant uncertainty, and there can be no assurance that such discussions
will lead to the establishment of any new corporate partnership on favorable
terms, or at all, or that, if established, any such corporate partnership will
result in the successful development of any of the Company's products or the
generation of significant revenue.
Because the success of the Company's business is largely dependent upon
its ability to enter into multiple corporate partnerships and to effectively
manage the numerous issues that arise from such partnerships, management of
these relationships will require, at a minimum, significant time and effort from
Corixa's management team and effective allocation of the Company's resources to
multiple projects, as well as an ability to obtain and retain management,
scientific and other personnel sufficient to accomplish the foregoing.
DEPENDENCE ON IN-LICENSED TECHNOLOGY
In addition to its dependence on existing and future corporate
partnerships, Corixa's success is also dependent on its ability to enter into
licensing arrangements with commercial or academic entities to obtain technology
that is advantageous or necessary to the development and commercialization of
Corixa's products. If the Company is unable to obtain or maintain licenses to
technology advantageous or necessary to the Company's business, Corixa and its
corporate partners may be required to expend significant time and resources to
develop or in-license similar technology, and there can be no assurance that the
Company and its corporate partners will be successful in this regard. If the
Company cannot acquire or develop necessary technology, it may be prevented from
commercializing certain of its products.
DEPENDENCE ON PROPRIETARY TECHNOLOGY AND UNCERTAINTY OF PATENT PROTECTION
Corixa's success will depend in part on its ability and that of its
corporate partners to obtain and enforce their respective patents and maintain
trade secrets, both in the United States and in other countries. As of September
30, 1998, the Company owned or had licensed 24 issued United States patents that
expire at various times between January 2007 and August 2016, 93, corresponding
issued foreign patents, 151 pending United States patent applications, as well
as 19 corresponding international filings under the Patent Cooperation Treaty
and 298 pending foreign national patent applications. The above numbers reflect
Corixa's license from GenQuest of 3 issued United States
17
<PAGE> 20
patents that expire at various times between July 2014 and January 2016 and 37
pending United States patent applications, as well as 5 corresponding
international filings under the Patent Cooperation Treaty and 34 pending foreign
national patent applications. The Company has licensed certain patent
applications from Southern Research Institute ("SRI") related to the Company's
microsphere encapsulation technology, one of which is currently the subject of
an opposition proceeding before the European Patent Office. There can be no
assurance that SRI will prevail in this opposition proceeding or that any
patents will issue in Europe related to such technology. There can also be no
assurance that the Company's or its corporate partners' current patents, or
patents that issue on pending applications, will not be challenged, invalidated,
infringed or circumvented, or that the rights granted thereunder will provide
proprietary protection or competitive advantages to Corixa.
The commercial success of Corixa depends significantly on its ability to
operate without infringing the patents and proprietary rights of third parties,
and there can be no assurance that the Company's and its corporate partners'
technologies do not or will not infringe the patents or proprietary rights of
others. A number of pharmaceutical companies, biotechnology companies,
universities and research institutions may have filed patent applications or may
have been granted patents that cover technologies similar to the technologies
owned, optioned by or licensed to the Company or its corporate partners. In
addition, the Company is unable to determine the patents or patent applications
that may materially affect the Company's or its corporate partners' ability to
make, use or sell any products.
Litigation may also be necessary to enforce patents issued or licensed
to the Company or its corporate partners or to determine the scope or validity
of a third party's proprietary rights. Corixa could incur substantial costs if
litigation is required to defend itself in patent suits brought by third
parties, if Corixa participates in patent suits brought against or initiated by
its corporate partners or if Corixa initiates such suits, and there can be no
assurance that funds or resources would be available to the Company in the event
of any such litigation. Additionally, there can be no assurance that the Company
or its corporate partners would prevail in any such action. An adverse outcome
in litigation or an interference to determine priority or other proceeding in a
court or patent office could subject the Company to significant liabilities,
require disputed rights to be licensed from other parties or require the Company
or its corporate partners to cease using certain technology, any of which may
have a material adverse effect on the Company's business, financial condition
and results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE
The market prices for securities of biotechnology companies have in the
past been, and in the future can be expected to be, especially volatile. The
market price of the Company's common stock has been and is likely to continue to
be subject to substantial volatility depending upon many factors, including
announcements regarding the results of discovery efforts and announcements
regarding the acquisition of technologies or companies, preclinical and clinical
activities, technological innovations or new commercial products developed by
the Company or its competitors, changes in government regulations, changes in
the Company's patent portfolio, developments or disputes concerning proprietary
rights, changes in existing corporate partnerships or licensing arrangements,
the establishment of additional corporate partnerships or licensing
arrangements, the progress of regulatory approvals, the issuance of new or
changed stock market analyst reports and/or recommendations, and economic and
other external factors, as well as operating losses by the Company, fluctuations
in the Company's financial results and the degree of trading liquidity in the
common stock. These factors could have a material adverse effect on the
Company's business, financial condition and results of operations and the price
of the Company's common stock in the public market.
FLUCTUATIONS IN FUTURE EARNINGS
Substantially all of the Company's revenue to date has resulted from
corporate partnerships, other research, development and licensing arrangements,
research grants and interest income. The Company's ability to achieve a
consistent, profitable level of operations is dependent in large part upon
entering into agreements with corporate partners for product discovery,
research, development and commercialization, obtaining regulatory approvals for
its products and successfully manufacturing and marketing commercial products.
The Company expects that its quarterly results will vary as it
18
<PAGE> 21
enters new agreements, and receives license and/or milestone payments. The
Company expects operating expenses to continue to increase as it adds to the
number and scope of its research and development programs, enters into clinical
trials and as it adds additional laboratory and office space. In addition,
payments under corporate partnerships and licensing arrangements will be subject
to significant fluctuations in both timing and amounts, resulting in quarters of
profitability and quarters of losses by the Company. Therefore, the Company's
results of operations for any period may fluctuate significantly and may not be
comparable to the results of operations for any other period.
GOVERNMENT REGULATION
The preclinical testing and clinical trials of any products developed by
the Company or its corporate partners and the manufacturing, labeling, sale,
distribution, export or import, marketing, advertising and promotion of any new
products resulting therefrom are subject to rigorous regulation by federal,
state and local governmental authorities in the United States, the principal one
of which is the FDA, and by similar agencies in other countries. Any product
developed by the Company or its corporate partners must receive all relevant
regulatory approvals or clearances before it may be marketed in a particular
country. The regulatory process, which includes extensive preclinical studies
and clinical trials of each product in order to establish its safety and
efficacy, is uncertain, can take many years and requires the expenditure of
substantial resources. Delays in obtaining regulatory approvals or clearances
would adversely affect the marketing of any products developed by the Company or
its corporate partners, impose significant additional costs on the Company and
its corporate partners, diminish any competitive advantages that the Company or
its corporate partners may attain and adversely affect the Company's ability to
receive royalties and generate revenue and profits. There can be no assurance
that, even after such time and expenditures, any required approvals or
clearances will be obtained for any products developed by or in collaboration
with the Company. Noncompliance with applicable requirements can result in
enforcement actions by the FDA including, among other things, fines,
injunctions, civil penalties, recall or seizure of products, refusal of the FDA
to grant pre-market clearances or approvals, withdrawal of marketing approvals
and criminal prosecution. Any such action would have a material adverse effect
on the Company's business, financial condition and results of operations.
For a more complete discussion of risks and uncertainties involving the
Company's business, please see the risk factors described under the heading
"Factors That May Affect Future Results of Operations" set forth in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997
and "Risk Factors" set forth in the Company's Registration Statement on Form
S-4, as amended, filed with the SEC on August 5, 1998.
19
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
In connection with its initial public offering of Common Stock (the
"Offering") in 1997, the Company filed a Registration Statement (the
"Registration Statement") on Form S-1, SEC File No 333-32147, which was
declared effective by the Commission on October 2, 1997. The net
offering proceeds to the Company after deducting the total expenses was
$40,778,100. The entire amount of the net proceeds has been allocated
for general corporate purposes, including working capital requirements
of the Company. None of the net proceeds of the Offering were paid
directly or indirectly to any director, officer, general partner of the
Company or their associates, persons owning ten percent or more of any
class of equity securities of the Company, or an affiliate of the
Company. This use of proceeds does not represent a material change in
the use of proceeds described in the prospectus of the Registration
Statement.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION.
On August 6, 1998, the Company's Registration Statement on Form S-4,
filed in connection with the Company's acquisition of GenQuest, was
declared effective by the SEC. Pursuant to such registration statement,
the Company registered a total of 1,080,000 shares of its common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) See Index to Exhibits.
(b) No reports on Form 8-K were filed by the Registrant during
the quarter ended September 30, 1998.
20
<PAGE> 23
Index to Exhibits for Form 10-Q for the quarter ended September 30, 1998
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
<S> <C> <C>
2.1+ Agreement and Plan of Merger dated June 22, 1998 by and among the
Registrant, Chinook Acquisition Corporation and GenQuest, Inc.
Registrant agrees to furnish supplementally to the Commission
upon request a copy of any omitted schedule. (E)
2.2 Form of Certificate of Merger between Chinook Acquisition
Corporation and GenQuest, Inc. (E)
3.1 Amended and Restated Certificate of Incorporation of Corixa
Corporation. (A)
3.2 Bylaws of Corixa Corporation. (A)
4.1 Amended and Restated Investors' Rights Agreement dated as of May
10, 1996 between Corixa Corporation and certain holders of its
capital stock. (A)
10.1 1994 Amended and Restated Stock Option and Restricted Stock Plan
and forms of stock purchase and stock option agreement. (A)
10.2 1997 Directors' Stock Option Plan and form of stock option
agreement. (A)
10.3 1997 Employee Stock Purchase Plan and form of subscription
agreement. (A)
10.4 Corixa Corporation 401(k) Savings & Retirement Plan. (A)
10.5 Form of Indemnification Agreement. (A)
10.6 Lease Agreement dated October 28, 1994 and amended December 29,
1995 between Corixa Corporation and Fred Hutchinson Cancer
Research Center. (A)
10.7 Lease Agreement dated May 31, 1996 between Corixa Corporation and
Health Science Properties, Inc. (A)
10.8 Amendment No. 2 , dated September 25, 1998, to the Lease
Agreement dated May 31, 1996 between Corixa Corporation and
Alexandria Real Estate Equities.
10.9+ Research Agreement between Corixa Corporation and ZymoGenetics,
Inc. dated September 30, 1996. (A)
10.10+ Licensing Agreement between Corixa Corporation and Dana-Farber
Cancer Institute, Inc. dated January 1, 1995. (A)
10.11+ Amendment No. 1, dated September 29, 1997, to the Licensing
Agreement, dated January 1, 1995, by and between Corixa
Corporation and Dana-Farber Cancer Institute, Inc. (D)
10.12 Amendment No. 2, dated July 31, 1998, to the Licensing Agreement,
dated January 1, 1995, by and between Corixa Corporation and
Dana-Farber Cancer Institute, Inc.
10.13+ License, Development and Supply Agreement between Corixa
Corporation and Abbott Laboratories dated July 24, 1997. (A)
10.14 Amendment No.1 to the License, Development and Supply Agreement
between Corixa Corporation and Abbott Laboratories dated July 24,
1997. (D)
10.15+ Amendment No. 2 to the License, Development and Supply Agreement
between Corixa Corporation and Abbott Laboratories dated July
24, 1997. (D)
10.16+ Letter Agreement, dated June 5, 1998, regarding the License,
Development and Supply Agreement between Corixa Corporation and
Abbott Laboratories dated July 24, 1997. (D)
10.17+ Option and License Agreement between Corixa Corporation and
Pasteur Merieux Connaught dated December 23, 1996. (A)
10.18 Amendment to Option and License Agreement between Corixa
Corporation and Pasteur Merieux Connaught dated March 28, 1997 (A)
10.19 Letter Agreement, dated July 1, 1998, regarding the Option and
License Agreement between Corixa Corporation and Pasteur Merieux
Connaught dated December 23, 1996. (D)
10.20+ Letter Agreement dated December 31, 1997 between Corixa
Corporation and Pasteur Merieux Connaught. (B)
</TABLE>
21
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Description Page
- ------- ------------------- ----
<S> <C> <C>
10.21+ Amended and Restated Research Services and Intellectual Property
Agreement effective as of January 1, 1997 by and between Corixa
Corporation and the Infectious Disease Research Institute. (A)
10.22+ License Agreement dated November 20, 1995 by and between Corixa
Corporation and Health Research, Inc. (A)
10.23 Amendment No. 1 to License Agreement dated January 1, 1997 by and
between Corixa Corporation and Health Research, Inc. (A)
10.24+ License Agreement dated May 22, 1996 by and among Corixa
Corporation, Southern Research Institute and University of
Alabama at Birmingham Research Foundation. (A)
10.25+ Amendment No. 1 to License Agreement dated April 30, 1997 by and
among Corixa Corporation, Southern Research Institute and
University of Alabama at Birmingham Research Foundation. (A)
10.26 Confirmation Letter, Purchase of $7,000,000 Loan Facility, dated
August 21, 1998 to Corixa Corporation from Banque Nationale de
Paris.
10.27 Assignment and Assumption Agreement, dated August 21, 1998, by
and among Sumitomo Bank, Limited, Sumitomo Bank of New York Trust
Corporation, Corixa Corporation, Well Fargo Bank, N.A., Banque
Nationale de Paris, and Bank of The West Trust and Investment
Services Division.
27 Financial Data Schedule
</TABLE>
- ------------------------------
(A) Incorporated herein by reference the Company's Form S-1, as amended,
(File No. 333-32147), filed with the Commission on September 30, 1997.
(B) Incorporated by herein reference to the Company's Form 10-K (File No.
333-32147), filed with the Commission on March 10, 1998.
(C) Incorporated herein by reference to the Company's Form 10-Q (File No.
333-32147), filed with the Commission on May 15, 1998.
(D) Incorporated herein by reference to the Company's Form 10-Q (File No.
333-32147), filed with the Commission on August 11, 1998.
(E) Incorporated herein by reference to Appendix A of The Proxy
Statement/Prospectus included in the Registration Statement on Form S-4,
as amended, (File No. 333-32147), filed with the Commission on August 5,
1998.
+ Confidential treatment granted by order of the SEC.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORIXA CORPORATION
November 11, 1998 By: /s/ MICHELLE BURRIS
- ------------------------- -------------------------------------
DATE Michelle Burris
Vice President and
Chief Financial Officer
23
<PAGE> 1
EXHIBIT 10.8
SECOND AMENDMENT TO COLUMBIA BUILDING LEASE
THIS SECOND AMENDMENT TO COLUMBIA BUILDING LEASE (this "SECOND
AMENDMENT") dated for reference purposes only as of September 25, 1998, is made
by and between ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation
("LANDLORD"), and CORIXA CORPORATION, a Delaware corporation ("TENANT").
Capitalized terms used in this Second Amendment but not expressly defined herein
will have the meanings given them in the amended Lease (as such term is
hereinafter defined), which is incorporated herein by reference.
RECITALS
A. Fred Hutchinson Cancer Research Center, a Washington nonprofit
corporation ("FHCRC"), Landlord's predecessor in interest, and Tenant previously
entered into that certain Columbia Building Lease dated as of October 28, 1994
(together with all exhibits thereto, the "ORIGINAL LEASE"), providing for the
lease of certain premises described therein upon the terms and conditions
specified therein.
B. FHCRC and Tenant previously entered into that certain Columbia
Building Lease First Amendment dated as of December 29, 1995 (together with all
exhibits thereto, the "FIRST AMENDMENT"), providing for the amendments to the
Original Lease specified therein.
C. On or about May 31, 1996, FHCRC sold to Landlord the Research
Complex, including, without limitation, the Building of which the Premises are a
part, and assigned to Landlord the Original Lease as amended by the First
Amendment (the "LEASE").
D. Landlord and Tenant desire to amend the Lease to provide for,
among other things, Landlord's lease to Tenant and Tenant's lease from Landlord
of certain additional premises described herein and in Exhibits A, B, and C
attached hereto (collectively, the "SECOND AMENDMENT PREMISES"), upon the terms
and conditions specified herein and in the Lease.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant
agree as follows:
1. Scope of Second Amendment. This Second Amendment is intended
to supplement (and not supersede) the Lease. Except as expressly provided
herein, or to the extent of an inconsistency between the Lease and this Second
Amendment (in which case this Second Amendment will control), all of the terms
of the Lease will continue in full force and effect and will apply to the
existing, from time to time, and expanded
1
<PAGE> 2
Premises, the Premises to include, without limitation, the Second Amendment
Premises (except where expressly stated or the context clearly requires
otherwise.)
2. Second Amendment of Lease. Effective as of the date hereof,
the following provisions of the Lease are amended as specified below:
a. Additional Defined Terms. To the end of the introductory
paragraph of the Lease is added the following:
"This Lease has been amended by that certain Columbia Building Lease First
Amendment dated as of December 29, 1995 (the "FIRST AMENDMENT"), and by
that certain Second Amendment to Columbia Building Lease dated as of
September 25, 1998 (the "SECOND AMENDMENT"). Except where expressly stated
or the context clearly requires otherwise, references herein to "the
Lease" or "this Lease" or any similar construction, will mean the Lease as
amended from time to time."
b. Confirmation of Landlord. The first block of Section 1
of the Lease entitled "LESSOR" is deleted in its entirety and replaced with the
following:
"LESSOR Alexandria Real Estate Equities, Inc.
Address for all notices: 135 N. Los Robles Avenue, Suite 250
Pasadena, California 91101
Attention: General Counsel
Tel: (626) 578-0777
Fax: (626) 578-0770
with a copy to: 11440 W. Bernardo Court, Suite 170
San Diego, California 92127
Attention: Asset Management
Tel: (619) 592-6801
Fax: (619) 592-6814"
c. Premises. The first and second sentences of Subsection
2.1(a) of the Lease are deleted in their entirety and replaced with the
following:
"Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
on the terms and conditions stated in this Lease (as amended from time to
2
<PAGE> 3
time) the laboratory, office, and other space described herein (the
"PREMISES") in the building and connected underground annex commonly known
as the Columbia Building (collectively, the "BUILDING") and located on the
real property legally described on Exhibit A to this Lease (the
"PROPERTY"). The original premises are generally depicted on Exhibit B to
this Lease."
d. Second Amendment Premises. To the end of Section 2 of
the Lease is added the following:
"2.8 SECOND AMENDMENT FIFTH FLOOR PREMISES. Commencing on June 1, 1998,
Landlord will lease to Tenant and Tenant will lease from Landlord, on the
terms and subject to the conditions set forth in this Lease, the
additional space depicted on Exhibit A attached to the Second Amendment
(the "SECOND AMENDMENT FIFTH FLOOR PREMISES"), which Landlord and Tenant
stipulate and agree will be deemed to consist of a total of 949 rentable
square feet.
2.9 SECOND AMENDMENT SIXTH FLOOR PREMISES. Commencing on June 1, 1998,
and, notwithstanding anything to the contrary contained herein, extending
only until May 31, 1999, (at which time Tenant will vacate the space and
surrender possession thereof to Landlord in accordance with all the terms
and conditions of this Lease relating thereto), Landlord will lease to
Tenant and Tenant will lease from Landlord, on the terms and subject to
the conditions set forth in this Lease, the additional space depicted on
Exhibit B attached to the Second Amendment (the "SECOND AMENDMENT SIXTH
FLOOR PREMISES"), which Landlord and Tenant stipulate and agree will be
deemed to consist of a total of 12,305 rentable square feet.
2.10 SECOND AMENDMENT FIRST FLOOR PREMISES. Commencing on October 1, 1998,
Landlord will lease to Tenant and Tenant will lease from Landlord, on the
terms and subject to the conditions set forth in this Lease, the
additional space depicted on Exhibit C attached to the Second Amendment
(the "SECOND AMENDMENT FIRST FLOOR Premises"), which Landlord and Tenant
stipulate and agree will be deemed to consist of a total of 5,991 rentable
square feet. (The Second Amendment First Floor Premises, the Second
Amendment Fifth Floor Premises, and the Second Amendment Sixth Floor
Premises are sometimes collectively referred to herein as the "SECOND
AMENDMENT PREMISES," and individually referred to herein as a "component
of" the Second Amendment Premises.)"
3
<PAGE> 4
e. Base Rent. Section 4.1 of the Lease is deleted in its
entirety and replaced with the following:
"4.1 BASE RENT
(a) Except with respect to the Second Amendment Premises, Tenant agrees to
pay Landlord annual base rent for the Premises at the rate of $28.00 per
rentable square foot, payable in twelve equal monthly installment in
advance of the first day of each calendar month, subject to increase as
provided in Sections 4.2 and 8.6(c) below (the "PRE-SECOND AMENDMENT BASE
RENT"). Except as otherwise provided herein, the Pre-Second Amendment Base
Rent for expansion space (including, without limitation, the Initial
Fourth Floor Expansion Space, Second Floor and Long Term Expansion Space)
will be the Pre-Second Amendment Base Rent in effect as of the date the
expansion space is added to the Premises. Rent for the Second Floor and
any Long Term Expansion Space (as defined below) will commence on the date
specified in Section 8.7 below.
(b) Tenant agrees to pay Landlord annual base rent for the Second
Amendment Fifth Floor Premises at the rate of $8.00 per rentable square
foot, payable in twelve equal monthly installments in advance on the first
day of each calendar month, subject to increase as provided in Section 4.2
below (the "SECOND AMENDMENT FIFTH FLOOR BASE RENT").
(c) Tenant agrees to pay Landlord annual base rent for the Second
Amendment Sixth Floor Premises at the rate of $28.84 per rentable square
foot, payable in twelve equal monthly installments in advance on the first
day of each calendar month, subject to increase as provided in Section 4.2
below (the "SECOND AMENDMENT SIXTH FLOOR BASE RENT")."
(d) Tenant agrees to pay Landlord annual base rent for the Second
Amendment First Floor Premises at the rate of $16.65 per rentable square
foot, payable in twelve equal monthly installments in advance on the first
day of each calendar month, subject to increase as provided in Section 4.2
below (the "SECOND AMENDMENT FIRST FLOOR BASE RENT"). (The Second
Amendment First Floor Base Rent, the Second Amendment Fifth Floor Base
Rent, and the Second Amendment Sixth Floor Base Rent are sometimes
collectively referred to herein as the "SECOND AMENDMENT BASE RENT;" the
Pre-Second Amendment Base Rent and the Second Amendment Base Rent are
sometimes collectively referred to herein as the "BASE RENT;"
4
<PAGE> 5
and the Base Rent and any applicable Additional Base Rent are sometimes
collectively referred to herein as "RENT").
(e) Rent will be paid by Tenant to Landlord at the first address shown on
Section 1 of the Lease or such other place as Landlord may designated by
written notice to Tenant. Rent for any period during the Term that is less
than one month will be prorated on a per diem basis based upon a
thirty-day month."
f. Base Rent Adjustment. Subsections 4.2(a) and 4.2(b) of
the Lease are deleted in their entirety and replaced with the following, and
subsections 4.2(c) and 4.2(d) of the Lease are renumbered as 4.2(d) and 4.2(e)
respectively:
"(a) Beginning January 15, 1998, Pre-Second Amendment Base Rent will be
increased on each anniversary thereof (the "ADJUSTMENT DATE") by the
percentage increase in the Consumer Price Index (defined below) over the
preceding twelve (12) month period, measured by the percentage difference
between the Consumer Price Index most recently published prior to that
Adjustment Date and the Consumer Price Index most recently published prior
to the previous Adjustment Date In no event, however, will the increase in
Pre-Second Amendment Base Rent for any Lease year be less than three
percent (3%) or more than six percent (6%). "Consumer Price Index" will
mean the Consumer Price Index - All Urban Consumers, All Cities, 1988
Revision (1982-84 = 100), which is published by the United States Bureau
of Labor Statistics or such comparable successor index as may be published
by the United States Bureau of Labor Statistics from time to time.
(b) Each segment of Additional Base Rent (i.e., Second Floor Additional
Base Rent, Third Floor Additional Base Rent and Fourth Floor Additional
Base Rent), and each segment of Second Amendment Base Rent (i.e., the
Second Amendment First Floor Base Rent, Second Amendment Fifth Floor Base
Rent, and Second Amendment Sixth Floor Base Rent) will also be adjusted
annually on the anniversary of the Adjustment Date in the same manner as
Pre-Second Amendment Base Rent; provided, however, that the first
adjustment for each will be calculated using as a base index the Consumer
Price Index published on the Adjustment Date immediately prior to the date
on which that segment of Additional Base Rent or of Second Amendment Base
Rent, as the case may be, commenced, and the amount of the adjustment will
be pro-rated for the period between the date such
5
<PAGE> 6
Additional Base Rent or Second Amendment Base Rent, as the case may be,
first becomes payable and the next following Adjustment Date.
(c) If the Consumer Price Index is discontinued and no comparable
successor index is published by the United States Bureau of Labor
Statistics, the parties will select another similar index which reflects
consumer prices, and if the parties cannot agree on another index, it will
be selected by binding arbitration pursuant to the terms of this Lease. If
arbitration is required to select another index, Tenant will continue to
pay an amount equal to the Pre-Second Amendment Base Rent, Second
Amendment Base Rent, and Additional Base Rent or adjusted Pre-Second
Amendment Base Rent, Second Amendment Base Rent, and Additional Base Rent
last payable until the newly adjusted Pre-Second Amendment Base Rent,
Second Amendment Base Rent, and Additional Base Rent can be determined
(which in no event will be less than the Pre-Second Amendment Base Rent,
Second Amendment Base Rent, and Additional Base Rent last payable), at
which time Tenant will pay any additional amounts owed for that Lease year
based on the newly adjusted Pre-Second Amendment Base Rent, Second
Amendment Base Rent, and Additional Base Rent as determined by the
arbitration, and Tenant will thereafter pay such newly adjusted Pre-Second
Amendment Base Rent, Second Amendment Base Rent, and Additional Base Rent,
subject to further adjustments as provided herein."
g. Pro Rata Share Calculation. Subsection 4.3(b) of the
Lease is deleted in its entirety and replaced with the following:
"(b) Tenant's "Pro Rata Share" will mean the percentage that is obtained
by dividing (i) the total rentable square feet of the Premises (not ever
including the Second Amendment First Floor Premises, and not including the
Second Amendment Fifth Floor Premises except as provided in Subsection
4.3(j) of this Lease, but expressly including, without limitation, the
Second Amendment Sixth Floor Premises) from time to time by (ii) the total
rentable square feet of the Building (not ever including the rentable
square footage on the first floor thereof), which Landlord and Tenant
stipulate and agree will be deemed to consist of a total of 143,631
rentable square feet. In the event of a change in the amount of Tenant's
Pro Rata Share, Landlord will deliver to Tenant a statement showing the
amount payable by Tenant, the manner in which the amount was calculated,
and the data or documentation supporting those calculations."
6
<PAGE> 7
h. Gross Operating Expenses and Operating Expenses. All
occurrences of the words "Operating Expenses" in Subsections 2.4(a)(2), 4.3(d),
4.3(e), and 6.2(a) of the Lease, in the second sentence of Subsection 8.1(a) of
the Lease, and in Sections 10.2 and 24 of the Lease, are deleted in their
entirety and replaced with the words "Gross Operating Expenses."
i. Additional Operating Expenses; Change in Pro Rata Share
Calculation. To the end of Section 4.3 of the Lease is added the following:
"(h) "Operating Expenses" for any period will mean the mathematical
difference calculated by subtracting (i) the product of the First Floor
Operating Expense Rate (as hereinafter defined) during such period by the
total rentable square footage on the first floor of the Building (which
Landlord and Tenant stipulate and agree will be deemed to consist of a
total of 16,893 rentable square feet) from (ii) Gross Operating Expenses
for such period.
(i) Notwithstanding anything to the contrary contained herein, commencing
on October 1, 1998, Tenant will pay to Landlord as additional rent, and in
the same manner as Tenant's Pro Rata Share of Operating Expenses,
additional annual expenses relating to the Second Amendment First Floor
Premises (the "SECOND AMENDMENT FIRST FLOOR OPERATING EXPENSES") at the
rate of $8.00 per rentable square foot thereof, subject to adjustment as
hereinafter provided (the "FIRST FLOOR OPERATING EXPENSE RATE"). Second
Amendment First Floor Operating Expenses will be payable in twelve equal
monthly installments in advance on the first calendar day of each calendar
month. Second Amendment First Floor Operating Expenses will be increased
by three percent (3%) each calendar year commencing on January 1, 2000,
including, without limitation, throughout any Option Period and any period
of Tenant's retention of the Second Amendment First Floor Premises after
the expiration of the Term.
j. Condition of Second Amendment Premises. To the end of
Section 7.1 of the Lease is added the following:
"Landlord will deliver the components of the Second Amendment Premises to
Tenant clean and free of debris and hazardous materials (without any
obligation to paint the same), and with any existing cabinetry and
equipment included (in its current state), but otherwise in an AS-IS
condition."
7
<PAGE> 8
k. Alterations and Utility Installations. Subsections
8.3(h), 8.3(i), and 8.3(k) of the Lease are deleted in their entirety and
replaced with the following:
"(h) Tenant may make Alterations and Utility Installations to the Premises
on the terms and conditions of this Section 8.3. In addition: (i) the
initial Alterations and Utility Installations planned by Tenant for the
Second, Third and Fourth Floors (the "TENANT IMPROVEMENT WORK") will be
performed in accordance with a work letter attached as Exhibit I to the
First Amendment (the "WORK LETTER"), which Work Letter was executed by
Tenant and Landlord concurrently with their execution of the First
Amendment; and (ii) the initial Alternations and Utility Installations
planned by Tenant for the Second Amendment Premises (the "SECOND AMENDMENT
TENANT IMPROVEMENT WORK") will be performed in accordance with a work
letter attached as Exhibit D to the Second Amendment (the "SECOND
AMENDMENT WORK LETTER"), which Second Amendment Work Letter was executed
by Tenant and Landlord concurrently with their execution of the Second
Amendment. Landlord will provide Tenant and its contractors with access to
the relevant Premises for purposes of completing the work under the Work
Letter and the Second Amendment Work Letter as provided under Section 8.7
below.
(i) Prior to Landlord allowing Tenant to enter upon the relevant Premises
for the purpose of performing the Tenant Improvement Work or the Second
Amendment Tenant Improvement Work pursuant to the Work Letter and the
Second Amendment Work Letter respectively, or for the placing of personal
property, Tenant will furnish to Landlord evidence satisfactory to
Landlord that insurance coverage required of Tenant under the provisions
of Section 10 of the Lease are in effect, and such entry will be subject
to all the terms and conditions of the Lease other than the payment of
Base Rent or Operating Expenses.
(k) Any unresolved dispute arising under this Section 8.3, the Work
Letter, or the Second Amendment Work Letter will be submitted to binding
arbitration as set forth in Section 25 of the Lease."
l. Allowances. To the end of Section 8.6 of the Lease is
added the following:
"(e) Landlord will also provide Tenant with an allowance, in an amount not
to exceed $191,712.00, to reimburse Tenant for its disbursements to
8
<PAGE> 9
third parties incurred solely in connection with Alterations and Utility
Installations for the Second Amendment First Floor Premises (the "SECOND
AMENDMENT ALLOWANCE"), subject to the terms and conditions of this Section
8.6 and the Second Amendment Work Letter; provided, however, that Tenant
will not be entitled to any part of the Second Amendment Allowance unless
and until Tenant has completed the installation of sprinklers in the
Second Amendment First Floor Premises in accordance with this Lease, the
Second Amendment Work Letter, and all applicable Laws. Tenant agrees to
complete such work prior to commencing any of its business in the Second
Amendment First Floor Premises."
"(f) Landlord will also provide Tenant with an allowance, in an amount not
to exceed $35,000.00, to reimburse Tenant for one-half (1/2) of its
disbursements to third parties incurred solely in connection with the
installation of sprinklers on the Third Floor and the Fourth Floor in
accordance with the Lease, the Second Amendment Work Letter, and all
applicable Laws. Tenant agrees to complete such work on or before May 31,
1999.
m. Access to Second Amendment Premises. To the end of
Section 8.7 of the Lease is added the following:
"Landlord will provide Tenant with access to the Second Amendment Sixth
Floor Premises on or prior to June 1, 1998. Landlord may provide Tenant
access to the Second Amendment Fifth Floor Premises and the Second
Amendment First Floor Premises prior to the dates Tenant is to receive
possession thereof pursuant to Sections 2.8 and 2.10 of the Lease
respectively, solely for the construction of Alterations and Utility
Installations relating thereto and the placing of personal property
therein, but Landlord will be under no obligation to do so and will assume
no liability for any failure to do so."
n. Landlord's Indemnity. Subsection 11.8(b) of the Lease is
deleted in its entirety, and Landlord and Tenant agree that such provision will
be deemed to have been null and void ab initio.
o. Remedies. Subsection 19.2(a) of the Lease is deleted in
its entirety and replaced with the following:
9
<PAGE> 10
"(a) Terminate Tenant's right to possession of the Premises by any lawful
means, in which case Tenant shall immediately surrender possession of the
Premises to Landlord. In such event, Landlord shall be entitled to recover
from Tenant all damages incurred by Landlord by reason of Tenant's default
including, but not limited to, the cost of recovering possession of the
Premises, including reasonable attorneys' fees and expenses, and Landlord
shall be entitled to enforce all of Landlord's rights and remedies under
this Lease, including the right to recover rent as it becomes due."
And to the end of Section 19.2 of the Lease is added the following:
"(d) Terminate the Lease by any lawful means, in which case Tenant shall
immediately surrender possession of the Premises to Landlord. In such
event, Landlord shall be entitled to recover from Tenant all damages
incurred by Landlord by reason of Tenant's default including, but not
limited to, the cost of recovering possession of the Premises, including
reasonable attorneys' fees and expenses."
p. Signage. To the end of Section 27 of the Lease is added
the following:
"Landlord may at any time place on or about the Building or the Research
Complex any ordinary "For Sale" or "For Lease" signs provided such signs
or the installation thereof do not damage, cover, or otherwise obstruct in
any manner the public view of any signage placed at the Research Complex
by Tenant in accordance with the terms and conditions of this Lease."
q. Second Amendment Basement Space. To the end of the Lease
is added the following:
"45. LICENSE; SHIPPING AND RECEIVING SERVICES.
45.1 GRANT AND USE OF LICENSE. Landlord hereby grants to Tenant a
revocable license (the "LICENSE") for the use by Tenant of certain space
located in the basement of the Building and depicted on Exhibit E attached
to the Second Amendment (the "SECOND AMENDMENT BASEMENT SPACE"). Tenant
may use such space exclusively for the purposes of operating and
maintaining (at Tenant's sole expense) shipping and receiving services for
the benefit of Tenant and all other tenants of the Building as described
in Section 45.6 hereof (the "SHIPPING AND RECEIVING SERVICES"), and to the
10
<PAGE> 11
extent it does not interfere therewith, the storage of Tenant's belongings
(excluding Hazardous Substances), both in accordance with all federal,
state, and local laws, rules, and regulations. Although the Second
Amendment Basement Space does not and will not constitute a part of the
Premises or rentable square footage at the Building, Tenant nevertheless
acknowledges and agrees that all of Tenant's obligations, duties, and
burdens (but none of its rights and privileges except as expressly
provided in this Section 45) pertaining to the Premises, except for the
payment of Rent and Operating Expenses, shall also apply to the Second
Amendment Basement Space including, without limitation, the obligations,
duties, and burdens imposed on Tenant pursuant to Sections 6, 7, 8, 10 and
11 of this Lease; provided, however, that nothing contained in this
sentence shall in any way diminish or otherwise abrogate Tenant's
agreements herein that specifically relate to the License, the Shipping
and Receiving Services, or the use of the Second Amendment Basement Space.
The License is made upon and subject to the terms, covenants, and
conditions herein set forth, and Tenant agrees as a material part of the
consideration for this License to keep and perform each and all of the
terms, covenants, and conditions hereof to be kept and performed by
Tenant, and this License is made upon the condition of such performance.
45.2 TERM OF LICENSE. The term of the License shall be for a period
commencing on June 1, 1998, and ending on the earlier of: (i) the
expiration or earlier termination of this Lease; (ii) five business days
after Landlord's written notification to Tenant of Landlord's
determination, in its sole and absolute discretion, to terminate the
License; and (iii) thirty calendar days after Tenant's written
notification to Landlord of Tenant's determination, in its sole and
absolute discretion, to both cease providing the Shipping and Receiving
Services and terminate the License. Upon any termination of the License as
provided in clause (i) immediately preceding, Tenant shall immediately
vacate, surrender possession of, and turn over to Landlord the entire
Second Amendment Basement Space. Upon any termination of the License as
provided in clauses (ii) and (iii) immediately preceding, Tenant shall
immediately vacate, surrender possession of, and turn over to Landlord
that portion of the Second Amendment Basement Space shown on Exhibit E as
the "Terminable Second Amendment Basement Space," but Tenant may, if
Tenant so desires, retain for its use for the remaining Term that portion
of the Second Amendment Basement Space described on Exhibit E as the
"Retainable Second Amendment Basement Space provided that Tenant shall
advise Landlord in writing, prior to the termination of the License, of
its intent to retain such space,
11
<PAGE> 12
and further provided that Tenant shall thereafter pay Landlord a fixed
monthly rent of $8.00 per square foot for the continued use of such space.
45.3 NATURE AND SCOPE OF LICENSE. Tenant hereby acknowledges and agrees
that the License is a revocable, personal, non-exclusive, unassignable
privilege only, and not a grant of a property interest in the Building,
the Research Complex, or elsewhere.
45.4 LICENSE FEE AND SECURITY DEPOSIT. Except as provided in Section 45.2
above, Tenant's use of the Second Amendment Basement Space shall be
without payment to Landlord of any Rent or Operating Expenses relating
thereto for so long as Tenant is using said space in accordance herewith.
If Tenant remains in possession of the Terminable Second Amendment
Basement Space or any part thereof after the License is for any reason
terminated, Tenant shall immediately pay to Landlord therefor, in addition
to all other loss, cost, damage, and liability suffered by Landlord on
account thereof, without deduction, setoff, prior notice, or demand, a
daily hold-over rental of $100.00, which amount shall be deemed earned in
full by Landlord on a daily basis. Notwithstanding anything to the
contrary contained in this Lease, the Security Deposit also shall be held
and used by Landlord as security for the faithful performance by Tenant of
all the terms, covenants, and conditions to be kept and performed by
Tenant pursuant to this Section 45 of the Lease.
45.5 ADDITIONAL COSTS OF LICENSE. Tenant shall pay, as an additional cost
of obtaining and maintaining the License, all amounts paid or incurred by
Tenant in connection with the staffing, operation, and maintenance of the
Shipping and Receiving Services, and any costs incurred in connection with
the termination of such services whether or not such termination is
required by Landlord. Tenant shall not earn a profit by providing Shipping
and Receiving Services, and may charge other tenants of the Building only
for the amount of disbursements made by Tenant to third party shippers and
vendors on such tenants' behalf.
45.6 SHIPPING AND RECEIVING SERVICES. Tenant shall staff, operate, and
maintain, and otherwise make the Shipping and Receiving Services available
to all the other tenants of the Building, from 8:00 a.m. to 4:30 p.m.,
Monday through Friday. Tenant shall be solely responsible for staffing,
operating, and maintaining the Shipping and Receiving Services, and shall
do so in a manner consistent with the level of services that were
previously provided to tenants at the Building by FHCRC. Tenant shall
provide Shipping and Receiving Services for the other tenants of the
Building by: (i) providing timely notification to tenants of the arrival
12
<PAGE> 13
of packages and other materials addressed to such tenants; (ii) arranging
appropriate and timely unloading of containers, packages, and equipment;
(iii) arranging a drop-off zone for the pick-up of packages by express
mail couriers; and (iv) using reasonable efforts to monitor and direct the
flow of traffic in the area of the loading dock in a manner that
accommodates all vehicles as efficiently as possible. Tenant shall obtain
such additional insurance relating to its furnishing of the Shipping and
Receiving Services as Landlord may, from time to time, reasonably require,
and as Tenant may, from time to time, deem desirable. Notwithstanding
anything herein to the contrary, Tenant shall have the right in connection
with performing the Shipping and Receiving Services to establish standard
operating procedures, reasonable in the biotechnology and biomedical
industries, relating to safety, security, and orderliness, and Tenant
shall also have the right to refuse to perform any or all of the Shipping
and Receiving Services for any tenant of the Building not materially
complying with such procedures."
r. Description of the Property. The legal description in
Exhibit A attached to the Lease and in Exhibit A attached to the First Amendment
is deleted in its entirety and replaced with the following:
"Lots 1-4, 6, and 7 , Block 94, Terry's Second Addition to the Town (now
City) of Seattle, according to the plat thereof recorded in Volume 1 of
Plats, Page 87, records of King County, Washington, together with the
vacated alley adjoining said lots, all situate in the City of Seattle,
County of King, State of Washington."
s. Rentable Square Footage at Building. The language and
chart in Exhibit F attached to the First Amendment is deleted in its entirety
and replaced with the following:
"Landlord and Tenant stipulate and agree that the rentable square
footages of the Building will be deemed to consist of the following:
<TABLE>
<CAPTION>
Floor RSF
<S> <C>
First Floor 16,893
Second Floor 21,143
Third Floor 21,429
Fourth Floor 21,434
</TABLE>
13
<PAGE> 14
<TABLE>
<S> <C>
Sixth Floor 22,166
Seventh Floor 22,171
Annex Level 100 11,482
Annex Level 200 12,923
Annex Level 300 13,883
TOTAL 163,524
</TABLE>
3. The Second Amendment Premises. Tenant acknowledges that it has
determined to its satisfaction that the Second Amendment Premises can be used by
it for the purposes described in Subsection 6.1(a) of the Lease, and that the
Second Amendment Basement Space can be used by it for the purposes described in
Section 45 of the Lease. Except as otherwise stated in this Second Amendment,
Tenant hereby acknowledges that neither Landlord nor any of Landlord's employees
or agents has made any oral or written warranties or representations to Tenant
relating to the condition or use by Tenant of the Second Amendment Premises, the
Second Amendment Basement Space, or the Research Complex, and Tenant further
acknowledges that Tenant assumes all responsibility regarding the Occupational
Safety Health Act, the legal use and adaptability of the Second Amendment
Premises and the Second Amendment Basement Space, and the compliance thereof
with all applicable laws, rules, and regulations in effect during the term of
the Lease, except as otherwise expressly and specifically stated therein or
herein. Landlord and Tenant further agree that the provisions of Section 22 of
the Lease will not apply to Landlord's demising and Tenant's leasing of the
Second Amendment Premises pursuant to this Second Amendment, that the Second
Amendment Premises are not, as of the date hereof, "public accommodations"
within the scope of the ADA, and that the Second Amendment Basement Space shall
not be included as "space Tenant occupies" in connection with the provisions of
Section 11.1 of the Lease. If Landlord has not delivered to Tenant possession of
any of the various components of the Second Amendment Premises within sixty (60)
days of the dates scheduled therefor in Sections 2.8, 2.9 and 2.10 of the Lease,
Landlord and Tenant agree that, as Tenant's sole remedy therefor, Tenant may at
Tenant's sole and absolute option by written notice to Landlord advise Landlord,
at anytime thereafter and before accepting possession of such space, that the
relevant provisions of Paragraph 2 of this Second Amendment relating thereto
will be ineffective and of no force or effect, in which event Landlord and
Tenant will be discharged from all obligations relating thereto, Landlord will
return to or adjust with Tenant any funds received from Tenant in connection
therewith, and Landlord and Tenant will promptly
14
<PAGE> 15
enter into a further written amendment to the Lease (as amended hereby) to
document the same.
4. Brokers. Landlord and Tenant each represent and warrant to the
other that it has had no dealings with any broker or finder other than the firm
of Kidder, Mathews & Segner (who represents Landlord and will receive a fee from
Landlord pursuant to a separate written agreement) in connection with the
negotiation of this Second Amendment and the consummation of the transaction
contemplated hereby, and that no broker, finder, or entity other than said named
broker is entitled to any commission or finder's fee in connection with said
transaction. Landlord and Tenant do each agree to indemnify, defend, and hold
the other harmless from and against liability for compensation or charges which
may be claimed by any such unnamed broker, finder, or other similar party by
reason of any dealings or actions of the indemnifying party, including any
costs, expenses, and/or attorneys' fees and disbursements reasonably incurred
with respect thereto, and Landlord agrees to pay the commission of its broker.
5. Authority to Amend. Each party hereto represents and warrants
to the other that it holds all the right, title, and interest of the lessor (in
the case of Landlord ) or the lessee (in the case of Tenant) under the Lease,
and that it has full power and authority to amend the Lease as provided herein
without the consent or agreement of any third party.
6. Further Assurances. Landlord and Tenant hereby agree to
execute and deliver to the other any additional instrument or other document
which the other party may reasonably request to evidence or to better effect the
amendments and agreements contained herein, promptly upon the request of such
other party; provided, however, that neither party will be obligated to execute
or deliver any such other document which would enlarge the obligations or
liabilities, or diminish the rights, of such party hereunder.
7. Enforcement Cost. If either Landlord or Tenant institute any
actions or proceedings to enforce any provision of this Second Amendment, or for
damages or other losses incurred by reason of an alleged breach of any provision
hereof, then the prevailing party will be entitled to receive all costs and
expenses (including reasonable attorneys' fees and disbursements) incurred by
the prevailing party in connection with such action or proceeding.
8. Modification; Binding Effect; Benefit. This Second Amendment
may not be modified, amended, supplemented, or otherwise changed except by a
writing executed by the party against whom such modification, amendment,
supplement, or other agreement is to be enforced. The terms and provisions
contained herein will be binding
15
<PAGE> 16
upon and inure to the benefit of the parties hereto and to their respective
successors and assigns (subject to Section 18 of the Lease), but upon and to no
other.
9. Counterparts. This Second Amendment may be executed in any
number of counterparts, each of which when executed and delivered will be deemed
an original, and all of which taken together will constitute but one and the
same instrument.
10. Governing Law. This Second Amendment will be governed by,
interpreted under, and construed and enforced in accordance with the laws of the
State of Washington without giving effect to the principles of conflict of laws
thereof.
11. Entire Agreement. This Second Amendment sets forth the entire
agreement of the parties hereto with respect to the subject matter contained
herein, and any prior agreement, whether oral or written, express or implied, of
the parties hereto and with respect to the subject matter contained herein is
hereby declared null and void. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by the parties hereto, that are not set forth expressly in this Second
Amendment.
12. Captions. The captions in this Second Amendment are for
convenience of reference only and will not be deemed to modify, explain,
restrict, alter, or affect the meaning or interpretation of any provision of
this Second Amendment.
16
<PAGE> 17
13. Time. Time is of the essence of each and every provision
hereof.
IN WITNESS WHEREOF, the undersigned parties have caused this
[Remainder of Page Intentionally Left Blank]
17
<PAGE> 18
Second Amendment to be executed and delivered by their respective
representatives, thereunto duly authorized, as of the date first above written.
LANDLORD:
ALEXANDRIA REAL ESTATE,
EQUITIES, INC., a Maryland corporation
By: /s/ PETER J. NELSON
---------------------------------
Name: Peter J. Nelson
---------------------------------
Title: CFO
---------------------------------
TENANT:
CORIXA CORPORATION,
a Delaware corporation
By: /s/MARK MCDADE
---------------------------------
Name: Mark McDade
---------------------------------
Title: COO
---------------------------------
18
<PAGE> 19
EXHIBIT A
DIAGRAM OF THE SECOND AMENDMENT FIFTH FLOOR PREMISES
[drawing]
19
<PAGE> 20
EXHIBIT B
DIAGRAM OF THE SECOND AMENDMENT
SIXTH FLOOR PREMISES
[drawing]
20
<PAGE> 21
EXHIBIT C
DIAGRAM OF THE SECOND AMENDMENT FIRST FLOOR PREMISES
[drawing]
21
<PAGE> 22
EXHIBIT D
SECOND AMENDMENT WORK LETTER
22
<PAGE> 23
SECOND AMENDMENT WORK LETTER
THIS SECOND AMENDMENT WORK LETTER (this "WORK LETTER") is dated for
reference purposes only as of the 25 day of September, 1998, and by and between
ALEXANDRIA REAL ESTATE EQUITIES, INC., a Maryland corporation ("LANDLORD") and
CORIXA CORPORATION, a Delaware corporation ("TENANT") with reference to the
following facts:
RECITALS
A. Landlord and Tenant have concurrently herewith executed that
certain Second Amendment to Columbia Building Lease dated of even date herewith
(the "SECOND AMENDMENT") to which this Work Letter is attached as Exhibit D. The
Second Amendment amends that certain Columbia Building Lease dated as of October
28, 1994, as previously amended by that certain Columbia Building Lease First
Amendment dated as of December 29, 1995 (together, the " ORIGINAL LEASE"). All
capitalized terms used but not otherwise defined herein shall have the meaning
ascribed to them in the Original Lease as amended by the Second Amendment (as
so amended, the "LEASE").
B. The provisions of this Work Letter shall apply to the initial
Tenant Improvement Work (as such term is hereinafter defined) planned by Tenant
for the various components of the Second Amendment Premises described in
Sections 2.8, 2.9, and 2.10 of the Lease (each, a "BUILD-OUT SITE," and
collectively, the "BUILD-OUT SITES"). The Tenant Improvement Work will be
performed in stages as Tenant prepares to renovate and occupy each Build-Out
Site. As a result, the provisions of this Work Letter will be applied to each
Build-Out Site as Tenant plans and accomplishes the Tenant Improvement Work for
such Site.
Now, therefore, in consideration of these premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
GENERAL REQUIREMENTS
1.1 Tenant Improvement Work. Planning, construction, and payment for
the Tenant Improvement Work shall be carried out in accordance with the terms
and conditions of the Lease and this Work Letter. To the extent this Work Letter
and the Lease are in conflict, the terms of this Work Letter shall prevail.
1.2 Architect. Tenant shall retain the services of a fully qualified
laboratory and office architect ("ARCHITECT") licensed in the State of
Washington, who shall be responsible for the preparation of fully detailed
working drawings and specifications (the "TENANT IMPROVEMENT PLANS") from which
the Tenant Improve-
<PAGE> 24
ment Work shall be constructed. Tenant shall be responsible for directing
Architect in the preparation of the Tenant Improvement Plans and Architect shall
be employed by Tenant. Tenant's selection of Architect, Contractor (as such term
is defined below), and major subcontractors shall be subject to the written
approval of Landlord and, if applicable, Landlord's lender. Landlord hereby
approves in advance Tenant's use of Mahlum & Norfors McKinley Gordon as
Architect and DPR as Contractor. At Landlord's request from time to time,
meetings shall be held and attended by Tenant, Architect, Contractor, and any
other tenant improvement consultants selected by Tenant, to discuss with
Landlord the construction of the Tenant Improvement Work.
1.3 Tenant Improvement Plans. Contractor shall prepare and deliver
to Landlord, at the same time the Tenant Improvement Plans are delivered to
Landlord, a detailed time schedule for the Tenant Improvement Work in form and
substance acceptable to Landlord. Such schedule shall include the earliest and
latest anticipated dates of completion of the Tenant Improvement Work.
1.4 Approval of the Tenant Improvement Plans.
1.4.1 The design, quality of materials, and installations
undertaken in the Second Amendment Premises pursuant to the Tenant Improvement
Plans shall be subject to the prior written approval of Landlord and, if
applicable, Landlord's lender, and shall conform to and meet all applicable
city, county, state, and federal laws, and all building codes, rules, and
regulations, and shall meet or exceed all guidelines, standards, and
recommendations prepared and issued by all other government authorities having
jurisdiction over or other control of the development and use of laboratory and
office space of the type to be constructed within the Second Amendment Premises.
1.4.2 Landlord shall review and approve or disapprove the
Tenant Improvement Plans in writing within ten (10) business days after
Landlord's receipt of such documents from Architect (together with the detailed
time schedule from Contractor). Landlord shall be responsible, at its sole
expense, for the cost of reviewing the Tenant Improvement Plans. If Landlord
disapproves any portion of the Tenant Improvement Plans, then Landlord shall
specifically: (a) approve those portions which are acceptable to Landlord; and
(b) disapprove those portions which are not acceptable to Landlord, specifying
the reasons for such disapproval and describing in reasonable detail the change
Landlord requests for each item disapproved.
2
<PAGE> 25
1.4.3 Landlord shall have full access to the Tenant
Improvement Plans during the course of the Tenant Improvement Work. Any changes,
modifications, improvements, amendments, additions, supplements, or alterations
(collectively, "CHANGES") to the Tenant Improvement Plans which Landlord may
consider necessary in order to protect its or other tenants' interests in the
Research Complex shall be conveyed to Tenant who shall instruct Architect to
make said Changes.
1.4.4 Where final Tenant Improvement Plans approved by
Landlord in writing conflict with this Work Letter or the Lease, the provisions
of the final Landlord-approved Tenant Improvement Plans shall prevail.
1.5 Permits for the Tenant Improvement Work. Tenant or Architect
shall be responsible for obtaining all necessary building and other permits,
licenses, and approvals (collectively, "PERMITS") relating to the Tenant
Improvement Work from the applicable governing agencies. If any such governing
agency shall reject the Tenant Improvement Work and thereby prevent the issuance
of a Permit, Tenant shall immediately take such action and make all necessary
corrections to the Tenant Improvement Plans required by said agencies and
approved by Landlord in writing. Upon said agency's approval of Tenant's Permit
applications, Tenant or Architect shall obtain the Permits from said agency and
deliver a copy of the same to Landlord.
1.6 Construction of the Tenant Improvement Work.
1.6.1 Tenant agrees, as soon as practical after receipt of the
required Permits therefor and after obtaining access to the respective Build-Out
Sites, to diligently and continuously prosecute the Tenant Improvement Work to
completion in accordance with the final Landlord-approved Tenant Improvement
Plans, and in accordance with all city, county, state, and federal laws,
ordinances, rules, and regulations relating thereto.
1.6.2 Commencing on the date Tenant begins the Tenant
Improvement Work on a Build-Out Site, Tenant shall indemnify and hold Landlord
harmless from any loss of or damage to Tenant's or Contractor's property,
completed work, fixtures, equipment, materials, or merchandise, and from
liability for death of or injury to any person except as caused by the willful
misconduct or gross negligence of Landlord.
3
<PAGE> 26
1.6.3 Tenant agrees that except for any available Second
Amendment Allowance, Landlord neither assumes nor shall bear any cost for the
Tenant Improvement Work.
1.6.4 Tenant shall deliver a completed City of Seattle
sign-off inspection card and an original Certificate of Occupancy to Landlord
prior to opening for business any Build-Out Site.
1.7 Changes to the Tenant Improvement Work.
1.7.1 Tenant shall notify Landlord in writing of any requested
Changes to the Tenant Improvement Work, describing in detail the nature and
extent of any such Change. If the nature of such Changes requires revisions to
the Tenant Improvement Plans, then Architect shall revise the Tenant Improvement
Plans and deliver a revised set of the affected portion of the Tenant
Improvement Plans to Landlord for Landlord's review and approval or disapproval
as provided below.
1.7.2 Material changes to the Tenant Improvement Work (each a
"MATERIAL Change") are Changes that: (a) alter any of the structural portions of
the Building including, without limitation, a load bearing wall, the roof, the
foundation, or the floor slabs; (b) alter the function of the mechanical,
electrical, heating, ventilation, air conditioning, plumbing, or other systems
of the Building; (c) exceed $5,000.00 in cost for a single Change; or (d) are
visible from the Common Area of the Research Complex. Landlord shall review and
approve or disapprove in writing Material Changes within ten (10) business days
of the written receipt from Tenant of the requested Material Changes. Landlord
shall review and approve or disapprove in writing all other Changes within five
(5) business days of the written receipt from Tenant of the requested Change.
1.7.3 Tenant shall reimburse Landlord for all reasonable and
actual fees incurred by Landlord in connection with its third party consultants
reviewing Charges and Material Changes to the Tenant Improvement Plans.
1.8 Diligence. Landlord and Tenant agree that each shall use due
diligence in performing their respective obligations pursuant to this Work
Letter.
4
<PAGE> 27
ARTICLE 2
THE TENANT IMPROVEMENT WORK
2.1 General. "The Tenant Improvement Work" shall include the
demolition, construction, purchase, and installation of all of the items of a
permanent or fixed nature described in the final Landlord-approved Tenant
Improvement Plans.
2.2 The Tenant Improvement Work. Tenant shall cause the Tenant
Improvement Work to be performed in a good and workman like manner and in
accordance with Section 1.6.1 above. At completion of each phase of the Tenant
Improvement Work, Tenant shall provide Landlord with complete as-built plans of
the Tenant Improvement Work.
2.3 Equipment and Furnishing. Tenant shall be responsible for the
placement within the Build-Out Sites of the personal property of Tenant. Tenant
shall purchase and install, at Tenant's sole expense, which shall not be
reimbursable from the Second Amendment Allowance, all equipment, furnishings,
and other personal property required by Tenant in the operation of its business,
other than the improvements described in the final Landlord-approved Tenant
Improvement Plans.
2.4 Removal of Waste. During the Tenant Improvement Work, Contractor
shall promptly remove all related trash and debris to Contractor supplied trash
receptacles. Tenant shall not permit disposal of such waste material into the
Research Complex's trash receptacles.
ARTICLE 3
THE TENANT IMPROVEMENT WORK BUDGET
3.1 Budget for the Tenant Improvement Work.
3.1.1 Tenant shall submit to Landlord for its review and
approval, prior to commencing construction of any Tenant Improvement Work, a
specific line item budget of the cost to complete such Tenant Improvement Work
(the "BUDGET") prepared by Contractor or Tenant and certified by Architect.
3.1.2 Tenant shall provide a copy of the fully executed
construction contract for the Tenant Improvement Work between Tenant and
Contractor to Landlord.
5
<PAGE> 28
ARTICLE 4
TENANT'S USE OF A CONTRACTOR
4.1 Contractor Selection. Contractor must be bondable and meet all
licensing and insurance requirements established by the State of Washington and
the City of Seattle, and have in force a general liability insurance policy of
not less than $2,000,000.00 or such higher limits as Landlord may reasonably
request, which policy of insurance shall name Landlord as an additional insured.
During the construction of any Tenant Improvement Work, Tenant shall provide or
cause Contractor to provide all-risk builder's insurance in such form and amount
as is required by Landlord. Tenant shall provide Landlord with certificates of
insurance naming Landlord as an additional insured prior to the commencement of
the Tenant Improvement Work. At the request of Landlord, Tenant shall also
provide Landlord with a copy of Contractor's most recent financial statements
and proof of bondability.
4.2 Special Conditions. Tenant shall incorporate into the contract
with Contractor the following items as "Special Conditions:"
4.2.1 Contractor shall diligently perform its work in a manner
and at times which do not unreasonably impede or delay any other work at the
Building.
4.2.2 Contractor shall be responsible for the repair,
replacement, and clean-up of any damage caused by Contractor at or to the Second
Amendment Premises, the Building, the Research Complex.
4.2.3 Except as shown on the final Landlord-approved Tenant
Improvement Plans, Contractor shall: (a) obtain written approval from Landlord
prior to penetrating any structural portion of the Building including, without
limitation, any floor slab, roof, or load bearing wall; and (b) obtain prior
written approval of such work by a structural engineer acceptable to Landlord.
Landlord's approval shall not relieve Tenant or Contractor from responsibility
for damage to the Building because of any such penetration by Contractor.
4.2.4 Contractor shall store all construction materials and
contain all operations within the relevant Build-Out Sites and such other space
as Landlord may specifically permit in writing. Contractor shall at all times
avoid interfering with or delaying other work and other tenants at the Research
Complex. All trash, construction debris, and surplus construction materials
shall be promptly removed from the Research Complex by Contractor.
4.2.5 Contractor shall notify Landlord in advance in writing,
and obtain Landlord's written prior approval: (a) two (2) business days in
advance of any
6
<PAGE> 29
work to be done on weekends or of any interruption of Building services; and (b)
one (1) business day in advance of any work to be done at other than regular job
hours.
4.2.6 Contractor shall comply with all applicable federal,
state, and local laws, codes, rules, and regulations governing the performance
of the Tenant Improvement Work, and all applicable regulations established by
Landlord for the Research Complex, including, without limitation, the procedures
for maintenance of air quality during construction set out by Landlord.
4.2.7 Neither Contractor nor any subcontractors shall post
signs at the Research Complex without first obtaining Landlord's written
consent, except for those necessary for health and safety.
4.2.8 Work performed by Contractor shall be performed in a
manner so as to avoid any labor dispute which results in a work stoppage or
impairment.
4.2.9 Access to other tenant's premises are to be scheduled at
least two (2) business days in advance and are to be requested in writing.
4.2.10 No music, animals, or inappropriate language is allowed
at the Building.
4.2.11 Construction personnel are to use the entrance,
elevator, or emergency stairs designated by Landlord. Loading of construction
materials, supplies, trash, and office/laboratory equipment shall not exceed the
maximum load requirement for each elevator or floor.
4.2.12 No construction parking is permitted in the designated
visitor parking stalls, in front of the Building's main entrance, in the loading
dock area, in the designated ambulance space, or in the vehicle area of the
basement of the Building.
4.2.13 Prior to the use or installation of heavy equipment of
any kind on the Building roof, written review and approval of the proposed
installation by a structural engineer acceptable to Landlord is required.
7
<PAGE> 30
ARTICLE 5
TENANT IMPROVEMENT (SECOND AMENDMENT) ALLOWANCE
5.1 Second Amendment Allowance. Payment to Contractor of portions of
the Second Amendment Allowance shall be made by Landlord subject to Subsections
8.3 and 8.6 of the Lease, and disbursed as provided below. Any additional funds
which may be needed to complete the Tenant Improvement Work, or any work related
thereto, shall be paid by Tenant. Tenant shall provide Landlord with evidence
reasonably acceptable to Landlord of the availability of such additional funds.
5.2 Disbursements. Payments from the Second Amendment Allowance
shall be made no more frequently than on a monthly basis by Landlord. Payments
shall be released only upon the approval of Architect who shall prepare a
monthly certificate for payment which shall be submitted to Landlord and which
in turn shall be based upon invoices from Contractor and others (including
Architect) for work completed to date and for services or materials provided to
date. The certificate shall be submitted to Landlord at least ten (10) business
days prior to the date the disbursement is requested and shall include: (a)
copies of bills received by Tenant for all sums expended or due; (b) to the
extent applicable, a statement from Architect that states that the Tenant
Improvement Work for which the previous disbursement was made was completed in
accordance with the final Landlord-approved Tenant Improvement Plans; and (c)
such other documentation or information as may be requested by Landlord. All
submittals for payment shall be accompanied by a lien release, conditioned upon
receipt of the applied for payment, executed by Contractor and when applicable,
by subcontractors, suppliers, and others who provided work, services, or
material to the Build-Out Site. At Landlord's option, disbursements may be made
directly to Architect, Contractor, subcontractors, materialmen, laborers, and
other persons planning or performing the Tenant Improvement Work.
5.2.1 Landlord shall have no obligation to make any
disbursement of the Second Amendment Allowance if the Tenant Improvement Work
shall have been materially injured or damaged by fire or other casualty, unless
Tenant shall demonstrate to landlord's reasonable satisfaction that Tenant has
sufficient funds available to complete the Tenant Improvement Work.
5.2.2 Landlord shall have the right to decline to make any
requested disbursement if Landlord, in the exercise of its reasonable
discretion, determines that the Tenant Improvement Work with respect to which
the disbursement has been requested has not been constructed substantially in
accordance with the final
8
<PAGE> 31
Landlord-approved Tenant Improvement Plans and as otherwise required by this
Work Letter or the Lease.
5.2.3 Landlord shall have no obligation to make a disbursement
from the Second Amendment Allowance for any Tenant Improvement Work if Landlord
has not received Architect's certificate and the other documentation required
under Section 5.2 above.
5.3 Outside Date. Any Second Amendment Allowance funds not disbursed
by December 31, 1999, shall remain with Landlord and no longer be available to
Tenant.
5.3.1 Tenant shall pay for all Tenant Improvement Work costs
in excess of the available Second Amendment Allowance within thirty (30) days of
invoicing by the party providing such work or materials, and shall obtain and
deliver to Landlord unconditional lien releases in connection with such payment.
5.3.2 Notwithstanding Section 5.3.1, if Tenant is unable to
obtain unconditional lien releases or if any liens are filed against the
Building or the Research Complex as a result of the Tenant Improvement Work,
then within thirty (30) days after completion of the work or immediately after
receipt of notice of any lien, Tenant shall cause the lien or lien rights to be
released of record or to be bonded over by a bond reasonably satisfactory to
Landlord in the amount of 150% of the amount of such lien.
5.4 Use of Second Amendment Allowance. The Tenant Improvement Work
chargeable against the Second Amendment Allowance may include, in addition to
the cost of construction for work shown on the final Landlord-approved Tenant
Improvement Plans, the cost of space planning, engineering work, and building
permits. Tenant shall be responsible for the cost of the matters described in
Section 2.3 above, which cost shall not be charged against the Second Amendment
Allowance. In addition, the Second Amendment Allowance shall not be used, among
other things, for the following: (a) the purchase of equipment, furnishings, or
other personal property for Tenant or for the Second Amendment Premises; (b)
costs for improvements which are not shown on or described in the final
Landlord-approved Tenant Improvement Plans unless otherwise approved by Landlord
in writing; (c) attorneys' fees and costs incurred by Tenant in connection with
the negotiation of construction contracts, and attorneys' or experts' fees and
costs or other expenses incurred by Tenant in connection with disputes with
Landlord or third parties; (d) costs incurred as a consequence of delay (unless
the delay is caused by
9
<PAGE> 32
Landlord and excepting any Permitted Delay); (e) construction defects or
defaults caused by Architect, Contractor, or any subcontractor or supplier; (f)
costs recoverable by Tenant on account of warranties or insurance; and (g)
wages, labor, and overhead for Tenant's employees or for overtime or premium
time unless approved by Landlord in writing.
5.5 Responsibilities. Architect and Tenant shall jointly be
responsible for ensuring that all construction work is carried out by Contractor
in accordance with the final Landlord-approved Tenant Improvement Plans, and
Contractor shall in turn be responsible for the execution of the Tenant
Improvement Work in accordance with the final Landlord-approved Tenant
Improvement Plans and as directed by Architect and Tenant.
ARTICLE 6
MISCELLANEOUS
6.1 Work Completion. "Substantially Complete" shall mean: (a)
Contractor has completed the Tenant Improvement Work as shown on the final
Landlord-approved Tenant Improvement Plans (subject only to a punch list of
items that do not materially interfere with Tenant's use of the Build-Out Site);
Tenant has obtained a temporary certificate of occupancy or similar occupancy
permit from the City of Seattle or other appropriate governmental agency; or (c)
a substantial completion certificate has been given by Architect to Landlord.
6.2 Lender Requirements. This Work Letter is subject to any
requirements of Landlord's lender, if any, and Tenant agrees to cooperate with
Landlord in meeting Landlord's lender's requirements and in obtaining said
lender's approvals.
6.3 Delays. "Permitted Delay" shall mean: (a) the occurrence of a
force majeure such as the unavailability of supplies or strikes by trade groups
necessary for Substantial Completion of work; (b) extraordinary acts of
government that force a general halt of construction at the Building and in the
surrounding vicinity; or (c) governmental or regulatory delays in inspecting or
approving Tenant Improvement Work, in each case beyond the reasonable control of
Tenant.
6.4 Approvals. In all cases where this Work Letter provides for
approval by Landlord or Tenant, the approval may not be unreasonably withheld or
delayed unless such provision states to the contrary. Except where otherwise
specifically provided, where approval is required, the reviewing party shall
respond within ten
10
<PAGE> 33
(10) business days, either granting its approval or giving the other party
detailed information as to what is not acceptable and why.
6.5 Modification. No modification, waiver, or amendment of this Work
Agreement or of any of its conditions or provisions shall be binding upon
Landlord or Tenant unless in a writing signed by Landlord and Tenant.
6.6 Counterparts. This Work Letter may be executed in any number of
counterparts but all counterparts taken together shall constitute a single
document.
6.7 Governing Law. This Work Letter shall be governed by, construed,
and enforced in accordance with the laws of the State of Washington.
6.8 Time of the Essence. Time is of the essence of this Work
Agreement and of each and all of the provisions thereof.
6.9 Severability. If any term or provision of this Work Letter is
declared invalid or unenforceable, the remainder of this Work Letter shall not
be affected by such determination and shall continue to be valid and
enforceable.
6.10 Merger. All understanding and agreements, oral or written,
heretofore made between the parties hereto and relating to Landlord's Work are
merged in this Work Letter, which alone (but inclusive of provisions of the
Lease incorporated herein and the final Landlord-approved Tenant Improvement
Plans) fully and completely expresses the agreement between Landlord and Tenant
with regard to the matters set forth in this Work Letter.
6.11 Liability. Tenant shall indemnify and hold Landlord harmless
from all costs, expenses, losses, claims, liabilities, and damages to the
Research Complex or to the person or property of tenants or guests at the
Research Complex arising in connection with or related to the performance of the
Tenant Improvement Work by Tenant, Contractor, any subcontractor, or
representatives of such parties.
6.12 Entire Agreement. This Work Letter is made as a part of and
pursuant to the Lease and, together with the Lease, constitutes the entire
agreement of the parties with respect to the subject matter hereof. This Work
Letter is subject to all of the terms and limitation set forth in the Lease, and
neither party shall have any rights or remedies under this Work Letter separate
and apart from their respective remedies pursuant to the Lease.
6.13 Captions. The headings and captions in this Work Letter are for
purposes of convenience only and shall not be used to modify or interpret any of
the provisions herein.
IN WITNESS WHEREOF, the parties hereto have executed this Work Letter as
of the date first above written.
11
<PAGE> 34
Landlord: Tenant:
Alexandria Real Estate Equities, Inc. Corixa Corporation
By:_______________________________ By:_______________________________
Name:_____________________________ Name:_____________________________
Its:______________________________ Its:______________________________
12
<PAGE> 35
EXHIBIT E
DIAGRAM OF THE SECOND AMENDMENT BASEMENT SPACE
[drawing]
13
<PAGE> 1
EXHIBIT 10.12
AMENDMENT NO. 2 TO LICENSING AGREEMENT
This Amendment No 2 to licensing Agreement (this "Amendment"), dated as of July
31, 1998 is entered into by and between the Dana-Farber Cancer Institute, Inc.,
a Massachusetts non-profit corporation ("DFCI"), and Corixa Corporation, a
Delaware corporation ("Corixa").
RECITALS
A. DFCI and Corixa are parties to that certain Licensing Agreement, dated as
of January 1, 1995 (the "License Agreement"), as amended on September 15,
1997, pursuant to which DFCI has granted to Corixa certain rights under
the Patent Rights and Technical Information as defined therein.
B. DFCI and Corixa desire to amend the License Agreement as set forth below.
NOW THEREFORE, the parties hereto agree to amend the License Agreement as
follows:
AMENDMENT
1. DEFINITIONS
Except as otherwise defined herein, capitalized terms used in this Amendment
shall have the meanings designated in the License Agreement.
2. DUE DILIGENCE
The last line of Section 3.1 shall be deleted and replaced with the
following:
File IND By 12/98
3. FULL FORCE AND EFFECT
Except as amended hereby, the License Agreement shall remain in full force and
effect in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly
executed as of the date first above written.
DANA-FARBER CANCER INSTITUTE, INC. CORIXA CORPORATION
By: /s/ RUTH EMYANIZOFF, PH.D. /s/ MARK MCDADE
-------------------------------- -------------------------------------
Ruth Emyanizoff, Ph.D. Mark McDade
Director, Office of Technology Chief Operating Officer
Transfer
1
<PAGE> 1
EXHIBIT 10.26
BANQUE NATIONALE DE PARIS
SAN FRANCISCO BRANCH
August 21, 1998
Corixa Corporation
Attn.: Ms. Michelle Burris
Vice President of Finance
and Administration
1124 Columbia Street, Suite 464
Seattle, WA 98104
RE: CONFIRMATION LETTER - PURCHASE OF $7,000,000 LOAN FACILITY
Dear Ms. Burris:
This will confirm that BANQUE NATIONALE DE PARIS, a French banking
corporation acting through its San Francisco Branch (the "Bank"), has purchased
from The Sumitomo Bank, Limited ("Sumitomo"), 100% of that certain loan facility
available to CORIXA CORPORATION, a Delaware corporation ("Borrower"), in the
aggregate principal amount of up to $7,000,000, including all of Sumitomo's
interest in, and all of Borrower's obligations in respect of, any and all loans
made thereunder, as evidenced by and including all of the following documents
and agreements:
1. That certain Loan Agreement, dated as of December 29, 1997 (the
"Loan Agreement"), by and between Borrower and Sumitomo, concerning the Loan;
2. That certain Irrevocable Instructions and Power of Attorney, dated
as of December 29, 1997 (the "Irrevocable Transfer Instructions"), by and among
Borrower, Sumitomo, and Wells Fargo Bank, N.A., as account holder (the "Account
Holder"), concerning that certain Wells Fargo Investment Management Account No.
358-213128; and
3. Concerning that certain Custodial Investment Account No. 658258 (the
"Former Custodian Account") maintained at Sumitomo Bank of New York Trust
Company ("Sumitomo
<PAGE> 2
Corixa Corporation
August 21, 1998
Page 2
Trust"), (a) that certain Custodian Agreement - Company Account, dated December
29, 1997 (the "Custodian Agreement"), between Borrower and Sumitomo Trust, (b)
that certain Restricted Account and Security Agreement, dated as of December 29,
1997 (the "Security Agreement"), by and among Borrower, Sumitomo, and Sumitomo
Trust, and (c) that certain Collateral Bailment Agreement, dated as of December
29, 1997 (the "Bailment Agreement"), by and among Borrower, Sumitomo, and
Sumitomo Trust.
The foregoing described documents and agreements, together with all
documents and agreements incident thereto, and as modified by the Assignment
Agreement (hereinafter described), are collectively referred to in this letter
(this "Confirmation Letter") as the "Loan Documents."
In connection with such purchase, the Bank has been substituted in the
place and stead of Sumitomo, and BANK OF THE WEST, acting by and through its
Trust and Investment Services Division ("BOW") has been substituted in the place
and stead of Sumitomo Trust, under the Loan Documents, in accordance with and
subject to the terms and conditions of that certain Purchase Agreement, dated as
of even date herewith, between Sumitomo and the Bank, and that certain
Assignment and Assumption Agreement, dated as of even date herewith (the
"Assignment Agreement"), by and among Sumitomo, Sumitomo Trust, Borrower,
Account Holder, the Bank, and BOW. Accordingly, all of Borrower's obligations to
Sumitomo and Sumitomo Trust under and in respect of the Loan Documents have been
purchased by and assigned to the Bank and to BOW, respectively.
In light of the foregoing, we wish to clarify the following described
terms of the Loan Documents.
A. THE LOAN AGREEMENT.
This will confirm that, from and after the date hereof and until otherwise
modified in writing in accordance with its terms, the terms of the Loan
Agreement shall reflect the following:
1. Concerning requests for funding, Schedule 2.1(b) to the Loan
Agreement (entitled "Election Notice") shall be revised as set forth in
Attachment 1 hereto.
2. Concerning payments, the first sentence of Section 2.3(b) of the
Loan Agreement shall read as follows:
<PAGE> 3
Corixa Corporation
August 21, 1998
Page 3
The Borrower shall make all payments hereunder in U.S. Dollars and
in immediately available funds via wire transfer (or as the Bank may
otherwise notify the Borrower in writing hereafter), as follows:
To: Federal Reserve Bank of New York
BNF: BNP San Francisco, Attn.: Peggy Tatum
RFB: [principal paydown/commitment fee/interest payment etc.]
OBI: Corixa Corporation
ABA No.: 14334000176 Banque Nationale de Paris
3. Concerning addresses for notices, requests, reports and other
communications, Section 9.7 of the Loan Agreement shall be modified by deleting
the addresses for the Bank and Bank's Counsel set forth therein and by replacing
them with the following:
If to Bank: Banque Nationale de Paris
San Francisco Branch
180 Montgomery Street
San Francisco, CA 94104
Attn.: Katherine Wolfe, Vice President
Telephone: (415) 956-0707
Facsimile: (415) 296-8954
If to Bank's Counsel: Lillick & Charles LP
Two Embarcadero Center, Suite 2700
San Francisco, CA 94111
Attn.: Harry Pfeifer or David Serepca
Telephone: (415) 984-8200
Facsimile: (415) 984-8300
4. All of Borrower's indemnity obligations contained the Loan
Agreement, including but not limited to Section 2.5 (entitled "Indemnification;
Increased Costs"), Section 2.7 (entitled "Change in Legality"), Section 5.4
(entitled "Fees and Expenses"), Section 5.7 (entitled "Certain Taxes"), and
Section 9.1 (entitled "Indemnity; Additional Fees"), shall run directly and
exclusively to Banque Nationale de Paris.
B. THE CUSTODIAN AGREEMENT AND THE CUSTODIAN ACCOUNT.
This will further confirm that, from and after the date hereof:
<PAGE> 4
Corixa Corporation
August 21, 1998
Page 4
1. Concerning the Custodian Account, this will confirm that such
Custodian Account is being contemporaneously transferred to BOW, and BOW has
opened Custodial Investment Account No. 80-3006-00 (the "New Custodian
Account"). Therefore, all references in the Loan Documents to the Former
Custodian Account shall, from and after the date hereof, mean and refer to the
New Custodian Account at BOW.
2. Concerning the New Custodian Account, this will confirm that the fee
for maintaining such account shall be $1,000 per annum, four years advance
payment of which you have paid to Sumitomo Trust and which is being
contemporaneously transferred to BOW; provided, however, that from and after the
date on which the Bank makes a Demand (as defined in and under the Irrevocable
Transfer Instructions, as modified as of the date hereof), Borrower shall pay
custodial account fees in accordance with BOW's Custodial Agency Account Fee
Schedule, a copy of which is set forth in Attachment 2 hereto. This will further
confirm that the foregoing fee arrangement replaces Schedule 1 to the Custodian
Agreement.
3. Concerning the choice of law to govern the interpretation of the
Custodian Agreement, this will confirm that Section 18 thereof shall be replaced
with the following:
18. This Agreement is to be governed by and construed in
accordance with the internal laws of the State of California.
4. The terms and conditions of the Custodian Agreement may not be
amended or otherwise modified by Borrower, except as and to the extent approved
in writing by BOW and by Banque Nationale de Paris.
5. Concerning the location of physical securities pursuant to Section 2
of the Custodian Agreement, this will confirm that the following sentence shall
be added to this provision:
Registered securities shall be held in the name of the Custodian, the
Custodian's Depository, or the Custodian's Nominee.
C. THE SECURITY AGREEMENT.
This will confirm that the terms of the Security Agreement, from and after
the date hereof and until otherwise modified in writing in accordance with the
terms of the Security Agreement, shall reflect the following:
1. Concerning the choice of law to govern the interpretation of the
Security Agreement, this will confirm that Section 5.2 thereof shall be replaced
with the following:
<PAGE> 5
Corixa Corporation
August 21, 1998
Page 5
5.2 Governing Law. This Agreement, and the rights of the parties
hereunder, shall be governed by and construed in accordance with the
internal laws of the State of California.
2. Borrower pledges, transfers and assigns to Banque Nationale de
Paris, and grants to such Bank a first priority security interest in and to and
lien upon, (a) the New Custodian Account and (b) all of Borrower's right, title
and interest therein, and in all tangible and intangible property, including but
not limited to all investment property and all money, now or hereafter therein,
and all proceeds thereof or therefrom, together with (c) all of Borrower's
rights now or hereafter existing against BOW and Investment Services, as Bailee,
with respect to the foregoing and the collateral described on Exhibit 2.3 to the
Security Agreement, which is incorporated herein by this reference, and
maintained from time to time in the New Custodian Account, all of which shall
constitute the "Collateral," as such term is used in the Loan Documents. All
references to and use of the term "Collateral" in the Loan Documents shall, from
and after the date hereof, mean and refer to the property described in this
paragraph.
3. All of Borrower's indemnity obligations contained in the Security
Agreement, including but not limited to Section 4.4 (entitled
"Indemnification"), shall run directly and exclusively to Banque Nationale de
Paris.
D. THE BAILMENT AGREEMENT.
This will confirm that the terms of the Bailment Agreement, from and after
the date hereof and until otherwise modified in writing in accordance with the
terms of the Bailment Agreement, shall reflect the following:
1. Concerning the duties of the Bailee under the Bailment Agreement,
Section 3.5 thereof shall provide as follows:
3.5 [Bailee will, unless Bank waives compliance in writing:] Hold
or cause to be held any instruments or certificates representing any
Collateral only in the State of California[.]
2. Concerning the choice of law to govern the interpretation of the
Bailment Agreement, Section 5.3 thereof shall be replaced with the following:
5.3 This Agreement shall be governed by, construed and interpreted
under the internal laws of the State of California.
<PAGE> 6
Corixa Corporation
August 21, 1998
Page 6
3. Concerning the addresses for notices to Bailee and the Bank under
and in respect of the Bailment Agreement (found on the signature page thereof),
such addresses shall be as follows:
If to Bailee: Bank of the West
Trust and Investment Services Division
50 West San Fernando Street
San Jose, CA 95113
Attn.: Clarence Herndon
Telephone: (408) 998-6860
Facsimile: (408) 971-0933
If to Bank: Banque Nationale de Paris
San Francisco Branch
180 Montgomery Street
San Francisco, CA 94104
Attn.: Katherine Wolfe or Mark McElwain
Telephone: (415) 956-0707
Facsimile: (415) 296-8954
E. MISCELLANEOUS.
1. By countersigning and returning this Confirmation Letter where
indicated below, Borrower acknowledges and agrees to all of the terms and
conditions contained herein, as of the date first written above. Borrower
further ratifies, reaffirms and remakes as of the date hereof, each
representation and warranty and each covenant, including but not limited to each
financial covenant, contained in the Loan Documents, as if each were set forth
herein in full. Borrower further acknowledges Sumitomo's delivery of notice in
accordance with and in satisfaction of Section 9.13(c) of the Loan Agreement.
Borrower agrees that, except as and to the extent expressly modified hereby, the
Loan Documents are and shall at all times remain in full force and effect.
2. Any capitalized term used in this Confirmation Letter and not
specifically defined herein shall have the meaning assigned to such term in the
Loan Agreement. In the event there exists any conflict between the definitions,
terms or provisions contained in this Confirmation Letter and any Loan Document,
the terms of this Confirmation Letter shall control.
Very truly yours,
BANQUE NATIONALE DE PARIS
<PAGE> 7
Corixa Corporation
August 21, 1998
Page 7
By /s/WILLIAM J. HERRAN
-------------------------------------
Name: William J. Herran
Title: Vice President
By /s/MARK McELWAIN
-------------------------------------
Name: Mark McElwain
Title: Assistant Vice President
ACKNOWLEDGED AND AGREED:
CORIXA CORPORATION
By /s/MICHELLE BURRIS
-------------------------------------
Name: Michelle Burris
Title: VP - CFO
BANK OF THE WEST,
acting by and through its Trust
and Investment Services Division,
as Custodian and Bailee
By /s/CLARENCE WHERNDON
-------------------------------------
Name: Clarence Wherndon
Title: Vice President, & Trust Officer
By /s/DIANA M. SAIDIN
-------------------------------------
Name: Diana M. Saidin
Title: Vice President & Trust Officer
<PAGE> 8
Attachment 1
to Confirmation Letter - Purchase of $7,000,000 Loan Facility
REVISED SCHEDULE 2.1(b) TO LOAN AGREEMENT
ELECTION NOTICE
VIA FACSIMILE TRANSMISSION (415/296-8954)
TO: BANQUE NATIONALE DE PARIS, SAN FRANCISCO BRANCH
DATE: ________ ___, ____
RE: CORIXA CORPORATION
Gentlemen and Ladies:
This Election Notice is delivered to you pursuant to Section 2.1(b) and/or
(d) of the Loan Agreement, dated as of December 29, 1997 (as modified as of
August __, 1998, and together with all amendments, if any, from time to time
made thereto, the "Loan Agreement"), by and among Corixa Corporation (the
"Borrower") and Banque Nationale de Paris, San Francisco Branch (the "Bank"),
assignee of The Sumitomo Bank, Limited.
Unless otherwise specifically defined herein or unless the context
otherwise requires, capitalized terms used herein have the meanings provided
therefor in the Loan Agreement. The undersigned Borrower hereby gives you
irrevocable notice of the activity specified below:
1. Effective Date:
2. Activity Requested:
a. New Borrowing $____________ Prime_____________ LIBOR
b. Continuation $____________ LIBOR Only
c. Conversion:
(i) Prime to LIBOR $
(ii) LIBOR to Prime $
d. Repayment $
3. Duration of interest period for LIBOR rate loans (one, two, three,
six or, if available, twelve months): ____________ months.
Election Notice
_______ ___, ____
Page 2
<PAGE> 9
The undersigned hereby certifies that the following statements are true on
the date hereof, and will be true on the proposed
Borrowing/Continuation/Conversion date, before and after giving effect thereto
and to the application of the proceeds therefrom:
a. The representations and warranties of the Borrower contained in
Article III of the Loan Agreement are true and correct in all
material respects as though made on and as of the
Borrowing/Continuation/Conversion date (except to the extent such
representations and warranties expressly refer to an earlier date,
in which case they are true and correct as of such earlier date);
b. No Trigger Event has occurred and is continuing, or would result
from such proposed Borrowing/Continuation/Conversion; and
c. No Default or Event of Default has occurred and is continuing, or
would result from such proposed Borrowing/Continuation/Conversion.
Please wire transfer the proceeds of the Borrowing to the account(s) at
the financial institution(s) indicated below:
Wire Amount:
Receiving Bank:
City/State:
ABA Number:
For Credit to:
Reference:
CORIXA CORPORATION
By
Name:
Title:
<PAGE> 10
Attachment 2
to Confirmation Letter - Purchase of $7,000,000 Loan Facility
REVISED SCHEDULE 1 TO CUSTODIAN AGREEMENT
[BOW's Custodial Agency Account Fee Schedule to be attached.]
<PAGE> 11
BANK OF THE WEST [logo] Trust & Investment Services
Division
Custodial Agency Account Fee Schedule
Acceptance Fee: $500 Minimum
Additional charges $125 per hour
Base Fee: $450
Ad Valorem Fee: First $5 Million 10%
Over $5 Million Negotiated
Trade Fees: $15 - Maturities/Redemptions
$75 - Limit Orders
$30 - DTC, Non-DTC, Mutual Funds
$100 - Options
Minimum Fee: $2,500 including base fee
Termination Fee: $500 Minimum - plus security transfer fees ($25 per asset)
Additional charges billed at $125 per hour A full year's fee
will be projected and charged if the account terminates within
the first year of operation.
All fees are calculated and charged monthly
****
See Page 2 - Special service fees may apply
ACCEPTED BY:
- -----------------------------------------
(Signature) (Date)
- -----------------------------------------
(Signature) (Date)
Bank of the West reserves the right to adjust its fee schedule from time to time
upon 60 days notice.
Revised 4/98 Page 1 of 2
<PAGE> 12
BANK OF THE WEST [logo] Trust & Investment Services
Division
SPECIAL SERVICE FEES
ASSET FEES
Limited Partnerships $125 per asset per year
Plus annual appraisal fees
GNMAs, FNMAs, CMOs $100 per asset per year
Notes & Mortgages $150 setup fee per asset
$75 per asset per year
Closely Held Securities $50 per asset per year
Insurance Policies $40 per asset per year
Real Estate $250 setup fee per asset
Tri-annual appraisals-actual cost
(no appraisal required for grantor occupied
residence) $300 per year holding fee for personal
residence (grantor occupied)
Non Bank CDs $50 per asset per year
Oil/Mineral/Gas
(Producing/non-producing) $125 per asset per year
SERVICE FEES
Bookkeeping Fee $250 or $500 minimum per year depending on
activity level (covers bill paying, rent
collection, payroll, excess transactions) $50 per
discretionary distribution request in excess of 4
per year
Tax Preparation $525 - standard state & federal fiduciary returns
(an additional fee is charged for more complex tax
Preparation)
Sub-Account Fee $500 per sub-account per year
Wire Transfer Fees $30 per outgoing wire
Stop Payments No Fee - 10 calendar day waiting period
$25 per stop payment before the 10 day waiting
period
OD/Client Responsibility $25 per occurrence - use of funds changes may
apply
Extra Statements $25 each - quarterly cycle
(2 included w/each account) $15 each - monthly cycle
Investment Reviews $25 each - quarterly cycle
$15 each - monthly cycle
Statement of Investment
Performance $175 per year - quarterly reporting
****
Other fees may apply for special and extraordinary services provided. Such
services may include but are not limited to, acquisition of real property
through foreclosure and its maintenance and sale, litigation, arbitration,
mediation, audits, preparation of special or customized reports, research, and
extraordinary travel. Out of pocket expenses (i.e. Federal Express, certified
mail, stock certification fees, etc.) will be reimbursed at cost.
Revised 4/98 Page 2 of 2
<PAGE> 1
EXHIBIT 10.27
ASSIGNMENT AND ASSUMPTION AGREEMENT
CORIXA CORPORATION
This ASSIGNMENT AND ASSUMPTION AGREEMENT (the "Assignment/Assumption
Agreement") is made and entered into as of the 21st day of August, 1998, by and
among THE SUMITOMO BANK, LIMITED, a Japanese banking corporation ("Seller"), as
Assignor Bank, SUMITOMO BANK OF NEW YORK TRUST COMPANY ("Sumitomo Trust"), as
Assignor Bailee and Assignor Custodian, CORIXA CORPORATION, a Delaware
corporation ("Borrower"), WELLS FARGO BANK, N.A. ("Account Holder), BANQUE
NATIONALE DE PARIS ("Buyer"), as Assignee Bank, and BANK OF THE WEST, acting by
and through its TRUST AND INVESTMENT SERVICES DIVISION ("Bank West"), as
Assignee Bailee and Assignee Custodian.
R E C I T A L S:
A. WHEREAS, Seller entered into that certain Loan Agreement dated
December 29, 1997 by and between Seller and Corixa Corporation, a Delaware
corporation (the "Borrower") whereby Seller agreed to loan to Borrower sums not
to exceed an aggregate principal amount of Seven Million Dollars ($7,000,000.00)
(the "Loan") in one or more disbursements, upon the terms and conditions more
particularly described therein (the "Loan Agreement");
B. WHEREAS, in connection with the Loan Agreement, Borrower,
Seller and certain other parties entered into the other Loan Documents (as
defined in the Loan Agreement), including the following:
1. That certain Irrevocable Instructions and Power of
Attorney by and among Wells Fargo Bank, N.A., as Account Holder,
Borrower and Seller, dated December 29, 1997 (the "Irrevocable
Instructions");
2. That certain letter Custodian Agreement -- Company
Account, dated December 29, 1997 ("Custodian Agreement") by and
among the Borrower and Sumitomo Bank of New York Trust Company
("Sumitomo Trust");
1
<PAGE> 2
3. That certain Restricted Account and Security Agreement
by and among Borrower, Seller, and Sumitomo Trust, as Bailee, dated
December 29, 1997 (the "Security Agreement"); and
4. That certain Collateral Bailment Agreement dated
December 29, 1997 by and among Borrower, Seller and Sumitomo Trust
as Bailee ("Collateral Bailment Agreement");
C. WHEREAS, on December 29, 1997, Seller made an initial
disbursement to Borrower of principal in the amount of Two Million Dollars
($2,000,000.00), evidenced by that certain promissory note dated December 29,
1997 ("Note 1");
D. WHEREAS, on April 1, 1998, Seller made a disbursement to
Borrower of principal in the amount of Two Million Dollars ($2,000,000.00),
evidenced by that certain promissory note dated April 1, 1998 ("Note 2");
E. WHEREAS, on May 22, 1998, Seller made a disbursement to
Borrower of principal in the amount of Two Million Dollars ($2,000,000.00),
evidenced by that certain promissory note dated May 22, 1998 ("Note 3"); Note 1,
Note 2 and Note 3 to be referred to collectively as the "Notes"); and
F. WHEREAS, Buyer and Seller have entered into a Loan Purchase
and Sale Agreement dated as of August 21, 1998 (the "Purchase Agreement"), for
the purchase of all of Seller's right, title and interest in the Loan by Buyer
(the "Loan Purchase");
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants and agreements set forth herein and certain other good and valuable
consideration, the sufficiency of which are hereby acknowledged, the parties
agree as follows:
A G R E E M E N T
1. DEFINITIONS.
1.1. The Loan Agreement, the Notes, the Irrevocable
Instructions, the Custodian Agreement, the Security Agreement, the Collateral
Bailment Agreement and all other Loan Documents (as defined in the Loan
Agreement) shall be referred to collectively herein as the Loan Documents;
1.2. The Purchase Agreement, this Assignment/Assumption
Agreement, and all certificates, documents and other instruments executed in
connection with the transaction contemplated by the Purchase Agreement shall be
referred to collectively herein as the Purchase Documents; and
2
<PAGE> 3
1.3. All capitalized terms not defined herein shall have the
meanings ascribed to them in the Loan Documents and the Purchase Documents.
2. ASSIGNMENT.
2.1. Seller hereby assigns all of its respective rights,
title and interest, including without limitation any beneficial interest and
third party interest, in, and delegates all of its obligations under, the Loan
Documents to Buyer, and Buyer accepts such assignment and assumes such
obligations without recourse to Seller. From and after the effective date
hereof, all references in the Loan Documents to Seller (including the defined
term "Seller" and any other defined term that references Seller) shall apply to
Buyer. The Loan Documents are hereby amended to effectuate the preceding
sentence.
2.2. Sumitomo Trust hereby assigns all of its rights, title
and interest in, and delegates all of its obligations under, the Custodian
Agreement, Security Agreement, and Collateral Bailment Agreement to Bank West,
and Bank West hereby accepts such assignment and assumes such obligations
without recourse to Seller. From and after the effective date hereof, all
references in the Loan Documents to Sumitomo Trust (including any defined term
that references Sumitomo Trust) shall apply to Bank West. The Loan Documents are
hereby amended to effectuate the preceding sentence.
3. ACKNOWLEDGMENT (BORROWER).
3.1. Borrower hereby (i) acknowledges the assignment of
Seller's interest in, and the delegation of Seller's obligations under, the Loan
Documents to Buyer, and Buyer's acceptance of such assignment and assumption of
such obligations; and (ii) releases Seller from all covenants, duties and
obligations under the Loan Documents.
3.2. Borrower hereby (i) acknowledges the assignment of
Sumitomo Trust's interest in, and delegation of its obligations under, the Loan
Documents to Bank West, and Bank West's acceptance of such assignment and
assumption of such obligations; and (ii) releases Sumitomo Trust from all
covenants, duties and obligations under the Loan Documents.
3.3. Buyer acknowledges that the Purchase Documents do not
modify or otherwise change the obligations to perform or the time of performance
under the Loan Documents, except only that following the closing of the sale of
the Loan from Seller to Buyer pursuant to the Purchase Documents ("Closing")
such performance by Borrower shall be owed to Buyer instead of Seller (as the
"Bank" under the Loan Documents) and owed to Bank West instead of Sumitomo Trust
(as the "Custodian" and as the "Bailee" under the Loan Documents), respectively.
3.4. Borrower agrees to execute such additional documents,
financing statements and other instruments, and to take such additional actions
as Seller, Buyer, Sumitomo Trust and Bank West may reasonably request in order
to complete the transaction contemplated by the Purchase Documents.
3
<PAGE> 4
4. ACKNOWLEDGMENT (ACCOUNT HOLDER)
4.1. Account Holder hereby acknowledges the assignment of
Seller's interest in, and the delegation of Seller's obligations under, the Loan
Documents to Buyer, and Buyer's acceptance of such assignment and assumption of
such obligations.
4.2. Account Holder hereby agrees to recognize Buyer as the
"Bank" under the Irrevocable Instructions and that Buyer is substituted for
Seller for all purposes under the Irrevocable Instructions.
4.3. Account Holder acknowledges that the Purchase Documents
do not modify or otherwise change its respective obligations under the
Irrevocable Instructions, except only that following the Closing all references
in the Irrevocable Instructions to Seller (including the defined term "Bank" and
any other defined term that references Seller) shall apply to Buyer. The
Irrevocable Instructions are hereby amended to effectuate the preceding
sentence.
4.4. Account Holder and Borrower each agree to execute such
additional documents, financing statements and other instruments, and to take
such action as Seller or Buyer may reasonably request in order to complete the
transaction contemplated by the Purchase Documents and modify the Irrevocable
Instructions accordingly.
5. POWERS OF ATTORNEY (BORROWER, BUYER). Effective as of the
Closing, Borrower hereby irrevocably constitutes and appoints Buyer and any
officer or agent thereof, in substitution for, place and stead of Seller, as its
true and lawful attorney-in-fact, as provided in, and upon all of the terms and
conditions of, the powers of attorney granted Seller in the Irrevocable
Instructions and Section 3.2 of the Security Agreement. The powers of attorney
granted herein are powers coupled with an interest and irrevocable for the terms
prescribed under the Loan Documents.
6. SURVIVAL OF INDEMNITIES. Notwithstanding any other provision
herein or in the Loan Documents, the parties agree that Seller's and Sumitomo
Trust's rights and remedies under the following provisions shall survive the
Closing (and that after the Closing such provisions shall apply to each of
Seller, Sumitomo Trust, Buyer and Bank West as the context requires): (i) Loan
Agreement Sections 9.1 (Indemnity; Additional Fees), 9.2 (Survival of Agreements
and Representations), and 9.11 (Relationship of the Borrower and the Bank); (ii)
Collateral Bailment Agreement Section 4 (Indemnification of Bailee); (iii)
Security Agreement Sections 4.4 (Indemnification), 4.5 (Bank Exculpations), and
4.6 (Bailee Exculpations); and (iv) all other obligations of Borrower to
indemnify Seller or Sumitomo Trust under the Loan Documents.
7. NOTICES. All notices, requests, reports and other
communications pursuant to this Assignment/Assumption Agreement must be in
writing, either by letter (delivered by hand or commercial delivery service or
sent by certified mail, return receipt requested) or facsimile or telecopier,
addressed as follows:
4
<PAGE> 5
If to Seller: The Sumitomo Bank, Limited
450 Lexington Avenue, Suite 1700
New York, New York 10017
Attn: Brian M. Smith, Senior Vice
President
Telephone: (212) 808-2325
Facsimile: (212) 818-0867
If to Sumitomo Sumitomo Bank of New York
Trust: Trust Company
Two World Financial Center
Tower B
225 Liberty Street, 35th Floor
New York, New York 10281
Attn: Wayne Bolin
Telephone: 212-224-5430
If to Seller's Freed & Heinemann LLP
or Sumitomo One Jackson Place
Trust's Counsel: 633 Battery Street, Suite 620
San Francisco, CA 94111
Attn: Peter Heinemann, Esq.
Telephone: (415) 986-0707
Facsimile: (415) 986-0999
If to Buyer: Banque Nationale De Paris
180 Montgomery Street
San Francisco, CA 94104
Attn: Katherine Wolfe, Vice President
Telephone: (415) 956-0707
Facsimile: (415) 296-8954
If to Buyer's Lillick & Charles LLP
Counsel: Two Embarcadero Center, Suite 2700
San Francisco, CA 94111
Attn: Harry Pfeifer or David Serepca
Telephone: (415) 984-8200
Facsimile: (415) 984-8300
If to Bank West: Bank of the West Trust and
Investment Services Division
50 West San Fernando Street
San Jose, CA 95113
Attn: Clarence Herndon
Telephone: (408) 971-0933
Facsimile: (408) 998-6860
5
<PAGE> 6
If to Borrower: Corixa Corporation
1124 Columbia Street, Suite 464
Seattle, WA 98104
Attn: Ms. Michelle Burris, Vice President
Telephone: (206) 667-5720
Facsimile: (206) 667-5715
If to Borrower's Venture Law Group
Counsel: 4750 Carillon Point
Kirkland, WA 98033
Attn: William Ericson, Esq.
Telephone: (425) 739-8700
Facsimile: (425)739-8750
If to Account Holder: Wells Fargo Bank, N.A.
525 Market Street, 10th Floor
MAC 0103-103
San Francisco, CA 94105
Attn: Mora Andrews
Re: Corixa Corporation;
Account No. 358-213128
Telephone: (415) 396-7188
Facsimile: (415) 975-6612
Any notice, request or communication hereunder will be deemed to have been given
(i) on the day on which it is delivered by hand to such party at its address
specified above, (ii) if sent by mail, on the third (3rd) Business Day following
the day it was deposited in the mail, postage prepaid, or (iii) if sent by
telecopy, when transmitted addressed as aforesaid on a Business Day during
normal business hours and receipt is confirmed, on such Business Day. Any party
may change the person or address to whom or which notices are to be given
hereunder, by notice duly given hereunder, provided, however, that any such
notice will be deemed to have been given hereunder only when actually received
by the party to which it is addressed.
80 MISCELLANEOUS PROVISIONS.
8.1. COUNTERPARTS. This Assignment/Assumption Agreement may
be executed in counterparts and shall be binding on all the parties hereto as if
one agreement had been signed.
8.2. CAPTIONS. The captions used in connection with sections
of this Assignment/Assumption Agreement are for convenience only, and shall not
be deemed to affect the meaning of any provision of this Agreement.
8.3. ADVICE OF COUNSEL. In entering into this
Assignment/Assumption Agreement, each party hereto represents that it has had
the opportunity to seek the advice of legal counsel of its choice and has either
obtained such advice or knowingly and willingly
6
<PAGE> 7
elected not to obtain such advice. Each party has had the opportunity to review
and propose revisions to this Assignment/Assumption Agreement and, accordingly,
the normal rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the interpretation
of this Assignment/Assumption Agreement or any amendment thereto.
8.4. FURTHER ASSURANCES. Each party shall deliver and execute
such instruments of transfer and other documents as may be reasonably requested
by another party and which are necessary to carry out the purposes and intent of
this Assignment/Assumption Agreement.
8.5. AUTHORITY. The parties represent and warrant to each
other that they have the right and authority to enter into and execute this
Assignment/Assumption Agreement.
8.6. BINDING EFFECT; ASSIGNMENT. This Assignment/Assumption
Agreement will be binding upon and inure to the benefit of Borrower and its
successors and assigns as permitted in the Loan Documents, and shall be binding
upon and inure to the benefit of Seller, Sumitomo Bank, Buyer and Seller West as
permitted in the Loan Documents and the Purchase Documents.
8.7. CONDITIONS. This Assignment/Assumption Agreement shall
be executed by the parties and deposited in escrow subject to and for delivery
at the Closing of the Loan Purchase. In the event that the Loan Purchase does
not close as provided in the Purchase Documents, this Assignment/Assumption
Agreement shall be deemed to have never been delivered, and the original
executed counterparts shall be returned to the respective parties.
IN WITNESS WHEREOF, the parties hereto have entered into this
Assignment/Assumption Agreement as of the date first set forth above.
<PAGE> 8
SELLER (ASSIGNOR BANK): BUYER (ASSIGNEE BANK):
THE SUMITOMO BANK, LIMITED, BANQUE NATIONALE DE PARIS,
a Japanese banking corporation a French banking corporation acting
through its San Francisco Branch
By: /s/DAVID G. HUME By: /s/WILLIAM J. LA HERRAN
----------------------------- -----------------------------
Name: David G. Hume Name: William J. La Herran
----------------------------- -----------------------------
Title: General Counsel Title: Vice President
----------------------------- -----------------------------
By: /s/BRIAN M. SMITH By: /s/MARK MCELWAIN
----------------------------- -----------------------------
Name: Brian M. Smith Name: Mark McElwain
----------------------------- -----------------------------
Title: Regional Vice President & Title: Assistant Vice President
----------------------------- -----------------------------
Regional Manager (East)
-----------------------------
7
<PAGE> 9
SUMITOMO TRUST BANK WEST
(ASSIGNOR CUSTODIAN/BAILEE): (ASSIGNEE CUSTODIAN/BAILEE):
SUMITOMO BANK OF NEW YORK BANK OF THE WEST TRUST AND
TRUST COMPANY, INVESTMENT SERVICES DIVISION,
a New York corporation
By: /s/SHINICHI ITO By: /s/CLARENCE W. HERNDON
------------------------------ ------------------------------
Name: Shinichi Ito Name: Clarence W. Herndon
------------------------------ ------------------------------
Title: President Title: Vice President & Trust Officer
------------------------------ ------------------------------
By: /s/ DIANA M. SAIDIN
------------------------------
Name: Diana M. Saidin
------------------------------
Title: Vice President & Trust Officer
------------------------------
8
<PAGE> 10
BORROWER: ACCOUNT HOLDER:
CORIXA CORPORATION, WELLS FARGO BANK, N.A.
a Delaware corporation
By: /s/MICHELLE BURRIS By: /s/J. MORA ANDREWS
----------------------------- -----------------------------
Name: Michelle Burris Name: J. Mora Andrews
----------------------------- -----------------------------
Title: VP - CFO Title: Assistant Vice President
----------------------------- -----------------------------
By: /s/JOHN VASCONCELLOS
-----------------------------
Name: John Vasconcellos
-----------------------------
Title: Vice President
-----------------------------
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CORIXA
CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AT AND FOR THE THREE MONTH
PERIOD ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,912,179
<SECURITIES> 40,564,766
<RECEIVABLES> 634,955
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,521,191
<PP&E> 10,054,321
<DEPRECIATION> 3,029,189
<TOTAL-ASSETS> 54,700,895
<CURRENT-LIABILITIES> 5,113,915
<BONDS> 11,707,243
0
0
<COMMON> 12,908
<OTHER-SE> 37,866,829
<TOTAL-LIABILITY-AND-EQUITY> 54,700,895
<SALES> 0
<TOTAL-REVENUES> 8,346,691
<CGS> 0
<TOTAL-COSTS> 31,330,271
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 512,806
<INCOME-PRETAX> (20,810,738)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20,810,738)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20,810,738)
<EPS-PRIMARY> (1.75)
<EPS-DILUTED> (1.75)
</TABLE>
