<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-21088
VICAL INCORPORATED
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(Exact name of registrant as specified in its charter)
Delaware 93-0948554
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9373 Towne Centre Dr., Suite 100, San Diego, California 92121
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(Address of principal executive offices) (Zip code)
(619) 646-1100
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(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days -- Yes X No .
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<CAPTION>
Class Outstanding at March 31, 1999
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<S> <C>
Common Stock, $.01 par value 16,190,313
</TABLE>
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VICAL INCORPORATED
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
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COVER PAGE.....................................................................................1
TABLE OF CONTENTS..............................................................................2
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of March 31, 1999, and December 31, 1998............................3
Statements of Operations for the Three Months Ended March 31, 1999 and 1998...........4
Statements of Cash Flows for the Three Months Ended March 31, 1999 and 1998...........5
Notes to Financial Statements.........................................................6
ITEM 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................................7
ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk.............................*
PART II OTHER INFORMATION
ITEM 1. Legal Proceedings............................................................*
ITEM 2. Changes in Securities........................................................*
ITEM 3. Defaults upon Senior Securities..............................................*
ITEM 4. Submission of Matters to a Vote of Security Holders..........................*
ITEM 5. Other Information............................................................*
ITEM 6. Exhibits and Reports on Form 8-K............................................10
SIGNATURE.....................................................................................11
EXHIBIT LIST..................................................................................12
</TABLE>
* No information provided due to inapplicability of item.
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
VICAL INCORPORATED
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,
1999 December 31,
(Unaudited) 1998
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<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 9,817,013 $ 13,567,817
Marketable securities - available-for-sale 33,816,715 26,615,939
Receivables and other 2,364,335 1,432,711
---------------- ---------------
Total current assets 45,998,063 41,616,467
---------------- ---------------
Property and Equipment:
Equipment 5,049,508 5,139,944
Leasehold improvements 1,640,874 1,558,554
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6,690,382 6,698,498
Less--accumulated depreciation and amortization (5,083,086) (4,992,121)
---------------- ---------------
1,607,296 1,706,377
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Patent costs, net of accumulated amortization 1,443,922 1,387,936
Other assets 142,967 133,385
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$ 49,192,248 $ 44,844,165
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---------------- ---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 1,861,662 $ 2,281,252
Current portion of capital lease obligations 478,005 473,466
Current portion of notes payable 213,773 213,773
Deferred revenue 1,183,334 250,000
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Total current liabilities 3,736,774 3,218,491
---------------- ---------------
Long-Term Obligations:
Long-term obligations under capital leases 651,200 747,807
Notes payable - 53,443
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Total long-term obligations 651,200 801,250
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Stockholders' Equity:
Preferred stock, $0.01 par value--5,000,000 shares authorized--
none outstanding - -
Common stock, $0.01 par value--40,000,000 shares authorized--
16,190,313 and 15,866,544 shares issued and outstanding at
March 31, 1999 and December 31, 1998, respectively 161,903 158,665
Additional paid-in capital 83,170,227 78,332,483
Accumulated other comprehensive income 17,353 69,440
Accumulated deficit (38,545,209) (37,736,164)
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Total stockholders' equity 44,804,274 40,824,424
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Total Liabilities and Stockholders' Equity $ 49,192,248 $ 44,844,165
---------------- ---------------
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</TABLE>
See accompanying notes.
3
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VICAL INCORPORATED
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------------
1999 1998
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<S> <C> <C>
Revenues:
License/royalty revenue $ 2,665,335 $ 2,531,975
Contract revenue 614,839 200,360
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3,280,174 2,732,335
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Expenses:
Research and development 3,614,228 3,094,838
General and administrative 1,012,942 967,066
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4,627,170 4,061,904
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Loss from operations (1,346,996) (1,329,569)
Interest income 571,174 651,725
Interest expense 33,223 43,224
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Net loss $ (809,045) $ (721,068)
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Net loss per share (basic and diluted--Note 2) $ (.05) $ (.05)
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Weighted average shares used in computing net loss per share
(Note 2) 15,952,678 15,753,191
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</TABLE>
See accompanying notes.
4
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VICAL INCORPORATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------------
1999 1998
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (809,045) $ (721,068)
Adjustments to reconcile net loss to net cash provided from
(used in) operating activities:
Depreciation and amortization 242,647 236,382
Change in operating assets and liabilities:
Receivables and other (931,624) 80,012
Accounts payable and accrued expenses (419,589) 149,797
Deferred revenue 933,333 (178,261)
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Net cash used in operating activities (984,278) (433,138)
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INVESTING ACTIVITIES:
Marketable securities (7,252,863) 848,718
Capital expenditures (117,385) (2,246)
Deposits and other 19,418 (5,511)
Patent expenditures (78,750) (41,188)
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Net cash provided from (used in) investment
activities (7,429,580) 799,773
---------------- ---------------
FINANCING ACTIVITIES:
Principal payments under capital lease obligations (124,485) (126,757)
Principal payments on notes payable (53,443) (106,887)
Issuance of common stock, net 4,840,982 348,670
---------------- ---------------
Net cash provided from (used in) financing activities 4,663,054 115,026
---------------- ---------------
Net increase (decrease) in cash and cash equivalents (3,750,804) 481,661
Cash and cash equivalents at beginning of period 13,567,817 12,157,149
---------------- ---------------
Cash and cash equivalents at end of period $ 9,817,013 $ 12,638,810
---------------- ---------------
---------------- ---------------
Supplemental Disclosure of Non-Cash Investing and Financing
Activities:
Equipment acquired under capital leases $ 32,417 $ 47,539
---------------- ---------------
---------------- ---------------
</TABLE>
See accompanying notes.
5
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VICAL INCORPORATED
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(unaudited)
1. ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Vical was incorporated in April 1987 and has devoted substantially all of
its resources since that time to its research and development programs. The
Company is currently focusing its resources on the development of its
direct gene transfer and related technologies.
BASIS OF PRESENTATION
The information contained herein has been prepared in accordance with
instructions for Form 10-Q. The information at March 31, 1999, and for the
three-month periods ended March 31, 1999 and 1998, is unaudited. In the
opinion of management, the information reflects all adjustments necessary
to make the results of operations for the interim periods a fair statement
of such operations. All such adjustments are of a normal recurring nature.
Interim results are not necessarily indicative of results for a full year.
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. For a presentation including all disclosures required by
generally accepted accounting principles, these financial statements should
be read in conjunction with the audited financial statements for the year
ended December 31, 1998, included in the Vical Incorporated Form 10-K filed
with the Securities and Exchange Commission.
2. NET LOSS PER SHARE
Net loss per share (basic and diluted) for the three-month periods ended
March 31, 1999 and 1998, has been computed using the weighted average
number of common shares outstanding during the respective periods. Diluted
loss per share does not include any assumed exercise of stock options as
the effect would be antidilutive.
3. COMPREHENSIVE INCOME
The Company implemented Statement of Financial Accounting Standards No.
130, "Comprehensive Income," effective January 1, 1998. This statement
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income be reported in a financial
statement that is displayed with the same prominence as other financial
statements. Accordingly, in addition to reporting net income (loss) under
the current rules, the Company is required to display the impact of any
unrealized gain or loss on marketable securities as a component of
comprehensive income and to display an amount representing total
comprehensive income for each period presented. In interim financial
results, this information is allowed to be presented in the notes to the
financial statements. For the three-month periods ended March 31, 1999 and
1998, other comprehensive loss was $52,087 and $725, respectively, and
total comprehensive loss was $861,132 and $721,793, respectively.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Vical was incorporated in April 1987 and has devoted substantially all of its
resources since that time to its research and development programs. The Company
is focusing its resources on the development of its direct gene transfer and
related technologies. The Company is developing its ALLOVECTIN-7, LEUVECTIN and
VAXID cancer product candidates internally, while developing vaccine product
candidates for infectious diseases primarily in collaboration with corporate
partners Merck & Co., Inc. ("Merck") and Pasteur Merieux Connaught ("PMC").
Vical and Centocor, Inc. have a license agreement allowing Centocor, Inc. to use
Vical's naked DNA technology to develop and market certain gene-based vaccines
for the potential treatment of certain types of cancer. The Company has an
agreement with Boston Scientific for the use of Vical's technology in
catheter-based intravascular gene delivery. Vical has an agreement with
Rhone-Poulenc Rorer to use its gene delivery technology to deliver certain
neurological proteins for neurodegenerative diseases. Vical also has agreements
with Pfizer Inc. for use of its technology for gene delivery of therapeutic
proteins in certain animal health applications and with Merial for use of its
technology for DNA vaccines in certain animal infectious disease targets.
To date, the Company has not received revenues from the sale of products. The
Company expects to incur substantial operating losses for at least the next
several years, due primarily to expansion of its research and development
programs and the cost of preclinical studies and clinical trials. As of March
31, 1999, the Company's accumulated deficit was approximately $38.5 million.
Vical has formulated ALLOVECTIN-7, a complex containing the gene encoding a
particular human histocompatibility antigen, HLA-B7, and a lipid material to
facilitate gene uptake. After direct injection of ALLOVECTIN-7 into a tumor, the
Company believes that the HLA-B7 gene will cause the tumor cells to produce the
HLA-B7 antigen. This gene expression may then trigger a potent cellular immune
response against the tumor cells.
In May 1998, the Company initiated registration-supportive expanded Phase II
and Phase III multi-center clinical trials with ALLOVECTIN-7 in certain
patients with metastatic melanoma. Either or both of the pivotal trials could
support product registration if endpoints are achieved. Vical also has a
multi-center Phase II study underway with ALLOVECTIN-7 in patients with head
and neck cancer.
Vical is developing its second gene-based product candidate, LEUVECTIN, also
intended for direct injection into tumor lesions of cancer patients. LEUVECTIN
contains a gene that encodes the potent immunostimulator IL-2 and a lipid
material to facilitate gene uptake. The Company expects that LEUVECTIN, when
injected into tumors, will cause the malignant cells to produce and secrete IL-2
in the vicinity of the tumor, stimulating the patient's immune system to attack
and destroy tumor cells. Because LEUVECTIN is designed to deliver IL-2 only at
the site of tumor lesions, the Company believes that it may provide similar
efficacy with fewer side effects than systemic IL-2 therapy.
In May 1998, the Company initiated a multicenter Phase II clinical trial using
LEUVECTIN in patients with metastatic renal cell carcinoma. In May 1999, data
were presented from a Phase I/II trial testing LEUVECTIN in patients with
prostate cancer. Based on this data, Vical intends to pursue additional clinical
development in prostate cancer.
In collaboration with Stanford University Medical Center, the Company is
conducting a Phase I/II clinical trial of VAXID, a naked DNA vaccine against
low-grade non-Hodgkin's B-cell lymphoma. VAXID contains a
7
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gene that encodes the patient-specific idiotype (characteristic feature) of
cancerous B-cells. The Company believes that immunization of post-chemotherapy
patients with VAXID could result in the elimination of residual disease and the
prevention of the relapse of disease.
The National Cancer Institute (NCI) published data from a previous NCI clinical
trial indicating a 42 percent response rate in end-stage melanoma patients after
treatment with systemic IL-2 and a peptide-based vaccine using a modified gp100
protein developed at NCI. This Phase I/II study is being repeated at the
National Cancer Institute with a naked DNA version of the gp100 vaccine provided
by Vical.
Vical is collaborating with PMC and the U.S. Naval Medical Research Center
(NMRC) to develop a DNA vaccine against malaria. In July 1997, Vical and PMC
began a Phase I trial of an experimental vaccine against the parasite that
causes malaria. NMRC conducted the clinical trial with approximately twenty
volunteers. Trial results, reported in an October 1998 issue of SCIENCE,
indicated that subjects immunized with a potential malaria DNA vaccine
developed dose-related killer T-cell immune responses. As a result of these
data, further clinical development is planned.
In January 1999, Vical and Pfizer Inc. entered into a license and option
agreement granting Pfizer rights to use Vical's proprietary naked DNA
technologies to deliver therapeutic proteins for animal health applications. The
agreement resulted in a $1,000,000 license payment to Vical, a $6,000,000
investment in approximately 318,000 shares of Vical common stock at $18.87 per
share, and a commitment to fund Vical research for a total of $1,500,000 over
the next three years.
The Company's product candidates may not prove to be safe and effective in
clinical trials and no commercially successful products may ultimately be
developed by the Company.
This Form 10-Q contains, in addition to historical information, forward-looking
statements. When used in this discussion, the words "expects," "anticipated" and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including whether the
Company's product candidates will be shown to be safe or efficacious in clinical
trials, whether the Company's corporate collaborations will be successful, and
whether the Company's product candidates will ultimately be successfully
developed or receive necessary regulatory approvals and other matters discussed
in Item 1 under the caption "Risk Factors" in the Company's Form 10-K for the
year ended December 31, 1998, filed with the Securities and Exchange Commission,
which could cause actual results to differ materially from those projected.
These forward-looking statements speak only as of the date hereof. The Company
undertakes no obligation to update these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
RESULTS OF OPERATIONS
Revenues of $3,280,000 were recorded for the quarter ended March 31, 1999. In
January 1999, Pfizer Inc. entered into a license and option agreement and a
stock purchase agreement with the Company. Under the terms of the agreements
Pfizer Inc. paid the Company $1,000,000 in license fees, $125,000 as an advance
for contract research and $6,000,000 for the purchase of approximately 318,000
shares of common stock at $18.87 per share, reflecting a 25% premium. The
license fee and the $1,200,000 premium on the purchase of stock were recognized
as revenue in the first quarter of 1999. License revenue also included
recognition of deferred license fees of $250,000 from the existing Merial
license agreement and royalty revenue of $215,000. In March 1999, the Company
received $1,100,000 from Merial for the extension to March 2000 of its option on
vaccine targets. This license fee will be recognized as revenue over the
twelve-month option period. In addition, for the quarter ended March 31, 1999,
the Company recognized net contract revenue of $615,000, primarily from a
contract entered into in September 1998 with the Office of Naval Research for
the development work on a potential naked DNA vaccine to prevent malaria. This
multi-year grant could provide up to $2,700,000 of funding to the Company, of
which $1,072,000 was recognized as revenue through March 31, 1999.
8
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The Company had revenues of $2,732,000 for the quarter ended March 31, 1998.
License revenue of $2,532,000 was derived primarily from an initial payment of
$2,000,000 from Centocor under a license and option agreement and reimbursement
of certain costs. License revenue for the quarter ended March 31, 1998, also
included amortization of deferred license fees under earlier agreements with PMC
and Merial and royalty revenues totaling $332,000. Contract revenues were
primarily from PMC.
The Company's total operating expenses for the quarter ended March 31, 1999,
were $4,627,000 compared with $4,062,000 for the first quarter of 1998.
Research and development expenses increased to $3,614,000 for the three months
ended March 31, 1999, from $3,095,000 for the same period in 1998. The increase
in research and development expenses for the three months was generally due to
increased preclinical and clinical trial costs, and personnel related costs,
partially offset by lower license payments to third parties.
General and administrative expenses increased to $1,013,000 for the three months
ended March 31, 1999, from $967,000 for the same period in 1998. The increase
primarily is attributable to timing of when certain printing and annual meeting
related costs were incurred.
Investment income for the three-month periods ended March 31, 1999 and 1998, was
$571,000 and $652,000, respectively. The decrease primarily is a result of lower
investment balances and lower rates of return on investments.
The net loss was $.05 per share for the three months ended March 31, 1999,
compared with net loss per share of $.05 for the same period of 1998. The
Company expects to incur losses throughout the remainder of 1999 and to report a
net loss per share for the year ended December 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, Vical has financed its operations primarily through private
placements of preferred and common stock, three public offerings of common stock
and revenues from collaborative agreements. As of March 31, 1999, the Company
had working capital of approximately $42.3 million compared with $38.4 million
at December 31, 1998. Cash and marketable securities totaled approximately $43.6
million at March 31, 1999, compared with $40.2 million at December 31, 1998.
The Company expects to incur substantial additional research and development
expense and general and administrative expense, including continued increases in
personnel costs, costs related to preclinical testing and clinical trials,
outside services and facilities. The Company's future capital requirements will
depend on many factors, including continued scientific progress in its research
and development programs, the scope and results of preclinical testing and
clinical trials, the time and costs involved in obtaining regulatory approvals,
the costs involved in filing, prosecuting and enforcing patent claims, competing
technological and market developments, the cost of manufacturing and scale-up,
and commercialization activities and arrangements. The Company intends to seek
additional funding through research and development relationships with suitable
potential corporate collaborators or through public or private financing.
Additional funding may not be available on favorable terms or at all.
If additional funding is not available, Vical anticipates that its available
cash and existing sources of funding will be adequate to satisfy its operating
needs through at least 2000.
9
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YEAR 2000 ISSUES
The Year 2000 problem is due to many computer systems using only two digits
rather than four to designate a specific year. As a result, many of these
systems may fail to function properly if a date beyond 1999 is entered. We have
completed our assessment of any potential Year 2000 issues for our internal
computer applications, including embedded control systems in equipment, to
determine whether they will function for the year 2000 and beyond and what
modifications, if any, would be required to ensure their continuing
functionality. We plan to upgrade our existing business applications software to
the latest Year 2000 compliant release of the software by June 1, 1999. We also
plan to implement a new financial and accounting system and related hardware to
meet our growing needs into the near future. This new system will be Year 2000
compliant and implemented prior to yearend. Given the relatively small size of
our systems and the predominantly new hardware, software and operating systems,
we do not anticipate any significant delays in becoming Year 2000 compliant. To
date our costs for Year 2000 compliance have been immaterial and we expect our
costs to finish becoming Year 2000 compliant to be immaterial.
We are unable to control whether our current and future strategic partners'
systems are Year 2000 compliant. The failure of systems maintained by our
strategic partners or suppliers could cause us to incur significant expenses to
remedy any problems, or otherwise seriously damage our business. We are
communicating with strategic partners to assess the risk of Year 2000 issues. We
have not completed the inquiries of the strategic partners. However, we are not
aware, at this time, of any material Year 2000 issues regarding our dealings
with our strategic partners. We anticipate that our assessment will be completed
by July 31, 1999.
At this time, we have no reason to believe that Year 2000 changes will have
a material impact on Vical's business, financial condition or results of
operations. Since no significant issues have been identified, we do not have a
comprehensive contingency plan to address any material Year 2000 issues. A
contingency plan, if required, will be developed for all applications and
systems that affect core business functions upon completion of our assessment of
Year 2000 issues. We do plan to perform backups of the existing and upgraded
versions of the computer system so that in the event our planned new financial
and accounting system and related hardware do not function properly we can
continue to operate under the old system. Vical has not identified what it
believes would be a reasonably likely worst case scenario with respect to Year
2000 failures.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) In January 1999 Vical sold approximately 318,000 shares of common
stock to Pfizer for $18.87 per share or $6,000,000 in the aggregate. Vical
relied on the exemption provided by Section 4(2) of the Securities Act of
1933 for this issuance given the nature of the purchaser.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Exhibits
EXHIBIT 4.4 Stock Purchase Agreement Dated January 22, 1999 between the
Company and Pfizer Inc.
EXHIBIT 27 Financial Data Schedule
2. Reports on Form 8-K
None
10
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VICAL INCORPORATED
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Vical Incorporated
Date: May 13, 1999 By /s/ MARTHA J. DEMSKI
----------------------
Martha J. Demski
Vice President and
Chief Financial Officer
(on behalf of the registrant and
as the registrant's Principal
Financial and Accounting
Officer)
11
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<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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<S> <C> <C>
1. EXHIBIT 4.4 Stock Purchase Agreement Dated January 22, 1999 between the
Company and Pfizer Inc.
2. EXHIBIT 27 Financial Data Schedule
</TABLE>
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EXHIBIT 4.4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of the
22nd day of January, 1999, by and between VICAL INCORPORATED, a Delaware
corporation (the "Company"), and PFIZER INC, a Delaware corporation
("Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF COMMON STOCK. Subject to the terms
and conditions of this Agreement, Investor hereby purchases and the Company
hereby sells and issues to Investor 317,969 shares (the "Shares") of Common
Stock for the purchase price per share equal to 125% of the average of the
closing prices reported by the Nasdaq National Market System for the fifteen
(15) consecutive trading days prior to, but not including, the Closing Date,
for an aggregate purchase price of $6,000,000 (the "Purchase Price").
1.2 CLOSING. The purchase and sale of the Common Stock shall
take place at the offices of the Company, 9373 Towne Centre Drive, San Diego,
California, at 10 A.M., on the date that the Collaborative Research and
Option Agreement between the Company and Investor, dated the date hereof,
becomes effective, or at such other times and places as the Company and
Investor mutually agree upon, verbally or in writing (which times and places
are designated as the "Closing"). At the Closing, the Company shall instruct
its transfer agent, ChaseMellon Shareholder Services L.L.C., to deliver
promptly to Investor a certificate representing the Common Stock which such
Investor is purchasing against delivery to the Company by such Investor of a
bank wire in same day funds in the amount of the Purchase Price therefor
payable to the Company's order.
1.3 DEFINITIONS.
(a) The following terms, as used herein, have the following
meanings:
"Closing Date" means the date of the Closing.
"Common Stock" means the Common Stock, par value $0.01 per
share of the Company, together with the associated preferred stock purchase
rights established pursuant to the Rights Agreement dated March 20, 1995
between the Company and ChaseMellon Shareholder Services L.L.C. as rights
agent.
"Material Adverse Effect" means a material adverse
- 1 -
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effect on the condition (financial or otherwise), business,assets, results of
operations of a corporation and its subsidiaries taken as a whole.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"1933 Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Person" shall mean an individual, corporation, partnership,
trust, business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
"SEC" shall mean the U.S. Securities and Exchange Commission.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to Investor that:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite
corporate power and authority to carry on its business as now conducted. The
Company is duly qualified to transact business and is in good standing in
each jurisdiction in which the failure so to qualify would have a Material
Adverse Effect.
2.2 CAPITALIZATION. The authorized capital of the Company
consists of:
(a) PREFERRED STOCK. 5,000,000 shares of Preferred Stock, of
which 40,000 shares have been designated Series A Participating Preferred
Stock, par value $.01 per share. There are no shares of Series A
Participating Preferred Stock issued and outstanding.
(b) COMMON STOCK. 40,000,000 shares of Common Stock, of
which 15,836,028 shares were issued and outstanding on December 4, 1998.
2.3 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for (i) the
authorization, execution and delivery of this Agreement, (ii) the performance
of all obligations of the Company hereunder and (iii) the authorization,
issuance (or reservation for issuance) and delivery of the Common Stock being
sold hereunder, to the extent that the foregoing requires performance on or
prior to the Closing, has been taken and this Agreement constitutes the valid
and legally binding obligation
- 2 -
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of the Company, enforceable against the Company in accordance with its terms.
2.4 VALID ISSUANCE OF COMMON STOCK. The Common Stock
purchased by the Investor hereunder has been duly and validly issued and is
fully paid and nonassessable and, based in part upon the representations of
the Investor in this Agreement, was issued in compliance with all applicable
federal and state securities laws.
2.5 SEC FILINGS. The Company has registered its Common Stock
pursuant to Section 12 of the 1934 Act, and the Common Stock is quoted on the
Nasdaq National Market. The Company has filed all forms, reports and
documents required to be filed pursuant to the federal securities laws and
the rules and regulations promulgated thereunder for a period of at least
twelve (12) months immediately preceding the offer or sale of the Shares. The
Company's filings with the SEC complied as of their respective filing dates,
or in the case of registration statements, their respective effective dates,
in all material respects with all applicable requirements of the 1933 Act and
the 1934 Act and the rules and regulations promulgated thereunder. None of
such filings, including, without limitation, any exhibits, financial
statements or schedules included therein, at the time filed, or in the case
of registration statements, at their respective filing dates, contained any
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
2.6 LITIGATION. Except as disclosed in the Company's filings
with the SEC, there is no action, suit or proceeding before or by any court
or governmental agency or body, domestic or foreign, now pending or, to the
knowledge of the Company, threatened, against or affecting the Company, or
any of its properties, which might result in any material adverse change in
the condition (financial or otherwise) or in the earnings, business affairs
or business prospects of the Company, or which might materially and adversely
affect the properties or assets thereof.
2.7 NO DEFAULT. Except as disclosed in the Company's filings
with the SEC, the Company is not in default in the performance or observance
of any material obligation, agreement, covenant or condition contained in any
indenture, mortgage, deed of trust or other material agreement or instrument
to which it is a party or by which it or its property may be bound, except
for defaults that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect.
2.8 SUBSEQUENT EVENTS. Since September, 1998, (i) the
Company has incurred no liability or obligation, contingent
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or otherwise, that taken as a whole, is material in the aggregate to the
Company, except in the ordinary course of business, and (ii) there has been
no material adverse change in the condition or results of operations,
financial or otherwise, of the Company, taken as a whole.
2.9 CONSENTS AND APPROVALS. No consent, approval,
qualification, order or authorization of, or filing with, any local, state or
federal governmental authority or any third party is required on the part of
the Company in connection with the Company's valid execution, delivery or
performance of this Agreement, or the offer, sale or issuance of the Shares
by the Company, other than the filings that have been made prior to the
Closing, except that any notices of sale required to be filed by the Company
with the SEC under Regulation D of the 1933 Act, or such post-closing filings
as may be required under applicable state securities laws, which will be
timely filed within the applicable periods therefor.
2.10 COMPLIANCE WITH LAWS AND COURT ORDERS. The Company is
not in violation of any applicable law, rule, regulation, judgment,
injunction, order or decree except for violations that have not had and would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect.
3. REPRESENTATIONS AND WARRANTIES OF INVESTOR. This
Agreement is made with Investor in reliance upon the Investor's
representation and warranties to the Company, which by such Investor's
execution of this Agreement the Investor hereby confirms, that:
3.1 ORGANIZATION AND EXISTENCE. Investor is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted, except for those licenses, authorizations,
permits, consents and approvals the absence of which would not, individually
or in the aggregate, have a Material Adverse Effect.
3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by Investor of this Agreement are within the corporate powers of
Investor and have been duly authorized by all necessary corporate action on
the part of Investor. This Agreement constitutes its valid and legally
binding obligation, enforceable in accordance with its terms.
3.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The Common Stock to
be received by Investor will be acquired for investment for Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that Investor has no present intention
of selling, granting
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any participation in, or otherwise distributing the same. By executing this
Agreement, Investor further represents that Investor does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Common Stock.
3.4 CONFIDENTIALITY. Investor hereby represents, warrants
and covenants that it shall maintain as confidential all information provided
to it by the Company hereunder.
3.5 RESTRICTED SECURITIES. Investor understands that the
shares of Common Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the 1933 Act only under certain limited
circumstances. In this connection Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the 1933 Act.
3.6 LEGENDS. It is understood that the certificates
evidencing the Common Stock may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to Vical Incorporated that such registration is not required or
unless sold pursuant to Rule 144 of such Act."
(b) If required by the authorities of any state in connection
with the issuance or sale of the Common Stock the legend required by such
state authority.
3.7 REMOVAL OF LEGENDS.
(a) Any legend endorsed on a certificate pursuant to
Subsection 3.6(a) shall be removed (i) if the shares of Common Stock
represented by such certificate shall have been resold under an effective
registration statement under the 1933 Act or otherwise lawfully sold in a
public transaction, (ii) if such shares may be transferred in compliance with
Rule 144(k) promulgated under the 1933 Act, or (iii) if the holder of such
shares shall have provided the Company with an opinion of counsel, in form
and substance acceptable to the Company and its counsel, stating that a
public sale, transfer or assignment of such shares may be made without
registration.
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(b) Any legend endorsed on a certificate pursuant to
Subsection 3.6(b) shall be removed if the Company receives an order of the
appropriate state authority authorizing such removal or if the holder of such
shares provides the Company with an opinion of counsel, in form and substance
acceptable to the Company and its counsel, stating that such state legend may
be removed.
4. ADDITIONAL DELIVERIES TO INVESTOR AT CLOSING. The
obligations of Investor under Subsection 1.1 of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective if such Investor does not consent
in writing thereto:
4.1 COMPLIANCE CERTIFICATE. The President or a Vice
President of the Company shall deliver to Investor at the Closing a
certificate stating that there has been no material adverse change in the
business, affairs, prospects, operations, properties, assets or condition of
the Company since September 30, 1998 other than because of operating losses
and changes in the ordinary course of business.
4.2 SECRETARY'S CERTIFICATE. The Secretary of the Company
shall deliver to Investor at the Closing a certificate certifying that
attached thereto are true and complete copies of each of the following
documents:
(a) Restated Certificate of Incorporation as in effect on the
Closing Date, of the Company;
(b) Bylaws, as amended as in effect on the Closing Date, of
the Company; and
(c) Copies of the resolutions of the Company's Board of
Directors authorizing the execution and delivery of this Agreement and the
performance by the Company of the transactions contemplated herein.
4.3 HSR ACT. If applicable, the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, including any
extensions of said waiting period, shall have expired and any investigations
relating to the transactions contemplated herein that may have been opened by
either the Department of Justice or the Federal Trade Commission (by means of
a request for additional information or otherwise) shall have been terminated.
5. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
5.1 CERTAIN ADDITIONAL DEFINITIONS. As used in this
Agreement, the following capitalized terms shall have the following meanings:
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"PROSPECTUS" shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all
other amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and such registration
statement or document becoming effective under the 1933 Act.
"REGISTRABLE SECURITIES" shall mean (i) the Common Stock
purchased by the Investor pursuant to this Agreement; and (ii) any Common
Stock issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such Common Stock.
"REGISTRATION STATEMENT" shall mean any registration statement
of the Company that covers any of the Registrable Securities pursuant to the
provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
5.2 REGISTRATION. The Company will use its reasonable best
efforts to effect a registration to permit the sale of the Registrable
Securities as described below, and pursuant thereto the Company will:
(a) prepare and file at such time as is mutually agreed upon
by the Company and Investor, and use its reasonable best efforts to
thereafter have declared effective by the SEC, a Registration Statement on
Form S-3 (or if the use of Form S-3 or any successor form is unavailable, on
another appropriate form, including but not limited to, Forms S-1, S-2 or
their successor forms) relating to resale of all of the shares of the
Registrable Securities and use its reasonable best efforts to cause such
Registration Statement to remain continuously effective for a period which
will terminate when all Registrable Securities covered by such Registration
Statement, as amended from time to time, have been sold or when the
Registrable Securities may be sold under Rule 144(k) under the 1933 Act;
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement and the Prospectus
and supplements to the Prospectus as may be necessary to keep such
Registration Statement effective for the period specified in
Subsection 5.2(a) and to comply with the provisions
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of the 1933 Act and the 1934 Act with respect to the distribution of all
Registrable Securities; provided, however, that with respect to
Subsections 5.2(a) and 5.2(b), before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will
furnish to the Investor copies of all such documents proposed to be filed,
which documents will be subject to the review and comment of Investor's
counsel;
(c) notify Investor promptly, and confirm such notice in
writing, (i) when the Prospectus or any supplement or post-effective
amendment has been filed, and, with respect to the Registration Statement or
any post-effective amendment, when the same has become effective, (ii) of any
request by the SEC for amendments or supplements to the Registration
Statement or Prospectus or for additional information, (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, and (iv) of
the receipt by the Company of any notification with respect to the suspension
of the qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose;
(d) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at the
earliest possible moment;
(e) furnish to the Investor, without charge, at least one
copy of the Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, all, upon a Investor's request,
documents incorporated therein by reference and all exhibits thereto
(including those incorporated by reference);
(f) deliver to the Investor, without charge, as many copies
of the Prospectus (including each preliminary prospectus) and any amendment
or supplement thereto as it may reasonably request in order to facilitate the
disposition of the Registrable Securities;
(g) cause all Registrable Securities covered by the
Registration Statement to be listed on each securities exchange or market on
which similar securities issued by the Company are then listed, and if the
securities are not so listed to use its reasonable best efforts promptly to
cause all such securities to be listed on either the New York Stock Exchange,
the American Stock Exchange or the Nasdaq National Market;
(h) use reasonable best efforts to qualify or register the
Registrable Securities for sale under (or obtain exemptions from the
application of) the Blue Sky laws of such jurisdictions as are applicable.
The Company shall not be required to qualify as a foreign corporation or to
file a
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general consent to service of process in any such jurisdiction where it is
not presently qualified or where it would be subject to general service of
process or taxation as a foreign corporation in any jurisdiction where it is
not now so subject;
(i) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC under the 1933 Act and the
1934 Act and take such other actions as may be reasonably necessary to
facilitate the registration of the Registrable Securities hereunder and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning
with the first day of the Company's first full calendar quarter after the
effective date of the Registration Statement, which earnings statement will
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158
thereunder;
(j) notify the Investor, at any time when a Prospectus
relating thereto is required to be delivered under the 1933 Act, of the
happening of any event as a result of which the Prospectus included in such
Registration Statement contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not misleading, and,
at the request of the Investor, the Company will prepare a supplement or
amendment to such Prospectus so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus will not contain
an untrue statement of a material fact or omit to state any fact necessary to
make the statements therein not misleading;
(k) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such Registration
Statement;
(l) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the Investor, or the underwriter(s) or other Person(s) administering the
offering, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities;
(m) make available for inspection by the Investor, any
underwriter or other Person participating in any disposition pursuant to such
Registration Statement and any attorney, accountant or other agent retained
by the Investor or underwriter, financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by the Investor, underwriter, attorney,
accountant or agent in connection with such Registration Statement;
(n) if any such registration or comparable statement refers
to the Investor by name or otherwise as the holder of any
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securities of the Company and if in its sole and exclusive judgment, the
Investor is or might be deemed to be an underwriter or a controlling person
of the Company, the Investor will have the right to require (i) the insertion
therein of language, in form and substance satisfactory to the Investor and
presented to the Company in writing, to the effect that the holding by the
Investor of such securities is not to be construed as a recommendation by the
Investor of the investment quality of the Company's securities covered
thereby and that such holding does not imply that Investor will assist in
meeting any future financial requirements of the Company, or (ii) in the
event that such reference to the Investor by name or otherwise is not
required by the 1933 Act or any similar federal statute then in force, the
deletion of the reference to the Investor;
(o) use its best efforts to cause such Registrable Securities
covered by such Registration Statement to be registered with or approved by
such other United States governmental agencies or authorities as may be
necessary to enable the sellers thereof to consummate the disposition of such
Registrable Securities; provided, however, that the Company shall not be
required for any such purpose to qualify generally to do business as a
foreign corporation in any jurisdiction where, but for the requirements of
this Subsection 5.2(o), it would not be obligated to qualify or to consent to
general service of process in any such jurisdiction;
(p) furnish the Investor with a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters; and
(q) furnish the Investor with opinions of counsel covering
all such matters customarily covered regarding the registration of the
Company's securities.
Investor shall furnish to the Company such information
regarding the distribution of such securities as the Company may from time to
time reasonably request in writing.
If at any time, the Company delivers a certificate in writing
to the Investor, to the effect that a delay in the sale of Registrable
Securities by the Investor under the Registration Statement is necessary
because a sale pursuant to such Registration Statement in its then current
form would reasonably be expected to constitute a violation of the federal
securities laws the Investor shall agree not to sell or otherwise transfer
such Registrable Securities for the period of time specified by the Company
in its certificate. In no event shall such delay exceed ten (10) business
days; PROVIDED, HOWEVER, that if, prior to the expiration of such ten (10)
business day period, the Company delivers a certificate in writing to the
Investor to the effect that a further delay in such sale beyond such ten (10)
business day period is necessary because a sale pursuant to such
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Registration Statement in its then current form would reasonably be expected
to constitute a violation of the federal securities laws, the Company may
refuse to permit the Investor to resell any Registrable Securities pursuant
to such Registration Statement for an additional period not to exceed
five (5) business days.
5.3 REGISTRATION EXPENSES. All expenses incident to the
Company's performance of or compliance with this Agreement, including without
limitation all registration and filing fees, fees with respect to the filings
required to be made with the National Association of Securities Dealers,
Inc., fees and expenses of compliance with the securities or blue sky laws,
printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of counsel for the Company, fees and disbursements of all
independent certified public accountants of the Company, fees and expenses
incurred in connection with the listing of the securities, rating agency fees
and the fees and expenses of any person, including special experts, retained
by the Company, will be borne by the Company, regardless of whether the
Registration Statement becomes effective; provided, however, that the Company
will not be required to pay discounts or commissions of underwriters, selling
brokers, dealer managers or similar securities industry professionals
relating to the distribution of the Registrable Securities or fees or
disbursements of any counsel to the Investor.
5.4 RULE 144. The Company covenants that it will file the
reports required to be filed by it under the 1933 Act and the 1934 Act and
the rules and regulations thereunder, and it will take such further action as
the Investor may reasonably request, all to the extent required to enable
Investor to sell Registrable Securities without registration under the 1933
Act in reliance on the exemption provided by Rule 144 or Rule 144A under the
1933 Act or any successor or similar rules or statues. Upon the request of
the Investor, the Company will deliver to the Investor a written statement as
to whether the Company has complied with such information and requirements.
5.5 SELECTION OF UNDERWRITER. If the registration is for a
registered public offering involving an underwriting, the Investor and the
Company shall enter into an underwriting agreement in customary form with an
underwriter or underwriters mutually agreed upon by the Investor and the
Company; provided however, that the Investor will not be required to make any
representations or warranties to the Company or to the underwriter(s) (other
than representations and warranties regarding the Investor's intended method
of distribution) or to undertake any indemnification obligations to the
Company or the underwriter(s) with respect thereto except as otherwise
provided in the Agreement.
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5.6 INDEMNIFICATION.
(a) The Company will indemnify and hold harmless the Investor
and each of its officers, directors and partners, and each person controlling
such Investor, with respect to which such registration, qualification or
compliance has been effected pursuant to this Agreement, and each
underwriter, if any, and each person who controls any underwriter of the
Registrable Securities held by or issuable to such Investor, against all
claims, losses, expenses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any Prospectus, offering circular
or other document (including any related Registration Statement, notification
or the like) incident to any such registration, qualification or compliance,
or based on any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statement therein
not misleading, or any violation or alleged violation by the Company of the
1933 Act, the 1934 Act and any state securities law or any rule or regulation
promulgated under the 1933 Act, the 1934 Act or any state securities law and
relating to action or inaction required of the Company in connection with any
such registration, qualification or compliance, and will reimburse such
Investor, each of its officers, directors and partners, and each person
controlling such Investor, each such underwriter and each person who controls
any such underwriter, within a reasonable amount of time after incurred, for
any reasonable legal and any other expenses incurred by them in connection
with investigating, defending or settling any such claim, loss, damage,
liability or action; provided, however, that the indemnity agreement
contained in this Subsection 5.6(a) shall not apply to amounts paid in
settlement of any such claim, loss, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld); and provided further, that the Company
will not be liable in any such case to the extent that any such claim, loss,
damages or liability arises out of or is based on any untrue statement or
omission based upon written information furnished to the Company by such
Investor, controlling person or underwriter specifically for use therein.
(b) The Investor will, if Registrable Securities held by or
issuable to such Investor are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify and
hold harmless the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a
Registration Statement, and each person who controls the Company within the
meaning of the 1933 Act, against all claims, losses, expenses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained
in any such Registration Statement, Prospectus, offering circular or other
document, or any omission
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(or alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, and will
reimburse the Company, such director, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damages, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such Registration Statement, Prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Company by the Investor specifically for
use therein; provided, however, that the indemnity agreement contained in
this Subsection 5.6(b) shall not apply to amounts paid in settlement of any
such claim, loss, damage, liability or action if such settlement is effected
without the consent of the Investor (which consent shall not be unreasonably
withheld); and provided further, that the total amount for which the Investor
shall be liable under this Subsection 5.6(b) shall not in any event exceed
the aggregate proceeds received by the Investor from the sale of Registrable
Securities held by such Investor in such registration.
(c) Each party entitled to indemnification under this
Subsection 5.6 (the "Indemnified Party") shall give notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom; provided
that counsel for the Indemnifying Party, who shall conduct the defense of
such claim or litigation, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified Party may
participate in such defense at such party's expense; and provided further,
that the failure of any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying party of its obligations hereunder, unless
such failure resulted in prejudice to the Indemnifying Party; and provided
further, that an Indemnified Party shall have the right to retain separate
counsel, with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential
differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of
each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation.
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(d) The obligations of the Company and Investor under this
Subsection 5.6 shall survive the completion of any offering of Registrable
Securities in a Registration Statement under Section 5, and otherwise and
will survive the transfer of the Registrable Securities.
6. MISCELLANEOUS.
6.1 SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
6.2 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California (irrespective of its
choice of law principles).
6.3 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
6.4 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
6.5 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified,
or if sent by telex or telecopier, upon receipt of the correct answerback, or
upon deposit with the United States Post Office, by registered or certified
mail, or upon deposit with an overnight air courier, in each case postage
prepaid and addressed to the party to be notified at the address as follows,
or at such other address as such party may designate by ten days' advance
written notice to the other party:
If to the Company:
Vical Incorporated
9373 Towne Centre Drive
Suite 100
San Diego, CA 92121
Attn: Secretary
Fax: (619) 646-1150
Phone: (619) 453-9900
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with a copy to:
Pillsbury Madison & Sutro LLP
P.O. Box 7880
San Francisco, CA 94104
Attn: Thomas E. Sparks, Jr.
Fax: (415) 983-1200
Phone: (415) 983-1000
If to the Investor:
Pfizer Inc
Groton Plant and Research Center
Eastern Point Road
Groton, CT 06340-5146
Attn: Mark DellaPorta
Fax: (860) 441-1738
Phone: (860) 441-1991
6.6 FINDERS' FEE. Each party represents that it neither is
nor will be obligated for any finders' fee or commission in connection with
this transaction. Investor agrees to indemnify and hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Investor or any of its officers,
partners, employees or representatives is responsible.
The Company agrees to indemnify and hold harmless Investor
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
6.7 EXPENSES. The Company and the Investor shall pay their
respective costs and expenses incurred with respect to the negotiation,
execution, delivery and performance of this Agreement.
6.8 AMENDMENTS AND WAIVERS. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the
Investor. Any amendment or waiver effected in accordance with this paragraph
shall be binding upon each holder of any securities purchased under this
Agreement at the time outstanding, each future holder of all such securities,
and the Company.
6.9 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of this Agreement shall
be interpreted as if such
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provision were so excluded and shall be enforceable in accordance with its
terms.
6.10 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied upon by either party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
6.11 OTHER AGREEMENTS. The Company will not enter into any
other agreement with respect to its securities which violates the rights
granted to the Investor in this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
VICAL INCORPORATED
By /s/ ALAIN B. SCHREIBER
----------------------------------
Alain B. Schreiber, M.D.
Title President & C.E.O.
------------------------------
PFIZER INC
By /s/ GEORGE A. MILNE
----------------------------------
George A. Milne, Ph.D.
Title President, Central Research
------------------------------
- 16 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEETS AND STATEMENTS OF OPERATIONS OF THE COMPANY'S FORM 10-Q FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,817
<SECURITIES> 33,817
<RECEIVABLES> 1,059
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 45,998
<PP&E> 6,690
<DEPRECIATION> 5,083
<TOTAL-ASSETS> 49,192
<CURRENT-LIABILITIES> 3,737
<BONDS> 651
0
0
<COMMON> 162
<OTHER-SE> 44,642
<TOTAL-LIABILITY-AND-EQUITY> 49,192
<SALES> 0
<TOTAL-REVENUES> 3,280
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,614
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 33
<INCOME-PRETAX> (809)
<INCOME-TAX> 0
<INCOME-CONTINUING> (809)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (809)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
