<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended March 31, 1998, or
[ ] Transition Period Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From ______ to ______.
Commission file number 0-19591
CYTEL CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 33-0245076
-------- ----------
(State of Incorporation) (I.R.S. Employer
Identification No.)
3525 John Hopkins Court
San Diego, California 92121
---------------------------
(Address of principal executive offices)
(619) 552-3000
(Registrant's telephone number)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock: $.01 par value, 32,867,887 shares outstanding as of March 31, 1998
<PAGE>
CYTEL CORPORATION
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
March 31, 1998 and December 31, 1997....................1
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1998 and 1997......2
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1998 and 1997......3
Notes to Condensed Consolidated Financial Statements....4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.....................6
PART II. OTHER INFORMATION
Items 1 to 6.........................................................9
Signatures..........................................................11
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
1998 1997
--------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 11,714,000 $ 6,187,000
Short-term investments 10,915,000 11,616,000
Current portion of restricted cash 375,000 375,000
Prepaids and other current assets 1,548,000 1,312,000
--------------- ---------------
Total current assets 24,552,000 19,490,000
Restricted cash 613,000 656,000
Property and equipment, net 2,015,000 1,704,000
Deposits and other assets 7,418,000 6,297,000
--------------- ---------------
Total assets $ 34,598,000 $ 28,147,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 850,000 $ 755,000
Deferred contract revenues 124,000 78,000
Accrued payroll and related expenses 470,000 463,000
Current portion of note payable to bank 375,000 375,000
Current portion of obligations under capital leases and equipment notes payable 14,000 40,000
--------------- ---------------
Total current liabilities 1,833,000 1,711,000
Deferred rent payable 1,313,000 1,388,000
Note payable to bank 563,000 656,000
Minority interest in consolidated subsidiary 2,151,000 -
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, 659,898 shares issued and outstanding at March 31, 1998 7,000 -
Common stock, $.01 par value, 50,000,000 shares
authorized, 32,867,887 and 32,222,497 shares issued and
outstanding at March 31, 1998 and December 31, 1997, respectively 329,000 322,000
Additional paid-in capital 139,746,000 131,288,000
Accumulated deficit (111,308,000) (107,188,000)
Unrealized losses on available-for-sale securities (36,000) (30,000)
--------------- ---------------
Total stockholders' equity 28,738,000 24,392,000
--------------- ---------------
Total liabilities and stockholders' equity $ 34,598,000 $ 28,147,000
=============== ===============
</TABLE>
Note: The balance sheet at December 31, 1997 has been derived from the audited
consolidated financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
See notes to condensed consolidated financial statements.
1
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended March 31,
1998 1997
----------------- -----------------
(Unaudited)
<S> <C> <C>
REVENUES
Research and development $ - $ 1,125,000
Research grants and other income 470,000 540,000
----------------- -----------------
470,000 1,665,000
OPERATING EXPENSES
Research and development 3,786,000 4,527,000
General and administrative 1,106,000 835,000
----------------- -----------------
4,892,000 5,362,000
Minority interest in net loss of consolidated subsidiary 25,000 -
Interest income, net 278,000 269,000
----------------- -----------------
Net loss $ (4,119,000) $ (3,428,000)
================= =================
Net loss per share - basic and diluted $ (0.13) $ (0.14)
================= =================
Shares used in computing net loss per share - basic
and diluted 32,594,805 25,105,999
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
CYTEL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three months ended March 31,
1998 1997
----------------- -----------------
OPERATING ACTIVITIES (Unaudited)
<S> <C> <C>
Net loss $ (4,119,000) $ (3,428,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 168,000 260,000
Deferred rent (75,000) (49,000)
Deferred revenue 46,000 (646,000)
Minority interest in consolidated subsidiary (25,000) -
Gain on sale of equipment - (35,000)
Changes in operating assets and liabilities:
Other current assets (236,000) (68,000)
Accounts payable and accrued liabilities 95,000 (595,000)
Accrued payroll and related expenses 7,000 (216,000)
----------------- -----------------
Net cash used in operating activities (4,139,000) (4,777,000)
INVESTING ACTIVITIES
Purchases of available-for-sale securities (7,754,000) (7,480,000)
Maturities of available-for-sale securities 4,774,000 3,995,000
Sales of available-for-sale securities 3,673,000 8,030,000
Proceeds from the sale of equipment - 35,000
Proceeds from the sale of assets of subsidiary - 161,000
Property and equipment (479,000) (79,000)
Deposits and other assets (221,000) (91,000)
----------------- -----------------
Net cash (used in) provided by investing activities (7,000) 4,571,000
FINANCING ACTIVITIES
Principal payments under capital lease obligations and equipment notes payable (26,000) (150,000)
Principal payments on note payable to bank (93,000) (93,000)
Restricted cash for note payable collateral 43,000 93,000
Net proceeds from issuance of preferred stock 9,700,000 -
Net proceeds from issuance of common stock 49,000 117,000
----------------- -----------------
Net cash provided by (used in) financing activities 9,673,000 (33,000)
Increase (decrease) in cash and cash equivalents 5,527,000 (239,000)
Cash and cash equivalents at beginning of period 6,187,000 3,231,000
----------------- -----------------
Cash and cash equivalents at end of period $ 11,714,000 $ 2,992,000
================= =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 21,000 $ 38,000
================= =================
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Unrealized losses on available-for-sale securities $ (6,000) $ (58,000)
================= =================
Issued common stock for non-exclusive license agreement for patent rights $ 900,000 -
================= =================
Promissory note and stock received for sale of assets of subsidiary $ - 800,000
================= =================
See notes to condensed consolidated financial statements.
</TABLE>
3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CYTEL CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The interim unaudited condensed consolidated financial statements
contained herein have been prepared in accordance with generally accepted
accounting principles for interim financial information. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In management's
opinion, the unaudited information includes all adjustments, consisting only of
normal recurring accruals, necessary for a fair presentation of the financial
position, results of operations and cash flows for the periods presented.
Interim results are not necessarily indicative of results to be expected for the
full year. The financial statements should be read in conjunction with the
audited consolidated financial statements and footnotes thereto included in the
Registrant's Form 10-K for the year ended December 31, 1997.
The condensed consolidated financial statements include the accounts of
Cytel Corporation and its subsidiaries (Cytel or the Company). All significant
intercompany accounts and transactions have been eliminated. The minority
interest calculation is based on G.D. Searle & Co.'s (Searle) actual ownership
percentage in Epimmune Inc. (Epimmune) of 13.4%. The calculation does not
include the potential additional ownership interest that would result from the
conversion of Searle's investment in Cytel's preferred stock which is
convertible into Epimmune common stock.
Basic and diluted net loss per share is computed using the weighted
average number of common shares outstanding during the period. All potential
common shares have been excluded from the diluted net loss per share
calculations as they are antidilutive.
Effective January 1, 1998, the Company adopted the Statement of
Financial Accounting Standards No. 130 (SFAS No. 130), "Reporting Comprehensive
Income". SFAS No. 130 requires that all components of comprehensive income,
including net income, be reported in the financial statements in the period in
which they are recognized. Comprehensive income is defined as the change in
equity during a period from transactions and other events and circumstances from
non-owner sources. Net income and other comprehensive income, including foreign
currency translation adjustments and unrealized gains and losses on investment
shall be reported, net of their related tax effect, to arrive at comprehensive
income. Comprehensive loss is not materially different than net loss for the
periods presented.
In June 1997, the Financial Accounting Standards Board issued SFAS No.
131, "Disclosure about Segments of an Enterprise and Related Information", which
is effective for years beginning after December 15, 1997. SFAS No. 131 amends
the requirements for public enterprises to report financial and descriptive
information about its reportable operating segments. Operating segments, as
defined by SFAS No. 131, are components of an enterprise for which financial
information is available and evaluated regularly by the Company in deciding how
to allocate resources and in assessing performance. The financial information is
required to be reported on the basis that is used internally for evaluating the
segment performance. The Company will adopt the new requirements retroactively
in 1998. Management has not completed its review of SFAS No. 131, but
anticipates that its adoption will not affect results of operations or financial
position, but possibly will require disclosure of segment information.
-4-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
2. Research and Development Agreements
In September 1997 as part of the letter of intent, Searle purchased
2,222,222 shares of Cytel common stock for $5 million for an exclusive right to
negotiate a definitive agreement. The Company then invested $6.5 million in cash
and transferred $1.5 million in other assets to fund Epimmune. In February 1998,
Epimmune entered into a collaborative agreement with Searle to develop
immune-stimulating products for the treatment of cancer. Under the terms of the
agreement, Epimmune has granted Searle exclusive worldwide rights to its epitope
and PADRE technologies in the cancer field, excluding rights previously granted
to Takara for the ex vivo treatment of cancer in Japan.
As part of the agreement, Searle purchased 1,032,149 shares of
Epimmune's convertible preferred stock for $6.1 million and 659,898 shares of
Cytel's convertible preferred stock for $3.9 million. Cytel simultaneously
purchased 659,898 shares of Epimmune's convertible preferred stock for $3.9
million. Searle has the right to convert the Cytel convertible preferred stock
into Cytel common stock after three years or to convert to Epimmune common stock
at any time. In addition to the $15 million investment made to date, Searle will
make milestone payments to Epimmune upon achievement of certain preclinical and
clinical milestones. Searle has the option to deliver shares of the Cytel
convertible preferred stock in lieu of up to 50% of certain milestone payments.
Searle will also pay royalties to Epimmune on product sales. In addition, Searle
has rights of first refusal with respect to newly-issued securities of Cytel,
enabling Searle to maintain its percentage ownership in Cytel. As of March 31,
1998, Cytel owned 86.6% of the outstanding capital stock of Epimmune, and Searle
owned 13.4%.
In February 1998, the Company entered into a non-exclusive licensing
agreement with Glycomed Incorporated (Glycomed), a wholly-owned subsidiary of
Ligand Pharmaceuticals Incorporated, under which the Company will receive rights
to a family of Glycomed patents relating to certain carbohydrate compounds for
the treatment of acute inflammation, including the Company's most advanced
product, Cylexin. The Company paid a license fee of $900,000 consisting of
591,327 shares of the Company's common stock at $1.52 per share. Glycomed will
receive milestone payments upon the first new drug application (NDA) and the
first FDA approval of each licensed product. These payments may also be made in
Company stock, at the Company's option. Glycomed will also receive royalties on
worldwide net sales of a licensed or sub-licensed product.
In September 1996, the Company entered into a collaborative agreement
with Baxter Healthcare Corporation's Nextran unit (Nextran) to develop a
carbohydrate product for use in xenotransplantation. Under the agreement, the
Company will manufacture and sell a carbohydrate which Nextran will incorporate
into a xenotransplant product. Nextran made an up-front payment and purchased
shares of the Company's common stock for the right to enter into an exclusive
supply agreement. In January 1997, the Company achieved a milestone with
delivery of the initial batch of a bioactive carbohydrate to Nextran. As a
result, Nextran made the first milestone payment. In December 1997, Nextran paid
an option fee and purchased additional shares of the Company's common stock for
the right to extend and expand the original agreement. Nextran will make
additional payments to the Company upon option exercise, achievement of
milestones and supply of carbohydrate.
In December 1995, the Company entered into a collaborative agreement
with Abbott Laboratories (Abbott) to develop manufacturing processes for the
production of certain carbohydrates for use in nutritional products. Abbott paid
a $2 million non-refundable fee in January 1996 for an option to obtain a
worldwide license for limited applications under the Company's patents and
know-how in the area of carbohydrate synthesis. Abbott will make payments to the
Company if production and commercial milestones are achieved and will pay
royalties if product is sold. In December 1996, Abbott made the first milestone
payment to the Company in the amount of $2 million. An additional option fee of
$250,000 was earned in August 1997 and paid in two equal installments in
September 1997 and January 1998.
-5-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Under two agreements with Takara Shuzo Co., Ltd. Biomedical Group
(Takara), which were assigned to Epimmune in October 1997, Epimmune's technology
is being applied to fungal disease targets and cellular therapy for the
treatment of cancer. Under the anti-fungal collaboration initiated in June 1994,
Takara obtained rights to any anti-fungal products resulting from the
collaboration for commercialization in Japan. Epimmune has the right to develop
products in North America, and the companies share rights in the rest of the
world. Research in the anti-fungal field, using Epimmune technology, is now
being conducted independently by Takara in Japan. Under the cellular therapy
collaboration initiated in October 1994, Takara obtained rights to Epimmune's
technology relevant to the development of ex vivo cellular therapies for the
treatment of cancer in Japan. Takara will pay royalties to Epimmune on sales
from products resulting from collaboration under both agreements.
In May 1995, the Company entered into a collaborative agreement with
Schwarz Pharma AG (Schwarz) for the development and marketing of carbohydrate
selectin blockers, including Cylexin. Schwarz funded 75% of clinical development
costs associated with the Phase II acute myocardial infarction trial from 1995
until termination of the agreement. In April 1997, the Company and Schwarz
agreed to terminate their collaboration.
In October 1991, the Company entered into a five-year collaborative
agreement with Sumitomo Pharmaceuticals Co., Ltd. (Sumitomo) to develop drugs
based on the Company's technology for the treatment of white blood cell-mediated
diseases and cancer. Under the terms of the agreement, Sumitomo provided
research support payments of $15 million. In January 1997, the collaborative
research agreement expired. Although Sumitomo has rights to Cylexin in the
Pacific Rim, it has stated that it will not pursue Cylexin for the CPB
indication and may not pursue Cylexin for any indication.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Except for the historical information contained herein, the following
discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, without limitation, those discussed in this section and those discussed
in the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1997.
Since its inception in July 1987, the Company has devoted substantially
all of its resources to the discovery and development of its potential
therapeutic products. To date, the Company has not received any revenues from
the sale of products. The Company has funded its research and development
primarily from equity-derived working capital and through strategic alliances
with other companies. The Company has been unprofitable since its inception and
expects to incur substantial operating losses for the next several years.
As of March 31, 1998, the Company's accumulated deficit was $111.3 million.
RESULTS OF OPERATIONS
Revenues for the three months ended March 31, 1998 were $0.5 million as
compared to $1.7 million for the same period in 1997. There were no research and
development revenues for the first quarter of 1998, and for the first quarter of
1997, research and development revenues mainly consisted of funding received
under the Company's collaborative research agreements with Abbott and Nextran
for milestones achieved. Research and development revenues for 1998 are
dependent upon the achievement of milestones under existing collaboration
agreements or the initiation of new collaborative research and development
relationships. There can be no assurance
-6-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
that the Company will be able to achieve such milestones on a timely basis, if
at all, or to establish or maintain any such collaborative relationships.
Research grant revenues for the three months ended March 31, 1998 decreased
slightly from the comparable period in 1997 due to a lesser number of active
grants in 1998 as compared to 1997.
Research and development expenses for the three months ended March 31,
1998 decreased by $0.7 million from the same period in 1997. The decrease
reflects lower costs due to a reduction in the number of clinical trials the
Company was conducting. During the remainder of 1998, clinical trial costs are
expected to increase due to greater patient enrollment in the Phase II/III study
of the Company's lead drug candidate, Cylexin, for the prevention of reperfusion
injury in infants following cardiopulmonary bypass surgery.
General and administrative expenses for the three months ended March
31, 1998 increased $0.3 million compared to the same period in 1997 due to
additional expenses of Epimmune, primarily for legal expenses for the Searle
collaboration completed in February 1998.
Net interest income was $0.3 million for the first quarter of 1998 and
1997 due to comparable average cash balances and similar interest rates earned
year to year.
The Company expects to incur substantial operating losses over the next
several years due to continuing and increasing expenses associated with its
research and development programs, including preclinical testing and clinical
trials. Operating losses may fluctuate from quarter to quarter as a result of
differences in the amount and timing of revenues earned and expenses incurred,
and such fluctuations may be substantial.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed operations since inception primarily through
private placements of its equity securities, two public common stock offerings,
revenues under collaborative research and development agreements, grant revenues
and interest income. In February 1998, Searle, one of the Company's research and
development collaborators, made an additional equity investment in the Company
and the Company's subsidiary, Epimmune, totaling $10 million. Also in February
1998, the Company issued $0.9 million in common stock in exchange for a
non-exclusive license agreement with Glycomed. Through March 1998, the Company
has raised approximately $142.2 million from the sale of equity securities. The
Company has financed its laboratory equipment and research and office facilities
primarily through capital and operating lease arrangements.
The Company had net working capital of $22.7 million as of March 31,
1998 compared to $17.8 million at December 31, 1997. Cash, cash equivalents,
short-term investments and restricted cash increased to $23.6 million as of
March 31, 1998 as compared to $18.8 million at December 31, 1997. Net cash used
in operating activities was $4.1 million and $4.8 million, respectively, for the
three months ended March 31, 1998 and 1997, respectively. The decrease in net
cash used in operating activities was due primarily to the timing of cash
receipts under existing collaborations in the prior year and the pay down of
current liabilities in the first quarter of 1997 versus the increase in accounts
payable and accrued liabilities for the same period in 1998.
For the three months ended March 31, 1998, the Company acquired an
aggregate of $0.5 million in capital equipment as compared to $0.1 million in
the first quarter of 1997. This increase is attributable to leasehold
improvements and equipment purchases for the new manufacturing facility which is
anticipated to be ready for occupancy during the second quarter of 1998.
The Company's cash, cash equivalents and short-term investments are
expected to decline primarily due to the continued clinical development of its
therapeutic product candidates and the
-7-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION
conduct of its research programs. While the Company's investments may
periodically reflect unrealized losses, management attempts to schedule the
maturities of the Company's investments to coincide with the Company's expected
cash requirements.
The Company expects to incur substantial additional research and
development expenditures, including costs related to preclinical testing,
clinical trials and manufacturing, as well as marketing and distribution
expenses. It is the Company's intention to seek additional collaborative
research and development relationships with suitable corporate partners. There
can be no assurance that any agreements that may result from these discussions
will successfully reduce the Company's funding requirements. Additional equity
or debt financing will be required, and there can be no assurance that these
funds will be available on favorable terms, if at all. If adequate funds are not
available, the Company may be required to delay, scale back or eliminate one or
more of its drug discovery or development programs or obtain funds through
arrangements with collaborative partners or others that may require the Company
to relinquish rights to certain of its technologies, product candidates or
products that the Company would not otherwise relinquish.
If additional financing is not available, Cytel anticipates its
existing available cash, cash equivalents and short-term investments, investment
income and research and development funding from collaborative agreements and
research grants will be adequate to satisfy its capital requirements and fund
operating losses through late 1998. The estimate for the period for which the
Company expects its available cash balances, investment income and estimated
cash flow from collaborative agreements and research grants to be sufficient to
meet its capital requirements is a forward-looking statement that involves risks
and uncertainties as set forth herein and in the Company's Form 10-K for the
year ended December 31, 1997. The Company's future capital requirements depend
on many factors, including continued scientific progress in its drug discovery
programs, the magnitude of these programs, progress with 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, changes in the existing collaborative
research relationships, the ability of the Company to establish and maintain
development arrangements, the cost of manufacturing scale-up and effective
commercialization activities and arrangements.
The Company has determined that it will need to update some of its
off-the-shelf applications software so that its computer systems will function
properly with respect to dates in the year 2000 and beyond. The Company
currently expects the project to be substantially complete in early 1999. The
cost is expected to be minimal and absorbed through normal operating costs of
software maintenance contracts currently in place for these third party software
products. The project is not expected to have a significant effect on
operations.
As is typical in the biotechnology industry, the commercial success of
the Company will depend in part on the Company neither infringing patents issued
to competitors nor breaching the technology licenses upon which the Company's
products might be based. The Company's business is also subject to other
significant risks, including the uncertainties associated with the lengthy
regulatory approval process and with potential competition from other products.
Even if the Company's products appear promising at an early stage of
development, they may not reach the market for a number of reasons. Such reasons
include, but are not limited to, the possibilities that the potential products
will be found ineffective during clinical trials, may fail to receive necessary
regulatory approvals, may be difficult to manufacture on a large scale, or may
be uneconomical to market.
-8-
<PAGE>
PART II. OTHER INFORMATION
1. Legal Proceedings
The Company is not a party to any legal proceedings.
2. Change in Securities
During the period covered by this Form 10-Q, the company sold and
issued the following securities which were not registered under the Securities
Act of 1933, as amended (the "Securities Act"):
(1) In February 1998, the Company entered into a Share Purchase
Agreement with G.D. Searle & Co. ("Searle") in connection with a collaboration
between Epimmune and Searle. Pursuant to such agreement, the Company issued
659,898 shares of Series A Preferred Stock of the Company to Searle at a
purchase price of $5.91 for an aggregate purchase price $3.9 million.
(2) In March 1998, the Company issued 591,327 shares of common stock
of the Company to Glycomed Incorporated pursuant to the terms of a license
agreement between the Company and Glycomed Incorporated.
The sale and issuance of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act by virtue of
Section 4(2) and/or Regulation D promulgated thereunder.
The recipients represented their intention to acquire the securities
for investment purposes only and not with a view to the distribution thereof.
Appropriate legends are affixed to the stock certificates issued in such
transactions. All recipients received adequate information about the Company.
3. Defaults Upon Senior Securities
None.
4. Submission of Matters to a Vote of Security Holders
None.
5. Other Information
None.
-9-
<PAGE>
PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K
(a) Exhibits.
Exhibit 10.55 Form of Severance Benefit Agreement between
Registrant and the following executive officers:
Virgil D. Thompson; Robert L. Roe, M.D.; James C.
Paulson, Ph.D; Edward C. Hall; Jennifer Lorenzen.
Exhibit 10.56 License and Collaboration Agreement between
Epimmune Inc. and G.D. Searle & Co., dated
February 27, 1998 (with certain confidential
portions deleted) (1)
Exhibit 10.57 Series B Preferred Stock Purchase Agreement
between Epimmune Inc. and G.D. Searle & Co. dated
February 27, 1998.
Exhibit 10.58 Series B-1 Preferred Stock Purchase Agreement
between Registrant and Epimmune Inc. dated
February 27, 1998.
Exhibit 10.59 Stock Purchase Agreement between Registrant and
G.D. Searle & Co. dated February 27, 1998.
Exhibit 27 Financial Data Schedule
(1) Certain confidential portions deleted subject to the
Application for Confidential Treatment pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934 filed by the Registrant with the Commission
concurrently herewith.
(b) Reports on Form 8-K.
None.
-10-
<PAGE>
CYTEL CORPORATION
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CYTEL CORPORATION
Date: May 15, 1998 By: /s/ Edward C. Hall
--------------------------------------
Edward C. Hall
Vice President-Finance
Chief Financial Officer
(Duly Authorized Officer and Principal
Financial & Accounting Officer)
-11-
<PAGE>
EXHIBIT 10.55
RE: SEVERANCE BENEFITS AGREEMENT
Dear :
This letter will memorialize our agreement as to benefits to which you will be
entitled upon termination of your employment by Cytel Corporation (the Company)
under the circumstances described in this Agreement.
We agree that you are employed by the Company as an at-will employee and that
either you or the Company has the right at any time to terminate your employment
with the Company, with or without cause or advance notice, for any reason or for
no reason.
For purposes of this Agreement, the following terms will have the meanings set
forth below:
"BASE SALARY" means your salary (excluding bonus, any other incentive or
other payments and stock option exercises) paid by the Company in
consideration for your service during the 12 months prior to the
termination of your employment which is includable in your gross income
for federal income tax purposes or which would have been includable in
gross income except for an election either under Section 125 or 402(e)(3)
of the Internal Revenue Code of 1986, as amended (the Code), or under the
terms of a nonqualified deferred compensation arrangement sponsored by
the Company.
"CAUSE" means (I) your material breach of any provision of this
Agreement; or (ii) your engaging or in any manner participating in any
activity which is directly competitive with or intentionally injurious to
the Company or which violates any provision of any confidential
information agreement or nonsolicitation agreement between you and the
Company; or (iii) your commission any fraud against the Company; or (iv)
your intentional improper use or appropriation for your personal use or
benefit of any funds or properties of the Company not authorized by the
Board of Directors of the Company or an authorized committee of such
Board of Directors to be so used or appropriated; or (v) your conviction
of any crime involving dishonesty or moral turpitude.
"BENEFIT" means any payment received or to be received by you pursuant to
this Agreement.
Severance Letter, Page 1
<PAGE>
"CHANGE IN CONTROL" of the Company will be deemed to have occurred if and
when (I) any person or entity (other than the Company) or group of
persons and/or entities acting in concert acquires, directly or
indirectly, beneficial ownership of more than 50% of the outstanding
shares of voting stock of the Company; or (ii) the Company is a
participant in a merger or consolidation in which it does not survive as
an independent company; or (iii) the business or businesses of the
Company for which your services are principally performed are disposed of
by the Company pursuant to a partial or complete liquidation of the
Company.
"COMPANY" for the purposes of this Agreement shall include the Company's
successor if a Change in Control occurs.
"EXCISE TAX" means the excise tax imposed by Section 4999 of the Code.
"GOOD REASON" means (I) reduction of your rate of compensation as in
effect immediately prior to the effective date of this Agreement; or (ii)
the Company's failure to provide to you a package of welfare benefit
plans which, taken as a whole, provide substantially similar benefits to
those in which you are entitled to participate immediately prior to the
occurrence of the termination of your employment (except that employee
contributions may be raised to the extent of any cost increases imposed
by third parties) or any action by the Company which would adversely
affect your participation or reduce your benefits under any of such
plans; or (iii) a change in your responsibilities, authority, title or
office resulting in diminution of your position, excluding for this
purpose an isolated, insubstantial and inadvertent action not taken in
bad faith which is remedied by the Company promptly after written notice
thereof is given by you; or (iv) a request that you relocate to a
worksite that is more than 35 miles from your prior worksite, unless you
accept such relocation opportunity; or (v) a material reduction in your
duties; or (vi) a failure or refusal of a successor to the Company to
assume the Company's obligations under this Agreement; or (vii) a
material breach by the Company or any successor to the Company of any of
the material provisions of this Agreement.
If your employment is involuntarily terminated without Cause by the Company or
you voluntarily terminate your employment for Good Reason, then upon your
furnishing to the Company an executed waiver and release of claims (a form of
which is attached hereto as Exhibit A), you will be entitled to the following
Benefits:
If your employment is involuntarily terminated without Cause any time other than
described below, then (1) within 30 days of such termination you will receive a
lump-sum payment equal to six months of Base Salary
Severance Letter, Page 2
<PAGE>
subject to any applicable withholding of federal, state or local taxes and (2)
the vesting of any stock option for Company stock and the time during which such
option may be exercised immediately will be accelerated by six months.
If, within 365 days following the occurrence of a Change in Control, your
employment is involuntarily terminated without Cause or you voluntarily
terminate your employment for Good Reason, then (1) within 30 days of such
termination you will receive a lump-sum payment equal to six months of base
salary subject to any applicable withholding of federal, state or local taxes
and (2) the vesting of any stock option for Company stock and the time during
which such option may be exercised immediately will be accelerated as to 50% of
the then unvested shares.
If any Benefit received or to be received by you pursuant to this Agreement
would constitute a parachute payment within the meaning of Section 280G of the
Code and but for this paragraph be subject to the Excise Tax, then such Benefit
shall be reduced to the extent necessary so that no portion of the Benefit would
be subject to the Excise Tax, as determined in good faith by the Company;
provided, however, that if, in the absence of any such reduction (or after such
reduction), you believe that the Benefit or any portion thereof (as reduced, if
applicable) would be subject to the Excise Tax, the Benefit shall be reduced (or
further reduced) to the extent determined by you in your discretion so that the
Excise Tax would not apply. If, notwithstanding any such reduction (or in the
absence of such reduction), the Internal Revenue Service determines that you are
liable for the Excise Tax as a result of the Benefit, then you shall be
obligated to return to the Company, within 30 days of such determination by the
Internal Revenue Service, a portion of the Benefit sufficient such that none of
the Benefit retained by you constitutes a parachute payment within the meaning
of Code Section 280G that is subject to the Excise Tax.
This Agreement may be changed or terminated only upon the mutual written consent
of the Company and you. Nothing in this Agreement will prevent or limit your
continuing or future participation in any benefit, bonus, incentive or other
plans, programs, policies or practices provided by the Company and for which you
may otherwise qualify, nor will anything herein limit or otherwise affect such
rights as you may have under any stock option or other agreements with the
Company.
If either party hereto brings any action to enforce such party's rights
hereunder, the prevailing party in any such action will be entitled to recover
such party's reasonable attorneys fees and costs incurred in connection with
such action.
This Agreement constitutes the entire agreement between you and the Company. It
is entered into without reliance on any promise or representation other than
those expressly contained herein. All questions concerning the construction,
Severance Letter, Page 3
<PAGE>
validity and interpretation of this Agreement will be governed by the law of the
State of California.
Very truly yours,
Cytel Corporation
Virgil Thompson
Chief Executive Officer
Agreed and Accepted:
_____________________________Dated:_______________, 1998
Severance Letter, Page 4
<PAGE>
EXHIBIT A
RELEASE AND WAIVER OF CLAIMS
In exchange for consideration provided to me in the Agreement to which this form
is attached, I hereby furnish Cytel Corporation (the Company) with the following
release and waiver.
I hereby release, and forever discharge the Company, its officers, directors,
agents, employees, stockholders, successors, assigns and affiliates, of and from
any and all claims, liabilities, demands, causes of action, costs, expenses,
attorneys fees, damages, indemnities and obligations of every kind and nature,
in law, equity, or otherwise, known and unknown, suspected and unsuspected,
disclosed and undisclosed, arising at any time prior to and including my
employment termination date with respect to any claims relating to my employment
and the termination of my employment, including but not limited to, claims
pursuant to any federal, state or local law relating to employment, including,
but not limited to, discrimination claims, claims under the California Fair
Employment and Housing Act, and the Federal Age Discrimination in Employment Act
of 1967, as amended (ADEA), or claims for wrongful termination, breach of the
covenant of good faith, contract claims, tort claims, and wage or benefit
claims, including but not limited to, claims for salary, bonuses, commissions,
stock, stock options, vacation pay, fringe benefits, severance pay or any form
of compensation (other than the obligations under the Agreement.)
I also acknowledge that I have read and understand Section 1542 of the
California Civil Code which reads as follows: A general release does not extend
to claims which the creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor. I hereby expressly waive and relinquish
all rights and benefits under that section and any law of any jurisdiction of
similar effect with respect to any claims I may have against the Company.
I acknowledge that, among other rights, I am waiving and releasing any rights I
may have under ADEA, that this waiver and release is knowing and voluntary, and
that the consideration given for this waiver and release is in addition to
anything of value to which I was already entitled as an employee of the Company.
I further acknowledge that I have been advised, as required by the Older Workers
Benefit Protection Act, that: (a) the waiver and release granted herein does not
relate to claims which may arise after this agreement is executed; (b) I have
the right to consult with an attorney prior to executing this agreement
(although I may choose voluntarily not to do so);
Severance Letter, Page 5
<PAGE>
(c) I have twenty-one (21) days from the date I receive this agreement in which
to consider this agreement (although I may choose voluntarily to execute this
agreement earlier); (d) I have seven (7) days following the execution of this
agreement to revoke my consent to the agreement; and (e) this agreement shall
not be effective until the seven (7) day revocation period has expired.
Dated: By:
------------------- ---------------------------------
Severance Letter, Page 6
<PAGE>
1346ictz Exhibit 10.56
Eo419
23 February 98
LICENSE
-------
AND
---
COLLABORATION AGREEMENT
-----------------------
THIS LICENSE AND COLLABORATION AGREEMENT ("Agreement") is entered into
as of February 27, 1998, between EPIMMUNE INC. ("Epimmune"), and G.D. SEARLE &
CO. ("Searle") (individually a "Party" or collectively the "Parties").
WHEREAS, Epimmune is the owner of certain valuable know-how and patent
rights relating to certain technology platforms for the treatment and prevention
of cancer; and
WHEREAS, Searle wishes to obtain licenses to make, have made, use and
sell in vivo and ex vivo immunotherapeutic and prophylactic products using such
technology and to collaborate with Epimmune in the research and identification
of such products for the treatment and/or prevention of cancer; and
WHEREAS, Epimmune is willing to grant such licenses to Searle and to
collaborate with Searle to develop such pharmaceutical products, subject to the
terms and conditions set forth in this Agreement.
NOW, THEREFORE, the Parties agree as follows:
ARTICLE 1. DEFINITIONS.
- ------------------------
1.1 "ACT" means, as applicable, either (a) the United States Food, Drug and
Cosmetics Act and applicable regulations thereunder, as amended from
time to time, or (b) the comparable laws, rules and regulations
governing the registration, approval and sale of pharmaceutical drugs
and devices in countries outside of the United States, as amended from
time to time.
1.2 "AFFILIATE(S)" means any entity which directly or indirectly controls,
is controlled by or is under common control with a Party. For purposes
of this definition, "control" shall mean the power to direct or cause
the direction of the management and policies of an entity, whether
through ownership of voting securities, by contract or otherwise.
1.3 "COLLABORATION" means the collaborative research activities of the
Parties under this Agreement pursuant to the Research Plan during the
Collaboration Term and the oversight by the JMC of the conduct of the
Initial Development by the JPT.
1.4 "COLLABORATION TERM" is defined in Section 15.1.1.
<PAGE>
1.5 "CONTROL" means possession of the ability to grant a license or
sublicense as provided for herein without violating the terms of any
agreement or arrangement with any Third Party.
1.6 "COST OF GOODS" means the cost of a Product or Product Component, as
applicable, in bulk or finished form (including samples) calculated in
accordance with GAAP. Cost of Goods shall include: (a) the cost of
manufacture for a Product or Product Component, as applicable,
manufactured by Searle or the amount paid for Product or Product
Component manufactured by a Third Party; (b) the net cost or credit of
any value-added taxes or duties actually paid or utilized in respect of
the Product or Product Component; (c) the cost of freight, insurance
and other transportation charges for the Product or Product Component
to the extent not invoiced to Third Parties and (d) the cost of any
royalty payments paid to Epimmune or Third Parties necessary for the
manufacture, use or sale of [...***....] For purposes of this
definition, "cost of manufacture" means the fully allocated cost of
manufacturing a Product or Product Component, as applicable,
(calculated in accordance with GAAP applied on a basis consistent with
Searle's past practices), excluding start up expenses and including the
direct and indirect cost of any raw materials, packaging materials and
labor (including benefits) utilized in such manufacturing (including
formulating, filling, finishing, labeling and packaging, as applicable)
plus factory overhead (fixed and variable) allocated to such Product or
Product Component.
1.7 "CYTOKINES" means a growth factor developed and/or owned by Searle or
developed and/or owned by a Third Party.
1.8 "DEVELOPMENT" means all pre-clinical and clinical development
activities with respect to a Product following the Product Alert,
through and including obtaining Regulatory Approval.
1.9 "DEVELOPMENT BUDGET" means, with respect to each Product developed
hereunder, the budget for the proposed costs to develop such Product
under the Development Plan.
1.10 "DEVELOPMENT PLAN" means, with respect to each Product developed
hereunder, the plan for the Development of such Product from the first
Development activity to its Launch Date.
1.11 "EFFECTIVE DATE" means the later of the date on which this Agreement is
executed by both Parties or the first business day following the day on
which all required waiting periods under the Hart-Scott-Rodino
Antitrust Improvements act of 1976, as amended, have expired or been
terminated.
CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
1.12 "EPIMMUNE INITIAL TECHNOLOGY" means any Patent Rights and Know-How
Controlled by Epimmune relating to the development, manufacture, use,
marketing, sale and/or importation of Products in the Field which exist
as of the Effective Date.
1.13 "EPIMMUNE PROJECT TECHNOLOGY" means any Patent Rights and Know-How
invented solely by Epimmune during the course of performing work under
the Research Plan and/or Development Plan during the Collaboration
Term.
1.14 "EPITOPE" means the portion of an antigen that makes contact with a
particular antibody or T cell receptor.
1.15 "FIELD" means in vivo and ex vivo immunotherapeutic and prophylactic
therapies for the treatment and prevention of cancer.
1.16 "GAAP" means United States generally accepted accounting principles.
1.17 "IMPROVEMENT" means any invention or discovery, patentable or not,
relating to the use, synthesis or manufacture of Products within the
Field, that is dominated by the Epimmune Initial Technology, the
Epimmune Project Technology or the Joint Technology and which comes
under the Control of Epimmune.
1.18 "INITIAL DEVELOPMENT" means early stage development activities
following Research up to the issuance of a Product Alert.
1.19 "INTELLECTUAL PROPERTY RIGHTS" means all Patent Rights, trademarks,
copyrights and/or Know-How relating to the development, manufacture,
use, marketing, or sale and/or importation of the Products in the Field
which are Controlled by either Party as of the Effective Date or comes
under the Control of either Party during the term of this Agreement or
Controlled jointly by the Parties.
1.20 "JMC" means the Joint Management Committee described in Section 3.2.
1.21 "JPT" means the Joint Project Team described in Section 3.3.
1.22 "JOINT TECHNOLOGY" means any Patent Rights and Know-How invented
jointly by Epimmune and Searle during the course of performing work
under the Research Plan and/or Development Plan during the
Collaboration Term.
1.23 "KEY MARKET(S)" means France, Germany, Italy, Japan, the United Kingdom
and the United States.
1.24 "KNOW-HOW" means all proprietary, confidential technical information
and data relating to Products, including, without limitation all data
relating to synthesis, formulation, manufacture, analytical methods,
clinical trials, pharmacology and toxicology.
-3-
<PAGE>
1.25 "LAUNCH DATE" means, with respect to each Product, the date of the
first sale of a Product to a Third Party by Searle, its Affiliates or
sublicensees through customary commercial channels of distribution.
1.26 "NET SALES" means:
(a) with respect to any Product, the gross amount invoiced on
sales of a Product by a Party and/or its Affiliates and/or
sublicensees, as applicable, to Third Parties, less the following
items: (i) trade, cash and quantity and promotional discounts actually
allowed and taken; (ii) excise, sales taxes or other taxes imposed upon
and paid with respect to such sales (excluding national, state or local
taxes based on income) as adjusted for rebates or refunds; (iii)
freight, insurance and other transportation charges invoiced to Third
Parties; (iv) amounts repaid or credited by reason of rejections,
defects, recalls or returns; and (v) rebates (including pursuant to
Medicaid or other similar governmental rebate, discount or chargeback
programs).
(b) with respect to the [...***...] of any Product Type 2, the
amount equal to the net amount invoiced on sales of a Product Type 2 by
a Party and/or its Affiliates and/or sublicensees (determined in the
manner described in (a)) multiplied by the [...***...] (as defined
below) attributable to such Product Type 2; and
(c) with respect to the [...***...] of any Product Type 2, the
amount equal to the net amount invoiced on sales of a Product Type 2 by
a Party and/or its Affiliates and/or sublicensees (determined in the
manner described in (a)) multiplied by the [...***...] (as defined
below) attributable to such Product Type 2.
The [...***...] shall mean a fraction, the numerator of which is the
fair market value of the [...***...] included in the Product Type 2 and
the denominator of which is the fair market value of all components
included in the Product Type 2 (e.g., [...***...] and/or other
ingredients). The [...***...] shall mean a fraction, the numerator of
which is the fair market value of the [...***...] included in the
Product Type 2 and the denominator of which is the fair market value of
all components included in the Product Type 2 (e.g., [...***...] and/or
any other ingredients). In the event that no market price is available
for the [...***...], the fair market value shall be determined in good
faith by the Parties, no later than the Launch Date for such
-4- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Product Type 2, taking into consideration, but not limited to, such
factors as a cost/benefit analysis of each Product component and
Product as a whole, drug profile, ease of use by patient and/or service
provider, competition and other relevant market factors. In the event
that the Parties disagree regarding the fair market value, the Parties
shall resolve such dispute in accordance with Section 19.12 hereof.
1.27 "PADRE" means PAN DR Reactive Epitopes, as described in the Patent
Rights included in the Epimmune Initial Technology.
1.28 "PATENT RIGHTS" means all claims contained in patents or patent
applications and all divisions, continuations, continuations-in-part,
reissues, extensions, renewals, supplementary protection certificates
and foreign counterparts thereof, existing as of the Effective Date or
filed or issuing during the Collaboration Term. The Patent Rights
included in the Epimmune Initial Technology are set forth in Exhibit A.
The Patent Rights included in the Searle Initial Technology are set
forth in Exhibit B.
1.29 "PHASE I", "PHASE II", "PHASE III" AND "PHASE IV" means the phases of
clinical development of pharmaceutical products and/or devices as
defined in the Act.
1.30 "PRIOR AGREEMENTS" means the Confidentiality Agreement between the
Parties dated December 3, 1996 and the Letter Agreement between the
Parties dated September 5, 1997, as amended December 19, 1997.
1.31 "PRODUCT ALERT" is defined in Section 2.3.
1.32 "PRODUCT(S)" means any pharmaceutical product which is covered by at
least one claim of the Patent Rights contained in Epimmune Initial
Technology, Epimmune Project Technology and/or Joint Technology in any
country.
1.33 "PRODUCT COMPONENT" means with respect to Searle, [...***...] and, with
respect to Epimmune, [...***...] or other active component which is
covered by at least one claim of the Patent Rights contained in
Epimmune Initial Technology, Epimmune Project Technology and/or Joint
Technology.
1.34 "PRODUCT TYPE 1" means a Product which contains an [...***...] alone
and is not packaged in combination with a [...***...] nor sold at a
single price in combination with a [...***....]
1.35 "PRODUCT TYPE 2" means a Product which contains [...***...] Component
and is packaged in combination with one or more [...***...] or sold at
a single price in combination with a [...***....]
-5- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
1.36 "PROJECT MANAGER" is defined in subsection 3.4.
1.37 "REGULATORY APPROVAL" means all authorizations by the relevant
competent authorities required for marketing, promoting, pricing,
reimbursing and selling of a Product in a given country of the
Territory.
1.38 "REGULATORY AUTHORITY" means the United States Food and Drug
Administration and/or such other similar and appropriate government
regulatory authority or agency outside the United States, the approval
of which is required for marketing, promoting, pricing, reimbursing and
selling Products in the Territory.
1.39 "RESEARCH" means all discovery phase activities which precede
pre-clinical and clinical development phases.
1.40 "RESEARCH BUDGET" is defined in Section 2.2.1.
1.41 "RESEARCH PLAN" is defined in Section 2.2.1.
1.42 "SEARLE INITIAL TECHNOLOGY" means any Patent Rights and Know-How
Controlled by Searle and applicable to the Field which exist as of the
Effective Date.
1.43 "SEARLE PROJECT TECHNOLOGY" means any Patent Rights and Know-How
invented solely by Searle during the course of performing work under
the Research Plan and/or Development Plan during the Collaboration
Term.
1.44 "TERRITORY" means all the countries of the world.
1.45 "THIRD PARTY" means any person or entity other than Epimmune, Searle or
their respective Affiliates.
ARTICLE 2. RESEARCH COLLABORATION AND DEVELOPMENT.
- ---------------------------------------------------
2.1 SCOPE. The Parties shall collaborate to research and develop Products
for use in the Field, making use of each Party's special expertise in
the following manner:
(a) The Research and Initial Development phases will be conducted
jointly by the Parties pursuant to a mutually agreed Research
Plan, through one or more joint project teams ("JPTs") as
described in Section 3.3. The Research Plan is more particularly
described in Section 2.2.
(b) The Development phase will be conducted by a Searle Project Team
pursuant to the applicable Development Plan with support from
Epimmune pursuant to the Research Plan. The Development Plan is
more particularly described in Section 2.4.
-6-
<PAGE>
2.2 RESEARCH PLAN AND BUDGET.
2.2.1 A preliminary research plan and research budget are attached
hereto as Exhibit C and Exhibit D, respectively. Epimmune
will prepare, in consultation with Searle, and provide to
the JMC within three (3) months following the Effective Date
a four (4) year finalized research plan covering the
calendar years 1998, 1999, 2000 and 2001 (as updated in
accordance with Section 2.2.2, the "Research Plan") and a
finalized budget for proposed Research costs (the "Research
Budget") during the Collaboration Term. The Research Plan
shall specify in detail all Research activities and
priorities, time frames for completion of activities, which
Party or Third Party is to be responsible for each activity,
and any other items reasonably required by the Parties.
Epimmune's financial obligation beginning [...***...] and
continuing through the [...***...] shall be [...***....]
which amount shall be expended in accordance with the
Research Plan and Research Budget. Such amount shall not be
increased without Epimmune's approval and shall not be
decreased without Searle's approval.
2.2.2 The Research Plan shall be updated annually by the JPT(s),
and reviewed and approved by the JMC, during the
Collaboration Term. Not later than September 1st of each
year of the Collaboration Term (other than the last year of
the Collaboration Term unless the Collaboration Term is
extended), the JPT will prepare, in consultation with the
JMC, and provide to Searle a rolling, three (3) year
research plan (the "Rolling Research Plan") which updates
the Research Plan and details Epimmune's research activities
planned and/or required to support Searle's on-going
strategic, development and commercial objectives in
connection with the development of Products as set forth in
the Development Plan or otherwise. If the Collaboration Term
is extended by mutual agreement pursuant to Section 15.1.1,
then the Rolling Research Plan agreed to by the JMC in 2001
shall serve as the Research Plan for the calendar years
2002, 2003 and 2004, unless otherwise agreed by the parties.
2.3 PRODUCT ALERT. A product alert is the formal selection of a compound
for clinical development based on criteria determined by Searle in
accordance with the procedures set forth in its "Product Lead Team
Document Outline and Approval Process" document dated February 7, 1997
("Product Alert"). Searle shall determine the criteria for each Product
Alert and advise Epimmune as soon as practicable of such criteria for
each Product to be developed hereunder and such criteria shall be
included in the Research Plan. Each JPT is responsible for the
conduct and management of the Research Plan and Initial Development
relating to each Product developed within the technology platform
applicable to such JPT until, with respect to individual potential
Products, each such potential Product enters the Product Alert stage.
Not later than the issuance of a Product Alert for each new Product
entering the Product Alert stage, a "Searle Project Team" shall be
formed for the implementation, conduct and management of the
Development activities for such potential Product. The Searle Project
Team shall be comprised of those Searle representatives responsible for
the relevant Development activities and one Epimmune representative.
-7- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
2.4 DEVELOPMENT PLAN AND BUDGET.
2.4.1 PREPARATION AND SUBMISSION. Promptly following the
constitution of the first JPT pursuant to the terms of
Section 3.3, the JPT shall prepare and submit, not later
than three (3) months following the Effective Date, to the
JMC the Development Plan for the first Product to be
developed hereunder and the Development Budget for such
Product. Promptly following Searle's approval of the
Development of Products under a new technology platform, a
JPT shall be formed, unless otherwise agreed by the JMC.
Within three (3) months after the formation of each such
JPT, the JPT (or, if no such JPT was formed, pursuant to the
decision of the JMC, the existing JPT(s)) shall submit to
the JMC the Development Plan and Development Budget for such
new Product. Each Development Plan and its Development
Budget shall be updated as deemed appropriate by the
applicable Searle Project Team, but in no event less
frequently than annually. Each Development Plan and its
annual update shall specify in detail all Development
activities and priorities, time frames for completion of
activities, which Party or Third Party is to be responsible
for each activity, and any other items reasonably required
by the Parties with respect to the Development of the
applicable Product, with the first twelve (12) months of
such Plan and/or updated Plan provided in detail, and with
as much detail as then available for the remaining years of
such Plan and/or updated Plan. Each Development Plan will
also include, to the extent practicable, the then-expected
profile for the Product being developed thereunder, the
desired labelling and the criteria for determining
acceptable requirements for any appropriate worldwide
applications for Regulatory Approval. In preparing each
Development Plan and Development Budget, the JPT (or Searle
Project Team, as appropriate) shall ensure that there is
adequate marketing input and shall give due consideration to
worldwide development of the Product.
2.4.2 APPROVALS. During the Collaboration Term, each Development
Plan, its annual update and changes thereto shall be subject
to the approval of the JMC as provided in subsection 3.2.2.
Following the Collaboration Term, Searle shall have the
right, in its sole discretion, to change or amend the
Development Plan; provided, however no such change or
amendment shall alter Searle's obligations under Article 17,
except as otherwise provided in Sections 17.2.4 and 17.2.5.
Searle's financial obligation with respect to the
Development Plan shall be set forth in the Development
Budget. The Development Budget and any changes thereto shall
be subject to the sole approval of Searle.
-8-
<PAGE>
2.5 SEARLE RESPONSIBILITIES. Searle shall be responsible for conducting the
following Research and Development activities in accordance with the
requirements of the Research Plan and/or Development Plan(s):
(a) to supply [...***...] used in Research and Development of the
Products;
(b) to provide all analytics required for the Products;
(c) to provide preclinical development such as pharmacology,
toxicology, formulation, etc.;
(d) to perform stability and compatibility studies;
(e) to develop worldwide clinical, regulatory and commercialization
strategies for the Products;
(f) to prepare, submit and maintain all appropriate worldwide filings
for the initiation and conduct of clinical trials;
(g) to develop a worldwide clinical plan;
(h) to conduct, directly or via Third Parties, all clinical trials
necessary to launch Products worldwide;
(i) to prepare, submit and maintain applications for Regulatory
Approvals and manage all communications with Regulatory
Authorities; and
(j) to provide support for marketing of Products following Product
launch (e.g., Phase IV Studies).
For purposes of dispute resolution in accordance with subsection 3.3.4,
Searle is hereby designated as the Lead Party for each of the
responsibilities listed above.
2.6 EPIMMUNE RESPONSIBILITIES. Epimmune shall be responsible for conducting
the following Research activities in accordance with the requirements
of the Research Plan:
(a) to identify, test, and modify [...***...] of human tumor antigens;
(b) to conduct research to define [...***...];
(c) to conduct research to define [...***...]; and
(d) to provide necessary support of development, clinical and
marketing efforts as defined in the Development Plan.
-9- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
For purposes of dispute resolution in accordance with subsection 3.3.4,
Epimmune is hereby designated as the Lead Party for each of the
responsibilities listed in (a), (b) and (c) above.
2.7 ON-SITE PRESENCE. Searle may have representative(s) occupy space at
Epimmune's premises on an as-needed basis in order to participate in
the Research Plan and, if necessary, Development Plan activities during
the Collaboration Term.
ARTICLE 3. MANAGEMENT.
- -----------------------
3.1 COMMITTEES. The Parties agree that the Collaboration activities and
relationship hereunder will be managed by the JMC and the JPT.
3.2 JOINT MANAGEMENT COMMITTEE.
3.2.1 COMPOSITION. The JMC will be composed of three (3) members
from each Party. Promptly after the Effective Date, the
Parties will appoint their respective representatives to the
JMC. The position of chairperson shall rotate between the
Parties annually. The chairperson during the first year of
the term hereof will be a Searle representative. A Party may
change any of its representatives at any time by giving
written notice to the other Party. The JMC will continue in
existence through the end of the Collaboration Term.
3.2.2 RESPONSIBILITIES. The JMC will oversee the Collaboration and
the Development Plan and manage the relationship hereunder,
including the JPT. In particular, the JMC will:
(a) oversee the JPT;
(b) review and approve the Research Plan and Initial
Development;
(c) provide recommendations relating to the conduct of the
Research Plan and Initial Development;
(d) approve the terms of any agreements for the use or
acquisition of Third Parties' enabling technology as it
relates to an Epimmune technology platform;
(e) subject to the provisions of Sections 2.4.2 and 4.2,
pre-approve any modification in the Development Budget;
(f) approve the Cytokine components, if any, to be used in
the final Products;
(g) approve any material change in the Initial Development;
(h) conduct program reviews at least twice yearly, or more
frequently as determined by the JMC;
(i) review and approve Joint Technology patent strategies
and filings based on the recommendations of the
Parties' patent counsel pursuant to Article 11; and
(j) perform such other functions as agreed in writing by the
Parties.
-10-
<PAGE>
3.2.3 MEETINGS AND VOTING. The JMC will meet at such times as
either Party may request, but in no event less frequently
than twice per calendar year, alternating between the
principal places of business of each Party (San Diego and
Skokie or St. Louis) and will otherwise communicate as
necessary by telephone, facsimile and video conference. The
chairperson shall appoint a secretary, who shall be
responsible for circulating minutes of the meeting within
ten (10) business days following the meeting. Each Party
recognizes the importance of the JMC in the success of the
Collaboration and will use diligent efforts to cause all its
representatives to attend all meetings. The JMC shall make
decisions by unanimous consent. Voting by proxy is
permissible. All decisions of the JMC shall be final and
non-appealable. Additional participants may be invited by
any member to attend meetings where appropriate, provided
such additional participants shall have no vote.
3.2.4 DISPUTE RESOLUTION. If any dispute arises between the
Parties as a result of any decision made or not made by the
JMC or as a result of the JMC's failure to resolve an issue
reviewed by it, then Epimmune shall make the final decision
on Research matters relating to Epitope and PADRE
technologies, for which it has responsibility under the
Research Plan, and Searle shall make the final decision on
all other matters. If either Party in good faith believes
such final decision of the other Party will have a
materially adverse effect on the outcome of the Research
Plan and/or the Development Plan, then such Party may refer
the issue to the senior executives of each Party (i.e., the
President of Epimmune and the President of Searle R&D) for
resolution. If the senior executives are unable to resolve
such issue within thirty (30) days of the date it was
referred to them, the Parties shall resolve such dispute in
accordance with Section 19.12 hereof.
3.3 JOINT PROJECT TEAM.
-11-
<PAGE>
3.3.1 COMPOSITION. The JPT will be composed of representatives
from each Party, including each Party's Project Manager, who
are directly involved with and responsible for Research and
Development activities. Promptly after the Effective Date,
the Parties will appoint their respective representatives to
the JPT. It is anticipated that the total number of
representatives on the JPT will fluctuate depending on the
then-current requirements under the Research Plan and the
Development Plan, however the total number of
representatives shall not exceed ten (10). The position of
chairperson shall rotate between the Parties annually. The
chairperson during the first year of the term hereof will be
an Epimmune representative. A Party may change any of its
representatives at any time by giving written notice to the
other Party. The JPT will continue in existence through the
end of the Collaboration Term.
3.3.2 RESPONSIBILITIES. Each JPT shall be responsible for
overseeing and managing all aspects of the Research Plan and
Initial Development activities with respect to Products
within its technology platform. In particular, the JPT
shall:
(a) prepare and submit the first annual Development Plan,
the Initial Development activities and the Development
Budget to the JMC for review and approval;
(b) prepare and submit to the JMC, the Rolling Research
Plan, the Research Plan and Research Budget relating to
Products within its technology platform.
(c) allocate the Research activities among Epimmune, Searle
and Third Parties in accordance with this Agreement;
(d) implement the annual Research Plan and ensure that the
program stays within the Research Budget;
(e) review progress and recommend any necessary interim
changes to the Research Plan to JMC;
(f) discuss and resolve ongoing issues;
(g) provide annual and quarterly progress reports of budget
and program activities to the JMC;
(h) provide quarterly forecasts of budget and program
activities to the JMC;
(i) provide and/or support program reviews with Searle R&D
senior management as requested from time to time;
(j) develop and implement publication strategies;
(k) support development and implementation of the clinical,
regulatory and commercial strategies carried out by
Searle following each Product Alert; and
(l) perform such other functions as agreed in writing by the
Parties.
Following the transfer of a Product to the Searle Project
Team, the JPT's responsibilities with respect to such
Product shall be limited to discovery support during
Development as provided in the Development Plan for such
Product. Any of Epimmune's responsibilities therefor shall
be set forth in the Research Plan.
-12-
<PAGE>
3.3.3 MEETINGS. The JPT will meet at such times as the chairperson
or either of the Project Managers may request, but in no
event less frequently than once every month. If possible,
the meetings shall be held in person, or where appropriate,
by telephone, facsimile and video conference. The
chairperson shall appoint a secretary, who shall be
responsible for circulating minutes of the meeting within
ten (10) business days following the meeting. Minutes of
each meeting shall be signed by both Project Managers. Each
Party recognizes the importance of the JPT in the success of
the collaboration contemplated hereunder and will use
diligent efforts to cause all its representatives to attend
all meetings. Additional participants may be invited by any
member to attend meetings where appropriate.
3.3.4 DISPUTE RESOLUTION. If the JPT is unable to reach consensus
on any matter relating to an item for which a Lead Party has
been designated pursuant to Sections 2.4 or 2.5, then the
relevant Lead Party shall decide such matter.
Notwithstanding the foregoing sentence, if the non-Lead
Party in good faith believes the decision of the other Party
will have a materially adverse effect on the outcome of the
Research Plan and/or the Development Plan, then such Party
may refer the issue to the JMC for resolution.
3.4 PROJECT MANAGERS. Each Party shall designate one senior representative
to serve as the primary contact person between the parties (the
"Project Manager"). Both Project Managers shall be members of the JPT
and shall be responsible for facilitating the exchange of all
Collaboration information and data between the Parties.
ARTICLE 4. COLLABORATION FUNDING
- ---------------------------------
4.1 EXPENSES. Each Party shall be responsible for bearing its own expenses
associated with its obligations to carry out the Research Plan and
Development Plan to the extent such expenses are contained in the
Research Budget and Development Budget, respectively.
4.2 BUDGET CHANGES. The JMC shall not have the right to increase either
party's portion of the Research Budget and/or Development Budget over
the commitment of such Party contained therein, without the written
consent of such Party. In any event, final approval of the Development
Budget and any changes thereto shall reside with Searle, subject to the
provisions of Section 2.4.2.
-13-
<PAGE>
ARTICLE 5. WARRANTY.
- ---------------------
5.1 Epimmune represents and warrants to Searle that:
5.1.1 the grant of the license by Epimmune to Searle of the
Epimmune Initial Technology does not conflict with any other
agreement to which Epimmune is a party;
5.1.2 other than as disclosed by Epimmune in writing prior to the
Effective Date, it has not received any notice that practice
of the inventions claimed under Epimmune Initial Technology
infringes on the patent or other legally protected
intellectual property rights of any Third Party in the
Territory and it is not aware of any basis therefor;
5.1.3 there are no pending or threatened adverse claims of
ownership, and, to the best of Epimmune's knowledge, no
facts or circumstances exist which could give rise to
adverse claims of ownership, to the Epimmune Initial
Technology;
5.1.4 all inventions, including all patents or patent applications
(and all divisions, continuations, continuations-in-part,
reissues, extensions, renewals, supplementary protection
certificates and foreign counterparts thereof), trademarks,
copyrights and proprietary, confidential technical
information and data existing as of the Effective Date and
materially relating to the license rights granted hereunder
which were originally owned by Cytel Corporation ("Cytel")
have been properly assigned irrevocably to Epimmune, and
documentation of the assignment of all such patents or
patent applications have been properly filed with the U.S.
Patent Office, submitted to foreign associates for filing
within five (5) days of the Effective Date with any
comparable government agencies outside of the United States,
and shall be diligently pursued by Epimmune; and
5.1.5 As of the date of the assignment contemplated by Section
5.1.4, Epimmune has entered into proprietary information and
assignment of inventions agreements with each of its
employees and consultants who are to do work under the
Collaboration and any inventions relating to the license
rights granted hereunder conceived or reduced to practice
following such date by persons working for Epimmune (or
Cytel only through the Effective Date) will come under the
Control of Epimmune.
5.2 Each Party warrants to the other that:
5.2.1 it has the corporate power and authority to execute and
deliver this Agreement and to perform its obligations
hereunder;
-14-
<PAGE>
5.2.2 the execution and delivery by it of this Agreement and the
performance of its obligations hereunder have been duly
approved by any necessary corporate action; do not require
any shareholder action or the approval and consent of any
trustee or the holders of any indebtedness which has not
been obtained; do not and will not contravene any law,
regulation, rules or order binding on it in any material
respect; and do not and will not contravene the provisions
of, or constitute an act of default under, any debenture,
mortgage contract or other agreement or instrument to which
it is a party in any material respect;
5.2.3 it will perform all its obligations hereunder in compliance
in any material respects with all applicable laws, including
the Act; and
5.2.4 it is not party to any Agreement in conflict with the rights
granted hereunder and that entering into and performing its
obligations under this Agreement will not conflict in any
material respect with its obligations to any Third Parties.
5.3 Searle represents and warrants to Epimmune that Searle will not use the
Epimmune Initial Technology or the Epimmune Project Technology for any
purpose other than the discovery and Development of royalty-bearing
Products pursuant to this Agreement.
5.4 Except as expressly set forth in this Article 5, no other express or
implied representation or warranty is made by either Party.
ARTICLE 6. LICENSE GRANT TO SEARLE; REVIEW RIGHTS
- --------------------------------------------------
6.1 Epimmune hereby grants to Searle:
6.1.1 an exclusive license, with right to sublicense, in the
Territory to make, have made, use, sell and import Products
in the Field under the Epimmune Project Technology and under
Epimmune's rights in the Joint Technology; provided,
however, that such license of Epimmune Project Technology is
granted subject to the license granted to Takara Shuzo, Co.
Ltd. ("Takara") of certain Patent Rights Controlled by
Epimmune to the extent such Patent Rights are dominated by
Epimmune Initial Technology and are filed on or before
January 26, 2000, which rights are limited to the rights to
make, use and sell products and services in the field of ex
vivo cellular therapy for treatment of cancer in Japan.
-15-
<PAGE>
6.1.2 an exclusive license, with right to sublicense, in the
Territory to make, have made, use, sell and import Products
in the Field under the Epimmune Initial Technology;
provided, however, such grant of license shall not include
rights previously granted to Takara, which rights are
limited to the rights to make, use and sell products and
services in the field of ex vivo cellular therapy for
treatment of cancer in Japan.
6.1.3 subject to the provisions of Section 6.3, an exclusive
license, with right to sublicense, for uses of Searle
Cytokines outside the Field in the Territory under the
Epimmune Project Technology and under Epimmune's rights in
the Joint Technology.
6.2 Except as provided in Section 3.2.2(d), the licenses granted to Searle
herein shall include the right to sublicense, co-develop, co-promote
and/or co-market Products with Third Parties without obtaining
Epimmune's consent.
6.3 The grant of license by Epimmune under subsection 6.1.3 is not intended
to restrict any use by Epimmune outside the Field of Epimmune Project
Technology or, subject to the limitations contained in Section 11.1, of
Joint Technology.
6.4 Epimmune hereby grants to Searle the right to review, within the first
ninety (90) days following the Effective Date, its scientific data
relating to infectious disease Epitopes utilizing Epimmune technology
prior to disclosing such data to any Third Party (except those Third
Parties to whom Epimmune and/or its Affiliates as of September 5, 1997
may have already disclosed such information and/or with whom Epimmune
and/or its Affiliates were already engaged in discussions regarding
potential transactions relating to infectious disease Epitopes).
Following such initial review, Epimmune shall present to Searle twice
in each calendar year during the Collaboration Term, an update of such
data, except for any such data the rights to which have been granted to
a Third Party. Following such review by Searle, upon mutual agreement
(but without any obligation to do so), the Parties may enter good faith
negotiations for the license by Searle of the rights to some or all of
such technology.
ARTICLE 7. ROYALTIES; MILESTONE PAYMENTS
- -----------------------------------------
7.1 In consideration of the grant of rights by Epimmune under Sections 6.1
and 6.2 and subject to the provisions of Sections 7.2 and 7.3, Searle
shall pay Epimmune royalties of:
7.1.1 [...***...] of Net Sales of Product Type 1;
7.1.2 [...***...] of Net Sales of the Epimmune Product Component
included in each Product Type 2;
-16-
<PAGE>
7.1.3 [***] of net sales of a Searle Cytokine or Searle Product
Component included in any product (determined in a manner
consistent with that described in Section 1.26) if and only if
such Searle Cytokine is covered by at least one composition of
matter claim of the Patent Rights contained in Joint Technology.
7.2 The royalties due under Sections 7.1.1 and 7.1.2 shall be reduced by
(i) [...***...] of the total amount of royalties, if any, paid to
Third Parties under licenses existing as of the Effective Date
or future licenses granting rights to Epimmune and/or Searle
which are necessary to make, have made, use or sell any Product
Type 1 or the Epimmune Product Component of a Product Type 2;
and
(ii) [...***...] of the dollar amount, if any, by which Searle's Cost
of Goods for Product(s) containing either [...***...] or a
[...***...] exceeds [...***...] of Searle's Net Sales of such
Product.
provided, however, in no event shall such royalties payable to Epimmune
be reduced below [...***...] of Net Sales as a result of the
application of the foregoing clauses (i) and/or (ii).
7.3 The royalty rates specified in Section 7.1 shall be reduced by
[...***...] for any country of the Territory in which there are no
Patent Rights or the Patent Rights relating to the Product expire, are
declared invalid or no longer provide Searle the exclusive (subject to
the limitations described in Section 6.1), right to make, use and sell
the Product. A Patent Right shall be deemed invalid if the related
patent is held invalid or unenforceable by any court of competent
jurisdiction and of last resort or by any inferior court of competent
jurisdiction, tribunal or agency from which no appeal is taken.
7.4 If the Collaboration Term expires on or after December 31, 2001 and
upon such expiration, Epimmune has failed to meet its funding
obligations set forth in Section 2.2.1, [...***....]
7.5 Searle shall make payments to Epimmune upon the occurrence of
Development milestones in accordance with the provisions of Exhibit E.
Searle may make a portion of such milestone payments in accordance with
Section 8.1 of that certain Stock Purchase Agreement of even date
herewith between Searle and Cytel.
-17-
<PAGE>
ARTICLE 8. PAYMENT; TAXES; AUDIT RIGHTS
- ----------------------------------------
8.1 Royalties due to Epimmune under this Agreement for each calendar
quarter of the term hereof shall be paid by Searle or its sublicensees
in United States Dollars within sixty (60) days following the end of
each such calendar quarter. Each payment of royalties made to Epimmune
hereunder shall be accompanied by a written report, clearly showing the
Net Sales for the months of the quarter for which payment is being made
and the calculation of royalties due. Foreign currency conversions into
United States Dollars shall be made monthly at the rate of exchange
published in the Midwest edition of The Wall Street Journal for the
currency of the applicable country on the last business day of the
calendar month for which Net Sales were made.
8.2 All payments to be made by Searle pursuant to Article 7 shall be made
in immediately available funds in United States dollars by wire
transfer to such bank and account of Epimmune as may be designated from
time to time by Epimmune.
8.3 Payments under Article 7 shall not be reduced by any taxes, licenses,
fees or other withholdings levied upon such payments by the government
of any country, or political subdivisions or agencies thereof, from
which Searle makes the payment unless all of the following requirements
are met:
8.3.1 the amount, if any, by which the payments are reduced, is a
tax imposed on royalties or income and is not an excise,
franchise, privileges turnover, sales, production, value
added, or property tax, or any other type of levy or duty;
8.3.2 the tax is imposed on Epimmune under the laws of the
relevant country in the Territory, and Searle is required by
law to withhold the tax from payments to Epimmune and to pay
such tax to the government, or political subdivision or
agency thereof, of such country; and
8.3.3 Searle furnishes Epimmune with a tax receipt for the taxes
withheld within sixty (60) days of payment thereof or such
other documentation as Epimmune may reasonably require in
order that Epimmune may credit such amount in full against
its own tax liabilities.
All taxes, licenses, fees or other levies or duties imposed upon Searle
or which arise because of payments to Epimmune by Searle under this
Agreement, other than those which meet the requirements of subsections
8.3.1, 8.3.2, and 8.3.3, shall be paid and absorbed by Searle.
-18-
<PAGE>
8.4 Searle shall keep and maintain for two (2) years after payment of
royalties, complete and accurate books and records in sufficient detail
so that royalties payable hereunder and/or any deductions thereto can
be properly calculated.
8.5 No more frequently than once during each year of the term of this
Agreement, Searle shall permit Epimmune's independent auditors, to whom
Searle has no reasonable objection and with reasonable notice at any
time during normal business hours, to inspect and audit such accounts
and records of Searle for the sole purpose of verifying the accuracy of
the royalty payments submitted to Epimmune and the reports which
accompanied them. Epimmune's independent auditors shall not disclose to
Epimmune or any Third Party any information other than information
relating solely to the accuracy of the accounting and payments made by
Searle. Any such inspection of Searle's records shall be at Epimmune's
expense unless such audit discloses a deficiency in the amount of Net
Sales reported by Searle of more than 5% of the actual amount of Net
Sales, in which case Searle shall bear the full cost of such audit.
ARTICLE 9. DISCLOSURE OF KNOW-HOW AND IMPROVEMENTS
- ---------------------------------------------------
9.1 Promptly after execution of this Agreement by both Parties and promptly
after discovery or acquisition during the term of this Agreement,
Epimmune shall disclose to Searle in writing all Know-How included in
the Epimmune Initial Technology, the Epimmune Project Technology and/or
the Joint Technology. Promptly after discovery or acquisition during
the Collaboration Term, Searle shall disclose to Epimmune in writing
all Know-How included in the Searle Project Technology and the Joint
Technology.
9.2 During the Collaboration Term and for a period of [...***...]
thereafter, Epimmune shall disclose to Searle in writing promptly after
discovery or acquisition all Improvements which are dominated by the
Epimmune Initial Technology, the Epimmune Project Technology and/or the
Joint Technology. Searle, at its option, may include said Improvements,
whether patented or not, within the rights granted hereunder,
[...***....]
ARTICLE 10. SUPPLY
- -------------------
Each Party, at its own expense, shall supply to the other Party its Product
Component for the conduct of the Research activities, provided that [...***...]
required for activities under the Research Plan and Development Plan shall be
supplied, at Searle's expense, by Searle, Cytel or a Third Party. Searle shall
be responsible for manufacturing or causing to be manufactured Products and
Product Components required under the Development Plan and following Launch
Date(s).
-19- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ARTICLE 11. INTELLECTUAL PROPERTY RIGHTS.
- ------------------------------------------
11.1 JOINT TECHNOLOGY.
11.1.1 Each party shall have the royalty-free right to use Joint
Technology freely, subject to the licenses granted under the
provisions of Article 6 and to the provisions contained in
Sections 11.1.2 and 15.5.4.
11.1.2 Except as provided in Section 15.5.4, Epimmune shall have no
right to practice or sublicense Joint Technology to the
extent it includes Searle Cytokines. For the avoidance of
doubt, in the event Joint Technology is useful for any
purpose other than in connection with Searle Cytokines, this
Section 11.1.2 is not intended to preclude Epimmune from
using Joint Technology in connection with such other
purposes.
11.2 PATENTABLE INVENTIONS.
11.2.1 Searle shall own solely all Searle Project Technology,
including all Patent Rights with respect thereto, and
Epimmune shall own solely all Epimmune Project Technology,
including all Patent Rights with respect thereto.
11.2.2 The Parties shall own jointly all Joint Technology including
all Patent Rights thereto. Each Party shall have the right
to make, have made, use or sell any such Joint Technology
only as permitted in Section 11.1.
11.2.3 Enforcement of Intellectual Property Rights relating to any
such Project Technology or Joint Technology shall be
governed by Section 11.6.
11.3 PROSECUTION AND MAINTENANCE OF PATENT RIGHTS.
11.3.1 Except as provided in Section 3.2.2(j), each Party, at its
expense, shall be responsible for filing, prosecuting and
maintaining the Patent Rights included in its respective
Initial Technology and Project Technology. If a Party
decides not to pursue patent protection for any invention
claimed in any patent application or patent within such
Patent Rights in any country, it shall give the other Party
reasonable notice thereof. The other Party, at its expense,
may file, prosecute or maintain a patent application or
patent covering such invention, and the ownership of such
invention will not be affected.
-20-
<PAGE>
11.3.2 The Parties will develop a joint strategy for filing,
prosecution and maintenance worldwide of the Patent Rights
included in the Epimmune Project Technology, Searle Project
Technology and Joint Technology with the understanding that
they will attempt to reach mutual agreement upon such
matters. In the event that the Parties are unable to reach
mutual agreement, Epimmune will have responsibility with
respect to all Patent Rights included in the Epimmune
Project Technology and Joint Technology which cover Epitope
identification or compositions and PADRE, and Searle will
have responsibility for all Patent Rights included in the
Searle Project Technology and all other Joint Technology.
The Parties shall share equally all expenses for filing,
prosecution and maintaining the Patent Rights included in
Joint Technology.
11.3.3 Searle will have the opportunity to provide significant
input to the filing and prosecution strategy for all Patent
Rights included in the Epimmune Initial Technology, Epimmune
Project Technology, and Joint Technology relevant to the
Field for which Epimmune has responsibility. Patent counsel
for each Party will meet regularly to discuss strategy, and
Searle shall have at least thirty (30) days to provide input
and comments on any significant patent actions. Epimmune
shall have the final say with respect to such actions. In
the event that Epimmune elects to abandon any of the Patent
Rights included in the Epimmune Initial Technology, Epimmune
Project Technology, or Joint Technology relevant to the
Field for which it is responsible in any country of the
Territory (unless such abandonment occurs because the
subject matter of the abandoned patent is covered by other
Patent Rights included in the Epimmune Initial Technology,
Epimmune Project Technology or Joint Technology), Searle
shall have the right to assume such patent or patent
application.
11.3.4 Epimmune will have the opportunity to provide significant
input to the filing and prosecution strategy for all Patent
Rights included in the Searle Project Technology and Joint
Technology relevant to the Field for which Searle has
responsibility, and Searle agrees, within reason, to include
claims which might be useful for applications outside the
Field. In the event that Searle elects to abandon any of the
Patent Rights included in the Searle Project Technology or
Joint Technology relevant to the Field for which it is
responsible (or claims of interest to Epimmune) in any
country of the Territory, Epimmune shall have the right to
assume such patent or patent application.
11.4 PATENT EXTENSIONS. If agreed by the JMC, the Parties shall apply in a
timely manner for such patent term extensions or supplemental
protection certificates for the Patent Rights relating to an invention
made hereunder as are available under any applicable legislation. All
expenses incurred in connection with such patent term extensions or
supplemental protection certificates shall be paid by the Party
(or Parties in the case of Joint Technology) responsible for the
prosecution and maintenance of the applicable Patent Rights.
-21-
<PAGE>
11.5 COOPERATION. Each Party shall sign or have its appropriate employees
and agents sign such documents as may be necessary to obtain, perfect
or maintain any Patent Rights filed or to be filed pursuant to this
Agreement, and shall furnish all information in its possession
reasonably necessary in connection therewith.
11.6 INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHTS.
11.6.1 (a) If either Party becomes aware of any infringement or
threatened infringement or misappropriation of any
Intellectual Property Rights in the Field, it shall
promptly notify the other Party in writing. The Party
responsible for the prosecution and maintenance of such
Intellectual Property Rights under Section 11.3, at its
expense (subject to subsection 11.6.1(b)), shall have
the right, but not the obligation, to institute,
prosecute and control any legal proceeding in its name
and by its counsel to prevent or restrain such
infringement in the Field. If such Party declines to
institute legal proceedings, the other Party shall have
the right to institute, prosecute and control any legal
proceeding in its name and by its counsel to prevent or
restrain such infringement in the Field. The Party
asserting such Intellectual Property Rights will deduct
and retain from any and all amounts recovered from Third
Parties the amount of all reasonable costs and expenses
incurred by it in prosecuting such legal proceeding. Any
remaining amounts recovered from such Third Parties
shall be shared by the Parties; [...***...] to the Party
which asserted such Intellectual Property Rights and
[...***...] to the other Party.
(b) The Parties shall determine which Party shall have the
primary right and responsibility (but not the
obligation) to institute, prosecute, and control any
proceeding with respect to infringement or
misappropriation of Joint Technology. If a Party brings
any such proceeding, the other Party agrees to be joined
as a party plaintiff if required to enforce Patent
Rights related to Joint Technology. In such case, the
other Party will give such Party reasonable assistance
and authority to file and prosecute such suit. Any
damages or monetary recovery shall be split equally
between the Parties, after payment of each Party's legal
costs and expenses.
-22-
<PAGE>
11.6.2 In connection with any proposed settlement with respect to
any infringement or threatened infringement of any
Intellectual Property Rights, the Party intending to settle
shall notify and consult with the other Party as to the
terms of settlement. The other Party's written consent,
which shall not be unreasonably withheld, shall be required
prior to any such settlement.
11.6.3 In connection with any action taken by either Party against
a Third Party to protect or enforce any Intellectual
Property Rights, the other Party shall, if requested,
consult with the Party taking such action, and make
available as witnesses its employees or as evidence any
materials and/or data as are reasonably necessary for the
furtherance of such action. The expenses in connection with
the providing of witnesses and/or the making available of
any materials and/or data shall be borne by the Party
incurring them, and reimbursed by the Party bringing such
action pursuant to subsection 11.6.1(a).
11.7 INFRINGEMENT OF THIRD PARTY PATENT RIGHTS. If either Party is sued for
patent infringement of any Third Party patents arising out of the
manufacture, use, sale or importation of any Product, the Parties shall
promptly meet to discuss the course of action to be taken to resolve or
defend any such infringement litigation. Subject to the indemnification
provisions of Article 16, a Party shall assume the defense of such
action if the infringement relates solely to the use of such Party's
Initial Technology; provided, however, if an action is brought alleging
that Epimmune Initial Technology is infringing any Third Party patents,
Searle shall have the right to participate fully at its expense in the
defense of such action. Each Party shall provide the other with such
assistance as is reasonably necessary and shall cooperate in the
defense of any such action.
11.8 THIRD PARTY TECHNOLOGY. Searle will use commercially reasonable efforts
to obtain rights to any Third Party patents it deems necessary to
commercialize the Products.
ARTICLE 12. LICENSE GRANT TO EPIMMUNE
- --------------------------------------
12.1 Searle hereby grants to Epimmune a non-exclusive license, with right to
sublicense, in the Territory to make, have made, use and sell Products
outside of the Field under the Searle Project Technology; provided,
however, except as provided in Section 15.5.5, Epimmune shall have no
right to practice or sublicense Searle Project Technology to the extent
it includes Searle Cytokines. For the avoidance of doubt, in the event
Searle Project Technology is useful for any purpose other than in
connection with Searle Cytokines, this Section 12.1 is not intended to
preclude Epimmune from using Searle Project Technology in connection
with such other purposes.
12.2 In consideration of the grant of license rights by Searle under Section
12.1, Epimmune shall pay Searle (i) in the case where Epimmune and/or
its Affiliates sell products which are covered by at least one claim of
the Patent Rights contained in the Searle Project Technology outside of
the Field directly to Third Parties, royalties on Epimmune's Net Sales
of such products by Epimmune and/or its Affiliates at the rate of
-23-
<PAGE>
[...***...] and (ii) in the case where Epimmune licenses products which
are covered by at least one claim of the Patent Rights contained in the
Searle Project Technology outside of the Field to any Third Party,
[...***...] of the royalties actually received by Epimmune from any
such Third Party for the license of such product up to a maximum of
[...***...] of such Third Party's Net Sales of such products.
12.3 In consideration of the disclosure of information to Takara permitted
under Section 13.3, Epimmune shall pay or cause to be paid to Searle
the following royalties, as applicable, on the net sales of products
and services which use, incorporate or are developed based on such
information:
12.3.1 [...***...] if royalties owed to Epimmune by Takara, after
payment by Epimmune of all Third Party royalties except
those owed to Searle hereunder, are [...***...] or greater;
12.3.2 [...***...] if royalties owed to Epimmune by Takara, after
payment by Epimmune of all Third Party royalties except
those owed to Searle hereunder, are [...***...] or greater;
and
12.3.1 If royalties owed to Epimmune by Takara, after payment by
Epimmune of all Third Party royalties except those owed to
Searle hereunder, are between [...***...] and [...***...]
Searle's royalty shall be [...***...] less one third of the
amount royalties to Epimmune are reduced below [...***....]
12.4 The provisions of Sections 1.26 and 7.3 and Article 8 shall apply
mutatis mutandis to Epimmune with respect to all royalties payable by
Epimmune hereunder.
ARTICLE 13. CONFIDENTIAL INFORMATION.
- --------------------------------------
13.1 INFORMATION. Each Party shall keep all information received from the
other Party hereunder or pursuant to any of the Prior Agreements or
developed during the term hereof (the "Information") confidential and
shall not disclose nor use the Information without the other Party's
written consent except to the extent contemplated by this Agreement.
This restriction shall not, however, prevent disclosure of the
Information if and to the extent that disclosure is required by law,
PROVIDED that the disclosing Party first informs the other Party
without delay of any such requirement to allow such other Party to
object to such disclosure and to seek an appropriate protective order
or similar protection prior to disclosure. This obligation shall
survive for five (5) years after termination or expiration of this
Agreement.
-24- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
13.2 EXCEPTIONS. The above obligations shall not apply or shall cease to
apply if such Information:
(a) has become generally available to the public otherwise than through
violation of this Agreement;
(b) was already in the recipient's possession prior to its acquisition
from the disclosing Party (other than Information provided under
the Prior Agreements);
(c) has been received from a Third Party who is not under any
obligation of confidentiality; or
(d) has been independently developed by the receiving Party (except for
Information developed pursuant to this Agreement) without the aid
or use of Information of the disclosing Party as supported by
competent written proof.
13.3 PERMITTED DISCLOSURES. Information may be disclosed to a Party's
Affiliates and agents, consultants, permitted sublicensees, suppliers
or subcontractors of the recipient Party, but only to the extent
required to accomplish the purposes of this Agreement and only if the
receiving Party obtains prior written agreement from such individuals
and/or entities to hold in confidence and not use such Information for
any purpose other than those permitted by this Agreement. Subject to
the provisions of the following sentence, information developed during
the term hereof may be disclosed (a) by Epimmune to its potential
partners or licensees in connection with a corporate partnership
license or similar arrangement outside the Field, provided all clinical
data developed hereunder is excluded from any such disclosure unless
otherwise agreed in writing by Searle; and (b) by Searle to its
potential corporate partners or sub-licensees in connection with a
sublicense, co-development, co-promotion or similar arrangement in the
Field. No such disclosure shall occur until the disclosing Party enters
into a written confidentiality agreement with such potential corporate
partner, licensee or sub-licensee to protect the confidentiality of
such Information. Information that is preclinical and clinical data
provided in the course of the Collaboration during the Collaboration
Term may be disclosed by Epimmune to Takara under the Collaboration
Agreement between Takara and Cytel (predecessor-in-interest to
Epimmune), dated October 18, 1994, as amended, for use by Takara in the
development of its program in the field of ex vivo cellular therapy for
treatment of cancer in Japan, subject to the provisions of Section
12.3. Each Party will use at least the same standard of care as it uses
to protect proprietary or confidential information of its own to ensure
that such individuals and/or entities do not disclose or make any
unauthorized use of the Information.
-25-
<PAGE>
13.4 PUBLICITY AND DISCLOSURE OF AGREEMENT. All publicity relating to this
Agreement shall be subject to the approval of both Parties. Except as
required by law, neither Party shall disclose any non-public
information with respect to the terms of this Agreement or concerning
the collaboration hereunder without the prior written consent of the
other Party, which consent will not be unreasonably withheld or
delayed. If either Party is required by securities laws or regulations
to disclose the existence of this Agreement or its contents, then the
disclosing Party shall notify the other Party of its disclosure
obligations and shall obtain such other Party's consent, which may not
be unreasonably withheld, to the form and content of such disclosure.
Notwithstanding any other provision of this Agreement, each Party may
disclose the terms of this Agreement to lenders, investment bankers and
other financial institutions solely for purposes of financing its
operations if the disclosing Party uses reasonable efforts to obtain a
signed confidentiality agreement with such financial institution with
respect to such information, upon terms substantially similar to those
contained in this Section.
13.5 PUBLICATION. The Parties shall cooperate in appropriate publication of
the results of Research and Development work performed pursuant to this
Agreement, subject to the predominating interest in obtaining patent
protection for any patentable subject matter. Prior to any public
disclosure of such results, the Party proposing disclosure shall send
the other Party a copy of the information to be disclosed. The other
Party shall have thirty (30) days from receipt to determine whether the
information to be disclosed contains subject matter for which patent
protection should be sought prior to disclosure, or otherwise contains
Information of the reviewing Party which such Party desires to maintain
as a trade secret. If notification is not received during the thirty
(30) day period, the Party proposing disclosure shall be free to
proceed with the disclosure. If due to a reasonable belief by the
non-disclosing Party that the disclosure contains confidential
Information for which a patentable invention should be sought, then
prior to the expiration of the thirty (30) day period, the
non-disclosing Party shall so notify the disclosing Party, which shall
then delay public disclosure of the Information for an additional
period of up to six (6) months to permit the preparation and filing of
a patent application on the Information to be disclosed or other action
to be taken. The Party proposing disclosure shall thereafter be free to
publish or disclose the Information. The determination of authorship
for any paper shall be in accordance with accepted scientific practice.
ARTICLE 14. TERM.
- ------------------
14.1 TERM. This Agreement shall be in effect from the Effective Date and,
unless earlier terminated pursuant to the terms of Article 15, shall
continue in effect, on a Product-by-Product and country by country
basis, until the later of (i) the last to expire of the patents
included in the Epimmune Initial Technology, Epimmune Project
Technology or Joint Technology, or (ii) the tenth (10th) anniversary of
the Launch Date. Epimmune's obligation to pay royalties to Searle for
products outside the Field, and the provisions of Article 12 shall be
in effect from the Effective Date and, unless earlier terminated
pursuant to the terms of Article 15, shall continue in effect, on a
product-by-product and country by country basis, until the later of (i)
the last to expire of the patents included in the Searle Project
Technology, or (ii) the tenth (10th) anniversary of the date of the
first sale of a product to a Third Party by Epimmune, its Affiliates or
sublicensees through customary commercial channels of distribution.
-26-
<PAGE>
14.2 EXPIRY. Upon the expiration of this Agreement, on a country by country
basis, (a) Searle shall have a fully paid up, perpetual, royalty-free,
non-exclusive license under the Epimmune Initial Technology and the
Epimmune Project Technology, and (b) Epimmune shall have a fully paid
up, perpetual, royalty-free, non-exclusive license under the Searle
Project Technology.
ARTICLE 15. TERMINATION
- ------------------------
15.1 RESEARCH COLLABORATION.
15.1.1 The Parties have agreed to participate in the Collaboration
until the earlier of the Completion of the Research Plan or
the date that Epimmune has met its obligation under the
Research Budget as contemplated under Subsection 2.2.1,
which is anticipated to be an initial four year period
ending December 31, 2001 (such period, as may be extended or
earlier terminated, is referred to herein as the
"Collaboration Term"). At least six (6) months prior to the
end of the Collaboration Term, Searle shall inform Epimmune
in writing whether it wishes to extend the Collaboration
Term. If, within three months following such notice from
Searle, the Parties have not agreed on the funding of the
Collaboration for an additional period, then the
Collaboration will terminate. In the event of any such
termination, all terms and conditions (except Articles 2, 3
and 4) of this Agreement shall continue in full force and
effect, and Searle may continue Development of the Products.
Epimmune shall provide Searle with all documentation in its
possession relevant to such Research and Development and
shall cooperate with Searle to transfer Epimmune's Research
and Development activities to Searle or its designee.
15.1.2 Beginning at any time after the first anniversary of the
Effective Date, the Collaboration and the Collaboration Term
may be terminated by Searle at any time for any reason or no
reason by giving Epimmune at least ninety (90) days prior
written notice. In the event of any such termination, all
terms and conditions (except Articles 2, 3 and 4) of this
Agreement shall continue in full force and effect and,
Searle may continue Development of the Products. Epimmune
shall provide Searle with all documentation in its
possession relevant to such Research and Development and
shall cooperate with Searle to transfer Epimmune's Research
and Development activities to Searle or its designee.
-27-
<PAGE>
15.2 VOLUNTARY TERMINATION. Searle shall have the right to terminate this
Agreement without cause at any time by giving Epimmune at least ninety
(90) days prior written notice.
15.3 BREACH. Either Party may terminate this Agreement upon sixty (60) days'
written notice if the other Party commits a material breach of any of
its obligations hereunder and such other Party does not remedy such
breach within said sixty (60) days, or, if such breach is not capable
of cure within said sixty (60) days, does not commence remedy of such
breach within such sixty (60) days.
15.4 INSOLVENCY. Either Party shall have the right to terminate this
Agreement at any time by giving the other Party written notice,
effective immediately, if such other Party is dissolved or liquidated,
files or has filed against it a petition under any bankruptcy or
insolvency law, makes an assignment for the benefit of its creditors or
has a receiver appointed for all or substantially all of its property.
15.5 EFFECT OF TERMINATION.
15.5.1 INTELLECTUAL PROPERTY RIGHTS. Following the termination of
this Agreement for any reason (a) all Intellectual Property
Rights owned by each Party as of the Effective Date shall
continue to be owned exclusively by such Party, subject to
the rights of each Party contained in this Agreement, and
(b) any Intellectual Property Rights relating to Joint
Technology shall continue to be jointly owned, subject to
the rights of each Party contained in this Agreement.
15.5.2 VOLUNTARY TERMINATION; BREACH.
15.5.2.1 If Searle terminates this Agreement under
subsection 15.2, or if Epimmune terminates
this Agreement under subsection 15.3, then,
except as provided in subsection (d) below,
(a) with respect only to Products which were
launched and Products for which
applications for Regulatory Approvals
were submitted as of the date such
termination is effective, Searle shall
continue to have the license rights
granted hereunder and make all royalty
payments and, if applicable, milestone
payments for such Products in accordance
with Articles 7 and 8 of this Agreement.
-28-
(b) except as provided in Subsection
15.5.2.1(a),
(i) Searle shall (1) have no further
rights under Epimmune Initial
Technology or Epimmune Project
Technology or Epimmune's rights in
the Joint Technology and the
licenses granted under Article 6
shall terminate, (2) if necessary,
grant Epimmune the license rights
provided under Section 15.5.4, (3)
return to Epimmune all data and
technical information relating to
such Technology, and (4) cooperate
with Epimmune to transfer Searle's
Development activities directly
related to such Technology to
Epimmune or its designee, except
any such activities relating to
Searle Cytokines other than as
specifically provided in Section
15.5.4, and
-28-
<PAGE>
(ii) Epimmune shall (1) have the right
to assume any agreements with any
Third Party for the grant of
license rights for the use of
and/or supply of such Third
Party's Cytokines, (2) upon the
commercialization of any such
Products, in consideration of the
grant of license rights provided
under Section 15.5.4, pay Searle:
(A) in the case where Searle
terminates this Agreement
under Section 15.2, a royalty
on the Net Sales of Product
Type 1 or the Epimmune
Product Component included in
any Product Type 2 sold by
Epimmune, its Affiliates or
sublicensees in the Field at
the following rates on a
Product-by-Product basis
depending on the stage of
Development achieved when
termination occurs:
Royalty If termination occurs when the Product is
------- -----------------------------------------
Rate in the following stage of Development:
---- --------------------------------------
[...***...] prior to the initiation of Phase I
[...***...] during Phase I or Phase II studies
[...***...] upon Phase II completion or during Phase III
[...***...] upon Phase III completion with a submittable
application for Regulatory Approval in a Key
Market
(B) in the case where Epimmune
terminates this Agreement
under Section 15.3, a
royalty on the Net Sales
of Product Type 1 or the
Epimmune Product Component
included in any Product
Type 2 sold by Epimmune,
its Affiliates or
sublicensees in the Field
at the following rates on
a Product-by-Product basis
depending on the stage of
Development achieved when
termination occurs:
-29- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Royalty If termination occurs when the Product is
------- -----------------------------------------
Rate in the following stage of Development:
---- --------------------------------------
[...***...] prior to the initiation of Phase I
[...***...] during Phase I or Phase II studies
[...***...] upon Phase II completion or during Phase III
[...***...] upon Phase III completion with a submittable
application for Regulatory Approval in a Key
Market
(C) in the case where either
Searle terminates this
Agreement under Section
15.2 or Epimmune
terminates this Agreement
under Section 15.3, Net
Sales of the Searle
Product Component packaged
alone or included in any
Product Type 2 sold by
Epimmune, its Affiliates
or sublicensees in the
Field at the higher of the
following rates:
(i) [ *** ] for a
Searle Cytokine
covered by at
least one
composition of
matter claim of
the Patent Rights
contained in Joint
Technology; and
(ii) [ *** ] for a
Searle Cytokine
covered by at
least one claim of
the Patent Rights
contained in
Searle Initial
Technology or
Searle Project
Technology.
(c) The provisions of Sections 1.26, 7.2(i)
(except with respect to Searle
Cytokines) and 7.3 and Article 8 shall
apply mutatis mutandis to Epimmune with
respect to all royalties payable by
Epimmune under this Section 15.5.2.
(d) Notwithstanding the provisions of
subsection (a) above, if Epimmune
terminates this Agreement under
subsection 15.3 due to Searle's failure
to make a royalty payment required
hereunder which is not the subject of a
good faith dispute, then subsection (a)
above shall not apply and subsection (b)
shall also apply to any Products which
were launched and/or for which
applications for Regulatory Approvals
were submitted as of the date such
termination is effective. With respect
only to any such Products which were
launched and/or for which applications
for Regulatory Approvals were submitted
as of the date such termination is
effective, Epimmune shall pay Searle a
royalty of [...***...] on the Net Sales
of any Product Type 1 or the Epimmune
Product Component included in any
Product Type 2 sold by Epimmune, its
Affiliates or sublicensees in the Field.
-30- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
15.5.2.2 If Searle terminates this Agreement under
Subsection 15.3, Searle shall have the
continuing right to make, have made, use,
sell and import Products in the Field as
provided in this Agreement, subject to the
payment of all royalties and milestone
payments due hereunder, except that all
milestone payments which become due after the
date such termination is effective shall be
reduced by [...***....]
15.5.2.3 If Searle terminates this Agreement under
Subsection 15.3 and Epimmune has failed to
meet its funding obligations defined in
Section 2.2.1 under the Collaboration,
[...***...]
15.5.3 INSOLVENCY.
15.5.3.1 In the event Epimmune becomes a debtor under
the Bankruptcy Code, all rights and licenses
granted under or pursuant to this Agreement
by Epimmune to Searle are, and shall
otherwise be deemed to be, for purposes of
Section 365(n) of the Bankruptcy Code,
licenses of rights to "intellectual property"
as defined under Section 101(35)(a) of the
Bankruptcy Code. The Parties agree that
Searle, in addition to the rights granted to
it under this Agreement, as licensee of
rights under this Agreement, shall retain and
may fully exercise all of its rights and
elections under the Bankruptcy Code. If a
bankruptcy proceeding is commenced by or
against Epimmune under the Bankruptcy Code,
Searle shall be entitled to a complete
duplicate of (or complete access to, as
appropriate) any such intellectual property
and all embodiments of such intellectual
property upon written request therefor by
Searle. Such intellectual property and all
embodiments thereof shall be promptly
delivered to Searle: (a) upon any such
commencement of a bankruptcy proceeding upon
written request by Searle, unless Epimmune
elects to continue to perform all of its
obligations under this Agreement; or (b) if
not delivered under (a) above, upon the
rejection of this Agreement by or on behalf
of Epimmune upon written request by Searle.
Epimmune shall not interfere with the rights
of Searle as provided in this Agreement, or
any agreement supplementary hereto, to such
intellectual property (including all such
embodiments thereof), including any right of
Searle to obtain such intellectual property
(or such embodiment) from any other entity.
-31- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
15.5.3.2 The provisions of the following sentence
shall apply if Epimmune becomes a debtor
under the Bankruptcy Code and if, in any
bankruptcy proceeding relating thereto,
Searle should lose the license rights granted
by Epimmune in Section 6.1 with respect to
any of the top fifteen (15) pharmaceutical
markets in the world based on published IMS
data at the time of such loss. In such event,
the cumulative milestone payments set forth
on Exhibit E shall be reduced by (a)
[...***...] if Searle loses such rights in
one of such top fifteen (15) pharmaceutical
markets, and (b) [...***...] if Searle loses
such rights in two or more of such fifteen
(15) pharmaceutical markets.
15.5.3.3 During the term of this Agreement, Epimmune
shall not grant any Third Party, other than a
banking institution or other similar
institution engaged primarily in the business
of lending money or extending credit, a
security interest in the Intellectual
Property Rights.
15.5.4 GRANT OF LICENSE TO EPIMMUNE.
15.5.4.1 In the event this Agreement is terminated by
Searle pursuant to Section 15.2 or by
Epimmune pursuant to Section 15.3, then
Searle shall grant to Epimmune a
semi-exclusive, worldwide license, with right
to sublicense, under
(a) Searle Project Technology and Searle's
rights under Joint Technology to make,
have made, use and sell Products in the
Field; provided, however, Epimmune shall
have no right to practice or sublicense
Searle Project Technology or Joint
Technology for uses of Searle Cytokines
except to the extent necessary to use a
Searle Cytokine that was included in the
formulation of a Product in Development
under the Development Plan at the time
of notice of such termination, and
-32- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
(b) Searle Initial Technology for uses of
Searle Cytokines only to the extent
necessary to make, have made, use and
sell Products in the Field which use a
Searle Cytokine that was included in the
formulation of a Product in Development
under the Development Plan at the time
of notice of such termination.
For the avoidance of doubt, if more than one
(1) Searle Cytokine was evaluated for use in
the formulation of any Product, the license
granted under this Section 15.5.4.1 shall
apply only to the Searle Cytokine(s) selected
by Epimmune for use in such Product. Also,
for the avoidance of doubt, if Epimmune
sublicenses the rights granted under this
Section 15.5.4.1, any such sublicensee shall
have no right whatsoever to use the Searle
Initial Technology, Searle Project Technology
or Searle's rights under the Joint Technology
for any purpose other than the express grant
of rights provided herein.
Any such license shall contain applicable
warranties by Searle to Epimmune similar to
those made by Epimmune in Section 5.1. In
connection with the grant of such license,
Searle shall disclose to Epimmune in writing
all Know-How included in the Searle Project
Technology and Joint Technology licensed to
Epimmune that was not previously disclosed to
Epimmune and all Know-How included in the
Searle Initial Technology relating to the
specific Searle Cytokine(s) evaluated in
connection with the Development of the
Products described in Sections 15.5.4.1(a)
and (b).
15.5.4.2 In consideration of the license granted under
Section 15.5.4.1, Epimmune shall pay Searle
the royalties provided in Section
15.5.2.1(b)(C).
15.5.4.3 In connection with the license granted under
Section 15.5.4.1, Searle shall have the
option, in its sole discretion and upon
commercially reasonable terms to be agreed by
the Parties, to either (i) provide Epimmune
with the enabling technology to manufacture
any Searle Cytokines contained in any Product
covered by such license, or (ii) supply
Epimmune with any such Searle Cytokines on
such commercially reasonable terms, which
terms shall be no less favorable than those
granted by Searle to Third Parties for the
purchase of Searle Cytokines or, if no Third
Parties purchase Searle Cytokines, of a
compound or product utilizing novel
technology similar to Searle Cytokines.
-33-
<PAGE>
15.6 SURVIVAL AND EFFECT OF TERMINATION. The provisions of Sections 11.1 and
14.2 and Articles 8, 12, 13 (excluding Sections 13.4 and 13.5), 15 and
16 shall survive termination or expiration of this Agreement.
Termination or expiration of this Agreement shall not deprive either
Party of any rights or remedies either at law or in equity or relieve
either Party of any of its obligations incurred prior to such
termination or expiration. The Parties shall cooperate in good faith to
wind-down the Development in order to minimize disruption of the
Development and/or commercialization efforts.
ARTICLE 16. INDEMNIFICATION.
- -----------------------------
16.1 IN FAVOR OF SEARLE. Epimmune agrees to indemnify, defend and hold
Searle harmless from and against any and all damages, losses,
liabilities (including without limitation product liability with
respect to Epimmune Technology) costs and expenses (including
reasonable costs and attorneys fees) arising from any claim, lawsuit or
other action made or brought against Searle as a result of (a) any
negligent or willful act or omission of Epimmune, or (b) the breach of
any provision, term, warranty or representation made by Epimmune
herein; or (c) any claim alleging the infringement of a Third Party's
intellectual property rights by the importing, making, using or selling
Epimmune Initial Technology in the importing, making, using or selling
of any Product.
16.2 IN FAVOR OF EPIMMUNE. Searle agrees to indemnify, defend and hold
Epimmune harmless from and against any and all damages, losses,
liabilities (including without limitation product liability with
respect to Searle Technology) costs and expenses (including reasonable
costs and attorneys fees) arising from any claim, lawsuit or other
action made or brought against Epimmune as a result of (a) any
negligent or willful act or omission of Searle, or (b) the breach of
any provision, term, warranty or representation made by Searle herein;
or (c) any claim alleging the infringement of a Third Party's
intellectual property rights by the importing, making, using or selling
Searle Initial Technology in the importing, making, using or selling of
any Product.
16.3 LIMITATION. Notwithstanding anything to the contrary set forth above or
elsewhere herein, in no event shall either Party be (a) required to
indemnify the other party for such other Party's negligence or
intentional misconduct, or (b) responsible for the lost profits,
consequential or indirect damages of the other Party.
16.4 NOTICE. Should any claim arise which could reasonably lead to a claim
or demand for indemnification, the Party seeking indemnification
("Indemnified party") shall promptly notify the other Party
("Indemnifying party") of the claim and the facts constituting the
basis for such claim. The Indemnified party shall not settle or
compromise any such claim without the prior written consent of the
Indemnifying party, which consent shall not be unreasonably withheld.
-34-
<PAGE>
16.5 DEFENSE. The Indemnifying party may, upon written notice to the
Indemnified party, assume the defense of any claim at its sole cost and
expense. The Indemnified party shall provide reasonable assistance in
the defense of such claim in the event the Indemnifying party assumes
the defense as set forth above.
ARTICLE 17. DILIGENT PERFORMANCE; NEW OPPORTUNITIES.
- -----------------------------------------------------
17.1 DILIGENCE STANDARDS. Each Party shall use commercially reasonable and
diligent efforts to perform its respective obligations under the
Research Plan and the Development Plan, as either or both may be
amended from time to time pursuant to the term of this Agreement, and
shall ensure that such responsibilities are carried out adhering to the
highest ethical and safety standards. Each Party shall provide
qualified, experienced personnel to carry out its respective
obligations under the Research Plan and the Development Plan. As used
herein, "commercially reasonable and diligent efforts" means, unless
the parties agree otherwise, those efforts consistent with the exercise
of prudent scientific and business judgment as applied to activities
conducted with regard to other programs or products of similar
potential and market size in the pharmaceutical industry.
17.2 SEARLE DILIGENCE.
17.2.1 Epimmune may provide 90 days written notice to Searle if, in
its opinion, Searle is not using commercially reasonable and
diligent efforts in the performance of its obligations under
the Research Plan and the Development Plan, in order for the
parties to discuss the situation and for Searle to make
diligent and continuing efforts to rectify the situation during
such 90 day period. In the event that the parties are unable to
resolve their differences within such 90 day period, such
dispute shall be submitted for resolution to the senior
executive of each Party (i.e., the President of Epimmune and
the President of Searle R&D). If the senior executives are
unable to satisfactorily resolve such dispute within 30 days of
the date it was submitted to them, then the dispute shall be
submitted for binding arbitration in accordance with Section
19.12.
17.2.2 Searle shall (i) make a determination to pursue research and
development of Products which are [...***...] and commit
sufficient resources to enable pre-clinical development of a
-35- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Product which is a [...***...] [...***...] by [...***...] and
(ii) issue a Product Alert for a Product which is a [...***...]
by [...***...] provided the Product candidate offered by
Epimmune meets the Product specifications provided by Searle,
such specifications to be provided as soon as practicable
following the Effective Date, and if such Product candidate
fails to meet such specifications then such date shall be
extended on a day-by-day basis for each day after [...***...]
until the date such Product candidate meeting such
specifications is provided. In the event that Epimmune has not
provided data regarding the [...***...] in accordance with the
requirements of the Research Plan by [...***...] the dates set
forth in (i) and (ii) of the preceding sentence shall be
extended on a day-by-day basis for each day after [...***...]
until the date such data is provided. In the event that Searle
does not satisfy the diligence requirements set forth in this
Section 17.2.2, then Epimmune may terminate the license granted
to Searle by Epimmune in Section 6.1 with respect to the PADRE
technology for the development of [...***...] upon written
notice to Searle.
17.2.3 In the event that, as of [...***...] Searle is not pursuing
development of any Product that is a [...***...] or has not
paid the milestone associated with a Product Alert for any
Product that is a [...***...] then Searle shall issue a Product
Alert with respect to at least one Product [...***...] and pay
the associated milestone payment by [...***....] In the event
that Searle does not satisfy the diligence requirements set
forth in this Section 17.2.3, then Epimmune may terminate the
license granted to Searle by Epimmune in Section 6.1 with
respect to [...***...] upon written notice to Searle.
17.2.4 If Searle decides not to proceed with the Development of a
Product in Development under the Development Plan, or if no
significant Development action has been taken by Searle with
respect to a Product in Development under the Development Plan,
as updated, for a period of [...***...] the provisions of this
Section 17.2.4 shall apply with respect to such Product (an
"Abandoned Product"). Searle shall promptly provide notice to
Epimmune of any decision not to proceed with a Product in
Development under the Development Plan. Upon written notice to
Searle, Epimmune may elect to conduct further development of
any such Abandoned Product for any indication that is not
included in any launched Product or in any Product for which
Regulatory Approval applications have been submitted or in any
Product in development under the Development Plan and the
license granted to Searle by Epimmune in Section 6.1 shall
terminate with respect to any such Abandoned Product.
Notwithstanding the foregoing, an Abandoned Product shall not
be deemed to include any (i) back-up compound, the development
of which depends on the success of the lead compound, or (ii)
Product or compound, the development of which has been delayed
as part of the overall pipeline management strategy in order to
optimize the applicable technology platform.
-36- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
17.2.5 If any failure to act diligently as required in Sections
17.2.1, 17.2.2, 17.2.3 and/or 17.2.4 is due to scientific
and/or technical results, clinical study problems outside of
Searle's control, action by any Regulatory Authority or mutual
agreement of the parties, then the time periods for such
diligence requirements set forth therein shall be adjusted
accordingly.
17.3 EPIMMUNE DILIGENCE.
17.3.1 Searle may provide 90 days written notice to Epimmune if
Epimmune has failed to complete Research activities for which
it is responsible under the Research Plan, as amended from time
to time, within six (6) months following the date such activity
was scheduled for completion, in order for Epimmune to make
diligent and continuing efforts to rectify the situation during
such 90 day period. In the event that the parties are unable to
resolve their differences within such 90 day period, such
dispute shall be submitted for resolution to the senior
executive of each Party (i.e., the President of Epimmune and
the President of Searle R&D). If the senior executives are
unable to satisfactorily resolve such dispute within 30 days of
the date it was submitted to them, then the dispute shall be
submitted for binding arbitration in accordance with Section
19.12.
17.3.2 In the event, for the first Product [...***...] appropriate for
clinical trials which cover [...***...] has not occurred by
[...***...] then the amount due for the achievement of the
milestone event(s) provided in Item I.1. of Exhibit E shall be
reduced by [...***...] following such date that such [...***...
.] As of the [...***...] no payment shall be due Epimmune for
the achievement of the milestone event(s) provided in Item I.1.
of Exhibit E.
17.3.3 In the event, for the first Product under the [...***...]
appropriate for clinical trials which cover [...***...] has not
occurred by [...***...] then the amount due for the achievement
of the milestone event(s) provided in Item I.1. of Exhibit E
shall be reduced by [...***...] following such date that such
[...***....] As of the [...***...] no payment shall be due
Epimmune for the achievement of the milestone event(s) provided
in Item I.1. of Exhibit E.
-37- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
17.3.4 If any failure to act diligently as required in Sections
17.3.1, 17.3.2 and 17.3.3 is due to scientific and/or technical
results, action by any Regulatory Authority or mutual agreement
of the parties, then the time periods for such diligence
requirements set forth therein shall be adjusted accordingly.
17.4 NEW OPPORTUNITIES. Following the [...***...] Epimmune may present ideas
for Products or technology not already contained in the Research Plan
or Development Plan(s) for inclusion in the Collaboration in reasonable
detail as is normally included in order to make a decision on compound
research within the pharmaceutical industry for consideration by Searle
(a "Proposal"). Searle shall consider any such Proposal in a timely
manner. If Searle determines in good faith that it is interested in
pursuing the Proposal under the Collaboration, the Parties will agree
on how to proceed with research and development of the Product or the
Development Plan. In the event that the Parties are unable to agree,
such dispute shall be submitted for resolution to the senior executive
of each Party (i.e., the President of Epimmune and the President of
Searle R&D). If the senior executives are unable to satisfactorily
resolve such dispute within 30 days of the date it was submitted to
them, then the dispute shall be submitted for binding arbitration in
accordance with Section 19.12. In the event Searle elects not to pursue
such Proposal under the Collaboration [...***...] upon written notice
to Searle, Epimmune may pursue the development of Products or
technology as described in the Proposal and the license granted to
Searle by Epimmune in Section 6.1 shall terminate solely with respect
to such Products or technology so rejected by Searle. For purposes of
this Section 17.4, a "Proposal" shall include a product concept for one
or more indications, with as much information as can be reasonably
determined about product specifications, and all relevant internal
data, relevant data from the literature, summary competitive analysis
and an overview at the target market(s).
ARTICLE 18. ASSIGNMENT.
- ------------------------
Neither this Agreement nor any of the rights or obligations hereunder may be
assigned by either Party without the prior written consent, which shall not be
unreasonably withheld, of the other Party, except to an Affiliate of the
assigning Party or to any Third Party who acquires all or substantially all of
the business of the assigning Party by merger, sale of assets or otherwise, so
long as such Affiliate or Third Party agrees in writing to be bound by the terms
of this Agreement. The assigning Party shall remain primarily liable hereunder
notwithstanding any such assignment.
-38- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
ARTICLE 19. MISCELLANEOUS.
- ---------------------------
19.1 WAIVER. The failure by either Party to require performance by the other
Party of any of its obligations hereunder shall in no manner affect the
right of such Party to enforce the same at a later time. No waiver by
either Party of any condition, or of the breach of any provision of
this Agreement, whether by conduct or otherwise shall be deemed to be
or construed as a further or continuing waiver thereof.
19.2 AMENDMENTS. This Agreement may not be amended except in writing, signed
by both Parties.
19.3 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable, such provision shall be deleted, and, if possible,
replaced by a provision which achieves the intent of the Parties.
19.4 RELATIONSHIP BETWEEN THE PARTIES. Nothing in this Agreement is intended
nor shall be construed to create a partnership or joint venture between
Epimmune and Searle. Neither Party shall have the express or implied
authority to assume or create any obligations on behalf of or in the
name of the other Party.
19.5 CORRESPONDENCE AND NOTICES. Extraordinary notices and communications
(including but not limited to notices of termination, force majeure,
material breach, change of address) shall be in writing and sent by
prepaid registered or certified air mail, or by facsimile confirmed by
prepaid registered or certified air mail letter, and shall be deemed to
have been properly served to the addressee upon receipt of such written
communication.
In the case of Epimmune, such address shall be:
Epimmune Inc.
6555 Nancy Ridge Drive
Suite 200
San Diego, California 92121
Attn: President
Fax: (619) 404-7177
-39-
<PAGE>
with a copy to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attn: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
and in the case of Searle, such address shall be:
G. D. Searle & Co.
P. O. Box 5110
Chicago, IL 60680-5110
Attn: Vice President, Business Development
Fax: (847) 967-2070
with a copy to:
Attn: General Counsel
Fax: (847) 967-2045
19.6 CHOICE OF LAW. This Agreement is subject to and governed by the laws of
Illinois (except the choice of laws rules thereof). The venue for any
legal proceedings shall be Illinois for legal proceedings brought by
Epimmune against Searle and California for legal proceedings brought by
Searle against Epimmune.
19.7 FORCE MAJEURE. Neither Party shall be liable to the other for delay or
failure in performing any of its obligations if and to the extent that
such failure or delay is due to circumstances beyond its control which
it could not have avoided by the exercise of reasonable diligence. It
shall notify the other Party promptly should such circumstances arise,
giving an indication of the likely extent and duration thereof, and
shall use all commercially reasonable efforts to resume performance of
its obligations as soon as practicable.
19.8 REGISTRATION AND FILING OF THE AGREEMENT. To the extent, if any, that a
Party concludes in good faith that it is required to file or register
this Agreement or a notification thereof with any governmental
authority, including without limitation the U.S. Securities and
Exchange Commission, the Competition Directorate of the Commission of
the European Communities or the U.S. Federal Trade Commission, in
accordance with applicable laws and regulations, such Party may do so,
and the other Party shall cooperate in such filing or notification and
shall execute all documents reasonably required in connection
therewith. In such situation, the Parties will request confidential
treatment of sensitive provisions of the Agreement, to the extent
permitted by law. The Parties shall promptly inform each other as to
the activities or inquiries of any such governmental authority relating
to this Agreement, and shall cooperate to respond to any request for
further information therefrom. Without limiting the foregoing, the
Parties agree to make all necessary filings required under the
Hart-Scott-Rodino Antitrust Improvements act of 1976, as amended, and
to cooperate with each other so as to comply therewith on a timely
basis in light of the provisions of this Agreement.
-40- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
19.9 EXPORT. The Parties agree to abide by the export laws and regulations
of the United States and to cooperate with each other in obtaining any
required export license applicable to the subject matter of this
Agreement.
19.10 ENTIRE AGREEMENT. This Agreement together with its Exhibits and further
agreements mentioned herein constitutes the entire agreement of the
Parties with respect to the subject matter hereof as of its date, and
supersedes all prior agreements (including the Prior Agreements),
understandings, representations and proposals, written or oral,
relating thereto.
19.11 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
19.12 ARBITRATION. Any dispute arising under Section 1.26, 3.2.4 or Article
17 will be finally settled by arbitration in accordance with the then
existing Commercial Arbitration Rules of the American Arbitration
Association ("AAA"). Upon the written request of either party,
arbitration will be by one arbitrator with relevant experience in the
pharmaceutical industry selected within 30 days of such arbitration
request by mutual agreement of the Parties (or in accordance with AAA
rules if the Parties are unable to reach agreement on the selection of
such arbitrator). Judgment upon the award rendered by the panel, or
single arbitrator as the case may be, shall be final and nonappealable
and may be entered in any court having jurisdiction thereof. The
location for any arbitration initiated by either party shall be Dallas,
Texas, or at such other place as the parties may mutually agree.
[the remainder of this page intentionally left blank]
-41-
<PAGE>
IN WITNESS WHEREOF, the parties have signed this Agreement effective as
of the year first set forth above.
G.D. SEARLE & CO. EPIMMUNE INC.
By:/s/ R.V. De Schutter By:/s/ Deborah Schueren
-------------------- --------------------
R. U. De Schutter Deborah Schueren
Chairman and Chief Executive President
Officer and President
EXHIBITS
--------
A EPIMMUNE PATENT RIGHTS
B SEARLE PATENT RIGHTS
C PRELIMINARY RESEARCH PLAN
D PRELIMINARY RESEARCH BUDGET
E MILESTONE PAYMENTS
-42-
<PAGE>
EXHIBIT A
---------
EPIMMUNE PATENT RIGHTS
[...***...]
CONFIDENTIAL TREATMENT REQUESTED
-43-
<PAGE>
EXHIBIT B
---------
SEARLE PATENT RIGHTS
[...***...}
CONFIDENTIAL TREATMENT REQUESTED
-44-
<PAGE>
EXHIBIT C
---------
PRELIMINARY RESEARCH PLAN
[...***...}
CONFIDENTIAL TREATMENT REQUESTED
-45-
<PAGE>
EXHIBIT D
---------
PRELIMINARY RESEARCH BUDGET
-46-
<PAGE>
EXHIBIT E
---------
MILESTONE PAYMENTS
For purposes of this Exhibit E, the following definitions shall apply:
(a) "First Product" means (i) for purposes of Articles I and II, the first
Product developed hereunder containing a [...***...] and (ii) for
purposes of Article III, the first Product developed hereunder
containing [...***....]
(b) "New Product" means any Product, whose composition (based on components
or formulation) is not identical to the First Product, for the
treatment of a specific type of cancer or cancers.
(c) "Additional Indication" means any indication, other than the specific
cancer(s) treated in the first indication of the First Product or of
any New Product. By way of illustration or example, if [...***...] is
the specific cancer treated as the first indication in either the First
Product or a New Product, then each of [...***...] shall be "Additional
Indications".
Subject to the provisos contained in Article IV of this Exhibit E, Searle shall
pay Epimmune the following amounts upon the occurrence of each of the following
milestone events with respect to each of [...***...]
I. [...***...]
-----------
1. Subject to sections 17.3.2 and 17.3.3 of the Agreement, [...***...]
upon the issuance of the first to occur of either (i) a single
Product Alert for a compound containing epitopes appropriate for
clinical trials which cover [...***...] for the treatment of
[...***...] or (ii) the last of separate Product Alerts for compounds
containing epitopes appropriate for clinical trials which cover,
[...***...] for the treatment of [...***...] or (iii) twelve (12)
months after selection of epitopes appropriate for clinical trials
which cover [...***...] for the treatment of [...***....]
2. [...***...] upon the start of Phase I/II clinical studies for (A) the
First Product, and (B) each New Product.
-47- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
3. [...***...] upon (A) the completion of Phase II clinical studies for
the first indication of the First Product, where completion of such
studies shall be deemed to occur upon the determination by Searle
that the data resulting therefrom supports the start of Phase III
studies and no additional Phase II studies are required, and (B) the
start of Phase III clinical studies for the first indication of each
New Product.
4. [...***...] upon the start of Phase III clinical studies for each
Additional Indication of (A) the First Product and (B) each New
Product.
5. [...***...] upon the submission in the first of the Key Markets to
the Regulatory Authority of the application for Regulatory Approval
of the first indication of the (A) First Product and (B) each New
Product.
6. [...***...] upo
n the Launch Date in the first of the Key Markets of
the first indication of the (A) First Product and (B) each New
Product.
7. [...***...] upon the Launch Date in the first of the Key Markets of
each Additional Indication of (A) the First Product and (B) each New
Product.
II. [...***...]
-----------
1. [...***...] upon the issuance of the First Product Alert
[...***...]
2. [...***...] upon the start of Phase I/II clinical studies for
(A) the First Product, and (B) each New Product.
3. [...***...] upon the start of Phase III clinical studies for
the first indication of (A) the First Product, and (B) each New
Product.
4. [...***...] upon the start of Phase III clinical studies for
each Additional Indication of (A) the First Product and (B)
each New Product.
5. [...***...] upon the submission in the first of the Key Markets
to the Regulatory Authority of the application for Regulatory
Approval of the first indication of the (A) First Product and
(B) each New Product.
6. [...***...] upon the Launch Date in the first of the Key
Markets of the first indication of the (A) First Product and
(B) each New Product.
7. [...***...] upon the Launch Date in the first of the Key
Markets of each Additional Indication of (A) the First Product
and (B) each New Product.
-48- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
III. [...***...]
-----------
1. [...***...] upon the issuance of a Product Alert satisfying the
Product specifications defined by Searle for the First Product.
2. [...***...] upon the start of Phase I/II clinical studies for
(A) the First Product, and (B) each New Product.
3. [...***...] upon the start of Phase III clinical studies for
the first indication of (A) the First Product, and (B) each New
Product.
4. [...***...] upon the start of Phase III clinical studies for
each Additional Indication of (A) the First Product, and (B)
each New Product.
5. [...***...] upon the submission in the first of the Key Markets
to the Regulatory Authority of the application for Regulatory
Approval of the first indication of (A) the First Product, and
(B) each New Product.
6. [...***...] upon the Launch Date in the first of the Key
Markets of the first indication of (A) the First Product, and
(B) each New Product.
7. [...***...] upon the Launch Date in the first of the Key
Markets of each Additional Indication of (A) the First Product,
and (B) each New Product.
IV. PROVISOS
--------
1. If, [...***...] a compound under Development fails and a back-up
compound is selected for Development in place thereof for the same
indications as the failed compound, then milestone payments will be
payable (upon the occurrence of the applicable triggering event) only
for those milestone events for which a payment was not previously
made with respect to the failed compound. For the avoidance of doubt,
no milestone payments shall be made for any back-up compound except
in the event a back-up compound replaces a lead compound in
Development.
2. It is the intention of the parties to begin Research and Development
of Products [...***...] then to [...***...] for pursuing Research and
Development of Products [...***...] If, for any technical, commercial
and/or strategic reasons, the parties agree to abandon Development of
Products within [...***...] in favor of the Research and Development
of Products within the [...***...] then, for any milestone events
achieved within the [...***...] which are for the same milestone
events (i.e. for the same indication) already achieved within the
[...***...] Searle shall pay Epimmune [...***...] of the amount
otherwise due for achievement of such [...***...] events provided
that this [...***...] cutback shall not apply to any Product Alert
milestone. For example, if the first three clinical milestone
payments have been made for the First Product developed within the
[...***...] prior to the abandonment of such platform, then Searle
shall pay Epimmune [...***...] of the first three clinical milestones
payments for the First Product developed within the [...***...].
-49- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
3. Under Articles I, II and III above, the milestones stated are
milestones owed for the first achievement of a milestone event for
each Product indication without regard to the technology platform
under which such Product was developed. The milestones due upon each
subsequent achievement of a milestone event for the same indication
within the same technology platform for second generation Products or
within another technology platform shall be reduced by [...***...].
For example, the milestone payments would be [...***...] for the
start of Phase I/II clinical studies for a Product for the treatment
of [...***...] developed under the [...***...] and [...***...] for
the subsequent start of Phase I/II clinical studies for a Product for
the treatment of [...***...] developed under the [...***...] or a
second generation Product for the treatment of [...***...] developed
under the [...***...]
4. Payments made by Searle for milestone events achieved for [...***...]
Products under Article III shall in no event exceed [...***...] for
each such Product developed under this Agreement.
-50- CONFIDENTIAL TREATMENT REQUESTED
<PAGE>
Exhibit 10.57
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Stock Purchase
Agreement") is made as of February 27, 1998 by and between G.D. Searle & Co., a
Delaware corporation ("SEARLE"), and Epimmune Inc., a Delaware corporation
("EPIMMUNE").
WHEREAS, SEARLE desires to purchase from EPIMMUNE and EPIMMUNE desires
to sell to SEARLE shares of EPIMMUNE's preferred stock as provided for herein;
and
WHEREAS, concurrently herewith, the parties hereto are entering into a
License and Collaboration Agreement (the "Collaboration Agreement").
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
hereof, at the Closing (as defined below) SEARLE shall purchase from EPIMMUNE,
and EPIMMUNE shall issue and sell to SEARLE, 1,032,149 shares of EPIMMUNE Series
B Preferred Stock, par value $0.001 (the "Shares"), at a per share purchase
price of $5.91, for an aggregate purchase price of $6,100,000, payable in cash.
1.2 CLOSING. Subject to the terms of Sections 6 and 7, the closing of
the sale and purchase of the Shares pursuant to Section 1.1 (the "Closing")
shall be held on the date hereof or at such other time upon which SEARLE and
EPIMMUNE shall agree. The Closing shall take place at the offices of Cooley
Godward LLP, 4365 Executive Drive, Suite 1100, San Diego, California 92121.
1.3 DELIVERY. At the Closing, subject to the terms and conditions
hereof, EPIMMUNE shall deliver to SEARLE a stock certificate registered in the
name of SEARLE representing the Shares purchased pursuant to Section 1.1 and
dated as of the Closing against payment of the purchase price therefor by wire
transfer, unless other means of payment shall have been agreed upon by EPIMMUNE
and SEARLE.
2. REPRESENTATIONS AND WARRANTIES OF EPIMMUNE.
EPIMMUNE hereby makes the following representations and warranties to
SEARLE, except as set forth in the Schedule of Exceptions attached hereto as
Exhibit A:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. EPIMMUNE 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. EPIMMUNE is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure so to qualify would have
a material adverse effect on its business or properties.
<PAGE>
2.2 AUTHORIZATION; DUE EXECUTION. EPIMMUNE has the requisite corporate
power and authority to enter into this Stock Purchase Agreement and an Investor
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"Investor Rights Agreement") and a Voting Agreement substantially in the form
attached hereto as Exhibit C (the "Voting Agreement") (the Stock Purchase
Agreement, the Investor Rights Agreement and the Voting Agreement are
collectively referred to as the "Agreements") and to perform its obligations
under the terms of the Agreements and, at the Closing, will have the requisite
corporate power to sell the Shares. All corporate action on the part of
EPIMMUNE, its officers, directors and stockholders necessary for the
authorization, execution and delivery of the Agreements has been taken. Each of
the Agreements has been duly authorized, executed and delivered by EPIMMUNE,
and, upon due execution and delivery by SEARLE, will be a valid and binding
agreement of EPIMMUNE, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles.
2.3 CAPITALIZATION. The authorized capital stock of EPIMMUNE consists
or will consist as of the Closing of 20,000,000 shares of Common Stock, par
value $0.001, and 10,000,000 shares of Preferred Stock, par value $0.001, of
which 6,000,000 shares have been designated Series A Preferred Stock, 1,032,149
shares have been designated Series B Preferred Stock and 659,898 shares have
been designated Series B-1 Preferred Stock. As of February 26, 1998, there were
no shares of Common Stock outstanding and 6,000,000 shares of Series A Preferred
Stock issued and outstanding. The rights, preferences and privileges of the
Series A Preferred Stock, the Series B Preferred Stock and the Series B-1
Preferred Stock will, as of the Closing, be as set forth in EPIMMUNE'S Amended
and Restated Certificate of Incorporation substantially in the form attached
hereto as Exhibit C (the "Restated Certificate"). Other than as contemplated by
the Agreements, the conversion rights of the Preferred Stock and options to
purchase 1,460,791 shares of Common Stock issued, and 459,209 shares of Common
Stock available for future option grants, to certain employees, officers,
directors, consultants and advisors of EPIMMUNE, there are no subscriptions,
options, warrants, rights or agreements (contingent or otherwise), including
without limitation, conversion rights, preemptive rights, rights of first
refusal or other rights or agreements, providing for the issuance by EPIMMUNE of
Common Stock or other equity securities of EPIMMUNE. The Shares to be acquired
by SEARLE pursuant to Section 1.1 above will constitute (i) approximately 13.42%
of the outstanding shares of Common Stock of EPIMMUNE on an as-converted,
undiluted basis, and (ii) approximately 11.28% of the outstanding Common Stock
of EPIMMUNE on an as-converted, fully diluted basis, assuming exercise of all
outstanding rights, warrants and options to acquire Common Stock.
2.4 VALID ISSUANCE OF SHARES. The Shares when issued, sold and
delivered in accordance with the terms hereof for the consideration set forth
herein, will be duly and validly authorized and issued, fully paid and
nonassessable, free of all taxes, liens and charges, and, based in part upon the
representations of SEARLE in this Stock Purchase Agreement, will be issued in
compliance with all applicable federal and state securities laws.
2.5 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of
EPIMMUNE is required in connection with the consummation of the transactions
contemplated by the Agreements, except for notices required or permitted to be
2.
<PAGE>
filed with certain state and federal securities commissions after the Closing,
which notices will be filed on a timely basis.
2.6 FINANCIAL INFORMATION. EPIMMUNE has provided to SEARLE unaudited
financial statements as of and for the three month period ended December 31,
1997 and the one month period ending January 31, 1998 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied, except as
disclosed therein, and present fairly the financial condition and position of
EPIMMUNE as of the date thereof, subject to normal recurring year-end
adjustments and except that they do not contain all footnotes required under
generally accepted accounting principles.
2.7 NO CONFLICT. The execution, delivery and performance by EPIMMUNE of
the Agreements do not and will not violate any provision of EPIMMUNE's
Certificate of Incorporation or By-laws, any provision of any order, writ,
judgment, injunction, decree, determination or award to which EPIMMUNE is a
party or by which it is bound, or to EPIMMUNE's knowledge, any law, rule or
regulation (including, without limitation, the rules and regulations of the
Securities and Exchange Commission (the "SEC") or any regulatory commission of
any jurisdiction) currently in effect having applicability to EPIMMUNE.
2.8 ABSENCE OF LITIGATION. There is no action, suit, proceeding or
investigation (including any such matter related to EPIMMUNE's intellectual
property) pending or currently threatened against EPIMMUNE or its properties
before any court or governmental agency, which would, singly or in the
aggregate, have a material adverse effect on EPIMMUNE's business, operations or
assets, taken as a whole (nor, to the best of EPIMMUNE's knowledge, is there any
basis therefor). There is no action, suit, proceeding or investigation which
EPIMMUNE currently intends to initiate.
2.9 CONFIDENTIALITY. EPIMMUNE hereby represents, warrants and covenants
that it shall maintain in confidence, and shall not use or disclose without
prior written consent of SEARLE, the terms of this Stock Purchase Agreement and
any information identified in writing as confidential that is furnished to it by
SEARLE in connection with this Stock Purchase Agreement. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no unauthorized act or failure to act by EPIMMUNE, (b) lawfully
disclosed to EPIMMUNE by a third party who possessed such information without
any obligation of confidentiality, (c) lawfully developed by EPIMMUNE
independent of any disclosure by EPIMMUNE as supported by EPIMMUNE written
records, or (d) required to be disclosed pursuant to applicable law, regulation
or order or requirement of a court, administrative agency or other government
body (including the securities laws of any applicable jurisdiction); provided
that if EPIMMUNE is required to make any such disclosure of such information it
will to the extent practicable give reasonable advance notice to SEARLE of such
disclosure requirement and will use its reasonable best efforts to secure
confidential treatment of such information required to be disclosed. EPIMMUNE
further covenants that it shall return to SEARLE all tangible materials
containing such information upon request by SEARLE. EPIMMUNE and SEARLE
acknowledge and agree that EPIMMUNE will be required to disclose the issuance of
the Shares contemplated by this Stock Purchase Agreement pursuant to applicable
securities laws and regulations.
3.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF SEARLE.
SEARLE hereby makes the following representations and warranties to
EPIMMUNE as of the date hereof and the Closing:
3.1 AUTHORIZATION; DUE EXECUTION. SEARLE has the requisite corporate
power and authority to enter into the Agreements and to perform its obligations
under the terms of the Agreements and, at the Closing, will have the requisite
corporate power to purchase the Shares. All corporate action on the part of
SEARLE, its officers, directors and stockholders necessary for the
authorization, execution and delivery of the Agreements has been taken. Each of
the Agreements has been duly authorized, executed and delivered by SEARLE, and,
upon due execution and delivery by EPIMMUNE, will be a valid and binding
agreement of SEARLE, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Stock Purchase Agreement is
made with SEARLE in reliance upon SEARLE's representation to EPIMMUNE, which by
SEARLE's execution of this Agreement SEARLE confirms, that the Shares to be
purchased by SEARLE will be acquired for investment for SEARLE'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 SEARLE has no present intention of selling, granting
any participation in, or otherwise distributing the same (subject to the
disposition of SEARLE's property being at all times within its control). By
executing this Stock Purchase Agreement, SEARLE further represents that SEARLE
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 Shares.
3.3 DISCLOSURE OF INFORMATION. SEARLE has received all the information
that it has requested and that it considers necessary or appropriate for
deciding whether to enter into this Stock Purchase Agreement and to purchase the
Shares. SEARLE further represents that it has had an opportunity to ask
questions and receive answers from EPIMMUNE regarding the terms and conditions
of the offering of the Shares.
3.4 INVESTMENT EXPERIENCE. SEARLE is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares. SEARLE also represents it has
not been organized solely for the purpose of acquiring the Shares.
3.5 ACCREDITED INVESTOR. SEARLE is an "accredited investor" as such
term is defined in Rule 501 of the General Rules and Regulations prescribed by
the SEC pursuant to the Securities Act of 1933, as amended (the "Securities
Act").
3.6 RESTRICTED SECURITIES. SEARLE understands that (a) the Shares have
not been registered under the Securities Act by reason of a specific exemption
therefrom, that such securities must be held by it indefinitely and that SEARLE
must, therefore, bear the economic risk of such investment indefinitely, unless
in each case a subsequent disposition thereof is registered under the Securities
4.
<PAGE>
Act or is exempt from such registration; (b) each certificate representing the
Shares will be endorsed with the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
and (c) Epimmune will instruct any transfer agent not to register the transfer
of the Shares (or any portion thereof) unless the conditions specified in the
foregoing legends are satisfied, until such time as a transfer is made, pursuant
to the terms of this Agreement, and in compliance with Rule 144 or pursuant to a
registration statement or, if the opinion of counsel referred to above is to the
further effect that such legend is not required in order to establish compliance
with any provisions of the Securities Act or this Stock Purchase Agreement.
3.7 CONFIDENTIALITY. SEARLE hereby represents, warrants and covenants
that it shall maintain in confidence, and shall not use or disclose without
prior written consent of EPIMMUNE, the terms of this Stock Purchase Agreement
and any information identified in writing as confidential that is furnished to
it by EPIMMUNE in connection with this Stock Purchase Agreement. This obligation
of confidentiality shall not apply, however, to any information (a) in the
public domain through no unauthorized act or failure to act by SEARLE, (b)
lawfully disclosed to SEARLE by a third party who possessed such information
without any obligation of confidentiality, (c) lawfully developed by SEARLE
independent of any disclosure by EPIMMUNE as supported by SEARLE's written
records, or (d) required to be disclosed pursuant to applicable law, regulation
or order or requirement of a court, administrative agency or other government
body (including the securities laws of any applicable jurisdiction); provided
that if SEARLE is required to make any such disclosure of such information it
will to the extent practicable give reasonable advance notice to EPIMMUNE of
such disclosure requirement and will use its reasonable best efforts to secure
confidential treatment of such information required to be disclosed. SEARLE
further covenants that it shall return to EPIMMUNE all tangible materials
containing such information upon request by EPIMMUNE.
4. CONDITIONS OF SEARLE'S OBLIGATIONS
The obligations of SEARLE under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, any of
which may be waived by SEARLE (and which conditions shall be deemed to have been
fulfilled or waived upon the occurrence of the Closing):
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of EPIMMUNE contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said date.
5.
<PAGE>
4.2 PERFORMANCE. EPIMMUNE shall have performed and complied with all
agreements, obligations and conditions in this Stock Purchase Agreement, if any,
that are required to be performed or complied with by it on or before the
Closing.
4.3 DELIVERY OF SHARES. EPIMMUNE shall have tendered delivery of the
Shares specified in Section 1.1 at the Closing.
4.4 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
and delivered by EPIMMUNE and Cytel Corporation.
4.5 VOTING AGREEMENT. A Voting Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by EPIMMUNE
and Cytel Corporation.
4.6 FILING OF AMENDED AND RESTATED CERTIFICATE. The Restated
Certificate substantially in the form attached hereto as Exhibit D shall have
been filed with the Secretary of State of Delaware.
4.7 LEGAL OPINION. An opinion of counsel to EPIMMUNE substantially in
the form attached hereto as Exhibit E shall have been delivered to SEARLE at the
Closing.
4.8 BOARD OF DIRECTORS. Upon the Closing, the authorized size of the
Board of Directors of Epimmune shall be five members and the Board shall consist
of Howard E. Greene, Jr., Virgil D. Thompson, Robert L. Roe, Deborah Schueren
and Nancy D. Rasmussen.
4.9 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
SEARLE, and it shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
5. CONDITIONS OF EPIMMUNE'S OBLIGATIONS
The obligations of EPIMMUNE under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by
SEARLE, any of which may be waived by EPIMMUNE (and which conditions shall be
deemed to have been fulfilled or waived upon the occurrence of the Closing):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of SEARLE contained in Section 3 hereof shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said dates.
5.2 PERFORMANCE. SEARLE shall have performed and complied with all
agreements, obligations and conditions in this Stock Purchase Agreement, if any,
that are required to be performed or complied with by it on or before the
Closing.
5.3 PAYMENT OF PURCHASE PRICE. SEARLE shall have tendered delivery of
the purchase price for the Shares specified in Section 1.1 at the Closing.
6.
<PAGE>
5.4 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
and delivered by SEARLE.
5.5 VOTING AGREEMENT. A Voting Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by SEARLE.
5.6 FILING OF AMENDED AND RESTATED CERTIFICATE. The Restated
Certificate in the form attached hereto as Exhibit D shall have been filed with
the Secretary of State of Delaware.
5.7 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
EPIMMUNE, and it shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
6. INDEMNIFICATION
6.1 INDEMNIFICATION OF SEARLE. EPIMMUNE agrees to indemnify and hold
harmless SEARLE and its permitted successors and assigns from and against any
and all (i) liabilities, losses, costs or damages ("Loss") and (ii) reasonable
attorneys' and accountants' fees and expenses, court costs and all other
reasonable out-of-pocket expenses ("Expense") incurred by SEARLE or its
permitted successors and assigns arising from (A) any breach or failure to
perform by EPIMMUNE of any of its covenants or agreements contained in this
Agreement; or (B) any breach of any warranty or the inaccuracy of any
representation of EPIMMUNE contained in this Agreement.
6.2 NOTICE OF CLAIMS BY SEARLE. If any person indemnified under Section
6.1 hereof believes it has suffered or incurred any Loss or incurred any Expense
as to which it is entitled to indemnification under Section 6.1 hereof, such
person shall so notify EPIMMUNE promptly in writing describing such Loss or
Expense, the amount thereof, if known, and the method of computation of such
Loss or Expense, all with reasonable particularity and containing a reference to
the provisions of this Agreement, or any agreement or instrument contemplated
hereby, or any certificate delivered pursuant hereto or thereto in respect of
which such Loss or Expense shall have occurred; and if any action at law or suit
in equity is instituted by or against a third party with respect to which any
such indemnified person intends to claim any Loss or Expense under Section 6.1,
such indemnified person shall promptly notify the indemnifying party of such
action or suit; provided that failure to give such notice shall not abrogate or
diminish EPIMMUNE's obligations under Section 6.1 if EPIMMUNE has or receives
timely actual knowledge of the existence of any such claim by any other means or
except to the extent such failure prejudices EPIMMUNE.
6.3 INDEMNIFICATION OF EPIMMUNE. SEARLE agrees to indemnify and hold
harmless EPIMMUNE and its permitted successors and assigns from and against any
and all Loss and Expense incurred by EPIMMUNE and its permitted successors and
assigns arising from (i) any breach or failure to perform by SEARLE of any of
its covenants or agreements contained in this Agreement; or (ii) any breach of
any warranty or the inaccuracy of any representation of SEARLE contained in this
Agreement.
7.
<PAGE>
6.4 NOTICE OF CLAIMS BY EPIMMUNE. If any person indemnified under
Section 6.3 believes that it has suffered or incurred any Loss or incurred any
Expense as to which it is entitled to indemnification under Section 6.3, such
person shall so notify SEARLE or the person responsible for such indemnification
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement, or any agreement or instrument contemplated hereby, or any
certificate delivered pursuant hereto or thereto in respect of which such Loss
or Expense shall have occurred; and if any action at law or suit in equity is
instituted by or against a third party with respect to which any such
indemnified party intends to claim any Loss or Expense under Section 6.3, such
indemnified party shall promptly notify the indemnifying party of such action or
suit; provided that failure to give such notice shall not abrogate or diminish
SEARLE's obligations under Section 6.3 if SEARLE has or receives timely actual
knowledge of the existence of any such claim by any other means or except to the
extent such failure prejudices SEARLE.
6.5 THIRD PARTY CLAIMS. The indemnifying party shall have the right to
participate in, and, to the extent the it so desires, jointly with any other
indemnitor similarly noticed, to assume the defense of any third party claim,
demand, action or other proceeding with counsel selected by the indemnifying
party; provided, however, that the indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of the indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between the indemnified party and any other party
represented by such counsel in such proceedings. So long as the indemnifying
party has received notice of any third party claim, demand, action or proceeding
for which any indemnified party intends to claim any Loss or Expense, and within
a reasonable period thereafter the indemnifying party has assumed the defense
thereof, the indemnity obligations under this Article 6 shall not apply to
amounts paid in settlement of such third party claim, demand, action or
proceeding if such settlement is effected without the consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
The indemnifying party may not settle or otherwise consent to an adverse
judgment in any such third party claim, demand, action or proceeding action that
diminishes the rights or interests of the indemnified party without the prior
express written consent of the indemnified party. The indemnified party, its
employees and agents, shall cooperate reasonably with the indemnifying party and
its legal representatives in the investigation of any third party claim, demand,
action or proceeding covered by this Article 6.
7. MISCELLANEOUS PROVISIONS
7.1 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 permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.
<PAGE>
7.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
7.3 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.
7.4 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.
7.5 ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party without the
written consent of the other party; provided, however, that either EPIMMUNE or
SEARLE may, without such consent, assign this Agreement and its rights and
obligations hereunder (a) in connection with the transfer or sale of all or
substantially all of that portion of its business relating to its performance of
its respective obligations hereunder or (b) in the event of its merger or
consolidation with another company at any time during the term of this
Agreement. Any purported assignment in violation of the preceding sentence shall
be void. Any other permitted assignee shall also assume all obligations of its
assignor under this Agreement.
7.6 NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to such
other party at its address indicated below, or to such other address as the
addressee shall have last furnished in writing to the addressor and shall be
effective upon receipt by the addressee.
EPIMMUNE: Epimmune Inc.
6555 Nancy Ridge Drive, Suite 200
San Diego, California 92121
Attention: President
Tel: (619) 404-7171
Fax: (619) 404-7177
WITH A COPY TO: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 452.3555
9.
<PAGE>
SEARLE: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: Vice President, Business
Development
Tel: (847) 982-7000
Fax: (847) 470-1480
WITH A COPY TO: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: General Counsel
Tel: (847) 982-7000
Fax: (847) 967-2045
7.7 FINDER'S FEE. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction, other than as agreed between the parties. SEARLE agrees to
indemnify and hold harmless EPIMMUNE 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 SEARLE or any
of its officers, partners, employees or representatives is responsible. EPIMMUNE
agrees to indemnify and hold harmless SEARLE from any liability for any
commission or compensation in the nature of a finder's fee (and the costs and
expenses of defending against such liability or asserted liability) for which
EPIMMUNE or any of its officers, employees or representatives is responsible.
7.8 EXPENSES. Irrespective of whether the Closing is effected, each
party shall bear its own costs with respect to the negotiation, execution,
delivery and performance of this Agreement.
7.9 AMENDMENTS AND WAIVERS. Except as specified in this Section 7.9,
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 EPIMMUNE and
SEARLE.
7.10 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof.
7.12 FURTHER ASSURANCES. Each party hereto agrees to do such further
actions and things, and to execute and deliver such additional agreements and
instruments, as either party may reasonably request of the other to effectuate
the transactions contemplated by this Agreement.
10.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
G.D. SEARLE & CO. EPIMMUNE INC.
By: /s/ R. De Schutter By:/s/ Deborah Schueren
------------------------------------- ---------------------------------
Name: R. De Schutter Name: Deborah Schueren
----------------------------------- -------------------------------
Title: Chairman and CEO Title:
---------------------------------- ------------------------------
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series B Preferred Stock Purchase Agreement dated as of February 27, 1998
between Epimmune Inc. and G.D. Searle and Co.
NONE
<PAGE>
EXHIBIT B
<PAGE>
EPIMMUNE INC.
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (the "Investor Rights Agreement") is
entered into as of the 27th day of February, 1998, by and among EPIMMUNE INC., a
Delaware corporation (the "Company"), G.D. SEARLE & CO., a Delaware corporation
("Searle"), CYTEL CORPORATION, a Delaware corporation ("Cytel") (collectively,
Searle and Cytel shall be referred to as the "Investors").
RECITALS
WHEREAS, the Company proposes to sell and issue 1,032,149 shares of its
Series B Preferred Stock, $0.001 par value (the "Series B Preferred"), to Searle
pursuant to the Series B Preferred Stock Purchase Agreement of even date
herewith (the "Series B Stock Purchase Agreement");
WHEREAS, the Company proposes to sell and issue 659,898 shares of its
Series B-1 Preferred Stock, $0.001 par value (the "Series B-1 Preferred"), to
Cytel pursuant to the Series B-1 Preferred Stock Purchase Agreement of even date
herewith (the "Series B-1 Stock Purchase Agreement");
WHEREAS, as a condition of entering into the Series B Stock Purchase
Agreement and the Series B-1 Stock Purchase Agreement, the Investors requested
that the Company extend to it registration rights and other rights as set forth
below; and
WHEREAS, this Investor Rights Agreement shall be effective only upon
the closing of the Series B Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Series B Stock Purchase Agreement and the Series B-1 Stock
Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Investor Rights Agreement the
following terms shall have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.8 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act in which the Company receives gross proceeds of at least $15 million.
1.
<PAGE>
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of counsel for the
Company, reasonable fees and disbursements not to exceed twenty-five thousand
dollars ($25,000) of a single special counsel for the Holders, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SHARES" shall mean the Company's Series B Preferred and Series B-1
Preferred.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by the
terms of this Agreement, (B) such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
2.
<PAGE>
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (a)(i) and
(a)(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its stockholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement or any other applicable agreement or
instrument):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 "PIGGY-BACK" REGISTRATIONS. In the event that shares of the
Company's equity securities held by any selling stockholder are included in a
registration statement under the Securities Act for purposes of the Company's
Initial Offering, the Company shall notify all Holders of Registrable Securities
in writing at least thirty (30) days prior to the filing of such registration
statement and will afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder on a pro rata basis with the securities of such other selling
stockholders to be included in the Registration Statement. Each Holder desiring
to include in any such registration statement all or any part of the Registrable
3.
<PAGE>
Securities held by it shall, within twenty (20) days after the above-described
notice from the Company, so notify the Company in writing.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; and second, to any stockholder of the
Company (including the Holders) on a pro rata basis based on the total number of
Registrable Securities held by the Holders and securities held by such other
stockholders; provided that no such reduction shall reduce the securities being
offered by the Company for its own account to be included in the registration
and underwriting.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.3 hereof.
2.3 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration under
Section 2.2 herein shall be borne by the Company. All Selling Expenses incurred
in connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
4.
<PAGE>
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any.
2.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
to a Holder under this Section 2 shall terminate and be of no further force and
effect upon completion of the distribution of the Company's Common Stock in the
Company's Initial Offering.
2.6 FURNISHING INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2.2 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
5.
<PAGE>
2.7 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Section 2.2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 2.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
6.
<PAGE>
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.7(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.7
exceed the proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.7.
(d) If the indemnification provided for in this Section 2.7 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.7 shall survive completion of any offering of Registrable Securities in a
registration statement. 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
7.
<PAGE>
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.
2.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, affiliate, parent, general partner, limited partner or retired
partner of a Holder, or (ii) is a Holder's family member, a trust for the
benefit of an individual Holder or such Holder's family members or a partnership
or other entity all of whose beneficial ownership is held by the Holder or such
Holder's family members; provided, however, (A) the transferor shall, within ten
(10) days after such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (B) such transferee shall
agree to be subject to all restrictions set forth in this Agreement.
2.9 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, enter into any agreement with any holder
or prospective holder of any securities of the Company that would grant such
holder registration rights senior to those granted to the Holders hereunder
unless the Company also grants such registration rights to the Holders.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that the Company, all officers and directors
of the Company and any other selling stockholders enter into similar agreements
(subject to customary exceptions).
The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.11 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
8.
<PAGE>
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
3. COVENANTS OF THE COMPANY.
3.1 FINANCIAL INFORMATION AND REPORTING.
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish to Searle a balance sheet of the Company, as at the end of
such fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by (i) a report and
opinion thereon by independent public accountants of national standing selected
by the Company's Board of Directors and reasonably acceptable to Searle, and
(ii) a certificate executed by an officer of the Company certifying that the
terms of the Series B Preferred and the terms of all other material agreements
between Searle and the Company, other than that certain License and
Collaboration Agreement dated as of February 27, 1998 (the "Collaboration
Agreement") between the Company and Searle and any other agreements entered
between the Company and Searle in connection with the Collaboration Agreement,
have been complied with.
(b) So long as Searle shall own not less than 5% of the Company's
outstanding capital stock, the Company will furnish Searle prior to the
beginning of each fiscal year a budget on a monthly basis for such fiscal year
(and as soon as available, any subsequent revisions thereto);
(c) The Company will furnish to Searle promptly after distribution
(and in any event within 10 days after distribution) other reports of the
Company that are publicly distributed, including written communications made
generally available to the Company's Stockholders or the financial community.
(d) The Company will furnish to each member of the Company's Board
of Directors, as soon as practicable after the end of each month, and in any
event within thirty (30) days thereafter, a balance sheet of the Company as of
the end of each such month, and a statement of income of the Company for such
month and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
3.2 INSPECTION RIGHTS. Searle shall have the right to visit and inspect
any of the properties of the Company or any of its subsidiaries, and to discuss
9.
<PAGE>
the affairs, finances and accounts of the Company or any of its subsidiaries
with its directors, officers, employees and independent public accountants, and
to review such information as is reasonably requested all at such reasonable
times and as often as may be reasonably requested.
3.3 SEARLE APPROVAL. The Company shall not without the prior written
consent of Searle enter into any agreement which by its terms restricts the
Company's performance of the terms of the Series B Preferred Stock, the Series B
Stock Purchase Agreement or this Investor Rights Agreement.
3.4 INSIDER TRANSACTIONS. The Company shall not without the approval of
a majority of the Board of Directors, with all non-interested Directors voting
and the approval of the Director designated by Searle (the "Designated
Director"), authorize or enter into any transactions with any director or
management employee, or such director's or employee's immediate family, other
than indemnification and employment related transactions on customary terms.
3.5 DIRECTORS' FEES AND EXPENSES. For so long as Searle is entitled to
designate a representative to the Company's Board of Directors, the Company
covenants to (i) reimburse the Designated Director for all reasonable costs
associated with attending meetings of the Board of Directors, and (ii) pay the
Designated Director any compensation paid to other members of the Company's
Board of Directors in connection with the performance of their duties as a
Director.
3.6 CONFIDENTIALITY OF RECORDS. Searle agrees to keep confidential, and
to use its best efforts to insure that its authorized representatives keep
confidential, any information furnished or made available to it hereunder in
accordance with Section 3.7 of the Series B Stock Purchase Agreement.
3.7 BY-LAWS. The Company shall not, without prior written consent of
Searle, take any action to amend the By-laws of the Company to (i) change the
designated number of directors from five members or (ii) amend Section 22(b) of
Article IV of such By-laws.
3.8 TERMINATION OF COVENANTS. The covenants of the Company set forth in
Sections 3.1(a) and (b), 3.2, 3.3 and 3.7 of this Agreement shall expire and
terminate on the earlier of (i) the effective date of the registration statement
pertaining to the Initial Offering, or (ii) the date on which Searle shall own
less than 5% of the Company's outstanding capital stock determined on a
fully-diluted, as-converted basis. The covenants of the Company set forth in
Sections 3.1(c) and (d) and 3.4 of this Agreement shall expire and terminate on
the date on which Searle shall own less than 5% of the Company's outstanding
capital stock.
4. RIGHT OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Searle shall have a right of first refusal to
purchase its pro rata share of all Equity Securities, as defined below, that the
Company may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
Searle's pro rata share is equal to the ratio of (a) the number of shares of the
Company's Common Stock (including all shares of Common Stock issued or issuable
upon conversion of the Shares) which Searle is deemed to hold immediately prior
to the issuance of such Equity Securities to (b) the total number of shares of
10.
<PAGE>
the Company's outstanding Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares or upon the exercise of any
outstanding warrants or options) immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.
4.2 EXERCISE OF RIGHT. If the Company proposes to issue any Equity
Securities, it shall give Searle written notice of its intention, describing the
Equity Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Searle shall have forty-five (45) days from the
giving of such notice to agree to purchase its pro rata share of the Equity
Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of Equity Securities to be purchased; provided, however, if the Company
reasonably requests in the Company's original notice that Searle respond within
thirty (30) days (due to timing considerations relating to the closing of the
issuance of such Equity Securities), then Searle shall be required to respond to
such notice within thirty (30) days. Notwithstanding the foregoing, the Company
shall not be required to offer or sell such Equity Securities to Searle if such
offer or sale would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale; provided, however, the Company
agrees to use its reasonable best efforts to take whatever action may be
necessary or appropriate to comply with applicable Federal Securities laws in
connection with such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If Searle does not
elect to purchase its pro rata share of the Equity Securities, then the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which Searle's rights were not exercised, at a price and upon general terms
and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to Searle pursuant to Section 4.2 hereof. If
the Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to Searle
in the manner provided above.
4.4 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first refusal
established by this Section 4 shall terminate on the first to occur of (i) the
effective date of the registration statement pertaining to the Company's Initial
Offering or (ii) the first date on which Searle sells, assigns or otherwise
transfers any of the Shares (other than to a subsidiary, affiliate or parent or
in connection with an assignment as provided in Section 7.5 of the Series B
Purchase Agreement or Section 7.5 of the Series B-1 Purchase Agreement, as
applicable). The right of first refusal shall not apply to the Company's Initial
Offering.
4.5 TRANSFER OF RIGHT OF FIRST REFUSAL. The right of first refusal of
the Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.8
11.
<PAGE>
4.6 EXCLUDED SECURITIES. The right of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights, agreements, options or
warrants outstanding as of the date of this Agreement and stock issued pursuant
to any rights, agreements, options or warrants granted after the date of this
Agreement, provided that the rights of first refusal established by this Section
4 applied with respect to the initial sale or grant by the Company of such
rights, agreements, options or warrants;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
whereby the stockholders of the Company will own more than fifty percent (50%)
of the voting power of the combined entity;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares or
the Series A Preferred Stock;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement; and
(g) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing, corporate
partnering or distribution arrangements or (ii) technology transfer, research or
development arrangements; provided that such strategic transactions and the
issuance of shares therein, has been approved by the Company's Board of
Directors.
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
12.
<PAGE>
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, any provision of this
Agreement (other than Sections 3 and 4) may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only upon the written consent of the Company and
the Holders of at least a majority of the Registrable Securities. Any amendment
or waiver of any provisions of this Agreement (other than Sections 3 and 4)
effected in accordance with this Agreement shall be binding upon each Holder and
the Company. By acceptance of any benefits under this Agreement, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
(b) Except as otherwise expressly provided, any provision of
Section 3 and 4 of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only upon the written consent of the Company and Searle.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.7 NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to such
other party at its address indicated below, or to such other address as the
13.
<PAGE>
addressee shall have last furnished in writing to the addressor and shall be
effective upon receipt by the addressee.
THE COMPANY: Epimmune Inc.
6555 Nancy Ridge Drive, Suite 200
San Diego, California 92121
Attention: President
Tel: (619) 404-7171
Fax: (619) 404-7177
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
SEARLE: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: Vice President, Business
Development
Tel: (847) 982-7000
Fax: (847) 470-1480
with a copy to: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: General Counsel
Tel: (847) 982-7000
Fax: (847) 967-2045
CYTEL: Cytel Corporation
3525 John Hopkins Court
San Diego, California 92121
Attention: President
Tel: (619) 552-3000
Fax: (619) 552-8801
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
5.8 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.
14.
<PAGE>
5.9 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
5.10 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.
15.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
EPIMMUNE INC. G.D. SEARLE & CO.
By: By:
----------------------------------- ----------------------------------
Title: Title:
-------------------------------- -------------------------------
CYTEL CORPORATION
By:
----------------------------------
Title:
-------------------------------
<PAGE>
EXHIBIT C
<PAGE>
EPIMMUNE INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into this
27th day of February, 1998, by and among Epimmune Inc., a Delaware corporation
(the Company"), Cytel Corporation, a Delaware corporation (the "Key
Stockholder"), and G.D. Searle & Co., a Delaware corporation (the "Investor").
WITNESSETH:
WHEREAS, the Key Stockholder is the beneficial owner of an aggregate of
Six Million (6,000,000) shares of the Series A Preferred Stock (the "Series A
Preferred") of the Company;
WHEREAS, the Company proposes to sell shares (the "Investor Shares") of
its Series B Preferred Stock (the "Series B Preferred") to the Investor pursuant
to the Series B Preferred Stock Purchase Agreement (the "Series B Stock Purchase
Agreement") of even date herewith;
WHEREAS, the Company proposes to sell shares of its Series B-1
Preferred Stock (the "Series B-1 Preferred"), to the Key Stockholder pursuant to
the Series B-1 Preferred Stock Purchase Agreement (the "Series B-1 Stock
Purchase Agreement") of even date herewith (collectively, the sale of Series B
and Series B-1 Preferred Stock shall be referred to as the "Financing");
WHEREAS, in connection with the consummation of the Financing, the Key
Stockholder has agreed to provide for the future voting of its shares of the
Company's capital stock as set forth below; and
WHEREAS, this Agreement shall be effective only upon the closing of the
Series B Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. VOTING.
1.1 SHARES. The Key Stockholder agrees to hold all shares of voting
capital stock of the Company (including but not limited to all shares of Common
Stock issued upon conversion of the Company's Series A Preferred and Series B-1
Preferred) registered in its name or beneficially owned by it as of the date
hereof (and any and all other securities of the Company legally or beneficially
acquired by the Key Stockholder after the date hereof) (hereinafter collectively
referred to as the "Shares") subject to, and to vote the Shares in accordance
with, the provisions of this Agreement.
1.2 ELECTION OF DIRECTOR. On all matters relating to the election of
directors of the Company, the Key Stockholder agrees to vote all Shares held by
1.
<PAGE>
it (or the holders thereof shall consent pursuant to an action by written
consent of the stockholders) so as to elect to the Company's Board of Directors
one (1) individual nominated by the holders of a majority in interest of the
Investor Shares. On all matters relating to the election of directors of the
Company, the Investor agrees to vote all Investor Shares held by it (or the
holders thereof shall consent pursuant to an action by written consent of the
stockholders) so as to elect to the Company's Board of Directors one (1)
individual nominated by the holders of a majority in interest of the Investor
Shares. Any vote taken to remove any director elected pursuant to this Section
1.2, or to fill any vacancy created by the resignation of a director elected
pursuant to this Section 1.2, shall also be subject to the provisions of this
Section 1.2.
1.3 LEGEND.
(a) Concurrently with the execution of this Agreement, there shall
be imprinted or otherwise placed, on certificates representing the Shares, the
following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES
CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL
BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT
WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS."
(b) The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Shares theretofore represented by a certificate carrying the Legend.
1.4 SUCCESSORS. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Shares. The Company shall not permit
the transfer of any of the Shares on its books or issue a new certificate
representing any of the Shares unless and until the person to whom such security
is to be transferred shall have executed a written agreement, substantially in
the form of this Agreement, pursuant to which such person becomes a party to
this Agreement and agrees to be bound by all the provisions hereof as if such
person were a Key Stockholder or Investor, as applicable; provided that this
provision shall not apply to the extent of any sale or transfer of the Shares to
the Investor.
1.5 OTHER RIGHTS. Except as provided by this Agreement, the Key
Stockholder and Investor shall exercise the full rights of a stockholder with
respect to the Shares.
2.
<PAGE>
2. TERMINATION
2.1 Agreement shall continue in full force and effect from the date
hereof through (i) the date that all of the Shares are sold or otherwise
transferred to the Investor, or (ii) the later of the following dates, on which
it shall terminate in its entirety:
(a) two (2) years from the date of the closing of a firm commitment
underwritten public offering of the Company's Common Stock pursuant to a
registration statement filed with, and declared effective under, the Securities
Act of 1933, as amended, in which the Company receives gross proceeds of at
least $15 million; or
(b) at such time as the Investor holds less than five percent (5%)
of the total shares of Common Stock and Preferred Stock outstanding of the
Company on a fully-diluted, as-converted basis.
3. MISCELLANEOUS
3.1 OWNERSHIP. The Key Stockholder represents and warrants to the
Investor that (a) it now owns the Shares, free and clear of liens or
encumbrances, and has not, prior to or on the date of this Agreement, executed
or delivered any proxy or entered into any other voting agreement or similar
arrangement other than one which has expired or terminated prior to the date
hereof, and (b) it has full power and capacity to execute, deliver and perform
this Agreement, which has been duly executed and delivered by, and evidences the
valid and binding obligation of, the Key Stockholder enforceable in accordance
with its terms.
3.2 FURTHER ACTION. If and whenever the Shares are sold, the Key
Stockholder or the personal representative of the Key Stockholder shall do all
things and execute and deliver all documents and make all transfers, and cause
any transferee of the Shares to do all things and execute and deliver all
documents, as may be necessary to consummate such sale consistent with this
Agreement.
3.3 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
3.5 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 parties hereto.
3.
<PAGE>
3.6 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
3.7 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 permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.8 ADDITIONAL SHARES. In the event that subsequent to the date of this
Agreement any shares or other securities (other than any shares or securities of
another corporation issued to the Company's stockholders pursuant to a plan of
merger) are issued on, or in exchange for, any of the Shares by reason of any
stock dividend, stock split, consolidation of shares, reclassification or
consolidation involving the Company, such shares or securities shall be deemed
to be Shares for purposes of this Agreement.
3.9 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.
3.10 ENTIRE AGREEMENT. This Agreement, along with the Series B Stock
Purchase Agreement and each of the Exhibits thereto and the Series B-1 Stock
Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
4.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.
COMPANY: INVESTOR:
EPIMMUNE INC. G. D. SEARLE & CO.
By: By:
----------------------------------- ---------------------------------
President Title:
------------------------------
KEY STOCKHOLDER:
CYTEL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
<PAGE>
EXHIBIT D
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EPIMMUNE INC.
Deborah Schueren and Robert W. Chesnut, Ph.D. do hereby certify that:
FIRST: The original name of this corporation is Cytel Subsidiary, Inc.
and the date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is April 25,
1997.
SECOND: They are the duly elected and acting President and Secretary,
respectively, of Epimmune Inc., a Delaware corporation.
THIRD: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of this Corporation is Epimmune Inc.
II.
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, County of New Castle, and the name of the
registered agent of the Corporation in the State of Delaware at such address is
Corporation Service Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Thirty million
(30,000,000). Twenty million (20,000,000) shares shall be Common Stock, each
having a par value of one-tenth of one cent ($0.001). Ten million (10,000,000)
shares shall be Preferred Stock, each having a par value of one-tenth of one
cent ($0.001).
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
C. The rights, preferences, privileges, restrictions and other matters
relating to the Common Stock are as follows:
<PAGE>
1. DIVIDEND RIGHTS. Subject to the rights of holders of all classes
of stock at the time outstanding having prior rights as to dividends, the
holders of the Common Stock shall be entitled to receive, when and as declared
by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote and shall be entitled to notice of any stockholders'
meeting in accordance with the By-laws of the Corporation and to vote upon such
matters and in such manner as regulated by law.
3. LIQUIDATION RIGHTS. Upon the liquidation, dissolution and
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 3 of Division (F) of this Article III hereof.
4. REDEMPTIONS. The Common Stock is not redeemable.
D. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to fix or alter the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, the liquidation preferences of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series. New series of Preferred
Stock may be issued on parity with prior series of Preferred Stock, but not on a
senior basis without stockholder approval of the outstanding Preferred Stock.
E. Six million (6,000,000) of the authorized shares of Preferred Stock
are hereby designated "Series A Preferred Stock" (the "Series A Preferred"), one
million thirty-two thousand one hundred forty-nine (1,032,149) of the authorized
shares of Preferred Stock are hereby designated "Series B Preferred Stock (the
"Series B Preferred") and six hundred fifty-nine thousand eight hundred
ninety-eight (659,898) of the authorized shares of Preferred Stock are hereby
designated "Series B-1 Preferred Stock (the "Series B-1 Preferred").
F. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, the Series B Preferred and the Series B-1
Preferred are as follows:
1. DIVIDEND RIGHTS.
a. So long as any shares of Series A Preferred, Series B
Preferred or Series B-1 Preferred shall be outstanding, no dividend, whether in
cash or property, shall be paid or declared nor shall any other distribution be
made, on any Common Stock (other than any dividend or distribution payable
solely in Common Stock of the Corporation), unless a dividend is paid with
respect to all outstanding shares of Series A Preferred, Series B Preferred and
2.
<PAGE>
Series B-1 Preferred in an amount per share (on an as-if-converted to Common
Stock basis) equal to the amount paid or set aside for each share of Common
Stock.
b. No dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any series of Preferred
Stock unless at the same time an equal dividend shall be paid on the shares of
all other series of Preferred Stock.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series A Preferred, Series B Preferred and Series B-1
Preferred shall be voted equally with the shares of the Common Stock of the
Corporation and not as a separate class, at any annual or special meeting of
stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Series A Preferred, Series B Preferred and Series B-1 Preferred
shall be entitled to such number of votes as shall be equal to the whole number
of shares of Common Stock into which such holder's aggregate number of shares of
Series A Preferred, Series B Preferred and Series B-1 Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
b. SEPARATE VOTE OF SERIES A PREFERRED. For so long as any
shares of Series A Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series A Preferred) remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least a majority of the
outstanding Series A Preferred shall be necessary for effecting or validating
the following actions:
(i) Any amendment, alteration, or repeal of any provision of
this Certificate of Incorporation or the By-laws of the Corporation (including
any filing of a Certificate of Designation), that adversely changes the rights,
preferences, and privileges with respect to liquidation preference, voting or
dividends of the Series A Preferred; or
(ii) Any agreement by the Corporation that by its terms
restricts the Corporation from complying with the terms of the Series A
Preferred or performing its obligations under any agreements to which the
Corporation is a party pursuant to which the holder purchased such Series A
Preferred.
c. SEPARATE VOTE OF SERIES B PREFERRED. For so long as any
shares of Series B Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series B Preferred) remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least a majority of the
outstanding Series B Preferred shall be necessary for effecting or validating
the following actions:
(i) Any amendment, alteration, or repeal of any provision of
this Certificate of Incorporation or the By-laws of the Corporation (including
3.
<PAGE>
any filing of a Certificate of Designation), that adversely changes the rights,
preferences, and privileges with respect to liquidation preference, voting or
dividends of the Series B Preferred; or
(ii) Any agreement by the Corporation that by its terms,
restricts the Corporation from complying with the terms of the Series B
Preferred or performing its obligations under any agreements to which the
Corporation is a party pursuant to which the holder purchased such Series B
Preferred.
d. SEPARATE VOTE OF SERIES B-1 PREFERRED. For so long as any
shares of Series B-1 Preferred (subject to adjustment for any stock split,
reverse stock split or other similar event affecting the Series B Preferred)
remain outstanding, in addition to any other vote or consent required herein or
by law, the vote or written consent of the holders of at least a majority of the
outstanding Series B-1 Preferred shall be necessary for effecting or validating
the following actions:
(i) Any amendment, alteration, or repeal of any provision of
this Certificate of Incorporation or the By-laws of the Corporation (including
any filing of a Certificate of Designation), that adversely changes the rights,
preferences, and privileges with respect to liquidation preference, voting or
dividends of the Series B-1 Preferred; or
(ii) Any agreement by the Corporation that by its terms,
restricts the Corporation from complying with the terms of the Series B-1
Preferred or performing its obligations under any agreements to which the
Corporation is a party pursuant to which the holder purchased such Series B-1
Preferred.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of the Common Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount per share of Series A Preferred equal to $1.3308 (the
"Series A Original Issue Price") (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) plus all declared and unpaid dividends on the Series A Preferred Stock
for each share of Series A Preferred held by them, (ii) the holders of Series B
Preferred shall be entitled to be paid out of the assets of the Corporation an
amount per share of Series B Preferred equal to $5.91 (the "Series B Original
Issue Price") (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus all declared
and unpaid dividends on the Series B Preferred Stock for each share of Series B
Preferred held by them, and (iii) the holders of Series B-1 Preferred shall be
entitled to be paid out of the assets of the Corporation an amount per share of
Series B-1 Preferred equal to $5.91 (the "Series B-1 Original Issue Price") (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) plus all declared and unpaid dividends on
the Series B-1 Preferred Stock for each share of Series B-1 Preferred held by
them.
b. After the payment of the full liquidation preference of the
Series A Preferred, Series B Preferred and Series B-1 Preferred as set forth in
4.
<PAGE>
Section 3(a) above, the remaining assets of the Corporation legally available
for distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them.
c. The following events shall be considered a liquidation under
this Section:
(i) any consolidation or merger of the Corporation with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Corporation immediately prior
to such consolidation, merger or reorganization, own less than fifty percent
(50%) of the Corporation's voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related transactions
in which in excess of fifty percent (50%) of the Corporation's voting power is
transferred (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "Asset Transfer").
d. If, upon any liquidation, distribution, or winding up, the
assets of the Corporation shall be insufficient to make payment in full to all
holders of Series A Preferred, the Series B Preferred and the Series B-1
Preferred of the liquidation preference set forth in Section 3(a), then such
assets shall be distributed among the holders of Series A Preferred, the Series
B Preferred and the Series B-1 Preferred at the time outstanding, ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred, Series B Preferred and
Series B-1 Preferred shall have the following rights with respect to conversion
of such shares into shares of Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred, Series B
Preferred and Series B-1 Preferred may, at the option of the holder, be
converted at any time into fully paid and nonassessable shares of Common Stock.
The number of shares to which a holder of Series A Preferred shall be entitled
upon conversion shall be the product obtained by multiplying the "Series A
Conversion Rate" then in effect (determined as provided in Section 4(b)) by the
number of shares of Series A Preferred being converted. The number of shares to
which a holder of Series B Preferred shall be entitled upon conversion shall be
the product obtained by multiplying the "Series B Conversion Rate" then in
effect (determined as provided in Section 4(b)) by the number of shares of
Series B Preferred being converted. The number of shares to which a holder of
Series B-1 Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series B-1 Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series B-1
Preferred being converted.
b. CONVERSION RATES. The conversion rate in effect at any time
for conversion of the Series A Preferred (the "Series A Conversion Rate") shall
be the quotient obtained by dividing the Series A Original Issue Price by the
"Series A Conversion Price," calculated as provided in Section 4(c). The
5.
<PAGE>
conversion rate in effect at any time for conversion of the Series B Preferred
(the "Series B Conversion Rate") shall be the quotient obtained by dividing the
Series B Original Issue Price by the "Series B Conversion Price," calculated as
provided in Section 4(c). The conversion rate in effect at any time for
conversion of the Series B-1 Preferred (the "Series B-1 Conversion Rate") shall
be the quotient obtained by dividing the Series B Original Issue Price by the
"Series B-1 Conversion Price," calculated as provided in Section 4(c).
c. CONVERSION PRICES. The conversion price for the Series A
Preferred shall initially be the Series A Original Issue Price (the "Series A
Conversion Price"). The conversion price for the Series B Preferred shall
initially be the Series B Original Issue Price (the "Series B Conversion
Price"). The conversion price for the Series B-1 Preferred shall initially be
the Series B-1 Original Issue Price (the "Series B-1 Conversion Price"). The
initial Series A, Series B and Series B-1 Conversion Prices shall be adjusted
from time to time in accordance with this Section 4. All references to the
Series A, Series B and Series B-1 Conversion Prices herein shall mean the Series
A, Series B and Series B-1 Conversion Prices as so adjusted.
d. AUTOMATIC CONVERSION. Each share of Series A, Series B and
Series B-1 Preferred shall automatically be converted into shares of Common
Stock, based on the then-effective Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price, as applicable, upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale by the Corporation of Common Stock to the public in
which the Company receives gross proceeds of at least $15 million.
e. MECHANICS OF CONVERSION. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock pursuant to
Section 4(a) hereof, and before the Corporation shall be obligated to issue
certificates for shares of Common Stock upon the automatic conversion of the
Preferred Stock pursuant to Section 4(d) hereof, such holder shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and shall give written
notice to the Corporation at such office that such holder elects to convert the
same and shall state therein the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued (except that
no such written notice of intent to convert shall be necessary in the event of
an automatic conversion pursuant to Section 4(d) hereof). The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock or its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid, together with cash in lieu of any fractional shares.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Preferred Stock to be
converted, except that in the case of an automatic conversion pursuant to
Section 4(d) hereof, such conversion shall be deemed to have been made
immediately prior to the date of the offering referred to in Section 4(d) . The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
6.
<PAGE>
f. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date that the first
share of Series B Preferred is issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, the Series A Conversion Price, Series B Conversion Price
and Series B-1 Conversion Price in effect immediately before that subdivision
shall be proportionately decreased. Conversely, if the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a smaller number of shares without a corresponding
combination of the Preferred Stock, the Series A Conversion Price, Series B
Conversion Price and Series B-1 Conversion Price in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
Section 4(f) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
g. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price, Series
B Conversion Price and Series B-1 Conversion Price that is then in effect shall
be decreased as of the time of such issuance or, in the event such record date
is fixed, as of the close of business on such record date, by multiplying the
Series A Conversion Price, Series B Conversion Price and Series B-1 Conversion
Price then in effect by a fraction (i) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series A Conversion Price,
Series B Conversion Price and Series B-1 Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Conversion Price, Series B Conversion Price and Series B-1 Conversion
Price shall be adjusted pursuant to this Section 4(g) to reflect the actual
payment of such dividend or distribution.
h. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series A Preferred, Series B Preferred
and Series B-1 Preferred shall receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable thereupon, the amount of other
securities of the Corporation which they would have received had their Series A
Preferred, Series B Preferred or Series B-1 Preferred been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Preferred, Series B
Preferred and Series B-1 Preferred or with respect to such other securities by
their terms.
7.
<PAGE>
i. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Series A Preferred, Series B Preferred
or Series B-1 Preferred is changed into the same or a different number of shares
of any class or classes of stock, whether by recapitalization, reclassification
or otherwise (other than an Acquisition or Asset Transfer as defined in Section
3(c) or a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 4), in any such event each holder of Series A Preferred, Series
B Preferred or Series B-1 Preferred, as applicable, shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Series A Preferred, Series B Preferred or Series B-1
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
j. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series A Preferred, Series B
Preferred or Series B-1 Preferred, as applicable, shall thereafter be entitled
to receive upon conversion of the Series A Preferred, Series B Preferred or
Series B-1 Preferred the number of shares of stock or other securities or
property of the Corporation to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series A Preferred, Series B Preferred or Series B-1 Preferred
after the capital reorganization to the end that the provisions of this Section
4 (including adjustment of the Series A Conversion Price, Series B Conversion
Price or Series B-1 Conversion Price then in effect and the number of shares
issuable upon conversion of the Series A Preferred, Series B Preferred or Series
B-1 Preferred) shall be applicable after that event and be as nearly equivalent
as practicable.
k. SALE OF SHARES BELOW THE CONVERSION PRICES.
(i) If the Corporation issues or sells, or is deemed by the
express provisions of this Section 4(k) to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), other than as a dividend or
other distribution on any class of stock as provided in Section 4(g) above, and
other than a subdivision or combination of shares of Common Stock as provided in
Section 4(f) above, for an Effective Price (as hereinafter defined) less than
the then effective Series A Conversion Price, Series B Conversion Price or
Series B-1 Conversion Price, as the case may be, then, and in each such case,
the then existing Series A Conversion Price, Series B Conversion Price or Series
B-1 Conversion Price, as the case may be, shall be reduced, as of the opening of
business on the date of such issue or sale, to a price determined by multiplying
the Series A Conversion Price, the Series B Conversion Price or the Series B-1
8.
<PAGE>
Conversion Price, as the case may be, by a fraction (1) the numerator of which
shall be (A) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale, plus (B) the number of shares of
Common Stock which the aggregate consideration received (as determined by the
provisions of Section 4(k)(ii)) by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Series A
Conversion Price, Series B Conversion Price or Series B-1 Conversion Price, as
the case may be, and (2) the denominator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus (B) the total number of Additional Shares of Common
Stock so issued. For the purposes of the preceding sentence, the number of
shares of Common Stock deemed to be outstanding as of a given date shall be the
sum of (a) the number of shares of Common Stock actually outstanding, (b) the
number of shares of Common Stock into which the then outstanding shares of
Series A Preferred, Series B Preferred and Series B-1 Preferred could be
converted if fully converted on the day immediately preceding the given date,
and (c) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required under
this Section 4(k), the consideration received by the Corporation for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Corporation after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Corporation in connection with such issue or sale but without deduction
of any expenses payable by the Corporation, (B) to the extent it consists of
property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as hereinafter defined) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Corporation for a consideration which covers both, be computed as
the portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section 4(k), if the Corporation issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series A Conversion Price, Series B Conversion
Price or Series B-1 Conversion Price, as applicable, in each case the
Corporation shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
9.
<PAGE>
thereof; provided that if, in the case of Convertible Securities, the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that, if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the Series A Conversion Price, Series B Conversion Price or Series
B-1 Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Series A Conversion
Price, Series B Conversion Price or Series B-1 Conversion Price as adjusted upon
the issuance of such rights, options or Convertible Securities shall be
readjusted to the Series A Conversion Price, Series B Conversion Price or Series
B-1 Conversion Price which would have been in effect had an adjustment been made
on the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Corporation upon such
exercise, plus the consideration, if any, actually received by the Corporation
for the granting of all such rights or options, whether or not exercised, plus
the consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) on the conversion of such Convertible
Securities, provided that such readjustment shall not apply to prior conversions
of Series A Preferred, Series B Preferred and Series B-1 Preferred.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Corporation or deemed to be issued pursuant
to this Section 4(k), whether or not subsequently reacquired or retired by the
Corporation other than (A) shares of Common Stock issued upon conversion of the
Series A Preferred, Series B Preferred or Series B-1 Preferred; and (B) shares
of Common Stock and/or options, warrants or other Common Stock purchase rights,
and the Common Stock issued pursuant to such options, warrants or other rights
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like) after the Original Issue Date to employees, officers or directors
of, or consultants or advisors to, the Corporation or any subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by
the Board. The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Corporation under this Section 4(k), into the aggregate consideration received,
10.
<PAGE>
or deemed to have been received by the Corporation for such issue under this
Section 4(k), for such Additional Shares of Common Stock.
l. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation, by filing a Certificate of Designation 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 Corporation but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
m. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the number of shares of Common Stock issuable upon
conversion of a share of Preferred Stock pursuant to this Section 4, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate prepared by the Corporation setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price for such series of
Preferred Stock at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series A Preferred, Series B Preferred or
Series B-1 Preferred, as applicable.
n. NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, the Corporation shall mail to each holder of
Preferred Stock at least 10 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right, and the amount and character of
such dividend, distribution, security or right.
o. ISSUE TAXES. The holders of Series A Preferred, Series B
Preferred and Series B-1 Preferred shall pay any and all issue, transfer and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred, Series B Preferred
and Series B-1 Preferred pursuant hereto.
p. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, Series B Preferred and
Series B-1 Preferred, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
Series A Preferred, Series B Preferred and Series B-1 Preferred; and if at any
11.
<PAGE>
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred, Series B Preferred and Series B-1 Preferred, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to the Certificate of Incorporation. All shares of Common
Stock which are issuable upon such conversion shall, when issued, be duly and
validly issued, fully paid and nonassessable and free of all taxes, liens and
charges.
q. FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Series A Preferred, Series B Preferred
or Series B-1 Preferred. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors).
5. REDEMPTION. The Series A Preferred, Series B Preferred and
Series B-1 Preferred shall not be redeemable by the Corporation.
6. NO REISSUANCE OF SERIES A PREFERRED, SERIES B PREFERRED OR
SERIES B-1 PREFERRED. No share or shares of Series A Preferred, Series B or
Series B-1 Preferred acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued.
7. NO PREEMPTIVE RIGHTS. Stockholders shall have no preemptive
rights except as granted by the Corporation pursuant to written agreements.
V.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the By-laws.
B. The Board of Directors may from time to time make, amend, supplement
or repeal the By-laws; provided, however, that the stockholders may change or
repeal any By-law adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation; and, provided further, that no
amendment or supplement to the By-laws adopted by the Board of Directors shall
12.
<PAGE>
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
C. The directors of the Corporation need not be elected by written
ballot unless the By-laws so provide.
VI.
A. A director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (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 Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
FOURTH: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Corporation.
FIFTH: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors and
the stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was 6,000,000 shares of Series A
Preferred Stock. A majority of the outstanding shares of Series A Preferred
Stock approved this Amended and Restated Certificate of Incorporation by written
consent in accordance with Section 228 of the General Corporation Law of the
State of Delaware and written notice was given by the Corporation in accordance
with said Section 228.
13.
<PAGE>
IN WITNESS WHEREOF, Epimmune Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by the President and Secretary in San
Diego, California this _____ day of _____________, 1998.
EPIMMUNE INC.
-------------------------------------
Deborah Schueren, President
ATTEST:
- ------------------------------------
Robert W. Chesnut, Secretary
<PAGE>
EXHIBIT E
<PAGE>
COOLEY GODWARD LLP
ATTORNEYS AT LAW San Francisco, CA
415 693-2000
4365 Executive Drive Palo Alto, CA
Suite 1100 650 843-5000
San Diego, CA
92121-2128 Menlo Park, CA
Main 619 550-6000 650 843-5000
Fax 619 453-3555
Boulder, CO
February 27, 1998 303 546-4000
www.cooley.com Denver, CO
303 606-4800
FREDERICK T. MUTO
619 550-6010
[email protected]
G.D. Searle & Co.
5200 Old Orchard Road
Skokie, Illinois 60077
Dear Ladies and Gentlemen:
We have acted as counsel for Epimmune Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale to you of 1,032,149 shares
of the Company's Series B Preferred Stock ("Shares") pursuant to the Series B
Stock Purchase Agreement dated as of February 27, 1998 (the "Agreement"). We are
rendering this opinion pursuant to Section 4.7 of the Agreement. Except as
otherwise defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, a copy of which is attached hereto, and (iii) such other
investigation, if any, that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement, the Voting Agreement and the Investor Rights
Agreement), where authorization, execution and delivery are prerequisites to the
effectiveness of such documents. We have also assumed: that all individuals
executing and delivering documents had the legal capacity to so execute and
deliver; that you have received all documents you were to receive under the
Agreement; that the Agreement, the Voting Agreement and the Investor Rights
Agreement are obligations binding upon you; that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to the Agreement and the Investor Rights
Agreement that would modify or interpret the terms thereof or the respective
rights or obligations of the parties thereunder.
<PAGE>
COOLEY GODWARD LLP
G.D. Searle & Co.
February 27, 1998
Page Two
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antifraud law, rule or regulation relating to securities, or to the
sale or issuance thereof.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, a copy of which is
attached hereto, to the effect that the consideration for all outstanding shares
of capital stock of the Company was received by the Company in accordance with
the provisions of the applicable Board of Directors resolutions and any plan or
agreement relating to the issuance of such shares, and we have undertaken no
independent verification with respect thereto.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own or lease its
property and assets and to conduct its business as it is currently being
conducted and is qualified to do business as a foreign corporation in
California.
3. The Agreement, the Voting Agreement and the Investor Rights Agreement
have been duly and validly authorized, executed and delivered by the Company and
constitute valid and binding agreements of the Company enforceable against the
Company in accordance with their respective terms, except as rights to indemnity
under Section 2.7 of the Investor Rights Agreement may be limited by applicable
laws and except (i) as limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general applicability
relating to or affecting creditors' rights, and (ii) as limited by equitable
principles generally and limitations on the availability of equitable remedies,
whether such enforceability is considered in a proceeding in equity or at law.
4. The Company's authorized capital stock consists of twenty million
(20,000,000) shares of Common Stock, $0.001 par value, of which no shares are
issued and outstanding, and (b) ten million (10,000,000) shares of Preferred
Stock, $0.001 par value, of which (i) six million (6,000,000) shares have been
designated Series A Preferred Stock, $0.001 par value, of which six million
(6,000,000) shares are issued and outstanding; (ii) one million thirty two
thousand one hundred forty-nine (1,032,149) shares have been designated Series B
Preferred Stock, $0.001 par value, of which no shares were issued and
outstanding prior to the Closing; and (iii) six hundred fifty-nine thousand
eight hundred ninety-eight (659,898) shares have been designated Series B-1
<PAGE>
COOLEY GODWARD LLP
G.D. Searle & Co.
February 27, 1998
Page Three
Preferred Stock, $0.001 par value, of which no shares were issued and
outstanding prior to the Closing. The rights, preferences and privileges of the
Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred
Stock are as stated in the Restated Certificate. The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, the Shares will be validly issued,
outstanding, fully paid and nonassessable. The shares of Common Stock issuable
upon conversion of the Shares have been duly authorized, and upon issuance and
delivery upon conversion of the Shares in accordance with the terms of the
Shares, will be validly issued, outstanding, fully paid and nonassessable. To
the best of our knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to purchase
any of the authorized but unissued capital stock of the Company, other than the
conversion privileges of the Series A Preferred Stock, Series B Preferred Stock
and Series B-1 Preferred Stock, rights created in connection with the
transactions contemplated by the Agreement and the Investor Rights Agreement,
and one million nine hundred twenty thousand (1,920,000) shares reserved for
issuance under the Company's 1997 Stock Option Plan.
5. The execution and delivery of the Agreement, the Voting Agreement and
the Investor Rights Agreement by the Company, and the performance by the Company
of the Agreement, the Voting Agreement and the Investor Rights Agreement, do not
violate any provision of the Company's Certificate of Incorporation or By-Laws,
and do not violate or contravene (a) any governmental statute, rule or
regulation applicable to the Company or (b) any order, writ, judgment,
injunction, decree, determination or award which has been entered against the
Company and of which we are aware, the violation or contravention of which would
materially and adversely affect the Company, its assets, financial condition or
operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or threatened in writing against the Company before any
court or administrative agency that questions the validity of the Agreement, the
Voting Agreement or the Investor Rights Agreement or that challenges the
consummation of the transactions contemplated thereby or might result, either
individually or in the aggregate, in any material adverse change in the assets,
financial condition, or operations of the Company.
7. The offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933, as amended.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the issuance by the Company of the
Shares, have been made or obtained, except for the filing of a Notice of
Transaction Pursuant To Section 25102(f) of the California Corporate Securities
Law of 1968.
<PAGE>
COOLEY GODWARD LLP
G.D. Searle & Co.
February 27, 1998
Page Four
This opinion is intended solely for your benefit and is not to be
made available to or be relied upon by any other person, firm, or entity without
our prior written consent.
Very truly yours,
Cooley Godward LLP
By:
-----------------------------------
Frederick T. Muto
<PAGE>
Exhibit 10.58
SERIES B-1 PREFERRED STOCK PURCHASE AGREEMENT
This Series B-1 Preferred Stock Purchase Agreement ("Agreement")
effective as of February 27, 1998, is entered into by and between Cytel
Corporation, a Delaware corporation ("CYTEL"), and Epimmune Inc., a Delaware
corporation ("EPIMMUNE").
WHEREAS, CYTEL desires to purchase from EPIMMUNE and EPIMMUNE desires
to sell to CYTEL shares of Epimmune's preferred stock as provided for herein.
NOW, THEREFORE, in consideration of the mutual promises, covenants and
conditions hereinafter set forth, the parties hereto agree as follows:
1. PURCHASE AND SALE OF SHARES
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
hereof, at the Closing (as defined below) CYTEL shall purchase from EPIMMUNE,
and EPIMMUNE shall issue and sell to CYTEL, 659,898 shares of EPIMMUNE Series
B-1 Preferred Stock, par value $0.001 (the "Shares"), at a per share purchase
price of $5.91, for an aggregate purchase price of $3,900,000, payable in cash.
1.2 CLOSING. Subject to the terms of Sections 6 and 7, the closing of the
sale and purchase of the Shares pursuant to Section 1.1 (the "Closing") shall be
held on the date hereof or at such other time upon which CYTEL and EPIMMUNE
shall agree. The Closing shall take place at the offices of Cooley Godward LLP,
4365 Executive Drive, Suite 1100, San Diego, California 92121.
1.3 DELIVERY. At the Closing, subject to the terms and conditions hereof,
EPIMMUNE shall deliver to CYTEL a stock certificate registered in the name of
CYTEL representing the Shares purchased pursuant to Section 1.1 and dated as of
the Closing against payment of the purchase price therefor by wire transfer,
unless other means of payment shall have been agreed upon by EPIMMUNE and CYTEL.
2. REPRESENTATIONS AND WARRANTIES OF EPIMMUNE.
EPIMMUNE hereby makes the following representations and warranties to
CYTEL, except as set forth in the Schedule of Exceptions attached hereto as
Exhibit A:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. EPIMMUNE 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. EPIMMUNE is duly qualified to transact business and is in
good standing in each jurisdiction in which the failure so to qualify would have
a material adverse effect on its business or properties.
<PAGE>
2.2 AUTHORIZATION; DUE EXECUTION. EPIMMUNE has the requisite corporate
power and authority to enter into this Stock Purchase Agreement and an Investor
Rights Agreement substantially in the form attached hereto as Exhibit B (the
"Investor Rights Agreement") and a Voting Agreement substantially in the form
attached hereto as Exhibit C (the "Voting Agreement") (the Stock Purchase
Agreement, the Investor Rights Agreement and the Voting Agreement are
collectively referred to as the "Agreements") and to perform its obligations
under the terms of the Agreements and, at the Closing, will have the requisite
corporate power to sell the Shares. All corporate action on the part of
EPIMMUNE, its officers, directors and stockholders necessary for the
authorization, execution and delivery of the Agreements has been taken. Each of
the Agreements has been duly authorized, executed and delivered by EPIMMUNE,
and, upon due execution and delivery by CYTEL, will be a valid and binding
agreement of EPIMMUNE, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles.
2.3 CAPITALIZATION. The authorized capital stock of EPIMMUNE consists or
will consist as of the Closing of 20,000,000 shares of Common Stock, par value
$0.001, and 10,000,000 shares of Preferred Stock, par value $0.001, of which
6,000,000 shares have been designated Series A Preferred Stock, 1,032,149 shares
have been designated Series B Preferred Stock and 659,898 shares have been
designated Series B-1 Preferred Stock. As of February 26, 1998, there were no
shares of Common Stock outstanding and 6,000,000 shares of Series A Preferred
Stock issued and outstanding. The rights, preferences and privileges of the
Series A Preferred Stock, the Series B Preferred Stock and the Series B-1
Preferred Stock will, as of the Closing, be as set forth in EPIMMUNE'S Amended
and Restated Certificate of Incorporation substantially in the form attached
hereto as Exhibit C (the "Restated Certificate"). Other than as contemplated by
the Agreements, the conversion rights of the Preferred Stock and options to
purchase 1,460,791 shares of Common Stock issued, and 459,209 shares of Common
Stock available for future option grants, to certain employees, officers,
directors, consultants and advisors of EPIMMUNE, there are no subscriptions,
options, warrants, rights or agreements (contingent or otherwise), including
without limitation, conversion rights, preemptive rights, rights of first
refusal or other rights or agreements, providing for the issuance by EPIMMUNE of
Common Stock or other equity securities of EPIMMUNE. The Shares to be acquired
by CYTEL pursuant to Section 1.1 above will constitute (i) approximately 8.58%
of the outstanding shares of Common Stock of EPIMMUNE on an as-converted,
undiluted basis, and (ii) approximately 7.21% of the outstanding Common Stock of
EPIMMUNE on an as-converted, fully diluted basis, assuming exercise of all
outstanding rights, warrants and options to acquire Common Stock.
2.4 VALID ISSUANCE OF SHARES. The Shares when issued, sold and delivered
in accordance with the terms hereof for the consideration set forth herein, will
be duly and validly authorized and issued, fully paid and nonassessable and,
based in part upon the representations of CYTEL in this Stock Purchase
Agreement, will be issued in compliance with all applicable federal and state
securities laws.
2.5 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of
EPIMMUNE is required in connection with the consummation of the transactions
contemplated by the Agreements, except for notices required or permitted to be
filed with certain state and federal securities commissions after the Closing,
which notices will be filed on a timely basis.
2.
<PAGE>
2.6 FINANCIAL INFORMATION. EPIMMUNE has provided to CYTEL unaudited
financial statements as of and for the three-month period ended December 31,
1997 and the one month period ending January 31, 1998 (the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied, except as
disclosed therein, and present fairly the financial condition and position of
EPIMMUNE as of the date thereof, subject to normal recurring year-end
adjustments and except that they do not contain all footnotes required under
generally accepted accounting principles.
2.7 NO CONFLICT. The execution, delivery and performance by EPIMMUNE of
the Agreements do not and will not violate any provision of EPIMMUNE's
Certificate of Incorporation or By-laws, any provision of any order, writ,
judgment, injunction, decree, determination or award to which EPIMMUNE is a
party or by which it is bound, or to EPIMMUNE's knowledge, any law, rule or
regulation (including, without limitation, the rules and regulations of the
Securities and Exchange Commission (the "SEC") or any regulatory commission of
any jurisdiction) currently in effect having applicability to EPIMMUNE.
2.8 ABSENCE OF LITIGATION. There is no action, suit, proceeding or
investigation (including any such matter related to EPIMMUNE's intellectual
property) pending or currently threatened against EPIMMUNE or its properties
before any court or governmental agency, which would, singly or in the
aggregate, have a material adverse effect on EPIMMUNE's business, operations or
assets, taken as a whole (nor, to the best of EPIMMUNE's knowledge, is there any
basis therefor). There is no action, suit, proceeding or investigation which
EPIMMUNE currently intends to initiate.
2.9 CONFIDENTIALITY. EPIMMUNE hereby represents, warrants and covenants
that it shall maintain in confidence, and shall not use or disclose without
prior written consent of CYTEL, the terms of this Stock Purchase Agreement and
any information identified in writing as confidential that is furnished to it by
CYTEL in connection with this Stock Purchase Agreement. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no unauthorized act or failure to act by EPIMMUNE, (b) lawfully
disclosed to EPIMMUNE by a third party who possessed such information without
any obligation of confidentiality, (c) lawfully developed by EPIMMUNE
independent of any disclosure by EPIMMUNE as supported by written records, or
(d) required to be disclosed pursuant to applicable law, regulation or order or
requirement of a court, administrative agency or other government body
(including the securities laws of any applicable jurisdiction); provided that if
EPIMMUNE is required to make any such disclosure of such information it will to
the extent practicable give reasonable advance notice to CYTEL of such
disclosure requirement and will use its reasonable best efforts to secure
confidential treatment of such information required to be disclosed. EPIMMUNE
further covenants that it shall return to CYTEL all tangible materials
containing such information upon request by Cytel. EPIMMUNE and CYTEL
acknowledge and agree that EPIMMUNE will be required to disclose the issuance of
the Shares contemplated by this Stock Purchase Agreement pursuant to applicable
securities laws and regulations.
3. REPRESENTATIONS AND WARRANTIES OF CYTEL.
CYTEL hereby makes the following representations and warranties to
EPIMMUNE as of the date hereof and the Closing:
3.
<PAGE>
3.1 AUTHORIZATION; DUE EXECUTION. CYTEL has the requisite corporate power
and authority to enter into the Agreements and to perform its obligations under
the terms of the Agreements and, at the Closing, will have the requisite
corporate power to purchase the Shares. All corporate action on the part of
CYTEL, its officers, directors and stockholders necessary for the authorization,
execution and delivery of the Agreements has been taken. Each of the Agreements
has been duly authorized, executed and delivered by CYTEL, and, upon due
execution and delivery by EPIMMUNE, will be a valid and binding agreement of
CYTEL, enforceable in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by equitable principles.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Stock Purchase Agreement is
made with CYTEL in reliance upon CYTEL's representation to EPIMMUNE, which by
CYTEL's execution of this Agreement CYTEL confirms, that the Shares to be
purchased by CYTEL will be acquired for investment for CYTEL'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 CYTEL has no present intention of selling, granting any
participation in, or otherwise distributing the same (subject to the disposition
of CYTEL's property being at all times within its control). By executing this
Stock Purchase Agreement, CYTEL further represents that CYTEL 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 Shares.
3.3 DISCLOSURE OF INFORMATION. CYTEL has received all the information
that it has requested and that it considers necessary or appropriate for
deciding whether to enter into this Stock Purchase Agreement and to purchase the
Shares. CYTEL further represents that it has had an opportunity to ask questions
and receive answers from EPIMMUNE regarding the terms and conditions of the
offering of the Shares.
3.4 INVESTMENT EXPERIENCE. CYTEL is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares. CYTEL also represents it has
not been organized solely for the purpose of acquiring the Shares.
3.5 ACCREDITED INVESTOR. CYTEL is an "accredited investor" as such term
is defined in Rule 501 of the General Rules and Regulations prescribed by the
SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act").
3.6 RESTRICTED SECURITIES. CYTEL understands that (a) the Shares have not
been, registered under the Securities Act by reason of a specific exemption
therefrom, that such securities must be held by it indefinitely and that CYTEL
must, therefore, bear the economic risk of such investment indefinitely, unless
in each case a subsequent disposition thereof is registered under the Securities
Act or is exempt from such registration; (b) each certificate representing the
Shares will be endorsed with the following legend:
4.
<PAGE>
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
and (c) EPIMMUNE will instruct any transfer agent not to register the transfer
of the Shares (or any portion thereof) unless the conditions specified in the
foregoing legends are satisfied, until such time as a transfer is made, pursuant
to the terms of this Agreement, and in compliance with Rule 144 or pursuant to a
registration statement or, if the opinion of counsel referred to above is to the
further effect that such legend is not required in order to establish compliance
with any provisions of the Securities Act or this Stock Purchase Agreement.
3.7 CONFIDENTIALITY. CYTEL hereby represents, warrants and covenants that
it shall maintain in confidence, and shall not use or disclose without prior
written consent of EPIMMUNE, the terms of this Stock Purchase Agreement and any
information identified in writing as confidential that is furnished to it by
EPIMMUNE in connection with this Stock Purchase Agreement. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no unauthorized act or failure to act by CYTEL, (b) lawfully
disclosed to CYTEL by a third party who possessed such information without any
obligation of confidentiality, (c) lawfully developed by CYTEL independent of
any disclosure by EPIMMUNE as supported by CYTEL's written records, or (d)
required to be disclosed pursuant to applicable law, regulation or order or
requirement of a court, administrative agency or other government body
(including the securities laws of any applicable jurisdiction); provided that if
CYTEL is required to make any such disclosure of such information it will to the
extent practicable give reasonable advance notice to EPIMMUNE of such disclosure
requirement and will use its reasonable best efforts to secure confidential
treatment of such information required to be disclosed. CYTEL further covenants
that it shall return to EPIMMUNE all tangible materials containing such
information upon request by EPIMMUNE.
4. CONDITIONS OF CYTEL'S OBLIGATIONS
The obligations of CYTEL under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, any of
which may be waived by Cytel (and which conditions shall be deemed to have been
fulfilled or waived upon the occurrence of the Closing):
4.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
EPIMMUNE contained in Section 2 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said date.
4.2 PERFORMANCE. EPIMMUNE shall have performed and complied with all
agreements, obligations and conditions in this Stock Purchase Agreement, if any,
that are required to be performed or complied with by it on or before the
Closing.
4.3 DELIVERY OF SHARES. EPIMMUNE shall have tendered delivery of the
Shares specified in Section 1.1 at the Closing.
5.
<PAGE>
4.4 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement substantially
in the form attached hereto as Exhibit B shall have been executed and delivered
by EPIMMUNE and G.D. Searle & Co.
4.5 VOTING AGREEMENT. A Voting Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by EPIMMUNE
and G.D. Searle & Co.
4.6 FILING OF AMENDED AND RESTATED CERTIFICATE. The Restated Certificate
in the form attached hereto as Exhibit D shall have been filed with the
Secretary of State of Delaware.
4.7 BOARD OF DIRECTORS. Upon the Closing, the authorized size of the
Board of Directors of Epimmune shall be five members and the Board shall consist
of Howard E. Greene, Jr., Virgil D. Thompson, Robert L. Roe, Deborah Schueren
and Nancy D. Rasmussen.
4.8 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
CYTEL, and it shall have received all such counterpart original and certified or
other copies of such documents as it may reasonably request.
5. CONDITIONS OF EPIMMUNE'S OBLIGATIONS
The obligations of EPIMMUNE under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by
CYTEL, any of which may be waived by EPIMMUNE (and which conditions shall be
deemed to have been fulfilled or waived upon the occurrence of the Closing):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
CYTEL contained in Section 3 hereof shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said dates.
5.2 PERFORMANCE. CYTEL shall have performed and complied with all
agreements, obligations and conditions in this Stock Purchase Agreement, if any,
that are required to be performed or complied with by it on or before the
Closing.
5.3 PAYMENT OF PURCHASE PRICE. CYTEL shall have tendered delivery of the
purchase price for the Shares specified in Section 1.1 at the Closing.
5.4 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement substantially
in the form attached hereto as Exhibit B shall have been executed and delivered
by CYTEL.
5.5 VOTING AGREEMENT. A Voting Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by CYTEL.
5.6 FILING OF AMENDED AND RESTATED CERTIFICATE. The Restated Certificate
in the form attached hereto as Exhibit D shall have been filed with the
Secretary of State of Delaware.
6.
<PAGE>
5.7 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
EPIMMUNE, and it shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
6. INDEMNIFICATION
6.1 INDEMNIFICATION OF CYTEL. EPIMMUNE agrees to indemnify and hold
harmless CYTEL and its permitted successors and assigns from and against any and
all (i) liabilities, losses, costs or damages ("Loss") and (ii) reasonable
attorneys' and accountants' fees and expenses, court costs and all other
reasonable out-of-pocket expenses ("Expense") incurred by CYTEL or its permitted
successors and assigns arising from (A) any breach or failure to perform by
EPIMMUNE of any of its covenants or agreements contained in this Agreement; or
(B) any breach of any warranty or the inaccuracy of any representation of
EPIMMUNE contained in this Agreement.
6.2 NOTICE OF CLAIMS BY CYTEL. If any person indemnified under Section
6.1 hereof believes it has suffered or incurred any Loss or incurred any Expense
as to which it is entitled to indemnification under Section 6.1 hereof, such
person shall so notify EPIMMUNE promptly in writing describing such Loss or
Expense, the amount thereof, if known, and the method of computation of such
Loss or Expense, all with reasonable particularity and containing a reference to
the provisions of this Agreement, or any agreement or instrument contemplated
hereby, or any certificate delivered pursuant hereto or thereto in respect of
which such Loss or Expense shall have occurred; and if any action at law or suit
in equity is instituted by or against a third party with respect to which any
such indemnified person intends to claim any Loss or Expense under Section 6.1,
such indemnified person shall promptly notify the indemnifying party of such
action or suit; provided that failure to give such notice shall not abrogate or
diminish EPIMMUNE's obligations under Section 6.1 if EPIMMUNE has or receives
timely actual knowledge of the existence of any such claim by any other means or
except to the extent such failure prejudices EPIMMUNE.
6.3 INDEMNIFICATION OF EPIMMUNE. CYTEL agrees to indemnify and hold
harmless EPIMMUNE and its permitted successors and assigns from and against any
and all Loss and Expense incurred by EPIMMUNE and its permitted successors and
assigns arising from (i) any breach or failure to perform by CYTEL of any of its
covenants or agreements contained in this Agreement; or (ii) any breach of any
warranty or the inaccuracy of any representation of CYTEL contained in this
Agreement.
6.4 NOTICE OF CLAIMS BY EPIMMUNE. If any person indemnified under Section
6.3 believes that it has suffered or incurred any Loss or incurred any Expense
as to which it is entitled to indemnification under Section 6.3, such person
shall so notify CYTEL or the person responsible for such indemnification
promptly in writing describing such Loss or Expense, the amount thereof, if
known, and the method of computation of such Loss or Expense, all with
reasonable particularity and containing a reference to the provisions of this
Agreement, or any agreement or instrument contemplated hereby, or any
certificate delivered pursuant hereto or thereto in respect of which such Loss
or Expense shall have occurred; and if any action at law or suit in equity is
instituted by or against a third party with respect to which any such
indemnified party intends to claim any Loss or Expense under Section 6.3, such
indemnified party shall promptly notify the indemnifying party of such action or
suit; provided that failure to give such notice shall not abrogate or diminish
CYTEL's obligations under Section 6.3 if CYTEL has or receives timely actual
knowledge of the existence of any such claim by any other means or except to the
extent such failure prejudices CYTEL.
7.
<PAGE>
6.5 THIRD PARTY CLAIMS. The indemnifying party shall have the right to
participate in, and, to the extent the it so desires, jointly with any other
indemnitor similarly noticed, to assume the defense of any third party claim,
demand, action or other proceeding with counsel selected by the indemnifying
party; provided, however, that the indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of the indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between the indemnified party and any other party
represented by such counsel in such proceedings. So long as the indemnifying
party has received notice of any third party claim, demand, action or proceeding
for which any indemnified party intends to claim any Loss or Expense, and within
a reasonable period thereafter the indemnifying party has assumed the defense
thereof, the indemnity obligations under this Article 6 shall not apply to
amounts paid in settlement of such third party claim, demand, action or
proceeding if such settlement is effected without the consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
The indemnifying party may not settle or otherwise consent to an adverse
judgment in any such third party claim, demand, action or proceeding action that
diminishes the rights or interests of the indemnified party without the prior
express written consent of the indemnified party. The indemnified party, its
employees and agents, shall cooperate reasonably with the indemnifying party and
its legal representatives in the investigation of any third party claim, demand,
action or proceeding covered by this Article 6.
7. MISCELLANEOUS PROVISIONS
7.1 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 permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
7.3 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.
7.4 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.
8.
<PAGE>
7.5 ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party without the
written consent of the other party; provided, however, that either EPIMMUNE or
CYTEL may, without such consent, assign this Agreement and its rights and
obligations hereunder (a) in connection with the transfer or sale of all or
substantially all of that portion of its business relating to its performance of
its respective obligations hereunder or (b) in the event of its merger or
consolidation with another company at any time during the term of this
Agreement. Any purported assignment in violation of the preceding sentence shall
be void. Any other permitted assignee shall also assume all obligations of its
assignor under this Agreement.
7.6 NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to such
other party at its address indicated below, or to such other address as the
addressee shall have last furnished in writing to the addressor and shall be
effective upon receipt by the addressee.
EPIMMUNE: Epimmune Inc.
6555 Nancy Ridge Drive, Suite 200
San Diego, California 92121
Attention: President
Tel: (619) 404-7171
Fax: (619) 404-7177
WITH A COPY TO: COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Frederick T. Muto, Esq.
Tel: (619) 550-6010
Fax: (619) 453-3555
CYTEL: CYTEL CORPORATION
3525 John Hopkins Court
San Diego, California 92121
Attention: President
Tel: (619) 552-3000
Fax: (619) 552-8801
WITH A COPY TO: COOLEY GODWARD LLP
4365 Executive Drive, Suite 1100
San Diego, CA 92121
Attn: Frederick T. Muto, Esq.
Tel: (619) 550-6010
Fax: (619) 453-3555
9.
<PAGE>
7.7 FINDER'S FEE. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction. CYTEL agrees to indemnify and hold harmless EPIMMUNE 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 CYTEL or any of its officers, partners, employees or
representatives is responsible. EPIMMUNE agrees to indemnify and hold harmless
CYTEL from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which EPIMMUNE or any of its officers, employees or
representatives is responsible.
7.8 EXPENSES. Irrespective of whether the Closing is effected, each party
shall bear its own costs with respect to the negotiation, execution, delivery
and performance of this Agreement.
7.9 AMENDMENTS AND WAIVERS. Except as specified in this Section 7.9, 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 EPIMMUNE and
CYTEL.
7.10 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof. 7.12
FURTHER ASSURANCES. Each party hereto agrees to do such further actions and
things, and to execute and deliver such additional agreements and instruments,
as either party may reasonably request of the other to effectuate the
transactions contemplated by this Agreement.
10.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
CYTEL CORPORATION EPIMMUNE INC.
By: /s/ Virgil Thompson By: /s/ Deborah Schueren
------------------------- --------------------------
Name: Virgil Thompson Name: Deborah Schueren
------------------------ -------------------------
Title: President & CEO Title: President
----------------------- ------------------------
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
This Schedule of Exceptions is made and given pursuant to Section 2 of the
Series B-1 Preferred Stock Purchase Agreement dated as of February 27, 1998
between Epimmune Inc. and Cytel Corporation.
NONE
<PAGE>
EXHIBIT B
<PAGE>
EPIMMUNE INC.
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (the "Investor Rights Agreement") is
entered into as of the 27th day of February, 1998, by and among EPIMMUNE INC., a
Delaware corporation (the "Company"), G.D. SEARLE & CO., a Delaware corporation
("Searle"), CYTEL CORPORATION, a Delaware corporation ("Cytel") (collectively,
Searle and Cytel shall be referred to as the "Investors").
RECITALS
WHEREAS, the Company proposes to sell and issue 1,032,149 shares of its
Series B Preferred Stock, $0.001 par value (the "Series B Preferred"), to Searle
pursuant to the Series B Preferred Stock Purchase Agreement of even date
herewith (the "Series B Stock Purchase Agreement");
WHEREAS, the Company proposes to sell and issue 659,898 shares of its
Series B-1 Preferred Stock, $0.001 par value (the "Series B-1 Preferred"), to
Cytel pursuant to the Series B-1 Preferred Stock Purchase Agreement of even date
herewith (the "Series B-1 Stock Purchase Agreement");
WHEREAS, as a condition of entering into the Series B Stock Purchase
Agreement and the Series B-1 Stock Purchase Agreement, the Investors requested
that the Company extend to it registration rights and other rights as set forth
below; and
WHEREAS, this Investor Rights Agreement shall be effective only upon
the closing of the Series B Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Series B Stock Purchase Agreement and the Series B-1 Stock
Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Investor Rights Agreement the following
terms shall have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" means any person owning of record Registrable Securities
that have not been sold to the public or any assignee of record of such
Registrable Securities in accordance with Section 2.8 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act in which the Company receives gross proceeds of at least $15 million.
1.
<PAGE>
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, reasonable fees and disbursements of counsel for the
Company, reasonable fees and disbursements not to exceed twenty-five thousand
dollars ($25,000) of a single special counsel for the Holders, blue sky fees and
expenses and the expense of any special audits incident to or required by any
such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean the Company's Series B Preferred and Series B-1
Preferred.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under
the Securities Act covering such proposed disposition and such disposition is
made in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
2.
<PAGE>
(iii) Notwithstanding the provisions of paragraphs (a)(i) and
(a)(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its stockholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement or any other applicable agreement or
instrument):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 "PIGGY-BACK" REGISTRATIONS. In the event that shares of the Company's
equity securities held by any selling stockholder are included in a registration
statement under the Securities Act for purposes of the Company's Initial
Offering, the Company shall notify all Holders of Registrable Securities in
writing at least thirty (30) days prior to the filing of such registration
statement and will afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder on a pro rata basis with the securities of such other selling
stockholders to be included in the Registration Statement. Each Holder desiring
to include in any such registration statement all or any part of the Registrable
Securities held by it shall, within twenty (20) days after the above-described
notice from the Company, so notify the Company in writing.
3.
<PAGE>
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; and second, to any stockholder of the
Company (including the Holders) on a pro rata basis based on the total number of
Registrable Securities held by the Holders and securities held by such other
stockholders; provided that no such reduction shall reduce the securities being
offered by the Company for its own account to be included in the registration
and underwriting.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.3 hereof.
2.3 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration under Section
2.2 herein shall be borne by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
4.
<PAGE>
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any.
2.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
to a Holder under this Section 2 shall terminate and be of no further force and
effect upon completion of the distribution of the Company's Common Stock in the
Company's Initial Offering.
2.6 FURNISHING INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2.2 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
5.
<PAGE>
2.7 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Section 2.2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 2.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.7(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.7
exceed the proceeds from the offering received by such Holder.
6.
<PAGE>
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.7.
(d) If the indemnification provided for in this Section 2.7 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.7 shall survive completion of any offering of Registrable Securities in a
registration statement. 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.
7.
<PAGE>
2.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, affiliate, parent, general partner, limited partner or retired
partner of a Holder, or (ii) is a Holder's family member, a trust for the
benefit of an individual Holder or such Holder's family members or a partnership
or other entity all of whose beneficial ownership is held by the Holder or such
Holder's family members; provided, however, (A) the transferor shall, within ten
(10) days after such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (B) such transferee shall
agree to be subject to all restrictions set forth in this Agreement.
2.9 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, enter into any agreement with any holder or
prospective holder of any securities of the Company that would grant such holder
registration rights senior to those granted to the Holders hereunder unless the
Company also grants such registration rights to the Holders.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that the Company, all officers and directors
of the Company and any other selling stockholders enter into similar agreements
(subject to customary exceptions).
The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.11 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
8.
<PAGE>
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
3. COVENANTS OF THE COMPANY.
3.1 FINANCIAL INFORMATION AND REPORTING.
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish to Searle a balance sheet of the Company, as at the end of
such fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by (i) a report and
opinion thereon by independent public accountants of national standing selected
by the Company's Board of Directors and reasonably acceptable to Searle, and
(ii) a certificate executed by an officer of the Company certifying that the
terms of the Series B Preferred and the terms of all other material agreements
between Searle and the Company, other than that certain License and
Collaboration Agreement dated as of February 27, 1998 (the "Collaboration
Agreement") between the Company and Searle and any other agreements entered
between the Company and Searle in connection with the Collaboration Agreement,
have been complied with.
(b) So long as Searle shall own not less than 5% of the Company's
outstanding capital stock, the Company will furnish Searle prior to the
beginning of each fiscal year a budget on a monthly basis for such fiscal year
(and as soon as available, any subsequent revisions thereto);
(c) The Company will furnish to Searle promptly after distribution
(and in any event within 10 days after distribution) other reports of the
Company that are publicly distributed, including written communications made
generally available to the Company's Stockholders or the financial community.
(d) The Company will furnish to each member of the Company's Board
of Directors, as soon as practicable after the end of each month, and in any
event within thirty (30) days thereafter, a balance sheet of the Company as of
the end of each such month, and a statement of income of the Company for such
month and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
9.
<PAGE>
3.2 INSPECTION RIGHTS. Searle shall have the right to visit and inspect
any of the properties of the Company or any of its subsidiaries, and to discuss
the affairs, finances and accounts of the Company or any of its subsidiaries
with its directors, officers, employees and independent public accountants, and
to review such information as is reasonably requested all at such reasonable
times and as often as may be reasonably requested.
3.3 SEARLE APPROVAL. The Company shall not without the prior written
consent of Searle enter into any agreement which by its terms restricts the
Company's performance of the terms of the Series B Preferred Stock, the Series B
Stock Purchase Agreement or this Investor Rights Agreement.
3.4 INSIDER TRANSACTIONS. The Company shall not without the approval of a
majority of the Board of Directors, with all non-interested Directors voting and
the approval of the Director designated by Searle (the "Designated Director"),
authorize or enter into any transactions with any director or management
employee, or such director's or employee's immediate family, other than
indemnification and employment related transactions on customary terms.
3.5 DIRECTORS' FEES AND EXPENSES. For so long as Searle is entitled to
designate a representative to the Company's Board of Directors, the Company
covenants to (i) reimburse the Designated Director for all reasonable costs
associated with attending meetings of the Board of Directors, and (ii) pay the
Designated Director any compensation paid to other members of the Company's
Board of Directors in connection with the performance of their duties as a
Director.
3.6 CONFIDENTIALITY OF RECORDS. Searle agrees to keep confidential, and
to use its best efforts to insure that its authorized representatives keep
confidential, any information furnished or made available to it hereunder in
accordance with Section 3.7 of the Series B Stock Purchase Agreement.
3.7 BY-LAWS. The Company shall not, without prior written consent of
Searle, take any action to amend the By-laws of the Company to (i) change the
designated number of directors from five members or (ii) amend Section 22(b) of
Article IV of such By-laws.
3.8 TERMINATION OF COVENANTS. The covenants of the Company set forth in
Sections 3.1(a) and (b), 3.2, 3.3 and 3.7 of this Agreement shall expire and
terminate on the earlier of (i) the effective date of the registration statement
pertaining to the Initial Offering, or (ii) the date on which Searle shall own
less than 5% of the Company's outstanding capital stock determined on a
fully-diluted, as-converted basis. The covenants of the Company set forth in
Sections 3.1(c) and (d) and 3.4 of this Agreement shall expire and terminate on
the date on which Searle shall own less than 5% of the Company's outstanding
capital stock.
4. RIGHT OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Searle shall have a right of first refusal to
purchase its pro rata share of all Equity Securities, as defined below, that the
Company may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
Searle's pro rata share is equal to the ratio of (a) the number of shares of the
Company's Common Stock (including all shares of Common Stock issued or issuable
upon conversion of the Shares) which Searle is deemed to hold immediately prior
to the issuance of such Equity Securities to (b) the total number of shares of
the Company's outstanding Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares or upon the exercise of any
outstanding warrants or options) immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.
10.
<PAGE>
4.2 EXERCISE OF RIGHT. If the Company proposes to issue any Equity
Securities, it shall give Searle written notice of its intention, describing the
Equity Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Searle shall have forty-five (45) days from the
giving of such notice to agree to purchase its pro rata share of the Equity
Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of Equity Securities to be purchased; provided, however, if the Company
reasonably requests in the Company's original notice that Searle respond within
thirty (30) days (due to timing considerations relating to the closing of the
issuance of such Equity Securities), then Searle shall be required to respond to
such notice within thirty (30) days. Notwithstanding the foregoing, the Company
shall not be required to offer or sell such Equity Securities to Searle if such
offer or sale would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale; provided, however, the Company
agrees to use its reasonable best efforts to take whatever action may be
necessary or appropriate to comply with applicable Federal Securities laws in
connection with such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If Searle does not
elect to purchase its pro rata share of the Equity Securities, then the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which Searle's rights were not exercised, at a price and upon general terms
and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to Searle pursuant to Section 4.2 hereof. If
the Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to Searle
in the manner provided above.
4.4 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first refusal
established by this Section 4 shall terminate on the first to occur of (i) the
effective date of the registration statement pertaining to the Company's Initial
Offering or (ii) the first date on which Searle sells, assigns or otherwise
transfers any of the Shares (other than to a subsidiary, affiliate or parent or
in connection with an assignment as provided in Section 7.5 of the Series B
Purchase Agreement or Section 7.5 of the Series B-1 Purchase Agreement, as
applicable). The right of first refusal shall not apply to the Company's Initial
Offering.
4.5 TRANSFER OF RIGHT OF FIRST REFUSAL. The right of first refusal of the
Investor under this Section 4 may be transferred to the same parties, subject to
the same restrictions as any transfer of registration rights pursuant to Section
2.8.
11.
<PAGE>
4.6 EXCLUDED SECURITIES. The right of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights, agreements, options or
warrants outstanding as of the date of this Agreement and stock issued pursuant
to any rights, agreements, options or warrants granted after the date of this
Agreement, provided that the rights of first refusal established by this Section
4 applied with respect to the initial sale or grant by the Company of such
rights, agreements, options or warrants;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
whereby the stockholders of the Company will own more than fifty percent (50%)
of the voting power of the combined entity;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares or
the Series A Preferred Stock;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement; and
(g) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing, corporate
partnering or distribution arrangements or (ii) technology transfer, research or
development arrangements; provided that such strategic transactions and the
issuance of shares therein, has been approved by the Company's Board of
Directors.
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
5.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
12.
<PAGE>
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, any provision of this
Agreement (other than Sections 3 and 4) may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only upon the written consent of the Company and
the Holders of at least a majority of the Registrable Securities. Any amendment
or waiver of any provisions of this Agreement (other than Sections 3 and 4)
effected in accordance with this Agreement shall be binding upon each Holder and
the Company. By acceptance of any benefits under this Agreement, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
(b) Except as otherwise expressly provided, any provision of
Section 3 and 4 of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only upon the written consent of the Company and Searle.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.7 NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to such
other party at its address indicated below, or to such other address as the
addressee shall have last furnished in writing to the addressor and shall be
effective upon receipt by the addressee.
13.
<PAGE>
THE COMPANY: Epimmune Inc.
6555 Nancy Ridge Drive, Suite 200
San Diego, California 92121
Attention: President
Tel: (619) 404-7171
Fax: (619) 404-7177
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
SEARLE: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: Vice President, Business Development
Tel: (847) 982-7000
Fax: (847) 470-1480
with a copy to: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: General Counsel
Tel: (847) 982-7000
Fax: (847) 967-2045
CYTEL: Cytel Corporation
3525 John Hopkins Court
San Diego, California 92121
Attention: President
Tel: (619) 552-3000
Fax: (619) 552-8801
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
5.8 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.
14.
<PAGE>
5.9 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
5.10 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.
15.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
EPIMMUNE INC. G.D. SEARLE & CO.
By:________________________________ By:__________________________________
Title:_____________________________ Title:_______________________________
CYTEL CORPORATION
By:__________________________________
Title:_______________________________
<PAGE>
EXHIBIT C
<PAGE>
EPIMMUNE INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into this
27th day of February, 1998, by and among Epimmune Inc., a Delaware corporation
(the Company"), Cytel Corporation, a Delaware corporation (the "Key
Stockholder"), and G.D. Searle & Co., a Delaware corporation (the "Investor").
6 WITNESSETH:
WHEREAS, the Key Stockholder is the beneficial owner of an aggregate of
Six Million (6,000,000) shares of the Series A Preferred Stock (the "Series A
Preferred") of the Company;
WHEREAS, the Company proposes to sell shares (the "Investor Shares") of
its Series B Preferred Stock (the "Series B Preferred") to the Investor pursuant
to the Series B Preferred Stock Purchase Agreement (the "Series B Stock Purchase
Agreement") of even date herewith;
WHEREAS, the Company proposes to sell shares of its Series B-1
Preferred Stock (the "Series B-1 Preferred"), to the Key Stockholder pursuant to
the Series B-1 Preferred Stock Purchase Agreement (the "Series B-1 Stock
Purchase Agreement") of even date herewith (collectively, the sale of Series B
and Series B-1 Preferred Stock shall be referred to as the "Financing");
WHEREAS, in connection with the consummation of the Financing, the Key
Stockholder has agreed to provide for the future voting of its shares of the
Company's capital stock as set forth below; and
WHEREAS, this Agreement shall be effective only upon the closing of the
Series B Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. VOTING.
1.1 SHARES. The Key Stockholder agrees to hold all shares of voting
capital stock of the Company (including but not limited to all shares of Common
Stock issued upon conversion of the Company's Series A Preferred and Series B-1
Preferred) registered in its name or beneficially owned by it as of the date
hereof (and any and all other securities of the Company legally or beneficially
acquired by the Key Stockholder after the date hereof) (hereinafter collectively
referred to as the "Shares") subject to, and to vote the Shares in accordance
with, the provisions of this Agreement.
1.
<PAGE>
1.2 ELECTION OF DIRECTOR. On all matters relating to the election of
directors of the Company, the Key Stockholder agrees to vote all Shares held by
it (or the holders thereof shall consent pursuant to an action by written
consent of the stockholders) so as to elect to the Company's Board of Directors
one (1) individual nominated by the holders of a majority in interest of the
Investor Shares. On all matters relating to the election of directors of the
Company, the Investor agrees to vote all Investor Shares held by it (or the
holders thereof shall consent pursuant to an action by written consent of the
stockholders) so as to elect to the Company's Board of Directors one (1)
individual nominated by the holders of a majority in interest of the Investor
Shares. Any vote taken to remove any director elected pursuant to this Section
1.2, or to fill any vacancy created by the resignation of a director elected
pursuant to this Section 1.2, shall also be subject to the provisions of this
Section 1.2.
1.3 LEGEND.
(a) Concurrently with the execution of this Agreement, there shall
be imprinted or otherwise placed, on certificates representing the Shares, the
following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES
CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL
BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT
WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS."
(b) The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Shares theretofore represented by a certificate carrying the Legend.
1.4 SUCCESSORS. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Shares. The Company shall not permit
the transfer of any of the Shares on its books or issue a new certificate
representing any of the Shares unless and until the person to whom such security
is to be transferred shall have executed a written agreement, substantially in
the form of this Agreement, pursuant to which such person becomes a party to
this Agreement and agrees to be bound by all the provisions hereof as if such
person were a Key Stockholder or Investor, as applicable; provided that this
provision shall not apply to the extent of any sale or transfer of the Shares to
the Investor.
1.5 OTHER RIGHTS. Except as provided by this Agreement, the Key
Stockholder and Investor shall exercise the full rights of a stockholder with
respect to the Shares.
2.
<PAGE>
2. TERMINATION
2.1 This Agreement shall continue in full force and effect from the date
hereof through (i) the date that all of the Shares are sold or otherwise
transferred to the Investor, or (ii) the later of the following dates, on which
it shall terminate in its entirety:
(a) two (2) years from the date of the closing of a firm commitment
underwritten public offering of the Company's Common Stock pursuant to a
registration statement filed with, and declared effective under, the Securities
Act of 1933, as amended, in which the Company receives gross proceeds of at
least $15 million; or
(b) at such time as the Investor holds less than five percent (5%)
of the total shares of Common Stock and Preferred Stock outstanding of the
Company on a fully-diluted, as-converted basis.
3. MISCELLANEOUS
3.1 OWNERSHIP. The Key Stockholder represents and warrants to the
Investor that (a) it now owns the Shares, free and clear of liens or
encumbrances, and has not, prior to or on the date of this Agreement, executed
or delivered any proxy or entered into any other voting agreement or similar
arrangement other than one which has expired or terminated prior to the date
hereof, and (b) it has full power and capacity to execute, deliver and perform
this Agreement, which has been duly executed and delivered by, and evidences the
valid and binding obligation of, the Key Stockholder enforceable in accordance
with its terms.
3.2 FURTHER ACTION. If and whenever the Shares are sold, the Key
Stockholder or the personal representative of the Key Stockholder shall do all
things and execute and deliver all documents and make all transfers, and cause
any transferee of the Shares to do all things and execute and deliver all
documents, as may be necessary to consummate such sale consistent with this
Agreement.
3.3 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
3.5 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 parties hereto.
3.
<PAGE>
3.6 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
3.7 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 permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.8 ADDITIONAL SHARES. In the event that subsequent to the date of this
Agreement any shares or other securities (other than any shares or securities of
another corporation issued to the Company's stockholders pursuant to a plan of
merger) are issued on, or in exchange for, any of the Shares by reason of any
stock dividend, stock split, consolidation of shares, reclassification or
consolidation involving the Company, such shares or securities shall be deemed
to be Shares for purposes of this Agreement.
3.9 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.
3.10 ENTIRE AGREEMENT. This Agreement, along with the Series B Stock
Purchase Agreement and each of the Exhibits thereto and the Series B-1 Stock
Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
4.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.
COMPANY: INVESTOR:
EPIMMUNE INC. G. D. SEARLE & CO.
By:_____________________________ By:____________________________
President Title:_________________________
KEY STOCKHOLDER:
CYTEL CORPORATION
By:_____________________________
Title:__________________________
<PAGE>
EXHIBIT D
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
EPIMMUNE INC.
Deborah Schueren and Robert W. Chesnut, Ph.D. do hereby certify that:
FIRST: The original name of this corporation is Cytel Subsidiary, Inc.
and the date of filing the original Certificate of Incorporation of this
corporation with the Secretary of State of the State of Delaware is April 25,
1997.
SECOND: They are the duly elected and acting President and Secretary,
respectively, of Epimmune Inc., a Delaware corporation.
THIRD: The Certificate of Incorporation of this corporation is hereby
amended and restated to read as follows:
I.
The name of this Corporation is Epimmune Inc.
II.
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, County of New Castle, and the name of the
registered agent of the Corporation in the State of Delaware at such address is
Corporation Service Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is Thirty million
(30,000,000). Twenty million (20,000,000) shares shall be Common Stock, each
having a par value of one-tenth of one cent ($0.001). Ten million (10,000,000)
shares shall be Preferred Stock, each having a par value of one-tenth of one
cent ($0.001).
B. The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares of Common Stock then outstanding)
by the affirmative vote of the holders of a majority of the stock of the
Corporation (voting together on an as-if-converted basis).
C. The rights, preferences, privileges, restrictions and other matters
relating to the Common Stock are as follows:
<PAGE>
1. DIVIDEND RIGHTS. Subject to the rights of holders of all
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the Corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote and shall be entitled to notice of any stockholders'
meeting in accordance with the By-laws of the Corporation and to vote upon such
matters and in such manner as regulated by law.
3. LIQUIDATION RIGHTS. Upon the liquidation, dissolution and
winding up of the Corporation, the assets of the Corporation shall be
distributed as provided in Section 3 of Division (F) of this Article III hereof.
4. REDEMPTIONS. The Common Stock is not redeemable.
D. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to fix or alter the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, the liquidation preferences of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the designation
thereof, or any of them; and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series. New series of Preferred
Stock may be issued on parity with prior series of Preferred Stock, but not on a
senior basis without stockholder approval of the outstanding Preferred Stock.
E. Six million (6,000,000) of the authorized shares of Preferred Stock
are hereby designated "Series A Preferred Stock" (the "Series A Preferred"), one
million thirty-two thousand one hundred forty-nine (1,032,149) of the authorized
shares of Preferred Stock are hereby designated "Series B Preferred Stock (the
"Series B Preferred") and six hundred fifty-nine thousand eight hundred
ninety-eight (659,898) of the authorized shares of Preferred Stock are hereby
designated "Series B-1 Preferred Stock (the "Series B-1 Preferred").
F. The rights, preferences, privileges, restrictions and other matters
relating to the Series A Preferred, the Series B Preferred and the Series B-1
Preferred are as follows:
1. DIVIDEND RIGHTS.
a. So long as any shares of Series A Preferred, Series B
Preferred or Series B-1 Preferred shall be outstanding, no dividend, whether in
cash or property, shall be paid or declared nor shall any other distribution be
made, on any Common Stock (other than any dividend or distribution payable
solely in Common Stock of the Corporation), unless a dividend is paid with
respect to all outstanding shares of Series A Preferred, Series B Preferred and
Series B-1 Preferred in an amount per share (on an as-if-converted to Common
Stock basis) equal to the amount paid or set aside for each share of Common
Stock.
2.
<PAGE>
b. No dividend, whether in cash or property, shall be paid or
declared, nor shall any other distribution be made, on any series of Preferred
Stock unless at the same time an equal dividend shall be paid on the shares of
all other series of Preferred Stock.
2. VOTING RIGHTS.
a. GENERAL RIGHTS. Except as otherwise provided herein or as
required by law, the Series A Preferred, Series B Preferred and Series B-1
Preferred shall be voted equally with the shares of the Common Stock of the
Corporation and not as a separate class, at any annual or special meeting of
stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Series A Preferred, Series B Preferred and Series B-1 Preferred
shall be entitled to such number of votes as shall be equal to the whole number
of shares of Common Stock into which such holder's aggregate number of shares of
Series A Preferred, Series B Preferred and Series B-1 Preferred are convertible
(pursuant to Section 4 hereof) immediately after the close of business on the
record date fixed for such meeting or the effective date of such written
consent.
b. SEPARATE VOTE OF SERIES A PREFERRED. For so long as any
shares of Series A Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series A Preferred) remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least a majority of the
outstanding Series A Preferred shall be necessary for effecting or validating
the following actions:
(i) Any amendment, alteration, or repeal of any provision of
this Certificate of Incorporation or the By-laws of the Corporation (including
any filing of a Certificate of Designation), that adversely changes the rights,
preferences, and privileges with respect to liquidation preference, voting or
dividends of the Series A Preferred; or
(ii) Any agreement by the Corporation that by its terms
restricts the Corporation from complying with the terms of the Series A
Preferred or performing its obligations under any agreements to which the
Corporation is a party pursuant to which the holder purchased such Series A
Preferred.
c. SEPARATE VOTE OF SERIES B PREFERRED. For so long as any
shares of Series B Preferred (subject to adjustment for any stock split, reverse
stock split or other similar event affecting the Series B Preferred) remain
outstanding, in addition to any other vote or consent required herein or by law,
the vote or written consent of the holders of at least a majority of the
outstanding Series B Preferred shall be necessary for effecting or validating
the following actions:
3.
<PAGE>
(i) Any amendment, alteration, or repeal of any provision of
this Certificate of Incorporation or the By-laws of the Corporation (including
any filing of a Certificate of Designation), that adversely changes the rights,
preferences, and privileges with respect to liquidation preference, voting or
dividends of the Series B Preferred; or
(ii) Any agreement by the Corporation that by its terms,
restricts the Corporation from complying with the terms of the Series B
Preferred or performing its obligations under any agreements to which the
Corporation is a party pursuant to which the holder purchased such Series B
Preferred.
d. SEPARATE VOTE OF SERIES B-1 PREFERRED. For so long as any
shares of Series B-1 Preferred (subject to adjustment for any stock split,
reverse stock split or other similar event affecting the Series B Preferred)
remain outstanding, in addition to any other vote or consent required herein or
by law, the vote or written consent of the holders of at least a majority of the
outstanding Series B-1 Preferred shall be necessary for effecting or validating
the following actions:
(i) Any amendment, alteration, or repeal of any provision of
this Certificate of Incorporation or the By-laws of the Corporation (including
any filing of a Certificate of Designation), that adversely changes the rights,
preferences, and privileges with respect to liquidation preference, voting or
dividends of the Series B-1 Preferred; or
(ii) Any agreement by the Corporation that by its terms,
restricts the Corporation from complying with the terms of the Series B-1
Preferred or performing its obligations under any agreements to which the
Corporation is a party pursuant to which the holder purchased such Series B-1
Preferred.
3. LIQUIDATION RIGHTS.
a. Upon any liquidation, dissolution, or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of the Common Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount per share of Series A Preferred equal to $1.3308 (the
"Series A Original Issue Price") (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares) plus all declared and unpaid dividends on the Series A Preferred Stock
for each share of Series A Preferred held by them, (ii) the holders of Series B
Preferred shall be entitled to be paid out of the assets of the Corporation an
amount per share of Series B Preferred equal to $5.91 (the "Series B Original
Issue Price") (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus all declared
and unpaid dividends on the Series B Preferred Stock for each share of Series B
Preferred held by them, and (iii) the holders of Series B-1 Preferred shall be
entitled to be paid out of the assets of the Corporation an amount per share of
Series B-1 Preferred equal to $5.91 (the "Series B-1 Original Issue Price") (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) plus all declared and unpaid dividends on
the Series B-1 Preferred Stock for each share of Series B-1 Preferred held by
them.
4.
<PAGE>
b. After the payment of the full liquidation preference of the
Series A Preferred, Series B Preferred and Series B-1 Preferred as set forth in
Section 3(a) above, the remaining assets of the Corporation legally available
for distribution, if any, shall be distributed among the holders of the Common
Stock in proportion to the shares of Common Stock then held by them.
c. The following events shall be considered a liquidation
under this Section:
(i) any consolidation or merger of the Corporation with or
into any other corporation or other entity or person, or any other corporate
reorganization, in which the stockholders of the Corporation immediately prior
to such consolidation, merger or reorganization, own less than fifty percent
(50%) of the Corporation's voting power immediately after such consolidation,
merger or reorganization, or any transaction or series of related transactions
in which in excess of fifty percent (50%) of the Corporation's voting power is
transferred (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or
substantially all of the assets of the Corporation (an "Asset Transfer").
d. If, upon any liquidation, distribution, or winding up, the
assets of the Corporation shall be insufficient to make payment in full to all
holders of Series A Preferred, the Series B Preferred and the Series B-1
Preferred of the liquidation preference set forth in Section 3(a), then such
assets shall be distributed among the holders of Series A Preferred, the Series
B Preferred and the Series B-1 Preferred at the time outstanding, ratably in
proportion to the full amounts to which they would otherwise be respectively
entitled.
4. CONVERSION RIGHTS.
The holders of the Series A Preferred, Series B Preferred and
Series B-1 Preferred shall have the following rights with respect to conversion
of such shares into shares of Common Stock (the "Conversion Rights"):
a. OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 4, any shares of Series A Preferred, Series B
Preferred and Series B-1 Preferred may, at the option of the holder, be
converted at any time into fully paid and nonassessable shares of Common Stock.
The number of shares to which a holder of Series A Preferred shall be entitled
upon conversion shall be the product obtained by multiplying the "Series A
Conversion Rate" then in effect (determined as provided in Section 4(b)) by the
number of shares of Series A Preferred being converted. The number of shares to
which a holder of Series B Preferred shall be entitled upon conversion shall be
the product obtained by multiplying the "Series B Conversion Rate" then in
effect (determined as provided in Section 4(b)) by the number of shares of
Series B Preferred being converted. The number of shares to which a holder of
Series B-1 Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series B-1 Conversion Rate" then in effect
(determined as provided in Section 4(b)) by the number of shares of Series B-1
Preferred being converted.
5.
<PAGE>
b. CONVERSION RATES. The conversion rate in effect at any time
for conversion of the Series A Preferred (the "Series A Conversion Rate") shall
be the quotient obtained by dividing the Series A Original Issue Price by the
"Series A Conversion Price," calculated as provided in Section 4(c). The
conversion rate in effect at any time for conversion of the Series B Preferred
(the "Series B Conversion Rate") shall be the quotient obtained by dividing the
Series B Original Issue Price by the "Series B Conversion Price," calculated as
provided in Section 4(c). The conversion rate in effect at any time for
conversion of the Series B-1 Preferred (the "Series B-1 Conversion Rate") shall
be the quotient obtained by dividing the Series B Original Issue Price by the
"Series B-1 Conversion Price," calculated as provided in Section 4(c).
c. CONVERSION PRICES. The conversion price for the Series A
Preferred shall initially be the Series A Original Issue Price (the "Series A
Conversion Price"). The conversion price for the Series B Preferred shall
initially be the Series B Original Issue Price (the "Series B Conversion
Price"). The conversion price for the Series B-1 Preferred shall initially be
the Series B-1 Original Issue Price (the "Series B-1 Conversion Price"). The
initial Series A, Series B and Series B-1 Conversion Prices shall be adjusted
from time to time in accordance with this Section 4. All references to the
Series A, Series B and Series B-1 Conversion Prices herein shall mean the Series
A, Series B and Series B-1 Conversion Prices as so adjusted.
d. AUTOMATIC CONVERSION. Each share of Series A, Series B and
Series B-1 Preferred shall automatically be converted into shares of Common
Stock, based on the then-effective Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price, as applicable, upon the closing
of a firm commitment underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the "Act"),
covering the offer and sale by the Corporation of Common Stock to the public in
which the Company receives gross proceeds of at least $15 million.
e. MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock pursuant
to Section 4(a) hereof, and before the Corporation shall be obligated to issue
certificates for shares of Common Stock upon the automatic conversion of the
Preferred Stock pursuant to Section 4(d) hereof, such holder shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the
Corporation or of any transfer agent for such stock, and shall give written
notice to the Corporation at such office that such holder elects to convert the
same and shall state therein the name or names in which such holder wishes the
certificate or certificates for shares of Common Stock to be issued (except that
no such written notice of intent to convert shall be necessary in the event of
an automatic conversion pursuant to Section 4(d) hereof). The Corporation shall,
as soon as practicable thereafter, issue and deliver at such office to such
holder of Preferred Stock or its nominee or nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled as aforesaid, together with cash in lieu of any fractional shares.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of surrender of the shares of Preferred Stock to be
converted, except that in the case of an automatic conversion pursuant to
Section 4(d) hereof, such conversion shall be deemed to have been made
immediately prior to the date of the offering referred to in Section 4(d). The
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
6.
<PAGE>
f. ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date that the first
share of Series B Preferred is issued (the "Original Issue Date") effect a
subdivision of the outstanding Common Stock without a corresponding subdivision
of the Preferred Stock, the Series A Conversion Price, Series B Conversion Price
and Series B-1 Conversion Price in effect immediately before that subdivision
shall be proportionately decreased. Conversely, if the Corporation shall at any
time or from time to time after the Original Issue Date combine the outstanding
shares of Common Stock into a smaller number of shares without a corresponding
combination of the Preferred Stock, the Series A Conversion Price, Series B
Conversion Price and Series B-1 Conversion Price in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
Section 4(f) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
g. ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If
the Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price, Series
B Conversion Price and Series B-1 Conversion Price that is then in effect shall
be decreased as of the time of such issuance or, in the event such record date
is fixed, as of the close of business on such record date, by multiplying the
Series A Conversion Price, Series B Conversion Price and Series B-1 Conversion
Price then in effect by a fraction (i) the numerator of which is the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance or the close of business on such record date, and (ii) the
denominator of which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series A Conversion Price,
Series B Conversion Price and Series B-1 Conversion Price shall be recomputed
accordingly as of the close of business on such record date and thereafter the
Series A Conversion Price, Series B Conversion Price and Series B-1 Conversion
Price shall be adjusted pursuant to this Section 4(g) to reflect the actual
payment of such dividend or distribution.
h. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Issue Date
makes, or fixes a record date for the determination of holders of Common Stock
entitled to receive, a dividend or other distribution payable in securities of
the Corporation other than shares of Common Stock, in each such event provision
shall be made so that the holders of the Series A Preferred, Series B Preferred
and Series B-1 Preferred shall receive upon conversion thereof, in addition to
the number of shares of Common Stock receivable thereupon, the amount of other
securities of the Corporation which they would have received had their Series A
Preferred, Series B Preferred or Series B-1 Preferred been converted into Common
Stock on the date of such event and had they thereafter, during the period from
the date of such event to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 4 with
respect to the rights of the holders of the Series A Preferred, Series B
Preferred and Series B-1 Preferred or with respect to such other securities by
their terms.
7.
<PAGE>
i. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If at any time or from time to time after the Original Issue Date, the Common
Stock issuable upon the conversion of the Series A Preferred, Series B Preferred
or Series B-1 Preferred is changed into the same or a different number of shares
of any class or classes of stock, whether by recapitalization, reclassification
or otherwise (other than an Acquisition or Asset Transfer as defined in Section
3(c) or a subdivision or combination of shares or stock dividend or a
reorganization, merger, consolidation or sale of assets provided for elsewhere
in this Section 4), in any such event each holder of Series A Preferred, Series
B Preferred or Series B-1 Preferred, as applicable, shall have the right
thereafter to convert such stock into the kind and amount of stock and other
securities and property receivable upon such recapitalization, reclassification
or other change by holders of the maximum number of shares of Common Stock into
which such shares of Series A Preferred, Series B Preferred or Series B-1
Preferred could have been converted immediately prior to such recapitalization,
reclassification or change, all subject to further adjustment as provided herein
or with respect to such other securities or property by the terms thereof.
j. REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS.
If at any time or from time to time after the Original Issue Date, there is a
capital reorganization of the Common Stock (other than an Acquisition or Asset
Transfer as defined in Section 3(c) or a recapitalization, subdivision,
combination, reclassification, exchange or substitution of shares provided for
elsewhere in this Section 4), as a part of such capital reorganization,
provision shall be made so that the holders of the Series A Preferred, Series B
Preferred or Series B-1 Preferred, as applicable, shall thereafter be entitled
to receive upon conversion of the Series A Preferred, Series B Preferred or
Series B-1 Preferred the number of shares of stock or other securities or
property of the Corporation to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series A Preferred, Series B Preferred or Series B-1 Preferred
after the capital reorganization to the end that the provisions of this Section
4 (including adjustment of the Series A Conversion Price, Series B Conversion
Price or Series B-1 Conversion Price then in effect and the number of shares
issuable upon conversion of the Series A Preferred, Series B Preferred or Series
B-1 Preferred) shall be applicable after that event and be as nearly equivalent
as practicable.
k. SALE OF SHARES BELOW THE CONVERSION PRICES.
(i) If the Corporation issues or sells, or is deemed by the
express provisions of this Section 4(k) to have issued or sold, Additional
Shares of Common Stock (as hereinafter defined), other than as a dividend or
other distribution on any class of stock as provided in Section 4(g) above, and
other than a subdivision or combination of shares of Common Stock as provided in
Section 4(f) above, for an Effective Price (as hereinafter defined) less than
the then effective Series A Conversion Price, Series B Conversion Price or
Series B-1 Conversion Price, as the case may be, then, and in each such case,
the then existing Series A Conversion Price, Series B Conversion Price or Series
B-1 Conversion Price, as the case may be, shall be reduced, as of the opening of
business on the date of such issue or sale, to a price determined by multiplying
the Series A Conversion Price, the Series B Conversion Price or the Series B-1
Conversion Price, as the case may be, by a fraction (1) the numerator of which
shall be (A) the number of shares of Common Stock deemed outstanding (as defined
below) immediately prior to such issue or sale, plus (B) the number of shares of
8.
<PAGE>
Common Stock which the aggregate consideration received (as determined by the
provisions of Section 4(k)(ii)) by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Series A
Conversion Price, Series B Conversion Price or Series B-1 Conversion Price, as
the case may be, and (2) the denominator of which shall be (A) the number of
shares of Common Stock deemed outstanding (as defined below) immediately prior
to such issue or sale plus (B) the total number of Additional Shares of Common
Stock so issued. For the purposes of the preceding sentence, the number of
shares of Common Stock deemed to be outstanding as of a given date shall be the
sum of (a) the number of shares of Common Stock actually outstanding, (b) the
number of shares of Common Stock into which the then outstanding shares of
Series A Preferred, Series B Preferred and Series B-1 Preferred could be
converted if fully converted on the day immediately preceding the given date,
and (c) the number of shares of Common Stock which could be obtained through the
exercise or conversion of all other rights, options and convertible securities
on the day immediately preceding the given date.
(ii) For the purpose of making any adjustment required under
this Section 4(k), the consideration received by the Corporation for any issue
or sale of securities shall (A) to the extent it consists of cash, be computed
at the net amount of cash received by the Corporation after deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed
by the Corporation in connection with such issue or sale but without deduction
of any expenses payable by the Corporation, (B) to the extent it consists of
property other than cash, be computed at the fair value of that property as
determined in good faith by the Board of Directors, and (C) if Additional Shares
of Common Stock, Convertible Securities (as hereinafter defined) or rights or
options to purchase either Additional Shares of Common Stock or Convertible
Securities are issued or sold together with other stock or securities or other
assets of the Corporation for a consideration which covers both, be computed as
the portion of the consideration so received that may be reasonably determined
in good faith by the Board of Directors to be allocable to such Additional
Shares of Common Stock, Convertible Securities or rights or options.
(iii) For the purpose of the adjustment required under this
Section 4(k), if the Corporation issues or sells any rights or options for the
purchase of, or stock or other securities convertible into, Additional Shares of
Common Stock (such convertible stock or securities being herein referred to as
"Convertible Securities") and if the Effective Price of such Additional Shares
of Common Stock is less than the Series A Conversion Price, Series B Conversion
Price or Series B-1 Conversion Price, as applicable, in each case the
Corporation shall be deemed to have issued at the time of the issuance of such
rights or options or Convertible Securities the maximum number of Additional
Shares of Common Stock issuable upon exercise or conversion thereof and to have
received as consideration for the issuance of such shares an amount equal to the
total amount of the consideration, if any, received by the Corporation for the
issuance of such rights or options or Convertible Securities, plus, in the case
of such rights or options, the minimum amounts of consideration, if any, payable
to the Corporation upon the exercise of such rights or options, plus, in the
case of Convertible Securities, the minimum amounts of consideration, if any,
9.
<PAGE>
payable to the Corporation (other than by cancellation of liabilities or
obligations evidenced by such Convertible Securities) upon the conversion
thereof; provided that if, in the case of Convertible Securities, the minimum
amounts of such consideration cannot be ascertained, but are a function of
antidilution or similar protective clauses, the Corporation shall be deemed to
have received the minimum amounts of consideration without reference to such
clauses; provided further that if the minimum amount of consideration payable to
the Corporation upon the exercise or conversion of rights, options or
Convertible Securities is reduced over time or on the occurrence or
non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which
such minimum amount of consideration is reduced; provided further that, if the
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities is subsequently
increased, the Effective Price shall be again recalculated using the increased
minimum amount of consideration payable to the Corporation upon the exercise or
conversion of such rights, options or Convertible Securities. No further
adjustment of the Series A Conversion Price, Series B Conversion Price or Series
B-1 Conversion Price, as adjusted upon the issuance of such rights, options or
Convertible Securities, shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities. If any such rights or
options or the conversion privilege represented by any such Convertible
Securities shall expire without having been exercised, the Series A Conversion
Price, Series B Conversion Price or Series B-1 Conversion Price as adjusted upon
the issuance of such rights, options or Convertible Securities shall be
readjusted to the Series A Conversion Price, Series B Conversion Price or Series
B-1 Conversion Price which would have been in effect had an adjustment been made
on the basis that the only Additional Shares of Common Stock so issued were the
Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Corporation upon such
exercise, plus the consideration, if any, actually received by the Corporation
for the granting of all such rights or options, whether or not exercised, plus
the consideration received for issuing or selling the Convertible Securities
actually converted, plus the consideration, if any, actually received by the
Corporation (other than by cancellation of liabilities or obligations evidenced
by such Convertible Securities) on the conversion of such Convertible
Securities, provided that such readjustment shall not apply to prior conversions
of Series A Preferred, Series B Preferred and Series B-1 Preferred.
(iv) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued by the Corporation or deemed to be issued pursuant
to this Section 4(k), whether or not subsequently reacquired or retired by the
Corporation other than (A) shares of Common Stock issued upon conversion of the
Series A Preferred, Series B Preferred or Series B-1 Preferred; and (B) shares
of Common Stock and/or options, warrants or other Common Stock purchase rights,
and the Common Stock issued pursuant to such options, warrants or other rights
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like) after the Original Issue Date to employees, officers or directors
of, or consultants or advisors to, the Corporation or any subsidiary pursuant to
stock purchase or stock option plans or other arrangements that are approved by
the Board. The "Effective Price" of Additional Shares of Common Stock shall mean
the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the
Corporation under this Section 4(k), into the aggregate consideration received,
or deemed to have been received by the Corporation for such issue under this
Section 4(k), for such Additional Shares of Common Stock.
10.
<PAGE>
l. NO IMPAIRMENT. The Corporation will not, by amendment of its
Certificate of Incorporation, by filing a Certificate of Designation 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 Corporation but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
m. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the number of shares of Common Stock issuable upon
conversion of a share of Preferred Stock pursuant to this Section 4, the
Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate prepared by the Corporation setting forth (i) such
adjustments and readjustments, (ii) the Conversion Price for such series of
Preferred Stock at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of the Series A Preferred, Series B Preferred or
Series B-1 Preferred, as applicable.
n. NOTICES OF RECORD DATE. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any security or
right convertible into or entitling the holder thereof to receive additional
shares of Common Stock, or any right to subscribe for, purchase or otherwise
acquire any shares of stock of any class or any other securities or property, or
to receive any other right, the Corporation shall mail to each holder of
Preferred Stock at least 10 days prior to the date specified therein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend, distribution, security or right, and the amount and character of
such dividend, distribution, security or right.
o. ISSUE TAXES. The holders of Series A Preferred, Series B
Preferred and Series B-1 Preferred shall pay any and all issue, transfer and
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Series A Preferred, Series B Preferred
and Series B-1 Preferred pursuant hereto.
p. RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred, Series B Preferred and
Series B-1 Preferred, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding shares of
Series A Preferred, Series B Preferred and Series B-1 Preferred; and if at any
time the number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of Series A
Preferred, Series B Preferred and Series B-1 Preferred, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to the Certificate of Incorporation. All shares of Common
Stock which are issuable upon such conversion shall, when issued, be duly and
validly issued, fully paid and nonassessable and free of all taxes, liens and
charges.
11.
<PAGE>
q. FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Series A Preferred, Series B Preferred
or Series B-1 Preferred. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Preferred Stock by a
holder thereof shall be aggregated for purposes of determining whether the
conversion would result in the issuance of any fractional share. If, after the
aforementioned aggregation, the conversion would result in the issuance of a
fraction of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction a sum
in cash equal to the fair market value of such fraction on the date of
conversion (as determined in good faith by the Board of Directors).
5. REDEMPTION. The Series A Preferred, Series B Preferred and
Series B-1 Preferred shall not be redeemable by the Corporation.
6. NO REISSUANCE OF SERIES A PREFERRED, SERIES B PREFERRED OR
SERIES B-1 PREFERRED. No share or shares of Series A Preferred, Series B or
Series B-1 Preferred acquired by the Corporation by reason of redemption,
purchase, conversion or otherwise shall be reissued.
7. NO PREEMPTIVE RIGHTS. Stockholders shall have no preemptive
rights except as granted by the Corporation pursuant to written agreements.
V.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by the Board
of Directors in the manner provided in the By-laws.
B. The Board of Directors may from time to time make, amend, supplement
or repeal the By-laws; provided, however, that the stockholders may change or
repeal any By-law adopted by the Board of Directors by the affirmative vote of
the holders of a majority of the voting power of all of the then outstanding
shares of the capital stock of the Corporation; and, provided further, that no
amendment or supplement to the By-laws adopted by the Board of Directors shall
vary or conflict with any amendment or supplement thus adopted by the
stockholders.
12.
<PAGE>
C. The directors of the Corporation need not be elected by written
ballot unless the By-laws so provide.
VI.
A. A director of the Corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any breach of fiduciary
duty as a director, except for liability (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 Delaware General Corporation
Law, or (iv) for any transaction from which the director derived an improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time of
the alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
VII.
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
FOURTH: This Amended and Restated Certificate of Incorporation has been
duly approved by the Board of Directors of this Corporation.
FIFTH: This Amended and Restated Certificate of Incorporation has been
duly adopted in accordance with the provisions of Sections 228 and 245 of the
General Corporation Law of the State of Delaware by the Board of Directors and
the stockholders of the Corporation. The total number of outstanding shares
entitled to vote or act by written consent was 6,000,000 shares of Series A
Preferred Stock. A majority of the outstanding shares of Series A Preferred
Stock approved this Amended and Restated Certificate of Incorporation by written
consent in accordance with Section 228 of the General Corporation Law of the
State of Delaware and written notice was given by the Corporation in accordance
with said Section 228.
13.
<PAGE>
IN WITNESS WHEREOF, Epimmune Inc. has caused this Amended and Restated
Certificate of Incorporation to be signed by the President and Secretary in San
Diego, California this _____ day of _____________, 1998.
EPIMMUNE INC.
_______________________________
Deborah Schueren, President
ATTEST:
__________________________________
Robert W. Chesnut, Secretary
<PAGE>
Exhibit 10.59
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement") is made as of February
27, 1998 (the "Effective Date"), by and between CYTEL CORPORATION, a Delaware
corporation (the "Company"), and G.D. SEARLE & CO., a Delaware corporation (the
"Investor").
RECITALS
WHEREAS, Epimmune Inc., a Delaware corporation and a wholly-owned
subsidiary of the Company ("Epimmune"), and the Investor have entered into that
certain License and Collaboration Agreement dated February 27, 1998 (the
"Collaboration Agreement") and, to the extent provided therein, have agreed to
the transactions and matters described therein; and
WHEREAS, the Investor desires to purchase from the Company, and the
Company desires to sell to the Investor, shares of the Company's Preferred Stock
on the terms and subject to the conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, the parties hereto, intending
to be legally bound, do hereby agree as follows:
AGREEMENT
1. PURCHASE AND SALE OF SHARES.
1.1 PURCHASE AND SALE OF SHARES. Subject to the terms and conditions
hereof, at the Closing (as defined below), the Investor shall purchase from the
Company, and the Company shall issue and sell to the Investor, 659,898 shares of
Series B Preferred Stock of the Company, $0.01 par value (the "Shares") at a per
share purchase price equal to US$5.91, for an aggregate purchase price of
US$3,900,000, payable in cash.
2. CLOSING DATE; DELIVERY.
2.1 CLOSING. Subject to the terms of Section 5, the closing of the sale
and purchase of the Shares pursuant to Section 1.1 above (the "Closing") shall
be held on the date hereof or at such other time upon which the Company and the
Investor agree. The closing shall take place at the offices of Cooley Godward
LLP, 4365 Executive Drive, Suite 1100, San Diego, California 92121.
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company shall deliver to the Investor a stock certificate,
registered in the name of the Investor, representing the Shares purchased
pursuant to Section 1.1 above and dated as of the Closing against payment of the
purchase price therefor by wire transfer, unless other means of payment shall
have been agreed upon by the Company and the Investor.
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby makes the following representations and warranties
to the Investor, except as set forth in the Schedule of Exceptions attached
hereto as Exhibit A:
3.1 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. The Company is duly qualified to transact business and is
in good standing in each jurisdiction in which the failure so to qualify would
have a material adverse effect on its business or properties.
3.2 AUTHORIZATION; DUE EXECUTION. The Company has the requisite
corporate power and authority to enter into this Agreement, an Investor Rights
Agreement substantially in the form attached hereto as Exhibit B (the "Investor
Rights Agreement") and a Voting Agreement substantially in the form attached
hereto as Exhibit C (the "Voting Agreement") (this Agreement, the Investor
Rights Agreement and the Voting Agreement are collectively referred to as the
"Agreements") and to perform its obligations under the terms of the Agreements
and, at the Closing, will have the requisite corporate power to sell the Shares.
All corporate action on the part of the Company, its officers, directors and
stockholders necessary for the authorization, execution and delivery of the
Agreements has been taken. Each of the Agreements has been duly authorized,
executed and delivered by the Company, and, upon due execution and delivery by
the Investor, will be a valid and binding agreement of the Company, enforceable
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally or by equitable principles.
3.3 CAPITALIZATION. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, par value $.01, and 10,000,000
shares of Preferred Stock, par value $.01, of which 500,000 shares have been
designated Series A Junior Participating Preferred Stock and 659,898 shares have
been designated Series B Preferred Stock. As of the close of business on
February 26, 1998, there were 32,222,497 shares of Common Stock and no shares of
Preferred Stock issued and outstanding. Other than, as of the close of business
on February 26, 1998, (a) options to purchase 4,646,754 shares of Common Stock
issued, and 152,392 shares of Common Stock available for future option grants,
to certain employees, officers, directors, consultants and advisors of the
Company, (b) 47,666 shares of Common Stock to be issued under the Company's
Employee Stock Purchase Plan, (c) warrants to purchase 200,000 shares of Common
Stock issued to certain investors, (d) those shares of Common Stock to be issued
under the Company's Rights Agreement and (e) the rights to purchase equity
securities of the Company granted to Investor under this Agreement, there are no
subscriptions, options, warrants, rights or agreements (contingent or
otherwise), including without limitation, conversion rights, preemptive rights,
rights of first refusal or other rights or agreements, providing for the
issuance by the Company of Common Stock or other equity securities of the
Company. The Shares to be acquired by the Investor pursuant to Section 1.1 above
(on an as-converted basis), together with the shares of Common Stock of the
Company issued to the Investor pursuant to that certain Stock Purchase
Agreement, dated as of September 18, 1997 (the "Prior Agreement"), will
constitute (i) approximately 8.31% of the outstanding shares of Common Stock of
the Company on an as-converted, undiluted basis, and (ii) approximately 7.30% of
the outstanding Common Stock of the Company on an as-converted, fully diluted
basis, assuming exercise of all outstanding rights, warrants and options to
acquire Common Stock.
2.
<PAGE>
3.4 VALID ISSUANCE OF SHARES. The Shares when issued, sold and
delivered in accordance with the terms hereof for the consideration set forth
herein, will be duly and validly authorized and issued, fully paid and
nonassessable, free of all taxes, liens and charges, and, based in part upon the
representations of the Investor in this Agreement, will be issued in compliance
with all applicable federal and state securities laws.
3.5 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by the Agreements, except for notices required or permitted to be
filed with certain state and federal securities commissions after the Closing,
which notices will be filed on a timely basis.
3.6 SEC FILINGS. The Company has timely filed all reports, registration
statements and other documents required to be filed by it (the "SEC Filings")
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "Securities Act"), and the Securities Exchange Act
of 1934, as amended, and the rules and regulations promulgated thereunder (the
"Exchange Act"). The SEC Filings were prepared in accordance and complied in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act, as the case may be. None of such forms, reports and statements,
including, without limitation, any financial statements, exhibits and schedules
included therein and documents incorporated therein by reference, at the time
filed, declared effective or mailed, as the case may be, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. Except to the
extent information contained in any of the SEC Filings has been revised,
corrected or superseded by a later filing of any such form, report or document,
none of the SEC Filings currently contains an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Since September 30, 1997, (i) there
has been no material adverse change in the condition, financial or otherwise, of
the Company and its subsidiaries considered as a whole, or in the business,
operations, or prospects of the Company and its subsidiaries considered as a
whole, whether or not arising in the ordinary course of business, and (ii) there
has been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its capital stock.
3.7 NO CONFLICT. The execution, delivery and performance by the Company
of the Agreements do not and will not violate any provision of the Company's
Certificate of Incorporation or By-laws, any provision of any order, writ,
judgment, injunction, decree, determination or award to which the Company is a
party or by which it is bound, or to the Company's knowledge, any law, rule or
regulation (including, without limitation, the rules and regulations of the
Securities and Exchange Commission (the "SEC") or any regulatory commission of
any jurisdiction) currently in effect having applicability to the Company.
3.
<PAGE>
3.8 ABSENCE OF LITIGATION. Except as disclosed in the SEC Filings,
there is no action, suit, proceeding or investigation (including any such matter
related to the Company's intellectual property) pending or currently threatened
against the Company or its properties before any court or governmental agency,
which would, singly or in the aggregate, have a material adverse effect on the
Company's business, operations or assets, taken as a whole (nor, to the best of
the Company's knowledge, is there any basis therefor). There is no action, suit,
proceeding or investigation which the Company currently intends to initiate.
3.9 CONFIDENTIALITY. The Company hereby represents, warrants and
covenants that it shall maintain in confidence, and shall not use or disclose
without prior written consent of the Investor, the terms of this Agreement and
any information identified in writing as confidential that is furnished to it by
the Investor in connection with this Agreement. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no unauthorized act or failure to act by the Company, (b)
lawfully disclosed to the Company by a third party who possessed such
information without any obligation of confidentiality, (c) lawfully developed by
the Company independent of any disclosure by the Company as supported by the
Investor's written records, or (d) required to be disclosed pursuant to
applicable law, regulation or order or requirement of a court, administrative
agency or other government body (including the securities laws of any applicable
jurisdiction). The Company further covenants that it shall return to the
Investor all tangible materials containing such information upon request by the
Investor. The Company and the Investor acknowledge and agree that the Company
will be required to disclose the issuance of the Shares contemplated by this
Agreement pursuant to applicable securities laws and regulations.
4. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.
The Investor hereby makes the following representations and warranties
to the Company as of the Effective Date and the Closing:
4.1 AUTHORIZATION; DUE EXECUTION. The Investor has the requisite
corporate power and authority to enter into the Agreements and to perform its
obligations under the terms of the Agreements and, at the Closing, will have the
requisite corporate power to purchase the Shares. All corporate action on the
part of the Investor, its officers, directors and stockholders necessary for the
authorization, execution and delivery of the Agreements has been taken. Each of
the Agreements has been duly authorized, executed and delivered by the Investor,
and, upon due execution and delivery by the Company, will be a valid and binding
agreement of the Investor, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally or by equitable
principles.
4.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made with the
Investor in reliance upon such Investor's representation to the Company, which
by such Investor's execution of this Agreement such Investor confirms, that the
Shares to be purchased by such Investor will be acquired for investment for such
Investor's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same (subject to the disposition of the Investor's property
being at all times within its control). By executing this Agreement, the
Investor further represents that such Investor does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares.
4.
<PAGE>
4.3 DISCLOSURE OF INFORMATION. The Investor has received all the
information that it has requested and that it considers necessary or appropriate
for deciding whether to enter into this Agreement and to purchase the Shares.
The Investor further represents that it has had an opportunity to ask questions
and receive answers from the Company regarding the terms and conditions of the
offering of the Shares.
4.4 INVESTMENT EXPERIENCE. The Investor is an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares. The Investor also represents
it has not been organized solely for the purpose of acquiring the Shares.
4.5 ACCREDITED INVESTOR. The Investor is an "accredited investor" as
such term is defined in Rule 501 of the General Rules and Regulations prescribed
by the SEC pursuant to the Securities Act.
4.6 RESTRICTED SECURITIES. The Investor understands that (a) the Shares
have not been, registered under the Securities Act by reason of a specific
exemption therefrom, that such securities must be held by it indefinitely and
that the Investor must, therefore, bear the economic risk of such investment
indefinitely, unless in each case a subsequent disposition thereof is registered
under the Securities Act or is exempt from such registration; (b) each
certificate representing the Shares will be endorsed with the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
and (c) the Company will instruct any transfer agent not to register the
transfer of the Shares (or any portion thereof) unless the conditions specified
in the foregoing legends are satisfied, until such time as a transfer is made,
pursuant to the terms of this Agreement, and in compliance with Rule 144 or
pursuant to a registration statement or, if the opinion of counsel referred to
above is to the further effect that such legend is not required in order to
establish compliance with any provisions of the Securities Act or this
Agreement.
4.7 CONFIDENTIALITY. The Investor hereby represents, warrants and
covenants that it shall maintain in confidence, and shall not use or disclose
without prior written consent of the Company, the terms of this Agreement and
any information identified in writing as confidential that is furnished to it by
the Company in connection with this Agreement. This obligation of
confidentiality shall not apply, however, to any information (a) in the public
domain through no unauthorized act or failure to act by the Investor, (b)
lawfully disclosed to such Investor by a third party who possessed such
information without any obligation of confidentiality, (c) lawfully developed by
such Investor independent of any disclosure by the Company as supported by the
Investor's written records, or (d) required to be disclosed pursuant to
applicable law, regulation or order or requirement of a court, administrative
agency or other government body (including the securities laws of any applicable
jurisdiction). The Investor further covenants that it shall return to the
Company all tangible materials containing such information upon request by the
Company. The Company and the Investor acknowledge and agree that the Investor
will be required to disclose its investment in the Company and the terms of this
Agreement pursuant to filing of a Form 13D with the SEC under the Exchange Act.
5.
<PAGE>
5. CONDITIONS OF THE INVESTOR'S OBLIGATIONS.
The obligations of the Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, any of
which may be waived by the Investor (and which conditions shall be deemed to
have been fulfilled or waived upon the occurrence of the Closing):
5.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in Section 3 shall be true and correct in all material
respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said date.
5.2 PERFORMANCE. The Company shall have performed and complied with all
agreements, obligations and conditions in this Agreement, if any, that are
required to be performed or complied with by it on or before the Closing.
5.3 DELIVERY OF SHARES. The Company shall have tendered delivery of the
Shares specified in Section 1.1 at the Closing.
5.4 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
and delivered by Epimmune and the Company.
5.5 VOTING AGREEMENT. A Voting Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by Epimmune
and the Company.
5.6 FILING OF CERTIFICATE OF DESIGNATION. The Certificate of
Designation of Series B Preferred Stock in the form attached hereto as Exhibit D
shall have been filed with the Secretary of State of Delaware.
5.7 LEGAL OPINION. An opinion of counsel to the Company in the form
attached hereto as Exhibit E shall have been delivered to the Investor at the
Closing.
5.8 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Investor, and it shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
6.
<PAGE>
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS.
The obligations of the Company under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by such
Investor, any of which may be waived by the Company (and which conditions shall
be deemed to have been fulfilled or waived upon the occurrence of the Closing):
6.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Investor contained in Section 4 hereof shall be true and correct in all
material respects on and as of the Closing with the same effect as though such
representations and warranties had been made on and as of said dates.
6.2 PERFORMANCE. The Investor shall have performed and complied with
all agreements, obligations and conditions in this Agreement, if any, that are
required to be performed or complied with by it on or before the Closing.
6.3 PAYMENT OF PURCHASE PRICE. The Investor shall have tendered
delivery of the purchase price for the Shares specified in Section 2.1 at the
Closing.
6.4 INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as Exhibit B shall have been executed
and delivered by the Investor.
6.5 VOTING AGREEMENT. A Voting Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
Investor.
6.6 FILING OF CERTIFICATE OF DESIGNATION. The Certificate of
Designation of Series B Preferred Stock in the form attached hereto as Exhibit D
shall have been filed with the Secretary of State of Delaware.
6.7 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to the
Company, and it shall have received all such counterpart original and certified
or other copies of such documents as it may reasonably request.
7. COVENANTS.
7.1 DELIVERY OF FINANCIAL STATEMENTS. So long as the Investor (or any
transferee pursuant to Section 10.5) holds the Shares, the Company shall deliver
to the Investor (or any such transferee pursuant to Section 10.5) copies of its
Forms 10-K and 10-Q as filed with the SEC, and other public announcements and
releases made by the Company.
7.2 STANDSTILL AGREEMENT. The Investor hereby covenants and agrees
that, prior to December 31, 2000, it will not, nor will it permit any of its
affiliates (including parents, subsidiaries or other related entities) to,
purchase or otherwise acquire or offer or agree to acquire, directly or
indirectly, beneficial ownership of any additional equity securities of the
Company (or rights or options to purchase such securities) after the Closing in
an amount that would cause the Investor to own, on a fully diluted basis, more
than 19% of the outstanding shares of Common Stock of the Company, without the
prior written consent of the Company; provided, however, that this clause shall
not apply to any securities issued with respect to the Shares pursuant to a
stock split, stock dividend, recapitalization or reclassification approved by a
disinterested majority of the Company's Board of Directors.
7.
<PAGE>
7.3 "MARKET STAND-OFF" AGREEMENT. The Investor hereby agrees that
during the period specified by the Company and an underwriter of Common Stock or
other securities of the Company following the effective date of a Registration
Statement of the Company filed under the Securities Act (which period shall not
exceed 120 days), to the extent requested by the Company and such underwriter,
it shall not, nor will it permit any of its affiliates (including parents,
subsidiaries or other related entities) to, directly or indirectly sell,
contract to sell (including, without limitation, any short sale), grant any
option to purchase or otherwise transfer or dispose of any securities of the
Company held by any of them during such period; provided, however, that any such
request will be made no more frequently than once every eight months.
7.4 REPORTING PERSON STATUS. For such period as the Investor or any
transferee pursuant to Section 10.5 owns all or part of the Shares, the Company
shall maintain its status as a reporting company under the Exchange Act and the
registration of its Common Stock pursuant to Section 12 of such Act and shall
timely file all forms, reports and documents required to be filed under the
Exchange Act, so as to ensure satisfaction of the condition contained in Rule
144(c) under the Securities Act relating to availability of adequate current
public information relating to the Company.
7.5 USE OF PROCEEDS. The Company agrees to use the purchase price of
the Shares paid pursuant to Section 1 hereof for the purpose of purchasing
Series B-1 Preferred Stock of Epimmune (the "Series B-1 Preferred") in order to
fund Epimmune.
8. RIGHT OF FIRST REFUSAL.
8.1 AMENDMENT AND RESTATEMENT OF SECTION 9 OF THE PRIOR AGREEMENT. The
parties agree that this Section 8 shall supersede, amend and restate Section 9
of the Prior Agreement so that this Section 8 is the sole agreement with respect
to the obligations and rights contained in this Section 8.
8.2 SUBSEQUENT OFFERINGS. The Investor shall have a right of first
refusal to purchase its pro rata share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
8.7 hereof. The Investor's pro rata share is equal to the ratio of (a) the
number of shares of Common Stock purchased pursuant to Sections 2.1 and 2.2 of
the Prior Agreement, plus the number of Shares purchased pursuant to Section 1,
plus the number of shares of Common Stock (and the number of shares of Common
Stock issued or issuable upon the conversion of any Equity Securities)
previously purchased pursuant to this Section 8, held by the Investor or any
transferee pursuant to Section 11.5, to (b) the total number of shares of the
Company's outstanding Common Stock (including all shares of Common Stock issued
or issuable upon the conversion of any Equity Securities or upon exercise of any
outstanding warrants or options) immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option, warrant or other right to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other security, or
(iv) any such warrant or right.
8.
<PAGE>
8.3 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company proposes to
issue any Equity Securities, it shall give the Investor written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. The Investor shall
have forty five (45) days from the giving of such notice to agree to purchase
its pro rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased; provided,
however, if the Company reasonably requests in the Company's original notice
that the Investor respond within thirty (30) days (due to timing considerations
relating to the closing of the issuance of such Equity Securities), then the
Investor shall be required to respond to such notice within thirty (30) days.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to the Investor if doing so would cause the Company
to be in violation of applicable federal securities laws by virtue of such offer
or sale; provided, however, the Company agrees to use its reasonable best
efforts to take whatever action may be necessary or appropriate to comply with
applicable federal securities laws in connection with such offer or sale.
8.4 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the Investor
fails to exercise in full the right of first refusal, the Company shall have
ninety (90) days thereafter to sell the Equity Securities in respect of which
the Investor's right was not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Investor pursuant to Section 8.3 hereof. If the
Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 8.3, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Investor in the manner provided above.
8.5 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first refusal
established by this Section 8 shall terminate on the first to occur of (a)
September 17, 2002, or (b) the first date on which the Investor sells, assigns
or otherwise transfers any of the Shares, excluding, however, transfers pursuant
to Section 11.5.
8.6 NO TRANSFER OF RIGHT OF FIRST REFUSAL. The right of first refusal
established by this Section 8 may not be assigned or transferred, except as
otherwise provided in Section 11.5.
8.7 EXCLUDED SECURITIES. The right of first refusal established by
Sections 8.2, 8.3 and 8.4 shall have no application to any of the following
Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other compensatory arrangements that are
approved by the Board of Directors;
9.
<PAGE>
(b) stock issued pursuant to any rights, agreements, options or
warrants outstanding as of the date of this Agreement, and stock issued pursuant
to any rights, agreements, options or warrants granted after the date of this
Agreement provided that the right of first refusal established by this Section 8
did not apply to the initial sale or grant by the Company of such rights,
agreements, options or warrants;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
whereby the stockholders of the Company will own more than fifty percent (50%)
of the voting power of the combined entity;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of any Equity
Securities;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement; and
(g) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and any third
party, including (i) joint ventures, manufacturing, marketing, corporate
partnering or distribution arrangements, or (ii) technology transfer, research
or development arrangements; provided that such strategic transactions and the
issuance of shares therein, has been approved by the Company's Board of
Directors.
Notwithstanding the foregoing, during the term of the right of first
refusal under this Section 8, if at any time or from time to time after the date
of this Agreement the Company issues, pursuant to one or more transactions
described in Sections 8.7(a) through (g), shares of its Common Stock (whether a
new issuance of Common Stock, or Common Stock issued upon the exercise of an
Equity Security, option, warrant or conversion or exchange right or other
similar right), and if upon such issuance the number of shares of Common Stock
purchased pursuant to Sections 2.1 and 2.2 of the Prior Agreement, plus the
number of Shares (on an as-converted basis) purchased pursuant to Section 1
hereof, plus the number of shares of Common Stock (and the number of shares of
Common Stock issued or issuable upon the conversion of any Equity Securities)
previously purchased pursuant to this Section 8 (collectively, the "Investor
Share Number"), in each case then held by the Investor or any transferee
pursuant to Section 11.5 as a percentage of the outstanding Common Stock of the
Company, is less than 95% of the Trigger Percentage (as defined below) (the date
of the consummation of each issuance of Common Stock causing such occurrence
being referred to herein as a "Trigger Date") as of such Trigger Date, the
Investor shall have the right, effective as of the next February 28 or August 31
immediately following such Trigger Date (such date being referred to herein as a
"Semi-Annual Exercise Date"), except as otherwise set forth in the first
immediately following paragraph, to purchase from the Company a number of shares
of Common Stock (the "Percentage Purchase Right") such that the sum of (a) the
Investor Share Number, plus (b) the number of shares to be purchased by the
Investor pursuant to the Percentage Purchase Right on such Semi-Annual Exercise
Date as a percentage of the outstanding Common Stock of the Company, shall equal
the Trigger Percentage as of such Semi-Annual Exercise Date. The "Trigger
10.
<PAGE>
Percentage" shall mean, as to any date, 8.38% subject to the following
adjustments: in the case (i) the Company issues Common Stock after the date of
this Agreement pursuant to the exercise of any option, warrant or conversion or
exchange right outstanding as of the date of this Agreement (collectively,
"Later Share Issuances"), or (ii) the Investor waives, or elects not to
exercise, a right to purchase Common Stock or other Equity Securities under this
Section 8 (including Section 8.2 and this Section 8.7) (an "Unexercised Investor
Right"), then the applicable Trigger Percentage, as of the date of
determination, shall be adjusted to a percentage which equates to the quotient
of (A) the Investor Share Number as of the date of determining such Trigger
Percentage, divided by (B) the sum of 32,222,497, plus (x) the aggregate number
of shares of Common Stock of the Company issued pursuant to Later Shares
Issuances as of the date of determining such Trigger Percentage, plus (y) the
aggregate number of shares of Common Stock of the Company issued in transactions
involving an Unexercised Investor Right as of the date of determining such
Trigger Percentage.
The Investor shall have the right to waive its Percentage Purchase
Right for any Semi-Annual Exercise Date by giving express written notice of such
waiver to the Company not less than thirty (30) trading days prior to such
Semi-Annual Exercise Date.
The price per share of Common Stock of the Company to be purchased by
the Investor pursuant to the Percentage Purchase Right shall be the fair market
value per share of the Common Stock of the Company as of the applicable
Semi-Annual Exercise Date, determined by averaging the per share closing prices
on the Nasdaq Stock Market of the Common Stock of the Company for the ten (10)
consecutive trading days immediately prior to such Semi-Annual Exercise Date
(the "Market Valuation"). To the extent that the Company has outstanding or
issues Equity Securities, options, warrants or purchase or subscription rights
which convert into or can be exchanged for shares of Common Stock, the parties
agree that a Trigger Date shall not have occurred with respect to such
securities until such time as the Common Stock underlying such Equity
Securities, options, warrants, rights or other securities is issued.
If at any time or from time to time the Company issues additional
shares of Common Stock which gives rise to the occurrence of a Trigger Date, it
shall give the Investor written notice within ten (10) days after the next
following Semi-Annual Exercise Date, which notice shall include the number of
shares of Common Stock which are subject to the Percentage Purchase Right, the
Market Valuation of such shares and sufficient information in order to
reasonably substantiate the Market Valuation. Upon receipt of such notice, the
Investor shall have forty-five (45) days to give written notice to the Company
that it wishes to exercise its Percentage Purchase Right. The purchase and sale
of shares of Common Stock pursuant to exercise of the Percentage Purchase Right
shall occur within fifteen (15) days after such exercise pursuant to a stock
purchase agreement containing terms and conditions substantially the same as
those contained in this Agreement, with appropriate modifications to reflect the
terms of such purchase and sale as contemplated by this Section 8.7 and
appropriate updating of information. Notwithstanding the foregoing, the Company
shall not be required to offer or sell such shares of Common Stock to the
Investor if doing so would cause the Company to be in violation of applicable
federal securities laws by virtue of such offer and sale, PROVIDED that the
Company agrees to use reasonable best efforts to take whatever action may be
necessary or appropriate to comply with such federal securities laws.
11.
<PAGE>
Unless the Investor has timely and expressly waived its Percentage
Purchase Right for any Semi-Annual Exercise Date as set forth above, by giving
express written notice of such waiver to the Company not less than thirty (30)
trading days prior to such Semi-Annual Exercise Date, the Investor hereby agrees
that during the period of thirty (30) trading days prior to such Semi-Annual
Exercise Date, it shall not, and will not permit any of its affiliates
(including parents, subsidiaries or other related entities) to, directly or
indirectly sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of any
securities of the Company held by any of them during such period.
9. CONVERSION COVENANTS.
9.1 OPTIONAL CONVERSION. The parties agree that, at the option of
Searle, all of the Shares may be, in whole or in part, (i) exchanged with the
Company at any time for 659,898 fully paid and nonassessable shares of Series
B-1 Preferred (which shall concurrently be converted into Common Stock of
Epimmune pursuant to the provisions of Epimmune's Restated Certificate of
Incorporation) (the "Exchange Option"), (ii) converted at any time commencing
three years after the Effective Date into shares of the Company's Common Stock
in accordance with the Certificate of Designation of Series B Preferred Stock
(the "Conversion Option"), or (iii) applied to the milestone payments due under
the Collaboration Agreement for (a) the start of any Phase III clinical trial
for a Product (as defined in the Collaboration Agreement), other than the first
Phase III clinical trial for such Product, (b) upon submission of a new drug
application or (c) Product launch (the "Milestone Option"); provided that in no
event shall less than 50% of any such milestone payment be made in cash.
9.2 AUTOMATIC CONVERSION. All of the Shares shall be exchanged pursuant
to the Exchange Option, converted pursuant to the Conversion Option or applied
to milestone payments pursuant to the Milestone Option upon the earlier to occur
of (i) the first closing of a firm commitment underwritten public offering
pursuant to an effective registration statement under the Securities Act
covering the offer and sale by Epimmune of Common Stock to the public in which
the Company receives gross proceeds of at least $15 million, or (ii) the first
product approval arising under the Collaboration Agreement (the date of such
event shall be referred to as the "Conversion Date"). The Company will provide
(or will cause Epimmune to provide) to the Investor at least 30 days' prior
written notice of the anticipated date of the applicable event described in (i)
or (ii) of the preceding sentence (the "Conversion Notice"). As promptly as
practicable (and in any event within 20 days) after the date of the Conversion
Notice, the Investor shall provide written notice to the Company of its election
of the Exchange Option, the Conversion Option or the Milestone Option. In the
event that the Investor does not provide such written notice by the end of such
20-day period, the Investor will be deemed to have elected the Exchange Option
for all of the Shares. The Company will cooperate in good faith in providing the
Investor with such information as the Investor may reasonably require in
determining which such option to elect.
9.3 MECHANICS OF CONVERSION.
(a) EXCHANGE OPTION. In the event that the Investor elects the
Exchange Option, it shall surrender the certificate or certificates representing
the Shares, duly endorsed, at the office of the Company or of any transfer agent
for the Company's Preferred Stock, and shall give written notice to the Company
12.
<PAGE>
at such office that it elects to exchange the same pursuant to the Exchange
Option. The Company shall, as soon as practicable thereafter, (i) deliver to
Epimmune the certificate or certificates representing the Series B-1 Preferred
held by the Company, (ii) request the conversion of the Series B-1 Preferred to
Common Stock of Epimmune in accordance with the Restated Certificate of
Incorporation of Epimmune and the transfer of such shares to the Investor, and
(iii) upon receipt of the certificate or certificates representing the converted
shares, registered in such names as specified by the Investor, present such
certificate or certificates to the Investor. Such exchange shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the Shares to be exchanged, and the person or persons entitled to
receive the shares of Common Stock of Epimmune issuable upon such exchange shall
be treated for all purposes as the record holder of such shares of Common Stock
on such date (except that under the circumstances described in Section 9.2, such
exchange shall be deemed to have been made immediately prior to the event
described in (i) or (ii) of Section 9.2).
(b) CONVERSION OPTION. In the event that the Investor elects the
Conversion Option, it shall surrender the certificate or certificates
representing the Shares, duly endorsed, at the office of the Company or of any
transfer agent for the Company's Preferred Stock, and shall give written notice
to the Company at such office that it elects to convert the same pursuant to the
Conversion Option. The Company shall, as soon as practicable thereafter, issue
and deliver to the Investor a certificate or certificates, registered in such
names as specified by the Investor, for the number of whole shares of Common
Stock to which such holder shall be entitled as aforesaid, and a check payable
to the holder in the amount of any amounts payable for any declared and unpaid
dividends on the converted Shares. No fractional shares of Common Stock shall be
issued upon conversion of the Shares. Such conversion shall be deemed to have
been made immediately prior to the close of business on the date of such
surrender of the Shares to be converted, and the person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date (except that under the circumstances described Section
9.2, such conversion shall be deemed to have been made immediately prior to the
event described in (i) or (ii) of Section 9.2).
(c) MILESTONE OPTION. In the event that the Investor elects the
Milestone Option, it shall surrender the certificate or certificates
representing the Shares, duly endorsed, at the office of the Company or of any
transfer agent for the Company's Preferred Stock, and shall give written notice
to the Company at such office of the milestone payments to which it elects to
apply the same pursuant to the Milestone Option. The Company shall, as soon as
practicable thereafter, surrender to Epimmune for cancellation the certificate
or certificates representing a number of shares of Series B-1 Preferred held by
the Company equal to the number of Shares applied toward milestone payments
pursuant to the Milestone Option. Such payment shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
Shares to be applied toward milestone payments pursuant to the Milestone Option
(except that under the circumstances described in Section 9.2, such payment
shall be deemed to have been made immediately prior to the event described in
(i) or (ii) of Section 9.2). All Shares shall be deemed cancelled as of such
date.
13.
<PAGE>
(d) COMBINATION OF CONVERSION FEATURES. The Investor may elect a
combination of conversion mechanisms pursuant to Section 9.1 and 9.2 and shall
include information regarding the number of Shares with respect to which it
elects the Exchange Option, the Conversion Option and/or the Milestone Option in
any notice provided to the Company under this Section 9. In such event, the
procedures set forth in Sections 9.3(a), (b) and (c) shall be applied to the
appropriate number of Shares, as applicable.
10. INDEMNIFICATION.
10.1 INDEMNIFICATION OF THE INVESTOR. The Company agrees to indemnify
and hold harmless the Investor and its permitted successors and assigns from and
against any and all (i) liabilities, losses, costs or damages ("Loss") and (ii)
reasonable attorneys' and accountants' fees and expenses, court costs and all
other reasonable out-of-pocket expenses ("Expense") incurred by the Investor or
its permitted successors and assigns arising from (A) any breach or failure to
perform by the Company of any of its covenants or agreements contained in this
Agreement; or (B) any breach of any warranty or the inaccuracy of any
representation of the Company contained in this Agreement.
10.2 NOTICE OF CLAIMS BY THE INVESTOR. If any person indemnified under
Section 10.1 hereof believes it has suffered or incurred any Loss or incurred
any Expense as to which it is entitled to indemnification under Section 10.1
hereof, such person shall so notify the Company promptly in writing describing
such Loss or Expense, the amount thereof, if known, and the method of
computation of such Loss or Expense, all with reasonable particularity and
containing a reference to the provisions of this Agreement, or any agreement or
instrument contemplated hereby, or any certificate delivered pursuant hereto or
thereto in respect of which such Loss or Expense shall have occurred; and if any
action at law or suit in equity is instituted by or against a third party with
respect to which any such indemnified person intends to claim any Loss or
Expense under Section 10.1, such indemnified person shall promptly notify the
indemnifying party of such action or suit; provided that failure to give such
notice shall not abrogate or diminish the Company's obligations under Section
10.1 if the Company has or receives timely actual knowledge of the existence of
any such claim by any other means or except to the extent such failure
prejudices the Company.
10.3 INDEMNIFICATION OF THE COMPANY. The Investor agrees to indemnify
and hold harmless the Company and its permitted successors and assigns from and
against any and all Loss and Expense incurred by the Company and its permitted
successors and assigns arising from (i) any breach or failure to perform by the
Investor of any of its covenants or agreements contained in this Agreement; or
(ii) any breach of any warranty or the inaccuracy of any representation of the
Investor contained in this Agreement.
10.4 NOTICE OF CLAIMS BY THE COMPANY. If any person indemnified under
Section 10.3 believes that it has suffered or incurred any Loss or incurred any
Expense as to which it is entitled to indemnification under Section 10.3, such
person shall so notify the Investor or person responsible for such
indemnification promptly in writing describing such Loss or Expense, the amount
thereof, if known, and the method of computation of such Loss or Expense, all
with reasonable particularity and containing a reference to the provisions of
this Agreement, or any agreement or instrument contemplated hereby, or any
14.
<PAGE>
certificate delivered pursuant hereto or thereto in respect of which such Loss
or Expense shall have occurred; and if any action at law or suit in equity is
instituted by or against a third party with respect to which any such
indemnified party intends to claim any Loss or Expense under Section 10.3, such
indemnified party shall promptly notify the indemnifying party of such action or
suit; provided that failure to give such notice shall not abrogate or diminish
the Investor's obligations under Section 10.3 if the Investor has or receives
timely actual knowledge of the existence of any such claim by any other means or
except to the extent such failure prejudices the Investor.
10.5 THIRD PARTY CLAIMS. The indemnifying party shall have the right to
participate in, and, to the extent the it so desires, jointly with any other
indemnitor similarly noticed, to assume the defense of any third party claim,
demand, action or other proceeding with counsel selected by the indemnifying
party; provided, however, that the indemnified party shall have the right to
retain its own counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of the indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between the indemnified party and any other party
represented by such counsel in such proceedings. So long as the indemnifying
party has received notice of any third party claim, demand, action or proceeding
for which any indemnified party intends to claim any Loss or Expense, and within
a reasonable period thereafter the indemnifying party has assumed the defense
thereof, the indemnity obligations under this Section 10 shall not apply to
amounts paid in settlement of such third party claim, demand, action or
proceeding if such settlement is effected without the consent of the
indemnifying party, which consent shall not be unreasonably withheld or delayed.
The indemnifying party may not settle or otherwise consent to an adverse
judgment in any such third party claim, demand, action or proceeding action that
diminishes the rights or interests of the indemnified party without the prior
express written consent of the indemnified party. The indemnified party, its
employees and agents, shall cooperate reasonably with the indemnifying party and
its legal representatives in the investigation of any third party claim, demand,
action or proceeding covered by this Section 10.
11. MISCELLANEOUS.
11.1 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 permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
11.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
11.3 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.
15.
<PAGE>
11.4 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.
11.5 ASSIGNMENT. This Agreement may not be assigned or otherwise
transferred, nor, except as expressly provided hereunder, may any right or
obligations hereunder be assigned or transferred, by either party without the
written consent of the other party; provided, however, that either the Company
or the Investor may, without such consent, assign this Agreement and its rights
and obligations hereunder (a) in connection with the transfer or sale of all or
substantially all of its business, if such assets include substantially all of
the assets relating to its performance of its respective obligations hereunder
or (b) in the event of its merger or consolidation with another company at any
time during the term of this Agreement. Any purported assignment in violation of
the preceding sentence shall be void. Any other permitted assignee shall also
assume all obligations of its assignor under this Agreement.
11.6 NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to such
other party at its address indicated below, or to such other address as the
addressee shall have last furnished in writing to the addressor and shall be
effective upon receipt by the addressee.
The Company: Cytel Corporation
3525 John Hopkins Court
San Diego, California 92121
Attention: President
Tel: (619) 552-3000 Fax: (619) 552-8801
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
The Investor: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: Vice President, Business
Development
Tel: (847) 982-7000
Fax: (847) 470-1480
with a copy to: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: General Counsel
Tel: (847) 982-7000
Fax: (847) 967-2045
16.
<PAGE>
11.7 FINDER'S FEE. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction. The 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 the Investor from any liability for any commission or compensation in
the nature of a finder's 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.
11.8 EXPENSES. Irrespective of whether the Closing is effected, each
party shall bear its own costs with respect to the negotiation, execution,
delivery and performance of this Agreement.
11.9 AMENDMENTS AND WAIVERS. Except as specified in this Section 11.9,
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.
11.10 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
11.11 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with regard to the subject matter hereof.
11.12 FURTHER ASSURANCES. Each party hereto agrees to do such further
actions and things, and to execute and deliver such additional agreements and
instruments, as either party may reasonably request of the other to effectuate
the transactions contemplated by this Agreement.
17.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CYTEL CORPORATION
By /s/ Virgil Thompson
--------------------------------------
Title President & CEO
------------------------------------
G.D. SEARLE & CO.
By
---------------------------------------
Title Chairman and CEO
------------------------------------
<PAGE>
EXHIBIT A
<PAGE>
EXHIBIT A
SCHEDULE OF EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
This Schedule of Exceptions is made and given pursuant to Section 3 of the
Stock Purchase Agreement dated as of February 27, 1998 between Cytel Corporation
("Cytel") and G.D. Searle and Co.
3.3 CAPITALIZATION.
---------------
The Company recently entered a Non-Exclusive Sublicense and License
Agreement (the "Agreement") with Glycomed Incorporated ("Glycomed"), a
wholly-owned subsidiary of Ligand Pharmaceuticals, Inc. Pursuant to the terms of
the Agreement, Cytel is obligated to issue 591,327 shares of restricted Common
Stock to Glycomed. Cytel will also pay Glycomed milestone payments of $1.5
million upon the first new drug application filing and $3.5 million upon the
first FDA approval of each licensed product. Such milestone payments may be
made, at Cytel's option, in Common Stock of Cytel.
<PAGE>
EXHIBIT B
<PAGE>
EPIMMUNE INC.
INVESTOR RIGHTS AGREEMENT
This INVESTOR RIGHTS AGREEMENT (the "Investor Rights Agreement") is
entered into as of the 27th day of February, 1998, by and among EPIMMUNE INC., a
Delaware corporation (the "Company"), G.D. SEARLE & CO., a Delaware corporation
("Searle"), CYTEL CORPORATION, a Delaware corporation ("Cytel") (collectively,
Searle and Cytel shall be referred to as the "Investors").
RECITALS
WHEREAS, the Company proposes to sell and issue 1,032,149 shares of its
Series B Preferred Stock, $0.001 par value (the "Series B Preferred"), to Searle
pursuant to the Series B Preferred Stock Purchase Agreement of even date
herewith (the "Series B Stock Purchase Agreement");
WHEREAS, the Company proposes to sell and issue 659,898 shares of its
Series B-1 Preferred Stock, $0.001 par value (the "Series B-1 Preferred"), to
Cytel pursuant to the Series B-1 Preferred Stock Purchase Agreement of even date
herewith (the "Series B-1 Stock Purchase Agreement");
WHEREAS, as a condition of entering into the Series B Stock Purchase
Agreement and the Series B-1 Stock Purchase Agreement, the Investors requested
that the Company extend to it registration rights and other rights as set forth
below; and
WHEREAS, this Investor Rights Agreement shall be effective only upon
the closing of the Series B Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Series B Stock Purchase Agreement and the Series B-1 Stock
Purchase Agreement, the parties mutually agree as follows:
1. GENERAL.
1.1 DEFINITIONS. As used in this Investor Rights Agreement the
following terms shall have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" means any person owning of record Registrable
Securities that have not been sold to the public or any assignee of record of
such Registrable Securities in accordance with Section 2.8 hereof.
"INITIAL OFFERING" means the Company's first firm commitment
underwritten public offering of its Common Stock registered under the Securities
Act in which the Company receives gross proceeds of at least $15 million.
1.
<PAGE>
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company
issued or issuable upon conversion of the Shares; and (ii) any Common Stock of
the Company issued as (or issuable upon the conversion or exercise of any
warrant, right or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
above-described securities. Notwithstanding the foregoing, Registrable
Securities shall not include any securities sold by a person to the public
either pursuant to a registration statement or Rule 144 or sold in a private
transaction in which the transferor's rights under Section 2 of this Agreement
are not assigned.
"REGISTRATION EXPENSES" shall mean all expenses incurred by
the Company in complying with Sections 2.2 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of
counsel for the Company, reasonable fees and disbursements not to exceed
twenty-five thousand dollars ($25,000) of a single special counsel for the
Holders, blue sky fees and expenses and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLING EXPENSES" shall mean all underwriting discounts and
selling commissions applicable to the sale.
"SHARES" shall mean the Company's Series B Preferred and
Series B-1 Preferred.
"SEC" or "COMMISSION" means the Securities and Exchange
Commission.
2. RESTRICTIONS ON TRANSFER; REGISTRATION.
2.1 RESTRICTIONS ON TRANSFER.
(a) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(i) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(ii) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder shall have notified the Company of
the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
2.
<PAGE>
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(iii) Notwithstanding the provisions of paragraphs (a)(i) and
(a)(ii) above, no such registration statement or opinion of counsel shall be
necessary for a transfer by a Holder which is (A) a partnership to its partners
or former partners in accordance with partnership interests, (B) a corporation
to its stockholders in accordance with their interest in the corporation, (C) a
limited liability company to its members or former members in accordance with
their interest in the limited liability company, or (D) to the Holder's family
member or trust for the benefit of an individual Holder, provided the transferee
will be subject to the terms of this Agreement to the same extent as if he were
an original Holder hereunder.
(b) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement or any other applicable agreement or
instrument):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER
SAID ACT OR UNLESS THE COMPANY HAS RECEIVED AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED."
(c) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the Holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(d) Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 "PIGGY-BACK" REGISTRATIONS. In the event that shares of the
Company's equity securities held by any selling stockholder are included in a
registration statement under the Securities Act for purposes of the Company's
Initial Offering, the Company shall notify all Holders of Registrable Securities
in writing at least thirty (30) days prior to the filing of such registration
statement and will afford each such Holder an opportunity to include in such
registration statement all or part of such Registrable Securities held by such
Holder on a pro rata basis with the securities of such other selling
stockholders to be included in the Registration Statement. Each Holder desiring
to include in any such registration statement all or any part of the Registrable
3.
<PAGE>
Securities held by it shall, within twenty (20) days after the above-described
notice from the Company, so notify the Company in writing.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of this Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; and second, to any stockholder of the
Company (including the Holders) on a pro rata basis based on the total number of
Registrable Securities held by the Holders and securities held by such other
stockholders; provided that no such reduction shall reduce the securities being
offered by the Company for its own account to be included in the registration
and underwriting.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Company in
accordance with Section 2.3 hereof.
2.3 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration under
Section 2.2 herein shall be borne by the Company. All Selling Expenses incurred
in connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to ninety (90) days or, if earlier,
until the Holder or Holders have completed the distribution related thereto.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
4.
<PAGE>
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) Use all reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and (ii) a letter dated as of
such date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the
underwriters, if any.
2.5 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
to a Holder under this Section 2 shall terminate and be of no further force and
effect upon completion of the distribution of the Company's Common Stock in the
Company's Initial Offering.
2.6 FURNISHING INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Section 2.2 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them and the intended method of
disposition of such securities as shall be required to effect the registration
of their Registrable Securities.
5.
<PAGE>
2.7 INDEMNIFICATION In the event any Registrable Securities are
included in a registration statement under Section 2.2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers, directors and legal counsel
of each Holder, any underwriter (as defined in the Securities Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Securities Act or the Exchange Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any of the following statements,
omissions or violations (collectively a "Violation") by the Company: (i) any
untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements thereto, (ii) the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading, or
(iii) any violation or alleged violation by the Company of the Securities Act,
the Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement; and the
Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided however, that the indemnity
agreement contained in this Section 2.7(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers,
and legal counsel and each person, if any, who controls the Company within the
meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (joint or several) to which the
Company or any such director, officer, controlling person, underwriter or other
such Holder, or partner, director, officer or controlling person of such other
Holder may become subject under the Securities Act, the Exchange Act or other
federal or state law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereto) arise out of or are based upon any Violation, in
each case to the extent (and only to the extent) that such Violation occurs in
reliance upon and in conformity with written information furnished by such
Holder under an instrument duly executed by such Holder and stated to be
specifically for use in connection with such registration; and each such Holder
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
6.
<PAGE>
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.7(b) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.7
exceed the proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.7 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.7, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.7, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.7.
(d) If the indemnification provided for in this Section 2.7 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; provided, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.7 shall survive completion of any offering of Registrable Securities in a
registration statement. 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.
7.
<PAGE>
2.8 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, affiliate, parent, general partner, limited partner or retired
partner of a Holder, or (ii) is a Holder's family member, a trust for the
benefit of an individual Holder or such Holder's family members or a partnership
or other entity all of whose beneficial ownership is held by the Holder or such
Holder's family members; provided, however, (A) the transferor shall, within ten
(10) days after such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (B) such transferee shall
agree to be subject to all restrictions set forth in this Agreement.
2.9 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, enter into any agreement with any holder
or prospective holder of any securities of the Company that would grant such
holder registration rights senior to those granted to the Holders hereunder
unless the Company also grants such registration rights to the Holders.
2.10 "MARKET STAND-OFF" AGREEMENT. If requested by the Company or the
representative of the underwriters of Common Stock (or other securities) of the
Company, each Holder shall not sell or otherwise transfer or dispose of any
Common Stock (or other securities) of the Company held by such Holder (other
than those included in the registration) for a period specified by the
representative of the underwriters not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that the Company, all officers and directors
of the Company and any other selling stockholders enter into similar agreements
(subject to customary exceptions).
The obligations described in this Section 2.10 shall not apply to a
registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.11 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
8.
<PAGE>
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent annual or quarterly report of
the Company; and such other reports and documents as a Holder may reasonably
request in availing itself of any rule or regulation of the SEC allowing it to
sell any such securities without registration.
3. CONVENANTS OF THE COMPANY
3.1 FINANCIAL INFORMATION AND REPORTING.
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish to Searle a balance sheet of the Company, as at the end of
such fiscal year, and a statement of income and a statement of cash flows of the
Company, for such year, all prepared in accordance with generally accepted
accounting principles consistently applied and setting forth in each case in
comparative form the figures for the previous fiscal year, all in reasonable
detail. Such financial statements shall be accompanied by (i) a report and
opinion thereon by independent public accountants of national standing selected
by the Company's Board of Directors and reasonably acceptable to Searle, and
(ii) a certificate executed by an officer of the Company certifying that the
terms of the Series B Preferred and the terms of all other material agreements
between Searle and the Company, other than that certain License and
Collaboration Agreement dated as of February 27, 1998 (the "Collaboration
Agreement") between the Company and Searle and any other agreements entered
between the Company and Searle in connection with the Collaboration Agreement,
have been complied with.
(b) So long as Searle shall own not less than 5% of the Company's
outstanding capital stock, the Company will furnish Searle prior to the
beginning of each fiscal year a budget on a monthly basis for such fiscal year
(and as soon as available, any subsequent revisions thereto);
(c) The Company will furnish to Searle promptly after distribution
(and in any event within 10 days after distribution) other reports of the
Company that are publicly distributed, including written communications made
generally available to the Company's Stockholders or the financial community.
(d) The Company will furnish to each member of the Company's Board
of Directors, as soon as practicable after the end of each month, and in any
event within thirty (30) days thereafter, a balance sheet of the Company as of
the end of each such month, and a statement of income of the Company for such
month and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied, with the
exception that no notes need be attached to such statements and year-end audit
adjustments may not have been made.
3.2 INSPECTION RIGHTS. Searle shall have the right to visit and inspect
any of the properties of the Company or any of its subsidiaries, and to discuss
9.
<PAGE>
the affairs, finances and accounts of the Company or any of its subsidiaries
with its directors, officers, employees and independent public accountants, and
to review such information as is reasonably requested all at such reasonable
times and as often as may be reasonably requested.
3.3 SEARLE APPROVAL. The Company shall not without the prior written
consent of Searle enter into any agreement which by its terms restricts the
Company's performance of the terms of the Series B Preferred Stock, the Series B
Stock Purchase Agreement or this Investor Rights Agreement.
3.4 INSIDER TRANSACTIONS. The Company shall not without the approval of
a majority of the Board of Directors, with all non-interested Directors voting
and the approval of the Director designated by Searle (the "Designated
Director"), authorize or enter into any transactions with any director or
management employee, or such director's or employee's immediate family, other
than indemnification and employment related transactions on customary terms.
3.5 DIRECTORS' FEES AND EXPENSES. For so long as Searle is entitled to
designate a representative to the Company's Board of Directors, the Company
covenants to (i) reimburse the Designated Director for all reasonable costs
associated with attending meetings of the Board of Directors, and (ii) pay the
Designated Director any compensation paid to other members of the Company's
Board of Directors in connection with the performance of their duties as a
Director.
3.6 CONFIDENTIALITY OF RECORDS. Searle agrees to keep confidential, and
to use its best efforts to insure that its authorized representatives keep
confidential, any information furnished or made available to it hereunder in
accordance with Section 3.7 of the Series B Stock Purchase Agreement.
3.7 BY-LAWS. The Company shall not, without prior written consent of
Searle, take any action to amend the By-laws of the Company to (i) change the
designated number of directors from five members or (ii) amend Section 22(b) of
Article IV of such By-laws.
3.8 TERMINATION OF COVENANTS. The covenants of the Company set forth in
Sections 3.1(a) and (b), 3.2, 3.3 and 3.7 of this Agreement shall expire and
terminate on the earlier of (i) the effective date of the registration statement
pertaining to the Initial Offering, or (ii) the date on which Searle shall own
less than 5% of the Company's outstanding capital stock determined on a
fully-diluted, as-converted basis. The covenants of the Company set forth in
Sections 3.1(c) and (d) and 3.4 of this Agreement shall expire and terminate on
the date on which Searle shall own less than 5% of the Company's outstanding
capital stock.
4. RIGHT OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Searle shall have a right of first refusal to
purchase its pro rata share of all Equity Securities, as defined below, that the
Company may, from time to time, propose to sell and issue after the date of this
Agreement, other than the Equity Securities excluded by Section 4.6 hereof.
Searle's pro rata share is equal to the ratio of (a) the number of shares of the
Company's Common Stock (including all shares of Common Stock issued or issuable
upon conversion of the Shares) which Searle is deemed to hold immediately prior
to the issuance of such Equity Securities to (b) the total number of shares of
10.
<PAGE>
the Company's outstanding Common Stock (including all shares of Common Stock
issued or issuable upon conversion of the Shares or upon the exercise of any
outstanding warrants or options) immediately prior to the issuance of the Equity
Securities. The term "Equity Securities" shall mean (i) any Common Stock,
Preferred Stock or other security of the Company, (ii) any security convertible,
with or without consideration, into any Common Stock, Preferred Stock or other
security (including any option to purchase such a convertible security), (iii)
any security carrying any warrant or right to subscribe to or purchase any
Common Stock, Preferred Stock or other security or (iv) any such warrant or
right.
4.2 EXERCISE OF RIGHT. If the Company proposes to issue any Equity
Securities, it shall give Searle written notice of its intention, describing the
Equity Securities, the price and the terms and conditions upon which the Company
proposes to issue the same. Searle shall have forty-five (45) days from the
giving of such notice to agree to purchase its pro rata share of the Equity
Securities for the price and upon the terms and conditions specified in the
notice by giving written notice to the Company and stating therein the quantity
of Equity Securities to be purchased; provided, however, if the Company
reasonably requests in the Company's original notice that Searle respond within
thirty (30) days (due to timing considerations relating to the closing of the
issuance of such Equity Securities), then Searle shall be required to respond to
such notice within thirty (30) days. Notwithstanding the foregoing, the Company
shall not be required to offer or sell such Equity Securities to Searle if such
offer or sale would cause the Company to be in violation of applicable federal
securities laws by virtue of such offer or sale; provided, however, the Company
agrees to use its reasonable best efforts to take whatever action may be
necessary or appropriate to comply with applicable Federal Securities laws in
connection with such offer or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If Searle does not
elect to purchase its pro rata share of the Equity Securities, then the Company
shall have ninety (90) days thereafter to sell the Equity Securities in respect
of which Searle's rights were not exercised, at a price and upon general terms
and conditions materially no more favorable to the purchasers thereof than
specified in the Company's notice to Searle pursuant to Section 4.2 hereof. If
the Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to Searle
in the manner provided above.
4.4 TERMINATION OF RIGHT OF FIRST REFUSAL. The right of first refusal
established by this Section 4 shall terminate on the first to occur of (i) the
effective date of the registration statement pertaining to the Company's Initial
Offering or (ii) the first date on which Searle sells, assigns or otherwise
transfers any of the Shares (other than to a subsidiary, affiliate or parent or
in connection with an assignment as provided in Section 7.5 of the Series B
Purchase Agreement or Section 7.5 of the Series B-1 Purchase Agreement, as
applicable). The right of first refusal shall not apply to the Company's Initial
Offering.
4.5 TRANSFER OF RIGHT OF FIRST REFUSAL. The right of first refusal of
the Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.8.
11.
<PAGE>
4.6 EXCLUDED SECURITIES. The right of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
(a) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Company or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors;
(b) stock issued pursuant to any rights, agreements, options or
warrants outstanding as of the date of this Agreement and stock issued pursuant
to any rights, agreements, options or warrants granted after the date of this
Agreement, provided that the rights of first refusal established by this Section
4 applied with respect to the initial sale or grant by the Company of such
rights, agreements, options or warrants;
(c) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business combination
whereby the stockholders of the Company will own more than fifty percent (50%)
of the voting power of the combined entity;
(d) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the Shares or
the Series A Preferred Stock;
(f) any Equity Securities issued pursuant to any equipment leasing
arrangement; and
(g) shares of the Company's Common Stock or Preferred Stock issued
in connection with strategic transactions involving the Company and other
entities, including (i) joint ventures, manufacturing, marketing, corporate
partnering or distribution arrangements or (ii) technology transfer, research or
development arrangements; provided that such strategic transactions and the
issuance of shares therein, has been approved by the Company's Board of
Directors.
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
12.
<PAGE>
5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
5.5 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, any provision of this
Agreement (other than Sections 3 and 4) may be amended and the observance
thereof may be waived (either generally or in a particular instance and either
retroactively or prospectively) only upon the written consent of the Company and
the Holders of at least a majority of the Registrable Securities. Any amendment
or waiver of any provisions of this Agreement (other than Sections 3 and 4)
effected in accordance with this Agreement shall be binding upon each Holder and
the Company. By acceptance of any benefits under this Agreement, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
(b) Except as otherwise expressly provided, any provision of
Section 3 and 4 of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively) only upon the written consent of the Company and Searle.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.7 NOTICES. Any notice or report required or permitted to be given or
made under this Agreement by one of the parties hereto to the other shall be in
writing, delivered personally or by facsimile (and promptly confirmed by
personal delivery or courier) or courier, postage prepaid, addressed to such
other party at its address indicated below, or to such other address as the
13.
<PAGE>
addressee shall have last furnished in writing to the addressor and shall be
effective upon receipt by the addressee.
THE COMPANY: Epimmune Inc.
6555 Nancy Ridge Drive, Suite 200
San Diego, California 92121
Attention: President
Tel: (619) 404-7171 Fax: (619) 404-7177
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
SEARLE: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: Vice President, Business
Development
Tel: (847) 982-7000
Fax: (847) 470-1480
with a copy to: G.D. Searle & Co.
P.O. Box 5110
Chicago, Illinois 60680-5110
Attention: General Counsel
Tel: (847) 982-7000
Fax: (847) 967-2045
CYTEL: Cytel Corporation
3525 John Hopkins Court
San Diego, California 92121
Attention: President
Tel: (619) 552-3000
Fax: (619) 552-8801
with a copy to: Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Frederick T. Muto, Esq.
Tel: (619) 550-6000
Fax: (619) 453-3555
5.8 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.
14.
<PAGE>
5.9 PRONOUNS. All pronouns contained herein and any variations thereof
shall be deemed to refer to the masculine, feminine or neuter, singular or
plural, as the identity of the parties hereto may require.
5.10 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.
15.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Investor
Rights Agreement as of the date set forth in the first paragraph hereof.
COMPANY: INVESTORS:
EPIMMUNE INC. G.D. SEARLE & CO.
By: By:
-------------------------------- -------------------------------
Title: Title:
----------------------------- ----------------------------
CYTEL CORPORATION
By:
-------------------------------
Title:
----------------------------
<PAGE>
EXHIBIT C
<PAGE>
EPIMMUNE INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into this
27th day of February, 1998, by and among Epimmune Inc., a Delaware corporation
(the Company"), Cytel Corporation, a Delaware corporation (the "Key
Stockholder"), and G.D. Searle & Co., a Delaware corporation (the "Investor").
WITNESSETH:
WHEREAS, the Key Stockholder is the beneficial owner of an aggregate of
Six Million (6,000,000) shares of the Series A Preferred Stock (the "Series A
Preferred") of the Company;
WHEREAS, the Company proposes to sell shares (the "Investor Shares") of
its Series B Preferred Stock (the "Series B Preferred") to the Investor pursuant
to the Series B Preferred Stock Purchase Agreement (the "Series B Stock Purchase
Agreement") of even date herewith;
WHEREAS, the Company proposes to sell shares of its Series B-1
Preferred Stock (the "Series B-1 Preferred"), to the Key Stockholder pursuant to
the Series B-1 Preferred Stock Purchase Agreement (the "Series B-1 Stock
Purchase Agreement") of even date herewith (collectively, the sale of Series B
and Series B-1 Preferred Stock shall be referred to as the "Financing");
WHEREAS, in connection with the consummation of the Financing, the Key
Stockholder has agreed to provide for the future voting of its shares of the
Company's capital stock as set forth below; and
WHEREAS, this Agreement shall be effective only upon the closing of the
Series B Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. VOTING.
1.1 SHARES. The Key Stockholder agrees to hold all shares of voting
capital stock of the Company (including but not limited to all shares of Common
Stock issued upon conversion of the Company's Series A Preferred and Series B-1
Preferred) registered in its name or beneficially owned by it as of the date
hereof (and any and all other securities of the Company legally or beneficially
acquired by the Key Stockholder after the date hereof) (hereinafter collectively
referred to as the "Shares") subject to, and to vote the Shares in accordance
with, the provisions of this Agreement.
1.2 ELECTION OF DIRECTOR. On all matters relating to the election of
directors of the Company, the Key Stockholder agrees to vote all Shares held by
it (or the holders thereof shall consent pursuant to an action by written
1.
<PAGE>
consent of the stockholders) so as to elect to the Company's Board of Directors
one (1) individual nominated by the holders of a majority in interest of the
Investor Shares. On all matters relating to the election of directors of the
Company, the Investor agrees to vote all Investor Shares held by it (or the
holders thereof shall consent pursuant to an action by written consent of the
stockholders) so as to elect to the Company's Board of Directors one (1)
individual nominated by the holders of a majority in interest of the Investor
Shares. Any vote taken to remove any director elected pursuant to this Section
1.2, or to fill any vacancy created by the resignation of a director elected
pursuant to this Section 1.2, shall also be subject to the provisions of this
Section 1.2.
1.3 LEGEND.
(a) Concurrently with the execution of this Agreement, there shall
be imprinted or otherwise placed, on certificates representing the Shares, the
following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES
CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES SHALL
BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL THE
PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING AGREEMENT
WILL BE FURNISHED TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON WRITTEN REQUEST TO THE COMPANY AT ITS
PRINCIPAL PLACE OF BUSINESS."
(b) The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Shares theretofore represented by a certificate carrying the Legend.
1.4 SUCCESSORS. The provisions of this Agreement shall be binding upon
the successors in interest to any of the Shares. The Company shall not permit
the transfer of any of the Shares on its books or issue a new certificate
representing any of the Shares unless and until the person to whom such security
is to be transferred shall have executed a written agreement, substantially in
the form of this Agreement, pursuant to which such person becomes a party to
this Agreement and agrees to be bound by all the provisions hereof as if such
person were a Key Stockholder or Investor, as applicable; provided that this
provision shall not apply to the extent of any sale or transfer of the Shares to
the Investor.
1.5 OTHER RIGHTS. Except as provided by this Agreement, the Key
Stockholder and Investor shall exercise the full rights of a stockholder with
respect to the Shares.
2.
<PAGE>
2. TERMINATION
2.1 This Agreement shall continue in full force and effect from the
date hereof through (i) the date that all of the Shares are sold or otherwise
transferred to the Investor, or (ii) the later of the following dates, on which
it shall terminate in its entirety:
(a) two (2) years from the date of the closing of a firm commitment
underwritten public offering of the Company's Common Stock pursuant to a
registration statement filed with, and declared effective under, the Securities
Act of 1933, as amended, in which the Company receives gross proceeds of at
least $15 million; or
(b) at such time as the Investor holds less than five percent (5%)
of the total shares of Common Stock and Preferred Stock outstanding of the
Company on a fully-diluted, as-converted basis.
3. MISCELLANEOUS
3.1 OWNERSHIP. The Key Stockholder represents and warrants to the
Investor that (a) it now owns the Shares, free and clear of liens or
encumbrances, and has not, prior to or on the date of this Agreement, executed
or delivered any proxy or entered into any other voting agreement or similar
arrangement other than one which has expired or terminated prior to the date
hereof, and (b) it has full power and capacity to execute, deliver and perform
this Agreement, which has been duly executed and delivered by, and evidences the
valid and binding obligation of, the Key Stockholder enforceable in accordance
with its terms.
3.2 FURTHER ACTION. If and whenever the Shares are sold, the Key
Stockholder or the personal representative of the Key Stockholder shall do all
things and execute and deliver all documents and make all transfers, and cause
any transferee of the Shares to do all things and execute and deliver all
documents, as may be necessary to consummate such sale consistent with this
Agreement.
3.3 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.4 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California, as applied to contracts executed and
performed entirely within the State of California, without regard to conflicts
of laws rules.
3.5 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 parties hereto.
3.
<PAGE>
3.6 SEVERABILITY. If one or more provisions of this Agreement is 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
provision were so excluded and shall be enforceable in accordance with its
terms.
3.7 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 permitted successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
3.8 ADDITIONAL SHARES. In the event that subsequent to the date of this
Agreement any shares or other securities (other than any shares or securities of
another corporation issued to the Company's stockholders pursuant to a plan of
merger) are issued on, or in exchange for, any of the Shares by reason of any
stock dividend, stock split, consolidation of shares, reclassification or
consolidation involving the Company, such shares or securities shall be deemed
to be Shares for purposes of this Agreement.
3.9 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.
3.10 ENTIRE AGREEMENT. This Agreement, along with the Series B Stock
Purchase Agreement and each of the Exhibits thereto and the Series B-1 Stock
Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof and no party shall be liable or bound to any other
in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
[THIS SPACE INTENTIONALLY LEFT BLANK]
4.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Stockholders
Agreement as of the date first above written.
COMPANY: INVESTOR:
EPIMMUNE INC. G. D. SEARLE & CO.
By: By:
-------------------------------------- --------------------------------
President Title:
-----------------------------
KEY STOCKHOLDER:
CYTEL CORPORATION
By:
---------------------------------------
Title:
------------------------------------
<PAGE>
EXHIBIT D
<PAGE>
CERTIFICATE OF DESIGNATION
OF THE
SERIES B CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.001 PER SHARE)
OF
CYTEL CORPORATION
---------------
PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------
CYTEL CORPORATION, a company organized and existing under the General
Corporation Law of the State of Delaware (the "Company"), in accordance with the
provisions of Section 103 thereof, and pursuant to Section 151 thereof, DOES
HEREBY CERTIFY:
That the Certificate of Incorporation of the Company (the "Certificate
of Incorporation") authorizes the creation of up to 10,000,000 shares of the
Company's preferred stock, par value $.001 per share (such preferred stock,
together with all other preferred stock of the Company the creation of which is
in the future authorized by the Certificate of Incorporation, referred to herein
as the "Preferred Stock"); and
That pursuant to the authority conferred upon the Board of Directors
(the "Board") by the Certificate of Incorporation of the Company, the Board on
February 20, 1998, approved the creation, issuance and the voting powers of
shares of Preferred Stock to be issued in one Series and adopted the following
resolution creating a series of 659,898 shares of Preferred Stock designated as
set forth below:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board by provisions of the Certificate of Incorporation of the
Company and the General Corporation Law of the State of Delaware, the issuance
of a series of Preferred Stock, which shall consist of 659,898 shares of the
10,000,000 shares of Preferred Stock which the Company now has authority to
issue, be, and the same hereby is, authorized, and the Board hereby fixes the
powers, designations, preferences and relative participating, optional or other
special rights, and the qualifications, limitations or restrictions thereof, of
the shares of such series (in addition to the powers, designations, preferences
and relative participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, set forth in the
Certificate of Incorporation which may be applicable to the Preferred Stock)
authorized by this resolution as follows:
SECTION 1. DESIGNATION OF SERIES B PREFERRED STOCK. The designation of such
series of Preferred Stock authorized by this resolution shall be Series B
Convertible Preferred Stock (the "Series B Preferred"). The Series B Preferred
is issuable solely in whole shares that shall entitle the holder thereof to
exercise the voting rights, to participate in the distributions and to have the
benefit of all other rights of holders of Series B Preferred, as set forth
herein and in the Certificate of Incorporation.
<PAGE>
SECTION 2. DIVIDEND RIGHTS OF SERIES B PREFERRED. So long as any shares of
Series B Preferred shall be outstanding, no dividend, whether in cash or
property, shall be paid or declared nor shall any other distribution be made, on
any Common Stock (other than any dividend or distribution payable solely in
Common Stock of the Company), unless a dividend is paid with respect to all
outstanding shares of Series B Preferred in an amount per share (on an
as-if-converted to Common Stock basis) equal to the amount paid or set aside for
each share of Common Stock.
SECTION 3. LIQUIDATION PREFERENCE.
(a) SERIES B PREFERRED. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of Series B
Preferred then outstanding shall be entitled to be paid, pro rata, out of the
assets of the Company available for distribution to its stockholders, whether
from capital, surplus or earnings, before any payment shall be made in respect
of any other class or series of stock ranking junior to the Series B Preferred,
an amount equal to $5.91 per share (the "Series B Original Issue Price") (as
adjusted for any combinations, consolidations, stock distributions, stock
dividends or other recapitalizations with respect to such shares) plus any
declared but unpaid dividends on such shares; provided that the total amounts to
which the holders of Series B Preferred are entitled under this provision shall
not exceed the value of the outstanding securities of Epimmune Inc.("Epimmune")
then owned by the Company. If, upon liquidation, dissolution or winding up of
the Company, the assets of the Company available for distribution to its
stockholders shall be insufficient to pay the holders of the Series B Preferred
the full amounts to which they shall be entitled as set forth above, then the
entire assets of the Company legally available for distribution shall be
distributed pro rata among the holders of the Series B Preferred in proportion
to the preferential amount each such holder would otherwise be entitled to
receive. After setting apart or paying in full the preferential amounts due the
holders of the Series B Preferred, the holders of the Series B Preferred will
not be entitled to any further participation in any distribution of the assets
of the Company, and the entire remaining assets of the Company legally available
for distribution, if any, shall be distributed among the holders of Common Stock
in proportion to the shares of Common Stock then held by them.
(b) MERGERS, CONSOLIDATIONS NOT DEEMED LIQUIDATIONS. The merger or
consolidation of the Company into or with another company in which the Company
is not the surviving entity or in which the stockholders of this Company
immediately prior to such event shall own less than a majority of the voting
securities of the surviving company, or the sale, transfer, or lease (but not
including a transfer or lease by pledge or mortgage to a bona fide lender) of
all or substantially all of the assets of the Company, shall not be deemed a
liquidation, dissolution or winding up of the Company as those terms are used in
this Section 3.
SECTION 4. CONVERSION PRIVILEGES.
(a) RIGHTS OF CONVERSION. Subject to the other provisions of this
Certificate of Designation, each share of Series B Preferred shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Series B
Original Issue Price by the Series B Conversion Price (as defined below) in
effect at the time of
2.
<PAGE>
conversion, at any time and from time to time after February 27, 2001, at the
office of the Company or any transfer agent for such stock; provided that the
average of the closing prices per share of the Common Stock on the Nasdaq
National Market (or any other national securities exchange on which the Common
Stock is then traded) for the 10 consecutive trading days ending on the trading
date immediately preceding the date of conversion is $5.00 or greater. The price
at which shares of Common Stock shall be deliverable upon conversion of Series B
Preferred (the "Series B Conversion Price") shall initially equal $7.50 per
share, subject to adjustment as set forth below.
(b) MECHANICS OF CONVERSION. Before any holder of Series B Preferred
shall be entitled to convert the same into shares of Common Stock pursuant to
Section 4(a) hereof, such holder shall surrender the certificate or certificates
thereof, duly endorsed, at the office of the Company or of any transfer agent
for such stock, and shall give written notice to the Company at such office that
such holder elects to convert the same and shall state therein the name or names
in which such holder wishes the certificate or certificates for shares of Common
Stock to be issued. The Company shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Series B Preferred or its nominee
or nominees, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid, together with cash in
lieu of any fractional shares. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of surrender of the
shares of Series B Preferred to be converted. The person or persons entitled to
receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock on such date.
(c) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Company shall at
any time or from time to time after the date that the first share of Series B
Preferred is issued (the "Original Issue Date") effect a subdivision of the
outstanding Common Stock without a corresponding subdivision of the Preferred
Stock, the Series B Conversion Price in effect immediately before that
subdivision shall be proportionately decreased. Conversely, if the Company shall
at any time or from time to time after the Original Issue Date combine the
outstanding shares of Common Stock into a smaller number of shares without a
corresponding combination of the Preferred Stock, the Series B Conversion Price
in effect immediately before the combination shall be proportionately increased.
Any adjustment under this Section 4(c) shall become effective at the close of
business on the date the subdivision or combination becomes effective.
(d) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Original Issue Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in additional shares of Common
Stock, in each such event the Series B Conversion Price that is then in effect
shall be decreased as of the time of such issuance or, in the event such record
date is fixed, as of the close of business on such record date, by multiplying
the Series B Conversion Price then in effect by a fraction (i) the numerator of
which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (ii) the denominator of which is the total number of shares of
Common Stock issued and outstanding immediately prior to the time of such
issuance or the close of business on such record date plus the number of shares
3.
<PAGE>
of Common Stock issuable in payment of such dividend or distribution; provided,
however, that if such record date is fixed and such dividend is not fully paid
or if such distribution is not fully made on the date fixed therefor, the Series
B Conversion Price shall be recomputed accordingly as of the close of business
on such record date and thereafter the Series B Conversion Price shall be
adjusted pursuant to this Section 4(d) to reflect the actual payment of such
dividend or distribution.
(e) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the Company at
any time or from time to time after the Original Issue Date makes, or fixes a
record date for the determination of holders of Common Stock entitled to
receive, a dividend or other distribution payable in securities of the Company
other than shares of Common Stock, in each such event provision shall be made so
that the holders of the Series B Preferred shall receive upon conversion
thereof, in addition to the number of shares of Common Stock receivable
thereupon, the amount of other securities of the Company which they would have
received had their Series B Preferred been converted into Common Stock on the
date of such event and had they thereafter, during the period from the date of
such event to and including the conversion date, retained such securities
receivable by them as aforesaid during such period, subject to all other
adjustments called for during such period under this Section 4 with respect to
the rights of the holders of the Series B Preferred or with respect to such
other securities by their terms.
(f) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at any
time or from time to time after the Original Issue Date, the Common Stock
issuable upon the conversion of the Series B Preferred is changed into the same
or a different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in Section 2 or this
Section 4), in any such event each holder of Series B Preferred shall have the
right thereafter to convert such stock into the kind and amount of stock and
other securities and property receivable upon such recapitalization,
reclassification or other change by holders of the maximum number of shares of
Common Stock into which such shares of Series B Preferred could have been
converted immediately prior to such recapitalization, reclassification or
change, all subject to further adjustment as provided herein or with respect to
such other securities or property by the terms thereof.
(g) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at
any time or from time to time after the Original Issue Date, there is a capital
reorganization of the Common Stock (other than a subdivision or combination of
shares or stock dividend or a reorganization, merger, consolidation or sale of
assets provided for elsewhere in Section 2 or this Section 4), as a part of such
capital reorganization, provision shall be made so that the holders of the
Series B Preferred shall thereafter be entitled to receive upon conversion of
the Series B Preferred the number of shares of stock or other securities or
property of the Company to which a holder of the number of shares of Common
Stock deliverable upon conversion would have been entitled on such capital
reorganization, subject to adjustment in respect of such stock or securities by
the terms thereof. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 4 with respect to the rights of
the holders of Series B Preferred after the capital reorganization to the end
that the provisions of this Section 4 (including adjustment of the Series B
Conversion Price then in effect and the number of shares issuable upon
conversion of the Series B Preferred) shall be applicable after that event and
be as nearly equivalent as practicable.
4.
<PAGE>
(h) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the number of shares of Common Stock issuable upon
conversion of a share of Series B Preferred pursuant to this Section 4, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Series B Preferred a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment is
based. The Company shall, upon the written request at any time of any holder of
Series B Preferred, furnish or cause to be furnished to such holder a like
certificate prepared by the Company setting forth (i) such adjustments and
readjustments, (ii) the Series B Conversion Price at the time in effect, and
(iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversion of the Series B
Preferred.
(i) NOTICES OF RECORD DATE. In the event of any taking by the Company of
a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any security or right convertible
into or entitling the holder thereof to receive additional shares of Common
Stock, or any right to subscribe for, purchase or otherwise acquire any shares
of stock of any class or any other securities or property, or to receive any
other right, the Company shall mail to each holder of Series B Preferred at
least 10 days prior to the date specified therein, a notice specifying the date
on which any such record is to be taken for the purpose of such dividend,
distribution, security or right, and the amount and character of such dividend,
distribution, security or right.
(j) ISSUE TAXES. The holders of Series B Preferred shall pay any and all
issue, transfer and other taxes that may be payable in respect of any issue or
delivery of shares of Common Stock on conversion of shares of Series B Preferred
pursuant hereto.
(k) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock, solely for the purpose of effecting the conversion of the
shares of the Series B Preferred, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Series B Preferred, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain the requisite stockholder
approval of any necessary amendment to the Certificate of Incorporation. All
shares of Common Stock which are issuable upon such conversion shall, when
issued, be duly and legally issued, fully paid and nonassessable and free of all
taxes, liens and charges.
(l) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any share or shares of Series B Preferred. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of Series B Preferred by a holder thereof shall be aggregated for purposes
5.
<PAGE>
of determining whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of a fraction of a share of Common Stock, the Company
shall, in lieu of issuing any fractional share, pay the holder otherwise
entitled to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion (as determined in good faith by the Board).
(m) NOTICES. Any notice required by the provisions of this Section 4
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (iii) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All notices shall be addressed
to each holder of record at the address of such holder appearing on the books of
the Company.
SECTION 5. VOTING RIGHTS.
(a) Except as provided in this Section 5 or as otherwise from time to
time required by law, the Series B Preferred shall vote together with the Common
Stock as a single class. The holder of each share of Series B Preferred shall be
entitled to that number of votes equal to the number of shares of Common Stock
into which such share would then be converted upon the application of Section
4(a) above and shall be entitled to notice of all stockholders' meetings in
accordance with the By-laws of the Company. The foregoing voting provisions
shall not apply if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all outstanding shares
of Series B Preferred shall have been converted into Common Stock.
(b) Notwithstanding anything contained in Section 5(a) to the contrary,
if any shares of Series B Preferred held by G.D. Searle & Co. (the "Shares")
when aggregated with all other shares of voting capital stock of the Company or
its subsidiary Epimmune Inc. ("Epimmune") held by G.D. Searle & Co. would (if
not for this Section 5(b)) entitle G.D. Searle & Co. to vote more than 19.4% of
the outstanding common stock of Epimmune (assuming the conversion of all such
shares of such capital stock into common stock of Epimmune pursuant to the
respective terms thereof), then any such Shares in excess of 19.4% shall be
entitled to no vote.
In facilitation of the foregoing voting restriction, the following
formula shall be applied to determine the number of shares of Series B Preferred
held by Searle which shall be entitled to a vote:
X = PC + (((CE*SC-.194*TC*TE+SE*TC)/(.194*TE-SE-CE)) x R)
where:
TE = total number of shares of Epimmune common stock (on an
as-converted basis) outstanding
6.
<PAGE>
CE = number of shares of Epimmune common stock (on an as-converted
basis) owned by Cytel
SE = number of shares of Epimmune common stock (on an as-converted
basis) owned by Searle
TC = total number of shares of Cytel Common Stock (on an
as-converted basis) outstanding
SC = total number of shares of Cytel Common Stock (on an
as-converted basis) owned by Searle
PC = total number of shares of Cytel Series B Preferred owned by
Searle
X = number of shares of Cytel Series B Preferred Stock owned by
Searle that will have voting rights, where 0<X<PC
R = Series B Conversion Price divided by the Series B Original
Issue Price
7.
<PAGE>
IN WITNESS WHEREOF, Cytel Corporation has caused this Certificate to be
signed by its President and Chief Executive Officer, and attested by its
Secretary, this ___ day of __________, 1998.
CYTEL CORPORATION
By:
-------------------------------------
Virgil Thompson,
President and Chief Executive Officer
Attest:
- ------------------------------
Deborah Schueren,
Secretary
<PAGE>
EXHIBIT E
<PAGE>
COOLEY GODWARD LLP
ATTORNEYS AT LAW San Francisco, CA
415 693-2000
4365 Executive Drive Palo Alto, CA
Suite 1100 650 843-5000
San Diego, CA
92121-2128 Menlo Park, CA
Main 619 550-6000 650 843-5000
Fax 619 453-3555
Boulder, CO
February 27, 1998 303 546-4000
www.cooley.com Denver, CO
303 606-4800
FREDERICK T. MUTO
619 550-6010
[email protected]
G.D. Searle & Co.
5200 Old Orchard Road
Skokie, Illinois 60077
Dear Ladies and Gentlemen:
We have acted as counsel for Epimmune Inc., a Delaware corporation (the
"Company"), in connection with the issuance and sale to you of 1,032,149 shares
of the Company's Series B Preferred Stock ("Shares") pursuant to the Series B
Stock Purchase Agreement dated as of February 27, 1998 (the "Agreement"). We are
rendering this opinion pursuant to Section 4.7 of the Agreement. Except as
otherwise defined herein, capitalized terms used but not defined herein have the
respective meanings given to them in the Agreement.
In connection with this opinion, we have examined and relied upon the
representations and warranties as to factual matters contained in and made
pursuant to the Agreement by the various parties and originals or copies
certified to our satisfaction, of such records, documents, certificates,
opinions, memoranda and other instruments as in our judgment are necessary or
appropriate to enable us to render the opinion expressed below. Where we render
an opinion "to the best of our knowledge" or concerning an item "known to us" or
our opinion otherwise refers to our knowledge, it is based solely upon (i) an
inquiry of attorneys within this firm who perform legal services for the
Company, (ii) receipt of a certificate executed by an officer of the Company
covering such matters, a copy of which is attached hereto, and (iii) such other
investigation, if any, that we specifically set forth herein.
In rendering this opinion, we have assumed: the genuineness and authenticity of
all signatures on original documents; the authenticity of all documents
submitted to us as originals; the conformity to originals of all documents
submitted to us as copies; the accuracy, completeness and authenticity of
certificates of public officials; and the due authorization, execution and
delivery of all documents (except the due authorization, execution and delivery
by the Company of the Agreement, the Voting Agreement and the Investor Rights
Agreement), where authorization, execution and delivery are prerequisites to the
effectiveness of such documents. We have also assumed: that all individuals
executing and delivering documents had the legal capacity to so execute and
deliver; that you have received all documents you were to receive under the
Agreement; that the Agreement, the Voting Agreement and the Investor Rights
Agreement are obligations binding upon you; that you have filed any required
California franchise or income tax returns and have paid any required California
franchise or income taxes; and that there are no extrinsic agreements or
understandings among the parties to the Agreement and the Investor Rights
Agreement that would modify or interpret the terms thereof or the respective
rights or obligations of the parties thereunder.
<PAGE>
COOLEY GODWARD LLP
G.D. Searle & Co.
February 27, 1998
Page Two
Our opinion is expressed only with respect to the federal laws of the United
States of America, the laws of the State of California and the General
Corporation Law of the State of Delaware. We express no opinion as to whether
the laws of any particular jurisdiction apply, and no opinion to the extent that
the laws of any jurisdiction other than those identified above are applicable to
the subject matter hereof. We are not rendering any opinion as to compliance
with any antifraud law, rule or regulation relating to securities, or to the
sale or issuance thereof.
With regard to our opinion in paragraph 4 below, we have examined and relied
upon a certificate executed by an officer of the Company, a copy of which is
attached hereto, to the effect that the consideration for all outstanding shares
of capital stock of the Company was received by the Company in accordance with
the provisions of the applicable Board of Directors resolutions and any plan or
agreement relating to the issuance of such shares, and we have undertaken no
independent verification with respect thereto.
On the basis of the foregoing, in reliance thereon and with the foregoing
qualifications, we are of the opinion that:
1. The Company has been duly incorporated and is a validly existing
corporation in good standing under the laws of the State of Delaware.
2. The Company has the requisite corporate power to own or lease its
property and assets and to conduct its business as it is currently being
conducted and is qualified to do business as a foreign corporation in
California.
3. The Agreement, the Voting Agreement and the Investor Rights Agreement
have been duly and validly authorized, executed and delivered by the Company and
constitute valid and binding agreements of the Company enforceable against the
Company in accordance with their respective terms, except as rights to indemnity
under Section 2.7 of the Investor Rights Agreement may be limited by applicable
laws and except (i) as limited by applicable bankruptcy, insolvency,
reorganization, arrangement, moratorium and other laws of general applicability
relating to or affecting creditors' rights, and (ii) as limited by equitable
principles generally and limitations on the availability of equitable remedies,
whether such enforceability is considered in a proceeding in equity or at law.
4. The Company's authorized capital stock consists of twenty million
(20,000,000) shares of Common Stock, $0.001 par value, of which no shares are
issued and outstanding, and (b) ten million (10,000,000) shares of Preferred
Stock, $0.001 par value, of which (i) six million (6,000,000) shares have been
designated Series A Preferred Stock, $0.001 par value, of which six million
(6,000,000) shares are issued and outstanding; (ii) one million thirty two
thousand one hundred forty-nine (1,032,149) shares have been designated Series B
Preferred Stock, $0.001 par value, of which no shares were issued and
outstanding prior to the Closing; and (iii) six hundred fifty-nine thousand
eight hundred ninety-eight (659,898) shares have been designated Series B-1
<PAGE>
COOLEY GODWARD LLP
G.D. Searle & Co.
February 27, 1998
Page Three
Preferred Stock, $0.001 par value, of which no shares were issued and
outstanding prior to the Closing. The rights, preferences and privileges of the
Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred
Stock are as stated in the Restated Certificate. The Shares have been duly
authorized, and upon issuance and delivery against payment therefor in
accordance with the terms of the Agreement, the Shares will be validly issued,
outstanding, fully paid and nonassessable. The shares of Common Stock issuable
upon conversion of the Shares have been duly authorized, and upon issuance and
delivery upon conversion of the Shares in accordance with the terms of the
Shares, will be validly issued, outstanding, fully paid and nonassessable. To
the best of our knowledge, there are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to purchase
any of the authorized but unissued capital stock of the Company, other than the
conversion privileges of the Series A Preferred Stock, Series B Preferred Stock
and Series B-1 Preferred Stock, rights created in connection with the
transactions contemplated by the Agreement and the Investor Rights Agreement,
and one million nine hundred twenty thousand (1,920,000) shares reserved for
issuance under the Company's 1997 Stock Option Plan.
5. The execution and delivery of the Agreement, the Voting Agreement and
the Investor Rights Agreement by the Company, and the performance by the Company
of the Agreement, the Voting Agreement and the Investor Rights Agreement, do not
violate any provision of the Company's Certificate of Incorporation or By-Laws,
and do not violate or contravene (a) any governmental statute, rule or
regulation applicable to the Company or (b) any order, writ, judgment,
injunction, decree, determination or award which has been entered against the
Company and of which we are aware, the violation or contravention of which would
materially and adversely affect the Company, its assets, financial condition or
operations.
6. To the best of our knowledge, there is no action, proceeding or
investigation pending or threatened in writing against the Company before any
court or administrative agency that questions the validity of the Agreement, the
Voting Agreement or the Investor Rights Agreement or that challenges the
consummation of the transactions contemplated thereby or might result, either
individually or in the aggregate, in any material adverse change in the assets,
financial condition, or operations of the Company.
7. The offer and sale of the Shares is exempt from the registration
requirements of the Securities Act of 1933, as amended.
8. All consents, approvals, authorizations, or orders of, and filings,
registrations, and qualifications with any regulatory authority or governmental
body in the United States required for the issuance by the Company of the
Shares, have been made or obtained, except for the filing of a Notice of
Transaction Pursuant To Section 25102(f) of the California Corporate Securities
Law of 1968.
<PAGE>
COOLEY GODWARD LLP
G.D. Searle & Co.
February 27, 1998
Page Four
This opinion is intended solely for your benefit and is not to be
made available to or be relied upon by any other person, firm, or entity without
our prior written consent.
Very truly yours,
Cooley Godward LLP
By:
-----------------------------------
Frederick T. Muto
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 11,714
<SECURITIES> 10,915
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 24,552
<PP&E> 8,575
<DEPRECIATION> 6,560
<TOTAL-ASSETS> 34,598
<CURRENT-LIABILITIES> 1,833
<BONDS> 0
0
3,900
<COMMON> 136,182
<OTHER-SE> (111,344)
<TOTAL-LIABILITY-AND-EQUITY> 34,598
<SALES> 0
<TOTAL-REVENUES> 470
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,892
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21
<INCOME-PRETAX> (4,119)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,119)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,119)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
