<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 2000
REGISTRATION NO. 333-91747
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ANTIGENICS INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C> <C>
DELAWARE 2836 06-1562417
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
630 FIFTH AVENUE, SUITE 2100
NEW YORK, NEW YORK 10111
(212) 332-4774
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
GARO H. ARMEN, PH.D.
CHIEF EXECUTIVE OFFICER
ANTIGENICS INC.
630 FIFTH AVENUE, SUITE 2100
NEW YORK, NEW YORK 10111
(212) 332-4774
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL LYTTON, ESQ. DANIELLE CARBONE, ESQ.
PAUL KINSELLA, ESQ. SHEARMAN & STERLING
PALMER & DODGE LLP 599 LEXINGTON AVENUE
ONE BEACON STREET NEW YORK, NEW YORK 10022
BOSTON, MASSACHUSETTS 02108 (212) 848-4000
(617) 573-0100
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ] ----------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ----------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ] ----------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE SECURITIES AND EXCHANGE COMMISSION
DECLARES OUR REGISTRATION STATEMENT EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED JANUARY 24, 2000
PRELIMINARY PROSPECTUS
3,000,000 SHARES
ANTIGENICS INC. [ANTIGENICS INC. LOGO]
COMMON STOCK
$ PER SHARE
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- - We anticipate that the initial public offering price will be between $14.00
and $16.00 per share.
- - This is a firm commitment initial public offering and no public market
currently exists for our shares.
- - Proposed trading symbol: Nasdaq
National Market - AGEN
----------------------
THIS INVESTMENT INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 8.
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<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- -----------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discount....................................... $ $
Proceeds to Antigenics...................................... $ $
</TABLE>
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The underwriters have a 30-day option to purchase up to 450,000 additional
shares of common stock from us to cover over-allotments, if any.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
U.S. BANCORP PIPER JAFFRAY ROBERTSON STEPHENS
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3
[Antigenics Logo]
- - Technology platform broadly applicable to cancer, infectious diseases and
autoimmune disorders
- - Evaluating lead product, Oncophage(R), in multiple phase II clinical trials
including kidney cancer, melanoma and colorectal cancer
- - Phase III clinical trial to commence in mid-2000
- - Lead infectious disease products in preclinical testing for genital herpes
- - Commercial scale manufacturing capacity in place
- - Nine issued United States patents cover use of our technology in treatment of
cancer, infectious diseases and autoimmune diseases
<TABLE>
<S> <C>
- -------------------------- -------------------------------------------------------------------------------------------
Clinical
Personalized Medicine Product Indication Research Preclinical Phase I/II Phase II
-------------------------------------------------------------------------------------------
CANCER
Oncophage(R) Kidney Cancer .............................................
Melanoma .........................................
Colorectal Cancer ...........................................
Gastric Cancer ...............................
Pancreatic Cancer .....................................
[Photo of vial] NHL ..........................
Sarcoma ..........................
HSPPC-70-C Various Cancers ..........
HSPPC-90-C Various Cancers ..........
HSPPC-56-C Various Cancers ..........
INFECTIOUS
DISEASES
HSPPC-96-GH Genital Herpes ...................
HSPPC-70-GH Genital Herpes ...................
HSPPC-56-I Various Infectious Diseases ..........
HSPPC-70-I Various Infectious Diseases ..........
AUTOIMMUNE
DISORDERS
gp96 Type 1 Diabetes ..........
Multiple Sclerosis ..........
[ANTIGENICS
LOGO]
- -------------------------- -------------------------------------------------------------------------------------------
</TABLE>
[PHOTO OF OUTSIDE OF BUILDING]
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 8
History of Antigenics....................................... 19
Use of Proceeds............................................. 20
Recent Financing............................................ 20
Dividend Policy............................................. 20
Forward-Looking Statements.................................. 21
Capitalization.............................................. 22
Dilution.................................................... 23
Selected Consolidated Financial Data........................ 24
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 26
Business.................................................... 31
Management.................................................. 49
Certain Relationships and Related Transactions.............. 55
Principal Stockholders...................................... 56
Description of Capital Stock................................ 58
Shares Eligible For Future Sale............................. 60
Underwriting................................................ 62
Legal Matters............................................... 64
Experts..................................................... 64
Where You Can Find More Information......................... 64
Index To Consolidated Financial Statements.................. F-1
</TABLE>
3
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SUMMARY
We describe the items in the following summary in more detail later in this
prospectus. This summary provides an overview of selected information and does
not contain all the information you should consider. Therefore, you should also
read the more detailed information set out in this prospectus, including the
financial information. We present information in this prospectus, except in the
consolidated financial statements or where we otherwise specify, to give effect
to our change from a limited liability company to a corporation which will occur
concurrently with the closing of this offering. In addition, except where we
indicate otherwise, we present information in this prospectus assuming that the
underwriters do not exercise their over-allotment option.
BUSINESS OF ANTIGENICS
Antigenics is engaged in the discovery and development of a family of novel
immunotherapeutics for the treatment of life threatening and chronic medical
conditions. Immunotherapeutics are drugs that work by modulating the immune
system to fight disease. We are currently evaluating our lead immunotherapeutic,
Oncophage, in six separate phase II or phase I/II clinical trials in four
different cancers, and we expect to start a pivotal phase III trial by mid-2000.
We are also developing immunotherapeutics to treat infectious diseases, such as
genital herpes, and autoimmune disorders, such as diabetes and multiple
sclerosis. Based upon our scientific and drug development skills, our technology
platform and our strategic expertise, we intend to become a leader in drug
discovery, development and commercialization.
Our immunotherapeutics are based on a specific class of proteins known as heat
shock proteins. Heat shock proteins are present in all cells throughout the body
and published research suggests that they play a central role in the generation
of immune responses. Inside cells, heat shock proteins naturally bind to protein
fragments called peptides. We refer to these combinations of heat shock proteins
and peptides as heat shock protein-peptide complexes. These complexes are our
immunotherapeutics. We believe that our immunotherapeutics elicit a powerful
immune response that is capable of systemically targeting and killing cancers or
other diseased cells from which the specific heat shock proteins originate.
We believe our heat shock protein technology is applicable to the treatment of a
wide variety of diseases. Each of our immunotherapeutics includes a heat shock
protein that is constant and a repertoire of peptides that varies depending on
the target disease. For a disease such as cancer, which varies among
individuals, we derive heat shock protein-peptide complexes from a patient's own
cancer and therefore our cancer immunotherapeutics are patient-specific, or
autologous. For each infectious disease, which is generally caused by a common
pathogen such as a virus or bacterium, we intend to produce a disease-specific
immunotherapeutic using that same common pathogen. In a wide range of
preclinical studies, we have shown that our immunotherapeutics stimulate the
immune system to target and destroy diseased cells. In addition, over one dozen
scientific institutions world-wide have independently confirmed various aspects
of our technology platform.
Our lead immunotherapeutic, Oncophage, consists of purified, patient-specific
heat shock protein-peptide complexes. The manufacturing process for Oncophage
begins when a surgeon removes a patient's tumor and ships it frozen by overnight
courier to our manufacturing facility. Using our proprietary methods, we purify
Oncophage from the tumor tissue in a process that takes less than 10 hours. We
then ship Oncophage frozen to the hospital for administration to the patient.
Four to six weeks after surgery, a doctor or nurse injects Oncophage into the
patient. The typical course of treatment involves a series of injections into
the skin once per week for four to six weeks.
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4
<PAGE> 6
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To date, we have treated approximately 160 advanced stage cancer patients with
Oncophage in our clinical trial programs. We have initially targeted cancers for
which there are limited or no treatment alternatives and cancers and stages of
disease that involve tumors that a doctor can surgically remove. Further, we
have targeted cancers and stages of disease which allow us to evaluate our
immunotherapeutics in clinical trials with near term endpoints. This should
permit us to rapidly and efficiently complete clinical trials and submit
regulatory filings. We are currently conducting separate phase II or phase I/II
clinical trials with Oncophage for the treatment of:
- renal cell carcinoma, a type of kidney cancer;
- metastatic melanoma, a type of skin cancer;
- colorectal cancer, or cancer of the colon and rectum; and
- gastric cancer, or stomach cancer.
In addition, we are planning to start separate phase II clinical trials
evaluating Oncophage as a treatment for sarcoma, a type of soft tissue cancer,
and non-Hodgkin's lymphoma, a type of cancer that originates in the lymph
tissue. We also expect to begin a pivotal phase III trial for Oncophage as a
treatment for renal cell carcinoma by mid-2000.
Preliminary results from our completed and ongoing clinical trials indicate that
Oncophage is generally safe and well tolerated. These results also demonstrate
preliminary indications of clinical benefit in a number of patients. For
example, in our renal cell carcinoma clinical trial, Oncophage has achieved a
response rate, a common measure of clinical benefit, comparable to that of the
existing approved treatment without the significant side effects associated with
that treatment. We have also shown that in all patients who responded
clinically, the number of immune cells increased after treatment with Oncophage.
Moreover, we have shown that we can manufacture Oncophage consistently and in
sufficient quantities from most tumor types.
In addition to cancer, we believe our immunotherapeutics may be effective in
treating various infectious diseases and autoimmune disorders. Our
immunotherapeutics for treating infectious diseases will consist of heat shock
proteins bound to peptides that are produced by disease-causing pathogens. Our
first infectious disease immunotherapeutic is intended for the treatment of
genital herpes. We anticipate filing an Investigational New Drug Application, or
IND, with the United States Food and Drug Administration, or FDA, for our
immunotherapeutic for genital herpes in 2000.
We are also researching the applicability of heat shock proteins to treat
autoimmune disorders like diabetes and multiple sclerosis. We have demonstrated
in a number of animal models that heat shock proteins administered in high doses
can turn off the misguided immune responses responsible for several autoimmune
disorders.
OFFICE LOCATION
We maintain our principal operations in Woburn, Massachusetts and our executive
offices in New York, New York. The address for our executive offices is 630
Fifth Avenue, Suite 2100, New York, New York 10111 and our telephone number is
(212) 332-4774.
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5
<PAGE> 7
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THE OFFERING
Common stock offered................ 3,000,000 shares
Common stock outstanding after this
offering............................ 23,715,942 shares. This number
excludes 1,696,423 shares of common
stock issuable upon exercise of
options outstanding at December 31,
1999, with a weighted average
exercise price of $5.89 per share and
280,886 shares issuable upon exercise
of warrants outstanding at December
31, 1999, with an exercise price of
$13.96 per share.
Offering price...................... $ per share
Use of proceeds..................... To fund clinical trials; to fund
research and development of our
immunotherapeutics; to increase our
manufacturing capacity; and for
general corporate purposes.
You should read our discussion under
"Use of Proceeds."
Proposed Nasdaq National Market
symbol.............................. AGEN
CORPORATE BACKGROUND AND MERGER
We formed our business in March 1994. We currently operate as a limited
liability company, Antigenics L.L.C. Concurrently with the completion of this
offering, Antigenics L.L.C. will change its structure from a limited liability
company to a corporation. This change will occur when we merge Antigenics L.L.C.
with and into Antigenics Inc., a newly formed Delaware corporation. In the
merger, equity holders, or members, of Antigenics L.L.C. will exchange
membership units, options and warrants in Antigenics L.L.C. for shares of
Antigenics Inc. common stock and options and warrants exercisable for shares of
Antigenics Inc. common stock.
This prospectus contains our trademark, Oncophage(R). Each trademark, trade name
or service mark of any other company appearing in this prospectus belongs to its
holder.
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6
<PAGE> 8
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 31, 1994
(DATE OF
YEAR ENDED DECEMBER 31, INCEPTION) TO
----------------------------------------------------- DECEMBER 31,
1995 1996 1997 1998 1999 1999
------- ------- ------- ------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenue................................. $ -- $ -- $ -- $ -- $ -- $ --
Operating expenses:
Research and development........... (742) (2,017) (2,563) (6,102) (10,977) (22,514)
General and administrative......... (2,453) (1,781) (1,549) (3,178) (6,875) (15,890)
Depreciation and amortization...... (40) (79) (202) (360) (1,005) (1,702)
------- ------- ------- ------- -------- --------
Loss from operations.................. (3,235) (3,877) (4,314) (9,640) (18,857) (40,106)
Interest income, net.................. 8 281 481 736 723 2,229
Non-operating income.................. -- 250 -- -- 10 260
------- ------- ------- ------- -------- --------
Net loss(1)........................... $(3,227) $(3,346) $(3,833) $(8,904) $(18,124) $(37,617)
======= ======= ======= ======= ======== ========
UNAUDITED PRO FORMA CONSOLIDATED
STATEMENT OF OPERATIONS DATA:
Pro forma net loss(2)................. $(18,124)
Pro forma net loss per common share,
basic and diluted(2)............... $ (1.00)
Pro forma weighted average shares
outstanding, basic and
diluted(2)......................... 18,144
</TABLE>
<TABLE>
<CAPTION>
AS OF
AS OF DECEMBER 31, DECEMBER 31, 1999
----------------------------- PRO FORMA,
1997 1998 1999 AS ADJUSTED(3)
------- ------- ------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................ $13,086 $22,168 $46,418 $87,780
Total current assets............................... 13,246 22,447 47,672 88,475
Total assets....................................... 14,090 26,636 56,004 96,807
Total current liabilities.......................... 878 2,285 2,171 1,974
Long-term liabilities, less current portion........ -- 709 2,155 2,155
Members' equity/stockholders' equity............... 13,212 23,641 51,678 92,678
</TABLE>
- ---------------------------------------------
(1)Since we have operated historically as a limited liability company, in
accordance with federal, state and local income tax regulations which provide
that no income taxes are levied on United States limited liability companies
and each member of the company is individually responsible for reporting the
member's share of our net income or loss, we have not provided for income
taxes in our consolidated financial statements.
(2)The unaudited pro forma consolidated statement of operations data give effect
to the change from a limited liability company to a corporation as though
this event occurred as of January 1, 1999. Each unit of members' equity
outstanding will be exchanged for 172.0336 shares of common stock. The
unaudited pro forma consolidated statement of operations data are unaudited
and reflect adjustments which are necessary, in our management's opinion, for
a fair presentation of our consolidated results of operations on a pro forma
basis. The number of pro forma weighted average shares outstanding used for
computing pro forma diluted loss per common share is the same as that used
for computing pro forma basic loss per common share because our options and
warrants are not included in the calculation since the inclusion of such
potential common shares would be antidilutive.
(3)The pro forma, as adjusted consolidated balance sheet data give effect to the
unaudited pro forma adjustments as described in footnote (2) and are adjusted
to reflect the issuance of 3,000,000 shares of common stock at an assumed
offering price of $15.00 per share, after deducting our estimated offering
expenses and the underwriting discount, as though these events occurred as of
December 31, 1999.
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7
<PAGE> 9
RISK FACTORS
You should carefully consider the following risk factors before you decide to
buy our common stock. If any of these risks actually occur, our business,
financial condition, operating results or cash flows could be materially
adversely affected. This could cause the trading price of our common stock to
decline, and you may lose part or all of your investment.
RISKS RELATED TO OUR BUSINESS
WE DO NOT CURRENTLY GENERATE ANY REVENUE, AND WE CANNOT GUARANTEE THAT WE WILL
EVER COMMERCIALIZE ANY OF OUR IMMUNOTHERAPEUTICS AND GENERATE REVENUE IN THE
FUTURE.
WE MUST RECEIVE SEPARATE REGULATORY APPROVAL FOR EACH OF OUR
IMMUNOTHERAPEUTICS IN EACH INDICATION BEFORE WE CAN SELL THEM COMMERCIALLY IN
THE UNITED STATES OR INTERNATIONALLY.
To obtain regulatory approvals, we must, among other requirements, complete
clinical trials demonstrating that a particular immunotherapeutic is safe and
effective. Because Oncophage is our only immunotherapeutic in clinical trials,
any delays or difficulties we encounter in these clinical trials may have a
significant adverse impact on our operations and cause our stock price to
decline significantly. We have limited clinical data. Future clinical trials may
not show that Oncophage is safe and effective. In addition, we or the FDA might
delay or halt our clinical trials of Oncophage for various reasons, including:
- Oncophage may not appear to be more effective than current
therapies;
- Oncophage may have unforeseen adverse side effects;
- the time required to determine whether Oncophage is effective may be
longer than expected;
- patients may die during a clinical trial because their disease is
too advanced or because they experience medical problems that may
not be related to Oncophage;
- sufficient number of patients may not enroll in the trials; or
- we may not be able to produce sufficient quantities of Oncophage to
complete the trials.
We rely on third party clinical investigators to conduct our clinical trials. As
a result, we may encounter delays outside of our control.
The process of obtaining and maintaining regulatory approvals for new
therapeutic products is lengthy, expensive and uncertain. It also can vary
substantially, based on the type, complexity and novelty of the product
involved. To date, the FDA and foreign regulatory agencies have approved only a
limited number of cancer immunotherapeutics for commercial sale. Furthermore,
the FDA and foreign regulatory agencies have relatively little experience with
autologous therapies. This lack of experience may lengthen the regulatory review
process for Oncophage, increase our development costs and delay or prevent
commercialization. In addition, problems encountered with other companies'
immunotherapeutic products may slow the regulatory review of our
immunotherapeutics. The FDA may not consider Oncophage to be an appropriate
candidate for fast track designation should we choose to seek it. Accordingly,
Oncophage or any of our other future drug candidates could take a significantly
longer time to gain regulatory approval than we expect or may never gain
approval.
BECAUSE DEVELOPMENT OF OUR IMMUNOTHERAPEUTICS FOR INFECTIOUS DISEASES AND
AUTOIMMUNE DISORDERS WILL INVOLVE A LENGTHY AND COMPLEX PROCESS, WE ARE NOT
CERTAIN WE WILL BE ABLE TO DEVELOP ANY MARKETABLE IMMUNOTHERAPEUTICS FOR THESE
INDICATIONS.
We have not completed the preclinical development of our immunotherapeutics for
any infectious disease or autoimmune disorder. We will need to conduct extensive
additional research and preclinical and clinical testing of these
immunotherapeutics prior to commercialization. This development process takes
several years and often fails to yield commercial products. Regulatory
authorities may not permit human testing of
8
<PAGE> 10
these immunotherapeutics and, even if they permit human testing, we may not
demonstrate that an immunotherapeutic is safe and effective.
EVEN IF SOME OF OUR IMMUNOTHERAPEUTICS RECEIVE REGULATORY APPROVAL, THOSE
IMMUNOTHERAPEUTICS MAY STILL FACE SUBSEQUENT REGULATORY DIFFICULTIES.
If we receive regulatory approval to sell any of our immunotherapeutics, the FDA
or a comparable foreign regulatory agency may, nevertheless, limit the
categories of patients who can use that immunotherapeutic. In addition,
regulatory agencies subject a marketed product, its manufacturer and the
manufacturer's facilities to continual review and periodic inspections.
Furthermore, the FDA or foreign regulatory agencies may require expensive
post-approval trials. If we discover previously unknown problems with a product
or our manufacturing and laboratory facility, a regulatory agency may impose
restrictions on that product or on us, including requiring us to withdraw the
product from the market. If we fail to comply with applicable regulatory
approval requirements, a regulatory agency may:
- send us warning letters;
- impose fines and other civil penalties on us;
- suspend our regulatory approvals;
- refuse to approve pending applications or supplements to approved
applications filed by us;
- refuse to permit exports of our products from the United States;
- require us to recall products;
- seize our products;
- impose restrictions on our operations; or
- criminally prosecute us.
WE MAY ENCOUNTER MANUFACTURING PROBLEMS THAT LIMIT OUR ABILITY TO SUCCESSFULLY
COMMERCIALIZE OUR IMMUNOTHERAPEUTICS.
IF WE ARE UNABLE TO PURIFY HEAT SHOCK PROTEINS FROM SOME CANCER TYPES, THE
SIZE OF OUR POTENTIAL MARKET WOULD DECREASE.
Our ability to successfully commercialize an immunotherapeutic for a particular
cancer type depends on our ability to purify heat shock proteins from that type
of cancer. Based on our clinical trials conducted to date, in renal cell
carcinoma, we have been able to manufacture Oncophage from 98% of the tumors
delivered to our manufacturing facility; for melanoma, 90%; for colorectal
carcinoma, 100%; for gastric cancer, 71%; and for pancreatic cancer, 30%. The
relatively low rate for pancreatic cancer is due to the abundance of proteases
in pancreatic tissue. Proteases are enzymes that break down proteins. These
proteases degrade the heat shock proteins during the purification process. We
may encounter this problem or similar problems with other types of cancers as we
expand our research. If we cannot overcome these problems, the number of cancer
types that our immunotherapeutics could treat would be limited.
DELAYS IN OBTAINING REGULATORY APPROVAL OF OUR MANUFACTURING FACILITY AND
DISRUPTIONS IN OUR MANUFACTURING PROCESS MAY DELAY OR DISRUPT OUR
COMMERCIALIZATION EFFORTS.
Before we can begin commercially manufacturing our immunotherapeutics, we must
obtain regulatory approval of our manufacturing facility and process.
Manufacturing of our immunotherapeutics must comply with the FDA's current Good
Manufacturing Practices requirements, commonly known as cGMP, and foreign
regulatory requirements. The cGMP requirements govern quality control and
documentation
9
<PAGE> 11
policies and procedures. In complying with cGMP and foreign regulatory
requirements, we will be obligated to expend time, money and effort in
production, recordkeeping and quality control to assure that the product meets
applicable specifications and other requirements. If we fail to comply with
these requirements, we would be subject to possible regulatory action and may be
limited in the jurisdictions in which we are permitted to sell our
immunotherapeutics.
We recently transferred the manufacturing of Oncophage from our facility in
Framingham, Massachusetts to our new facility in Woburn, Massachusetts. We have
limited manufacturing experience in this facility and unforeseen circumstances
may cause delays or disruptions in our manufacturing process. The FDA, The
Commonwealth of Massachusetts and foreign regulatory authorities have the
authority to continuously inspect this facility. Preparing this facility for
commercial manufacturing may take longer than planned and the costs of complying
with FDA regulations may be higher than those which we have budgeted. In
addition, any material changes we make to the manufacturing process may require
approval by the FDA, The Commonwealth of Massachusetts or foreign regulatory
authorities. It could take longer than we expect for us to obtain these
approvals. Any delays in obtaining these approvals could disrupt our
manufacturing process.
We are the only manufacturer of our immunotherapeutics. For the next several
years, we expect that we will conduct all of our manufacturing in our facility
in Woburn, Massachusetts. If this facility or the equipment in the facility is
significantly damaged or destroyed, we will not be able to quickly or
inexpensively replace our manufacturing capacity. Due to the nature of our
immunotherapeutics, a third party may not be able to manufacture our
immunotherapeutics.
We have no experience manufacturing Oncophage in the volumes that will be
necessary to support large clinical trials or commercial sales. Our present
manufacturing process may not meet our initial expectations as to:
- scheduling;
- reproducibility;
- yield;
- purity;
- cost;
- potency;
- quality; and
- other measurements of performance.
In addition, we have not demonstrated the ability to manufacture our
immunotherapeutics other than Oncophage in quantities sufficient for any
clinical trials.
IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, TRADE SECRETS OR
KNOW-HOW, WE MAY NOT BE ABLE TO OPERATE OUR BUSINESS PROFITABLY.
IF WE FAIL TO SUSTAIN AND FURTHER BUILD OUR INTELLECTUAL PROPERTY RIGHTS,
COMPETITORS WILL BE ABLE TO TAKE ADVANTAGE OF OUR RESEARCH AND DEVELOPMENT
EFFORTS TO DEVELOP COMPETING THERAPIES.
Our success depends, in part, on our ability to maintain protection for our
products and technologies under the patent laws of the United States and other
countries, so that we can stop others from using our inventions. Our success
also will depend on our ability to prevent others from using our trade secrets.
In addition, we must operate in a way that does not infringe, or violate, the
intellectual property rights of others.
We have exclusive rights to nine issued U.S. patents, and foreign counterpart
patents and patent applications, relating to our heat shock protein technology.
Our rights to these patents are as a result of an
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<PAGE> 12
exclusive worldwide license with Fordham University and one with Mount Sinai
School of Medicine of New York University. In addition, we have licensed or
optioned rights to 43 pending U.S. patent applications and foreign counterpart
patents and patent applications. The standards which the U.S. Patent and
Trademark Office uses to grant patents are not always applied predictably or
uniformly and can change. Consequently, we cannot be certain as to the type and
extent of patent claims that will be issued to us in the future. Any patents
which are issued may not contain claims which will permit us to stop competitors
from using similar technology. The standards which courts use to interpret
patents are not always applied predictably or uniformly and can change,
particularly as new technologies develop. Consequently, we cannot be certain as
to how much protection, if any, will be given to our patents, if we attempt to
enforce them and they are challenged in court. If we choose to go to court to
stop someone else from using the inventions claimed in our patents, that
individual or company has the right to ask the court to rule that our patents
are invalid and should not be enforced against them. These lawsuits are
expensive and would consume time and other resources, even if we were successful
in stopping the violation of our patents. In addition, there is a risk that the
court will decide that our patents are not valid and that we do not have the
right to stop the other party from using the inventions. There is also the risk
that, even if the validity of our patents were upheld, the court will refuse to
stop the other party on the ground that its activities are not covered by, that
is, do not infringe, our patents.
Furthermore, a third party may claim that we are using inventions covered by
their patents and may go to court to stop us from engaging in our normal
operations and activities. Such lawsuits are expensive and would consume time
and other resources. There is a risk that a court would decide that we are
violating the third party's patents and would order us to stop the activities
covered by the patents. In addition, there is a risk that a court will order us
to pay the other party's damages for having violated their patents.
We rely on certain proprietary trade secrets and know-how that are not
patentable. We have taken measures to protect our unpatented trade secrets and
know-how, including the use of confidentiality agreements with our employees,
consultants and certain contractors. It is possible, however, that:
- these persons will breach the agreements;
- we would have inadequate remedies for any breach; or
- our competitors will independently develop or otherwise discover our
trade secrets.
WE MAY INCUR SUBSTANTIAL COSTS AS A RESULT OF LITIGATION OR OTHER PROCEEDINGS
RELATING TO PATENT AND OTHER INTELLECTUAL PROPERTY RIGHTS.
The cost to us of any litigation or other proceeding relating to intellectual
property rights, even if resolved in our favor, could be substantial. Some of
our competitors may be able to sustain the costs of complex patent litigation
more effectively than we can because they have substantially greater resources.
Uncertainties resulting from the initiation and continuation of any litigation
could have a material adverse effect on our ability to continue our operations.
Should third parties file patent applications, or be issued patents claiming
technology also claimed by us in pending applications, we may be required to
participate in interference proceedings in the United States Patent and
Trademark Office to determine priority of invention. We, or our licensors, may
also need to participate in interference proceedings involving our issued
patents and pending applications of another entity. An unfavorable outcome in an
interference proceeding could require us to cease using the technology or to
license rights from prevailing third parties. There is no guarantee that any
prevailing party would offer us a license or that we could acquire any license
made available to us on commercially acceptable terms.
We cannot guarantee that the practice of our technologies will not conflict with
the rights of others. We are aware of a United States patent, issued to a third
party, with claims directed to certain heat shock protein based
immunotherapeutics and their use in the field of tissue grafting. We do not
believe that our products or activities are infringing any valid claims of this
patent. We also are aware of two United States
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patents, issued to a different third party, with claims directed to certain
methods of making heat shock protein products and related apparatuses. These
patents do not claim any therapeutic applications. These patents also do not
claim any of the methods we presently use to make Oncophage. Moreover, we do not
believe that our methods of producing any of our heat shock protein-based
immunotherapeutics would infringe any valid claim of either of these patents.
However, we cannot guarantee that this third party, or any other third party,
will not sue us for infringing these, or any other, patents. One of the patent
applications licensed to us contains claims which are substantially the same as
claims in one of this third party's patents. Therefore, there is a possibility
that the U.S. Patent and Trademark Office will declare an interference
proceeding between one or both of this third party's patents and our patent
application. In an interference proceeding, the party with the earliest
effective filing date has certain advantages. We believe that our claims have an
earlier effective filing date than the claims of the other patents. However, we
cannot guarantee that we would prevail in any interference proceeding. In the
past and again recently, this third party has contacted us about licensing
patents, but we have not yet responded to the recent inquiry.
In some foreign jurisdictions, we could become involved in opposition
proceedings, either by opposing the validity of another's foreign patent or by
third parties opposing the validity of our foreign patents. In 1995, the
European Patent Office issued a European patent, with claims directed to the use
of heat shock proteins to produce or enhance immune responses to cancer and
infectious diseases, to the Whitehead Institute for Biomedical Research and to
the Medical Research Council. This patent is exclusively licensed to StressGen
Biotechnologies Corporation. The patent holders have made no attempt to enforce
this patent against us. Nonetheless, we are seeking to have this patent revoked
in its entirety in an opposition proceeding in the European Patent Office. The
European Patent Office has issued a provisional, non-binding opinion that this
patent should be revoked in its entirety. The patent owners, in response,
amended the patent claims to exclude autologous treatment of tumors. We then
argued that this third party patent still should be revoked in its entirety.
Even if the European Patent Office changes its position and the patent is
maintained with the amended claims, we still should be free to practice our
autologous cancer business in Europe. However, the patent owners or their
licensee might try to enforce the amended patent against our infectious disease
business in Europe. We or the holders of this patent may appeal any decision to
revoke the patent in its entirety, or to maintain the patent in any form. We may
not obtain a final, non-appealable decision for several years, during which
time, the patent, with any amendments made during the opposition proceedings,
remains enforceable. We may incur significant costs by participating in the
opposition proceedings and any appeals. Furthermore, if we are sued on this
patent in Europe prior to any final decision of revocation, we may incur
significant costs defending ourselves, even if we ultimately succeed in proving
that we do not infringe any valid claims of this patent.
This European patent claims priority to a United States patent application filed
in 1988. We do not know whether this application, or any related application, is
still pending. We do not believe that any United States patent has issued from
this application, and we do not know whether a United States patent will ever
issue from this patent application. If a United States patent does issue, we do
not know whether the patent will be enforceable, whether any valid claims will
cover our activities or products, or whether the patent owner will attempt to
assert the patent against us.
Earlier this year, we received correspondence from both Copernicus Therapeutics,
Inc. and its counsel alleging similarity between the companies' respective logos
and demanding that we cease using our logo. In July 1999, we sent a response to
Copernicus stating that we have prior rights in our logo. In the response to
Copernicus, we also stated that since the respective corporate names are vastly
different, both companies should be able to continue the use of their respective
logos without causing public confusion. At this time, we have not received any
further communications from Copernicus or its counsel. Although we do not
believe we are infringing any rights owned by Copernicus, Copernicus may proceed
with a trademark lawsuit against us.
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WE ARE AN EARLY STAGE BIOTECHNOLOGY COMPANY THAT MAY NEVER BE PROFITABLE.
IF WE INCUR OPERATING LOSSES FOR LONGER THAN WE EXPECT, WE MAY BE UNABLE TO
CONTINUE OUR OPERATIONS.
We have not generated any revenues from sales, and we do not expect to generate
significant revenues for several years. We have incurred losses since we were
formed. From inception through December 31, 1999, we have generated losses
totaling $37.6 million. We expect to incur increasing and significant losses
over the next several years as we complete our Oncophage clinical trials, apply
for regulatory approvals, continue development of our technology and expand our
operations.
Our profitability will depend on the market acceptance of any of our
immunotherapeutics that receive FDA or foreign regulatory approval. The
commercial success of any of our immunotherapeutics will depend on whether:
- the immunotherapeutic is more effective than alternative treatments;
- side effects of the immunotherapeutic are acceptable to doctors and
patients;
- we produce the immunotherapeutic at a competitive price;
- we obtain sufficient reimbursement for the immunotherapeutic; and
- we have sufficient capital to market the immunotherapeutic
effectively.
Because Oncophage is autologous, or patient specific, it may be more expensive
to manufacture than conventional therapeutic products. This increased expense
may decrease our profit margins. Furthermore, because our autologous products
are novel, some doctors and patients may be reluctant to use them.
IF WE FAIL TO OBTAIN THE CAPITAL NECESSARY TO FUND OUR OPERATIONS, WE WILL BE
UNABLE TO ADVANCE OUR DEVELOPMENT PROGRAMS AND COMPLETE OUR CLINICAL TRIALS.
Developing immunotherapeutics and conducting clinical trials for multiple
diseases is expensive. We plan to conduct clinical trials for many different
cancer types simultaneously, which will increase our costs. We will need to
raise additional capital:
- to fund operations;
- to continue the research and development of our immunotherapeutics;
and
- to commercialize our immunotherapeutics.
Additional financing may not be available on favorable terms or at all. If we
are unable to raise additional funds when we need them, we may be required to
delay, reduce or eliminate some or all of our development programs and some or
all of our clinical trials. We also may be forced to license technologies to
others that we would prefer to develop internally.
On December 31, 1999, we had $46.4 million in cash and cash equivalents. We
believe that, after this offering, we will have sufficient capital to fund our
operations for the next two years. We may need to raise capital sooner, however,
due to a number of factors, including:
- an acceleration of the number, size or complexity of our clinical
trials;
- slower than expected progress in developing our immunotherapeutics;
- higher than expected costs to obtain regulatory approvals;
- higher than expected costs to pursue our intellectual property
strategy;
- higher than expected costs to further develop our manufacturing
capability; and
- higher than expected costs to develop our sales and marketing
capability.
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BECAUSE OF THE SPECIALIZED NATURE OF OUR BUSINESS, THE TERMINATION OF
RELATIONSHIPS WITH OUR SCIENTIFIC ADVISORS OR THE DEPARTURE OF KEY MEMBERS OF
MANAGEMENT MAY PREVENT US FROM ACHIEVING OUR OBJECTIVES.
IF PRAMOD K. SRIVASTAVA, PH.D. SEVERS HIS RELATIONSHIP WITH ANTIGENICS, WE MAY
EXPERIENCE SIGNIFICANT DIFFICULTIES IN OUR FUTURE DEVELOPMENT EFFORTS.
Since our formation, Dr. Srivastava has played a significant role in our
research efforts. Dr. Srivastava is a director of our company and acts as
chairman of our scientific advisory board. In addition, we have licensed nearly
all of our intellectual property from institutions at which Dr. Srivastava has
worked. We sponsor research in Dr. Srivastava's laboratory at the University of
Connecticut Health Center in exchange for the right to license discoveries made
in that laboratory with our funding. Dr. Srivastava is a member of the faculty
of the University of Connecticut School of Medicine. The regulations and
policies of the University of Connecticut Health Center govern the relationship
between a faculty member and a commercial enterprise. These regulations and
policies prohibit Dr. Srivastava from becoming an employee of Antigenics.
Furthermore, the University of Connecticut may modify these regulations and
policies in the future to further limit Dr. Srivastava's relationship with us.
While Dr. Srivastava has a consulting agreement with us, which includes
financial incentives for him to remain associated with us, we cannot guarantee
that he will remain associated with us even during the time covered by the
consulting agreement. In addition, this agreement does not restrict his ability
to compete with us after his association is terminated.
IF WE FAIL TO KEEP KEY MANAGEMENT AND SCIENTIFIC PERSONNEL, WE MAY BE UNABLE
TO SUCCESSFULLY DEVELOP OUR IMMUNOTHERAPEUTICS, CONDUCT CLINICAL TRIALS AND
OBTAIN FINANCING.
We are highly dependent on our senior management and scientific staff,
particularly Garo H. Armen, Ph.D., our chairman and chief executive officer, and
Gamil G. de Chadarevian, our vice chairman and executive vice president,
international. The competition for qualified personnel in the biotechnology
field is intense, and we rely heavily on our ability to attract and retain
qualified scientific, technical and managerial personnel. Since our
manufacturing process is unique, our manufacturing and quality control personnel
are also very important.
THE COMMERCIAL SUCCESS OF ANY OF OUR IMMUNOTHERAPEUTICS WILL DEPEND UPON THE
STRENGTH OF OUR SALES AND MARKETING EFFORT AND THE AVAILABILITY OF THIRD PARTY
REIMBURSEMENT.
IF WE ARE UNABLE TO ESTABLISH SALES AND MARKETING CAPABILITIES OR ENTER INTO
AGREEMENTS WITH PHARMACEUTICAL COMPANIES TO SELL AND MARKET OUR
IMMUNOTHERAPEUTICS, WE MAY EXPERIENCE DIFFICULTY GENERATING REVENUES.
We do not have a sales organization and have no experience in the sales,
marketing and distribution of pharmaceutical products. If Oncophage is approved
for commercial sale, we plan to market it in the United States with our own
sales force. Developing a sales force is expensive and time consuming and could
delay any product launch. We cannot be certain that we would be able to develop
this capacity. If we are unable to establish our sales and marketing capability,
we will need to enter into sales and marketing agreements to market Oncophage in
the United States. We plan to enter into these types of arrangements for sales
outside the United States. If we are unable to establish successful distribution
relationships with pharmaceutical companies, we may fail to realize the full
sales potential of our immunotherapeutics.
IF WE FAIL TO OBTAIN ADEQUATE LEVELS OF REIMBURSEMENT FOR OUR
IMMUNOTHERAPEUTICS FROM THIRD PARTY PAYORS, THE COMMERCIAL POTENTIAL OF OUR
IMMUNOTHERAPEUTICS WILL BE SIGNIFICANTLY LIMITED.
Our profitability will depend on the extent to which government administration
authorities, private health insurance providers and other organizations provide
reimbursement for the cost of our immunotherapeutics. Many patients will not be
capable of paying for our immunotherapeutics themselves. A primary trend in the
United States health care industry is toward cost containment. Large private
payors, managed care
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organizations, group purchasing organizations and similar organizations are
exerting increasing influence on decisions regarding the use of particular
treatments. These organizations are becoming increasingly economically focused.
Furthermore, many third party payors limit reimbursement for newly approved
health care products. Cost containment measures may prevent us from becoming
profitable.
In addition, healthcare reform is an area of significant government focus. Any
reform measures, if adopted, could adversely affect:
- the pricing of immunotherapeutics in the United States or
internationally; and
- the amount of reimbursement available from governmental agencies or
other third party payors.
For example, recent proposals regarding Medicare coverage, if they take effect,
may put novel cancer therapies like Oncophage at a competitive disadvantage
compared to existing therapies.
PRODUCT LIABILITY AND OTHER CLAIMS AGAINST US MAY REDUCE DEMAND FOR OUR PRODUCTS
OR RESULT IN SUBSTANTIAL DAMAGES.
We face an inherent risk of product liability exposure related to testing
immunotherapeutics in human clinical trials and will face an even greater risk
if we sell any of our therapeutic products commercially. An individual may bring
a product liability claim against us if one of our immunotherapeutics causes, or
merely appears to have caused, an injury. Regardless of merit or eventual
outcome, product liability claims may result in:
- decreased demand for our immunotherapeutics;
- injury to our reputation;
- withdrawal of clinical trial volunteers;
- costs of related litigation; and
- substantial monetary awards to plaintiffs.
We manufacture Oncophage from a patient's tumor, and a medical professional must
inject the Oncophage into that same patient. A patient may sue us if we, a
hospital or a delivery company fail to deliver the removed tumor or that
patient's Oncophage. We anticipate that the logistics of shipping will become
more complex as the number of patients we treat increases, and we cannot assure
that all shipments will be made without incident. In addition, administration of
Oncophage at a hospital poses another chance for delivery to the wrong patient.
Currently, we do not have insurance that covers loss of or damage to Oncophage
and do not know whether insurance will be available to us at a reasonable price
or at all.
WE MAY INCUR SIGNIFICANT COSTS COMPLYING WITH ENVIRONMENTAL LAWS AND
REGULATIONS.
We use hazardous, infectious and radioactive materials that could be dangerous
to human health, safety or the environment. As appropriate, we store these
materials and various wastes resulting from their use at our facility pending
ultimate use and disposal. We are subject to a variety of federal, state and
local laws and regulations governing the use, generation, manufacture, storage,
handling and disposal of these materials and wastes resulting from their use. We
may incur significant costs complying with both existing and future
environmental laws and regulations. In particular, we are subject to regulation
by the Occupational Safety and Health Administration and the Environmental
Protection Agency and to regulation under the Toxic Substances Control Act and
the Resource Conservation and Recovery Act. OSHA or the EPA may adopt
regulations that may affect our research and development programs. We are unable
to predict whether any agency will adopt any regulations which could have a
material adverse effect on our operations.
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Although we believe our safety procedures for handling and disposing of these
materials comply with federal, state and local laws and regulations, we cannot
entirely eliminate the risk of accidental injury or contamination from these
materials. In the event of an accident, we could be held liable for any
resulting damages which could be substantial.
OUR COMPETITORS IN THE BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES MAY HAVE
SUPERIOR PRODUCTS, MANUFACTURING CAPABILITY OR MARKETING EXPERTISE.
Our business may fail because we face intense competition from major
pharmaceutical companies and specialized biotechnology companies engaged in the
development of immunotherapeutics and other therapeutic products directed at
cancer, infectious diseases and autoimmune disorders. Many of our competitors
have greater financial and human resources and more experience. Our competitors
may:
- develop safer or more effective immunotherapeutics and other
therapeutic products;
- implement more effective approaches to sales and marketing; or
- establish superior proprietary positions.
More specifically, if we receive regulatory approvals, some of our
immunotherapeutics will compete with well-established, FDA approved therapies
that have generated substantial sales over a number of years.
We anticipate that we will face increased competition in the future as new
companies enter our markets and scientific developments surrounding
immunotherapy and other cancer therapies continue to accelerate.
WE MAY NOT BE ABLE TO KEEP UP WITH THE RAPID TECHNOLOGICAL CHANGES IN THE
BIOTECHNOLOGY AND PHARMACEUTICAL INDUSTRIES WHICH COULD MAKE OUR
IMMUNOTHERAPEUTICS OBSOLETE.
The field of biotechnology is characterized by significant and rapid
technological change. Research and discoveries by others may result in medical
insights or breakthroughs which may render our immunotherapeutics obsolete even
before they generate any revenue.
OUR BUSINESS MAY BE DISRUPTED IF WE EXPERIENCE ANY PROBLEMS WITH Y2K COMPLIANCE.
The date fields coded in certain software products and computer systems need to
be able to distinguish 21st century dates from 20th century dates. The failure
to be able to do so is commonly known as the year 2000 or Y2K problem.
While we have yet to experience problems, our installed computer systems,
software products or other business systems, or those of our suppliers or
service providers, working either alone or in conjunction with other software
systems, may experience errors or interruptions due to the Y2K problem.
Some risks associated with the Y2K problem are beyond our ability to control,
including the extent to which our suppliers and service providers can address
the Y2K problem. The failure by a third party to adequately address the Y2K
issue may have an adverse effect on their operations, which, in turn, may have
an adverse impact on us. If, for instance, our supply of electricity and/or
water is interrupted, our freezers may not be able to adequately preserve our
immunotherapeutics and our scientific experiments may be interrupted.
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RISKS RELATING TO THE OFFERING
OUR OFFICERS AND DIRECTORS MAY BE ABLE TO BLOCK PROPOSALS FOR A CHANGE IN
CONTROL.
After this offering, Antigenics Holdings L.L.C. will control approximately 47.0%
of our outstanding common stock. Due to this concentration of ownership,
Antigenics Holdings may be able to prevail on all matters requiring a
stockholder vote, including:
- the election of directors;
- the amendment of our organizational documents; or
- the approval of a merger, sale of assets or other major corporate
transaction.
Our directors and officers, if they elect to act together, can control
Antigenics Holdings. In addition, several of our directors and officers directly
own shares of our common stock. See "Principal Stockholders."
WE MAY ALLOCATE THE NET PROCEEDS FROM THIS OFFERING IN WAYS WHICH YOU AND OTHER
STOCKHOLDERS MAY NOT APPROVE.
Management will have significant flexibility in applying the net proceeds of
this offering and could use these proceeds for purposes other than those
contemplated at the time of the offering.
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE LAW MAY
MAKE AN ACQUISITION OF US MORE DIFFICULT.
We are incorporated in Delaware. Anti-takeover provisions of Delaware law and
our charter documents may make a change in control more difficult, even if the
stockholders desire a change in control. Our anti-takeover provisions include
provisions in our certificate of incorporation providing that stockholders'
meetings may only be called by the president or the majority of the board of
directors and a provision in our by-laws providing that our stockholders may not
take action by written consent. Additionally, our board of directors has the
authority to issue 1,000,000 shares of preferred stock and to determine the
terms of those shares of stock without any further action by our stockholders.
The rights of holders of our common stock are subject to the rights of the
holders of any preferred stock that may be issued. The issuance of preferred
stock could make it more difficult for a third party to acquire a majority of
our outstanding voting stock. Our charter also provides for the classification
of our board of directors into three classes. This "staggered board" generally
may prevent stockholders from replacing the entire board in a single proxy
contest. In addition, our directors may only be removed from office for cause.
Delaware law also prohibits a corporation from engaging in a business
combination with any holder of 15% or more of its capital stock until the holder
has held the stock for three years unless, among other possibilities, the board
of directors approves the transaction. The board may use this provision to
prevent changes in our management. Also, under applicable Delaware law, our
board of directors may adopt additional anti-takeover measures in the future.
OUR COMMON STOCK MAY HAVE A VOLATILE PUBLIC TRADING PRICE AND LOW TRADING
VOLUME.
Prior to this offering, our equity did not trade in a public market. An active
public market for our common stock may not develop or be sustained after this
offering. We and the underwriters, through negotiations, will determine the
initial public offering price. The initial public offering price is not
necessarily indicative of the market price at which the common stock will trade
after this offering. The market prices for securities of companies comparable to
us have been highly volatile, and the market has experienced significant price
and volume fluctuations that are unrelated to the operating performance of the
individual
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companies. Many factors may have a significant adverse effect on the market
price of the common stock, including:
- results of our preclinical and clinical trials;
- announcement of technological innovations or new commercial products
by us or our competitors;
- developments concerning proprietary rights, including patent and
litigation matters;
- publicity regarding actual or potential results with respect to
products under development by us or by our competitors;
- regulatory developments; and
- quarterly fluctuations in our revenues and other financial results.
THE SALE OF A SUBSTANTIAL NUMBER OF SHARES COULD CAUSE THE MARKET PRICE OF OUR
COMMON STOCK TO DECLINE.
After this offering, we will have 23,715,942 shares of common stock outstanding.
In connection with the private placement completed in November 1999, we are
obligated to file, approximately 90 days after the date of this prospectus, a
registration statement covering up to 2,808,857 shares for resale. When this
registration statement is declared effective by the Securities and Exchange
Commission, stockholders holding these shares will be permitted to resell their
shares on the Nasdaq National Market. Sales of these shares or anticipation of
those sales may depress our stock price.
The sale by our company or the resale by stockholders of shares of our common
stock after this offering could cause the market price of the common stock to
decline. The 20,715,942 shares of common stock outstanding after this offering
but not offered by this prospectus will be available for resale on the Nasdaq
National Market as follows:
- 2,808,857 shares when a resale registration statement to be filed
approximately 90 days after the date of this prospectus is declared
effective, and
- 17,907,085 shares one year following this offering, some of which
are subject to volume and other limitations.
We intend to file a registration statement following the offering to permit the
sale of approximately 4,800,000 shares of common stock under our equity
incentive plan and 300,000 shares of common stock under our employee stock
purchase plan. As of December 31, 1999, options to purchase 1,696,423 shares of
our common stock upon exercise of options with a weighted average exercise price
per share of $5.89 were outstanding. Many of these options are subject to
vesting that generally occurs over a period of up to five years following the
date of grant. Substantially all outstanding options are subject to agreements
with the underwriters not to sell the shares issuable upon their exercise for
one year after the offering. As of December 31, 1999, warrants to purchase
280,886 shares of our common stock with an exercise price per share of $13.96
were outstanding.
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HISTORY OF ANTIGENICS
We formed our business in March 1994 through the creation of a Delaware
corporation. We subsequently formed Antigenics L.L.C., a Delaware limited
liability company. In December 1995, we raised capital and concurrently
transferred to Antigenics L.L.C. all of the assets, properties and rights of the
Delaware corporation in exchange for a portion of the total initial equity
interests in Antigenics L.L.C. When we complete this offering, we will merge
Antigenics L.L.C. with and into Antigenics Inc., a newly formed Delaware
corporation. As part of the merger, holders will exchange membership units,
options and warrants in Antigenics L.L.C. for shares of Antigenics Inc. common
stock and options and warrants exercisable for shares of Antigenic Inc. common
stock.
Since inception, we have used our technology platform to develop heat shock
protein-based immunotherapeutics. Based on extensive research and preclinical
studies, we focused initially on the development of products for the treatment
of human cancer. We filed an IND in November 1996 to start clinical trials in
the United States and began our first phase I clinical trial for pancreatic
cancer patients at Memorial Sloan-Kettering Cancer Center in November 1997. We
subsequently began clinical trials in renal cell carcinoma, melanoma, colorectal
cancer and gastric cancer. During the next several years, we intend to conduct
clinical trials in additional cancer types and to further research and develop
immunotherapeutics for the treatment of infectious diseases and autoimmune
disorders.
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USE OF PROCEEDS
We estimate the net proceeds from the sale of 3,000,000 shares of common stock
in this offering at an assumed public offering price of $15.00 per share will be
$41.0 million after deducting the underwriting discount and estimated offering
expenses payable by us. Our net proceeds are estimated to be $47.3 million if
the underwriters' exercise their over-allotment option in full.
We intend to use the net proceeds of this offering to fund clinical trials,
research, preclinical and development activities for our immunotherapeutics and
general corporate purposes, including working capital and an increase in our
administrative staff. We may also use a portion of the net proceeds to increase
our manufacturing capacity or to acquire complementary businesses or products.
As of the date of this prospectus, we have no specific understandings,
commitments or agreements with respect to any acquisition.
We have not determined the amount of net proceeds that we will use for each of
these purposes. Accordingly, we will have broad discretion to use the proceeds
as we see fit. Prior to spending the funds, we will invest the net proceeds in
short-term, investment grade, interest-bearing securities or guaranteed
obligations of the United States government.
RECENT FINANCING
In November 1999, we raised an aggregate of $39.2 million in a private
placement. We incurred approximately $293,000 in related costs, so we received
net proceeds of about $38.9 million. In the private placement, we sold member
interests and warrants to purchase member interests. When we reorganize into a
corporation, the member interests will convert into 2,808,857 shares of our
common stock and the warrants will convert into warrants to acquire an aggregate
of 280,886 shares of common stock at $13.96 per share.
DIVIDEND POLICY
We have never paid cash dividends. We currently intend to retain any future
earnings to finance the growth and development of our business. We do not intend
to pay cash dividends on our common stock in the foreseeable future.
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FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements, principally in the sections
entitled "Management's Discussion and Analysis of Financial Conditions and
Results of Operations" and "Business." Generally, these statements can be
identified by the use of phrases like "believe," "expect," "anticipate," "plan,"
"may," "will," "could," "estimate," "potential," "opportunity," "future,"
"project" and similar terms and include statements about our:
- product research and development activities and projected
expenditures;
- the efficacy of our immunotherapeutics in treating diseases;
- plans for regulatory filings;
- receipt of regulatory approvals;
- spending the proceeds from this offering;
- cash needs;
- plans for sales and marketing;
- results of scientific research;
- implementation of our corporate strategy; and
- financial performance.
These forward-looking statements involve risks and uncertainties. Our actual
results could differ significantly from the results discussed in the
forward-looking statements. Factors that could cause or contribute to these
differences include those discussed in "Risk Factors." You should carefully
consider that information before you make an investment decision. You should not
place undue reliance on our forward-looking statements.
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CAPITALIZATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth, as of December 31, 1999, our historical and pro
forma capitalization and cash and cash equivalents. The pro forma capitalization
gives effect to the change from a limited liability company to a corporation and
the exchange of each unit of members' equity into 172.0336 shares of common
stock as if they occurred on December 31, 1999.
The pro forma, as adjusted capitalization reflects the pro forma adjustments
described in the previous sentence and the sale in this offering of 3,000,000
shares of common stock at an assumed initial public offering price of $15.00 per
share and the application of the estimated net proceeds from this offering,
after deducting the underwriting discount and estimated offering expenses
payable by us. This table does not include an aggregate of 1,696,423 shares of
common stock issuable upon exercise of stock options outstanding as of December
31, 1999 with a weighted average exercise price of $5.89 per share. This table
does not include an aggregate of 280,886 shares of common stock issuable upon
exercise of outstanding warrants at an exercise price of $13.96 per share. This
table should be read in conjunction with our consolidated financial statements
and the other financial information included in this prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-----------------------------------------
PRO FORMA,
HISTORICAL PRO FORMA AS ADJUSTED
----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Cash and cash equivalents.............................. $ 46,418 $ 46,418 $ 87,780
======== ======== ========
Long-term debt, including current portion.............. 2,968 2,968 2,968
-------- -------- --------
Members' capital....................................... 89,954 -- --
Stockholders' equity
Common stock, par value $0.01 per share; 100,000,000
shares authorized, 20,715,942 shares issued and
outstanding, pro forma; 23,715,942 shares issued
and outstanding, pro forma, as adjusted........... -- 207 237
Preferred stock, par value $0.01 par value per share;
1,000,000 shares authorized, no shares issued and
outstanding, pro forma and pro forma, as
adjusted.......................................... -- -- --
Additional paid-in capital............................. -- 89,747 130,717
Deferred compensation.................................. (659) (659) (659)
Deficit accumulated during the development stage....... (37,617) (37,617) (37,617)
-------- -------- --------
Total members'/stockholders' equity.................. 51,678 51,678 92,678
-------- -------- --------
Total capitalization......................... $ 54,646 $ 54,646 $ 95,646
======== ======== ========
</TABLE>
22
<PAGE> 24
DILUTION
Our pro forma net tangible book value as of December 31, 1999, was $51.7
million, or $2.49 per share of common stock. Pro forma net tangible book value
per share before this offering represents the amount of our pro forma
stockholders' equity, less intangible assets, divided by the pro forma number of
shares of common stock outstanding as of December 31, 1999 after giving effect
to the change from a limited liability company to a corporation and the exchange
of each unit of members' equity into 172.0336 shares of common stock.
Pro forma net tangible book value per share after this offering gives effect to
the adjustments described above and to the application of net proceeds from the
sale of 3,000,000 shares of our common stock at an assumed initial public
offering price of $15.00 per share. As of December 31, 1999, our pro forma net
tangible book value after this offering would have been $92.7 million, or $3.91.
per share.
This represents an immediate increase in net tangible book value to existing
stockholders of $1.42 per share and an immediate dilution to new investors of
$11.09 per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $15.00
------
Pro forma net tangible book value per share before this
offering................................................ $2.49
-----
Increase in pro forma net tangible book value per share
attributable to new investors........................... $1.42
-----
Pro forma net tangible book value per share after this
offering.................................................. $ 3.91
------
Dilution per share to new investors......................... $11.09
======
</TABLE>
Assuming the exercise in full of the underwriters' over-allotment option, our
adjusted pro forma net tangible book value after this offering at December 31,
1999 would have been approximately $4.09 per share, representing an immediate
increase in pro forma tangible book value of $1.60 per share to our existing
stockholders and an immediate dilution in pro forma net tangible book value of
$10.91 per share to purchasers in this offering.
The following table enumerates the number of shares of common stock purchased,
the total consideration paid and the average price per share paid by our
existing stockholders. The following table also enumerates the number of shares
of common stock purchased and the total consideration paid, calculated before
deduction of the underwriting discount and estimated offering expenses, and the
average price per share paid by the new investors in this offering assuming the
sale of 3,000,000 shares of our common stock at an assumed initial offering
price of $15.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 20,715,942 87.4% $ 79,244,415 63.8% $ 3.83
New investors.............................. 3,000,000 12.6% $ 45,000,000 36.2% $15.00
---------- ---- ------------ ----
Total............................. 23,715,942 100% $124,244,415 100% $ 5.24
========== ==== ============ ==== ======
</TABLE>
The table above is calculated on a pro forma basis as of December 31, 1999 and
gives effect to the change from a limited liability company to a corporation as
described above.
The tables above assume no exercise of the underwriters' over-allotment option
and no exercise of stock options or warrants outstanding at December 31, 1999.
As of December 31, 1999, there were options outstanding to purchase a total of
1,696,423 shares, at a weighted average exercise price of $5.89 per share and
warrants outstanding to purchase a total of 280,886 shares, at an exercise price
of $13.96 per share. To the extent that any of these options or warrants are
exercised, there will be further dilution to new investors. Please see
"Capitalization," "Management -- Director Compensation," "-- Executive
Compensation," Note 5 to Antigenics' audited consolidated financial statements.
23
<PAGE> 25
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT AND UNIT DATA)
We have derived the selected consolidated balance sheet data set forth below as
of December 31, 1998 and 1999, and the consolidated statement of operations data
for each of the years in the three-year period ended December 31, 1999, from our
audited consolidated financial statements included elsewhere in this prospectus.
We have derived the selected consolidated balance sheet data as of December 31,
1995, 1996 and 1997, and selected consolidated statement of operations data for
the years ended December 31, 1995 and 1996, from our audited consolidated
financial statements which are not included in this prospectus. These
consolidated financial statements of Antigenics L.L.C. have been audited by KPMG
LLP, independent certified public accountants.
You should read the selected consolidated financial data in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes to those
consolidated financial statements included elsewhere in this prospectus.
Since we have operated historically as a limited liability company, in
accordance with federal, state and local income tax regulations which provide
that no income taxes are levied on United States limited liability companies and
each member of the limited liability company is individually responsible for
reporting the member's share of our net income or loss, we do not provide for
income taxes in our consolidated financial statements.
The unaudited pro forma information set forth below reflects adjustments which
are necessary, in our management's opinion, for a fair presentation of our
consolidated financial condition and results of operations on a pro forma basis.
The unaudited pro forma net loss, basic and diluted net loss per common share
and weighted average shares outstanding for the year ended December 31, 1999
give effect to the change from a limited liability company to a corporation and
the exchange of each unit of members' equity into 172.0336 shares of common
stock as if they occurred on January 1, 1999.
The unaudited pro forma selected balance sheet data as of December 31, 1999
reflect the events described above as if these events occurred as of December
31, 1999.
Increases in cash and cash equivalents, total current assets, total assets and
members' equity in the years presented below include the effects of the receipt
of net proceeds from our equity offerings that totalled approximately $10.5
million, $7.6 million, $18.0 million and $41.1 million in 1996, 1997, 1998 and
1999, respectively.
24
<PAGE> 26
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 31, 1994
(DATE OF
YEAR ENDED DECEMBER 31, INCEPTION) TO
------------------------------------------------ DECEMBER 31,
1995 1996 1997 1998 1999 1999
------- ------- ------- ------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue......................................... $ -- $ -- $ -- $ -- $ -- $ --
Operating expenses:
Research and development...................... (742) (2,017) (2,563) (6,102) (10,977) (22,514)
General and administrative.................... (2,453) (1,781) (1,549) (3,178) (6,875) (15,890)
Depreciation and amortization................. (40) (79) (202) (360) (1,005) (1,702)
------- ------- ------- ------- -------- --------
Loss from operations............................ (3,235) (3,877) (4,314) (9,640) (18,857) (40,106)
Interest income, net............................ 8 281 481 736 723 2,229
Non-operating income............................ -- 250 -- -- 10 260
------- ------- ------- ------- -------- --------
Net loss........................................ $(3,227) $(3,346) $(3,833) $(8,904) $(18,124) $(37,617)
======= ======= ======= ======= ======== ========
Net loss per members' equity unit, basic and
diluted....................................... $(40.92) $(39.42) $(42.81) $(93.07) $(171.85)
======= ======= ======= ======= ========
Weighted average number of units outstanding,
basic and diluted............................. 78,854 84,876 89,525 95,673 105,468
======= ======= ======= ======= ========
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Pro forma net loss.............................. $(18,124)
Pro forma net loss per common share, basic and
diluted....................................... $ (1.00)
Pro forma weighted average shares outstanding,
basic and diluted............................. 18,144
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, DECEMBER 31,
--------------------------------------------------- 1999
1995 1996 1997 1998 1999 PRO FORMA
------- ------- ------- ------- ------- -----------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.............. $ 791 $ 9,588 $13,086 $22,168 $46,418 $46,418
Total current assets................... 876 9,639 13,246 22,447 47,672 47,672
Total assets........................... 1,124 10,041 14,090 26,636 56,004 56,004
Total current liabilities.............. 584 883 878 2,285 2,171 2,171
Long-term liabilities, less current
portion.............................. -- -- -- 709 2,155 2,155
Members' equity/stockholders' equity... 540 9,158 13,212 23,641 51,678 51,678
</TABLE>
25
<PAGE> 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of the financial condition and results
of operations in conjunction with our consolidated financial statements and
their notes appearing elsewhere in this prospectus.
OVERVIEW
Since our inception in March 1994, our activities have primarily been associated
with the development of our heat shock protein technology and our lead
immunotherapeutic, Oncophage. Our business activities have included:
- establishing manufacturing capabilities;
- product research and development;
- manufacturing immunotherapeutics for clinical trials;
- regulatory and clinical affairs; and
- intellectual property prosecution.
We have incurred significant losses since our inception because we have not
generated any revenues. As of December 31, 1999, we had an accumulated deficit
of $37,617,000. We expect to continue to incur net losses over the next several
years as we complete our Oncophage clinical trials, apply for regulatory
approvals, continue development of our technology and expand our operations. We
have been dependent on funding from equity and debt financings to finance our
business activities. Our financial results may vary depending on many factors,
including:
- the progress of Oncophage in the regulatory process;
- the acceleration of our other immunotherapeutic candidates into
preclinical and clinical trials;
- our investment in manufacturing process development and in
manufacturing capacity for Oncophage and other product candidates;
- development of a sales and marketing staff and initial sales
activities if Oncophage is approved for commercialization; and
- the progress of our other additional research and development
efforts.
In December 1999, we accelerated the vesting on options to acquire approximately
268,700 shares of common stock that we had granted to outside advisors. As a
result, we recognized a charge of $2,093,000 in the fourth quarter of 1999 based
on a fair value of $15.00 per share.
In addition, we have outstanding unvested options to acquire approximately
41,300 shares of our common stock for which the exercise price will be set at an
amount equal to the fair value of an underlying share of common stock at the
time of vesting. We will take a compensation charge equal to the fair value of
these options at the time these options vest using our option pricing model.
HISTORICAL RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO THE YEAR ENDED DECEMBER 31, 1998
Revenue: We generated no revenue during the year ended December 31, 1999 or
during the year ended December 31, 1998.
Research and Development: Research and development expense increased 79.9% to
$10,977,000 for the year ended December 31, 1999 from $6,102,000 for the year
ended December 31, 1998. This increase was partially attributable to the
increase in the non-cash charge for options granted and earned by outside
advisors, directors and employees to $1,814,000 for the year ended December 31,
1999 from $314,000 for
26
<PAGE> 28
the year ended December 31, 1998. The remainder of the increase was primarily
due to the number of later stage Oncophage clinical trials in process that
increased costs by $1,055,000, an increase in our staff to support our expanded
business activities that increased costs by $1,137,000 and other ongoing
development activities that increased costs by $1,183,000. Research and
development expenses consisted primarily of compensation for our employees and
outside advisors conducting research and development work, funding paid to the
University of Connecticut, where we sponsor research, costs associated with the
operation of our manufacturing and laboratory facility and funding paid to
support our Oncophage clinical trials.
General and Administrative: General and administrative expenses increased
116.3% to $6,875,000 for the year ended December 31, 1999 from $3,178,000 for
the year ended December 31, 1998. This increase was partially due to the
increase in the non-cash charge for options granted and earned by outside
advisors, directors and employees to $3,213,000 for the year ended December 31,
1999 from $795,000 for the year ended December 31, 1998. The remainder of the
increase was primarily due to the growth in the number of our employees to
support our expanded business operations that increased costs by $740,000.
General and administrative expenses consisted primarily of personnel
compensation, office expenses and professional fees.
Depreciation and Amortization: Depreciation and amortization expense increased
179.4% to $1,006,000 for the year ended December 31, 1999 from $360,000 for the
year ended December 31, 1998. This increase was due to the depreciation expense
of our new 30,225 square foot manufacturing and laboratory facility and related
equipment.
Interest Income, net: Interest income increased 37.8% to $1,014,000 for the
year ended December 31, 1999 from $736,000 for the year ended December 31, 1998.
This increase was principally attributable to a higher average cash and cash
equivalents balance during the year ended December 31, 1999 as compared to the
year ended December 31, 1998 due to a $28,000,000 private equity financing
completed in January 1999 and a $39,200,000 private equity financing completed
in November 1999. Interest expense was $291,000 during the year ended December
31, 1999 due to borrowings under a credit facility to fund the construction of
our manufacturing and laboratory facility. We incurred no interest expense
during the year ended December 31, 1998.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Revenue: We generated no revenue during the year ended December 31, 1998 or
during the year ended December 31, 1997.
Research and Development: Research and development expenses increased 138.1% to
$6,102,000 for the year ended December 31, 1998 from $2,563,000 for the year
ended December 31, 1997. This increase was due primarily to an increase of
$1,777,000 in salary cost due to an increase in the number of our employees as
we expanded our business and clinical activities, an increase of $190,000 in
expense to support our Oncophage clinical trials, an increase in professional
fees of $126,000 related to expansion of our intellectual property and patent
activities, and the non-cash charge for options granted to and earned by outside
advisors, employees and directors of $275,000.
General and Administrative: General and administrative expenses increased
105.2% to $3,178,000 for the year ended December 31, 1998 from $1,549,000 for
the year ended December 31, 1997. This increase was due primarily to an increase
of $196,000 in costs related to increased personnel necessary to support our
expanding business and clinical operations and the non-cash charge for options
granted and earned by outside advisors, employees and directors of $583,000.
Depreciation and Amortization: Depreciation and amortization expense increased
78.2% to $360,000 for the year ended December 31, 1998 from $202,000 for the
year ended December 31, 1997. This increase was due to the depreciation expense
of our manufacturing and laboratory equipment.
Interest Income, net: Interest income increased 53.0% to $736,000 for the year
ended December 31, 1998 from $481,000 for the year ended December 31, 1997. This
increase was primarily attributable to a higher
27
<PAGE> 29
average cash and cash equivalents balance during the year ended December 31,
1998 as compared to the year ended December 31, 1997. There was no interest
expense during the years ended December 31, 1998 and 1997.
INCOME TAXES
Because we have historically operated as a limited liability company for tax
purposes, we have allocated and will allocate all taxable losses incurred prior
to the closing of this offering to the members for reporting on their income tax
returns. As a result, we will not be able to offset future taxable income, if
any, against losses incurred prior to the closing of this offering. Upon our
conversion from a limited liability company to a corporation, we expect to
recognize a valuation allowance equal to any gross deferred tax assets as we
believe that it is more likely than not that we will not realize these deferred
tax assets.
LIQUIDITY AND CAPITAL RESOURCES
We have incurred annual operating losses since inception, and at December 31,
1999, we had incurred an accumulated deficit of $37,617,000. Since our
inception, we have financed our operations primarily through various private
placements of equity, interest income earned on cash and cash equivalent
balances and debt provided through a credit line secured by some of our
manufacturing and laboratory assets. From our inception through December 31,
1999, we raised aggregate equity proceeds of $79,244,000 and borrowed $3,481,000
under our $5,000,000 credit facility. We expect that we will fund our capital
expenditures and growing operations over the next two years with the net
proceeds from this offering and current working capital. Our future capital
requirements include, but are not limited to, supporting our Oncophage clinical
trial efforts and continuing our other research and development programs.
Satisfying our long-term liquidity needs will require the successful
commercialization of Oncophage or other products and may require additional
capital.
Our cash and cash equivalents at December 31, 1999 were $46,418,000, an increase
of $24,250,000 from December 31, 1998. During the year ended December 31, 1999
we used cash primarily to finance operations, including our Oncophage clinical
trials, and to make capital expenditures related to the establishment of our
manufacturing and laboratory facility.
Net cash used in operating activities for the years ended December 31, 1997,
1998 and 1999 was $3,518,000, $6,377,000 and $13,457,000. The increase resulted
from the increase in the number and size of our Oncophage clinical trials and
general expansion of our operations.
Net cash used in investing activities for the years ended December 31, 1997,
1998 and 1999 was $619,000, $3,676,000 and $4,926,000. The investments were
primarily for the construction of our manufacturing and laboratory facility and
equipment, furniture and fixtures. We partially financed our new manufacturing
and laboratory facility in Woburn, Massachusetts through the $5,000,000 credit
facility discussed below and available cash balances.
Net cash provided by financing activities was $7,635,000, $19,134,000 and
$42,633,000 for the years ended December 31, 1997, 1998 and 1999. Since
inception, our primary source of financing has been from equity investments.
During 1997, 1998 and 1999, equity contributions from private placements and, in
1998 and 1999, exercises of options, totaled approximately $7,635,000,
$18,225,000 and $41,135,000. At December 31, 1999, we had outstanding $2,968,000
under a $5,000,000 credit facility to finance the construction of our
manufacturing and laboratory facility and the purchase of related equipment.
Loans that are drawn down on the credit facility are secured by specific assets,
including leasehold improvements, which they finance.
28
<PAGE> 30
YEAR 2000 COMPLIANCE
The following constitutes "Year 2000 Readiness Disclosure" under the Year 2000
Information and Readiness Disclosure Act of 1998.
The year 2000 issue, or Y2K, refers to potential problems with computer systems
or any equipment with computer chips or software that use dates where the date
has been stored as just two digits. On or after January 1, 2000, any clock or
date recording mechanism incorporating date sensitive software which uses only
two digits to represent the year may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruption of operations, including, among other things,
a temporary inability to process transactions, perform laboratory analyses, or
engage in similar business activities.
We are a biopharmaceutical company and our proposed product candidates are not
software or computer based. Therefore, our proposed products are not directly
impacted by the Y2K problem. Our exposure to potential risks from this problem
involves computer and information technology systems, and other systems which
include embedded technology using date sensitive programs such as for:
- heating, ventilation, air conditioning, or HVAC;
- scientific instrumentation;
- manufacturing and laboratory equipment; and
- laboratory facilities.
Our internal information systems consist of off-the-shelf accounting and e-mail
systems, off-the-shelf application programs such as spreadsheet, word
processing, graphics, database management, and presentation software, and some
instrumentation/data acquisition software. Non-informational technology systems
consist of HVAC and telecommunications.
Prior to December 31, 1999, we completed the process of determining whether
there were any critical areas of our business that were not year 2000 compliant.
We estimate that the total cost of addressing any year 2000 problems will be
immaterial. We believe our worst case scenario relating to year 2000 risks
includes a power interruption and a lack of supplies to support our clinical
trials. We have implemented a contingency plan to cover these situations
including expanding our supplies inventory and maintaining a generator at our
manufacturing facility for the supply of electrical power. As of the date of
this prospectus, we have not yet encountered year 2000 related problems. We
continue to monitor developments in this area.
Any year 2000 compliance problems that arise could materially and adversely
affect our business, results of operations or cash flow.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
In the normal course of business, we are exposed to fluctuations in interest
rates as we seek debt financing to make capital expenditures. We do not employ
specific strategies, such as the use of derivative instruments or hedging, to
manage our interest rate exposures. There has been no change since the fiscal
year ended December 31, 1998 with respect to our interest rate exposures or our
approach toward those exposures. Further, we do not expect our market risk
exposures to change in the near term.
The information below summarizes our market risks associated with debt
obligations as of December 31, 1999. Fair values included herein have been
estimated taking into consideration the nature and terms of each instrument and
the prevailing economic and market conditions at December 31, 1999. The table
presents cash flows by year of maturity and related interest rates based on the
terms of the debt.
<TABLE>
<CAPTION>
ESTIMATED YEAR OF MATURITY
FAIR CARRYING -------------------------------------------
VALUE AMOUNT 2000 2001 2002 2003
---------- ---------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt(1)........ $3,026,000 $2,968,000 $813,000 $939,000 $1,022,000 $194,000
</TABLE>
- ---------------
(1) Fixed interest rates from 13.954% to 15.084%
29
<PAGE> 31
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including derivatives instruments embedded
in other contracts, and for hedging activities. SFAS No. 133 is effective for
all of our fiscal quarters beginning January 1, 2001. We do not expect this
statement to affect us as we currently do not use derivative instruments or
engage in hedging activities.
30
<PAGE> 32
BUSINESS
OVERVIEW
Antigenics is engaged in the discovery and development of novel
immunotherapeutic drugs for the treatment of life threatening and chronic
medical conditions. Our immunotherapeutics are based on a specific class of
proteins known as heat shock proteins and their ability to modulate the immune
system. We are currently evaluating our lead immunotherapeutic, Oncophage, in
six clinical trials for the treatment of four different cancers, and we expect
to start our first pivotal clinical trial by mid-2000. We are also developing
immunotherapeutics to treat infectious diseases, such as genital herpes, and
autoimmune disorders, such as diabetes and multiple sclerosis. Based upon our
scientific and drug development skills, our technology platform and our
strategic expertise, we intend to become a leader in drug discovery, development
and commercialization.
THE IMMUNE SYSTEM
The immune system is the body's natural defense mechanism to prevent and combat
disease. The immune system differentiates between normal tissue, or "self,"
versus diseased tissue or "non-self." When a competent immune system recognizes
diseased cells, the immune system initiates a series of steps that results in
the elimination of these cells. There are two types of immune response:
antibody-based and T cell-based.
Antibody-based immune response is primarily involved in the prevention of
diseases. Antibodies are proteins produced by the body in response to disease
causing agents known as pathogens. Antibodies bind to pathogens, such as viruses
and bacteria, and block their ability to infect cells. Preventive vaccines that
trigger an antibody-based immune response have been very successful in reducing
the incidence of several deadly diseases, including smallpox, polio and measles.
These vaccines consist of weakened, or attenuated, pathogens that stimulate the
production of antibodies. However, these types of vaccines have not been
effective in the prevention or treatment of many serious diseases, including
cancer, herpes, tuberculosis, hepatitis and HIV.
T cell-based immune response, on the other hand, is primarily involved in
combating diseases, such as cancers or infections. T cells are specialized white
blood cells that are normally produced by the body to kill cancer cells and
infected cells. T cell-based immune response begins when specialized immune
cells called dendritic cells capture antigens, which are the identifying
structural components of cancers and pathogens. Once inside dendritic cells,
antigens are broken down into small fragments called peptides that are
subsequently displayed on the surface of the dendritic cell. T cells continually
scan the surface of dendritic cells for peptides. If T cells recognize displayed
peptides as foreign or non-self, they replicate rapidly and then search for and
kill other diseased cells containing those same peptides. Hormones known as
cytokines enhance this T cell-based immune response by activating various
components of the immune system.
Significant scientific evidence suggests that cancers and infections trigger a T
cell-based immune response during the initial course of their progression. This
immune response, however, is not always sufficient to eradicate the disease.
Tumor cells, for example, hide their antigens and produce substances that
suppress the patient's immune response.
31
<PAGE> 33
To date, efforts to develop immunotherapeutics that sufficiently overcome this
suppression of the immune system and stimulate T cells to selectively and
accurately target and kill diseased cells have failed due to one or both of the
following:
- the inability of drug developers to discover the appropriate
antigens that identify diseases such as a particular person's
cancer; and
- the inability to present these relevant antigens to activate T cells
to selectively destroy diseased cells.
We believe our immunotherapeutics specifically address these issues.
OUR TECHNOLOGY PLATFORM
INTRODUCTION
We are the pioneers in activating T cells using purified heat shock
protein-peptide complexes. In individuals who develop cancer, infections and
autoimmune disorders, the immune system fails in its normal function. Our
immunotherapeutics are designed to restore this function and treat these life
threatening or chronic disease conditions.
We believe our immunotherapeutics will be applicable to the treatment of all
cancer types and several types of infectious diseases and autoimmune disorders.
Our immunotherapeutics consist of two components: a variable component,
consisting of small protein fragments called peptides, which is necessary for
the targeting of specific diseases; and a constant component, consisting of a
heat shock protein, which is necessary for the activation of a T cell-based
immune response to the targeted disease. In the case of cancer, which is a
highly variable disease from one patient to another, we purify, from each
patient's own tumor tissue, heat shock proteins that are bound, or complexed, to
peptides. Our cancer immunotherapeutics are therefore specific to each patient.
In contrast, for each infectious disease which is generally caused by a common
pathogen, we use a human heat shock protein bound to peptides derived from the
target pathogen. Our immunotherapeutics for infectious diseases therefore will
be disease-specific rather than patient-specific. Our immunotherapeutic for
autoimmune disorders will be generic, meaning it will be intended for the
treatment of all disorders that result in T cells attacking healthy tissue.
The principle upon which our technology platform is based extends back over 50
years when scientists began using genetically identical laboratory animals to
study the immune response to cancer. Researchers demonstrated that animals
vaccinated with attenuated, or weakened, tumor cells are immune to subsequent
injections of live tumor cells. Further, researchers have shown that this
immunity to cancer is tumor-specific, meaning that animals are immune only to
the cancer used for immunization and not to any other kind of cancer. Twenty
years ago, the chairman of our scientific advisory board, Pramod Srivastava,
discovered that cancers harbor molecular factors known as heat shock proteins,
which are responsible for conferring immunity to cancer. Consistent with the
observation that immunity generated with attenuated tumor cells is
tumor-specific, we discovered that heat shock proteins generate immunity only to
the tumor from which they are purified.
HEAT SHOCK PROTEINS
Heat shock proteins are a class of proteins that play a major role in
transporting peptides, including antigens, within a cell and are thus often
called chaperones. In this capacity, heat shock proteins bind to the entire
antigenic repertoire or fingerprint of the cell in which they reside. Heat shock
proteins are present in all cells of all organisms from bacteria to mammals and
their structure and function are similar across these diverse life forms.
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<PAGE> 34
Published research suggests that heat shock proteins play a central role in the
generation of immune responses. This role includes coordinating the breakdown
and transport of peptides from the point of their generation inside cells to
their ultimate display on the cell's surface for recognition by T cells.
Although heat shock proteins inside tumor cells and pathogen-infected cells help
display antigens to the immune system, tumors and pathogens simultaneously
employ strategies to evade immune responses. In some cases, this evasion of
immune responses results in disease progression.
The ability of heat shock proteins to chaperone peptides is key to our
technology platform. When we purify heat shock proteins from tumor cells or
pathogen-infected cells according to our manufacturing protocols, the heat shock
proteins remain bound to the entire repertoire of peptides produced by the tumor
or pathogen. These purified heat shock protein-peptide complexes isolated from
diseased cells are our immunotherapeutics.
We believe that when purified heat shock protein-peptide complexes are injected
into the skin, they stimulate a powerful T cell-based immune response capable of
targeting and killing cancers and pathogen-infected cells from which these
complexes originated. Doctors or nurses inject our immunotherapeutics into the
skin to take advantage of the high concentration of dendritic cells in this
region. These dendritic cells express receptors that specifically recognize heat
shock proteins; therefore, dendritic cells efficiently capture and process our
immunotherapeutics. Once inside dendritic cells, heat shock protein-peptide
complexes separate and the dendritic cell displays the peptides on its surface
where T cells can recognize the peptides.
Dendritic cells expressing cancer-specific or pathogen-specific peptides
activate T cells that are capable of specifically targeting and killing diseased
cells throughout the body that express those same peptides. The interaction of
heat shock proteins with their receptors on dendritic cells also leads to
secretion of cytokines by the dendritic cells that further stimulate the immune
system.
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<PAGE> 35
THE MECHANISM OF HEAT SHOCK PROTEIN-INDUCED IMMUNE RESPONSE
[CELL GRAPH]
STEP 1. Injection of purified heat shock protein-peptide complexes into skin
STEP 2. Heat shock protein-peptide complexes bind to receptor on surface of
dendritic cell and are subsequently internalized
STEP 3. Heat shock proteins and peptides separate inside dendritic cell
STEP 4. Dendritic cell presents peptides on its surface for recognition by T
cells. This activates T cells to kill diseased cells, such as tumor or
pathogen-infected cells, expressing those same peptides. Heat shock proteins
also stimulate dendritic cells to release cytokines which activate natural
killer cells and enhance the immune response
<TABLE>
<S> <C>
Heat shock protein receptor Dendritic cell
Heat shock protein Peptide presented on surface of dendritic cell
Peptide chaperoned by heat shock protein
</TABLE>
We believe our immunotherapeutics stimulate the immune system to recognize the
entire antigenic fingerprint of a tumor or pathogen. Due to this characteristic,
we believe our immunotherapeutics will:
- trigger the immune system to recognize and destroy all tumor or
pathogen-infected cells in the body; and
- make it difficult for tumors or pathogens to escape recognition by
the immune system.
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<PAGE> 36
We believe that the dendritic cells displaying these peptides trigger a more
potent immune response than that achieved by the presentation of these same
peptides by the tumor or pathogen-infected cell.
Our preclinical studies with heat shock protein immunotherapeutics have
demonstrated a beneficial effect in preventing or treating 13 types of cancer in
three different species. The cancer types tested include cancers of the skin,
colon, lung and other tissues. Further, our immunotherapeutics show therapeutic
benefit in animals with metastatic disease, which is when cancer has spread
beyond the primary tumor to distant regions of the body. Metastatic disease is
often responsible for the relapse and ultimate death of patients with cancer.
OUR PRODUCTS UNDER DEVELOPMENT
INTRODUCTION
The chart below summarizes the indications and status for each of our products
and development programs. We use "HSPPC" as an abbreviation for "heat shock
protein-peptide complex." The number following HSPPC is the molecular weight of
the heat shock protein used in the product. For cancer applications, we call
HSPPC-96 "Oncophage."
<TABLE>
<CAPTION>
PRODUCT INDICATION STATUS
- ------- ---------- ------
<S> <C> <C>
CANCER
Oncophage Renal cell carcinoma Phase II trial ongoing
Phase I/II trial completed
Melanoma Phase II trial ongoing
Phase I/II trial completed
Colorectal cancer Phase II trial enrollment completed
Gastric cancer Phase I/II trial ongoing
Pancreatic cancer Phase I trial completed
Non-Hodgkin's lymphoma Phase II trial planned
Sarcoma Phase II trial planned
HSPPC-70-C Various cancers Research
HSPPC-90-C Various cancers Research
HSPPC-56-C Various cancers Research
INFECTIOUS DISEASES
HSPPC-96-GH Genital herpes Preclinical
HSPPC-70-GH Genital herpes Preclinical
HSPPC-56-I Various infectious diseases Research
HSPPC-70-I Various infectious diseases Research
AUTOIMMUNE DISORDERS
gp96 Type 1 diabetes Research
Multiple sclerosis Research
</TABLE>
OUR CANCER IMMUNOTHERAPEUTICS
Background. The American Cancer Society estimated that doctors would diagnose
approximately 1.2 million new cases of cancer in the United States in 1999.
Cancer is the second leading cause of death in the United States, resulting in
an estimated 563,100 deaths in 1999. The American Cancer Society reports that
since 1990 medical professionals have diagnosed nearly 12 million cases of
cancer, and cancer has killed nearly 5 million people in the United States.
35
<PAGE> 37
Cancer results from the uncontrolled proliferation of abnormal cells.
Eventually, these cells form a mass referred to as a tumor. As the tumor grows,
it pushes outward, often invading adjacent tissues and organs and interfering
with their normal function. In addition, small groups of cells may break away
from the primary tumor and spread or metastasize. Tumors produced at distant
sites are referred to as metastatic tumors.
The uncontrolled proliferation of cancer cells is due to alterations, or
mutations, in a cell's DNA. Mutations can take place when a gene is exposed to
radiation or particular drugs or chemicals, or when some as yet unexplained
internal change occurs. The mutations in DNA also lead to production of
antigens. Because mutations occur randomly, the antigenic fingerprint of each
person's cancer is unique.
Studies in animals have confirmed that a unique repertoire of antigens is
associated with each primary tumor. As cancers metastasize, they continue to
mutate, potentially producing new antigens not found in the primary tumor of the
same patient. However, we believe that a significant overlap exists between the
antigenic fingerprint of the metastatic cells and the primary tumor of the same
patient.
Current Treatments. Surgery, chemotherapy and radiotherapy are the three most
commonly used methods for treating cancer. Medical professionals often
administer a combination of these treatments to a cancer patient, depending upon
the type of cancer and the extent of the disease. Surgery is curative only when
a doctor detects a tumor at a relatively early stage of growth and is able to
completely remove the tumor. Unfortunately, most tumors metastasize when they
are very small, ultimately causing relapse and death in many cancer patients.
The use of chemotherapy or radiotherapy sometimes improves survival rates;
however, these treatments have significant limitations.
High rates of treatment failure and limitations posed by severe side effects and
tumor resistance have compelled researchers to focus on alternative strategies
of cancer treatment. Immunotherapeutics have the ability to target and destroy
widely disseminated disease without damaging normal tissue. In addition,
immunotherapeutics do not have many of the shortcomings of traditional cancer
treatments.
Our Approach. We purify our cancer immunotherapeutics from portions of a
patient's tumor that a doctor has surgically removed. Our cancer
immunotherapeutics are patient-specific and therefore incorporate the entire
antigenic fingerprint of each patient's own tumor. Because our cancer
immunotherapeutics contain overlapping antigens present in both the primary and
metastatic tumors, we believe they will be effective in treating all the tumor
cells that remain in the body that are derived from the primary tumor.
ONCOPHAGE
Oncophage is our lead cancer immunotherapeutic. We are evaluating Oncophage in
four different cancers in six separate phase II or phase I/II clinical trials.
Oncophage consists of purified, patient-specific heat shock protein-peptide
complexes designed to elicit a T cell-based immune response to a patient's
cancer. After a surgeon removes a patient's tumor, the hospital or clinic ships
a portion of the tumor tissue frozen by overnight courier to our facility. We
purify Oncophage from the tumor tissue using our proprietary manufacturing
process in less than ten hours. Depending on the dose, we require a minimum of
one to three grams of tumor tissue to yield a sufficient amount of Oncophage for
a typical course of treatment.
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<PAGE> 38
We formulate Oncophage in sterile saline solution and package it in standard
single injection vials in our manufacturing facility. We subject the final
immunotherapeutic to extensive quality control testing, including sterility
testing of each lot. We ship the product frozen via overnight courier back to
the hospital. We have developed sophisticated tracking systems and procedures
designed to ensure correct delivery of Oncophage to the appropriate patient.
ONCOPHAGE MANUFACTURING PROCESS
[CHART]
<TABLE>
<S> <C> <C> <C>
STARTING MATERIAL MANUFACTURING FINAL PRODUCT
Tumor tissue Sample of tissue Heat shock protein- Product frozen
removed by shipped frozen to our peptide complexes and shipped to
surgery manufacturing purified from hospital/clinic for
facility tumor tissue at patient treatment
our facility
</TABLE>
There are several benefits associated with the production and administration of
our autologous product:
- we can sterilize Oncophage through simple filtration; sterility is
required for FDA approval of a product that will be injected into
humans;
- the scheduling of production at our central facility is flexible
because we purify Oncophage from frozen tumor samples;
- doctors can administer Oncophage when the patient is ready to begin
treatment because Oncophage is stored frozen and has a current
shelf-life of at least six months; and
- Oncophage consists of a purified protein which can be consistently
produced from most tumor types.
A medical professional initially administers Oncophage to a patient four to six
weeks after a doctor surgically removes the patient's primary or metastatic
tumor. The typical course of treatment consists of a series of injections into
the skin administered once per week for four to six weeks. An oncologist may
recommend treating a patient with more than one course of Oncophage.
ONCOPHAGE COURSE OF TREATMENT
[CHART]
<TABLE>
<S> <C>
4-6 week Repeat course of Oncophage treatment
recovery upon request
</TABLE>
<TABLE>
<S> <C> <C>
Surgery Oncophage once per Follow up
week for 4-6 weeks
</TABLE>
Although we believe Oncophage will be applicable to the treatment of all cancer
types, our initial focus is on cancers that are resistant to available treatment
options. Further, we have chosen types of cancer and stages of disease that
typically yield tumors that doctors can surgically remove. Additionally, in
order to
37
<PAGE> 39
complete clinical trials rapidly and file for regulatory approvals, we have
selected cancers and stages of disease which allow us to evaluate our
immunotherapeutics in clinical trials with near term endpoints.
We filed an IND for Oncophage in November 1996 that the FDA allowed on December
20, 1996. To date, we have treated approximately 160 advanced stage, metastatic
cancer patients with Oncophage in our clinical programs. We started enrolling
patients in our first clinical trial at the Memorial Sloan-Kettering Cancer
Center in New York, New York in November 1997.
We believe the collective results from these clinical trials show that Oncophage
is generally safe and well tolerated. These results also demonstrate preliminary
indications of clinical benefit in a number of these patients. Moreover, we have
shown that Oncophage can generate an anti-tumor immunological response. In
addition, we believe we can manufacture Oncophage consistently and in sufficient
quantities from most human cancer tissue.
The investigators participating in our clinical programs have documented tumor
regression using standard response criteria. A complete response means that all
tumor tissue has disappeared and the patient appears to be disease free. A
partial response means that evaluable tumor tissue has shrunk by at least 50%. A
minor response means that the tumor has shrunk by 25-50%. Stable disease means
that the tumor has either shrunk or grown by less than 25%. Progressive disease
means that the tumor has grown by more than 25%.
The investigators also document survival. Median survival refers to the time at
which 50% of patients diagnosed with a particular cancer are alive.
Renal Cell Carcinoma
Background. Renal cell carcinoma is the most common type of kidney cancer. The
American Cancer Society estimated that doctors would diagnose about 30,000 new
cases of kidney cancer in the United States in 1999 and that the disease would
kill approximately 11,900 people during 1999. Of the 30,000 patients diagnosed
with kidney cancer, approximately 85% have the specific type of kidney cancer
known as renal cell carcinoma. By the time renal cell carcinoma is diagnosed in
these patients, about one-third of them have developed metastatic disease.
The median survival of patients with metastatic renal cell carcinoma is
approximately 12 months. For patients with metastatic disease, the only FDA
approved treatment is intravenous high-dose interleukin-2, a human cytokine. The
response rate, which includes partial responses and complete responses, of
patients who are treated with high-dose interleukin-2 is approximately 15%.
Treatment with high-dose interleukin-2 is generally associated with severe
adverse effects. These side effects often can lead to discontinuation of
treatment. Although not FDA-approved for the treatment of renal cell carcinoma,
a lower-dose of interleukin-2 injected underneath the skin, or subcutaneously,
either alone or in combination with other cytokines, has become a treatment
option. This treatment regimen has been the subject of a number of small studies
with widely varying outcomes. Generally, side effects using the subcutaneous
route of administration have been milder than those associated with high-dose,
intravenous treatment.
Our Clinical Program. In our phase I/II trial, we enrolled patients with
measurable metastatic renal cell carcinoma. We conducted this trial with
clinical investigators at the M.D. Anderson Cancer Center in Houston, Texas.
These patients did not receive prior or concurrent cancer therapy. After
surgical removal of their primary tumors, patients were treated at one of three
dose levels of Oncophage: 2.5 micrograms, 25 micrograms or 100 micrograms. The
clinical investigators treated 38 patients, of whom 34 could be evaluated with
standard radiology measurements.
Of the 34 evaluable patients, 13 patients responded or had stable disease. Four
patients had a partial response and one patient had a minor response. The other
eight patients showed stabilization of their disease. Three of these patients
had been stable in excess of 10 months. The response rate in this trial, which
does not include patients with a minor response or stable disease, was 12% and
no adverse events were associated with treatment with Oncophage.
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<PAGE> 40
The median survival in this trial has not yet been reached; this means that more
than half of the patients are still alive with an average follow up time of 12
months.
While the analysis of immunological results is still ongoing, testing to date
shows that in four out of five patients who responded clinically, the number of
T cells increased after treatment with Oncophage. Further, in all patients who
responded clinically, the number of natural killer cells increased after
treatment with Oncophage.
In the phase I/II trial, clinical investigators found that Oncophage is
generally safe and well tolerated. Sixty-three percent of our patients received
more than one course of treatment with Oncophage.
We were able to prepare Oncophage successfully from approximately 98% of renal
cancer carcinoma samples we received at our manufacturing facility for this
phase I/II trial. Based on this result, we believe we will be able to
manufacture Oncophage for nearly all renal cell carcinoma patients whose tumors
a surgeon can remove.
Based on the results from our phase I/II clinical trial, we have initiated a 60
patient phase II trial for patients with metastatic renal cell carcinoma at the
M.D. Anderson Cancer Center. For this trial, the dose of Oncophage has been set
at 25 micrograms and patients receive one dose once a week for four weeks,
followed by one dose every two weeks. Some patients may also receive an
injection of subcutaneous interleukin-2 if they have not had an adequate
response after three months of treatment with Oncophage. We anticipate that we
will complete this phase II trial in the first quarter of 2000. Based on the
analysis of the results from the phase I/II and phase II trials, we anticipate
that we will start a pivotal trial for renal cell carcinoma by the middle of
2000.
Melanoma
Background. Melanoma is the most serious form of skin cancer. The American
Cancer Society estimated that doctors would diagnose about 44,200 new cases of
melanoma in the United States in 1999 and that the disease would kill
approximately 7,300 people during 1999. The incidence of melanoma is growing at
5-7% per year, which is substantially faster than the growth in incidence rates
of most other cancers. Oncologists treat advanced or metastatic melanoma, also
known as stage III or IV, with surgery, radiation therapy, immunotherapy, or
chemotherapy depending on the case. Approximately 20% of all melanoma patients
at the time of their first diagnosis have stage III or stage IV disease.
Existing treatments have not significantly improved overall survival of patients
with melanoma. The median survival of patients with stage III melanoma varies
widely according to published literature. At the M.D. Anderson Cancer Center,
the median survival of patients with late stage III melanoma is 24 months.
According to published literature, patients with stage IV melanoma have a median
survival of about seven months. Although oncologists use various treatment
options, the only FDA approved drug therapies for patients with metastatic
melanoma are high dose intravenous interleukin-2 and alpha interferon, another
human cytokine.
Our Clinical Program. We have treated 36 patients in a phase I/II clinical
trial, evaluating Oncophage as a treatment for late stage III and early stage IV
metastatic melanoma. Eighty-three percent of the patients in our trial were
previously treated with chemotherapy, radiotherapy, and alpha interferon. We are
conducting the trial with clinical investigators at the M.D. Anderson Cancer
Center. After surgery to remove a portion of the tumor, the clinical
investigators treated patients with 2.5 micrograms, 25 micrograms or 100
micrograms of Oncophage.
In this trial, the clinical investigators treated 25 patients with stage IV
disease and 11 patients with stage III disease. Among the 25 patients with stage
IV disease, 12 patients were "adjuvant patients." This means that these patients
had all of their detectable melanoma tissue surgically removed before the
clinical investigators treated them with Oncophage. Of these 12 patients, 11
patients are free of disease at a median of 13 months after surgery. Not enough
time has elapsed to appropriately report on the eight patients in the adjuvant
setting with stage III disease.
39
<PAGE> 41
In our melanoma trial, the clinical investigators also treated 16 stage III and
stage IV patients with "residual disease." These are patients who have had only
part of their disease surgically removed, leaving them with visible disease at
the time of Oncophage treatment. In this group of patients, there was one stage
IV patient who, after initial progression of his disease, experienced a mixed
response. This patient's largest metastatic tumor disappeared completely but the
smaller tumors progressed. There were also two other stage IV patients who
experienced stabilization of their disease following initial progression of
disease.
At the time of this analysis, 81% of all the patients who our clinical
investigators treated in this study are alive. We are continuing to analyze the
results from this trial.
To date, the trial has shown Oncophage to be generally safe and well tolerated
by patients. In addition, we have been able to successfully prepare Oncophage
from approximately 92% of melanoma samples we received at our manufacturing
facility for this phase I/II trial. Based on this result, we believe we will be
able to manufacture our product for nearly all melanoma patients from whom a
surgeon can remove an adequate amount of tumor tissue.
In addition to our phase I/II trial at the M.D. Anderson Cancer Center, we are
also currently enrolling patients in a phase II trial for melanoma at the
Istituto dei Tumori in Milan, Italy. We anticipate our clinical investigators
will treat 40 patients in this trial at 5 or 50 micrograms of Oncophage. The
purpose of this trial is to confirm the route of administration of Oncophage.
Colorectal Cancer
Background. Colorectal cancer is cancer of the colon or rectum. The American
Cancer Society estimated that doctors would diagnose about 129,400 new cases of
colorectal cancer in the United States in 1999 and that this disease would kill
approximately 56,600 people during 1999.
For patients whose disease has not spread to other parts of the body, surgery
remains the most common treatment and can be curative in about two thirds of
these cases. For patients whose disease has metastasized to other parts of the
body, treatment options are limited and the patients' prognosis is poor.
Patients with recurrence of advanced disease may have their metastatic lesions
removed by surgery. The median survival for these patients is approximately 12
months. Conventional cancer treatments such as chemotherapy and radiation have
shown limited benefit in treating colorectal cancer.
Our Clinical Program. We have completed enrollment of a 30 patient phase II
clinical trial evaluating Oncophage as a treatment for metastatic colorectal
cancer. We are conducting the trial at the Istituto dei Tumori. The clinical
investigators will treat patients with 2.5 micrograms, 25 micrograms or 100
micrograms of Oncophage after a surgeon removes the patients' metastatic tumors.
We are continuing to analyze the results from this trial. To date, the trial has
shown Oncophage to be generally safe and well tolerated by patients. In
addition, we have successfully prepared Oncophage from 100% of colorectal cancer
samples we received at our manufacturing facility for this trial. Based on this
result, we believe we will be able to manufacture our product for nearly all
colorectal cancer patients whose tumors a surgeon can remove.
Gastric Cancer
Background. Gastric cancer is cancer of the stomach. The American Cancer
Society estimated that doctors would diagnose about 21,900 new cases of gastric
cancer in the United States in 1999 and that the disease would kill
approximately 13,500 people during 1999. The treatment options for gastric
cancer are surgery, chemotherapy and radiation. Biological therapies are
currently in clinical trials. For patients with surgically removable tumors,
improvements in surgical techniques have led to increased survival. Despite
these advances, as well as the development of multi-drug chemotherapy regimens,
the median survival for patients with advanced gastric cancer, according to
published research, is approximately seven months.
40
<PAGE> 42
Our Clinical Program. We are currently enrolling patients in a 30 patient phase
I/II clinical trial evaluating Oncophage as a treatment for metastatic gastric
cancer. We are conducting this trial with clinical investigators at the Johannes
Gutenberg-University Hospital in Mainz, Germany. After clinical investigators
surgically remove a patient's tumor, the clinical investigators treat the
patient with 2.5 micrograms or 15 micrograms of Oncophage. Although enrollment
is still ongoing, to date, the trial has shown Oncophage to be generally safe
and well tolerated by patients. In addition, we have been able to successfully
prepare Oncophage from approximately 71% of gastric cancer samples we received
at our manufacturing facility for this trial. Based on this result, we believe
we will be able to manufacture our product for the majority of gastric cancer
patients whose tumors a surgeon can remove.
Pancreatic Cancer
Background. Pancreatic cancer is the fourth leading cause of cancer death in
the United States. The American Cancer Society estimated that doctors would
diagnose about 28,600 new cases of pancreatic cancer in the United States in
1999 and that the disease would kill approximately 28,600 people during 1999.
The treatment options for pancreatic cancer are surgery and chemotherapy.
Doctors at the Memorial Sloan-Kettering Cancer Center report that patients who
have had tumors surgically removed have a median survival of 14 months. Doctors
treat patients with tumors that cannot be surgically removed, or resected, with
chemotherapy. The median survival time for patients with unresectable disease is
less than six months.
Our Clinical Program. In early 1999, we completed a pilot phase I clinical
trial evaluating Oncophage as a treatment for resectable pancreatic cancer. We
conducted the trial with clinical investigators at the Memorial Sloan-Kettering
Cancer Center and enrolled 15 patients. The clinical investigators treated five
of the 15 patients with five micrograms of Oncophage after doctors had removed
the patient's primary tumor.
Two out of five patients generated a T cell response to their tumor after
treatment with Oncophage. These two patients are alive and disease free at 11
and 22 months, respectively, since surgery. A third patient is known to be free
of disease at 24 months after surgery. The fourth patient is alive with
recurrent disease at 11 months, and the fifth patient died seven months after
surgery.
The trial showed Oncophage to be generally safe and well tolerated by patients.
We successfully prepared Oncophage from 5 of 15 pancreatic cancer samples we
received in our manufacturing facility. We were not able to prepare Oncophage
from the remaining tumor samples due to the presence of enzymes in the
pancreatic tissue that break down proteins, including heat shock proteins. Based
upon our process development advances, we anticipate that a modified process
will improve our rate of success for purifying Oncophage from pancreatic tumors.
Non-Hodgkin's Lymphoma
Background. Non-Hodgkin's lymphoma is cancer that originates in lymph tissue.
The American Cancer Society estimated that doctors would diagnose about 56,800
new cases of non-Hodgkin's lymphoma in the United States in 1999 and that the
disease would kill approximately 25,700 people during 1999. Approximately 40% of
patients with non-Hodgkin's lymphoma have low grade indolent disease, which is a
slow growing, often fatal, lymphoma.
Doctors have traditionally treated patients with non-Hodgkin's lymphoma with
chemotherapy. Recently, the FDA approved one new antibody therapy for low grade
non-Hodgkin's lymphoma.
Our Clinical Program. We are in the process of initiating a 35 patient phase II
clinical trial evaluating Oncophage as a treatment for low grade indolent
non-Hodgkin's lymphoma. We will conduct this trial with clinical investigators
at the M.D. Anderson Cancer Center. We anticipate that the clinical
investigators will treat patients with 25 micrograms of Oncophage after a
surgeon removes the patients' tumor tissue.
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<PAGE> 43
Sarcoma
Background. Soft tissue sarcomas are cancerous tumors that can develop from
fat, muscle, nerve, joint, blood vessel or deep skin tissues. The American
Cancer Society estimated that doctors would diagnose about 7,800 new cases of
soft tissue sarcomas in the United States in 1999 and that the disease would
kill approximately 4,400 people during 1999.
Doctors treat sarcoma with surgery, chemotherapy or targeted radiotherapy. For
resectable disease, doctors perform surgery and administer chemotherapy or
targeted radiotherapy as follow up treatments. For unresectable disease, doctors
treat patients with a combination of chemotherapy and radiotherapy.
Our Clinical Program. We are in the process of initiating a 35 patient phase II
clinical trial evaluating Oncophage as a treatment for soft tissue sarcomas. We
will conduct the trial with clinical investigators at Memorial Sloan-Kettering
Cancer Center and may expand it to include other sites. We anticipate that the
clinical investigators will treat patients with 25 micrograms of Oncophage after
a surgeon removes the patients' tumor tissue.
Other Cancer Immunotherapeutics
In addition to Oncophage, we are currently researching several other autologous
cancer immunotherapeutics using different heat shock proteins, including
HSPPC-70, HSPPC-90, and HSPPC-56. These immunotherapeutics have demonstrated
efficacy in animal cancer models.
OUR INFECTIOUS DISEASE IMMUNOTHERAPEUTICS
Background. Infectious diseases are illnesses caused by microorganisms, or
pathogens, like viruses, bacteria and parasites, and include tuberculosis,
hepatitis, genital herpes and HIV. While doctors use antiviral agents and
antibiotics to treat a number of viral and bacterial diseases effectively,
medical professionals are concerned about the emergence of new strains of
pathogens that have developed resistance to all available drugs.
Our Approach. Our immunotherapeutics for treating infectious diseases will
consist of heat shock proteins bound to peptides that are produced by the
pathogen causing the infection. Typically, each infectious disease is caused by
a specific pathogen. Consequently, our infectious disease immunotherapeutics
will be common to all patients with a particular infection and will not be
patient-specific. We currently produce these immunotherapeutics from cells
infected with the target pathogen. This manufacturing procedure has enabled us
to test our immunotherapeutics in preclinical studies and should enable us to
produce sufficient quantities to begin human clinical trials. Another technique
to manufacture our immunotherapeutics involves binding specific peptides with
heat shock proteins in vitro. We can generate the peptides in microorganisms or
produce them synthetically.
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<PAGE> 44
OUR INFECTIOUS DISEASE IMMUNOTHERAPEUTIC MANUFACTURING PROCESS
[CHART]
<TABLE>
<CAPTION>
STARTING MATERIAL MANUFACTURING FINAL PRODUCT
<S> <C> <C>
Mammalian cell lines Heat shock protein-peptide Product frozen
infected with pathogen complexes (purified from cell and shipped to
of interest and grown lines or produced in vitro) hospital/clinic for
in bioreactors patient treatment
or
Heat shock proteins
and pathogen specific
peptides produced
synthetically or in
microorganisms
</TABLE>
Genital Herpes. Genital herpes is a contagious viral infection that affects an
estimated 45 million Americans. Doctors estimate that as many as 500,000 new
cases may occur each year in the United States. Genital herpes is currently
treated with palliative antiviral agents that reduce further replication of the
virus. The challenge of antiviral therapy lies not only in treatment of the
symptoms during the first and recurrent episodes but also in the long-term
suppression of the herpes virus in patients with frequent recurrences. We expect
to file an IND for this indication in 2000.
OUR AUTOIMMUNE DISORDER IMMUNOTHERAPEUTIC
Background. Autoimmune disorders result from an inappropriate immune response
that targets and destroys normal tissue. While researchers have not definitively
determined what triggers autoimmune responses, many believe that both genetic
and environmental factors are probably involved in this process. Several
autoimmune disorders, including diabetes and multiple sclerosis, result in the
proliferation of misdirected T cells that attack normal tissues. We believe that
a therapeutic product that can turn off misdirected T cell responses could treat
these disorders.
Our Approach. We have demonstrated in animal models that heat shock proteins
administered at higher doses than those required for treating cancer and
infectious diseases can turn off misguided T cells that destroy healthy tissue
in animals with some autoimmune disorders. We are currently researching the
application of heat shock proteins to treat autoimmune diseases like diabetes
and multiple sclerosis. The source of heat shock proteins used in our autoimmune
disorders immunotherapeutic will be human cells. Our immunotherapeutic could
also be made using recombinant DNA techniques.
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<PAGE> 45
OUR AUTOIMMUNE DISORDER IMMUNOTHERAPEUTIC MANUFACTURING PROCESS
[CHART]
<TABLE>
<CAPTION>
Starting Material Manufacturing Final Product
<S> <C> <C>
Mammalian cells Heat shock protein-peptide Product frozen and
or complexes purified shipped to
recombinant DNA from cell lines hospital/clinic for
or patient treatment
recombinantly produced
</TABLE>
MANUFACTURING
We manufacture our own immunotherapeutic products in a 30,225 square foot
manufacturing and research and development facility located in Woburn,
Massachusetts. We are in the process of preparing this facility for the
commercialization of Oncophage.
Our process development group is currently working on improving the process by
which we manufacture heat shock protein-based immunotherapeutics. Efforts in
this area to date have resulted in a 50% reduction in the time required to
purify Oncophage from individual patients' tumors and a 40% increase in the
quantity of Oncophage we can produce from tumor tissue. These efforts in our
cancer program should also benefit preparation of our heat shock protein-based
immunotherapeutics for treatment of infectious diseases.
SALES AND MARKETING
To commercially market our immunotherapeutic products once we obtain the
necessary regulatory approvals, we must either develop our own sales and
marketing force or enter into arrangements with third parties. Currently, our
sales and marketing plans consist of the following:
- Commercialize cancer immunotherapeutics in the United States
through our own sales force. We believe that we can build a United
States sales force to market our cancer immunotherapeutics due to
the concentration of the United States oncology market.
- Form collaborations with pharmaceutical companies for
commercializing cancer immunotherapeutics outside the United
States. For example, we have entered into an agreement with
Sigma-Tau Industrie Farmaceutiche Riunite S.p.A., under which they
have agreed to pay for two clinical trials in return for rights
which include an option to enter into an agreement to market
Oncophage in Italy, Spain, Portugal and Switzerland. We have also
signed an agreement with Medison Pharma Ltd. for marketing
Oncophage in Israel.
- Form collaborations with pharmaceutical companies for infectious
diseases and autoimmune disorders. Unlike cancer, the number of
doctors and health care institutions prescribing treatments for
infectious diseases and autoimmune disorders is large and
fragmented, and we will need a large sales force to effectively
market our products.
OUR INTELLECTUAL PROPERTY PORTFOLIO
We devote significant resources to protecting and expanding our intellectual
property portfolio. We seek to protect our core technologies through a
combination of patents, trade secrets and know-how. As a result of an exclusive
worldwide license with Fordham University and one with Mount Sinai School of
Medicine,
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we have exclusive rights to nine issued U.S. patents, and foreign counterpart
patents and patent applications, relating to our heat shock protein technology.
Prior to directing the Center for Immunotherapy of Cancer at the University of
Connecticut, Dr. Srivastava, the Chairman of our Scientific Advisory Board, was
an assistant professor of immunology at Mount Sinai School of Medicine, and,
then, a professor of immunology at Fordham University.
We also have licensed rights to 43 pending U.S. patent applications, and
corresponding foreign counterpart patents and applications, from Mount Sinai
School of Medicine of New York University, Fordham University, Duke University
and the University of Miami. Under the license agreements with these
institutions, we have exclusive, worldwide rights to inventions using heat shock
proteins in the treatment and prevention of cancer, infectious diseases,
autoimmune disorders and other indications. If we commercialize any of the
inventions, we will pay the licensors a royalty on sales of the commercialized
product. In addition, pursuant to a research agreement with the University of
Connecticut Health Center, we will fund the laboratory directed by Dr.
Srivastava at the University through December 31, 2002. In return, we have an
option to obtain an exclusive license to new inventions as that term is defined
in the research agreement, with the royalty rates and other terms to be
determined by negotiation between the parties. We also have an option to obtain
an exclusive license to certain types of "improvement" inventions as that term
is defined in the research agreement, at already-determined royalty rates, but
with the other terms to be determined by negotiation between the parties. To
date, we have exercised options to license three patent applications.
It is worth noting that:
- patent applications in the United States are maintained in secrecy
until patents are issued;
- patent applications in other countries generally are not published
until 18 months after they are first filed in any country;
- publication of technological developments in the scientific or
patent literature often lags behind the date of these developments;
and
- searches of prior art may not reveal all relevant prior inventions.
Although we have licensed nine issued United States patents and 43 pending
United States patent applications, we cannot be certain that our licensors'
inventors were the first to invent the subject matter covered by these patent
and patent applications or that they were the first to file patent applications
for those inventions or that a court or patent authority will not determine that
these patent rights are invalid or unpatentable.
REGULATORY CONSIDERATIONS
Governmental authorities in the United States and other countries extensively
regulate the preclinical and clinical testing, manufacturing, labeling, storage,
record keeping, advertising, promotion, export, marketing and distribution,
among other things, of our immunotherapeutics. In the United States, the FDA
under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act
and other federal statutes and regulations subjects pharmaceutical products to
rigorous review. If we do not comply with applicable requirements we may be
fined, our products may be recalled or seized, our production may be totally or
partially suspended, the government may refuse to approve our marketing
applications or allow us to distribute our products, and we may be criminally
prosecuted. The FDA also has the authority to revoke previously granted
marketing authorizations.
In order to obtain approval of a new product from the FDA, we must, among other
requirements, submit proof of safety and efficacy as well as detailed
information on the manufacture and composition of the product. In most cases,
this proof entails extensive preclinical, clinical and laboratory tests. This
testing, the preparation of necessary applications and processing of those
applications by the FDA are expensive and typically take several years to
complete. We cannot assure that the FDA will act quickly or favorably in
reviewing these applications, and we may encounter significant difficulties or
costs in our efforts to
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obtain FDA approvals that could delay or preclude us from marketing any products
we may develop. The FDA may also require post-marketing testing and surveillance
to monitor the effects of approved products or place conditions on any approvals
that could restrict the commercial applications of these products. Regulatory
authorities may withdraw product approvals if we fail to comply with regulatory
standards or if we encounter problems following initial marketing. With respect
to patented products or technologies, delays imposed by the governmental
approval process may materially reduce the period during which we will have the
exclusive right to exploit them.
The first stage of the FDA approval process for a new biologic or drug involves
completion of preclinical studies and the submission of the results of these
studies to the FDA, together with proposed clinical protocols, manufacturing
information, analytical data and other information, in an investigational new
drug application, which must become effective before human clinical trials may
commence. The investigational new drug application is automatically effective 30
days after receipt by the FDA, unless the FDA before that time requests an
extension to review the application, or raises concerns or questions about the
conduct of the trials as outlined in the application. In the latter case, the
sponsor of the application and the FDA must resolve any outstanding concerns
before clinical trials can proceed. We cannot guarantee that submission of an
investigational new drug application will result in the FDA authorizing us to
commence clinical trials in any given case.
Preclinical studies involve laboratory evaluation of product characteristics and
animal studies to assess the efficacy and safety of the product. The FDA
regulates preclinical studies under a series of regulations called the current
"Good Laboratory Practices" regulations. If the sponsor violates these
regulations, in some cases, the FDA may invalidate the studies and require that
the sponsor replicate those studies.
After the investigational new drug application becomes effective, a sponsor may
commence human clinical trials. The sponsor typically conducts human clinical
trials in three sequential phases, but the phases may overlap. In phase I
trials, the sponsor tests the product in a small number of patients or healthy
volunteers, primarily for safety at one or more doses. In phase II, in addition
to safety, the sponsor evaluates the efficacy of the product in a patient
population somewhat larger than phase I trials. Phase III trials typically
involve additional testing for safety and clinical efficacy in an expanded
population at geographically dispersed test sites. The sponsor must submit to
the FDA a clinical plan, or "protocol," accompanied by the approval of the
institution participating in the trials, prior to commencement of each clinical
trial. The FDA may order the temporary or permanent discontinuation of a
clinical trial at any time.
The sponsor must submit to the FDA the results of the preclinical and clinical
testing, together with, among other things, detailed information on the
manufacture and composition of the product, in the form of a new drug
application or, in the case of a biologic, a biologics license application. In a
process which generally takes several years, the FDA reviews this application
and, when and if it decides that adequate data is available to show that the new
compound is both safe and effective and that other applicable requirements have
been met, approves the drug or biologic for marketing. The amount of time taken
for this approval process is a function of a number of variables, including the
quality of the submission and studies presented, the potential contribution that
the compound will make in improving the treatment of the disease in question,
and the workload at the FDA. We cannot guarantee that any of our
immunotherapeutics will successfully proceed through this approval process or
that the FDA will approve them in any specific period of time, or at all.
Congress enacted the Food and Drug Administration Modernization Act of 1997, in
part, to ensure the availability of safe and effective drugs, biologics and
medical devices by expediting the FDA review process for new products. The
Modernization Act establishes a statutory program for the approval of fast track
products, including biologics. A fast track product is defined as a new drug or
biologic intended for the treatment of a serious or life-threatening condition
that demonstrates the potential to address unmet medical needs for this
condition. Under the fast track program, the sponsor of a new drug or biologic
may
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request the FDA to designate the drug or biologic as a fast track product at any
time during the clinical development of the product.
The Modernization Act specifies that the FDA must determine if the product
qualifies for fast track designation within 60 days of receipt of the sponsor's
request. The FDA can base approval of a marketing application for a fast track
product on an effect on a clinical endpoint or on another endpoint that is
reasonably likely to predict clinical benefit. The FDA may subject approval of
an application for a fast track product to:
- post-approval studies to validate the surrogate endpoint or confirm
the effect on the clinical endpoint; and
- prior review of all promotional materials.
In addition, the FDA may withdraw its approval of a fast track product on a
number of grounds, including the sponsor's failure to conduct any required
post-approval study with due diligence.
If a preliminary review of the clinical data suggests that a fast track product
may be effective, the FDA may initiate review of sections of a marketing
application for a fast track product before the sponsor completes the
application. This rolling review is available if the applicant provides a
schedule for submission of remaining information and pays applicable user fees.
However, the time periods specified under the Prescription Drug User Fee Act
concerning timing goals to which the FDA has committed in reviewing an
application, do not begin until the sponsor submits the application.
We may request fast track designation for our immunotherapeutics. We cannot
predict whether the FDA will grant that designation, nor can we predict the
ultimate impact, if any, of the fast track process on the timing or likelihood
of FDA approval of our immunotherapeutics.
The FDA may, during its review of a new drug application or biologics license
application, ask for additional test data. If the FDA does ultimately approve
the product, it may require post-marketing testing, including potentially
expensive phase IV studies, and surveillance to monitor the safety and
effectiveness of the drug. In addition, the FDA may in some circumstances impose
restrictions on the use of the drug that may be difficult and expensive to
administer, and may require prior approval of promotional materials.
Before approving a new drug application or biologics license application, the
FDA will inspect the facilities at which the product is manufactured and will
not approve the product unless the manufacturing facilities are in compliance
with current Good Manufacturing Practices. In addition, the manufacture,
holding, and distribution of a product must be in compliance with current Good
Manufacturing Practices. Manufacturers must continue to expend time, money and
effort in the area of production and quality control and record keeping and
reporting to ensure full compliance with those requirements. The labeling,
advertising, promotion, marketing and distribution of a drug or biologic product
must be in compliance with FDA regulatory requirements. Failure to comply with
applicable requirements can lead to the FDA demanding that production and
shipment cease, and, in some cases, that the manufacturer recall products, or to
enforcement actions that can include seizures, injunctions and criminal
prosecution. These failures can also lead to FDA withdrawal of approval to
market the product.
We are also subject to regulation by the Occupational Safety and Health
Administration and the Environmental Protection Agency and to regulation under
the Toxic Substances Control Act, the Resource Conservation and Recovery Act and
other regulatory statutes, and may in the future be subject to other federal,
state or local regulations. Either or both of OSHA or the EPA may promulgate
regulations that may affect our research and development programs. We are unable
to predict whether any agency will adopt any regulation which could have a
material adverse effect on our operations.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
Whether or not we have obtained FDA approval, we must obtain approval of a
product by comparable regulatory authorities of foreign countries prior to the
commencement
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of marketing the product in those countries. The time required to obtain this
approval may be longer or shorter than that required for FDA approval. The
foreign regulatory approval process includes all the risks associated with FDA
regulation set forth above as well as country-specific regulations.
COMPETITION
Competition in the pharmaceutical and biotechnology industries is intense. Many
pharmaceutical or biotechnology companies have products on the market and are
actively engaged in the research and development of products for the treatment
of cancer, infectious diseases and autoimmune disorders. In addition, many
competitors focus on immunotherapy as a treatment for cancer, infectious
diseases and autoimmune disorders. In particular, some of these companies are
developing autologous cancer vaccines. Others are focusing on developing heat
shock protein products. We compete for funding, access to licenses, personnel
and third-party collaborations. In addition, many competitors have substantially
greater financial, manufacturing, marketing, sales, distribution and technical
resources, and more experience in research and development, clinical trials and
regulatory matters, than we do. A competing company developing, or acquiring
rights to, a more efficacious therapeutic product for the same diseases targeted
by us, or one which offers significantly lower costs of treatment, could render
our products noncompetitive or obsolete.
Academic institutions, governmental agencies and other public and private
research institutions conduct significant amounts of research in biotechnology,
medicinal chemistry and pharmacology. These entities have become increasingly
active in seeking patent protection and licensing revenues for their research
results. They also compete with us in recruiting and retaining skilled
scientific talent.
FACILITIES
We lease approximately 30,225 square feet of laboratory space in Woburn,
Massachusetts under a lease agreement that terminates in August 2003. We have an
option to renew for an additional five-year period with the landlord's consent.
We maintain our executive offices in New York, New York, in an office building
in which we lease approximately 8,000 square feet from an affiliated party. The
agreement terminates in December 2006. You should read the discussion under
"Certain Relationships and Related Transactions" regarding our executive
offices.
EMPLOYEES
As of December 31, 1999, we had 71 employees, of whom 11 have Ph.D.s and one has
an M.D.; three are clinical staff, 21 are manufacturing and quality control
staff, 24 are research and development staff, and 23 are management or
administrative staff. None of our employees is subject to a collective
bargaining agreement. We believe that we have good relations with our employees.
LEGAL PROCEEDINGS
Other than our opposition of a European patent discussed under "Risk Factors,"
we are not currently a party to any material legal proceedings or claims. You
should read the discussion of our opposition of this European patent under "Risk
Factors."
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Set forth below is certain information regarding our executive officers,
directors and key employees, including their age as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AGE TITLE
- ---- --- -----
<S> <C> <C>
Garo Armen, Ph.D......................... 46 Chairman of the Board, Chief Executive
Officer
Pramod Srivastava, Ph.D.................. 44 Director, Chairman of Scientific Advisory
Board
Gamil de Chadarevian..................... 47 Vice Chairman of the Board, Executive
Vice President International
Elma Hawkins, Ph.D....................... 43 Senior Vice President
Dirk Reitsma, M.D........................ 50 Vice President of Clinical Affairs
Neal Gordon, Ph.D........................ 38 Vice President of Operations
Donald Panoz............................. 64 Director, Honorary Chairman
Noubar Afeyan, Ph.D.(1)(2)............... 37 Director
Edward Brodsky(1)........................ 70 Director
Tom Dechaene(2).......................... 40 Director
Martin Taylor(1)(2)...................... 47 Director
</TABLE>
- ---------------------------------------------
(1)Member of the Compensation Committee
(2)Member of the Audit Committee
The size of the board of directors is currently set at eight members.
Our certificate of incorporation provides for a classified board of directors
consisting of three classes, with each class being as nearly equal in number as
possible. The term of one class expires and their successors are elected for a
term of three years at each annual meeting of the stockholders. We have
designated three class I directors, Messrs. de Chadarevian, Brodsky and Taylor;
three class II directors, Messrs. Panoz, Afeyan and Srivastava; and two class
III directors, Messrs. Armen and Dechaene. These class I, class II and class III
directors will serve until the annual meetings of stockholders to be held in
2000, 2001 and 2002, respectively, and until their respective successors are
duly elected and qualified, or until their earlier resignation or removal. The
board of directors appoints officers until the next annual meeting of the board
of directors.
GARO ARMEN, PH.D. co-founded Antigenics in 1994 and has been the Chairman of the
board and Chief Executive Officer since inception. Dr. Armen was previously a
Senior Vice President of Research for Dean Witter Reynolds, focusing on the
chemical and pharmaceutical industries. Dr. Armen has also served as an
Associate Professor at the Merchant Marine Academy and as a research associate
at the Brookhaven National Laboratory. He currently serves as a director of Elan
Corporation, Plc. and Color Kinetics Inc. Dr. Armen received his Ph.D. degree in
physical chemistry from the City University of New York in 1979. Since 1990, Dr.
Armen has been the managing general partner of Armen Partners, L.P., an
investment partnership specializing in public and private healthcare and
biotechnology investments.
PRAMOD SRIVASTAVA, PH.D. co-founded Antigenics in 1994 and has served as the
Chairman of the scientific advisory board since inception. Dr. Srivastava is the
Director of the Center for Immunotherapy of Cancer and Infectious Diseases at
the University of Connecticut. Dr. Srivastava has held positions at Fordham
University and the Mount Sinai School of Medicine. He performed his postdoctoral
training at Yale University and the Sloan-Kettering Institute for Cancer
Research. Dr. Srivastava serves on the Scientific Advisory Council of the Cancer
Research Institute, New York, and has been a member of the Experimental
Immunology Study Section of the National Institutes of Health of the United
States
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Government since 1994. Dr. Srivastava is a past recipient of the First
Independent Research Support & Transition Award of the National Institutes of
Health (1987), the Irma T. Hirschl Scholar Award (1988), the Investigator Award
of the Cancer Research Institute, New York (1991), the Mildred Scheel
Lectureship (1994), and the Sigma Tau Foundation Speakership (1996). In 1997, he
was inducted into the Roll of Honor of the International Union against Cancer
and was listed in the Who's Who in Science and Engineering. He is among the
twenty founding members of the Academy of Cancer Immunology. Dr. Srivastava
earned his Ph.D. in Biochemistry from the Centre for Cellular and Molecular
Biology, Hyderabad, India. Dr. Srivastava is a director of Iconisys, Inc.
GAMIL DE CHADAREVIAN has served as the Vice Chairman of the Board since 1995 and
as Executive Vice President International since 1998. Until April of 1998, he
was Managing Director of Special Projects at Alza International, responsible for
creating new business opportunities in Europe. From 1992 to 1993, Mr. de
Chadarevian was the Vice President of Corporate Development for Corange London
Limited. Prior to 1992, Mr. de Chadarevian held positions at Pasfin Servizi
Finanziara SpA, GEA Consulenza and Credit Suisse. He is also co-founder and
serves as an advisor to several private health care companies in the United
States and Europe. Mr. de Chadarevian received a Lic. Oec. Publ. Degree from the
University of Zurich in Switzerland. Mr. de Chadarevian is the co-founder and
currently the Vice Chairman of Iconisys, Inc. and CambriaTech Holding S.A.
ELMA HAWKINS, PH.D. has served as Senior Vice President since August 1998. From
July 1996 through August 1998, Dr. Hawkins served as our Chief Operating
Officer. Prior to her employment with us, Dr. Hawkins served in a number of
senior positions at Genzyme Corporation, including Director of Corporate
Development. Dr. Hawkins has also held positions in preclinical and clinical
research at Warner-Lambert/Parke-Davis and at the Center for the Study of Drug
Development at Tufts Medical School. Dr. Hawkins holds a Ph.D. in Medicinal
Chemistry from the University of Alabama and an M.B.A. from Boston University.
Dr. Hawkins is a director of Nalari Computing Corporation.
DIRK REITSMA, M.D. has served as Vice President of Clinical Affairs and Medical
Director since April 1997. From 1990 to 1997, Dr. Reitsma was employed by
Ciba-Geigy, where he managed the clinical development of several biologic
compounds and other new drugs. Dr. Reitsma was responsible for the phase III
trials of Aredia in breast cancer, and for their regulatory submissions to the
FDA. Prior to that, Dr. Reitsma was employed by Organon in Rockville, Maryland,
where he worked on various biologics, including human monoclonal antibodies and
on the submission of the regulatory filing for Bacillus Calmette Guerin, also
known as BCG, for superficial bladder cancer. Dr. Reitsma practiced internal
medicine and oncology at the Bergwegiekenhuis in Rotterdam prior to joining
Organon. He received his M.D. from the Erasmus University in Rotterdam, The
Netherlands.
NEAL GORDON, PH.D. has served as Vice President of Operations since May 1999.
Prior to this position he served as Vice President Process Development from July
1998. Previously, he was Senior Director of Chromatography R&D at PerSeptive
Biosystems, a division of PE Corp., formerly Perkin-Elmer Corporation. Over his
ten-year career at PerSeptive, Dr. Gordon was involved in the development and
application of innovative technologies for the purification and analysis of
biopolymers, most notably the development of the BioCAD(R) Chromatography
Workstation. Dr. Gordon received his Ph.D. in Biochemical Engineering from the
Massachusetts Institute of Technology and a Bachelors degree in Chemical
Engineering from McGill University.
DONALD PANOZ has been a director since 1995 and is the Honorary Chairman of the
board of directors. In 1969, Mr. Panoz founded Elan Corporation, Plc., a
pharmaceutical research and development company. Mr. Panoz was Chairman and
Chief Executive Officer of Elan Corporation from 1969 until his retirement in
1996. Mr. Panoz is currently a Lecturer of Pharmacy at the University of
Georgia. In January 1995, Mr. Panoz was named Honorary Irish Consul General to
Bermuda. Mr. Panoz attended Pittsburgh University and Duquesne University in
Pennsylvania.
NOUBAR AFEYAN, PH.D. has been a director since 1998. Dr. Afeyan is Chairman and
CEO of the NewcoGen Group and is also a partner at One Liberty Ventures. Dr.
Afeyan was Senior Vice President
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and Chief Business Officer of PE Corp. until August 1999. Prior to its
acquisition by PE Corp., Dr. Afeyan was the Chairman and Chief Executive Officer
of PerSeptive Biosystems, a company that he founded in 1987 to develop,
manufacture and market instruments and chemical reagents used to purify, analyze
and synthesize biomolecules. Dr. Afeyan served as Chairman of the Board of
ChemGenics Pharmaceuticals, Inc. during 1996 and 1997. He is also a member of
the board of directors of two private companies. Dr. Afeyan received his
undergraduate degree in Chemical Engineering from McGill University and his
Ph.D. in Biochemical Engineering from the Massachusetts Institute of Technology.
EDWARD BRODSKY has been a director since 1995. Mr. Brodsky has been a partner of
the law firm of Proskauer Rose LLP since 1992 and was previously a partner at
the firm of Spengler Carlson Gubar Brodsky & Frisching. Mr. Brodsky and his firm
represent us in legal matters. Mr. Brodsky is currently a director of Giant
Cement Holding, Inc. and UIS, Inc.. He received his LL.B. from New York
University School of Law.
TOM DECHAENE has been a director since 1999. Mr. Dechaene is currently the Chief
Financial Officer of SurfCast, Inc. He was with Deutsche Bank from 1991 through
1999, most recently as a director in the Principal Investments Group within the
Equity Capital Markets division. Mr. Dechaene is a director of Color Kinetics
Inc., Veridicom, Inc., Xaim, Inc. and Iconisys, Inc. Mr. Dechaene holds a law
degree from Ghent University, Belgium, a degree in Applied Economics from the
University of Antwerp and an MBA from INSEAD, France.
MARTIN TAYLOR has been a director since June 1999. From 1993 until 1998, Mr.
Taylor held the position of Chief Executive Officer of Barclays Bank Plc. Mr.
Taylor is presently a member of the Council for Science and Technology and,
since November 1999, has been chairman of the W.H. Smith Group Plc. In October
1999, he became an advisor to Goldman Sachs International. He was educated at
Balliol College, Oxford University.
SCIENTIFIC ADVISORY BOARD
Our scientific advisory board is comprised of internationally recognized
scientists in the fields of immunology, oncology, genetics and drug delivery.
The scientific advisory board advises our management on strategic issues related
to our scientific development program. Dr. Srivastava chairs the board which
consists of the following other individuals:
JOSHUA LEDERBERG, PH.D. has been a member of the scientific advisory board since
1996 and is the board's Honorary Chairman. In 1958, at the age of 33, Dr.
Lederberg received the Nobel Prize in Physiology of Medicine for his work in the
field of bacterial genetics. Dr. Lederberg is currently the Sackler Foundation
Scholar and Professor- and President-Emeritus at The Rockefeller University, in
New York City, where he is researching the interrelationships of DNA
conformation and mutagenesis. Previously, Dr. Lederberg was a professor of
genetics at Stanford University. A member of the National Academy of Sciences
and a charter member of its Institute of Medicine, Dr. Lederberg has served as
chairman of the President's Cancer Panel and has chaired a comprehensive study
of emergent infections sponsored by the Institute of Medicine, intended to
counteract complacency about the threats from many infectious diseases. He has
also received the United States National Medal of Science. Dr. Lederberg has
served on the board of the Procter & Gamble Co., and continues as a part-time
consultant to several financial and pharmaceutical research and development
institutions. He received his Ph.D. from Yale University.
SIR WALTER BODMER, PH.D. has been a member of the scientific advisory board
since 1996 and he is currently the board's Vice Chairman. Sir Walter currently
serves as the Principal of Herford College, Oxford University. Previously, he
was the Director-General of the Imperial Cancer Research Fund and was Director
of Research at the Fund from 1979 to 1991. He is a Foreign Associate of the
United States National Academy of Sciences and a Foreign Honorary Member of the
American Academy of Arts and Sciences. He is also a Trustee of Sir John Soane's
Museum and the first President of the International Federation of Associations
for the Advancement of Science and Technology. In 1995, Sir Walter was appointed
Chancellor of the University of Salford. Sir Walter was the second President of
the Human
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Genome Organization and is a past President of the British Association for the
Advancement of Science and of the Royal Statistics Society. He has served as
Chairman of the BBC Science Consultative Group and as Vice-President of the
Royal Institution. Sir Walter has recently completed his term as Chairman of the
Trustees of the Natural History Museum, having served as a Trustee for ten
years. He received a Ph.D. from Cambridge University.
HANS-GEORG RAMMENSEE, PH.D. has been a member of the scientific advisory board
since 1999. Dr. Rammensee is currently the Chair of Immunology at the University
of Tubingen, where he has served in various capacities since 1987. From 1993
until 1996, he was Head, Department of Tumorvirus-Immunology, German Cancer
Research Center, Heidelberg, where he was also on the faculty of Theoretical
Medicine. From 1987 until 1993, Dr. Rammensee was Head, Laboratory for
Immunology at the Max Planck Institute for Biology. Since 1987, Dr. Rammensee
has been Coeditor of Immunogenetics and, since 1991, Coeditor of European
Journal of Immunology. Dr. Rammensee is also Speaker for the Graduate Committee
for Cell Biology in Medicine at the University of Tubingen and a Member of the
Evaluation Committee for the Cooperation Program in Cancer Research between the
German Cancer Research Center in Heidelberg and the Ministry of Science in
Israel. From 1992 through 1997, Dr. Rammensee was a Member of the
"Hinterzartener Kreis", a committee of the German Research Council. Dr.
Rammensee has been the recipient of numerous awards including the Heinz Maier
Leibnitz Award of the German Federal Ministry of Science (1988), the Wilhelm and
Maria Meyenburg Award of the German Cancer Research Center (1991), the Gottfried
Wilhelm Leibnitz Award of the German Research Council (1991), the Avery
Landsteiner Award of the Society for Immunology (1992), the Robert Koch Award of
the Robert Koch Foundation (1993), the Paul Ehrlich and Ludwig Darmstaedter
Award of the Paul Ehrlich Foundation (1996) and the Rose Payne Distinguished
Scientist Award of the American Society for Histocompatibility and
Immunogenetics (1997). Dr. Rammensee received his Ph.D. from the University of
Tubingen in 1982, where he studied minor histocompatibility antigens in immune
response.
FELIX THEEUWES, PH.D. has been a member of the scientific advisory board since
1996. Dr. Theeuwes is currently the Chairman and Chief Scientist of Durect
Corporation, which is an affiliate of Alza Corporation. Prior to his current
position, Dr. Theeuwes was Chief Scientist at Alza Corporation. Dr. Theeuwes was
with Alza from 1970, directing research, technology development and product
development for a variety of controlled drug delivery systems. Dr. Theeuwes
holds more than 220 United States patents and has published more than 80
articles and book chapters. In 1980, Dr. Theeuwes was named Inventor of the Year
by the Peninsula Patent Law Association. In 1983, he was the recipient of the
Award for the Advancement of Industrial Pharmacy. He was the Busse Lecturer at
the University of Wisconsin in 1981 and, in 1985, the Third Annual Sidney
Riegelman Lecturer at the University of California, San Francisco. He is a
Fellow of the American Association of Pharmaceutical Scientists, and, in 1993,
he became the first recipient of Alza Corporation's Founder's Award. Dr.
Theeuwes is currently a member of the board of directors of both Vinifera, Inc.
and Durect Corporation. He received his undergraduate and graduate education in
physics at the University of Leuven, Belgium, with a D.Sc. degree in 1966. From
1966 to 1970 he served as a post-doctoral fellow and visiting research assistant
professor in the Department of Chemistry, University of Kansas.
AUDIT COMMITTEE
The audit committee makes recommendations to the board of directors about the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by our independent auditors, and evaluates our
internal controls. The audit committee consists of Messrs. Taylor, Dechaene and
Afeyan.
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COMPENSATION COMMITTEE
The compensation committee reviews and approves the compensation and benefits
for our executive officers, administers our stock option plans and makes
recommendations to the board of directors about compensation matters. The
compensation committee consists of Messrs. Taylor, Brodsky and Afeyan.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid to or earned during the
fiscal years ended December 31, 1998 and 1999 by our chief executive officer and
all of our other executive officers whose salary and bonus exceeded $100,000. We
refer to these persons as the named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION -----------------
----------------------- SHARES UNDERLYING OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)
- --------------------------- ---- ---------- --------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
Garo H. Armen, Ph.D., Chief
Executive Officer.............. 1999 $150,000 -- 254,682 $50,000(2)
1998 -- -- -- --
Elma Hawkins, Ph.D., Senior Vice
President...................... 1999 $200,000 $25,000 -- --
1998 $200,000 $20,000 -- --
Neal Gordon, Ph.D., Vice
President of Operations........ 1999 $136,282 $20,000 9,634 --
1998 $ 57,272(1) $28,750 18,924 --
</TABLE>
- ---------------------------------------------
(1)Dr. Gordon commenced employment with Antigenics in July 1998.
(2)Represents the premium we paid for an executive split-dollar life insurance
policy. Under this policy, under some circumstances, we would be entitled to
a refund of the premiums paid.
1999 OPTION GRANTS
The following table contains certain information regarding stock option grants
during the twelve months ended December 31, 1999 by us to the named executive
officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES PERCENT OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE OR BASE FOR OPTION TERM(1)
OPTIONS TO EMPLOYEES PRICE EXPIRATION ---------------------------------
NAME GRANTED(#) IN FISCAL YEAR ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ---------- ---------------- ---------------- ---------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Garo H. Armen, Ph.D.,
Chief Executive
Officer............... 254,682 83.3% $12.07 2/09-4/09 -- $3,148,740 $6,834,681
Elma Hawkins, Ph.D.,
Senior Vice President... -- -- -- -- -- -- --
Neal Gordon, Ph.D., Vice
President of
Operations............ 9,634 3.2% $ 6.50 1/09 $45,052 $ 172,771 $ 312,201
</TABLE>
- ---------------------------------------------
(1)The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and, therefore, are not intended to forecast
possible future appreciation, if any, in the price of the underlying common
stock. The potential realizable values are calculated by assuming the initial
public offering price is $15.00 per share and that the market price
appreciates from this price at the indicated rate for the entire term of each
option and that each option is exercised and sold on the last day of its term
at the appreciated price.
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<PAGE> 55
OPTION EXERCISES AND YEAR-END OPTION VALUES
The following table provides information about the number of shares issued upon
option exercises by the named executive officers during the year ended December
31, 1999, and the value realized by the named executive officers. The table also
provides information about the number and value of options held by the named
executive officers at December 31, 1999. As our common stock is not publicly
traded, a readily ascertainable market value is not available.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL IN-THE-MONEY OPTIONS
YEAR-END(#) AT FISCAL YEAR END($)(1)
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Garo H. Armen, Ph.D., Chief
Executive Officer........... -- -- 134,431 171,862 $ 941,548 $503,000
Elma Hawkins, Ph.D., Senior
Vice President............ -- -- 137,627 -- $1,864,403 --
Neal Gordon, Ph.D., Vice
President of Operations... -- -- 3,785 24,773 $ 32,186 $210,673
</TABLE>
- ---------------------------------------------
(1)Based on the difference between the option exercise price and an assumed
initial public offering price of $15.00 per share of common stock.
EMPLOYMENT AND CONSULTING AGREEMENTS
Under an employment agreement dated June 1, 1998, we agreed to employ Elma
Hawkins, Ph.D. as Senior Vice President for one year at an annual base salary of
$200,000, which is subject to performance and merit based increases. Pursuant to
the agreement, we issued Dr. Hawkins options to purchase 137,627 shares of the
company's common stock at an exercise price of $1.45 per share vesting over
three years. The agreement is automatically renewed for successive one-year
periods unless either party terminates the agreement. If we terminate Dr.
Hawkins without cause, as that term is defined in the agreement, she is entitled
to her base salary through the end of the one-year term during which the
termination occurs. If we terminate Dr. Hawkins either because we eliminate her
position of Senior Vice President or because there is a change in control of
Antigenics, we are obligated to pay her cash or Antigenics common stock equal to
one year's base salary.
In March 1995, in exchange for Dr. Pramod Srivastava's consulting services, we
agreed to pay him $1,500 per day for up to three days per month. This obligation
expires in March 2005 but will be automatically extended for additional one-year
periods unless either we or Dr. Srivastava decide not to extend the agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As a limited liability company, a compensation committee consisting of Messrs.
Afeyan and Brodsky reviewed salaries and incentive compensation for our
employees and consultants. The compensation committee of the board of directors
of Antigenics Inc. consists of Messrs. Taylor, Brodsky and Afeyan. Although none
of the compensation committee members are officers or employees of Antigenics,
each of Garo Armen, our chairman and chief executive officer, and Gamil de
Chadarevian, our vice chairman and executive vice president international, have
previously participated in compensation discussions with the committee. None of
our executive officers serves as a member of the board of directors or
compensation committee of any entity that has one or more executive officers
serving on our compensation committee. Mr. Brodsky, however, is a partner of
Proskauer Rose LLP, a law firm that provides legal services to us.
54
<PAGE> 56
DIRECTOR COMPENSATION
We reimburse directors for out-of-pocket and travel expenses incurred while
attending board of director and committee meetings. We have generally granted to
each director 17,203 shares when that director has joined our board.
EMPLOYEE BENEFIT PLANS
1999 EQUITY INCENTIVE PLAN
Our equity plan authorizes the grant of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended, and
nonqualified stock options for the purchase of an aggregate of 4,800,000 shares,
subject to adjustment for stock splits and similar capital changes, of common
stock to our employees and, in the case of non-qualified stock options, to
consultants or any affiliate, as defined in the equity plan. The board of
directors has appointed the compensation committee to administer the equity
plan. Upon the closing of this offering, we will have issued options to purchase
1,696,423 shares of common stock under the equity plan, leaving 3,103,577 shares
available for issuance under future grants under the equity plan.
1999 EMPLOYEE STOCK PURCHASE PLAN
We have also adopted an employee stock purchase plan under which employees may
purchase shares of common stock at a discount from fair market value. We have
reserved 300,000 shares of common stock for issuance under the purchase plan.
The purchase plan is intended to qualify as an employee stock purchase plan
within the meaning of Section 423 of the Internal Revenue Code of 1986, as
amended. The compensation committee grants rights to purchase common stock under
the purchase plan. The compensation committee also determines the frequency and
duration of individual offerings under the plan and the dates when employees may
purchase stock. Eligible employees participate voluntarily and may withdraw from
any offering at any time before they purchase stock. Participation terminates
automatically upon termination of employment. The purchase price per share of
common stock in an offering will not be less than 85% of the lesser of its fair
market value at the beginning of the offering period or on the applicable
exercise date and employees may pay through payroll deductions, periodic lump
sum payments or a combination of both. The purchase plan terminates on November
15, 2009. As of December 31, 1999, we had issued no shares of common stock under
the purchase plan.
401(k) PLAN
We sponsor a 401(k) plan for all of our employees. Employees are eligible to
participate after they have completed one year of service with us. Participants
may contribute up to 15% of their current compensation, with a maximum of
$10,500 in 2000. Each participant is fully vested in his or her salary
contributions and related earnings and losses. We match 100% of the
participant's contribution and our matching contributions vest over four years.
We have discretion to change that amount at any time.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
We currently lease office space at cost from GHA Management Corporation which is
wholly owned by Garo Armen, Ph.D. Dr. Armen is our chairman and chief executive
officer, and we use the office space for our corporate headquarters. We incurred
an expense of approximately $143,000, $211,000 and $281,000 for the years ended
December 31, 1997, 1998 and 1999, respectively in connection with that lease.
Under the current agreement, we will pay approximately $312,000 annually until
the agreement expires in December 2006. We believe that the terms of the current
agreement are at least as favorable as terms we could have obtained in an arm's
length transaction with an independent third party. As of December 31, 1999, we
had outstanding letters of credit for the benefit of GHA Management Corporation
in connection with this lease in the amount of $375,000. These letters of credit
expire in January 2000. In addition, during 1997 we obtained office services
from Armen Capital Management Corp., which is wholly owned by Dr. Armen, for
$415,000. You should also read the discussion regarding Mr. Brodsky's
relationship with the law firm of Proskauer Rose LLP under
"Management -- Compensation Committee Interlocks and Insider Participation."
55
<PAGE> 57
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of December 31, 1999, and as
adjusted to reflect the sale of 3,000,000 shares of common stock in this
offering, by:
- each person, or group of affiliated persons, who is known by us to
beneficially own more than 5% of the common stock;
- each of our directors;
- each of our named executive officers; and
- all of our directors and current executive officers as a group.
Except as otherwise noted, the persons or entities in this table have sole
voting and investing power with respect to all the shares of common stock
beneficially owned by them, subject to community property laws, where
applicable.
The "Number of Shares Beneficially Owned" column below is based on an assumed
20,715,942 shares of common stock outstanding before the offering, and
23,715,942 shares of common stock outstanding after the offering. For purposes
of the table below, we deem shares of common stock subject to options that are
currently exercisable or exercisable within 60 days of December 31, 1999, to be
outstanding and to be beneficially owned by the person holding the options for
the purpose of computing the percentage ownership of the person but we do not
treat them as outstanding for the purpose of computing the percentage ownership
of any other person.
<TABLE>
<CAPTION>
PERCENTAGE OF TOTAL
NUMBER OF SHARES --------------------
BENEFICIALLY BEFORE AFTER
OWNED OFFERING OFFERING
---------------- -------- --------
<S> <C> <C> <C>
BENEFICIAL OWNER(1)
Antigenics Holdings L.L.C.(2)................. 11,154,275 53.9% 47.0%
Garo H. Armen, Ph.D.(2)....................... 134,431(3) * *
Pramod Srivastava, Ph.D.(2)................... 182,478(3) * *
Gamil de Chadarevian.......................... 1,625,839(4) 7.8% 6.8%
Elma Hawkins, Ph.D............................ 137,627(3) * *
Neal Gordon, Ph.D............................. 5,712(3) * *
Donald Panoz.................................. 270,612(5) 1.3% 1.1%
Noubar Afeyan, Ph.D.(2)....................... 174,614(3) * *
Edward Brodsky(2)............................. 17,203(3) * *
Tom Dechaene.................................. -- * *
Martin Taylor................................. 54,363(6) * *
All current executive officers and directors
as a group(2) (10 persons)................. 2,602,878(7) 11.2% 9.9%
</TABLE>
- ---------------------------------------------
*Indicates less than 1%
(1)The address of each stockholder is Antigenics Inc., 630 Fifth Avenue, New
York, New York 10111.
56
<PAGE> 58
(2)Founder Holdings Inc. owns about 79.1% of the outstanding common stock of
Antigenics Holdings. Antigenics Holdings owns 53.9% of our common stock
before this offering and will own 47.0% after this offering. Messrs. Armen,
Srivastava and Brodsky are managers of Antigenics Holdings. Messrs. Armen and
Brodsky are directors of Founder Holdings. The following individuals own the
indicated percentages of Founder Holdings outstanding common stock on a fully
diluted basis:
<TABLE>
<CAPTION>
INDIVIDUAL PERCENTAGE
- ---------- ----------
<S> <C> <C>
Garo Armen 43.1%
Pramod Srivastava 24.2%
Edward Brodsky 2.8%
Noubar Afeyan 1.1%
Lawrence Feinberg 19.4%
</TABLE>
The following individuals own the indicated percentage interests in Antigenics
Holdings on a fully diluted basis:
<TABLE>
<CAPTION>
INDIVIDUAL PERCENTAGE
- ---------- ----------
<S> <C> <C>
Garo Armen 13.6%
Pramod Srivastava 6.2%
Edward Brodsky 0.6%
</TABLE>
(3)Consists solely of shares of common stock issuable upon exercise of options
currently exercisable or exercisable within 60 days of December 31, 1999.
(4)Includes 146,351 shares of common stock issuable upon exercise of options
currently exercisable or exercisable within 60 days of December 31, 1999.
(5)Consists of (a) 17,203 shares of common stock issuable upon exercise of
options currently exercisable or exercisable within 60 days of December 31,
1999 and (b) 253,409 shares of common stock held by Fountainhead Holdings
Ltd., all of the capital stock of which is held by trusts, the beneficiaries
of which are the children and grandchildren of Mr. Panoz.
(6)Includes 17,203 shares of common stock issuable upon exercise of options
currently exercisable or exercisable within 60 days of December 31, 1999.
(7)Includes 832,821 shares of common stock issuable upon exercise of options
currently exercisable or exercisable within 60 days of December 31, 1999. See
footnotes (3), (4), (5) and (6).
57
<PAGE> 59
DESCRIPTION OF CAPITAL STOCK
Immediately following the closing of this offering, our authorized capital stock
will consist of 100,000,000 shares of common stock, $0.01 par value per share,
and 1,000,000 shares of preferred stock, $0.01 par value per share. After the
closing of this offering, if we give effect to the issuance of 3,000,000 shares
of common stock and the merger of Antigenics L.L.C. with and into Antigenics
Inc., as of December 31, 1999 there would have been:
- 23,715,942 shares of common stock outstanding;
- options to purchase 1,696,423 shares of common stock outstanding, of
which options to purchase 1,159,334 shares will be exercisable upon
the closing of this offering;
- warrants to purchase 280,886 shares of common stock outstanding, all
of which will be exercisable upon the closing of this offering; and
- no shares of preferred stock outstanding.
COMMON STOCK
Subject to preferences that may apply to shares of preferred stock outstanding
at the time, the holders of outstanding shares of common stock are entitled to
receive dividends out of assets legally available for payment of dividends, as
the board may from time to time determine. Each stockholder is entitled to one
vote for each share of common stock held on all matters submitted to a vote of
stockholders. Our certificate of incorporation does not provide for cumulative
voting for the election of directors, which means that the holders of a majority
of the shares voted can elect all of the directors then standing for election.
The common stock is not entitled to preemptive rights and is not subject to
conversion or redemption. Each outstanding share of common stock is, and all
shares of common stock to be outstanding upon completion of this offering will
be, fully paid and nonassessable.
PREFERRED STOCK
Pursuant to our certificate of incorporation, our board of directors has the
authority, without further action by the stockholders, to issue up to 1,000,000
shares of preferred stock in one or more series and to fix the designations,
powers, preferences, privileges and relative participating, optional or special
rights as well as the qualifications, limitations or restrictions of those
shares, including dividend rights, conversion rights, voting rights, terms of
redemption and liquidation preferences, any or all of which may be greater than
the rights of the common stock. Our board of directors, without stockholder
approval, is able to issue preferred stock with voting, conversion or other
rights that could adversely affect the voting power and other rights of the
holders of common stock. We could therefore issue preferred stock quickly with
terms calculated to delay or prevent a change in control or make removal of
management more difficult. Additionally, the issuance of preferred stock may
have the effect of decreasing the market price of the common stock, and may
adversely affect the voting and other rights of the holders of common stock. At
present, we have no shares of preferred stock outstanding.
WARRANTS
In a private placement in November 1999, we issued warrants to purchase member
interest in Antigenics L.L.C. In connection with this offering, each warrant
holder had the option to:
- convert the warrants into shares of common stock or
- exchange the warrants for warrants to purchase shares of Antigenics
common stock.
None of the warrant holders elected to convert their warrants into shares of
common stock. As a result, these warrants will be exchanged for warrants to
acquire an aggregate of approximately 280,886 shares of common stock. The per
share exercise price for the warrants is $13.96. If not previously exercised,
each warrant will expire on September 30, 2002. Holders may not transfer the
warrants without our consent.
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<PAGE> 60
ANTI-TAKEOVER PROVISIONS
Delaware Law
Section 203 of the Delaware General Corporation Law is applicable to corporate
takeovers of Delaware corporations. Subject to exceptions enumerated in Section
203, Section 203 provides that a corporation shall not engage in any business
combination with any "interested stockholder" for a three-year period following
the date that the stockholder becomes an interested stockholder unless:
- prior to that date, the board of directors of the corporation
approved either the business combination or the transaction that
resulted in the stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the
stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the time the transaction commenced,
though some shares may be excluded from the calculation; and
- on or subsequent to that date, the business combination is approved
by the board of directors of the corporation and by the affirmative
votes of holders of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.
Except as specified in Section 203, an interested stockholder is generally
defined to include any person who, together with any affiliates or associates of
that person, beneficially owns, directly or indirectly, 15% or more of the
outstanding voting stock of the corporation, or is an affiliate or associate of
the corporation and was the owner of 15% or more of the outstanding voting stock
of the corporation, any time within three years immediately prior to the
relevant date. Under some circumstances, Section 203 makes it more difficult for
an interested stockholder to effect various business combinations with a
corporation for a three-year period, although the stockholders may elect not to
be governed by this section, by adopting an amendment to our certificate of
incorporation or by-laws, effective 12 months after adoption. Our certificate of
incorporation and by-laws do not exclude us from the restrictions imposed under
Section 203. We expect that the provisions of Section 203 may encourage
companies interested in acquiring us to negotiate in advance with our board of
directors. These provisions may have the effect of deterring hostile takeovers
or delaying changes in control of us, which could depress the market price of
the common stock and which could deprive stockholders of opportunities to
realize a premium on shares of the common stock held by them.
Charter and By-law Provisions
Our certificate of incorporation and by-laws contain provisions that could
discourage potential takeover attempts and make more difficult attempts by
stockholders to change management. Our certificate of incorporation provides
that stockholders may not take action by written consent but may only act at a
stockholders' meeting, and that only our president or a majority of our board
may call special meetings of the stockholders. Our by-laws also require that
stockholders provide advance notice of business to be brought by a stockholder
before the annual meeting. Our certificate of incorporation includes provisions
classifying the board of directors into three classes with staggered three-year
terms. In addition, our directors may only be removed from office for cause.
Under our certificate of incorporation and by-laws, the board of directors may
enlarge the size of the board and fill any vacancies on the board. The by-laws
provide that stockholders may not make nominations for directors at any annual
or special meeting unless the stockholder intending to make a nomination
notifies us of its intention a specified period in advance and furnishes certain
information.
59
<PAGE> 61
REGISTRATION RIGHTS
In connection with the private placement completed in November 1999, we granted
registration rights with respect to 2,808,857 shares of common stock sold in
that private placement. Pursuant to these registration rights, we are obligated
to file, approximately 90 days after the date of this prospectus, a registration
statement covering these shares of common stock for resale. We will bear all
expenses incurred in connection with this registration, other than any
underwriters' discounts and commissions.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock Transfer
& Trust Company.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the common stock, and we
cannot assure you that a liquid trading market for the common stock will develop
or be sustained after this offering. Future sales of substantial amounts of
common stock, including shares issued upon exercise of outstanding options and
warrants, in the public market after this offering or the anticipation of those
sales could adversely affect market prices prevailing from time to time and
could impair our ability to raise capital through sales of our equity
securities.
After the closing of this offering, we will have outstanding 23,715,942 shares
of common stock, which assumes the underwriters do not exercise their
over-allotment option and holders do not exercise any outstanding options or
warrants. Of these shares, the shares sold in this offering will be freely
tradable without restriction under the Securities Act unless purchased by our
"affiliates", as that term is defined in Rule 144 under the Securities Act. We
expect to register an additional 2,808,857 shares under a registration statement
we will file approximately 90 days following this offering. Substantially all
the remaining 17,907,085 restricted shares held by existing stockholders are
subject to various lock-up agreements providing that, with limited exceptions,
the stockholder will not offer, sell, contract to sell, grant an option to
purchase, effect a short sale or otherwise dispose of or engage in any hedging
or other transaction that is designed or reasonably expected to lead to a
disposition of any shares of common stock or any option to purchase common stock
or any securities exchangeable for or convertible into common stock for a period
of one year after the date of this prospectus. Though these shares may be
eligible for earlier sale under the provisions of the Securities Act, none of
these shares will be saleable until 365 days after the date of this prospectus
as a result of these lock-up agreements. In addition, as of December 31, 1999,
we had outstanding options to purchase 1,696,423 shares of common stock, none of
which we expect the option holders to exercise prior to the closing of this
offering. In addition, we have outstanding warrants to purchase 280,886 shares
of common stock.
In general, under Rule 144 as currently in effect, a person, or persons whose
shares are aggregated, who has beneficially owned restricted shares for at least
one year is entitled to sell within any three-month period up to that number of
shares that does not exceed the greater of: (1) 1% of the number of shares of
common stock then outstanding, which will be approximately 237,159 shares after
this offering, or (2) the average weekly trading volume of the common stock
during the four calendar weeks preceding the filing of a Form 144 with respect
to the sale. Sales under Rule 144 are also subject to certain "manner of sale"
provisions and notice requirements and to the requirement that the issuer has
made current public information about itself available. Under Rule 144(k), a
person who is not deemed to have been an affiliate of the issuer at any time
during the three months preceding a sale, and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner except an affiliate, is entitled to sell those shares without
complying with the manner of sale, public information, volume limitation or
notice provisions of Rule 144.
Rule 701 permits resales of qualified shares held by some affiliates in reliance
upon Rule 144 but without compliance with some restrictions, including the
holding period requirement, of Rule 144. Any of our
60
<PAGE> 62
employees, officers, directors or consultants who purchased his or her shares
pursuant to a written compensatory plan or contract may be entitled to rely on
the resale provisions of Rule 701. Rule 701 further provides that non-affiliates
may sell shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares of common stock are required to wait
until 90 days after the date of this prospectus before selling shares. However,
all shares issued pursuant to Rule 701 are subject to lock-up agreements and
will only become eligible for sale at the expiration of the 365-day lock-up.
61
<PAGE> 63
UNDERWRITING
Subject to certain terms and conditions contained in an underwriting agreement,
the underwriters named below, for whom U.S. Bancorp Piper Jaffray Inc. and
FleetBoston Robertson Stephens Inc. are acting as representatives, have
severally agreed to purchase the number of shares of common stock from us set
forth opposite their names below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
- ------------ ----------------
<S> <C>
U.S. Bancorp Piper Jaffray Inc..............................
FleetBoston Robertson Stephens Inc..........................
Total.............................................
========
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase shares of common stock are subject to the approval of
certain legal matters by counsel and to certain other conditions. If any of the
shares of common stock are purchased by the underwriters pursuant to the
underwriting agreement, all such shares of common stock (other than the shares
of common stock covered by the over-allotment option described below) must be so
purchased.
We have been advised by the underwriter representatives that the underwriters
propose to offer the shares of common stock to the public initially at the price
to the public set forth on the cover page of this prospectus and to certain
dealers (who may include the underwriters) at such price less a concession not
to exceed $ per share. The underwriters may allow, and such dealers may
reallow, discounts not in excess of $ per share to any other
underwriter and certain other dealers.
We have granted to the underwriters an option to purchase up to 450,000
additional shares of common stock at the initial public offering price less the
underwriting discount solely to cover over-allotments. Such option may be
exercised in whole or in part from time to time during the 30-day period after
the date of this prospectus. To the extent that the underwriters exercise such
option, each of the underwriters will be committed, subject to certain
conditions, to purchase a number of option shares proportionate to such
underwriter's initial commitment as indicated in the preceding table. If the
underwriters exercise their option in full, the total price to the public would
be $ , the total underwriting discount would be $ and total proceeds
to us would be $ .
We, together with certain of our stockholders and our executive officers and
directors, have agreed not to directly or indirectly offer, pledge, sell,
contract to sell, sell any option or contract to purchase or grant any option,
right or warrant to purchase or otherwise transfer or dispose of any shares of
common stock or any securities convertible into or exercisable or exchangeable
for common stock, or enter into any swap or other arrangement that transfers all
or a portion of the economic consequences associated with the ownership of such
common stock, or to cause a registration statement covering any shares of common
stock to be filed, for a period of one year after the date of this prospectus
without the prior written consent of the underwriters, subject to limited
exceptions. See "Shares Eligible for Future Sale."
Prior to this offering, there has been no established trading market for the
common stock. The initial price to the public for the common stock offered by us
will be determined by negotiation among and the underwriter representatives and
us. The factors to be considered in determining the initial price to the public
will include the history of and the prospects for the industry in which we
compete, the ability of our management, our past and present operations, our
prospects for future earnings, the general condition of the securities markets
at the time of this offering and the recent market prices of securities of
generally comparable companies. We will apply to list our common stock on the
Nasdaq National Market.
The underwriters do not intend to make sales to accounts over which they
exercise discretionary authority in excess of 5% of the number of shares of
common stock offered hereby.
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<PAGE> 64
In connection with this offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may over-allot this offering, creating a
syndicate short position. Underwriters may bid for and purchase shares of common
stock in the open market to cover syndicate short positions. In addition, the
underwriters may bid for and purchase shares of common stock in the open market
to stabilize the price of the common stock. These activities may stabilize or
maintain the market price of the common stock above independent market levels.
These transactions may be effected on the Nasdaq National Market or otherwise.
The underwriters are not required to engage in these activities and may end
these activities at any time.
In connection with this offering, some underwriters and selling group members
may also engage in passive market making transactions in the common stock on the
Nasdaq National Market. Passive market making consists of displaying bids on the
Nasdaq National Market limited by the prices of independent market makers and
effecting purchases limited by those prices in response to order flow. Rule 103
of Regulation M promulgated by the SEC limits the amount of net purchases that
each passive market maker may make and the displayed size of each bid. Passive
market making may stabilize the market price of the common stock at a level
above that which might otherwise prevail in the open market and, if commenced,
may be discontinued at any time.
At our request, the underwriters have reserved for sale, at the initial public
offering price, up to 150,000 shares of common stock for our directors,
officers, employees and business associates. The number of shares of common
stock available for sale to the general public will be reduced to the extent
those persons purchase any of the reserved shares. Any reserved shares that are
not purchased will be offered by the underwriters to the general public on the
same basis as the other shares in this offering.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
Each underwriter has represented and agreed to the following:
- - it has not offered or sold, and for six months after the date we issue the
common stock, will not offer or sell any shares of common stock to persons in
the United Kingdom except to persons who are ordinarily involved in acquiring,
holding, managing or disposing of investments, as principal or agent, for
business purposes or in other circumstances which have not resulted and will
not result in a public offer in the United Kingdom within the Public Offers of
Securities Regulations 1995;
- - it has complied and will comply with all applicable provisions of the
Financial Services Act 1986 and the Public Offers of Securities Regulations
1995 in any act it has taken or will take with respect to the common stock in,
from or otherwise involving the United Kingdom; and
- - it has only distributed and will only distribute to any person in the United
Kingdom any document received by it in connection with the issuance of the
common stock if that person is of a kind described in Article 11(3) of the
Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom such document may otherwise be distributed.
The common stock will not be offered directly or indirectly to the public in
Ireland. This document does not constitute or form part of any offer or
invitation to the public or any section of the public in Ireland to purchase or
subscribe for, nor does it constitute a form of application, for any common
stock for the purposes of the Irish Companies Acts, 1963-1999 or the European
Communities (Transferable Securities and Stock Exchange) Regulations 1992 or any
other law of Ireland.
The common stock offered has not been and will not be registered with the
Comision Nacional del Mercado de Valores (Spanish Securities Market Commission)
according to the requirements of Act 24/1988 and R.D. 291/1992. Consequently,
the common stock may not be publicly offered, subscribed, sold or distributed in
Spain.
63
<PAGE> 65
LEGAL MATTERS
Palmer & Dodge LLP, Boston, Massachusetts will pass upon the validity of the
common stock offered by this prospectus for us. Shearman & Sterling, New York,
New York, will pass upon certain legal matters in connection with this offering
for the underwriters.
EXPERTS
We have included in this prospectus and in the registration statement the
consolidated financial statements of Antigenics L.L.C. and subsidiaries as of
December 31, 1998 and 1999, and for each of the years in the three-year period
ended December 31, 1999, and for the period from March 31, 1994 (date of
inception) to December 31, 1999, in reliance upon the report of KPMG LLP,
independent certified public accountants, appearing elsewhere in this
prospectus, and upon the authority of that firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC for the stock we
are offering by this prospectus. This prospectus does not include all of the
information contained in the registration statement. You should refer to the
registration statement and its exhibits for additional information. While we
have disclosed the material terms of any of our contracts, agreements or other
documents referenced in this prospectus, you should refer to the exhibits
attached to the registration statement for copies of the actual contract,
agreement or other document. When we complete this offering, we will also be
required to file annual, quarterly and special reports, proxy statements and
other information with the SEC.
You can read our SEC filings, including the registration statement, over the
Internet at the SEC's web site at http://www.sec.gov. You may also read and copy
any document we file with the SEC at its public reference facilities at 450
Fifth Street, NW, Washington, DC 20549, 7 World Trade Center, Suite 1300, New
York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. You may also obtain copies of the documents at
prescribed rates by writing to the Public Reference Section of the SEC at 450
Fifth Street, NW, Washington, DC 20549. Please call the SEC at 1-800-SEC-0330
for further information on the operation of the public reference facilities. Our
SEC filings are also available at the office of the Nasdaq National Market. For
further information on obtaining copies of our public filings at the Nasdaq
National Market you should call (212) 656-5060.
You should rely only on the information contained in the registration statement,
including its exhibits. We have not, and the underwriters have not, authorized
any other person to provide you with different information. This prospectus is
not an offer to sell, nor is it seeking an offer to buy, the securities in any
state where the offer or sale is not permitted. The information in this
prospectus is complete and accurate as of the date in the front cover, but the
information may have changed since that date.
64
<PAGE> 66
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements:
Independent Auditors' Report................................ F-2
Consolidated Balance Sheets as of December 31, 1998 and
1999................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999 and for the period
from March 31, 1994 (date of inception) to December 31,
1999................................................... F-4
Consolidated Statements of Members' Equity for the years
ended December 31, 1997, 1998 and 1999 and for the
period from March 31, 1994 (date of inception) to
December 31, 1999...................................... F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1997, 1998 and 1999 and for the period
from March 31, 1994 (date of inception) to December 31,
1999................................................... F-6
Notes to Consolidated Financial Statements................ F-7
</TABLE>
F-1
<PAGE> 67
INDEPENDENT AUDITORS' REPORT
The Members and Board of Managers
Antigenics L.L.C.:
We have audited the accompanying consolidated balance sheets of Antigenics
L.L.C. and subsidiaries (a Delaware limited liability company in the development
stage and a successor operating company) as of December 31, 1998 and 1999, and
the related consolidated statements of operations, members' equity and cash
flows for each of the years in the three-year period ended December 31, 1999 and
for the period from March 31, 1994 (date of inception) to December 31, 1999.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Antigenics L.L.C.
and subsidiaries as of December 31, 1998 and 1999 and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999 and for the period from March 31, 1994 (date of
inception) to December 31, 1999, in conformity with generally accepted
accounting principles.
/s/ KPMG LLP
Short Hills, New Jersey
January 17, 2000
F-2
<PAGE> 68
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1999
<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 22,168,049 $ 46,417,942
Prepaid expenses............................................ 230,632 103,204
Deferred public offering costs.............................. -- 559,417
Other assets................................................ 21,189 591,134
Due from related party...................................... 27,605 240
------------ ------------
Total current assets................................... 22,447,475 47,671,937
Plant and equipment, net.................................... 4,106,183 8,034,598
Other assets................................................ 74,071 297,646
Organization costs, less accumulated amortization of $28,174
in 1998................................................... 7,885 --
------------ ------------
Total assets........................................... $ 26,635,614 $ 56,004,181
============ ============
LIABILITIES AND MEMBERS' EQUITY
Accounts payable............................................ $ 2,036,814 $ 424,673
Accrued liabilities......................................... 48,134 933,440
Current portion, long-term debt............................. 200,497 812,702
------------ ------------
Total current liabilities.............................. 2,285,445 2,170,815
Long-term debt.............................................. 709,006 2,155,005
Members' capital -- no stated value; 104,024 and 120,418
units issued in 1998 and 1999, respectively............... 45,849,184 89,954,195
Subscription notes receivable............................... (2,102,000) --
Deferred compensation....................................... (613,545) (659,081)
Deficit accumulated during development stage................ (19,492,476) (37,616,753)
------------ ------------
Total members' equity.................................. 23,641,163 51,678,361
Commitments and contingencies
------------ ------------
Total liabilities and members' equity.................. $ 26,635,614 $ 56,004,181
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 69
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
FOR THE PERIOD FROM MARCH 31, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARCH 31,
1994
(DATE OF
INCEPTION) TO
DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Revenue........................... $ -- $ -- $ -- $ --
Expenses:
Research and development:
Related party................ (39,630) -- (33,000) (72,630)
Other........................ (2,523,041) (6,102,362) (10,943,934) (22,441,824)
----------- ----------- ------------ ------------
(2,562,671) (6,102,362) (10,976,934) (22,514,454)
----------- ----------- ------------ ------------
General and administrative:
Related party................ (518,011) (211,152) (248,000) (1,269,555)
Other........................ (1,030,934) (2,966,011) (6,626,543) (14,620,306)
----------- ----------- ------------ ------------
(1,548,945) (3,177,163) (6,874,543) (15,889,861)
----------- ----------- ------------ ------------
Depreciation and amortization... (202,090) (360,285) (1,005,411) (1,701,758)
----------- ----------- ------------ ------------
Total operating loss......... (4,313,706) (9,639,810) (18,856,888) (40,106,073)
Other income:
Non-operating income............ -- -- 10,000 259,988
Interest income................. 481,179 735,778 1,014,008 2,520,729
Interest expense................ -- -- (291,397) (291,397)
----------- ----------- ------------ ------------
Net loss..................... $(3,832,527) $(8,904,032) $(18,124,277) $(37,616,753)
=========== =========== ============ ============
Net loss per members' equity unit,
basic and diluted............... $ (42.81) $ (93.07) $ (171.85)
=========== =========== ============
Weighted average members' equity
units outstanding, basic and
diluted......................... 89,525 95,673 105,468
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 70
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND
THE PERIOD FROM MARCH 31, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
SUBSCRIPTION DURING
MEMBERS' NOTES DEFERRED DEVELOPMENT
UNITS CAPITAL RECEIVABLE COMPENSATION STAGE TOTAL
------- ----------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994................ -- $ -- $ -- $ -- $ -- $ --
Net loss................................. -- -- -- -- (183,440) (183,440)
Issuance of units to founders during
1994, for cash, $6 per unit............ 65,200 400,010 -- -- -- 400,010
------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1994............. 65,200 400,010 -- -- (183,440) 216,570
Net loss................................. -- -- -- -- (3,226,579) (3,226,579)
Issuance of units in connection with the
recapitalization in December 1995, $250
per unit............................... 6,000 1,500,000 (150,000) -- -- 1,350,000
Grant of members' equity units........... 8,800 2,200,000 -- -- -- 2,200,000
------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1995............. 80,000 4,100,010 (150,000) -- (3,410,019) 539,991
Net loss................................. -- -- -- -- (3,345,898) (3,345,898)
Payment of subscription notes
receivable............................. -- -- 150,000 -- -- 150,000
Deferred compensation on options......... -- 781,200 -- (781,200) -- --
Grant and recognition of options......... -- 1,116,815 -- 347,200 -- 1,464,015
Issuance of units in private placement
from March 13, 1996 to December 31,
1996, $1,118 per unit.................. 9,512 10,600,000 (250,000) -- -- 10,350,000
------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1996............. 89,512 16,598,025 (250,000) (434,000) (6,755,917) 9,158,108
Net loss................................. -- -- -- -- (3,832,527) (3,832,527)
Payment of subscription notes
receivable............................. -- -- 250,000 -- -- 250,000
Deferred compensation on options......... -- 144,004 -- (144,004) -- --
Grant and recognition of options......... -- 62,815 -- 188,373 -- 251,188
Issuance of units in private placement
from September 8, 1997 to December 31,
1997, $1,922 per unit.................. 3,842 7,385,000 -- -- -- 7,385,000
------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1997............. 93,354 24,189,844 -- (389,631) (10,588,444) 13,211,769
Net loss................................. -- -- -- -- (8,904,032) (8,904,032)
Deferred compensation on options......... -- 493,701 -- (493,701) -- --
Grant and recognition of options......... -- 838,654 -- 269,787 -- 1,108,441
Exercise of options...................... 224 250,000 -- -- -- 250,000
Issuance of units in private placement
from January 1, 1998 to December 31,
1998, $1,922 per unit.................. 10,446 20,076,985 (2,102,000) -- -- 17,974,985
------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1998............. 104,024 45,849,184 (2,102,000) (613,545) (19,492,476) 23,641,163
Net loss................................. (18,124,277) (18,124,277)
Payment of subscription notes
receivable............................. 2,102,000 2,102,000
Deferred compensation on options......... 354,009 (354,009) -- --
Grant and recognition of options......... 4,718,582 308,473 5,027,055
Exercise of options...................... 10 100 -- -- -- 100
Issuance of units in private placement in
January, 1999, $1,922 per unit......... 57 110,000 110,000
Issuance of units and warrants in private
placement on November 30, 1999, $2,402
per unit (net of issuance costs of
$293,000).............................. 16,327 38,922,320 38,922,320
------- ----------- ----------- --------- ------------ ------------
Balance at December 31, 1999............. 120,418 $89,954,195 $ -- $(659,081) $(37,616,753) $ 51,678,361
======= =========== =========== ========= ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 71
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998 AND
FOR THE PERIOD FROM MARCH 31, 1994 (DATE OF INCEPTION)
TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARCH 31,
1994
(DATE OF
INCEPTION) TO
DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ------------ -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss................................ $(3,832,527) $(8,904,032) $(18,124,277) $(37,616,753)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization...... 202,090 360,285 1,005,411 1,701,758
Members' equity options and
Predecessor Company options...... 251,188 1,108,441 5,027,055 7,850,699
Members' equity grant.............. -- -- -- 2,200,000
Changes in operating assets and
liabilities:
Other assets....................... (64,583) (28,885) (793,520) (888,780)
Prepaid assets..................... (87,927) (91,638) 127,428 (103,204)
Organization costs................. -- -- -- (32,934)
Accounts payable................... (553,263) 1,791,212 (1,612,141) 424,673
Accrued liabilities................ 504,004 (522,735) 885,306 933,440
Due to/from related party, net..... 63,361 (89,263) 27,365 (240)
----------- ----------- ------------ ------------
Net cash used in operating
activities.................... (3,517,657) (6,376,615) (13,457,373) (25,531,341)
----------- ----------- ------------ ------------
Cash flows from investing activities:
Purchase of plant and equipment....... (622,504) (3,704,168) (4,925,941) (9,735,364)
Proceeds from the sale of plant and
equipment.......................... 4,000 27,942 -- 31,942
----------- ----------- ------------ ------------
Net cash used in investing
activities.................... (618,504) (3,676,226) (4,925,941) (9,703,422)
----------- ----------- ------------ ------------
Cash flows from financing activities:
Members' equity contributions......... 7,635,000 17,974,985 41,134,320 78,994,315
Exercise of members' equity options... -- 250,000 100 250,100
Deferred public offering costs........ -- -- (559,417) (559,417)
Payments of long-term debt............ -- -- (512,835) (512,835)
Proceeds from long-term debt.......... -- 909,503 2,571,039 3,480,542
----------- ----------- ------------ ------------
Net cash provided by financing
activities....................... 7,635,000 19,134,488 42,633,207 81,652,705
----------- ----------- ------------ ------------
Net increase in cash and cash
equivalents........................... 3,498,839 9,081,647 24,249,893 46,417,942
Cash and cash equivalents at beginning
of period............................. 9,587,563 13,086,402 22,168,049 --
----------- ----------- ------------ ------------
Cash and cash equivalents at end of
period................................ $13,086,402 $22,168,049 $ 46,417,942 $ 46,417,942
=========== =========== ============ ============
Non-cash investing and financing
activities:
Members' equity contributions financed
by notes receivable................ $ -- $ 2,102,000 $ -- $ --
=========== =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 72
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BUSINESS
The business was formed on March 31, 1994 through the creation of a Delaware
corporation (the Predecessor Company). In July 1995, the founders of the
Predecessor Company formed Antigenics L.L.C. (together with its subsidiaries,
Antigenics or the Company), a Delaware limited liability company, and
subsequently transferred to the Company all of the assets, liabilities,
properties and rights of the Delaware corporation in exchange for an initial
81.5% equity interest in the Company. The accounting for this recapitalization
was recorded at the Predecessor Company's historical cost. In connection with
the recapitalization, the Company also raised $1,500,000 (including $150,000 of
subscription notes receivable) in a private equity transaction in exchange for a
7.5% initial ownership interest and a further 11% initial ownership interest was
exchanged for services rendered to the Company by certain outside advisors, the
value of which was recognized as a non-cash expense of $2,200,000 during 1995.
Since the reorganization in 1995, the Predecessor Company has directly or
indirectly owned a majority of the Company's members' equity units. As of
December 31, 1999, the Predecessor Company owns approximately 79% of a limited
liability company that in turn owns approximately 54% of the Company's
outstanding members' equity units. Certain board members and executive officers
of the Company own significant interests in these related parties.
The Company is developing immunotherapeutics for the treatment of cancer,
infectious diseases and autoimmune disorders based on the Company's proprietary
heat shock protein technology. The Company's research has demonstrated that when
purified heat shock protein-peptide complexes are injected into the skin, they
trigger an immune response against cancers and infectious diseases. Antigenics
seeks to create immunotherapeutics to stimulate patients' immune systems into
destroying diseased cells in the body.
Antigenics is primarily engaged in the development of its heat shock protein
technology and its lead immunotherapeutic product, Oncophage(R). The related
business activities include product research and development activities,
regulatory and clinical affairs, establishing manufacturing capabilities,
production for clinical trials, and administrative and corporate development
activities. As of December 31, 1999, the Company has not commenced commercial
operations and, accordingly, is in the development stage. Consequently, the
Company is subject to all the risks inherent in the establishment of a new
business. The Company has incurred annual operating losses since inception and,
as a result, at December 31, 1999 has a deficit accumulated during the
development stage of approximately $37.6 million. The Company's operations
during development have been funded principally by members' equity. While the
Company believes that its working capital resources are sufficient to satisfy
its liquidity requirements over the next 12 months, satisfying the Company's
long-term liquidity needs will require the successful commercialization of
Oncophage or other products and may require additional capital.
The Company's immunotherapeutics require clinical trials and approvals from
regulatory agencies as well as acceptance in the marketplace. The Company is
conducting clinical trials in various cancer indications. Although the Company
believes its patents, patent rights and patent applications are valid, the
invalidation of its patents or failure of certain of its pending patent
applications to issue as patents could have a material adverse effect upon its
business. The Company competes with specialized biotechnology companies, major
pharmaceutical and chemical companies and universities and research
institutions. Many of these competitors have substantially greater resources
than the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) BASIS OF PRESENTATION
The Company's consolidated financial statements include the accounts of
Antigenics L.L.C. and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.
F-7
<PAGE> 73
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(c) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with maturities at
acquisition of three months or less to be cash equivalents. Cash equivalents at
December 31, 1998 and 1999 consist of investments in money market accounts which
are unrestricted as to withdrawal or use.
(d) PLANT AND EQUIPMENT
Plant and equipment are carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets. Amortization
of leasehold improvements is computed over the shorter of the lease term or
estimated useful life of the asset. Additions and improvements are capitalized,
while repairs and maintenance are charged to expense as incurred.
(e) ORGANIZATION COSTS
Prior to 1999, organization costs, consisting primarily of legal fees, were
amortized using the straight-line method over a five-year period. Effective
January 1, 1999, the Company adopted the provisions of the American Institute of
Certified Public Accountants' Statement of Position No. 98-5 (SOP 98-5),
"Reporting on the Costs of Start-Up Activities". SOP 98-5 requires that the
costs of start-up activities and organizational costs be expensed as incurred
and that previously capitalized organizational costs be charged to operations.
The adoption of SOP 98-5 had an immaterial effect on the Company's consolidated
financial statements.
(f) LONG-LIVED ASSETS
The Company's policy is to record long-lived assets at cost, amortizing these
costs over the expected useful lives of the related assets. In accordance with
Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of,"
these assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amounts of the assets may not be
recoverable. The assets are evaluated for continuing value and proper useful
lives by comparison to expected undiscounted future net cash flows. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets, calculated as expected discounted future cash flows.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell.
(g) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amounts of financial instruments that are
recognized at historical cost amounts. The estimated fair values of all of the
Company's financial instruments, excluding debt, approximate their carrying
amounts in the consolidated balance sheets. The
F-8
<PAGE> 74
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
fair value of the Company's long-term debt was derived by evaluating the nature
and terms of each term note and considering the prevailing economic and market
conditions at the balance sheet date. The carrying amount of debt, including
current portions, is approximately $910,000 and $2,968,000 at December 31, 1998
and 1999, respectively; and the fair value is estimated to be approximately
$910,000 and $3,026,000 at December 31, 1998 and 1999, respectively.
(h) ACCRUED LIABILITIES
Accrued liabilities consist of the following at December 31, 1998 and 1999:
<TABLE>
<CAPTION>
1998 1999
------- --------
<S> <C> <C>
Clinical trials......................................... $23,946 $399,897
Professional fees....................................... -- 170,000
Vacation................................................ 2,400 59,551
Sponsored research...................................... -- 81,000
Other................................................... 21,788 222,992
------- --------
$48,134 $933,440
======= ========
</TABLE>
(i) MEMBERS' EQUITY OPTION PLAN
The Company accounts for options granted to employees and directors in
accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation expense is recorded on fixed members' equity option grants only if
the current fair value of the underlying unit exceeds the exercise price of the
option at the date of grant.
The Company accounts for members' equity options granted to non-employees on a
fair value basis in accordance with SFAS No. 123, "Accounting for Stock-Based
Compensation" and Emerging Issues Task Force Issue No. 96-18, "Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services". As a result, the non-cash charge
to operations for non-employee options with vesting or other performance
criteria is affected each reporting period by changes in the fair value of the
Company's members' equity units.
As required, the Company also provides pro forma net loss and pro forma net loss
per members' equity unit disclosures for employee and director members' equity
option grants as if the fair-value-based method defined in SFAS No. 123 had been
applied (see Note 5).
(j) RESEARCH AND DEVELOPMENT
Research and Development expenses include the costs associated with internal
research and development by the Company and research and development conducted
for the Company by outside advisors, sponsored university-based research
partners, and clinical study partners. All research and development costs
discussed above are expensed as incurred. Amounts received under research and
development contracts, which are not refundable, are recorded as a reduction to
research and development expense in the consolidated statement of operations.
(k) INCOME TAXES
As a Delaware limited liability company, no federal, state and local income
taxes are levied on the Company. Each member of the Company is individually
responsible for reporting his or her share of the
F-9
<PAGE> 75
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's net income or loss on their personal tax returns. Therefore, no
provision for income taxes and no deferred tax assets or liabilities are
recognized in the accompanying consolidated financial statements.
(l) NET LOSS PER MEMBERS' EQUITY UNIT
Basic earnings or loss per members' equity unit (EPU) is computed using the
weighted average number of members' equity units outstanding during the period
being reported on. Diluted EPU reflects the potential dilution that could occur
if securities or other contracts to issue members' equity units were exercised
or converted into members' equity units at the beginning of the period being
reported on and the effect was dilutive. Net loss and weighted average members'
equity units used for computing diluted EPU were the same as that used for
computing basic EPU for each of the years ended December 31, 1997, 1998 and 1999
because the Company's members' equity options and warrants were not included in
the calculation since the inclusion of such potential members' equity units
would be antidilutive.
(m) SEGMENT INFORMATION
The Company is managed and operated as one business. The entire business is
managed by a single management team that reports to the chief executive officer.
The Company does not operate separate lines of business or separate business
entities with respect to any of its product candidates. Accordingly, the Company
does not prepare discrete financial information with respect to separate product
areas or by location and does not have separately reportable segments as defined
by SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information."
(n) RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities", which
establishes accounting and reporting standards for derivative instruments,
including derivatives instruments embedded in other contracts, and for hedging
activities. SFAS No. 133 is effective for all the Company's fiscal quarters
beginning January 1, 2001. This statement is not expected to affect the Company
as it currently does not have derivative instruments or engage in hedging
activities.
(3) PLANT AND EQUIPMENT, NET
Plant and equipment, net at December 31, 1998 and 1999 consists of the
following:
<TABLE>
<CAPTION>
ESTIMATED
DEPRECIABLE
1998 1999 LIVES
---------- ---------- -------------
<S> <C> <C> <C>
Furniture, fixtures and other.............. $ 486,933 $ 575,989 3 to 10 years
Laboratory and manufacturing equipment..... 1,426,427 2,915,053 3 to 10 years
Leasehold improvements..................... 224,580 5,901,213 2 to 5 years
Construction in progress................... 2,639,181 --
---------- ----------
4,777,121 9,392,255
Less accumulated depreciation and
amortization............................. 670,938 1,357,657
---------- ----------
$4,106,183 $8,034,598
========== ==========
</TABLE>
Plant and equipment retired and removed from the accounts aggregated $310,807
for the year ended December 31, 1999.
F-10
<PAGE> 76
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) MEMBERS' EQUITY
Antigenics has one class of members' equity. All members vote their equity
interests in proportion to their respective unit interest in the Company. Net
profits and losses of the Company for each fiscal year are allocated to the
capital accounts of the members as described in the limited liability company
agreement, generally in proportion to their respective unit ownership interests.
No members are liable for any obligations of the Company or are required to
contribute any additional capital related to the deficits incurred.
Since the formation of the Company in 1995 (see Note 1), the Company has raised
capital through private placement equity transactions. During 1996, the Company
completed a private placement offering of approximately 9,500 members' equity
units in exchange for $10,600,000. Subscription notes receivable of $250,000 at
December 31, 1996, which represented promissory notes from members in
consideration of their equity contributions, were satisfied in full during 1997.
During 1997, the Company commenced a private placement offering, which resulted
in approximately 3,800 members' equity units being sold for approximately
$7,385,000 during 1997 and approximately 10,400 members' equity units being sold
for approximately $20,077,000 during 1998. This offering was completed during
early 1999 and resulted in an aggregate of approximately $27,572,000 being
received by the Company over the three-year period.
Subscription notes receivable of $2,102,000 at December 31, 1998, which
represented promissory notes from members in consideration of their equity
contributions, were satisfied in full during 1999.
In November 1999, the Company raised gross proceeds of approximately $39.2
million from the sale of approximately 16,300 members' equity units, inclusive
of warrants, through a private equity placement. In connection with the private
placement, the Company netted approximately $293,000 of expenses against the
gross proceeds and agreed to issue approximately 32 members' equity units to
placement agents which are not considered outstanding as of December 31, 1999.
Each member participating in this private placement received a warrant to
purchase an additional 10% of the units acquired in this offering, rounded to
the nearest whole number, at a price of approximately $2,402 per unit. The
warrants expire on September 30, 2002. Each warrant holder has the option to
convert its warrants into common stock of Antigenics Inc. on a cashless basis
upon the completion of an initial public offering (IPO) of the Company's equity,
the amount of which is affected by the offering price of the common stock. Each
member participating in this private placement also received registration rights
in the event of an IPO.
(5) EQUITY OPTIONS
In March 1996, the board of managers approved an equity-based incentive
compensation plan (the Plan). Pursuant to the provisions of the Plan, the board
of managers may grant options to directors, employees and outside advisors to
purchase members' equity units of the Company. At the date of grant, the board
of managers sets the terms of the options including the exercise price and
vesting period. The options granted through December 31, 1999 have vesting
periods ranging up to five years. Options generally have a contractual life of
ten years. A maximum of 9% (increased from 7% during 1999) of total equity,
inclusive of the options granted, may be granted as options (approximately
11,900 options as of December 31, 1999).
The following summarizes activity for options granted to directors and
employees, including those with an exercise price equal to the fair value of the
underlying members' equity unit at the date of grant ("at-the-money exercise
price"), those with an exercise price greater than the fair value of the
underlying members' equity unit at the date of grant ("out-of-the-money exercise
price"), and those with an exercise
F-11
<PAGE> 77
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
price less than the fair value of the underlying members' equity unit at the
date of grant ("in-the-money exercise price"):
<TABLE>
<CAPTION>
OPTIONS WEIGHTED WEIGHTED
MEMBERS' EXERCISABLE AVERAGE AVERAGE
EQUITY AT END OF GRANT-DATE EXERCISE
OPTIONS YEAR FAIR VALUE PRICE
-------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding December 31, 1995............ --
Granted:
At-the-money exercise price......... 1,300 $ 120 $ 250
In-the-money exercise price......... 900 948 250
Exercised.............................. -- -- --
-----
Outstanding December 31, 1996............ 2,200 1,500
=====
Granted:
At-the-money exercise price......... 110 687 1,118
In-the-money exercise price......... 166 1,113 522
Exercised.............................. -- -- --
-----
Outstanding December 31, 1997............ 2,476 1,733
=====
Granted:
Out-of-the-money exercise price..... 154 1,158 1,922
In-the-money exercise price......... 536 1,441 1,001
Exercised.............................. -- -- --
-----
Outstanding December 31, 1998............ 3,166 2,022
=====
Granted:
Out-of-the-money exercise price..... 1,480 1,075 2,077
In-the-money exercise price......... 296 1,664 1,118
Expired................................ (127) -- 1,222
Exercised.............................. -- -- --
----- ====== ======
Outstanding December 31, 1999............ 4,815 2,907
===== =====
</TABLE>
During 1996, 1997, 1998 and 1999, 900, 166, 536 and 296 options, respectively,
were granted to employees and directors at exercise prices which were less than
the fair value of the underlying members' equity units on the grant date.
Compensation expense recognized with respect to such options totaled
approximately $347,000, $188,000, $270,000 and $308,000 for the years ended
December 31, 1996, 1997, 1998 and 1999, respectively. Deferred compensation at
December 31, 1999 of approximately $659,000 will be recognized over the vesting
period of the options.
F-12
<PAGE> 78
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes activity for options granted to outside advisors:
<TABLE>
<CAPTION>
OPTIONS WEIGHTED WEIGHTED
MEMBERS' EXERCISABLE AVERAGE AVERAGE
EQUITY AT END OF GRANT-DATE EXERCISE
OPTIONS YEAR FAIR VALUE PRICE
-------- ----------- ---------- --------
<S> <C> <C> <C> <C>
Outstanding December 31, 1995............ --
Granted.................................. 2,057 $ 577 $ 344
Exercised.............................. -- -- --
-----
Outstanding December 31, 1996............ 2,057 1,449
=====
Granted................................ -- -- --
Exercised.............................. -- -- --
-----
Outstanding December 31, 1997............ 2,057 1,857
=====
Granted................................ 1,115 1,649 549
Exercised.............................. (224) -- 250
-----
Outstanding December 31, 1998............ 2,948 1,783
=====
Granted................................ 1,591 1,614 2,066
Exercised.............................. (10) -- 10
----- ====== ======
Outstanding December 31, 1999............ 4,529 3,555
===== =====
</TABLE>
In December 1999, the board of managers accelerated the remaining vesting
requirements on 1,562 members' equity options granted to outside advisors. As a
result, the Company recognized a charge to operations in the fourth quarter of
1999 of approximately $2,093,000.
The 1996 options grants above exclude 517 options granted to outside advisors
with an exercise price which is determined based on fair value of the underlying
units beginning on the second anniversary of the grant date as the options vest.
Compensation expense for these options is recognized when the exercise price
becomes known and performance has been completed. For the years ended December
31, 1998 and 1999, approximately $199,000 and $189,000, respectively, was
charged to operations for 138 and 139 of such options, respectively, that vested
at an exercise price of approximately $1,922 per unit in each year.
The charge to operations related to options granted to outside advisors by the
Company, including the amounts described in the previous two paragraphs, totaled
approximately $696,000, $63,000, $839,000 and $4,719,000 for the years ended
December 31, 1996, 1997, 1998 and 1999, respectively. At December 31, 1999,
unrecognized expense for options granted to outside advisors for which
performance (vesting) has not yet been completed but the exercise price of the
options is known is approximately $40,000; such amount is subject to change each
reporting period based upon changes in the fair value of the Company's members'
equity units, estimated volatility and the risk free interest rate until the
outside advisor completes his or her performance under the option agreement.
F-13
<PAGE> 79
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A summary of the Company's options outstanding and exercisable, excluding the
1996 options described above for which the exercise price is not yet known, as
of December 31, 1999, follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVE. ----------------------------
RANGE OF NUMBER REMAINING WEIGHTED AVE. NUMBER WEIGHTED AVE.
EXERCISE PRICES OUTSTANDING LIFE (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ----------------- ----------- ------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 250 - $ 750 5,258 6.73 $ 301 4,300 $ 262
$ 751 - $1,250 1,161 8.13 1,118 169 1,118
$1,251 - $1,750 -- -- -- -- --
$1,751 - $2,250 3,202 9.27 2,078 1,993 2,077
----- -----
9,621 6,462
===== =====
</TABLE>
Since the 1995 reorganization described in Note 1, the Predecessor Company has
directly or indirectly owned a majority of the Company's members' equity units.
During 1996, the Predecessor Company approved a stock option plan (the
Predecessor Plan). In accordance with generally accepted accounting principles,
the Predecessor Plan is accounted for as if it had been adopted by Antigenics
and treated as a contribution to members' capital. Pursuant to the provisions of
the Predecessor Plan, the Predecessor Company may grant options to officers,
directors, employees and consultants to purchase common stock of the Predecessor
Company. The terms of the options, including exercise price and vesting period,
are set at the date of grant. The options have a contractual life of ten years
and may not have an exercise price less than the fair value of a share of common
stock of the Predecessor Company at date of grant. A maximum of 300 options may
be granted under the Predecessor Plan.
During 1996, the Predecessor Company granted approximately 160 options to
directors and employees at a weighted average exercise price of $9,006 per share
of Predecessor Company common stock and a weighted average grant-date fair value
of approximately $4,301 per share. During 1997, the Predecessor Company granted
approximately 14 options to a director at a weighted average exercise price of
$26,666 per share of Predecessor Company common stock and a weighted average
grant-date fair value of $16,407 per share. All the options are immediately
vested and exercisable. All of the options remain outstanding and none have been
exercised. No compensation expense was recognized by Antigenics during 1996 and
1997 as the exercise price of the options is equal to the fair value of the
common stock of the Predecessor Company at the date of the option grant.
During 1996, the Predecessor Company granted approximately 76 options to
consultants at a weighted average exercise price of $9,006 per share and a
weighted average grant-date fair value of approximately $5,535 per share. All of
the consultants' options are immediately vested and exercisable. All of the
consultants' options remain outstanding and none have been exercised. During
1996, Antigenics recognized a charge to operations related to options granted to
consultants by the Predecessor Company of approximately $421,000.
The Company accounts for options granted to employees and directors under APB
Opinion No. 25. Had compensation cost for options granted to employees and
directors by Antigenics and the Predecessor
F-14
<PAGE> 80
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company been determined consistent with SFAS No. 123, the Company's pro forma
net loss and pro forma net loss per members' equity unit would have been as
follows:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Net loss:
As reported.............................. $(3,832,527) $(8,904,032) $(18,124,277)
Pro forma................................ (4,090,742) (8,978,654) (19,097,345)
=========== =========== ============
Net loss per members' equity unit:
As reported.............................. $ (42.81) $ (93.07) $ (171.85)
Pro forma................................ (45.69) (93.85) (181.07)
=========== =========== ============
</TABLE>
The effects of applying SFAS No. 123, for either recognizing or disclosing
compensation cost under such pronouncement, may not be representative of the
effects on reported net income or loss for future years. The fair value of each
option granted is estimated on the date of grant using an option-pricing model
with the following weighted average assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Estimated volatility........................................ 57% 61% 54%
Expected life in years -- employee and director options..... 6 6 6
Risk-free interest rate..................................... 6.3% 5.4% 5.0%
Dividend yield.............................................. 0% 0% 0%
</TABLE>
The Company estimates volatility for purposes of computing compensation expense
on outside advisor options and for disclosure purposes using the volatility of
public companies that the Company considers comparable. The expected life used
to estimate the fair value of outside advisor options is equal to the
contractual life of the option granted.
(6) COMMITMENTS
In November 1994, the Predecessor Company entered into a Patent License
Agreement (Mount Sinai Agreement) with the Mount Sinai School of Medicine (Mount
Sinai). Through the Mount Sinai Agreement, the Company has obtained the
exclusive licenses to the patent rights which resulted from the research and
development performed by Dr. Pramod Srivastava, a director of the Company. Under
the Mount Sinai Agreement, the Company agreed to pay Mount Sinai a nominal
royalty on related product sales (as defined in the Mount Sinai Agreement)
through the last expiration date of the patents under the Mount Sinai Agreement
(2015). In addition to these royalty payments, Mount Sinai was issued a nominal
equity interest.
During 1995, Dr. Srivastava moved his research to Fordham University (Fordham).
The Predecessor Company entered into a Patent License Agreement (Fordham
Agreement) with Fordham, agreeing to reimburse Fordham for all approved costs
incurred in the performance of the research. The Predecessor Company has also
agreed to pay Fordham a nominal royalty on related product sales, as defined,
through the last expiration date of the patents under the Fordham Agreement.
This agreement ended in mid-1997. During 1995, 1996 and 1997, the direct and
indirect costs incurred by the Company related to this agreement were
approximately $546,000, $926,000 and $902,000, respectively, and are included in
research and development expenses in the consolidated statements of operations
for such years.
F-15
<PAGE> 81
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In February 1998, the Company entered into a research agreement with the
University of Connecticut Health Center (UConn) and Dr. Srivastava. The
agreement has a term of approximately five years and calls for payments to UConn
totaling a minimum of $5,000,000, payable quarterly at the rate of $250,000
(contingent on the continuing employment of Dr. Srivastava by UConn). In
addition, as research was begun by Dr. Srivastava in 1997, the Company agreed to
pay approximately $475,000 for these previous services and expensed such amount
as research and development during 1997. Research and development expense in the
accompanying 1998 and 1999 consolidated statement of operations includes
approximately $1,000,000 in each of the respective years of costs incurred under
the UConn agreement. Royalties at varying rates are due to UConn upon
commercialization of a product utilizing technology discovered during the
research agreement.
In 1996, Antigenics entered into an agreement with Sloan-Kettering Institute for
Cancer Research (Sloan Kettering) to conduct clinical studies. The Company is
required to pay Sloan Kettering $10,000 for administration and start up costs
and $4,000 per patient in the study.
On December 2, 1997, Antigenics entered into two agreements with The University
of Texas M.D. Anderson Cancer Center (M.D. Anderson) to conduct clinical
studies. The Company is required to pay M.D. Anderson a total of approximately
$538,000 for expenses for the clinical study of approximately 90 patients and
other related costs payable in four installments. In addition, on March 20, 1998
the Company entered into another clinical study with M.D. Anderson. Under such
1998 agreement, the Company is required to pay M.D. Anderson a total of
approximately $118,000 for the study of 30 patients and other related costs
payable in four installments.
In 1998, Antigenics entered into an agreement with the Johannes Gutenberg
Universitat Mainz Klinikum (Universitat) to conduct additional clinical studies.
The Company is required to pay the Universitat approximately $279,000 for
expenses for the clinical study of approximately 30 patients. The first
installment was paid upon signing the agreement.
In 1998, Antigenics entered into an agreement, as amended, with Sigma-Tau
Industrie Farmaceutiche Riunite S.P.A (Sigma-Tau), a minority interest-holder of
members' equity, to conduct clinical studies in Italy, Spain, Portugal and
Switzerland. Under the agreement, Sigma-Tau is required to pay Antigenics for
services provided by the Company in relation to these clinical studies. In
return, Antigenics has granted Sigma-Tau the exclusive right to negotiate a
marketing and development agreement (the Development Agreement) for the
exclusive use of Antigenics' patent rights and their product, and the right of
first offer to negotiate licenses for other medical uses of their product, in
Italy, Spain, Portugal and Switzerland. The Development Agreement has not been
finalized. During 1999, Antigenics provided approximately $581,000 of services
associated with this agreement. This receivable amount is included in other
current assets in the accompanying consolidated balance sheet. Amounts received
under this agreement are non-refundable even if the research effort is
unsuccessful. In addition, Antigenics does not incur any future performance
commitments in relation to amounts recorded for Sigma-Tau.
On June 21, 1999, Antigenics entered into another agreement with M.D. Anderson
to conduct clinical studies. The Company is required to pay M.D. Anderson a
total of approximately $277,000 for the clinical study of approximately 40
patients and other related costs payable in installments over two years.
For the years ended December 31, 1996, 1997, 1998 and 1999, approximately
$10,000, $4,000, $255,000 and $975,000, respectively, has been expensed in the
accompanying consolidated statements of operations related to the above
mentioned clinical studies.
F-16
<PAGE> 82
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) RELATED PARTY TRANSACTIONS
The Company rents office space for its New York City headquarters (see Note 8)
and, prior to 1999, utilized certain office services of entities which are
wholly-owned by the Company's chief executive officer and chairman of the board.
Rent and office services, which are recorded at the affiliates' cost, are
allocated to the Company based on square footage and clerical staff usage,
respectively, which management believes is reasonable. Such transactions
amounted to approximately $293,000, $558,000, $211,000 and $281,000 for the
years ended December 31, 1996, 1997, 1998 and 1999, respectively. The Company
also periodically pays the entire monthly rent amount for all of the office
space on behalf of the above noted entities for which the Company is reimbursed
on a current basis. As of December 31, 1998 and 1999, the affiliated entities
were indebted to the Company for $27,605 and $240, respectively, for costs paid
on the affiliated entities' behalf.
During 1997 and renewed each year thereafter, the Company obtained standby
letters of credit for the benefit of the related party in the amount of $375,000
in connection with the related party's lease of the New York City office space.
These letters expire in January 2000.
(8) LEASES
The Company leases administrative, laboratory and office facilities under
various month-to-month and long-term lease arrangements. Rent expense, exclusive
of the amounts paid to the affiliate (see Note 7), was approximately $134,000,
$685,000 and $560,000 for the years ended December 31, 1997, 1998 and 1999,
respectively.
In November 1999, the Company signed a long-term lease agreement for its New
York City headquarters with an entity wholly-owned by the Company's chief
executive officer and chairman of the board. The lease expires in December 2006
and requires annual rental payments of approximately $312,000 which is equal to
the related party's cost. Prior to November 1999, the headquarters office space
was rented on a month-to-month basis from the same affiliate.
The future minimum rental payments under the Company's lease of its Woburn,
Massachusetts manufacturing and laboratory facility, which expires in 2003, and
its New York City headquarters, are as follows:
<TABLE>
<S> <C>
Year ending December 31:
2000........................................... $ 759,516
2001........................................... 759,516
2002........................................... 759,516
2003........................................... 591,696
2004........................................... 312,000
Thereafter..................................... 624,000
----------
$3,806,244
==========
</TABLE>
(9) DEBT
The Company has a $5 million credit facility from a financial institution
pursuant to which the Company can draw down amounts to make or refinance certain
capital expenditures. As the Company utilizes the credit facility, separate term
notes will be executed. Each term loan will have a term of forty-two months
F-17
<PAGE> 83
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
and the interest rate is fixed at the closing of each term loan. Each loan is
collateralized by the equipment, fixtures, and improvements acquired with the
proceeds of the loan.
The aggregate maturities of the term loan for each of the five years subsequent
to December 31, 1999 are as follows: 2000 -- $812,702; 2001 -- $939,303;
2002 -- $1,021,634; 2003 -- $194,068.
(10) 401(k) PLAN
The Company sponsors a defined contribution 401(k) savings plan for all eligible
employees, as defined. Participants may contribute up to 15% of their
compensation, as defined, with a maximum of $10,000 in 1999. Each participant is
fully vested in his or her contributions and related earnings and losses. The
Company matches 100% of the participant's contribution and such matching
contribution vests over four years. For the years ended December 31, 1997, 1998
and 1999, the Company charged approximately $29,000, $55,000 and $145,000 to
operations for the 401(k) plan.
(11) PROPOSED INITIAL PUBLIC OFFERING
The Initial Public Offering
In November 1999, the Company created a subsidiary, Antigenics Inc., in
contemplation of the Company's IPO. The board of directors of Antigenics Inc.
authorized the filing of a registration statement with the Securities and
Exchange Commission (SEC) to sell shares of its common stock in connection with
the proposed IPO. Concurrent with the completion of the IPO, the Company will be
converted from a limited liability company to a corporation through a merger
with and into Antigenics Inc. All members will exchange their respective member
interests for shares of common stock and options and warrants to purchase common
stock of Antigenics Inc. based on an exchange ratio of 172.0336 shares of common
stock for each members' equity unit. If the IPO is not completed, the conversion
to the corporation will not take place.
Through December 31, 1999, the Company has deferred approximately $559,000 of
offering costs on its consolidated balance sheet. These and other costs of the
offering will be netted against the gross proceeds from the offering at closing.
If the IPO does not close, all deferred offering costs will be charged to
operations.
Adoption of Employee Stock Purchase Plan
In connection with the proposed IPO, the board of directors of Antigenics Inc.
approved an employee stock purchase plan. Under the plan, employees may purchase
shares of common stock at a discount from fair value. There are 300,000 shares
of common stock reserved for issuance under the purchase plan. The purchase plan
is intended to qualify as an employee stock purchase plan within the meaning of
Section 423 of the Internal Revenue Code of 1986, as amended. Rights to purchase
common stock under the purchase plan are granted at the discretion of the
compensation committee, which determines the frequency and duration of
individual offerings under the plan and the dates when stock may be purchased.
Eligible employees participate voluntarily and may withdraw from any offering at
any time before the stock is purchased. Participation terminates automatically
upon termination of employment. The purchase price per share of common stock in
an offering will not be less than 85% of the lesser of its fair value at the
beginning of the offering period or on the applicable exercise date and may be
paid through payroll deductions, periodic lump sum payments or a combination of
both. The plan terminates on November 15, 2009.
F-18
<PAGE> 84
ANTIGENICS L.L.C.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Adoption of Equity Incentive Plan
In connection with the proposed IPO, the board of directors of Antigenics Inc.
approved an employee equity incentive plan. Antigenics Inc.'s equity incentive
plan authorizes the grant of incentive stock options within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and nonqualified
stock options for the purchase of an aggregate of 4,800,000 shares (subject to
adjustment for stock splits and similar capital changes) of common stock to
Antigenics Inc.'s employees and, in the case of non-qualified stock options, to
consultants and directors of Antigenics Inc. or any affiliate, as defined in the
equity plan. The board of directors has appointed the compensation committee to
administer the equity plan. Members' equity options outstanding under the
Company's current equity-based incentive compensation plan (see Note 5) will be
exchanged for stock options under the new equity incentive plan at the closing
of the IPO.
(12) PRO FORMA INCOME TAX PROVISION (UNAUDITED)
As discussed in Note 2(k), the Company is not subject to income taxes and
therefore does not provide for income taxes in its consolidated financial
statements. Had the Company been organized as a tax paying entity for the year
ended December 31, 1999, there would be no pro forma income tax provision
because of a loss before income taxes and the need to recognize a valuation
allowance on all gross deferred tax assets. Given the Company's past history of
incurring operating losses, management believes that it is more likely than not
that any deferred tax assets will not be realized.
F-19
<PAGE> 85
3,000,000 SHARES
ANTIGENICS INC.
COMMON STOCK
[ANTIGENICS INC. LOGO]
-------------------------------
PROSPECTUS
-------------------------------
Until 2000, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
U.S. BANCORP PIPER JAFFRAY
ROBERTSON STEPHENS
, 2000
<PAGE> 86
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of common stock being registered. All amounts are estimates except the
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE
PAID
--------
<S> <C>
Registration fee............................................ $ 14,573
NASD filing fee............................................. 6,020
Nasdaq National Market listing fee.......................... 95,000
Printing and engraving...................................... 150,000
Legal fees and expenses..................................... 300,000
Accounting fees and expenses................................ 250,000
Transfer Agent fees......................................... 3,500
Miscellaneous............................................... 30,907
--------
Total............................................. $850,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law provides that a corporation
may indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, other than an action
by or in the right of the corporation, by reason of the fact that the person is
or was a director, officer, employee or agent of the corporation or is or was
serving at the corporation's request as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses, including attorneys' fees, judgments, fines and amounts paid
in settlement actually and reasonably incurred by the person in connection with
the action, suit or proceeding if the person acted in good faith and in a manner
the person reasonably believed to be in or not opposed to the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe the person's conduct was unlawful. The power to
indemnify applies to actions brought by or in the right of the corporation as
well, but only to the extent of expenses, including attorneys' fees but
excluding judgments, fines and amounts paid in settlement, actually and
reasonably incurred by the person in connection with the defense or settlement
of the action or suit. And with the further limitation that in these actions no
indemnification shall be made in the event of any adjudication of negligence or
misconduct in the performance of his duties to the corporation, unless a court
believes that in light of all the circumstances indemnification should apply.
Article V of Antigenics' By-laws provides that Antigenics shall, to the extent
legally permitted, indemnify each person who was or is a party or is threatened
to be made a party to any threatened, pending or completed action, suit or
proceeding by reason of the fact that he is or was, or has agreed to become, a
director or officer of Antigenics, or is or was serving, or has agreed to serve,
at the request of Antigenics, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprises. The indemnification provided for in Article V is expressly
not exclusive of any other rights to which those seeking indemnification may be
entitled under any law, agreement or vote of stockholders or disinterested
directors or otherwise, and shall inure to the benefit of the heirs, executors
and administrators of such persons.
Section 145(g) of the Delaware General Corporation Law and Article V of By-laws
of Antigenics provide that the company shall have the power to purchase and
maintain insurance on behalf of its officers, directors, employees and agents,
against any liability asserted against and incurred by such persons in any such
capacity.
II-1
<PAGE> 87
Antigenics has entered into indemnification agreements with each of its
directors and executive officers and has obtained insurance covering its
directors and officers against losses and insuring Antigenics against certain of
its obligations to indemnify its directors and officers.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a corporation may eliminate or limit the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, provided that such provisions shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. No such provision shall eliminate or limit
the liability of a director for any act or omission occurring prior to the date
when such provision becomes effective.
Pursuant to the Delaware General Corporation Law, Section 7 of Article FIFTH of
the Certificate of Incorporation of Antigenics eliminates a director's personal
liability for monetary damages to Antigenics and its shareholders for breach of
fiduciary duty as a director, except in circumstances involving a breach of the
director's duty of loyalty to Antigenics or its shareholders, acts or omissions
not in good faith, intentional misconduct, knowing violations of the law,
self-dealing or the unlawful payment of dividends or repurchase of stock.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
We have sold and issued the following securities in the previous three years.
In 1996, we completed a private placement offering of equity interests in
Antigenics L.L.C. equal to 10.6% of the total post-offering equity interests in
the L.L.C. for an aggregate sale price of $10,600,000.
In January 1999, we completed a private placement offering of equity interests
in Antigenics L.L.C. equal to 13.8% of the total post-offering equity interests
in the L.L.C. for an aggregate sales price of $27,572,000.
In November 1999, we completed a private placement offering of (i) equity
interests in Antigenics L.L.C. equal to 13.56% of the total post-offering equity
interests in the L.L.C. and (ii) warrants to purchase equity interests in the
L.L.C. equal to 1.36% of the total post-offering equity interests in the L.L.C.
The equity interests and warrants were sold for an aggregate of approximately
$39,200,000.
All of the above sales of L.L.C. equity interests were made in reliance on the
exemption from registration under Section 4(2) of the Securities Act of 1933, as
amended, as transactions not involving a public offering.
The registrant has from time to time granted options to purchase equity
interests in Antigenics L.L.C. As of December 31, 1999, following the company's
reorganization into a corporation, the registrant will have options with a
weighted average exercise price of $5.89 per share that are, in the aggregate,
exercisable for 8.2% of the total common stock of the registrant, assuming all
of these options are exercised. The options were issued in reliance upon
exemptions from registration pursuant to either Section 4(2) of the Securities
Act of 1933, as amended, or Rule 701 promulgated under the Securities Act of
1933, as amended.
Concurrently with the closing of this offering, the registrant will merge with
Antigenics, L.L.C. Members of the L.L.C. will receive shares of the registrant's
common stock in exchange for their equity interests at a rate of 172.0336 shares
per percentage equity interest, for an aggregate of approximately 20,715,942
shares of common stock. The issuance of the registrant's common stock upon
contribution of the equity interests in the L.L.C. will be made in reliance on
the exemption from registration under Section 4(2) of the Securities Act of 1933
and Rule 506 thereunder as a transaction not involving a public offering.
The registrant retained two placement agents in connection with the November
1999 private placement who received aggregate compensation of $217,769 in cash
and will receive $76,298 in members' equity for
II-2
<PAGE> 88
their services. There were no underwriters employed in connection with any of
the other transactions set forth in Item 15.
For additional information concerning these equity investment transactions,
reference is made to the information contained under the caption "Certain
Relationships and Related Transactions" in the form of prospectus included
herein.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
See the Exhibit Index, which is incorporated herein by reference.
(b) Financial Statement Schedules
None.
Schedules not listed above have been omitted because the information required to
be set forth therein is not applicable or is shown in the consolidated financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referenced in Item 14 of this Registration
Statement or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to provide to the underwriter at
the closing specified in the underwriting agreements, certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to 424(b)(1) or (4), or 497(h) under
the Securities Act shall be deemed to be part of this registration statement as
of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE> 89
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has duly caused this Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the Town of Woburn,
Commonwealth of Massachusetts, as of January 24, 2000.
ANTIGENICS INC.
By: /s/ GARO ARMEN
------------------------------------
Garo H. Armen
Chief Executive Officer and
Chairman of
the Board of Directors
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
as of the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Chief Executive Officer and January 24, 2000
- --------------------------------------------------- Chairman of the Board of
Garo Armen, Ph.D. Directors (Principal
Executive Officer and
Principal Financial and
Accounting Officer)
* Director January 24, 2000
- ---------------------------------------------------
Pramod Srivastava, Ph.D.
* Director January 24, 2000
- ---------------------------------------------------
Noubar Afeyan, Ph.D.
* Director January 24, 2000
- ---------------------------------------------------
Edward Brodsky
* Director January 24, 2000
- ---------------------------------------------------
Gamil de Chadarevian
* Director January 24, 2000
- ---------------------------------------------------
Tom Dechaene
* Director January 24, 2000
- ---------------------------------------------------
Donald Panoz
* Director January 24, 2000
- ---------------------------------------------------
Martin Taylor
*By: /s/ GARO ARMEN
- ---------------------------------------------------
As Attorney-in-Fact
</TABLE>
II-4
<PAGE> 90
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement. Previously filed.
3.1 Certificate of Incorporation of Antigenics Inc. Previously
filed.
3.2 By-laws of Antigenics Inc. Previously filed.
4.1 Form of Common Stock Certificate. Previously filed.
4.2 Form of Warrant to purchase Common Stock, together with a
list of holders. Filed herewith.
4.3 Form of Subscription Agreement, as amended, together with a
list of parties thereto. Filed herewith.
5.1 Opinion of Palmer & Dodge LLP. Previously filed.
10.1* 1999 Equity Incentive Plan. Previously filed.
10.2* 1999 Employee Stock Purchase Plan. Previously filed.
10.3 Founding Scientist's Agreement between Antigenics and Pramod
K. Srivastava dated March 28, 1995. Previously filed.
10.4 Form of Indemnification Agreement between Antigenics and its
directors and executive officers. These agreements are
materially different only as to the signatories and the
dates of execution. Previously filed.
10.5 Lease Agreement between Antigenics and Cummings Property
Management, Inc. dated May 28, 1998, as amended on December
10, 1998. Previously filed.
10.6 License Agreement between GHA Management Corporation and
Antigenics dated November 12, 1999. Previously filed.
10.7 Master Loan and Security Agreement between Antigenics and
Finova Technology Finance, Inc. dated November 19, 1998.
Filed herewith.
10.8 Patent License Agreement between Antigenics and Mount Sinai
School of Medicine dated November 1, 1994, as amended on
June 5, 1995. Previously filed.(1)
10.9 Sponsored Research and Technology License Agreement between
Antigenics and Fordham University dated March 28, 1995, as
amended on March 22, 1996. Previously filed.(1)
10.10 Research Agreement between Antigenics and The University of
Connecticut Health Center dated February 18, 1998.
Previously filed.(1)
10.11 License Agreement between Antigenics and Duke University
dated March 4, 1999. Previously filed.(1)
10.12 License Agreement between Antigenics and University of Miami
dated April 12, 1999. Previously filed.(1)
10.13 Letter Agreement between Antigenics and Sigma-Tau Industrie
Farmaceutiche Riunite SpA dated June 3, 1998. Previously
filed.(1)
10.14 Letter Agreement between Antigenics and Medison Pharma Ltd.
dated November 15, 1999. Previously filed.(1)
10.15 Amendment to Letter Agreement between Antigenics and
Sigma-Tau Industrie Farmaceutiche Riunite SpA dated October
20, 1999. Previously filed.
10.16* Employment Agreement between Antigenics and Elma Hawkins,
Ph.D. dated June 1, 1998. Previously filed.
10.17* Antigenics 401(k) Plan. Previously filed.
10.18* Antigenics L.L.C. Incentive Equity Plan. Filed herewith.
23.1 Consent of KPMG LLP. Filed herewith.
23.2 Consent of Palmer & Dodge LLP. Included in the opinion filed
as Exhibit 5.1.
24.1 Power of Attorney. Included on the signature page of the
initial filing of this Registration Statement.
27.1 Financial Data Schedule (available in EDGAR format only).
Filed herewith.
</TABLE>
- ---------------------------------------------
* Indicates a management contract or compensatory plan.
(1)This Exhibit has been filed separately with the Commission pursuant to an
application for confidential treatment. The confidential portions of this
Exhibit have been omitted and are marked by an asterisk.
<PAGE> 1
Exhibit 4.2
[FORM OF WARRANT]
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK FOR WHICH IT IS EXERCISABLE
HAVE BEEN REGISTERED OR QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY APPLICABLE STATE OR FOREIGN SECURITIES LAWS (THE
"OTHER LAWS"), AND MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED OR OTHERWISE
DISTRIBUTED FOR VALUE UNLESS THEY ARE REGISTERED OR QUALIFIED OR THE COMPANY
RECEIVES FROM THE HOLDER HEREOF AN OPINION OF COUNSEL, WHICH OPINION SHALL BE
REASONABLY ACCEPTABLE TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR DISTRIBUTION IS EXEMPT FROM THE APPLICABLE REGISTRATION AND
QUALIFICATION REQUIREMENTS OF THE SECURITIES ACT AND THE OTHER LAWS.
ANTIGENICS INC.
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for value received, __________, (the "Holder") is
entitled to subscribe for and purchase up to ______________ shares of common
stock, $0.01 par value per share ("Shares") of Antigenics Inc. (the "Company"),
a Delaware corporation. This Warrant is being issued in connection with the
merger of Antigenics L.L.C. ("LLC"), a Delaware corporation, with and into the
Company, in exchange for, or in full satisfaction of, a warrant to purchase
interests in the LLC.
The initial per Share exercise price of this Warrant (the "Warrant
Price"), subject to adjustment from time to time pursuant to the provisions of
Section 3 hereof, shall equal $__________.
1. TERM OF WARRANT. The purchase right represented by this Warrant is
exercisable, in whole or in part, at any time during the period beginning on the
date hereof and ending on November 29, 2002.
2. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
2.1 EXERCISE. Subject to Section 1 hereof, the purchase right
represented by this Warrant may be exercised by the Holder hereof, in whole or
in part, by the surrender of this Warrant (with the notice of exercise form
attached hereto as EXHIBIT 1 duly executed) at the principal executive office of
the Company and by the payment to the Company, by bank check or wire transfer,
of an amount equal to the then applicable Warrant Price per Share multiplied by
the number of Shares then being purchased. The Company agrees that the Shares so
purchased shall be deemed to be issued to the Holder hereof as the record owner
of such Shares as of the close of business on the date on which this Warrant
shall have been surrendered and payment made for such Shares as aforesaid.
Unless this Warrant has been fully exercised or expired, a
<PAGE> 2
new Warrant representing the portion of the Shares, with respect to which this
Warrant shall not then have been exercised, shall also be issued to the Holder.
2.2 SHARES FULLY PAID. All Shares which may be issued upon the
exercise of this Warrant will, upon issuance, be fully paid and nonassessable.
3. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES. The kind of
securities purchasable upon the exercise of this Warrant, the Warrant Price and
the number of Shares purchasable upon exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of certain events as
follows:
3.1 RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than as a result of a subdivision or
combination), or in case of any consolidation or merger of the Company with or
into another legal entity (other than a merger in which the Company is the
surviving entity and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, the Company,
or such successor or purchasing corporation, as the case may be, shall execute a
new Warrant, providing that the Holder of this Warrant shall have the right to
exercise such new Warrant and purchase upon such exercise, in lieu of each Share
theretofore issuable upon exercise of this Warrant, the kind and amount of
securities, money and property which would have been received upon such
reclassification, change, consolidation or merger by the Holder if this Warrant
had been exercised immediately prior to such event. Such new Warrant shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 3.
3.2 SUBDIVISION OR COMBINATION OF SHARES. If the Company at
any time while this Warrant remains outstanding and unexpired shall subdivide or
combine its equity securities, the number of securities for which this Warrant
is exercised shall be proportionately increased in the case of a subdivision or
decreased in the case of a combination.
3.3 DISTRIBUTIONS OF ASSETS. If the Company at any time shall
distribute assets (or rights to acquire assets) to its equityholders as a
partial liquidating dividend, the Warrant Price shall be reduced by an amount
equal to the then fair market value (as determined in good faith by the Board of
Directors of the Company) of the portion of the assets distributed with respect
to a Share.
4. NOTICE OF ADJUSTMENTS. Whenever there is an adjustment pursuant to
Section 3 hereof, the Company shall prepare a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring the
adjustment and the nature of the adjustment and shall cause copies of such
certificate to be mailed to the Holder.
5. NO FRACTIONAL SHARES. If any adjustment under Section 3 would create
a fractional Share, or a right to acquire a fractional Share, such fractional
Share shall be disregarded and the number of Shares issuable upon exercise shall
be rounded to the nearest whole number.
6. REGISTRATION RIGHTS. If this Warrant has been exercised prior to the
filing of the resale registration statement contemplated by Section 7(a) of the
Subscription Agreement (as
2
<PAGE> 3
amended, the "Subscription Agreement") entered into in connection with the
offering described in the LLC's Confidential Private Placement Memorandum, dated
August 31, 1999, the securities issued upon exercise of this Warrant shall be
"Registrable Securities" for the purposes of the Subscription Agreement, and the
Holder of such securities shall be entitled to the benefits of the registration
rights provisions of such Subscription Agreement.
7. COMPLIANCE WITH SECURITIES LAWS. The Holder of this Warrant, by
acceptance hereof, agrees that this Warrant and the securities to be issued upon
exercise hereof are being acquired for investment for such Holder's own account
and not with a view toward distribution thereof, and that it will not offer,
sell or otherwise dispose of this Warrant or any securities issued upon its
exercise unless this Warrant or such securities have been registered or
qualified, as the case may be, under the Securities Act of 1933, as amended, and
applicable state and foreign securities laws or (i) registration or
qualification under state and foreign securities laws is not required and (ii)
an opinion of counsel satisfactory to the Company is furnished to the Company to
the effect that registration under the Securities Act of 1933, as amended, is
not required.
8. TRANSFER AND EXCHANGE OF WARRANT.
8.1 TRANSFER. This Warrant may not be transferred without the
prior written consent of the Company.
8.2 EXCHANGE. Subject to compliance with the terms hereof
including Section 8.1, this Warrant and all rights hereunder are transferable,
in whole or in part, at the principal executive office of the Company by the
Holder in person or by duly authorized attorney, upon surrender of this Warrant
properly endorsed. The last Holder of this Warrant as registered on the books of
the Company may be treated by the Company and all persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented by this Warrant or to transfer this Warrant
on the books of the Company, any notice to the contrary notwithstanding, unless
and until such Holder seeks to transfer registered ownership of this Warrant on
the books of the Company and such transfer is effected.
9. MISCELLANEOUS.
9.1 NO RIGHTS AS STOCKHOLDER. No Holder shall be entitled to
vote or receive distributions or be deemed the holder of securities of the
Company which may at any time be issuable upon its exercise for any purpose, nor
shall anything contained herein be construed to confer upon the Holder, as such,
any of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any action (whether upon any
recapitalization, issuance of additional equity, reclassification of equity,
consolidation, merger, conveyance or otherwise) or to receive notice of
meetings, or to receive distributions or otherwise until the Warrant shall have
been exercised and the securities purchasable upon such exercise shall have
become deliverable, as provided herein.
9.2 REPLACEMENT. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft
3
<PAGE> 4
or destruction, on delivery of an indemnity agreement reasonably satisfactory in
form to the Company or, in the case of mutilation, on surrender and cancellation
of this Warrant, the Company, at its expense, will execute and deliver, in lieu
of this Warrant, a new warrant of like tenor.
9.3 NOTICE OF CAPITAL CHANGES. In this event:
(a) the Company shall declare any distribution
payable to its stockholders;
(b) there shall be any capital reorganization or
reclassification of the equity of the Company, or consolidation or merger of the
Company with, or sale of all or substantially all of its assets to, another
legal entity; or
(c) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then the Company shall give the Holder written notice, in the manner set forth
in Section 9.4 below, of the date on which a record shall be taken for such
distribution or for determining stockholders entitled to vote upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up and of the date when any such transaction shall take
place, as the case may be. Except as otherwise set forth herein, such written
notice shall be given at least 20 days prior to the transaction in question and
not less than 10 days prior to any record date in respect thereof, unless such
notice is waived by the Holder.
9.4 NOTICE. Any notice given to either party under this
Warrant shall be in writing, and any notice hereunder shall be deemed to have
been given upon the earlier of delivery thereof by hand delivery, by courier or
by facsimile transmission or three (3) business days after the mailing thereof
if sent registered mail with postage prepaid, addressed, as the case may be, to
the Company at its principal executive offices or to the Holder at its address
set forth in the Company's books and records or at such other address as the
Holder may have provided to the Company in writing.
9.5 NO IMPAIRMENT. The Company will not, by amendment of its
charter or by-laws or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company, but will at all
times in good faith assist in the carrying out of all the provisions in this
Warrant.
9.6 GOVERNING LAW. This Warrant shall be governed by and
construed under the internal domestic laws of the State of Delaware.
[The remainder of this page has been intentionally left blank.]
4
<PAGE> 5
IN WITNESS WHEREOF, this Warrant is executed as of this ____ day of
February, 2000.
ANTIGENICS INC.
By:
-------------------------------------
Name: Garo Armen
Title: President and Chief Executive
Officer
5
<PAGE> 6
EXHIBIT 1
NOTICE OF EXERCISE
TO: ANTIGENICS INC.
1. The undersigned hereby elects to purchase _______ Shares pursuant
to the terms of the attached Warrant, and tenders herewith payment in full of
the Warrant Price of such Shares.
2. The undersigned represents that the aforesaid Shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
except in compliance with the Securities Act of 1933, as amended.
Name of Holder:_________________________
________________________________________
Signature
Title (if applicable):__________________
<PAGE> 7
List of Warrant Holders
Blackford Securities
Michael & Pamela Clark
Stephen A. Cohen
Mary & Michael Darling
Delaware Charter Guarantee
Russell S. Reynolds III
Eagle Constellation Fund
Elan Corporation
EM Sterne & DM Moore TTEES
Stephen Feid
Freedale Investments
Frost Nevada
Phillip T. George, M.D.
German American Capital Corp.
H. Leland Getz
Joseph Grano Jr.
Kara Ann Berg Trust
Dr. Ernest Mario
Donald Marron
Mark McInerney
John P. McNiff
Richard Omohundro
James Pinto
Pinto Trust, C.S.
Pinnacle Investments
PNC Bank Delaware
SAC Capital
Stephen Schram
Sigma-Tau Industrie
Farmaceutiche Riunite SpA
Aptafin
Richard Sterne
Carol Swiggett
John Martin Taylor
ThermoElectron
A&A Actien Bank
Dr. Darrick Antell
Michael G. Baldwin
E. Garrett Bewkes Jr.
Blue Star Group
Arthur Castlebaum
Coleman Partnership
Dean C. Colson
Dean C. Colson, IRA
Dominic Corvino
Carmine DeSantis
Ralph A. Daiuto Sr.
Sergio Dompe
Lew Eisenberg
Gibralt Capital Corp
Chris Hart
H.B. Rigs Ltd.
Robert Hoffman
Medison Pharma Ltd.
Medison Tech.
Mark Tzalkovitz
Loren Kramer
Dr. Bernard Lahasky
Andrew J. Lanza
Peter Lawson-Johntson II
Peter Lawson-Johntson
Links LLC
Fredda Levitt
Dr. Ivan Lieberberg
Michael E. Mederrick
William Morrison
John Morse
PaineWebber
Darryl Parmenter
Manny Reiser
SAAD Investment Company Ltd.
John Saraceno
James F. & Virginia Sattler
A. Scurfin-Moratti
N. Lloyd Scurlock
Walter Toombs
Neil & Karen Vaccaro
H. William & Laura Walker
Frank B. White
Joseph E. Wurtz
Strauss Zelnick
Pilar Morales-Arce
E. Gutzwiller & CIE
S. L. Gubel
Interimage
Lloyds
Osa Mayor
Carmen Miranda
Percacer SA
Redwood Investment Ltd.
L. Rispoli
Stanhope S.L.
STH Capital
Olga Subirana
Torreal
<PAGE> 1
EXHIBIT 4.3
ANTIGENICS L.L.C.
SUBSCRIPTION AGREEMENT
Antigenics L.L.C.
630 Fifth Avenue
Suite 2170
New York, New York 10111
Ladies and Gentlemen:
1. SUBSCRIPTION FOR UNITS. The undersigned, intending to be legally
bound, hereby irrevocably applies to purchase from Antigenics L.L.C., a limited
liability company organized under the Delaware Limited Liability Company Act
(the "LLC"), the number of Units (as defined below) indicated on the signature
page hereof and to be admitted into the LLC as a member as and to the extent
provided herein and in the Private Placement Memorandum dated August __, 1999
(which Private Placement Memorandum, including all amendments thereof and
supplements and exhibits thereto, is herein referred to as the "Memorandum").
Each Unit shall represent a percentage equity interest in the LLC determined
according to the following formula:
$2,401.86
Percentage = ---------------------
$250,000,000 + A
where "A" equals the aggregate gross proceeds to the LLC in the offering
contemplated by the Memorandum assuming no exercise of any of the Warrants (as
defined below).
This subscription is submitted to the LLC in accordance with and subject to the
terms and conditions described in this Subscription Agreement and the form of
Amended and Restated Limited Liability Company Agreement, dated as of September
10, 1998, as amended by the Amendment Agreement, dated as of December 22, 1998
(the "LLC Agreement"), attached as Exhibits A-1 and A-2 hereto. Notwithstanding
any other provision of the LLC Agreement, if all or substantially all the assets
of the LLC or the outstanding equity interests in the LLC shall be transferred
(by sale, merger or otherwise) to a successor corporation (the "Successor
Corporation") in exchange for securities of such Successor Corporation and such
exchange is made to facilitate a Proposed Registration (as described in Section
7) of the same or any other class of securities of the Successor Corporation,
the undersigned agrees that it will be entitled to receive in such exchange, as
full payment for its Units, a percentage of each class of securities issued by
the Successor Corporation in such exchange equal to the percentage derived by
dividing the total number of Units owned by the undersigned at the time of such
exchange by the total outstanding Units of the LLC at such time. THE SIGNATURE
OF THE UNDERSIGNED HERETO CONSTITUTES AUTHORIZATION OF THE EXECUTION ON BEHALF
OF THE UNDERSIGNED OF THE LLC AGREEMENT OR AN AMENDMENT THERETO FOR THE PURPOSE
OF ADMITTING THE UNDERSIGNED AS A MEMBER OF THE LLC. See Section 4 below.
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2. WARRANTS. In connection with the purchase of any Units subscribed for
in Section 1 (the "Initial Units"), the LLC will issue to the undersigned a
warrant (a "Warrant") exercisable for a number of additional Units equal to 5%
of the number of Initial Units, rounded down to the nearest whole number. The
Warrant shall entitle the undersigned to purchase Units at any time until
September 30, 2002, shall have a per Unit exercise price of $2,401.86, and shall
be in substantially the form of Exhibit B hereto.
3. AMOUNT AND METHOD OF PAYMENT. The undersigned encloses herewith a
check made payable to "Antigenics L.L.C.", or contemporaneously with the
undersigned's delivery of this Subscription Agreement, is paying by wire
transfer to the account of Antigenics L.L.C., the consideration (the "Purchase
Price") required to purchase the Units subscribed for hereunder, in the amount
of $2,401.86 for each Unit subscribed for, which represents payment in full for
the subscription. The minimum purchase is 416 Units; provided, however, the LLC
may decide, in its discretion, to accept subscriptions for less than 416 Units
or to limit any subscription to 4,163 Units.
4. ADMISSION TO LLC; POWER OF ATTORNEY. An investor, whose subscription
agreement is accepted by the LLC and whose payment of the purchase price for the
Units to be purchased by the undersigned is received by the LLC, will become a
party to the LLC Agreement at such time as the investor's admission to the LLC
is reflected in the books and records of the LLC (the "LLC Closing"). The
undersigned has received and read a copy of the form of Amended and Restated
Limited Liability Company Agreement and the Amendment Agreement thereto attached
as Exhibits A-1 and A-2 hereto and accepts and agrees to be bound by all of the
terms thereof and to perform all obligations therein imposed upon an investor
with respect to the equity interest included in each Unit purchased, and any
equity interest acquired upon exercise of a Warrant.
If the subscription is rejected as provided in Section 5 hereof, the
undersigned's subscription shall be void and all funds received from the
undersigned, together with any interest earned thereon, shall be promptly
returned to the undersigned.
The undersigned, by the execution and delivery of this Subscription
Agreement, hereby irrevocably constitutes and appoints each of the Chairman of
the Board of Managers and Chief Executive Officer and the Vice Chairman of the
Board of Managers of the LLC with full power of substitution, as the true and
lawful agent and attorney-in-fact for the undersigned and authorizes and
empowers such attorney, in the name, place, and stead of the undersigned, to
make, execute, deliver, acknowledge, swear to, file and record in all necessary
or appropriate places the LLC Agreement and such other documents and instruments
(including, without limitation, the LLC Agreement and amendments and
restatements of the LLC Agreement in accordance with the terms of the LLC
Agreement), and to take such other actions as may be necessary or appropriate to
carry out the LLC Agreement. The Power of Attorney granted hereby shall be
deemed to be coupled with an interest, shall be irrevocable and shall survive
and shall not be affected by the subsequent death, disability, incapacity,
insolvency or bankruptcy of the undersigned or the transfer of the equity
interest of the undersigned until such time as the transferee shall have been
admitted to the Limited Liability Company as a member or the transfer of any
portion of the equity interest.
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5. ACCEPTANCE OF SUBSCRIPTION.
(a) The undersigned understands and agrees that the LLC, in its sole
discretion, reserves the right to accept or reject this and any other
subscription for Units in whole or in part at any time prior to the sale of such
Units, notwithstanding prior receipt by the undersigned of notice of acceptance.
(b) In the event that this subscription is rejected in whole or in
part, or if the sale of the Units is not consummated for any reason (in which
event this subscription shall be deemed to be rejected), the LLC shall promptly
cause the return of the Purchase Price to the undersigned, and this Subscription
Agreement shall thereafter have no force or effect to that extent.
6. REPRESENTATIONS AND WARRANTIES. The undersigned hereby acknowledges,
represents, warrants to, and agrees with the LLC as follows:
(a) The undersigned understands that the offering and sale of the
Units and Warrants is intended to be exempt from registration under the
Securities Act of 1933, as amended (the "Securities Act"), by virtue of Section
4(2) of the Securities Act and the provisions of Rule 506 of Regulation D
promulgated thereunder and, in accordance therewith and in furtherance thereof,
the undersigned represents and warrants to and agrees with the LLC as follows:
(i) The undersigned has received the Memorandum and the LLC
Agreement, has carefully reviewed each and understands the information contained
therein and information otherwise provided to the undersigned in writing by the
LLC relating to this investment and has had the opportunity to show to, and
discuss with, the undersigned's attorney, accountant and financial advisor, all
such information;
(ii) The undersigned understands that all other documents,
records, and books pertaining to this investment have been made available for
inspection by the undersigned, the undersigned's attorney, the undersigned's
accountant and the undersigned's financial advisor;
(iii) The undersigned and/or the undersigned's advisor(s) have
had a reasonable opportunity to ask questions of and receive information and
answers from a person or persons acting on behalf of the LLC concerning the
offering of the Units and, as the undersigned has deemed necessary, to verify
the information contained in the Memorandum and all such questions have been
answered and all such information has been provided to the full satisfaction of
the undersigned;
(iv) No oral or written representations have been made or oral or
written information furnished to the undersigned or the undersigned's advisor(s)
in connection with the offering of the Units which were in any way inconsistent
with or in addition to the information stated in the Memorandum;
(v) The undersigned is not subscribing for a Unit as a result of
or subsequent to any advertisement, article, notice, or other communication
published in any
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newspaper, magazine, or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of a subscription by a
person not previously known to the undersigned in connection with investments in
securities generally;
(vi) If the undersigned is a natural person, the undersigned has
reached the age of majority in the state in which the undersigned resides, has
adequate means of providing for the undersigned's current needs and personal
contingencies, is able to bear the substantial economic risks of an investment
in the LLC for an indefinite period of time, has no need for liquidity in such
investment, and could afford a complete loss of such investment;
(vii) The undersigned has such knowledge and experience in
financial, tax and business matters so as to enable the undersigned to utilize
the information made available to the undersigned in connection with the
offering of the Units in order to evaluate the merits and risks of an investment
in the LLC and to make an informed investment decision with respect thereto and,
therefore, he is not relying upon the advice of a purchaser representative in
making a final investment decision to purchase Units;
(viii) The undersigned is not relying on the LLC with respect to
the tax and other economic considerations of the undersigned relating to this
investment. In regard to such considerations, the investor has relied on the
advice of, or has consulted with, only the undersigned's own professional
advisors who are unaffiliated with and who are not directly or indirectly
compensated by the LLC or any affiliate;
(ix) The undersigned understands that the undersigned may be
subject to taxes with respect to allocations of income and distributions with
respect to the undersigned's equity interest in the LLC and that pursuant to the
provisions of the LLC Agreement, among other things, the LLC shall be entitled
to deduct, to withhold, and/or to pay any and all taxes and withholdings, and
all interest, penalties, additions to tax, and similar liabilities in connection
therewith or attributable thereto. (See Section 8.6 of the LLC Agreement). It
shall be the policy of the LLC to consider the tax liabilities of equity
interest holders with respect to allocations of income to their equity interests
in connection with the LLC's determinations from time to time regarding whether
to make any distributions to equity interest holders and the extent thereof. The
undersigned further understands that no assurance can be made that any such
distributions will be made, or that, if made, will be in amounts sufficient to
enable equity interest holders to pay all such taxes;
(x) The undersigned is acquiring the Units and Warrants solely
for the undersigned's own account as principal, for investment purposes only and
not with a view to the resale or distribution thereof, in whole or in part, and
no other person has a direct or indirect beneficial interest in such equity
interest;
(xi) The undersigned will not sell or otherwise transfer the
Units or Warrants without registration under the Securities Act or an exemption
therefrom or if such sale or transfer would violate any provision of the LLC
Agreement, and fully understands and agrees that the undersigned must bear the
economic risk of the undersigned's purchase for an indefinite period of time
because, among other reasons, neither the Units nor the Warrants have been
registered under the Securities Act or under the securities laws of certain
states and, therefore,
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cannot be resold, pledged, assigned, or otherwise disposed of unless they are
subsequently registered under the Securities Act and under the applicable
securities laws of such states or unless an exemption from such registration is
available. Except as otherwise set forth herein, the undersigned further
understands that the LLC is not under any obligation to register the Units or
Warrants on the undersigned's behalf or to assist the undersigned in complying
with any exemption from registration; and
(xii) The undersigned understands that sales or transfers of the
Units are further restricted by the provisions of the LLC Agreement and that
sales or transfers of securities are restricted under the Securities Act and
under certain state securities laws.
(b) The undersigned recognizes that an investment in the LLC involves
a high degree of risk. Among other considerations in this regard,
(i) no Federal or state agency has passed upon the Units or the
Warrants or made any finding or determination as to the fairness of this
investment;
(ii) there is no established market for the Units or the
Warrants; and it is unlikely that a public market for such securities will
develop.
(c) If the undersigned is a corporation, partnership, trust, or other
entity, it is authorized and qualified to become a member in, and make its
capital contributions to, the LLC, and the person signing this Subscription
Agreement on behalf of such entity has been duly authorized by such entity to do
so.
(d) If the undersigned is purchasing the Units subscribed for hereby
in a representative or fiduciary capacity, the representations and warranties
contained herein (and in any other written statement or document delivered in
connection herewith) shall be deemed to have been made on behalf of the person
or persons for whom such equity interest is being purchased.
(e) If the undersigned is a natural person, the undersigned is an
"accredited investor" within the meaning of Rule 501 under the Securities Act
because the undersigned (i) had individual income in excess of $200,000 in each
of the last two calendar years and the undersigned reasonably expects to have
individual income in excess of $200,000 in the current calendar year; and/or
(ii) the undersigned had joint income with the spouse of the undersigned in
excess of $300,000 in each of the last two calendar years and the undersigned
reasonably expects to have joint income in excess of $300,000 in the current
calendar year; and/or (iii) the undersigned has an individual net worth, or the
spouse of the undersigned and the undersigned have a joint net worth, in excess
of $1,000,000. If the undersigned is an entity, the undersigned is an
"accredited investor" within the meaning of Rule 501 under the Securities Act
because (i) the undersigned was not formed for the specific purpose of acquiring
the securities offered and has total assets in excess of $5,000,000, or (ii) all
of the equity owners of the undersigned are "accredited investors" pursuant to
the preceding clause (i) and/or the preceding sentence.
(f) All information which the undersigned has heretofore furnished
and furnishes herewith to the LLC, including, without limitation, the
certification as to the undersigned's status as an "accredited investor" within
the meaning of Rule 501 under the
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Securities Act and applicable state securities laws, and any other information
with respect to the undersigned's financial position and business experience set
forth herein, and any representations contained herein, is correct and complete
as of the date of this Subscription Agreement, and if there should be any
material change in such information prior to the undersigned's admission to the
LLC as a member, the undersigned will immediately furnish such revised or
corrected information to the LLC.
(g) Within five days after receipt of a request from the LLC, the
undersigned hereby agrees to provide such information and to execute and deliver
such documents as may reasonably be necessary to comply with any and all laws
and ordinances to which the LLC is subject.
(h) The foregoing representations, warranties, and agreements,
together with all other representations and warranties made or given by the
undersigned to the LLC in any other written statement or document delivered in
connection with the transactions contemplated hereby, shall be true and correct
in all respects on and as of the date of the undersigned's admission to the LLC
as a member as if made on and as of such date and shall survive such date.
7. PIGGYBACK REGISTRATION RIGHTS.
(a) If prior to the second anniversary of the LLC Closing, the LLC or
its successor (the "Company") proposes to register under the Securities Act (a
"Proposed Registration") the LLC equity interests or shares of common stock or
other securities into which such equity interests have been exchanged in a
reorganization (the "Securities") in connection with the initial public offering
of such Securities (other than a registration on Form S-4 or any successor
form), the Company shall, at such time, promptly give the undersigned written
notice of such Proposed Registration. The undersigned shall have ten (10) days
from its receipt of such notice to deliver to the Company a written request
specifying the amount of Securities purchased pursuant to this Subscription
Agreement or acquired upon exercise of Warrants purchased pursuant to this
Subscription Agreement (including any Securities received in a reorganization)
that the undersigned intends to sell (the "Registrable Securities") and the
undersigned's intended method of distribution. Upon receipt of such request, the
Company shall use reasonable commercial efforts to cause all Registrable
Securities which the Company has been requested to register to be registered
under the Securities Act to the extent necessary to permit their sale or other
disposition in accordance with the intended method of distribution specified in
the request of the undersigned; provided, however, that the Company shall have
the right, prior to the date the applicable registration statement becomes
effective, to postpone or withdraw any Proposed Registration without obligation
to the undersigned. If the Proposed Registration involves an underwriting, the
Company shall not be required to include any Registrable Securities in the
underwritten portion of the offering.
(b) In connection with the registration of Registrable Securities
pursuant to this Agreement, the Company shall:
(i) subject to subsection (iv), keep a registration statement
covering Registrable Securities effective until the earliest of (A) one year
after the effective date thereof, (B) the sale of all Registrable Securities
covered by the registration statement, or (C) the date on
<PAGE> 7
which all the remaining Registrable Securities can be immediately sold to the
public without registration;
(ii) prepare and file with the Commission such amendments and
supplements to a registration statement covering Registrable Securities and the
prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act and the rules and
regulations thereunder to maintain the effectiveness of the registration
statement;
(iii) furnish to the undersigned such number of copies of the
prospectus included in a registration statement covering Registrable Securities
as the undersigned may reasonably request in order to facilitate the disposition
of the undersigned's Registrable Securities;
(iv) notify the undersigned promptly upon the occurrence of any
event or circumstance that, in the reasonable judgment of the Company, makes it
necessary or appropriate to amend or supplement the prospectus included in a
registration statement covering Registrable Securities, and promptly prepare,
file and furnish to the undersigned a reasonable number of copies of such a
supplemented or amended prospectus; provided, however, that the Company may
delay preparing, filing and distributing any such supplement or amendment if the
Company determines that such supplement or amendment could (i) interfere with or
adversely affect the negotiation or completion of a transaction that is being
contemplated by the Company or (ii) involve initial or continuing disclosure
obligations that are not in the best interests of the Company's equityholders at
such time; provided, further, that (x) the Company will give notice of any such
delay prior to such delay, (y) such delay shall not extend for a period of more
than sixty (60) days without the written consent of the undersigned and (z) the
Company may utilize such delay no more than twice in any period of 365
consecutive days; and
(v) use reasonable commercial efforts to prevent the issuance of
any stop order or other order suspending the effectiveness of a registration
statement covering Registrable Securities and, if such an order is issued, to
obtain the withdrawal thereof at the earliest possible time and to notify the
undersigned of the issuance of such order and the resolution thereof.
(c) In connection with any registration of the Registrable
Securities, the undersigned shall:
(i) furnish to the Company such information regarding itself and
the intended method of disposition of Registrable Securities as the Company
shall reasonably request in order to effect the registration thereof; and
(ii) upon receipt of any notice from the Company of the issuance
of a stop order or a notice under Section 6(b)(iv), immediately discontinue
disposition of Registrable Securities pursuant to the applicable registration
statement until withdrawal of the stop order or receipt of the amended or
supplemented prospectus, as the case may be.
(d) With a view to making available to the undersigned the benefits
of Rule 144 under the Securities Act ("Rule 144"), the Company agrees that after
it becomes subject to
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the reporting requirements under the Securities Exchange Act of 1934, as
amended, and until the second anniversary of the purchase of the Units, it shall
make available adequate public information, as that term is defined in Rule 144.
(e) Expenses incurred by the Company in connection with the
registration of Registrable Securities, including registration fees, printer
costs, accounting fees and the fees and disbursements of counsel for the
Company, shall be borne by the Company. The Company shall not be responsible for
underwriting discounts and commissions payable with respect to Registrable
Securities or fees and expenses for attorneys or other advisors to the
undersigned.
8. INDEMNIFICATION. The undersigned agrees to indemnify and hold harmless
the LLC and its officers, directors, and Affiliates and each other person, if
any, who controls any thereof, within the meaning of Section 15 of the
Securities Act, against any and all losses, liabilities, claims, damages, and
expenses whatsoever (including, but not limited to, any and all expenses
reasonably incurred in investigating, preparing, or defending against any
litigation commenced or threatened or any claim whatsoever) arising out of or
based upon any false representations or breaches of warranty or breach or
failure by the undersigned to comply with any covenant or agreement made by the
undersigned herein or in any other document furnished by the undersigned to any
of the foregoing in connection with this transaction.
9. ADDITIONAL INFORMATION. The undersigned hereby acknowledges and agrees
that the LLC may make or cause to be made such further inquiry and obtain such
additional information as they may deem appropriate, with regard to the
suitability of the undersigned.
10. IRREVOCABILITY; BINDING EFFECT. The undersigned hereby acknowledges
and agrees that the subscription hereunder is irrevocable, that the undersigned
is not entitled to cancel, terminate, or revoke this Subscription Agreement or
any agreements of the undersigned thereunder, and that this Subscription
Agreement and such other agreements shall survive the death or disability of the
undersigned and shall be binding upon and inure to the benefit of the parties
and their heirs, executors, administrators, successors, legal representatives,
and assigns. If the undersigned is more than one person, the obligations of the
undersigned hereunder shall be joint and several and the agreements,
representations, warranties, and acknowledgements herein contained shall be
deemed to be made by and be binding upon each such person and his heirs,
executors, administrators, successors, legal representatives, and assigns.
11. MODIFICATION. Neither this Subscription Agreement nor any provisions
hereof shall be waived, modified, discharged, or terminated except by an
instrument in writing signed by the party against whom any such waiver,
modification, discharge, or termination is sought.
12. NOTICES. Any notice, demand, or other communication which any party
hereto may be required, or may elect, to give to any other party hereunder shall
be sufficiently given if (a) deposited, postage prepaid, in a United States mail
box, stamped registered or certified mail, return receipt requested, addressed
to such address as may be listed on the books of the LLC, or (b) delivered
personally at such address.
13. COUNTERPARTS. This Subscription Agreement may be executed through the
use of separate signature pages or in any number of counterparts, and each such
counterpart shall, for
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all purposes, constitute one agreement binding on all parties, notwithstanding
that all parties are not signatories to the same counterpart.
14. ENTIRE AGREEMENT. This Subscription Agreement contains the entire
agreement of the parties with respect to the subject matter hereof and there are
no representations, covenants or other agreements except as stated or referred
to herein.
15. SEVERABILITY. Each provision of this Subscription Agreement is
intended to be severable from every other provision, and the invalidity or
illegality of any portion hereof shall not affect the validity or legality of
the remainder hereof.
16. ASSIGNABILITY. This Subscription Agreement is not transferable or
assignable by the undersigned.
17. APPLICABLE LAW. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York as applied to
residents of that State executing contracts wholly to be performed in that
State.
18. CHOICE OF JURISDICTION. The parties agree that any action or
proceeding arising, directly, indirectly, or otherwise, in connection with, out
of, or from this Subscription Agreement, any breach hereof or any transaction
covered hereby shall be resolved within the County, City, and State of New York.
Accordingly, the parties consent and submit to the jurisdiction of the United
States federal and state courts located within the County, City, and State of
New York.
19. TAXPAYER IDENTIFICATION NUMBER. The undersigned verifies under
penalties of perjury that the Taxpayer Identification Number or Social Security
Number shown below is true, correct, and complete and that the undersigned is
not subject to backup withholding either (a) because the undersigned has not
been notified that it is subject to backup withholding as a result of a failure
to report all interest or dividends or (b) because the Internal Revenue Service
has notified the undersigned that the undersigned is no longer subject to backup
withholding.
------------------------------------------------------------------------
Number of Units for $___________
(minimum of _______)
------------------------------------------------------------------------
Aggregate Purchase Price $___________
------------------------------------------------------------------------
Names in which the Units are to be registered:
----------------------------------------------------
Federal Taxpayer I.D. or Social Security Number (applicable only to U.S.
subscribers):
----------------------------------------------------
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IN WITNESS WHEREOF, the undersigned has caused this Subscription
Agreement to be executed this ___ day of ____________, 1999.
Individuals: ____________________________________________
Print name: ________________________________
Print name of joint owner, if any below:
____________________________________________
Print address: _____________________________
Corporation or other entity: Print name of corporation or other entity
By:_________________________________________
Authorized Signatory
Print name: ________________________________
Print address:______________________________
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THIS PAGE NOT TO BE COMPLETED BY SUBSCRIBER
RECEIPT AND ACCEPTANCE
SUBSCRIPTION ACCEPTED ON _____________________, 1999
ANTIGENICS L.L.C.
By:______________________________________
Garo H. Armen,
Chairman of the Board of Managers and
Chief Executive Officer
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AMENDMENT TO SUBSCRIPTION AGREEMENT
THIS AMENDMENT (the "Amendment") to the Subscription Agreement related
to the Private Placement Memorandum dated August 31, 1999 (the "Subscription
Agreement") between Antigenics L.L.C., a limited liability company organized
under the Delaware Limited Liability Company Act (the "Company") and the
undersigned, is hereby entered into by the Company and the undersigned.
In consideration for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the undersigned
hereby amend the Subscription Agreement as follows:
1. All capitalized terms set forth herein shall have the same meaning as set
forth in the Subscription Agreement.
2. Section 2 of the Subscription Agreement is hereby deleted in its entirety
and replaced with the following:
"2. Warrants. In connection with the purchase of any Units
subscribed for in Section 1 (the "Initial Units"), the LLC will issue to the
undersigned a warrant (a "Warrant") exercisable for a number of additional Units
equal to 10% of the number of Initial Units, rounded down to the nearest whole
number. The Warrant shall entitle the undersigned to purchase Units at any time
until September 30, 2002, shall have a per Unit exercise price of $2,401.86, and
shall be in substantially the form of Exhibit B hereto."
3. Section 7(a) of the Subscription Agreement is hereby deleted in its
entirety and replaced with the following:
"7. Piggyback Registration Rights.
(a) If prior to the second anniversary of the LLC Closing, the
LLC or its successor (the "Company") registers under the Securities Act (a
"Proposed Registration") the LLC equity interests or shares of common stock or
other securities into which such equity interests have been exchanged in a
reorganization (the "Securities") in connection with the initial public offering
of such Securities (other than a registration on Form S-4 or any successor
form), the Company shall, on the 91st day after the effective date of such
registration statement, promptly give the undersigned written notice of such
Proposed Registration. The undersigned shall have ten (10) days from its receipt
of such notice to deliver to the Company a written request specifying the amount
of Securities purchased pursuant to this Subscription Agreement or acquired upon
exercise of Warrants purchased pursuant to this Subscription Agreement
(including any Securities received in a reorganization) that the undersigned
intends to sell (the "Registrable Securities") and the undersigned's intended
method of distribution. Upon receipt of such request, the Company shall use
reasonable commercial efforts to cause all Registrable Securities which the
Company has been requested to register to be registered under the Securities
<PAGE> 13
Act to the extent necessary to permit their sale or other disposition in
accordance with the intended method of distribution specified in the request of
the undersigned; provided, however, that the Company shall have the right, prior
to the date the applicable registration statement becomes effective, to postpone
or withdraw any Proposed Registration without obligation to the undersigned."
4. Subject to the amendment set forth herein, the remainder of the
Subscription Agreement shall remain in full force and effect.
5. This Amendment may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, the undersigned has caused this Amendment
to the Subscription Agreement to be executed this ___ day of ____________, 1999.
ANTIGENICS L.L.C.
By:_____________________________________
Garo H. Armen,
Chairman of the Board of Managers and
Chief Executive Officer
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
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Individuals: ____________________________________________
Print name:_________________________________
Print name of joint owner, if any below:
____________________________________________
Print address:______________________________
Corporation or other entity: Print name of corporation or other entity
By:_________________________________________
Authorized Signatory
Print name:_________________________________
Print address:______________________________
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List of Parties to Subscription Agreement
Blackford Securities
Michael & Pamela Clark
Stephen A. Cohen
Mary & Michael Darling
Delaware Charter Guarantee
Russell S. Reynolds III
Eagle Constellation Fund
Elan Corporation
EM Sterne & DM Moore TTEES
Stephen Feid
Freedale Investments
Frost Nevada
Phillip T. George, M.D.
German American Capital Corp.
H. Leland Getz
Joseph Grano Jr.
Kara Ann Berg Trust
Dr. Ernest Mario
Donald Marron
Mark McInerney
John P. McNiff
Richard Omohundro
James Pinto
Pinto Trust, C.S.
Pinnacle Investments
PNC Bank Delaware
SAC Capital
Stephen Schram
Sigma-Tau Industrie
Farmaceutiche Riunite SpA
Aptafin
Richard Sterne
Carol Swiggett
John Martin Taylor
ThermoElectron
A&A Actien Bank
Dr. Darrick Antell
Michael G. Baldwin
E. Garrett Bewkes Jr.
Blue Star Group
Arthur Castlebaum
Coleman Partnership
Dean C. Colson
Dean C. Colson, IRA
Dominic Corvino
Carmine DeSantis
Ralph A. Daiuto Sr.
Sergio Dompe
Lew Eisenberg
Gibralt Capital Corp
Chris Hart
H.B. Rigs Ltd.
Robert Hoffman
Medison Pharma Ltd.
Medison Tech.
Mark Tzalkovitz
Loren Kramer
Dr. Bernard Lahasky
Andrew J. Lanza
Peter Lawson-Johntson II
Peter Lawson-Johntson
Links LLC
Fredda Levitt
Dr. Ivan Lieberberg
Michael E. Mederrick
William Morrison
John Morse
PaineWebber
Darryl Parmenter
Manny Reiser
SAAD Investment Company Ltd.
John Saraceno
James F. & Virginia Sattler
A. Scurfin-Moratti
N. Lloyd Scurlock
Walter Toombs
Neil & Karen Vaccaro
H. William & Laura Walker
Frank B. White
Joseph E. Wurtz
Strauss Zelnick
Pilar Morales-Arce
E. Gutzwiller & CIE
S. L. Gubel
Interimage
Lloyds
Osa Mayor
Carmen Miranda
Percacer SA
Redwood Investment Ltd.
L. Rispoli
Stanhope S.L.
STH Capital
Olga Subirana
Torreal
<PAGE> 1
EXHIBIT 10.7
MASTER LOAN AND SECURITY AGREEMENT
Master Loan and Security Agreement No. S7020, dated November 19, 1998
FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA") is willing to make a
loan (the "Loan") to ANTIGENICS, LLC ("you" or "Borrower") under the terms and
conditions contained in this Master Loan and Security Agreement (this "Master
Agreement"). The Loan will be secured by the Collateral described in any
schedule to this Agreement (a "Schedule"). The Collateral also includes any
replacement parts, additions and accessories that you may add to the Collateral,
as well as any proceeds of sale, lease or rental of the Collateral. We may treat
any Schedule as a separate loan and security agreement containing all of the
provisions of this Loan and Security Agreement.
1. THE CREDIT
We may make the Loan in more than one advance (an "Advance", each of which shall
be evidenced by a "Schedule"). All of the Schedules, taken together, will make
up the Loan. We will only make the Loan to you if all the conditions in this
Master Agreement have been met to our satisfaction. We will rely on your
representations and warranties, contained in this Master Agreement, in making
the Loan. The terms of this Agreement will each apply to the Loan.
- - USE OF PROCEEDS. You will use the proceeds of the Loan to pay for the
Collateral. We may pay the Supplier (whom you have chosen) of the
Collateral directly from the Loan proceeds. The Supplier will deliver the
Collateral to you at your expense. You will properly install the
Collateral at your expense at the location(s) indicated in the Schedule.
If you have already paid for the Collateral, we will pay the Loan proceeds
to you or to another person that you may designate in writing.
- - NOTES. Your obligation to repay the Loan and to pay interest on the Loan
will be evidenced by Notes. Each Note will be dated the date of the
Schedule to which the Advance evidenced by the Note is related.
- - TERM. The Term of each Schedule (and the related Advance) begins upon the
date that we make payment for the Collateral covered under each Schedule
(the "Closing Date"). The Term continues until you fully perform all of
your obligations under this Agreement and each Schedule and the related
Note(s) If the Collateral is not delivered, installed and accepted by you
by the date indicated in the Schedule, we may terminate this Agreement and
the Schedule as to the Collateral that was not delivered, installed and
accepted by giving you 10 days written notice of termination.
- - LOAN ACCOUNT. We will keep a loan account on our books and records (which
are computerized) for the Loan. We will record all payments of principal
and interest in the loan account. Unless the entries in the loan account
are clearly in error, the loan account will definitively indicate the
outstanding principal balance and accrued interest on the Loan. We may
send you loan account statements from time to time or upon your request.
<PAGE> 2
- - PAYMENTS. The scheduled loan payments (the "Payments") are indicated on
the Schedule. The Payments are payable periodically as specified on the
Schedule from time to time (for example, monthly). The Schedule also
indicates whether the Payments are payable "in advance" or "in arrears."
You agree that you owe us the total of all of these Payments over the Term
of the Schedule.
- - FIRST PAYMENT. The first Payment is due at the beginning of the Term or at
a later date that we agree to in writing. Subsequent Payments are due on
the thirtieth day of each successive period (except the next following
period if Payments are payable in arrears) until you pay us in full all of
the Payments and any other charges or expenses you owe us.
- - INTEREST. Prior to maturity of a Schedule, you will pay us interest on
each Schedule at the Interest Rate indicated in the Schedule. "Maturity"
means the scheduled maturity or any earlier date on which we accelerate
the Loan. The Payment amount indicated in the Schedule includes interest
at this Interest Rate. Interest is calculated in advance using a year of
360 days with twelve months of 30 days.
- - DEFAULT INTEREST RATE. After Maturity of the Loan you will pay us interest
at a rate of four (4%) percent per year above the Interest Rate. This is
referred to as the "Default Rate."
- - INTERIM PAYMENT. If an Advance is made on a day other than the thirtieth
or thirty-first day of a period, you will also pay us an interim Payment
on the first Payment date. The interim Payment will be for the period from
the beginning of the Term until the twenty-ninth day of the period in
which the Advance is made, unless the Advance is made on the thirty-first
day of a period. If the Advance is made on the thirty-first day of a
period, the interim Payment will be for the period from the beginning of
the Term through and including the twenty-ninth day of the next following
period. The Interim Payment will be calculated the same way as the regular
Payments but pro rata on a daily basis for the number of days for which
the interim Payment is due.
- - USURY. You and we intend to obey the law. If the Interest Rate charged
would exceed the maximum legal rate, you will only have to pay the maximum
legal rate. You do not have to pay any excess interest over and above the
maximum legal rate of interest. However, if it later becomes legal for you
to pay all or part of any excess interest, you will then pay it to us upon
our request.
- - PAYMENT DETAILS. You will make all payments due under this Master
Agreement by 12:00 P.M., Connecticut time, on the day they are due. You
will make all payments in US Dollars (US$) in immediately available funds.
We do not have to make or give "presentment, demand, protest or notice" to
get paid. You waive "presentment, demand, protest and notice."
- - APPLICATION OF PAYMENTS. Each payment under this Master Agreement is to be
applied in the following order: first, to any fees, costs, expenses and
charges you may owe us; second, to any interest due; and third to the
principal balance.
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- - PREPAYMENT. You may not prepay the Loan, in whole or in part, unless this
is specifically permitted by Exhibit A to this Agreement. If prepayment is
permitted by Exhibit A to this Master Agreement, you will give us at least
30 days advance written notice of prepayment. You will pay us the
prepayment premium indicated in the Schedule(s). You will also pay us all
accrued and unpaid interest through the date of prepayment, as well as all
outstanding fees, costs, expenses and charges then due. Of course, you
will also pay the entire outstanding principal balance of the Loan. Once
you give us a notice of prepayment, that notice is final and irrevocable.
If we accelerate the Loan following an Event of Default, you will also owe
us a prepayment premium calculated as if the Loan were prepaid on the date
of acceleration. If no prepayment is permitted, the premium due upon
acceleration will be five (5%) percent of the outstanding principal
balance.
- - YOUR OBLIGATION TO PAY US ALL PAYMENTS IS ABSOLUTE AND UNCONDITIONAL. YOU
ARE NOT EXCUSED FROM MAKING THE PAYMENTS, IN FULL, FOR ANY REASON. YOU
AGREE THAT YOU HAVE NO DEFENSE FOR FAILURE TO MAKE THE PAYMENTS AND YOU
WILL NOT MAKE ANY COUNTERCLAIMS OR SETOFFS TO AVOID MAKING THE PAYMENTS.
2. SECURITY INTEREST
- - You grant us a security interest in the Collateral. The Collateral secures
the full and timely payment and performance of all of your obligations to
us and to FINOVA Capital Corporation under this Master Agreement and any
other agreement, loan or lease that you may have with us or FINOVA Capital
Corporation (the "Obligations"). You also grant us a security interest in
any additional collateral identified in any Schedule. Any additional
collateral is considered to be "Collateral" and it secures all of the
Obligations.
- - If we request, you will put labels supplied by us stating "PROPERTY OF
FINOVA" on the Collateral where they are clearly visible.
- - You give us permission to add to this Master Agreement or any Schedule the
serial numbers and other information about the Collateral.
- - You give us permission to file this Master Agreement or a Uniform
Commercial Code financing statement, at your expense, in order to perfect
our security interest in the Collateral. You also give us permission to
sign your name on the Uniform Commercial Code financing statements where
this is permitted by law.
- - You will pay our cost to do searches for other filings or judgments
against you or your affiliates. You will also pay any filing, recording or
stamp fees or taxes resulting from filing this Agreement or a Uniform
Commercial Code financing statement. You will also pay our fees in effect
from time to time for documentation, administration and Termination of
this Master Agreement.
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- - At your expense, you will defend our first priority security interest in
the Collateral against, and keep the Collateral free of, any legal
process, liens, other security interests, attachments, levies and
executions. You will give us immediate written notice of any legal
process, liens, attachments, levies or executions, and you will indemnify
us against any loss that results to us from these causes.
- - You will notify us at least 15 days before you change the address of your
principal executive office.
- - You will promptly sign and return additional documents that we may request
in order to protect our first priority security interest in the
Collateral.
- - The Collateral is personal property and will remain personal property. You
will not incorporate it into real estate and will not do anything that
will cause the Collateral to become part of real estate or a fixture.
3. CONDITIONS OF LENDING
- - See our Commitment Letter to you dated November 16, 1998, which you and we
consider to be a part of this Master Agreement. The terms and conditions
of the Commitment Letter continued following the making of the first
Advance. However, if there is a conflict between the terms and conditions
of this Master Agreement, any schedule or any Note and the terms and
conditions of the Commitment Letter, then you and we agree that the terms
and conditions of this Agreement, the Schedules and the Notes control over
the Commitment Letter terms and conditions.
- - Before we disburse any proceeds of any Advance, we also require the
following:
* That no payment is past due to us under any other agreement, loan or lease
that you or any guarantor have with us or with FINOVA Capital Corporation.
* That we have received all the documents we requested, including the signed
Schedule, Note and Delivery and Acceptance Certificate.
* that there has been no material adverse change in your financial
condition, business, operations or prospects, or that of any guarantor,
from the financial condition that you disclosed to us in your application
for credit.
4. REPRESENTATIONS AND WARRANTIES
You represent and warrant to us as follows:
- - All financial information and other information that you or any guarantor
have given us is true and complete. You or any guarantor have not failed
to tell us anything that would make the financial information misleading.
There has been no material adverse change in your financial condition,
business, operations or prospects, or the financial condition of any
guarantor, or the financial condition of any guarantor, from the financial
condition that you disclosed to us in your application for credit.
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<PAGE> 5
- - You have supplied us with information about the Collateral. You promise to
us that the amount of our Advance as to each item of Collateral is no more
than the fair and usual price for this kind of Collateral, taking into
account any discounts, rebates and allowances that you or any affiliate of
yours may have given for the Collateral.
- - You have complied with all "environmental laws" and will continue to
comply with all "environmental laws." No "hazardous substances" are used,
generated, treated, stored or disposed of by you or at your properties
except in compliance with all environmental laws. "Environmental laws"
mean all federal, state or local environmental laws and regulations,
including the following laws: CERCLA, RCRA, Hazardous Materials Transport
Act and The Federal Water Pollution Control Act. "Hazardous substances"
means all hazardous or toxic wastes, materials or substances, as defined
in the environmental laws, as well as oil, flammable substances, asbestos
that is or could become friable, urea formaldehyde insulation,
polychlorinated biphenyls and radon gas.
- - You have taken all action necessary including but not limited to due
inquiry and due diligence to assure that there will be no material adverse
change to your business by reason of the advent of the year 2000,
including without limitation that all computer-based systems, embedded
microchips and other processing capabilities effectively recognize and
process dates after April 1, 1999.
5. COVENANTS
You agree to do the following things (or not to do the following things if so
stated) until full payment of all amounts due to us under this Agreement, the
Schedules and the Notes:
CARE, USE, LOCATION AND ALTERATION OF THE COLLATERAL
- - You will make sure that the Collateral is maintained in good operating
condition, and that it is serviced, repaired and overhauled when this is
necessary to keep the Collateral in good operating condition. All
maintenance must be done according to the Supplier's or Manufacturer's
requirements or recommendations. All maintenance must also comply with any
legal or regulatory requirements.
- - You will maintain service logs for the Collateral and permit us to inspect
the Collateral, the service logs and service reports. You give us
permission to make copies of the service logs and service reports.
- - We will give you prior notice if we, or our agent, want to inspect the
Collateral or the service logs or service reports. We may inspect it
during regular business hours. You will pay our travel, meals and lodging
costs to inspect the Collateral, but only for one inspection ear. If we
find during an inspection that you are not complying with this Master
Agreement, you will pay our travel, meals and lodging costs, our salary
costs, and the costs and fees of our agents for reinspection. You will
promptly cure any problems with the Collateral that are discovered during
our inspection.
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<PAGE> 6
- - You will use the Collateral only for business purposes. You will obey all
legal and regulatory requirements in your use of the Collateral.
- - You will make all additions, modifications and improvements to the
Collateral that are required by law or government regulation. Otherwise,
you will not alter the Collateral without our written permission. You will
replace all worn, lost, stolen or destroyed parts of the Collateral with
replacement parts that are as good or better than the original parts. The
new parts will become subject to our security interest upon replacement.
- - You will not remove the Collateral from the location indicated in the
Schedule without our written permission.
YEAR 2000 COMPLIANT
- - You shall take all action necessary including but not limited to due
inquiry and due diligence with critical business partners to assure that
there will be no material adverse change to your business by reason of the
advent of the year 2000, including without limitation that all
computer-based systems, embedded microchips and other processing
capabilities effectively recognize and process dates after April 1, 1999.
At our request, you shall provide to us assurance reasonably acceptable to
us that your computer-based systems, embedded microchips and other
processing capabilities are year 2000 compatible.
RISK OF LOSS
- - You have the complete risk of loss or damage to the Collateral. Loss or
damage to the Collateral will not relieve you of your obligation to make
the Payments.
- - If any Collateral is lost or damaged, you have two choices (although if
you are in default under this Master Agreement, we and not you will have
the two choices). The choices are:
(1) Repair or replace the damaged or lost Collateral so that, once again, the
Collateral is in good operating condition and we have a perfected first
priority security interest in it.
(2) Pay us the present value (as of the date of payment) of the remaining
Payments. We will calculate the present value using a discount rate of
five (5%) percent per year. Once you have paid us this amount and any
other amount that you may owe us, we will release our security interest in
the damaged or lost Collateral and you (or your insurer) may keep the
Collateral for salvage purposes, on an "AS IS WHERE IS" basis.
INSURANCE
- - Until you have made all Payments to us under this Master Agreement, the
Schedules and the Notes, you will keep the Collateral insured. The amount
of insurance, the coverage, and the insurance company must be acceptable
to us.
- - If you do not provide us with written evidence of insurance that is
acceptable to us, we may buy the insurance ourselves, at your expense. You
will promptly pay us the cost of this
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<PAGE> 7
insurance. We have no obligation to purchase any insurance. Any insurance
that we purchase will be our insurance, and not yours.
- - Insurance proceeds may be used to repair or replace damaged or lost
Collateral or to pay us the present value of the Payments, as provided
above.
- - You appoint us as your "attorney-in-fact" to make claims under the
insurance policies, to receive payments under the insurance policies, and
to endorse your name on all documents, checks or drafts relating to
insurance claims for Collateral.
TAXES
- - You will pay all sales, use, excise, stamp, documentary and ad valorum
taxes, license, recording and registration fees, assessments, fines,
penalties and similar charges imposed on the ownership, possession, use,
lease or rental of the equipment or on the Loan.
- - You will pay all taxes (other than our federal or state net income taxes)
imposed on your or on us regarding the Payments.
- - You will reimburse us for any of these taxes that we pay or advance.
- - You will file and pay for any personal property taxes on the Collateral.
FINANCIAL STATEMENTS
- - During the Term you will promptly give copies of any filings you make with
the Securities and Exchange Commission (SEC). You and any guarantor will
also provide us with the following financial statements:
* Quarterly balance sheet and statements of earnings and cash flow - within
45 days after the end of your first three fiscal quarters in each fiscal
year. These will be certified by the chief financial officer. You will
also deliver to us, together with your quarterly financial statements, a
certificate executed by your chief financial officer, to the effect that
since the date of the previous certificate delivered to us, there has been
no default under this Master Agreement or, if the same cannot be so
certified, the reasons surrounding the same.
* Annual balance sheet and statements of earnings and cash flow - within 90
days after the end of each fiscal year. These will be audited by
independent auditors acceptable to FINOVA. Their audit report must be
unqualified.
These financial statements will be prepared according to generally accepted
accounting principles, consistently applied.
All financial statements and Sec filings that you or any guarantor provide us
will be true and complete. They will not fail to tell us anything that would
make them misleading.
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<PAGE> 8
6. DEFAULTS
You are in default if any of the following happens:
- - You do not pay us, when it is due or within seven (7) days thereafter, any
payment or other payment that you owe us under this Master Agreement, any
Schedule, Note or that you owe us under this Master Agreement, any
Schedule, Note or that you owe under any other agreement, loan or lease
that you have with us or with FINOVA Capital Corporation.
- - Any of the financial information that you give us is not true and complete
in all material respects, or you fail to tell us anything that would make
the financial information misleading in any material respect.
- - You do something you are not permitted to do, or you fail to do anything
that is required of you, under this Master Agreement, any schedule or nay
other lease, loan or other financial arrangement that you have with us.
- - An event or default occurs for any other lease, loan or obligation of
yours (or any guarantor) that exceeds $50,000.
- - You or any guarantor file bankruptcy, or involuntary bankruptcy is filed
against you or any guarantor.
- - You or any guarantor are subject to any other insolvency proceeding other
than bankruptcy (for example, a receivership action or an assignment for
the benefit of creditors).
- - Without our permission, you or any guarantor sell all or a substantial
part of its assets, merge or consolidate, or a majority of your voting
stock or interests (or any guarantor's voting stock or interests) is
transferred.
- - There is a material adverse change in your financial condition, business
or operations, or that of any guarantor, from the condition that you
disclosed to us in your application for credit.
REMEDIES, DEFAULT INTEREST, LATE FEES
If you are in default we may exercise one or more of our "remedies." Each of our
remedies is independent. We may exercise any of our remedies, all of our
remedies or none of our remedies. We may exercise them in any order we choose.
Our exercise of any remedy will not prevent us from exercising any other remedy
or be an "election of remedies." If we do not exercise a remedy, or if we delay
in exercising a remedy, this does not mean that we are forgiving your default or
that we are giving up our right to exercise the remedy. Our remedies allow us to
do one or more of the following:
- - "Accelerate" this Loan balance under any or all Notes. This means that we
may require you to immediately pay us all Payments for the entire Term for
any or all Schedules.
- - Require you to immediately pay us all amounts that you are required to pay
us for the entire Term of any other agreements, loans or leases that you
have with us.
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<PAGE> 9
- - Sue you for all Payments and other amounts you owe us plus the Prepayment
Premium (see Section 1 above).
- - Require you at your expense to assemble the Collateral at a location we
request in the Untied States of America.
Remove and repossess the Collateral from where it is located, without demand or
notice, or make the Collateral inoperable. We have your permission to remove any
physical obstructions to removal of the Collateral. We may also disconnect and
separate all Collateral from other property. No court order, court hearing or
"legal process" will be required for us to repossess the Collateral. You will
not be entitled to any damages resulting form removal or repossession of the
Collateral. We may use, ship, store, repair or lease any Collateral that we
repossess. We may sell any repossessed Collateral at private or public sale. You
give us permission to show the Collateral to buyers at your location free of
charge during normal business hours. If we do this, we do not have to remove the
Collateral from your location. If we repossess the Collateral and sell it we
will give you credit for the net sale price, after subtracting our costs of
repossessing and selling the Collateral. If we rent the Collateral to somebody
else, we will give you credit for the net rent received, after subtracting our
costs of repossessing and renting the Collateral, but the credit will be
discounted to present value using a discount rate equal to the Default Rate. The
credit will be applied against what you owe us under this Master Agreement, the
Schedules, the Notes and any other agreements, loans or leases that you have
with us. If the credit exceeds the amount you owe under this Master Agreement,
the Schedule, the Notes and any other agreements, loans or leases that you have
with us, we will refund the amount of the excess to you.
- - Return conditions: Following an Event of Default, at our request you will
return the Collateral, freight and insurance prepaid by you, to us at a
location we request in the United States of America. It will be returned
in good operating condition, as required by Section 5 above. The
Collateral will not be subject to any liens when it is returned. All
advertising insignia will be removed and the finish will be painted or
blended so that nobody can see that advertising insignia used to be there.
* You will pack or crate the Collateral for shipping in the original
containers, or comparable ones. You will do this carefully and follow all
recommendations of the Supplier and the Manufacturer as to packing or
crating.
* You will also return to us the plans, specifications, operating manuals,
software documentation, discs, warranties and other documents furnished by
the Manufacturer or Supplier. You will also return to us all service logs
and service reports, as well as all written materials that you may have
concerning the maintenance and operation of the Collateral.
* At our request, you will provide us with up to 60 days free storage of the
Collateral at your location, and will let us (or our agent) have access to
the Collateral in order to inspect it and sell it.
* You will pay us what it costs us to repair the Collateral if you do not
return it in the required condition.
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You will also pay us for the following:
- - All our expenses of enforcing our remedies. This includes all our expenses
to repossess, store, ship, repair and sell the Collateral.
- - Our reasonable attorney's fees and expenses.
- - Default interest on everything you owe us from the date of your default to
the date on which we are paid in full at the Default Rate.
You realize that the damages we could suffer as a result of your default are
very uncertain. This is why we have agreed with you in advance on the Default
Rate to be used in calculating the payments you will owe us if you default. You
agree that, for these reasons, the payments you will owe us if you default are
"agreed" or "liquidated" damages. You understand that these payments are not
"penalties" or "forfeitures."
LATE FEES. You will pay us a late fee whenever you pay any amount that you owe
us more than ten (10) days after it is due. You will pay the late fee within one
month after the late Payment was originally due. The late fee will be five (5%)
percent of the late Payment. If this exceeds the highest legal amount we can
charge you, you will only be required to pay the highest legal amount. The late
fee is intended to reimburse us for our collection costs that are caused by late
Payment. It is charged in addition to all other amounts you are required to pay
us, including Default Interest.
7. EXPENSES AND INDEMNITIES
PERFORMING YOUR OBLIGATIONS IF YOU DO NOT
- - If you do not perform one or more of your obligations under this Master
Agreement or a Schedule or Note, we may perform it for you. We will notify
you in writing at least ten (10) days before we do this. We do not have to
perform any of your obligations for you. If we do choose to perform them,
you will pay us all of our expenses to perform them, you will pay us all
of our expenses to perform the obligations. You will also reimburse us for
any money that we advance to perform your obligations, together with
interest at the Default Rate on that amount. These will be additional
"Payments" that you will owe us and you will pay them at the same time
that your next Payment is due.
- - You will indemnify us, defend us and hold us harmless for any and all
claims, expenses and attorney's fees concerning or arising from the
Collateral, this Agreement, or any Schedule or Note, or your breach of any
representation or warranty. It includes any claims concerning the
manufacture, selection, delivery, possession, use, operation or return of
the Collateral.
- - This obligation of yours to indemnify us continues even after the Term is
over.
8. MISCELLANEOUS
WE MAY ASSIGN OR GRANT A SECURITY INTEREST IN THIS AGREEMENT, ANY SCHEDULE, ANY
NOTE OR ANY PAYMENTS WITHOUT YOUR PERMISSION. THE
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PERSON TO WHOM WE ASSIGN IS CALLED THE "ASSIGNEE." THE ASSIGNEE WILL NOT HAVE
ANY OF OUR OBLIGATIONS UNDER THIS MASTER AGREEMENT. YOU WILL NOT BE ABLE TO
RAISE ANY DEFENSE, COUNTERCLAIM OR OFFSET AGAINST THE ASSIGNEE.
AFTER ASSIGNMENT YOU MAY "QUIETLY ENJOY" THE USE OF THE COLLATERAL SO LONG AS
YOU ARE NOT IN DEFAULT.
UNLESS YOU RECEIVE OUR WRITTEN PERMISSION, YOU MAY NOT ASSIGN OR TRANSFER YOUR
RIGHTS UNDER THIS MASTER AGREEMENT OR ANY SCHEDULE. YOU ALSO ARE NOT ALLOWED TO
LEASE OR RENT THE COLLATERAL OR LET ANYBODY ELSE USE IT UNLESS WE GIVE YOU OUR
WRITTEN PERMISSION.
WE DID NOT MANUFACTURE OR SUPPLY THE COLLATERAL. WE ARE NOT A DEALER IN THE
COLLATERAL. INSTEAD, YOU CHOSE THE COLLATERAL.
WE DO NOT MAKE ANY WARRANTY AS TO THE COLLATERAL. WE DO NOT MAKE ANY WARRANTY AS
TO "MERCHANTABILITY" OR "SUITABILITY" OR "FITNESS FOR A PARTICULAR PURPOSE" OR
"NONINFRINGEMENT" OF ANY PATENT, COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHT.
WE WILL NOT BE RESPONSIBLE FOR ANY LOSS, DAMAGE, OR INJURY TO YOU OR ANYBODY
ELSE AS A RESULT OF ANY DEFECTS, HIDDEN OR OTHERWISE, IN THE COLLATERAL UNDER
"STRICT LIABILITY" LAWS OR ANY OTHER LAWS.
WE WILL NOT BE RESPONSIBLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES,
LOSS OF PROFITS OR GOODWILL.
If the Collateral is unsatisfactory, you will continue to pay us all Payments
and other amounts you are required to pay us. You must seek repair or
replacement of the equipment solely from the Manufacturer or Supplier and not
from us. Neither the Manufacturer nor the Supplier is our "agent," so they
cannot speak for us and they are not allowed to make any changes in this Master
Agreement or any Schedule or Note, or give up any of our rights.
ACCEPTANCE BY FINOVA, GOVERNING LAW, JURISDICTION, VENUE, SERVICE OF PROCESS,
WAIVER OF JURY TRIAL.
THIS MASTER AGREEMENT WILL ONLY BE BINDING WHEN WE HAVE ACCEPTED IT IN WRITING.
THIS MASTER AGREEMENT IS GOVERNED BY THE SUBSTANTIVE LAWS OF THE STATE OF
ARIZONA (NOT INCLUDING THE "CHOICE OF LAW" DOCTRINE), THE STATE IN WHICH OUR
OFFICE IS LOCATED IN WHICH FINAL APPROVAL OF THE TERMS OR CONDITIONS OF THIS
MASTER AGREEMENT OCCURRED AND FROM WHICH DISBURSEMENT OF THE LOAN PROCEEDS WILL
BE ORDERED. HOWEVER, IF THIS MASTER AGREEMENT IS UNENFORCEABLE UNDER ARIZONA
LAW. IT
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WILL INSTEAD BE GOVERNED BY THE LAWS OF THE STATE IN WHICH THE COLLATERAL IS
LOCATED.
YOU MAY ONLY SUE US IN A FEDERAL OR STATE COURT THAT IS LOCATED IN MARICOPA
COUNTY, ARIZONA. THIS APPLIES TO ALL LAWSUITS UNDER ALL LEGAL THEORIES,
INCLUDING CONTRACT, TORT AND STRICT LIABILITY. YOU CONSENT TO THE PERSONAL
JURISDICTION OF THESE ARIZONA COURTS. YOU WILL NOT CLAIM THAT MARICOPA COUNTY
ARIZONA, IS AN "INCONVENIENT FORUM" OR THAT IT IS NOT A PROPER "VENUE."
WE MAY SUE YOU IN ANY COURT THAT HAS JURISDICTION. WE MAY SERVE YOU WITH PROCESS
IN A LAWSUIT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO YOUR ADDRESS
INDICATED AFTER YOUR SIGNATURE BELOW.
YOU AND WE EACH WAIVE ANY RIGHT YOU OR WE MAY HAVE TO A JURY TRIAL IN ANY
LAWSUIT BETWEEN YOU AND US.
BOARD MEETINGS. You will provide us with the minutes of the meetings of your
board of directors.
NOTICES. We may give you written notice in person, by mail, by overnight
delivery service, or by fax. Notice will be sent to your address below your
signature. Mail notice will be effective three (3) days after we mail with
prepaid postage to the address stated. Overnight delivery notice requires a
receipt and tracking number. Fax notice requires a receipt from the sending
machine showing that it has been sent to your fax number and received.
You may give us notice the same way that we may give you notice.
This Master Agreement benefits our successors and assigns. This Master Agreement
benefits our successors and assigns. This Master Agreement benefits only those
successors and assigns of yours that we have approved in writing.
This Master Agreement binds your successors and assigns. This Master Agreement
binds only those successors and assigns of ours that clearly assume our
obligations in writing.
TIME IS OF THE ESSENCE OF THIS MASTER AGREEMENT
This Master Agreement, all of the Schedules and the Notes and the Commitment
Letter are together the entire agreement between you and us concerning the
Collateral.
Only an employee of FINOVA who is authorized by corporate resolution or policy
may modify or amend this Loan or any Schedule or Note on our behalf, an this
must be in writing. Only he or she may give up any of our rights, and this must
be in writing. If more than one person is the Borrower under this Agreement,
then each of you is jointly an severally liable for your obligations under this
Master Agreement.
This Master Agreement is only for your benefit and for our benefit, as well as
our successors and assigns. It is not intended to benefit any other person.
-12-
<PAGE> 13
If any provision in this Master Agreement is unenforceable, then that provision
must be deleted. Only unenforceable provisions are to be deleted. The rest of
this Master Loan Agreement will remain as written.
PUBLICITY. We may make press releases and publish a tombstone announcing this
transaction and its total amount. You may not publicize this transaction in any
way without our prior written consent.
LENDER: BORROWER:
FINOVA TECHNOLOGY FINANCE, INC. ANTIGENICS, LLC
10 WATERSIDE DRIVE 630 FIFTH AVENUE, SUITE 2170
FARMINGTON, CT 06032-3065 NEW YORK, NY 10111
BY: /s/ Linda A. Mischitto BY: /s/ Garo Armen
------------------------------- --------------------------------------
PRINTED NAME: Linda A. Mischitto PRINTED NAME: Garo H. Armen
TITLE: Director, Contract TITLE: Chairman of the Board of Managers
Administration and Chief Executive Officer
----------------------------- -----------------------------------
FAX NUMBER: (860) 676-1814 Taxpayer ID# 13-3769335
-----------------------------
DATE ACCEPTED: December 8, 1998 FAX NUMBER: (212) 332-4778
--------------------- ------------------------------
DATED: December 4, 1998
-----------------------------------
-13-
<PAGE> 14
STATE OF NEW YORK
COUNTY OF NEW YORK
I acknowledge that Garo Armen, who stated that he/she/ is
_______________ of the Borrower named above, signed this Master Loan and
Security Agreement in my presence today: December 4, 1998. He/She acknowledged
to me that his/her signature on this Master Loan and Security Agreement was
authorized by a valid resolution or other valid authorization from Borrower's
board of Directors or other governing body.
/s/ Michelle Barr
-----------------------------------
Notary Public
[SEAL]
Michelle Barr
Notary Public, State of New York
No. 01BA5042457
Qualified in Westchester County
Commission Expires April 24, 1999
-14-
<PAGE> 15
Exhibit A
THERE SHALL BE NO PREPAYMENT ALLOWED UNDER THIS MASTER AGREEMENT.
-15-
<PAGE> 16
PROMISSORY NOTE NO. 1
$935,745.00 December 30, 1998
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA TECHNOLOGY
FINANCE, INC. ("we," "us" or "FINOVA") the principal amount of Nine Hundred
Thirty-Five Thousand, Seven Hundred Forty-Five and 00/100 Dollars ($935,745.00),
together with interest on the unpaid principal balance at the interest rate per
annum and on the dates and as otherwise provided in the "Master Agreement" and
"Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
of ten (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 17
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 12/18/98 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 18
SCHEDULE NO. 1 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 1, dated December 30, 1998, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19, 1998 (the "Master Agreement")
between ANTIGENICS, LLC, a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, Suite
2170, New York, New York 10111 ("you"), and FINOVA TECHNOLOGY FINANCE, INC., a
Delaware corporation with its executive office and principal place of business
at 10 Waterside Drive, Farmington, Connecticut 06032-3065 ("we," "us", or
"FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing Nine Hundred Thirty-Five
Thousand, Seven Hundred Forty-Five and 00/100 Dollars ($935,745.00) from us.
This borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $935,745.00 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $26,083.89, followed by one (1) final monthly
payment in the amount of $93,574.50 (the "Final Payment"). These payments will
be adjusted on the date we make the Loan to you as set forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30% interest only, at the interest rate, from the date we make the Loan to
you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (31st), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury Notes. Two-business days prior to
the date we make the Loan to you, we will read THE WALL STREET JOURNAL to
determine the final Index Rate. If the Index Rate is not published in THE WALL
<PAGE> 19
STREET JOURNAL, we will determine it from another reliable source. We will
increase or decrease the payments set forth above in Paragraph 2 to reflect any
increase or decrease in the Index Rate. We will give you notice of any increase
as soon as we can. You will pay the increased payments unless we have made an
obvious mistake in our calculations. Interest is calculated in advance using a
360-day year of twelve 30-day months.
4. PURPOSE OF LOAN: Security Interest. You are making this borrowing to finance
(or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us or FINOVA Capital Corporation.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed and
accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a part
of this Schedule as if repeated in this Schedule. Any declaration of default
under the Master Agreement is a default under this Schedule and permits us to
exercise all remedies provided by the Master Agreement.
ANTIGENICS, LLC ATTEST:
[SEAL]
By /s/ Garo Armen
------------------------------ /s/ Jeffrey Rona
Name Garo Armen ------------------------------
------------------------------ [Assistant] Secretary
Title CEO
------------------------------
Date 12/18/98
------------------------------
<PAGE> 20
<TABLE>
<CAPTION>
SCHEDULE A TO SCHEDULE NO. 1
Collateral Description Below: EQUIPMENT
REFERENCE# VENDOR COLLATERAL DESCRIPTION INVOICE # COST TAX FREIGHT TOTAL CHECK#
- ---------- ------ ---------------------- --------- ---- --- ------- ----- ------
PURCHASES FROM OCT 1, 1997 TO DEC. 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Micron 2-Micron Computer ATO 1555179 $ 5,874.00 $ 99.00 $ 5,973.00 2008
2 Micron Computer Equipment 1508072 $ 5,396.00 $270.00 $ 5,666.00 2008
3 Pace Windows NT Workstation 981318 $ 1,889.00 $ 1,889.00 2036
4 Pace Laserjet 4000T 981567 $ 1,973.00 $ 23.00 $ 1,996.00 2036
5 Comdisco Misc Lab Equipment: 11520 $ 45,000.00 $ 45,000.00 2104
Glass Washer, Cage Washer
Autoclave Irradiator, Fume Hoods
Biosafety Cabinets
6 Pharmacia Biotech Phastsystem 00151 $ 9,599.00 $ 48.00 $ 9,647.00 1784
8 Micron Computer equipment 1550021 $ 2,797.00 $140.00 $ 99.00 $ 3,036.00 2008
9 Pace Memory Laserjet 4000T 981490 $ 1,278.00 $ 1,278.00 2011
10 Pace Memory MS Project 98 and misc. computer 981468 $ 4,050.00 $ 4,050.00 3118 and 2011
11 Pace Memory Proliant 2500R Proc 980526 $ 3,216.00
Tigerswitch SMC 8PT $ 1,415.00 $100.00 $ 4,731.00 1915
12 Pace Memory 3-Proliant 2500R Servers 980299 $ 17,175.00
3-Compaq RPS 980299 $ 4,170.00
3-Smart Array 2/P Cont 980299 $ 6,300.00
other misc. computer equipment 980299 $ 72,350.00 $ 99,995.00 1882
13 Micron Micron Computer System ATO Model 1513342 $ 4,082.00 $ 4,082.00 2008
BOM Serial# 1075374-0001
14 VWR Lab equipment 42593290 $ 1,570.00 $ 1,570.00 1988
15 Rittal Shelving 570867 $ 1,146.00 $108.00 $185.00 $ 1,439.00 1858
16 Rittal Air Conditioners 571155 $ 4,173.00 $332.00 $ 83.00 $ 4,588.00 1858
SUB-TOTAL $193,453.00 $850.00 $637.00 $194,940.00
--------- ----------- ------- ------- -----------
</TABLE>
1
<PAGE> 21
<TABLE>
<CAPTION>
SCHEDULE A TO SCHEDULE NO. 1
Collateral Description Below: EQUIPMENT
REFERENCE# VENDOR COLLATERAL DESCRIPTION INVOICE# COST TAX FREIGHT TOTAL CHECK#
- ---------- ------ ---------------------- -------- ---- --- ------- ----- ------
PURCHASES FROM JAN. 1, 1998 - SEPT. 30, 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 MBS MS Exchange Server 982059 $ 3,225.00 $ 3,225.00 2313
2 MBS Cheyenne Protector 981786 $ 1,393.00
MBS Inoculan V4.0 for NT 981786 $ 2,168.00
MBS Cheyenne Inoculan 981786 $ 345.00 $ 3,906.00 2313
2A Hammen Materials/Labor/Installation $ 4,375.00 $ 4,375.00 1893 & 2095
3 Immulogic Lab Equipment $78,000.00 $78,000.00 2480
4 PC Connection ThinkPad 600 694254 $ 2,924.00 $ 20.00 $ 2,944.00 2599
5 Teracom Partners Computer Equipment $16,201.00 $1,337.00 $17,538.00 wire
5A Teracom Partners Computer Equipment $65,877.00 $5,434.00 $71,311.00 wire
6 Bellco Glass SCI/ERA Quad Drive 91939 $ 2,194.00 $ 37.00 $ 2,231.00 2731
7 BIO-RAD Capacitance Ext Plus 1346723 $ 1,525.00 $ 30.00 $ 1,555.00 2732
8A Allentown Caging Animal Cages 18222 $ 3,140.00 $ 66.00 $ 3,206.00 2198
8B 18413 $ 1,922.00 $ 1,922.00 2092
8C 18413 $ 1,346.00 $116.00 $ 1,462.00 2291
9 Cole Palmer Ultrasonic Cleaner 3349284 $ 1,028.00 $ 13.00 $ 1,041.00 2577
10 Cole Palmer Drive, MFLEX 3339545 $ 1,015.00 $ 9.00 $ 1,024.00 2577
11 Lab Research 2 Chromatography Refrigerators 225 $ 5,768.00 $436.00
Products
Lab Research 2 Chromatography Masts 225 $ 202.00 $ 6,406.00 2591
Products
12 Lab Research Chromatography Refrigerator 214 $ 2,884.00 $180.00
Products
Lab Research Chromatography Mast 214 $ 101.00 $ 3,165.00 2459
Products
13 Optical Analysis CH30-1 set 980520 $ 1,538.00 $ 1,538.00 2681
Corp.
14 Optical Analysis CK2 Microscope Stand 980521 $ 1,641.00 $ 1,641.00 2681
Corp.
15 Optical Analysis BH-TR30 Tri Tube/Eyepiece/Phase 980581 $ 959.00 $ 959.00 2681
Corp. ach 10x
</TABLE>
2
<PAGE> 22
<TABLE>
<CAPTION>
SCHEDULE A TO SCHEDULE NO. 1
Collateral Description Below: EQUIPMENT
REFERENCE# VENDOR COLLATERAL DESCRIPTION INVOICE # COST TAX FREIGHT TOTAL CHECK #
- ---------- ------ ---------------------- --------- ---- --- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
16 Optical Analysis Phase Ach 20x/Plan OBJ. for CK2 980582 $ 1,045.00 $ 1,045.00 2681
Corp.
17 Optical Analysis CK 2 various attachments 980583 $ 1,015.00 $ 1,015.00 2681
Corp.
18 Micron Computer Equipment 1689535 $ 4,994.00 $250.00 $130.00 $ 5,374.00 2170
19 MBS Laserjet 4000T 984165 $ 2,540.00
MBS Deskjet 670C 984165 $ 200.00 $ 2,740.00 2212
20 VWR Balance TPLD 310G x 1MG 4589440 $ 1,346.00 $ 1,346.00 2118
21 VWR Orion Research ZZMFG meter 42593300 $ 2,727.00 $ 2,727.00 2184
22 VWR Shaker, Reciprocal, BNCHTOP 55506770 $ 1,088.00 $ 1,088.00 2657
115V
23 VWR Balance TPLD 310G x 1MG 55507440 $ 1,346.00 $ 1,346.00 2657
24 Brinkman McIlwain Tissue Chopper, 110V 300127 $ 2,425.00 $ 2,425.00 2629
25 Dell 5 Dell P6266 160365540 $ 11,765.00 $588.00 $ 12,353.00 2581
26 Sorvall 3 centrifuges and rotors SLS/ $189,026.00 $2,850.00 $191,876.00 2181
97014474
27 Hydro 4 Picosystems plus picopure and W18799 $ 14,643.00 $ 14,643.00 2277
monitor
28 Comdisco Nikon TMS Beckman GP Centrifuge 11648 $ 19,125.00 $ 19,125.00 2264
2119
29 Comdisco 3 Lab products 6 door cage rack 11650 $ 13,835.00
and ice maker 11649 $ 13,835.00 $ 27,670.00 2483
30 Comdisco Virtis VirTishear Homogenizer 11758 and $ 1,025.00
11757
Comdisco Savant SFR-11K Micro centrifuge 11759 and $ 2,200.00
11757
Comdisco Forma 3326 CO2 incubator 11760 and $ 4,500.00
11757
Comdisco NuAire 2700 IR GO2 Incubator 11761 and $ 4,700.00 2359
11757
Comdisco Becton FacScan flow Cytometer 11762 and $ 58,950.00 $ 71,375.00 2450
11757
31 Comdisco Various-balance, 12110 $ 4,062.00 $ 4,062.00 2578
microcentrifuge ph meter, etc.
32 12151 $ 4,063.00 $ 4,063.00 2931
33 Lunaire L34HV72 Depyprogenating Lab 1010787A $ 6,544.00 $ 6,544.00 2312
34 Biorad Mini-Transilluminator, 120V 1330378 $ 1,750.00 $55.00 $ 1,805.00 2414
</TABLE>
3
<PAGE> 23
<TABLE>
<CAPTION>
SCHEDULE A TO SCHEDULE NO. 1
Collateral Description Below: EQUIPMENT
REFERENCE# VENDOR COLLATERAL DESCRIPTION INVOICE # COST TAX FREIGHT TOTAL CHECK #
- ---------- ------ ---------------------- --------- ---- --- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
35 Cryosafe #SSBA 1 Liquid Nitrogen Auto- 472 $ 6,990.00
Fill Tank
Cryosafe #A1-13RP Complete Inventory 472 $ 2,679.00 $ 345.00 $10,014.00 2485
System
36 Lebrepco 5 -80 Freezers 5040 $ 30,565.00 $ 30,565.00 2477
37 Teracom Partners Computer Equipment $ 16,201.00 $ 16,201.00 Wire
38 VWR Balance Analytical 110Gx0.1 MG 45670151 $ 2,021.00 $ 2,021.00 2184
39 Lunaire 2 Depyrogenating Lab Ovens 1010787B $ 13,088.00 $ 13,088.00 2952
40 Biorad MDL 1575 Washer 1416951 $ 5,396.00 $ 54.00 $ 5,450.00 3067
41 The Baker Company Biosafety Cabinet 3519 $ 7,062.00 $ 295.00 $ 7,357.00 2854
42 Dell Computers 2 -P6266 GXI/MT+Base (66MHz FSB) 170894984 $ 3,908.00 $ 195.00 $ 4,103.00 2877
43 Polar Tap, Inc. Cold Plate Prototype $ 2,950.00 $ 148.00 $ 71.00 $ 3,169.00 2866
44 Waldner's File Cabinets 16953 $ 2,459.00 $ 203.00 $ 2,662.00 2692
Waldner's File Cabinets 134385 $ 162.00 $ 162.00 2902
45 American Express Guinea Pig Feeders $ 1,658.00 $ 1,658.00
46 Dell Computers P6266 GXI/MT+Base (66MHz FSB) 170235832 $ 2,363.00 $ 118.00 $ 2,481.00 2937
47 Dell Computers 2 -P6266 GXI/MT+Base (66MHz FSB) 170903389 $ 4,158.00 $ 343,00 $ 4,501.00 2877
SUB-TOTAL $670,018.00 $8,616.00 $ 4,869.00 $683,503.00
--------- ----------- --------- ---------- -----------
PURCHASES FROM OCT 1, 1998 - DEC 8, 1998
2 Unplug.It (1) Sharp Aticus P233 Laptop American $ 3,709.00 $ 3,709.00 3374
Express
6 Unplug.It (3) Sharp Aticus.P233MMX Laptops Craig $ 8,334.00 $688.00 $ 9,022.00 3261
Winter
7 Serono Labs Lab Equipment (Freezers, $ 33,415.00 $ 33,415.00 3530
Shakers, Cabinets)
8 Serono Labs Lab Equipment (Lypholizer, $ 5,600.00 $ 5,600.00 3557
Vacuum Pump, Cabinet)
10 Advanced Asset (1) Baker Safety Hood, Vortex 2 $ 4,810.00 $746.00 $ 5,556.00 Wire
Mixers,
(1) Fisher Scientific Electronic
Analytical Balance
</TABLE>
4
<PAGE> 24
<TABLE>
<CAPTION>
SCHEDULE A TO SCHEDULE NO. 1
Collateral Description Below: EQUIPMENT
REFERENCE# VENDOR COLLATERAL DESCRIPTION INVOICE # COST TAX FREIGHT TOTAL CHECK #
- ---------- ------ ---------------------- --------- ---- --- ------- ----- -------
<S> <C> <C> <C> <C>
SUB-TOTAL $ 55,868.00 $ 1,434.00 $ 0.00 $ 57,302,00
----------- ----------- ---------- --------- -----------
GRAND TOTAL $919,339.00 $10,900.00 $5,505.00 $935,745.00
----------- ----------- ---------- --------- -----------
</TABLE>
Collateral Locations: 630 Fifth Avenue, Suite 2170
New York, NY 10111
500 Old Connecticut Path
Framingham, MA 01701
Tufts University
20 Wildlife Road, Building 21
North Grafton, MA 01536
5
<PAGE> 25
PROMISSORY NOTE NO. 2
$267,622.00 February 26, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of Two Hundred Sixty-Seven Thousand, Six Hundred Twenty-Two
and 00/100 Dollars (S267,622.00), together with interest on the unpaid principal
balance at the interest rate per annum and on the dates and as otherwise
provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 26
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 2/23/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 27
SCHEDULE NO. 2 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 2, dated February 26, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19, 1998 (the "Master Agreement")
between ANTIGENICS, LLC, a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, Suite
2170, New York, New York 10111 ("you"), and FINOVA TECHNOLOGY FINANCE, INC., a
Delaware corporation with its executive office and principal place of business
at 10 Waterside Drive, Farmington, Connecticut 06032-30065 ("we," "us", or
"FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing Two Hundred Sixty-Seven
Thousand, Six Hundred Twenty-Two and 00/100 Dollars ($267,622.00) from us. This
borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $267,622.00 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $7,459.96, followed by one (1) final monthly
payment in the amount of $26,762.20 (the "Final Payment"). These payments will
be adjusted on the date we make the Loan to you as set forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (3lst), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury Notes. Two-business days prior to
the date we make the Loan to you, we will read THE WALL STREET JOURNAL to
determine the final Index Rate. If the Index Rate is not published in THE WALL
<PAGE> 28
STREET JOURNAL, we will determine it from another reliable source. We will
increase or decrease the payments set forth above in Paragraph 2 to reflect any
increase or decrease in the Index Rate. We will give you notice of any increase
as soon as we can. You will pay the increased payments unless we have made an
obvious mistake in our calculations. Interest is calculated in advance using a
360-day year of twelve 30-day months.
4. PURPOSE OF LOAN; SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us or FINOVA Capital Corporation.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, LLC ATTEST:
[SEAL]
By /s/ Garo Armen
----------------------------
/s/ Jeffrey Rona
Name Garo Armen ------------------------------
-------------------------- [Assistant] Secretary
Title CEO
-------------------------
Date 2/23/97
--------------------------
<PAGE> 29
SCHEDULE A TO SCHEDULE NO. 2
COLLATERAL DESCRIPTION:
<TABLE>
<CAPTION>
Equipment
Item Description Vendor Invoice # Cost Tax Freight Total Check #
- ---------------- ------ --------- --------- --- ------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Laptop Unplug.It 4001567-00 $ 2,690 222 $ 2,912 3847
Payable to
Craig Winter
2 Laser Printers Dell 192722296 $ 798 48 35 $ 881 3588
Laptop Dell 192722205 $ 1,998 117 35 $ 2,150 3588
Desktop Computer Dell 192722072 $ 1,588 95 90 $ 1,753 3848
Cage Washer Dick Burnham Tech. 9851 $45,325 $45,325 3679
various (Lab) Serona Laboratories $11,000 $11,000 3767
various (Lab) Serona Laboratories $ 4,950 $ 4,950 3788
Air Compressor SPEC 98170006 $16,158 $10,158 3884 Invoice total $119,175.56
Point of use coolers SPEC 98170007 $ 8,320 $ 6,320 3711 Invoice total $581,427.27
Plant Steam SPEC 98170007 $51,312 $51,312 3711 Invoice total $581,427.28
Process Utility Chiller SPEC 98170008 $18,263 $18,623 3892 Invoice total $701,448.83
HB-6 rotor, swing
bucket, etc. Kendro Laboratory SLS98018897 $ 5,981 $ 5,981 3655
Rotor package Beckman 383653FT01 $ 7,750 45 $ 7,795 3775
power supply WR 20521430 $ 4,281 $ 4,281 3888
fire proof file Office Furniture Express 22449 $ 2,248 75 $ 2,323 3873
biostat base unit,
culture vessel, etc. B. Braun Biotech Inc. 30680 $85,859 $86,859 3846
TOTAL ACQUISITION COST $267,622.00
</TABLE>
COLLATERAL LOCATIONS:
Framingham, MA
Akron, OH
North Grafton, HA
630 Fifth Avenue, NY, NY 10111
128 Spring Street, Lexington, MA 02173
<PAGE> 30
PROMISSORY NOTE NO. 3
$134,775.80 April _____, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of One Hundred Thirty-Four Thousand, Seven Hundred
Seventy-Five and 80/100 Dollars ($134,775.80), together with interest on the
unpaid principal balance at the interest rate per annum and on the dates and as
otherwise provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 31
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 4/23/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 32
SCHEDULE NO. 3 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 4, dated April __, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19, 1998 (the "Master Agreement")
between ANTIGENICS, L.L.C., a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, Suite
2170, New York, New York 10111 ("you"), and FINOVA CAPITAL CORPORATION, ASSIGNEE
OF FINOVA TECHNOLOGY FINANCE, INC., a Delaware corporation with its executive
office and principal place of business at 10 Waterside Drive, Farmington,
Connecticut 06032-3065 ("we," "us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing One Hundred Thirty-Four
Thousand, Seven Hundred Seventy-Five and 80/100 Dollars ($134,775.80) from us.
This borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $134,775.80 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $3,756.88, followed by one (1) final monthly
payment in the amount of $13,477.58 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (3lst), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST; INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury
<PAGE> 33
Notes. Two-business days prior to the date we make the Loan to you, we will read
THE WALL STREET JOURNAL to determine the final Index Rate. If the Index Rate is
not published in THE WALL STREET JOURNAL, we will determine it from another
reliable source. We will increase or decrease the payments set forth above in
Paragraph 2 to reflect any increase or decrease in the Index Rate. We will give
you notice of any increase as soon as we can. You will pay the increased
payments unless we have made an obvious mistake in our calculations. Interest is
calculated in advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN; SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us or FINOVA Capital Corporation.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
[SEAL]
By /s/ Garo Armen
-----------------------------
/s/ Jeffrey Rona
Name Garo Armen ------------------------------
--------------------------- [Assistant] Secretary
Title CEO
--------------------------
Date 4/23/99
---------------------------
<PAGE> 34
Schedule A
To
Schedule No. 3
To
Master Loan and Security Agreement No. S7020
The Collateral Consists of the Following:
<TABLE>
<CAPTION>
Qty Description Serial Numbers Cost
- --- ----------- -------------- ----
<S> <C> <C> <C>
1 Consolidated Model SR-24DMCV Sterilizer 012199
1 Consolidated Model SR-24EMCV Sterilizer 012099
Location: 34 Commerce Way, Woburn, MA
Supplier: Consolidated Stills & Sterilizers
Equipment Cost: $119,753.00
1 Microscope, consisting of:
(1) BX40F4: Stand/Quint Inward Facing Nosepiece,
(1) lamphouse, (2) 6V30W Bulbs, (1) power cord.
(1) UYCP Power Cord
(2) 6V30W Bulbs
(1) U-LS30; 30 Watt Halogen Lamp Socket
(1) U-TBI-2 Tilting Binocular Observation Tube
(1) U-SVRS Mechanical Stage
(1) U-SVRS Abbc Condenser
(1) U PLAN Flourite 10X Objective
(1) U PLAN Flourite 20X Objective
(1) U PLAN Flourite 40X Objective
(1) U PLAN Flourite 100X OIL Objective
(2) WH 10X3 Eyepieces
(1) U-ULH;.Universal Lamphouse
(1) U-HG100T3; 100 Watt Halogen Lamp Socket and Power Supply
(1) U-OCLHG/XEB; Collector lens Mercury, Xeno Sources for U-ULH
(1) Osram HBO 100W Mercury Burner
(1) Wide Band Green Flour Cube
Location: 128 Spring Street, Lexington, MA 02173
Supplier: Optical Analysis Corporation
Equipment Cost: $ 9,972.80
1 96PW Full Plate Washer with Four Liter Bottle Set 72073
Location: 500 Old Connecticut Path, Framingham, MA 01701
Supplier: TECAN US Inc.
Equipment Cost: $ 5,050.00
-----------
Grand Total $134,775.80
</TABLE>
<PAGE> 35
PROMISSORY NOTE NO. 4
$432,980.45 May 30, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of Four Hundred Thirty-Two Thousand, Nine Hundred Eighty
and 45/100 Dollars ($432,980.45), together with interest on the unpaid principal
balance at the interest rate per annum and on the dates and as otherwise
provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 36
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 5/25/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 37
SCHEDULE NO. 4 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 4, dated May 30,1999, (this "Schedule") to MASTER LOAN AND SECURITY
AGREEMENT dated as of November 19, 1998 (the "Master Agreement") between
ANTIGENICS, L.L.C., a Delaware limited liability corporation with its executive
office and principal place of business at 630 Fifth Avenue, Suite 2170, New
York, New York 10111 ("you"), and FINOVA CAPITAL CORPORATION, ASSIGNEE OF FINOVA
TECHNOLOGY FINANCE, INC., a Delaware corporation with its executive office and
principal place of business at 10 Waterside Drive, Farmington, Connecticut
06032-3065 ("we," "us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing Four Hundred Thirty-Two
Thousand, Nine Hundred Eighty and 45/100 Dollars ($432,980.45) from us. This
borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $432,980.45 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $12,069.33, followed by one (1) final monthly
payment in the amount of $43,298.05 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (3lst), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST; INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury
<PAGE> 38
Notes. Two-business days prior to the date we make the Loan to you, we will read
THE WALL STREET JOURNAL to determine the final Index Rate. If the Index Rate is
not published in THE WALL STREET JOURNAL, we will determine it from another
reliable source. We will increase or decrease the payments set forth above in
Paragraph 2 to reflect any increase or decrease in the Index Rate. We will give
you notice of any increase as soon as we can. You will pay the increased
payments unless we have made an obvious mistake in our calculations. Interest is
calculated in advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN; SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us or FINOVA Capital Corporation.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement o is a default under this Schedule and
permits us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
[SEAL]
By /s/ Garo Armen
---------------------------
/s/ Jeffrey Rona
Name Garo Armen ------------------------------
------------------------- [Assistant] Secretary
Title CEO
------------------------
Date 5/25/99
-------------------------
<PAGE> 39
Schedule A
To
Schedule No. 4
To
Master Loan and Security Agreement No. S7020
The Collateral Consists of the Following:
<TABLE>
<CAPTION>
Qty Description Invoice No. Cost
- --- ----------- ----------- ----
<S> <C> <C> <C>
1 Vacuum Pump 981700010 $ 7,801.00
1 Cold Room 98170007 & 11 $ 56,912.00
1 Carpeting and Roofing 98170008, 10, 11 $ 50,790.00
1 Steel 98170007, 8, 12 $210,850.00
1 Miscellaneous Metals 98170008, 10, 11 $ 25,544.00
VENDOR: SHOOSHANIAN PROCESS ENGINEERING, 92 MONTVALE AVENUE, STONEHAM, MA
- -------------------------------------------------------------------------
Equipment Location: 34 Commerce Way, Woburn, MA
1 Glasswasher 34099, 34672 $ 9,500.00
VENDOR: RANGER ENGINEERING, INC., PO BOX 3111, FRAMINGHAM, MA 01705
- -------------------------------------------------------------------
Equipment Location: 34 Commerce Way, Woburn, MA
1 Personal Denitometer 14125 $ 12,450.00
VENDOR: COMDISCO, 6111 NORTH RIVER ROAD, ROSEMONT, IL 90018
- -----------------------------------------------------------
Equipment Location: 500 Old Connecticut Path, Framingham, MA 01701
1 Incubator and Roller 15587 $ 31,188.80
VENDOR: BELLCO GLASS, INC., 340 EDRUDO ROAD, VINELAND, NJ 08360
- --------------------------------------------------------------
Equipment Location: 34 Commerce Way, Woburn, MA
1 Validator 2000 40020 $ 27,944.65
VENDOR: KAYE INSTRUMENTS, INC., 15 DEANGELO DRIVE, BEDFORD, MA 01730
- ------------------------------------------------------------------
Equipment Location: 500 Old Connecticut Path, Framingham, MA 01701
Grand Total $432,980.45
</TABLE>
<PAGE> 40
PROMISSORY NOTE NO. 5
$204,100.26 June 29, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of Two Hundred Four Thousand, One Hundred and 26/100
Dollars ($204,100.26), together with interest on the unpaid principal balance at
the interest rate per annum and on the dates and as otherwise provided in the
"Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 41
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 6/24/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 42
SCHEDULE NO. 5 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 5, dated June 29,1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19, 1998 (the "Master Agreement")
between ANTIGENICS, L.L.C., a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, Suite
2170, New York, New York 10111 ("you"), and FINOVA CAPITAL CORPORATION, ASSIGNEE
OF FINOVA TECHNOLOGY FINANCE, INC., a Delaware corporation with its executive
office and principal place of business at 10 Waterside Drive, Farmington,
Connecticut 06032-3065 ("we," "us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing Two Hundred Four Thousand,
One Hundred and 26/100 Dollars ($204,100.26) from us. This borrowing is
evidenced by your promissory, note dated the same date as this Schedule in the
amount of $204,100.26 (the "Note") to which this Schedule is attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $5,689.29, followed by one (1) final monthly
payment in the amount of $20,410.03 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (31st), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury
<PAGE> 43
Notes. Two-business days prior to the date we make the Loan to you, we will read
THE WALL STREET JOURNAL to determine the final Index Rate. If the Index Rate is
not published in THE WALL STREET JOURNAL, we will determine it from another
reliable source. We will increase or decrease the payments set forth above in
Paragraph 2 to reflect any increase or decrease in the Index Rate. We will give
you notice of any increase as soon as we can. You will pay the increased
payments unless we have made an obvious mistake in our calculations. Interest is
calculated in advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN: SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
By /s/ Garo Armen
-------------------------------
/s/ Jeffrey Rona
Name Garo Armen ------------------------------
----------------------------- [Assistant] Secretary
Title CEO
----------------------------
Date 6/24/99
-----------------------------
<PAGE> 44
SCHEDULE A
TO
SCHEDULE NO. 5
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C. (BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OF
FINOVA TECHNOLOGY FINANCE, INC. (LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE COLLATERAL CONSISTS OF THE FOLLOWING AND AS FURTHER DESCRIBED ON THE FOLLOWING TWENTY PAGES ATTACHED:
Ref No. Description Serial No. Vendor Invoice No. Cost Tax Freight Grand Total
- ------- ----------- ---------- ------ ----------- ---- --- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Office Furniture N/A Haworth, Inc. 19059630 $ 13,976.02 $ 698.80 $ 14,674.82
2 Office Furniture N/A Haworth, Inc. 19076609 $ 10,879.41 $ 543.97 $ 11,423.38
3 Office Furniture N/A Haworth, Inc. 19074720 $ 19,940.76 $ 997.04 $ 20,937.80
4 Office Furniture N/A Haworth, Inc. 19064990 $ 13,376.66 $ 668.83 $ 14,045.49
5 Office Furniture N/A Haworth, Inc. 19060619 $ 15,799.65 $ 789.98 $ 16,589.63
6 Office Furniture N/A Haworth, Inc. 19065725 $ 59,054.87 $2,952.74 $ 62,007.61
7 Microscope N/A Image Processing Solutions 3200 $ 3,670.53 $ 3,670.53
8 Microbeta Trilux
6 Detector System 4501346 EG&G Wallac Inc. 117412 $ 57,750.00 $2,887.50 $113.50 $ 60,751.00
Grand Totals $194,447.90 $9,538.86 $113.50 $204,100.26
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
COLLATERAL LOCATION:
34 COMMERCE WAY
WOBURN, MA 01801
<PAGE> 45
PROMISSORY NOTE NO. 6
$125,118.06 July 30, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we." "us" or "FINOVA")
the principal amount of One Hundred Twenty-Five Thousand, One Hundred Eighteen
and 06/100 Dollars ($125,118.06), together with interest on the unpaid principal
balance at the interest rate per annum and on the dates and as otherwise
provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 46
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 7/29/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 47
SCHEDULE NO. 6 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 6. dated July 30 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19. 1998 (the "Master Agreement")
between ANTIGENICS. L.L.C., a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue. Suite
2170, New York, New York 10111 ("you"). and FINOVA CAPITAL CORPORATION, ASSIGNEE
OF FINOVA TECHNOLOGY FINANCE. INC., a Delaware corporation with an office at 10
Waterside Drive, Farmington, Connecticut 06032-3065 ("we," "us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing One Hundred Twenty-Five
Thousand, One Hundred Eighteen and 06/100 Dollars ($125,118.06) from us. This
borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $125,118.06 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate. in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $3,487.67, followed by one (1) final monthly
payment in the amount of $12,511.81 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (31st), you will pay
interest at the interest rate. from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate." of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury Notes. Two-business days prior to
the date we make the Loan to you. we will read THE WALL
<PAGE> 48
STREET JOURNAL to determine the final Index Rate. If the Index Rate is not
published in THE WALL STREET JOURNAL. we will determine it from another reliable
source. We will increase or decrease the payments set forth above in Paragraph 2
to reflect any increase or decrease in the Index Rate. We will give you notice
of any increase as soon as we can. You will pay the increased payments unless we
have made an obvious mistake in our calculations. Interest is calculated in
advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN: SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
By /s/ Garo Armen
-------------------------------
/s/ Jeffrey Rona
Name Garo Armen ------------------------------
----------------------------- [Assistant] Secretary
Title Chairman & CEO
----------------------------
Date 7/29/99
-----------------------------
<PAGE> 49
SCHEDULE A
TO
SCHEDULE NO. 6
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C. (BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OF
FINOVA TECHNOLOGY FINANCE, INC. (LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE COLLATERAL CONSISTS OF THE FOLLOWING:
Ref No. Collateral Description Serial No. Vendor Invoice No. Cost Tax Freight Grand Total
- ------- ---------------------- ---------- ------ ----------- ---- --- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(1) 375 with internal GM
detector area monitor, (1)
Model 3 survey meter, (1)
Model 44-9 pancake GM probe,
(1) 2200 SCA, (1) 44-88
pancake GM probe, (1) 44-3
low energy gamma scint., (2)
40-1004 cable, (1) 296 A-B
switch box, (1) APS-482
probe/sampler holder for 44-88,
(1) APS-483 probe/sampler
holder for 44-3, (1) SPL-626
air sample system complete, (1)
IH-350 iodine hood complete
with two fans, (1) 16A20SS
lead-lined waste can, (1) 16A35
30 gallon 1/8" lead-lined drum
with dolly, (1) 042-116 mini
1 table top shield with two lead
glass. N/A Atlantic Nuclear Cop. 030568 $ 9,500.00 $475.00 $ 9,975.00
ALR99851,
ALR99852,
ALR99853,
ALR99854,
(6) Allegra 6R, 120V 60HZ ALR99855,
2 Centrifuges ALR99856, Beckman Coulter 383826FT05 $31,482.21 $1,619.65 $ 33,101.86
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 2
<PAGE> 50
SCHEDULE A
TO
SCHEDULE NO. 6
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C. (BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OF
FINOVA TECHNOLOGY FINANCE, INC. (LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
99U29758,
99U29765,
99U29776,
99U29965,
(6) GH3.8 Rotor AY with 99U29980,
2 aluminum buckets 99U30017 Beckman Coulter 383826FT05 $ 10,606.76 $ 10,606.76
(6) Canister Kits, GH-3.8 Rotor
(Pkg-4), (6) Tube Racks, Light
Green 17MM (Set-4), (6) Tibe
2 Racks, Lime Green 30MM (Set-4) N/A Beckman Coulter 383826FT05 $ 6,085.15 $ 6,085.15
Centrifuge Accessories: (1 DU-
3 640 Color, 120V 4323908 Beckman Coulter 383826FT04 $ 7,395.15 $ 218.51 $ 7,613.66
Centrifuge Accessories: (1)
Accessory Option Board, (1)
DNA/RNA Protein Package#1, (1)
Transport standard assembly, (1)
3 Auto 6 Cell Holder, Wtr Jckt (1) N/A Beckman Coulter 383826FT05 $ 2,398.14 $ 2,398.14
4 Milliflex Sensor II 115V (1) N/A Millipore Corporation 2328727 $ 2,402.14 $ 5.05 $ 2,407.19
(6) Animal Cages: 30 Unit, 30-
Cage IPC RAT, (100) PC10x19x8
Reg Temp Grommet, (1) Cage Wash
5 Rack w/8 Fixed Baskets N/A Allentown Caging
(2) Animal Cages: 98 Unit, Equipment Co., Inc. 22312 $ 30,030.00 $ 592.00 $ 30,622.00
6 Mouse 98 Cage IPC N/A Allentown Caging
(1325) 3/8" Hytrel Black Tubing, (4) Equipment Co., Inc. 22261 $ 10,232.00 $ 592.00 $ 10,824.00
95' Plenum Wire
w/Connectors, (7)
7 135' Plenum Wire w/Connectors N/A Veltek Associates, Inc. 21495 $ 7,950.00 $ 59.00 $ 8,009.00
8 Various Office Furniture N/A Workplace Systems, Inc. 001467 $ 3,110.55 $155.53 $ 209.22 $ 3,475.00
COLLATERAL LOCATION:
34 COMMERCE WAY GRAND TOTALS $121,192.10 $630,53 $3,295.43 $125,118.06
WOBURN, MA 01801
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 2
<PAGE> 51
PROMISSORY NOTE NO. 7
$1,049,533.81 August 26, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of One Million Forty-Nine Thousand Five Hundred
Thirty-Three and 81/100 Dollars ($l.049.533.81), together with interest on the
unpaid principal balance at the interest rate per annum and on the dates and as
otherwise provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farrnington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 52
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 8/20/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 53
SCHEDULE NO. 7 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 7, dated August 26, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19. 1998 (the "Master Agreement")
between ANTIGENICS, L.L.C., a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, Suite
2170, New York, New York 1011l ("you"), and FINOVA CAPITAL CORPORATION,
ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC., a Delaware corporation with an
office at 10 Waterside Drive, Farmington, Connecticut 06032-3065 ("we," "us", or
"FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing One Million, Forty-Nine
Thousand, Five Hundred Thirty-Three and 81/100 Dollars ($1,049,533.81) from us.
This borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $1,049,533.81 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $29,255.75, followed by one (1) final monthly
payment in the amount of $104,953.38 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (3lSt), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury Notes. Two-business days prior to
the date we make the Loan to you. we will read THE WALL
<PAGE> 54
STREET JOURNAL to determine the final Index Rate. If the Index Rate is not
published in THE WALL STREET JOURNAL, we will determine it from another reliable
source. We will increase or decrease the payments set forth above in Paragraph 2
to reflect any increase or decrease in the Index Rate. We will give you notice
of any increase as soon as we can. You will pay the increased payments unless we
have made an obvious mistake in our calculations. Interest is calculated in
advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN: SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
By /s/ Garo Armen
---------------------------
/s/ Jeffrey Rona
Name Garo Armen -----------------------------------
------------------------- [Assistant] Secretary
Title CEO
------------------------
Date 8/20/99
-------------------------
<PAGE> 55
SCHEDULE A
TO
SCHEDULE NO. 7
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C. (BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OF
FINOVA TECHNOLOGY FINANCE, INC. (LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE COLLATERAL CONSISTS OF THE FOLLOWING:
COLLATERAL DESCRIPTION SERIAL NO. VENDOR INVOICE NO. COST TAX FREIGHT GRAND TOTAL
---------------------- ---------- ------ ----------- ---- --- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
(2) Lab Incubators with (2) 28924-09073,
Gas-Guards and (2) Inner DR. 28989-09111 Form Scientific, Inc. 2823250 $ 6,773.08 $0.00 $ 322.57 $ 7,095.65
Lock (100) (S) PC 10x19x8 Cage
Hi-T, (100) (S) Wire Bar Lid
10x19 Rat, (100) (S) Cardholder, Allentown Caging Equipment
Horizontal Hang. N/A Co., Inc. 22163 $ 4,410.00 $0.00 $ 105.95 $ 4,515.95
(1) Portable Air Purifier, Model
FU-1224 9998 Laminaire Corporation 18722A $ 2,090.00 $0.00 $ 0.00 $ 2,090.00
Optima #98U385;
Rotor #MFA98M68;
Avanti #JJY99D08,
JLY98K10, JLY98K14,
JLY99B01, JLY99D10,
JLY99D12, JLY99D13,
JLY99D14;
Ultra Centrifuge includes: (1) F/A RTR w/Biosafe
Optima LE-80K, UL/CSA, 60HZ, (1) Lid #97V1460,
HEPA Optima Filter, (1) TY-45TI 97V1561; Rotor
Rotor Assembly, (1) Tube Kit, #99U2069; F/A
(8) Avanti J-20, (2) JA-25.50 Rotor w/Biosafe
F/A RTR w/Biosafe Lid, (1) Lid #99U986; Rotor
JLA-10.500 Rotor Assembly, (1) Assembly #98U385;
JLA-16.250 RTR w/Biosafe Lid, Rotor Ay #99U3955,
(1) JLA 8.1000 Rotor Assembly, 99U3958, 99U3960,
(1) SW-28 Rotor iPackage, (6) 99U3961, 99U3962,
JA-17 Rotor Ay. (1) SAS S90 CR 99U3963 Beckman Coulter 383826FT01 $232,127.77 $0.00 $1,905.98 $234,033.75
Microbial Air Sampler with NiMH
Battery Charger 97/D25547 Bioscience International,
Inc. 99-1140 $ 4,950.00 $0.00 $ 28.00 $ 4,978.00
(1) Filtering Fume Hood N/A Captairlabx, Inc. 3540 $ 9,604.50 $0.00 $ 0.00 $ 9,604.50
(2) Refrig, Gen, Solr VWR 115V VWR Scientific Products
29CF N/A Corporation 900263 $ 4,442.96 $0.00 $ 0.00 $ 4,442.96
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 2
<PAGE> 56
SCHEDULE A
TO
SCHEDULE NO. 7
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C(BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OFF INOVA
TECHNOLOGY FINANCE, INC.(LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
SPEC PROJECT:
<S> <C> <C> <C> <C> <C> <C> <C>
Shooshanian Process
Engineering &
Plant Steam N/A Construction, Inc. 981700010 $ 27,181.00 $0.00 $0.00 $ 27,181.00
98170004,
981700010,
Shooshanian Process 981700011,
Engineering & 981700014,
RODI System N/A N/A Construction, Inc. 981700015 $ 75,482.00 $0.00 $ 0.00 $ 75,482.00
Shooshanian Process
Engineering & 98170007,
Air Handlers N/A N/A Construction, Inc. 981700014, $ 340,896.00 $0.00 $ 0.00 $ 340,896.00
98170007,
981700010,
Shooshanian Process 981700011,
Engineering & 981730012,
Cabinetry, shelving N/A Construction, Inc. 981700014 $ 243,414.00 $0.00 $ 0.00 $ 243,414.00
Shooshanian Process
Engineering &
Power Generator N/A Construction, Inc. 981700014 $ 95,800.00 $0.00 $ 0.00 $ 95,800.00
Collateral Location:
34 Commerce Way GRAND TOTALS $1,047,171.31 $0.00 $2,362.50 $1,049,533.81
Woburn, MA 01801
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 2
<PAGE> 57
PROMISSORY NOTE NO. 8
$244,383.80 August 26, 1999
ANTIGENICS, LLC ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of Two Hundred Twenty-Four Thousand, Three Hundred
Eighty-Three and 80/100 Dollars ($224,383.80), together with interest on the
unpaid principal balance at the interest rate per annum and on the dates and as
otherwise provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY
<PAGE> 58
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, LLC. ATTEST:
[SEAL]
By /s/ Garo Armen
-------------------------------------
Name Garo Armen
-----------------------------------
Title CEO
----------------------------------
Date 8/20/99 /s/ Jeffrey Rona
----------------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule
<PAGE> 59
SCHEDULE NO. 8 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 8, dated August 26, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19, 1998 (the "Master Agreement")
between ANTIGENICS, L.L.C.. a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, Suite
2170, New York, New York 10111 ("you"), and FINOVA CAPITAL CORPORATION, ASSIGNEE
OF FINOVA TECHNOLOGY FINANCE, INC., a Delaware corporation with an office at 10
Waterside Drive, Farmington, Connecticut 06032-3065 ("we,' "us" or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing Two Hundred Twenty-Four
Thousand, Three Hundred Eighty-Three and 80/100 Dollars ($224,383.80) from us.
This borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $224.383.80 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $6,254.70, followed by one (1) final monthly
payment in the amount of $22,438.38 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (3lst), you wilt pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury Notes. Two-business days prior to
the date we make the Loan to you, we will read THE WALL
<PAGE> 60
STREET JOURNAL to determine the final Index Rate. If the Index Rate is not
published in THE WALL STREET JOURNAL, we will determine it from another reliable
source. We will increase or decrease the payments set forth above in Paragraph 2
to reflect any increase or decrease in the Index Rate. We will give you notice
of any increase as soon as we can. You will pay the increased payments unless we
have made an obvious mistake in our calculations. Interest is calculated in
advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN: SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral, This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us and to FINOVA Capital
Corporation under the Master Agreement and any other agreement, loan or lease
that you may have with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
By /s/ Garo Armen
---------------------------
/s/ Jeffrey Rona
Name Garo Armen -----------------------------------
------------------------- [Assistant] Secretary
Title CEO
------------------------
Date 8/20/99
-------------------------
<PAGE> 61
SCHEDULE A
TO
SCHEDULE NO. 8
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C. (BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OF
FINOVA TECHNOLOGY FINANCE, INC. (LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE COLLATERAL CONSISTS OF THE FOLLOWING:
COLLATERAL DESCRIPTION SERIAL NO. VENDOR INVOICE NO. COST TAX FREIGHT
---------------------- ---------- ------ ----------- ---- --- -------
<S> <C> <C> <C> <C> <C> <C>
Various Office Furniture N/A Workplace Systems, Inc. 001686 $ 3,108.68 $109.87 $ 84.19
(5) 98-Unit Mouse Cage, (400)
Grommets, (100) (S) M-Barrier Top
10x19 Hi-T, (100) (S) PC 10x19x8
Cage Hi-T, (100) (S) Wire Bar Lid
10x19 Rat, (200) (S) PC 7xllx5
Cage Hi-Temp, (200) (S) Wire Bar
Lid 7xll Sheet Metal, (100) (S) Allentown Caging
Cardholder, Horizontal Hang. (6) N/A Equipment Co., Inc. 22420 $ 42,500.00 $ 0.00 $ 592.00
Ventilated Units (1) Washer-Super N/A Lab Products Inc. 052607 $ 59,745.00 $ 0.00 $1,386.00
Drying-Pro, (2) Sanitary Valves,
(1) Validation Monitor, (1) Washer
Resistivimeter, (2) Flowmeters. #82100009 Lancer USA Inc. 15489 $104,646.00 $ 0.00 $ 0.00
(1) Clean Air Hoods N/A The Baker Company 9248 $ 6,664.49 $ 0.00 $ 330.00
(1) Microfuge 18 W/Rotor 120V
50/60HZ MFA99F16 Beckman Coulter 383826FT07 $ 1,672.71 $ 83.64 $ 51.22
COLLATERAL LOCATION:
34 COMMERCE WAY GRAND TOTALS $218,246.88 $193.51 $3,500.00
WOBURN, MA 01801
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------------
TRAINING GRAND TOTAL
-------- -----------
<S> <C>
$ 0.00 $ 3,212.74
$ 0.00 $ 43,092.00
$ 0.00 $ 61,131.00
$3,500.00 $108,146.00
$ 0.00 $ 6,994.49
$ 0.00 $ 1,807.57
$3,500.00 $224,383.80
- ------------------------------------
</TABLE>
Page 1 of 1
<PAGE> 62
PROMISSORY NOTE NO. 9
$132,324.64 September 30, 1999
ANTIGENICS, L.L.C. ("you") promise to pay to the order of FINOVA CAPITAL
CORPORATION ASSIGNEE OF FINOVA TECHNOLOGY FINANCE, INC. ("we," "us" or "FINOVA")
the principal amount of One Hundred Thirty-Two Thousand, Three Hundred
Twenty-Four and 64/100 Dollars ($132,324.64), together with interest on the
unpaid principal balance at the interest rate per annum and on the dates and as
otherwise provided in the "Master Agreement" and "Schedule" referred to below.
If the interest rate charged would exceed the maximum legal rate, you will only
have to pay the maximum legal rate. You do not have to pay any excess interest
over and above the maximum legal rate of interest. However, if it later becomes
legal for you to pay all or part of any excess interest, you will then pay it to
us upon our request.
You will make all payments in US Dollars at our offices at 10 Waterside Drive,
Farmington, Connecticut 06032-3065, or to another address that we request in
writing. All payments will be made in immediately available funds.
This Note is secured by a Master Loan and Security Agreement dated November 19,
1998 (the "Master Agreement"), between you and FINOVA, and by the Collateral and
other collateral listed in the attached Schedule (the "Schedule"), dated the
same date as this Note. This Note may be accelerated by us upon a payment
default or upon another default under the Master Agreement.
TIME IS OF THE ESSENCE.
If you do not make a payment when it is due, you will also pay us a late charge
often (10%) of the amount past due. Your interest rate will be increased by 4%
per annum, over and above your regular interest rate if payment is not made at
the scheduled or accelerated Maturity of this Note. You will also pay all of our
costs of collection, including our reasonable attorney's fees and expenses. If
we accelerate this Note, you will also owe a prepayment premium, as set forth in
Exhibit A to the Master Agreement.
You waive diligence, presentment, formalities of demand, protest or notice of
nonpayment or dishonor or any other notice as to this Note.
THIS NOTE IS GOVERNED BY THE SUBSTANTIVE LAWS (AND NOT THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF ARIZONA, THE STATE IN WHICH OUR OFFICE IS LOCATED IN
WHICH FINAL APPROVAL OF THE TERMS AND CONDITIONS OF THIS NOTE OCCURRED AND FROM
WHICH THE ORDER TO PAY THE LOAN FUNDS WAS MADE. YOU CONSENT TO THE JURISDICTION
OF ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF ARIZONA. YOU WAIVE TRIAL
BY JURY.
<PAGE> 63
You represent to us that the proceeds of the loan evidenced by this Note are
being used to finance (or refinance) your purchase of the Collateral described
in the Schedule, and that the Collateral will only be used for business
purposes.
ANTIGENICS, L.L.C. ATTEST:
By /s/ Garo Armen
---------------------------
Name Garo Armen
-------------------------
Title CEO
------------------------
Date 9/29/99 /s/ Jeffrey Rona
------------------------- -----------------------------------
[Assistant] Secretary
FTF Promissory Note & Schedule(9)
<PAGE> 64
SCHEDULE NO. 9 TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
Schedule No. 9, dated September 30, 1999, (this "Schedule") to MASTER LOAN AND
SECURITY AGREEMENT dated as of November 19, 1998 (the "Master Agreement")
between ANTIGENICS, L.L.C., a Delaware limited liability corporation with its
executive office and principal place of business at 630 Fifth Avenue, New York,
New York 10111 ("you"), and FINOVA CAPITAL CORPORATION, ASSIGNEE OF FINOVA
TECHNOLOGY FINANCE, INC., a Delaware corporation with an office at 10 Waterside
Drive, Farmington, Connecticut 06032-3065 ("we," "us", or "FINOVA").
1. OBLIGATION TO PAY. You are presently borrowing One Hundred Thirty-Two
Thousand, Three Hundred Twenty-Four and 64/100 Dollars ($132,324.64) from us.
This borrowing is evidenced by your promissory note dated the same date as this
Schedule in the amount of $132,324.64 (the "Note") to which this Schedule is
attached.
2. PAYMENTS (SUBJECT TO ADJUSTMENT IN PARAGRAPH 3). You will repay the Loan,
together with interest at the interest rate, in forty-three (43) consecutive
monthly payments of principal and interest as follows: forty-two (42) monthly
payments each in the amount of $3,688.55, followed by one (1) final monthly
payment in the amount of $13,232.46 (the "Final Payment"). These payments will
be adjusted two business days prior to the date we make the Loan to you as set
forth in Paragraph 3.
The first monthly payment of principal and interest will be due on the thirtieth
(30th) day of the month that we make the Loan to you. The remaining payments
will continue on the same day in each and every month thereafter through and
including the date upon which the Final Payment is scheduled to be due (the
"Maturity Date"). Any remaining amount that you owe us is due on the "Maturity
Date."
If the date we make the Loan to you is not the thirtieth (30th) or the
thirty-first (31st) day of the month, you will pay, on the thirtieth (30th) day
of the month in which we make the Loan to you (in the case of making the Loan
the 30th), interest only, at the interest rate, from the date we make the Loan
to you to the twenty-ninth (29th) day of the same month.
If the date we make the Loan to you is the thirty-first (3lst), you will pay
interest at the interest rate, from the date we make the Loan to you to the
twenty-ninth (29th) day of the next following month.
3. INTEREST: INDEXING. The interest rate in your payments shown above is
calculated at your regular rate of 9.20% per annum plus an "Index Rate," of
4.41%. The Index Rate means the highest yield, as published in THE WALL STREET
JOURNAL of three-year United States Treasury Notes. Two-business days prior to
the date we make the Loan to you, we will read THE WALL
<PAGE> 65
STREET JOURNAL to determine the final Index Rate. If the Index Rate is not
published in THE WALL STREET JOURNAL, we will determine it from another reliable
source. We will increase or decrease the payments set forth above in Paragraph 2
to reflect any increase or decrease in the Index Rate. We will give you notice
of any increase as soon as we can. You will pay the increased payments unless we
have made an obvious mistake in our calculations. Interest is calculated in
advance using a 360-day year of twelve 30-day months.
4. PURPOSE OF LOAN: SECURITY INTEREST. You are making this borrowing to
finance (or refinance) your purchase of the collateral described in the attached
Schedule A to this Schedule, which you and we refer to as the "Collateral." You
grant us a security interest in the Collateral, as well as any additions,
omissions, substitutions and proceeds of the Collateral. You also grant us a
security interest in any leases and rentals of the Collateral. This security
interest secures the Note. It also secures the full and timely payment and
performance of all of your other obligations to us under the Master Agreement
and any other agreement, loan or lease that you may have with us.
5. COLLATERAL ACCEPTANCE DATE. The Collateral shall be delivered, installed
and accepted no later than December 31, 1999.
6. TERMS OF MASTER AGREEMENT. The terms of the Master Agreement are made a
part of this Schedule as if repeated in this Schedule. Any declaration of
default under the Master Agreement is a default under this Schedule and permits
us to exercise all remedies provided by the Master Agreement.
ANTIGENICS, L.L.C. ATTEST:
By /s/ Garo Armen
---------------------------
/s/ Jeffrey Rona
Name Garo Armen -----------------------------------
------------------------- [Assistant] Secretary
Title CEO
------------------------
Date 8/20/99
-------------------------
<PAGE> 66
SCHEDULE A
TO
SCHEDULE NO. 9
TO
MASTER LOAN AND SECURITY AGREEMENT NO. S7020
ANTIGENICS L.L.C. (BORROWER) AND FINOVA CAPITAL CORPORATION, AS ASSIGNEE OF
FINOVA TECHNOLOGY FINANCE, INC. (LENDER)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
THE COLLATERAL CONSISTS OF THE FOLLOWING:
QTY COLLATERAL DESCRIPTION SERIAL NO. VENDOR INVOICE NO. COST TAX FREIGHT GRAND TOTAL
- --- ---------------------- ---------- ------ ----------- ---- --- ------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1 Bio Safety Cabinet N/A The Baker Company 8862 $ 49,129.35 $0.00 $0.00 $ 49,129.35
1 Bio Safety Cabinet N/A The Baker Company 8900 $ 42,074.24 $0.00 $0.00 $ 42,074.24
1 Bio Safety Cabinet N/A The Baker Company 8860 $ 41,121.05 $0.00 $0.00 $ 41,121.05
COLLATERAL LOCATION:
34 COMMERCE WAY GRAND TOTALS $132,324.64 $0.00 $0.00 $132,324.64
WOBURN, MA 01801
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 1 of 1
<PAGE> 1
EXHIBIT 10.18
ANTIGENICS L.L.C.
INCENTIVE EQUITY PLAN
1. Purpose of the Plan
The purpose of this Antigenics L.L.C. Incentive Equity Plan (the
"Plan") is to enable Antigenics L.L.C. ("Antigenics"), through the issuance of
options to acquire Interests in Antigenics, to provide incentives to Managers,
officers and employees of, and advisors and consultants to, Antigenics who,
through the performance of services to Antigenics, contribute to its success and
the growth of its business.
2. Definitions
Capitalized terms that are not otherwise defined herein shall have the
meaning ascribed to them in the Limited Liability Company Agreement of
Antigenics dated as of December 31, 1995 (the "LLC Agreement").
(a) "Act" means the Securities Exchange Act of 1934.
(b) "Board" means the Board of Managers of Antigenics.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Company" means Antigenics and the entities directly or
indirectly controlled by it, if any, any of whose managers, officers, employees,
advisors and consultants are Participants in the Plan.
(e) "Disability" means a permanent and total disability, as
determined by the Board in its sole discretion. A Disability shall be deemed to
occur at the time of the determination of the Disability by the Board.
(f) "Fair Market Value" means the value of an Interest on a
particular date, determined by the Board in good faith.
(g) "Option" means the right to purchase an Interest at a prescribed
Purchase Price on the terms specified in the Plan.
(h) "Participant" means any individual or entity that is granted an
Option under the Plan.
<PAGE> 2
(i) "Termination of Services" means termination of the relationship
with the Company so that an individual or entity is no longer a manager, officer
or employee of, or an advisor or consultant to, the Company. In the event an
entity shall cease to be controlled by Antigenics, any individual or entity that
is not otherwise a manager, officer or employee of, or an advisor or consultant
to the Company shall incur a Termination of Services at the time the entity
ceases to be wholly-owned by Antigencis. A Termination of Services shall not
include a leave of absence approved for purposes of the Plan by the Board.
3. Effective Date/Expiration of Plan
The Plan shall become effective (the "Effective Date") upon its
approval by a majority in interest of the Members. No Option shall be granted
under the Plan on or after the tenth anniversary of the Effective Date, but
Options previously granted may extend beyond that date.
4. Administration
(a) BOARD OF MANAGERS OR ITS COMMITTEE. The Plan shall be administered
by the Board or any committee of the Board duly appointed by the Board
(references herein to the "Board" shall be deemed to include such committee so
appointed). The Board shall have full authority to interpret the Plan and to
decide any questions and settle all controversies and disputes that may arise in
connection with the Plan; to establish, amend, and rescind rules for carrying
out the Plan; to administer the Plan, subject to its provisions, to select
Participants in, and grant Options under, the Plan; to determine the terms,
exercise price and form of exercise payment for each Option granted under the
Plan; to prescribe the form or forms of instruments evidencing Options and any
other instruments required under the Plan (which need not be uniform) and to
change such forms from time to time; and to make all other determinations and
to take all such steps in connection with the Plan and the Options as the Board,
in its sole discretion, deems necessary or desirable. The Board shall not be
bound to any standards of uniformity or similarity of action, interpretation or
conduct in the discharge of its duties hereunder, regardless of the apparent
similarity of the matters coming before it. The determination, action or
conclusion of the Board in connection with the foregoing shall be final and
conclusive.
(b) ADVISORS. The Board may designate one or more officers of the
Company, employees of the Company or professional advisors to assist the Board
in the administration of the Plan, and may grant authority to such persons to
execute instruments evidencing Options (as defined herein) or other documents on
behalf of the Board. The Board may employ such legal counsel, consultants and
agents as it may deem desirable for the administration of the Plan, and may rely
upon any opinion received from any such counsel or consultant and any
computation received from any such
2
<PAGE> 3
consultant or agent. Expenses incurred by the Board in the engagement of such
counsel, consultant or agent shall be paid by the Company.
(c) INDEMNIFICATION. No Manager, and no officer or employee of, or
professional advisor, legal counsel, consultant or agent referred to in the
preceding paragraph (b), shall be liable for any action or determination made in
good faith with respect to the Plan or any Option granted under it. To the
maximum extent permitted by applicable law or the LLC Agreement, each such
person or entity referred to in the preceding sentence, shall be indemnified and
held harmless by the Company against any cost or expense (including reasonable
fees and expenses of counsel) or liability (including any sum paid in settlement
of a claim with the approval of the Company, such consent not to be unreasonably
withheld), and advance amounts necessary to pay the foregoing at the earliest
time and to the fullest extent permitted, arising out of any act or omission to
act in connection with the Plan, except to the extent arising out of such
person's, or such entity's, own fraud or bad faith. Such indemnification shall
be in addition to any rights of indemnification such persons or entities may
have under applicable law or under the LLC Agreement.
5. Interests; Adjustment Upon Certain Events
(a) MAXIMUM INTERESTS. The maximum aggregate Interests that may be
issued under the Plan shall be 5% of the total Interests that would be
outstanding as of the Effective Date, assuming the issuance of the Interests
that may be acquired upon exercise of Options. If Options are for any reason
canceled, or expire or terminate unexercised, the Interest covered by such
Options shall again be available for the grant of Options, subject to the
foregoing limit.
(b) ADJUSTMENTS; RECAPITALIZATION, ETC. The existence of the Plan and
the Options granted hereunder shall not affect in any way the right or power of
the Board or the Members of Antigenics to make or authorize any' adjustment,
recapitalization, reorganization or other change in Antigenics' capital
structure or its business, any merger or consolidation of Antigenics, any issue
of bonds, debentures or preference interests ahead of or affecting Interests,
the dissolution or liquidation of Antigenics or any other entity, or any sale or
transfer of all or part of its assets or business or any other Company act or
proceeding. If and whenever Antigenics takes any such action, however, the
following provisions, to the extent applicable, shall govern:
(i) Subject to Section 5(b)(ii), if Antigenics merges or
consolidates with one or more entities, then from and after the
effective date of such merger or consolidation, upon exercise of
Options theretofore granted, the Participant shall be entitled to
purchase under such Options, in lieu of the Interest as to which such
Options shall then be exercisable but on the same terms and conditions
of exercise set forth in such Options, the number and class of
securities or property (including cash) to which the Participant would
have been entitled pursuant to the terms of
3
<PAGE> 4
the agreement of merger or consolidation if, immediately prior to such
merger or consolidation, the Participant had been the holder of record of
the Interest receivable upon exercise of such Options (whether or not then
exercisable).
(ii) In the event of a merger or consolidation in which Antigenics is
not the surviving entity or in the event of any transaction that results in
the acquisition of substantially all of Antigenics' outstanding Interests
by a single person or entity or by a group of persons and/or entities
acting in concert, or in the event of the sale or transfer of all of
Antigenics' assets (the foregoing being referred to as "Acquisition
Events"), then the Board may in its discretion terminate all outstanding
Options as of the consummation of the Acquisition Event by delivering
notice of termination to each Participant at least 20 days prior to the
date of consummation of the Acquisition Event; provided that, during the
period from the date on which such notice of termination is delivered to
the consummation of the Acquisition Date, each Participant shall have the
right to exercise in full all of the Options that are then outstanding
(without regard to limitations on exercise otherwise contained in the
Options).
(iii) Subject to Section 5(a), the Board may grant Options under the
Plan in substitution for options held pursuant to grants made by another
entity that is merged with or otherwise acquired by the Company. The
Company may direct that substitute awards be granted on such terms and
conditions as the Board considers appropriate in the circumstances.
(iv) If, as a result of any adjustment made pursuant to the preceding
paragraphs of this Section 5, any Participant shall become entitled upon
exercise of an Option to receive any securities other than an Interest,
then the number and class of securities so receivable thereafter shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Interests
set forth in this Section 5, as determined by the Board in its discretion.
(v) Except as hereinbefore expressly provided, the issuance by
Antigenics of Interests, or securities convertible into Interests, for
cash, property, labor or services, upon direct sale, upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of other
securities, and in any case whether or not for fair value, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the Interests and/or other securities or property subject to Options
theretofore granted or the Purchase Price therefor.
6. Awards and Terms of Options
(a) GRANT. The Board may grant Options, subject to the terms of this
Plan. Each Option shall be evidenced by an Option agreement (the "Option
Agreement") in
4
<PAGE> 5
such form not inconsistent with the Plan as the Board shall approve from time to
time. Without limiting the generality of the preceding sentence, any such
agreement may provide, among other things, that Interests acquired pursuant to
exercise of Options should be subject to (i) the right, but not the obligation,
of Antigenics to repurchase such Interests for their Fair Market Value in the
event that the Participant desires to sell such Interests, and/or (ii) the
right, but not the obligation, of Antigenics to repurchase such Interests for
their Fair Market Value from a Participant in the event of a Termination of
Services of such Participant.
(b) EXERCISE PRICE. The purchase price per Share (the "Purchase
Price") deliverable upon the exercise of an Option shall be determined by the
Board.
(c) INTEREST. Subject to Section 5(a), the Option Agreement shall
specify the Interest subject to the Options granted to the Participant, as
determined by the Board in its sole discretion.
(d) EXERCISABILITY. At the time of grant, the Board shall specify when
and on what terms the Options granted shall be exercisable. In the case of
Options not immediately exercisable in full, the Board may at any time
accelerate the time at which all or any part of the Options may be exercised and
may waive any other conditions to exercise set forth in the Option Agreement,
subject to the terms of the Plan; No Option shall be exercisable after the
expiration of ten (10) years from the date of grant. Each Option shall be
subject to earlier termination as provided in Section 8 below.
(e) EXERCISE OF OPTIONS.
(i) A Participant may elect to exercise an Option by giving
written notice to the Board of such election and of the portion of the
Option such Participant has elected to exercise, accompanied by payment in
full of the aggregate Purchase Price for the portion of ,the Option being
exercised.
(ii) The Purchase Price shall be paid at the time of exercise as
follows:
(A) in cash or by check, bank draft or money order payable
to the order of Antigenics;
(B) with the Board's prior written approval, by delivery of
a promissory note of the Participant to Antigenics, such promissory
note to be on such terms as are specified by the Board, or by a
combination of cash and the Participant's promissory note; or
(C) on such other terms and conditions as may be acceptable
to the Board and in accordance with the law of the State of
5
<PAGE> 6
Delaware. Upon receipt of payment, Antigenics shall deliver to the
Participant as soon as practicable evidence of the Interest then
purchased.
7. Admission as Member
Upon exercise of an Option, the Participant shall become a Member of
Antigenics by virtue of the Interest issued to such Participant and shall be
subject to the terms and conditions of the LLC Agreement, as then in effect.
8. Effect of Termination of Services
(a) DEATH OR DISABILITY. Except as otherwise provided in the
Participant's Option Agreement, upon Termination of Services, all outstanding
Options then exercisable and not exercised by the Participant prior to such
Termination of Services (and any Options not previously exercisable but made
exercisable by the Board at or after the Termination of Employment) shall remain
exercisable by the Participant to the extent not exercised for the following
time periods:
(i) In the event of the Participant's death, such Options shah
remain exercisable Coy the Participant's estate or by the person given
authority to exercise such Options by the Participant's will or by
operation of law) for a period of one (1) year from the date of the
Participant's death, provided that the Board, in its discretion, may at any
time extend such time period to up to three (3) years from the date of the
Participant's death.
(ii) In the event the Participant's services terminate due to
Disability, such Options shall remain exercisable for one (1) year from the
date of the Participant's Termination of Services, provided that the Board,
in its discretion, may at any time extend such time period to up to three
(3) years from the date of the Participant's Termination of Services.
(b) OTHER TERMINATION. In the event the Participant's services to the
Company are terminated by the Company for a reason other than cause, such
Options shall remain exercisable for the original term of such Options. In the
event the Participant voluntarily terminates his/her services to the Company,
such Options shall remain exercisable for six (6) months from the date of the
Participant's Termination of Services. In the event of Termination of Services
for any reason other than as provided in Section 8(a) or in the preceding two
sentences of this Section 8(b), all outstanding Options not exercised by the
Participant prior to such Termination of Services shall immediately be
cancelled.
6
<PAGE> 7
9. Nontransferability of Options
No Option shall be transferable by the Participant otherwise than by
will or under applicable laws of descent and distribution, and during the
lifetime of the Participant may be exercised only by the Participant or his or
her guardian or legal representative. In addition, no Option shah be assigned,
negotiated, pledged or hypothecated in any way (whether by operation of law or
otherwise), and no Option shall be subject to execution, attachment or similar
process. Upon any attempt to transfer, assign, negotiate, pledge or hypothecate
any Option, or in the event of any levy upon any Option by reason of any
execution, attachment or similar process contrary to the provisions hereof, such
Option shall immediately become null and void.
10. Rights as a Member
A Participant (or a permitted transferee of an Option) shall have no
rights as a Member with respect to any Interest covered by such Participant's
Options until such Participant shall have become the holder of record of such
Interest, and no adjustments shall be made for distributions in cash or other
property or other rights in respect to any such Interest, except as otherwise
specifically provided for in this Plan.
11. Determinations
Each determination, interpretation or other action made or taken
pursuant to the provisions of this Plan by the Board shall be final and binding
for all purposes and upon all persons.
12. Termination, Amendment and Modification
The Plan shall terminate at the close of business on the day
immediately preceding the tenth anniversary of the Effective Date, unless
terminated sooner as hereinafter provided, and no Option shall be granted under
the Plan on or after that date. The termination of the Plan shall not terminate
any outstanding Options which by their terms continue beyond the termination
date of the Plan. At any time prior to the tenth anniversary of the Effective
Date, the Board may amend or terminate the Plan or suspend the Plan in whole or
in part. Notwithstanding the foregoing, however, no such amendment may, without
the approval of a majority in interest of the Members of Antigenics, (i)
increase the total Interests which may be acquired upon exercise of Options
granted under the Plan or (ii) change the types of persons eligible to be
Participants under the Plan.
Nothing contained in this Section 12 shall be deemed to prevent the
Board from authorizing amendments of outstanding Options of Participants,
including, without
7
<PAGE> 8
limitation, the reduction of the Purchase Price specified therein (or the
granting or issuance of new Options at a lower Purchase Price upon cancellation
of outstanding Options), so long as all Options outstanding at any one time
shall not call for issuance of more Interests than the Plan authorizes and so
long as the provisions of any amended Options would have been permissible under
the Plan if such Option had been originally granted or issued as of the date of
such amendment with such amended terms.
Notwithstanding anything to the contrary contained in this Section 12,
no termination, amendment or modification of the Plan may, without the consent
of the Participant or the transferee of such Participant's Option, alter or
impair the rights and obligations arising under any then outstanding Option.
13. Non-Exclusivity
Neither the adoption of the Plan by the Board nor the submission of
the Plan to the Members of Antigenics for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting or issuance of options and/or other incentives otherwise than under the
Plan, and such arrangements may be either generally applicable or limited in
application.
14. Use of Proceeds
The proceeds of the sale of Interests subject to Options under the
Plan are to be added to the general funds of Antigenics and used for its general
corporate purposes as the Board shall determine.
15. General Provisions
(a) RIGHT TO TERMINATE SERVICES. Neither the adoption of the Plan nor
the grant of Options shall impose any obligations on the Company to continue the
services of any Participant, nor shall it impose any obligation on the part of
any Participant to continue to perform services for the Company, subject however
to the provisions of any agreement between the Company and the Participant.
(b) PURCHASE FOR INVESTMENT. If the Board determines that the law so
requires, the holder of an Option granted hereunder shall, upon any exercise or
conversion thereof, execute and deliver to Antigenics a written statement, in
form satisfactory to Antigenics, representing and warranting that such
Participant is purchasing or accepting the Interest then acquired for such
Participant's own account and not with a view to the resale or distribution
thereof, that any subsequent offer for sale or resale of any such Interest shall
be made either pursuant to (i) a Registration Statement on an
8
<PAGE> 9
appropriate form under the Securities Act of 1933, as amended (the "Securities
Act"), which Registration Statement shall have become effective and shall be
current with respect to the Interests being offered and sold, or (ii) a specific
exemption from the registration requirements of the Securities Act, and that in
claiming such exemption the holder will, prior to any offer for sale or sale of
such Shares, obtain a favorable written opinion, satisfactory in form and
substance to Antigenics, from counsel approved by Antigenics as to the
availability of such exception.
(c) TRUSTS, ETC. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any Option
thereunder) shall create or be construed to create a trust of any kind, or a
fiduciary relationship, between Antigenics and any Participant or the executor,
administrator or other personal representative or designated beneficiary of such
Participant, or any other persons. Any reserves that may be established by
Antigenics in connection with the Plan shall continue to be part of the general
funds of Antigenics, and no individual or entity other than Antigenics shall
have any interest in such funds until paid to a Participant. If and to the
extent that any Participant or such Participant's executor, administrator, or
other personal representative, as the case may be, acquires a right to receive
any payment from Antigenics pursuant to the Plan, such right shall be no greater
than the right of an unsecured general creditor of Antigenics.
(d) NOTICES. Each Participant shall be responsible for furnishing the
Board with the current and proper address for the mailing to such Participant of
notices and the delivery to such Participant of agreements, Interests and
payments. Any notices required or permitted to be given shall be deemed given if
directed to the person to whom addressed at such address and mailed by regular
United States mail, first class and prepaid. If any item mailed to such address
is returned as undeliverable to the addressee, mailing will be suspended until
the Participant furnishes the proper address.
(e) SEVERABILITY OF PROVISIONS. If any provisions of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions of the Plan, and the Plan shall be construed and
enforced as if such provisions had not been included.
(f) PAYMENT TO MINORS, ETC. Any benefit payable to or for the benefit
of a minor, an incompetent person or other person incapable of receipting
therefor shall be deemed paid when paid to such person's guardian or to the
party providing or reasonably appearing to provide for the care of such person,
and such payment shall fully discharge the Board, the Company and its officers,
employees, agents and representatives with respect thereto.
(g) HEADINGS AND CAPTIONS. The headings and captions herein are
provided for reference and convenience only. They shall not be considered part
of the Plan and shall not be employed in the construction of the Plan.
9
<PAGE> 10
(h) CONTROLLING LAW. The Plan shall be construed and enforced
according the laws of the State of Delaware.
16. Issuance of Certificates; Legends and Payment of Expenses
(a) CERTIFICATES. Upon any exercise of an Option and payment of the
exercise price as provided in such Option, any evidence of the Interest as to
which such Option has been exercised shall be issued by Antigenics in the name
of the person or persons exercising such Option and shall be delivered to or
upon the order of such person or persons.
(b) LEGENDS. Evidence of Interests issued upon exercise of an Option
shall bear such legend or legends as the Board, in its discretion, determines to
be necessary or appropriate to prevent a violation of, or to perfect an
exemption from, the registration requirements of the Securities Act or to
implement the provisions of any agreements between Antigenics and the
Participant with respect to such Interest.
(c) PAYMENT OF EXPENSES. The Company shall pay all issue or transfer
taxes with respect to the issuance or transfer of Interest, as well as all fees
and expenses necessarily incurred by the Company in connection with such
issuance or transfer and with the administration of the Plan.
17. Withholding Taxes
Antigenics shall be entitled, if necessary or desirable, to withhold
(or secure payment from the Participant in cash or other property in lieu of
withholding) the amount of any Federal, state or local taxes required by law to
be withheld by Antigenics for any Interest or cash payments deliverable under
this Plan, and Antigenics may defer such delivery unless such withholding
requirement is satisfied.
10
<PAGE> 1
EXHIBIT 23.1
The Members and Board of Managers
Antigenics L.L.C.:
We consent to the use of our report included herein and to the references to our
firm under the headings "Selected Consolidated Financial Data" and "Experts" in
the prospectus and registration statement.
/s/ KPMG LLP
Short Hills, New Jersey
January 21, 2000
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<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
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<DEPRECIATION> (1,357,657)
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