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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Lidak Pharmaceuticals
---------------------
(Name of Issuer)
Class A Common Stock
--------------------
(Title of Class of Securities)
531707107
(CUSIP Number of Class of Securities)
Michael D. Donahue, Esq.
Asher M. Leids, Esq.
Donahue, Mesereau & Leids LLP
1900 Avenue of the Stars
Suite 2700
Los Angeles, California 90067
(310) 277-1441
-----------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
January 12, 1998
----------------
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Statement because of Rule
13d-1(b)(3) or (4), check the following
[ ]
Check the following box if a fee is being paid with this Statement:
[ ]
Page 1 of 9 Pages
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CUSIP No. 531707107
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1 NAME OF REPORTING PERSON: HealthMed, Inc.
S.S. OR I.R.S.
IDENTIFICATION NOS. OF ABOVE PERSON: 91-1878972
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [ ]
(b) [X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS*
00 HealthMed, Inc. is obligated to pay an aggregate of $1,791,238.98 in
promissory notes for the shares purchased from Dr. Katz and Medical Biology
Institute
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or
2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
Nevada
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7 SOLE VOTING POWER
2,200,424
NUMBER OF ----------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY -0-
OWNED BY ----------------------------------------------------------
EACH 9 SOLE DISPOSITIVE POWER
REPORTING 1,165,821
PERSON ----------------------------------------------------------
WITH 10 SHARED DISPOSITIVE POWER
-0-
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
2,200,424
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11)
EXCLUDES CERTAIN SHARES* [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.5%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
CO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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This statement on Schedule 13D (the "Schedule 13D"), relates to the
Class A Common Stock, no par value (the "Class A Common Stock" or the "Shares"),
issued by Lidak Pharmaceuticals, a California corporation (the "Company"), and
is being filed pursuant to Rule 13d-2 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
The information set forth in the Exhibits attached hereto is hereby
expressly incorporated herein by reference and the response to each item of this
Schedule 13D is qualified in its entirety by the provisions of such exhibits.
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D relates to shares of the Class A Common
Stock, no par value (the "Shares"), of the Company. The principal executive
offices of the Company are located at 11077 N. Torrey Pines Road, La Jolla,
California 92037.
ITEM 2. IDENTITY AND BACKGROUND
This Schedule 13D is being filed by HealthMed, Inc., a Nevada
Corporation (the "Reporting Person"). The Reporting Person's principal business
is providing consulting services to healthcare companies.
The address of the Reporting Person's principal business and principal
office is 8306 Wilshire Boulevard, Suite 7056, Beverly Hills, California 90211.
During the past five years neither the Reporting Person and, to the
best knowledge of the Reporting Person, none of the executive officers,
directors, trustees or controlling persons of the Reporting Person has been
convicted in a criminal proceeding (excluding traffic violations or similar
misdemeanors).
Neither the Reporting Person, and, to the best knowledge of the
Reporting Person, none of the executive officers, directors, trustees or control
persons of the Reporting Person has, during the last five years, been a party to
a civil proceeding or subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to Federal
or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to the terms of a Stock Purchase Agreement dated January 12,
1998 by and between David H. Katz, M.D. ("Dr. Katz") and the Reporting Person
(the "Katz Stock Purchase Agreement"), Dr. Katz sold 308,100 shares of Class A
Common Stock and 70,200 shares of Class B Common Stock, no par value of the
Company (the "Class B Common Stock")to the Reporting Person for a total purchase
price of $1,528,234.98 (the "Katz Promissory Note"). The purchase price was paid
by the Reporting Person in the form
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of a promissory note in the principal amount of $1,528,234.98. Said promissory
note matures on January 12, 2000.
Pursuant to the terms of a Stock Purchase Agreement dated January 12,
1998 by and between Medical Biology Institute, a California nonprofit public
benefit corporation ("MBI") and the Reporting Person (the "MBI Stock Purchase
Agreement"), MBI sold 65,100 shares of Class A Common Stock to the Reporting
Person for a total purchase price of $263,004. The purchase price was paid by
the Reporting Person in the form of a promissory note in the principal amount of
$263,004 (the "MBI Promissory Note"). Said promissory note matures on January
12, 2000.
ITEM 4. PURPOSE OF TRANSACTION
The Reporting Person purchased the Shares for purposes of investment
and for the purposes otherwise specified hereinbelow in this Item 4. Subject to
applicable legal and contractual requirements, and depending upon its evaluation
of the Company's business and prospects, future developments, market conditions
and other factors, the Reporting Person may, from time to time, purchase
additional Shares or sell or cause to be sold, all or a portion of these Shares
for which the Reporting Person exercises voting or dispositive power, either in
open market or privately negotiated transactions or otherwise.
Subject to the foregoing, the Reporting Persons have no plans or
proposals which relate to Items 4(a) through (j) of Schedule 13D except as
follows:
(a) The Reporting Person is seeking to achieve voting
control over 30% to 40% of the Company through open market purchases, privately
negotiated transactions, placement of shares of the Company into voting trusts
over which the Reporting Person will have voting control, or otherwise.
(b) Not Applicable.
(c) Not Applicable.
(d) The Reporting Person's intent is to seek to replace
everyone on the Board of Directors of the Company.
(e) Pursuant to the terms of a non-binding letter
proposal (the "Proposal") dated January 13, 1998 from the President of the
Reporting Person to Dr. Katz, the Chief Executive Officer of the Company, the
Reporting Person, in conjunction with National Century Financial Enterprises,
Inc., an affiliate of the Reporting Person, has proposed to provide to the
Company up to $130 million of financing, such as loans, lines of credit and/or
accounts receivable facilities, in order to fund completion of the Company's
pharmaceutical technologies. The proposal is subject to certain conditions,
including, without limitation, the following: (i) satisfaction with a due
diligence review of the Company, (ii) receiving sufficient entry of shareholders
of the Company in voting trusts with the Reporting
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Person, and (iii) reconfiguring the Board of Directors of the Company.
(f) If the proposal is accepted, the Company's
outstanding debt would increase, thereby effecting the Company's debt-to-equity
ratio.
(g) Not Applicable.
(h) Not Applicable.
(i) Not Applicable.
(j) Not Applicable.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Reporting Person is the direct beneficial owner
of 443,400 Shares. Further, the Reporting Person has voting power over an
additional 1,034,603 Shares pursuant to the terms of Voting Trust Agreements
with Dr. Katz and MBI (see below). Moreover, the Reporting Person may be deemed
to have a beneficial interest in 722,421 Shares which the Reporting Person may
acquire pursuant to the terms of the Purchase Rights Agreement (as hereinafter
defined). Accordingly, the Reporting Person may be deemed to beneficially own
approximately 2,200,424 Shares, representing approximately 5.5% of the Shares
outstanding.
The percentage of Shares outstanding reported as beneficially owned by
the Reporting Person on the date hereof is based upon the Company's Form 10-K
for the Fiscal Year Ended September 30, 1997 so that the Reporting Person's
information is that the total shares of Class A Common Stock issued and
outstanding as of December 29, 1997 was 38,742,511 Shares. The calculation as to
percentage ownership gives effect to (i) the automatic conversion of the 234,000
shares of Class B Common Stock of the Company into 234,000 Shares of Class A
Common Stock upon the transfer of such Shares as required by the Company's
Restated Articles of Incorporation (the "Articles") and (ii) the exercise by Dr.
Katz of options to acquire up to 1,918,400 shares of Class A Common Stock and
375,000 shares of Class B Common Stock, aggregating 2,293,400, the Reporting
Person's right to acquire 31.5% of such shares representing an aggregate of
604,296 shares of Class A Common Stock and 118,125 shares of Class B Common
Stock, aggregating 722,421 shares and the automatic conversion of the 118,125
shares of Class B Common Stock into 118,125 shares of Class A Common Stock, and
results, for purposes of calculating the percent of class owned by the Reporting
Person, in there being 39,698,932 shares of Class A Common Stock issued and
outstanding.
(b) The Reporting Person has sole voting and dispositive
power with respect to the 443,400 Shares of Class A Common Stock purchased
pursuant to the Katz Stock Purchase Agreement and the MBI Stock Purchase
Agreement.
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Pursuant to the terms of a Voting Trust Agreement dated January 12,
1998 by and between Dr. Katz and the Reporting Person (the "Katz Voting Trust
Agreement"), Dr. Katz transferred 718,903 shares of Class A Common Stock and
163,800 shares of Class B Common Stock (which automatically converted into
163,800 shares of Class A Common Stock) into a voting trust with the Reporting
Person. The Reporting Person is the trustee of such voting trust and has the
sole power to vote the 1,034,603 Shares transferred into such voting trust. The
term of the Katz Voting Trust Agreement is ten (10) years. Under the terms of
the Katz Voting Trust Agreement, Dr. Katz has retained the power to dispose of
all of the Shares held in such trust; provided, however, Dr. Katz may not
dispose of more than twenty percent (20%) of such Shares within any thirty (30)
day period.
Pursuant to the terms of a Voting Trust Agreement dated January 12,
1998 by and between MBI and the Reporting Person (the "MBI Voting Trust
Agreement"), MBI transferred 151,900 Shares of Class A Common Stock into a
voting trust with the Reporting Person. The Reporting Person is the trustee of
such voting trust and has the sole power to vote the 151,900 Shares of Class A
Common Stock transferred into such voting trust. The term of the MBI Voting
Trust Agreement is ten (10) years. Under the terms of the MBI Voting Trust
Agreement, MBI has retained the power to dispose of all of the Shares held in
such trust; provided, however, MBI may not dispose of more than twenty percent
(20%) of such Shares within any thirty (30) day period.
Dr. Katz and the Reporting Person have also entered into a Purchase
Rights Agreement (the "Purchase Rights Agreement") dated January 12, 1998
pursuant to which Dr. Katz has granted to the Reporting Person the irrevocable
right to receive either (i) 31.5% of the shares received by Dr. Katz upon the
exercise of his stock options (the "Options") to purchase 1,918,400 shares of
Class A Common Stock and 375,000 shares of Class B Common Stock or (ii) 31.5% of
the net proceeds from the sale of the shares received upon exercise of the
Options. The Purchase Rights Agreement expires on June 21, 2007. The Options are
exercisable within 60 days. Accordingly, the Reporting Person may be deemed to
beneficially own 722,421 shares of Class A Common Stock.
(c) Within the last sixty days, the Reporting Person has
effected the transactions described in the Katz Stock Purchase Agreement, the
MBI Stock Purchase Agreement, the Katz Voting Trust Agreement, the MBI Voting
Trust Agreement, the Purchase Rights Agreement, the Katz Promissory Note and the
MBI Promissory Note (collectively, the "Operative Agreements"). A detailed
description of these transactions is set forth in Item 3, Item 5(a) and Item
5(b) of this Schedule 13D (and the exhibits hereto) and is hereby incorporated
herein by this reference and includes the following:
(1) The Reporting Person effected the
transactions;
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(2) The date of the transaction was January 12,
1998.
(3) The transactions involved an aggregate of
2,200,424 shares of Class A Common Stock.
(4) 378,300 shares of Class A Common Stock were
purchased from Dr. Katz by the Reporting
Person and 65,100 shares of Class A Common
Stock were purchased from MBI, in each case
at $4.04 per share.
(5) The transactions were privately negotiated
and were effected in San Diego, California
pursuant to the terms of the Operative
Agreements.
(d) Pursuant to the terms of the Purchase Rights
Agreement, Dr. Katz has the right to exercise the Options, to sell the shares of
stock received upon such exercise and to either (i) to retain 68.5% of the net
proceeds from the sale of such shares or (ii) to retain 68.5% of the shares
received upon exercise of the Options.
(e) Not Applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
The discussion contained in Item 3, Item 5(a) and Item 5(b) is hereby
incorporated herein by this reference.
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ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1: Katz Stock Purchase Agreement
Exhibit 2: MBI Stock Purchase Agreement
Exhibit 3: Katz Voting Trust Agreement
Exhibit 4: MBI Voting Trust Agreement
Exhibit 5: Purchase Rights Agreement
Exhibit 6: Katz Promissory Note
Exhibit 7: MBI Promissory Note
Exhibit 8: Proposal
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Date: January 22, 1998
HEALTHMED, INC.
By: /S/ T. Daniel Neveau
---------------------------------
Name: T. Daniel Neveau
Title: Vice President-Development
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EXHIBIT 1
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into this 12th
day of January, 1998, by and between HealthMed, Inc., a Nevada corporation
("Purchaser") and David Katz, M.D. ("Seller").
RECITALS
A. LIDAK Pharmaceuticals, a California corporation (the "Corporation")
presently has outstanding two classes of common stock (individually, "Class A
Shares" and "Class B Shares" and collectively, the "Shares"), of which 1,027,003
Class A Shares and 234,000 of Class B Shares have been issued to Seller.
B. The Shares are collectively the only issued and outstanding capital
stock of the Corporation held by Seller.
C. The parties hereto are parties to that certain Purchase Rights
Agreement dated of even date herewith, which agreement is appended hereto as
Exhibit A and incorporated herein by this reference.
D. The Purchaser desires to purchase from Seller and Seller desires to
sell to the Purchaser 308,100 of the Class A Shares and 70,200 of the Class B
Shares owned by Seller on the terms and subject to the conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Purchase of Shares.
1.1 Purchase of Shares. Subject to the terms and conditions set
forth herein, at the Closing (as defined below) Seller will sell 308,100 of the
Class A Shares and 70,200 of the Class B Shares owned by Seller to the Purchaser
and the Purchaser will purchase all of such Shares owned by Seller from Seller,
such Shares constituting thirty percent (30%) of all of the issued and
outstanding capital stock of the Corporation owned by Seller as of the Closing.
1.2 Purchase Price. The Purchase Price shall be One Million Five
Hundred Twenty Eight Thousand Two Hundred Thirty Four and 98/100 Dollars
($1,528,234.98) for the Shares purchased hereby (referred herein to as the
"Purchase Price").
1.3 Payment of Purchase Price. The Purchase Price will be paid to
Seller by Purchaser's delivery to Seller of a promissory note in the principal
sum of the Purchase Price and in substantially the form of Exhibit 1.3 hereto at
the Closing (the "Note"), such Note to be at the
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rate of ten percent (10%) per annum computed on the basis of a year of 360 days
for the actual number of days elapsed and shall additionally provide for annual
payments of interest only with principal due and payable on the second (2nd)
anniversary of such Note, and the Note shall not be subject to any prepayment
penalties; provided, however, that in the event the last stock purchase price on
the first (1st) anniversary date of this Agreement of the Company's Class A
common stock on the public market equals or exceeds Nine and No/100 Dollars
($9.00), then Seven Hundred Seventy One Thousand Eight Hundred Thirty Two and
98/100 ($771,832.98) of the amount due on the Note shall be accelerated from the
maturity date thereof and shall be due and payable no later than fifteen (15)
days thereafter.
2. Representations and Warranties of Seller. As a material inducement to
the Purchaser to enter into this Agreement and purchase the Shares, the Seller
represents and warrants that:
2.1 Ownership of the Shares. Seller is the owner, beneficially
and of record, of the Shares being transferred pursuant to this Agreement free
and clear of all liens, charges, claims, encumbrances, security interests,
equities, restrictions on transfer or other defects in title of any kind or
description.
2.2 Authority to Enter into Agreements; Enforceability. Seller
has the right, power and authority to enter into and to carry out the terms and
provisions of this Agreement, including the transfer and delivery of the Shares
being transferred pursuant to this Agreement, without obtaining the approval or
consent of any other party or authority, and this Agreement is a legal, valid
and binding agreement of Seller, enforceable in accordance with its terms.
2.3 No Conflict. The execution and performance of this Agreement
by Seller will not violate any agreement, promissory note, security arrangement,
order or other instrument to which Seller is a party or by which Seller may be
bound.
2.4 Litigation. To the best knowledge of Seller, there are no
suits, actions or legal, administrative, arbitration or other proceedings
pending, filed or initiated by or against the Corporation occurring since the
issuance of the Corporation's Form 10K dated September 30, 1997.
2.5 Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates, or other items
prepared or supplied to the Purchaser by or on behalf of the Seller with respect
to this purchase contain any untrue statement of a material fact or omit a
material fact necessary to make each statement contained herein or therein not
misleading. The Seller has not intentionally concealed any fact known by him to
have a material adverse effect upon the Corporation's existing or expected
financial condition, operating results, assets, customer relations, employee
relations, or business prospects taken as a whole.
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3. Representations and Warranties of Purchaser. As a material inducement
to the Seller to enter into this Agreement and sell the Shares, the Purchaser
hereby represents and warrants to the Seller as follows:
3.1 Organization; Power. The Purchaser is a corporation duly
incorporated and validly existing under the laws of the State of California, and
has all requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
3.2 Authorization. The execution, delivery, and performance by
the Purchaser of this Agreement and all other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
necessary corporate action of the Purchaser, and this Agreement and each such
other agreement, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of the Purchaser enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, and similar statutes affecting creditors'
rights generally and judicial limits on equitable remedies.
3.3 No Conflict with Other Instruments or Agreements. The
execution, delivery, and performance by the Purchaser of this Agreement and all
other agreements contemplated hereby to which the Purchaser is a party will not
result in a breach or violation of, or constitute a default under, its Articles
of Incorporation or Bylaws or any material agreement to which the Purchaser is a
party or by which the Purchaser is bound.
3.4 Litigation. There are no actions, suits, proceedings, or
governmental investigations or inquiries pending or, to the knowledge of the
Purchaser, threatened against the Purchaser or its properties, assets,
operations, or businesses that might delay, prevent, or hinder the consummation
of this purchase.
3.5 Investment Representations.
3.5.1 The Purchaser is an "accredited investor" as
defined by the SEC's Rule 501(a), and the Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Corporation so that the Purchaser is capable of
evaluating the merits and risks of the Purchaser's investment in the Corporation
and has the capacity to protect the Purchaser's own interests.
3.5.2 The Purchaser is acquiring the Shares for
investment for the Purchaser's own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
The Purchaser understands that the Shares to be purchased have not been, and
will not be, registered under the Securities Act or the securities laws of any
state by reason of a specific exemption from the registration provisions of the
Securities Act and the applicable state securities laws, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
The Purchaser is acquiring the Shares without
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expectation, desire, or need for resale and not with the view toward
distribution, resale, subdivision, or fractionalization of the Shares.
3.5.3 During the course of the negotiation of this
Agreement, the Purchaser has had an opportunity to discuss the Corporation's
business, management and financial affairs with the Corporation's management and
the opportunity to review the Corporation's financial statements, books and
records, facilities and business plan. The Purchaser has also had an opportunity
to ask questions of officers of the Corporation, which questions were answered
to the Purchaser's satisfaction.
3.5.4 The Purchaser understands that the Shares to be
purchased have not been registered under Securities Act of 1933 ("1933 Act"), or
under any state securities law.
3.5.5 The Purchaser understands that the Shares cannot be
resold in a transaction to which the 1933 Act and state securities laws apply
unless (i) subsequently registered under the 1933 Act and applicable state
securities laws or (ii) exemptions from such registrations are available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the 1933 Act
which permit limited resale of shares purchased in a private transaction subject
to the satisfaction of certain conditions.
3.5.6 The Purchaser understands that no public market now
exists for the Shares and that it is uncertain that a public market will ever
exist for the Shares.
3.5.7 The Purchaser understands that the certificates for
the Shares will bear the following legend:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE
UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES
REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES
A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS
OF THE CORPORATION OR ITS AGENTS, STATING THAT IN THE OPINION OF
THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
3.6 Tax Liability. To the extent the Purchaser deems
necessary, the Purchaser has reviewed with the Purchaser's own tax advisors the
federal, state, local and foreign tax
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consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser relies solely on such advisors and not on any
statements or representations of the Seller or any of its agents. The Purchaser
understands that the Purchaser (and not the Seller) shall be responsible for the
Purchaser's own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
3.7 Disclosure. To the Purchaser's knowledge, this Agreement,
with the Exhibits hereto, when taken as a whole, does not contain any untrue
statement of a material fact concerning the Purchaser or omit to state a
material fact necessary in order to make the statements concerning the Purchaser
contained herein not misleading in light of the circumstances under which they
were made.
3.8 Compliance with Other Instruments. The execution, delivery
and performance of and compliance with this Agreement, and the issuance of
shares will not result in any material violation of, or conflict with, or
constitute a material default under, any Purchaser's articles of incorporation
or bylaws or any of the Purchaser's material agreements nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge against any of the
assets or properties of the Corporation or the Shares.
4. Covenants of Seller. The Seller covenants and agrees with the
Purchaser as follows:
4.1 Satisfaction of Conditions. The Seller will use reasonable
efforts to obtain as promptly as practicable the satisfaction of the conditions
to Closing described in this Agreement and any necessary consents or waivers
under or amendments to agreements by which the Seller is bound.
4.2 Supplements to Schedules. From time to time prior to the
Closing, the Seller will promptly supplement or amend the Exhibits and Schedules
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in any Exhibit or Schedule and will promptly notify the Purchaser of
any breach by either of them that either of them discovers of any
representation, warranty, or covenant contained in this Agreement. No supplement
or amendment of any Exhibit or Schedule made pursuant to this Section will be
deemed to cure any breach of any representation of or warranty made in this
Agreement unless the Purchaser specifically agrees thereto in writing; provided,
however, that if this purchase is closed, the Purchaser will be deemed to have
waived its rights with respect to any breach of a representation, warranty, or
covenant or any supplement to any Schedule of which it shall have been notified
pursuant to this Subsection.
4.3 No Solicitation. Until the Closing or termination pursuant to
Section 9 of this Agreement, the Seller shall not encourage, solicit, initiate,
or enter into any discussions or negotiations concerning any disposition of any
of the capital stock of Seller (other than pursuant to this Agreement), or any
proposal therefor. The Seller will promptly inform the Purchaser of any inquiry
(including the terms thereof and the person making such inquiry) received by the
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Seller after the date hereof and believed by such person to be a bona fide,
serious inquiry relating to any such proposal.
5. Covenant of Purchaser. The Purchaser will use its best efforts to
cause the conditions set forth in Section 7 to be satisfied.
6. Conditions Precedent to the Obligations of Purchaser; Legal Opinion.
Each and every obligation of the Purchaser under this Agreement is subject to
the delivery, at or before the Closing, of an opinion of Luce, Forward, Hamilton
& Scripps LLP, in form and content reasonably acceptable to the Purchaser and
its legal counsel, to the effect that (i) this Agreement has been duly executed
and delivered by Seller; (ii) this Agreement and each other agreement
contemplated hereby, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms except as the enforceability
thereof may be limited by the application of bankruptcy, insolvency, moratorium,
or similar laws affecting the rights of creditors generally or judicial limits
on the right of specific performance; (iii) except as set forth in Schedule 6,
the execution and delivery by the Seller of this Agreement and all other
agreements contemplated hereby to which the Seller is a party, the offering and
sale of the Shares hereunder and the fulfillment of and compliance with the
respective terms hereof and thereof by the Seller, do not and will not (a)
conflict with or result in a breach of the terms, conditions or provisions of,
(b) constitute a default under, (c) result in the creation of any lien, security
interest, charge, or encumbrance upon the capital stock or assets of the Seller,
(d) give any third party the right to accelerate any obligation under, (e)
result in a violation of, or (f) require any authorization, consent, approval,
exemption, or other action by or notice to any court or administrative or
governmental body, or any law, statute, rule, or regulation to which the Seller
is subject, or any agreement, instrument, order, judgment, or decree to which
the Seller is subject; and (iv) to such counsel's knowledge, Seller owns the
Shares.
7. Conditions Precedent to the Obligations of Seller. Each and every
obligation of the Seller under this Agreement is subject to the satisfaction, at
or before the Closing, of each of the following conditions:
7.1 Representations and Warranties; Performance. Each of the
representations and warranties made by the Purchaser herein will be true and
correct in all material respects as of the Closing with the same effect as
though made at that time except for changes contemplated, permitted, or required
by this Agreement; the Purchaser will have performed and complied with all
agreements, covenants, and conditions required by this Agreement to be performed
and complied with by it prior to the Closing; and the Seller will have received,
at the Closing, a certificate of the Purchaser, signed by the President and the
Secretary or the Chief Financial Officer of the Purchaser, stating that each of
the representations and warranties made by the Purchaser herein is true and
correct in all material respects as of the Closing except for changes
contemplated, permitted, or required by this Agreement and that the Purchaser
has performed and complied with all agreements, covenants, and conditions
required by this Agreement to be performed and complied with by it prior to the
Closing.
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7.2 Corporate Action. The Purchaser will have furnished to the
Seller a copy, certified by the Secretary of an Assistant Secretary of the
Purchaser, of the resolutions of the Purchaser authorizing the execution,
delivery, and performance of this Agreement.
8. Closing.
8.1 Time, Place, and Manner of Closing. Unless this Agreement has
been terminated and this purchase has been abandoned pursuant to the provisions
of Section 9, the closing ("Closing") will be held at the offices of Stein
Perlman & Hawk, or such other place as the parties may agree, on January 12,
1998, or as soon as practicable after the satisfaction of the various conditions
precedent to the Closing set forth herein. At the Closing the parties to this
Agreement will exchange certificates, Notes, and other instruments and documents
in order to determine whether the terms and conditions of this Agreement have
been satisfied. Upon the determination of each party that its conditions to
consummate this purchase have been satisfied or waived, the Seller shall deliver
to the Purchaser the certificate(s) evidencing the Shares, duly endorsed for
transfer, and the Purchaser shall deliver to the Seller the Note referred to in
Section 1.3, in a manner to be agreed upon by the parties. After the Closing,
the Seller, at the Purchaser's cost, will execute, deliver, and acknowledge all
such further instruments of transfer and conveyance and will perform all such
other acts as the Purchaser may reasonably request to effectively transfer the
Shares.
8.2 Consummation of Closing. All acts, deliveries, and
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. The time of the Closing has been scheduled to
correspond with the close of business at the principal office of the Corporation
and, regardless of when the last act, delivery, or confirmation of the Closing
shall take place, the transfer of the Shares shall be deemed to occur as of the
close of business at the principal office of the Corporation on the date of the
Closing.
9. Termination.
9.1 Termination for Cause. If, pursuant to the provisions of
Section 6 or 7 of this Agreement, the Seller or the Purchaser is not obligated
at the Closing to consummate this Agreement, then the party who is not so
obligated may terminate this Agreement.
9.2 Termination Without Cause. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and abandoned at
any time without further obligation or liability on the part of any party in
favor of any other by mutual consent of the Purchaser and the Seller.
9.3 Termination Procedure. Any party having the right to
terminate this Agreement due to a failure of a condition precedent contained in
Sections 6 or 7 hereto may
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terminate this Agreement by delivering to the other party written notice of
termination, and thereupon, this Agreement will be terminated without obligation
or liability of any party.
10. Miscellaneous Provisions.
10.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written agreement
signed by the Purchaser and the Seller.
10.2 Waiver of Compliance; Consents
10.2.1 Any failure of any party to comply with any
obligation, covenant, agreement, or condition herein may be waived by the party
entitled to the performance of such obligation, covenant, or agreement or who
has the benefit of such condition, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement, or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
10.2.2 Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent will be given in a manner
consistent with the requirements for a waiver of compliance as set forth above.
10.3 Payment of Fees and Expenses. Each party to this Agreement
will be responsible for, and will pay, all of its own fees and expenses,
including those for its own counsel and accountants, incurred in the
negotiation, preparation, and consumption of this Agreement and this purchase
and sale.
10.4 Costs. Each party hereto shall bear, pay and discharge all
of his/its respective expenses incurred in connection with the execution and
performance of this Agreement, except as otherwise provided specifically herein.
10.5 Entire Agreement; Successors and Assigns; and Amendment;
Third Parties. Except for that certain Voting Trust Agreement executed
concurrently herewith and appended hereto as Exhibit B and the Purchase Rights
Agreement executed concurrently herewith and appended hereto as Exhibit A, this
Agreement and the exhibits appended hereto constitute the entire agreement
between the parties concerning the subject matter hereof and no party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous or concurrent
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement and the exhibits appended hereto. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective executors, administrators, heirs, successors and assigns of the
parties. Except as expressly provided herein, nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the parties hereto,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
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10.6 Governing Law and Consent to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California. The parties irrevocably (i) submit to the exclusive jurisdiction of
the state courts of the State of California over any action or proceeding
arising out of a breach of this Agreement, (ii) agree that all claims in respect
of such action or proceeding may be heard and determined in such courts, (iii)
waive, to the fullest extent they may effectively do so, the defense of an
inconvenient or inappropriate forum to the maintenance of such action or
proceeding, (iv) agree that any communication given in accordance with Section
10.9, to the fullest extent permitted by law, shall be taken and held to be
valid personal service and personal delivery to such party for the purposes set
forth in this Section, and (v) waive any defense based on lack of personal
jurisdiction for any such purpose.
10.7 Legal Action and Fees. In the event of any controversy,
claim or dispute between the parties hereto arising out of or relating to this
Agreement, the prevailing party shall be entitled to recovery from the
non-prevailing party its reasonable expenses, including but not limited to its
reasonable attorneys' fees.
10.8 Headings. The headings of the sections of this Agreement are
for convenience only and shall not determine the interpretation of this
Agreement.
10.9 Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
24 hours after transmission by telecopy, telex, or five (5) days after deposit
in the United States mail by registered or certified mail, addressed as set
forth below or at such other address as such party may designate by ten (10)
days' advance written notice to the other party:
If to Seller: David Katz, M.D.
1775 La Jolla Rancho Road
La Jolla, CA 92037
If to Purchaser: HealthMed, Inc.
8306 Wilshire Boulevard, Suite 7056
Beverly Hills, California 90211
Attention: President
10.10 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.
10.11 Other Documents. Seller shall, at any time after the
Closing and upon the request of the Purchaser, execute and deliver to the
Purchaser such documents or instruments of conveyance, license or assignment or
take such other action as is reasonably necessary to complete the transfer of
the Shares or other transactions contemplated by this Agreement or to perfect
the interest of the Purchaser therein. Further, the parties agree to take all
actions and file such documents required to comply with California securities
laws.
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10.12 Legal Advice. The parties hereby acknowledge that they have
received independent legal advice from attorneys of their choice with respect to
the advisability of executing this Agreement and the related documents affecting
this transaction. Prior to the execution of this Agreement, each of the parties'
attorneys reviewed this Agreement and discussed the Agreement with such party,
and each party made all desired changes. Each of the parties and their attorneys
have made such investigation of the facts pertaining to this Agreement and all
of the matters appertaining thereto as they deemed necessary. Each of the
parties certifies that it has read this Agreement, and fully understands this
Agreement and that it has executed it voluntarily, free of any duress, force or
undue influence of any party or any person.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
SELLER:
---------------------------------
DAVID KATZ, M.D.
PURCHASER:
HEALTHMED, INC.
By:_________________________________
Mitchell J. Stein
Its: President & Secretary
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CONSENT OF SPOUSE, COHABITANT OR DOMESTIC PARTNER
The undersigned spouse, cohabitant or domestic partner of the
Shareholder acknowledges on her behalf that: I have read the foregoing Agreement
and I know its contents. I am aware that by its provisions that my spouse,
cohabitant or domestic partner sells to Purchaser thirty percent (30%) of his
Shares in the Company, including my community interest in them. I hereby consent
to and approve of the provisions of the Agreement, and agree that those Shares
and my interest in them are subject to the provisions of the Agreement and that
I will take no action at any time to hinder operation of the Agreement on those
Shares or my interest in them.
Signature:__________________________________
Print Name:____________________________
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EXHIBITS 1.3
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EXHIBIT A
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EXHIBIT B
14
<PAGE> 1
EXHIBIT 2
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into this 12th
day of January, 1998, by and between HealthMed, Inc., a Nevada corporation
("Purchaser") and Medical Biology Institute, a California nonprofit public
benefit corporation ("Seller").
RECITALS
A. LIDAK Pharmaceuticals, a California corporation (the "Corporation")
presently has outstanding two classes of common stock (individually, "Class A
Shares" and "Class B Shares" and collectively, the "Shares"), of which 217,000
Class A Shares have been issued to Seller.
B. The Shares are collectively the only issued and outstanding capital
stock of the Corporation held by Seller.
C. The Purchaser desires to purchase from Seller and Seller desires to
sell to the Purchaser 65,100 of the Class A Shares and thirty percent (30%) of
the Class B Shares owned by Seller on the terms and subject to the conditions
set forth herein.
AGREEMENT
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Purchase of Shares.
1.1 Purchase of Shares. Subject to the terms and conditions set
forth herein, at the Closing (as defined below) Seller will sell 65,100 of the
Class A Shares and thirty percent (30%) of the Class B Shares owned by Seller to
the Purchaser and the Purchaser will purchase all of such Shares owned by Seller
from Seller, such Shares constituting thirty percent (30%) of all of the issued
and outstanding capital stock of the Corporation owned by Seller as of the
Closing.
1.2 Purchase Price. The Purchase Price shall be Two Hundred Sixty
Three Thousand Four and No/100 Dollars ($263,004.00) for the Shares purchased
hereby (referred herein to as the "Purchase Price").
1.3 Payment of Purchase Price. The Purchase Price will be paid to
Seller by Purchaser's delivery to Seller of a promissory note in the principal
sum of the Purchase Price and in substantially the form of Exhibit 1.3 hereto at
the Closing (the "Note"), such Note to be at the rate of ten percent (10%) per
annum computed on the basis of a year of 360 days for the actual number of days
elapsed and shall additionally provide for annual payments of interest only with
principal due and payable on the second (2nd) anniversary of such Note, and the
Note shall not be subject to any prepayment penalties; provided, however, that
in the event the last stock purchase
<PAGE> 2
price on the first (1st) anniversary date of this Agreement of the Company's
Class A common stock on the public market equals or exceeds Nine and No/100
Dollars ($9.00), then One Hundred Thirty Two Thousand Eight Hundred Four and
No/100 ($132,804.00) of the amount due on the Note shall be accelerated from the
maturity date thereof and shall be due and payable no later than fifteen (15)
days thereafter.
2. Representations and Warranties of Seller. As a material inducement to
the Purchaser to enter into this Agreement and purchase the Shares, the Seller
represents and warrants that:
2.1 Organization; Power; Ownership of the Shares. The Purchaser
is a corporation duly incorporated and validly existing under the laws of the
State of California, and has all requisite corporate power and authority to
enter into this Agreement and perform its obligations hereunder. Seller is the
owner, beneficially and of record, of the Shares being transferred pursuant to
this Agreement free and clear of all liens, charges, claims, encumbrances,
security interests, equities, restrictions on transfer or other defects in title
of any kind or description.
2.2 Authority to Enter into Agreements; Enforceability. The
execution, delivery, and performance by the Seller of this Agreement and all
other agreements contemplated hereby to which the Seller is a party have been
duly and validly authorized by all necessary corporate action of the Seller, and
this Agreement and each such other agreement, when executed and delivered by the
parties thereto, will constitute the legal, valid, and binding obligation of the
Seller enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, and similar
statutes affecting creditors' rights generally and judicial limits on equitable
remedies.
2.3 No Conflict. The execution and performance of this Agreement
by Seller will not violate any agreement, promissory note, security arrangement,
order or other instrument to which Seller is a party or by which Seller may be
bound.
2.4 Litigation. To the best knowledge of Seller, there are no
suits, actions or legal, administrative, arbitration or other proceedings
pending, filed or initiated by or against the Corporation.
2.5 Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates, or other items
prepared or supplied to the Purchaser by or on behalf of the Seller with respect
to this purchase contain any untrue statement of a material fact or omit a
material fact necessary to make each statement contained herein or therein not
misleading. The Seller has not intentionally concealed any fact known by it to
have a material adverse effect upon the Corporation's existing or expected
financial condition, operating results, assets, customer relations, employee
relations, or business prospects taken as a whole.
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<PAGE> 3
3. Representations and Warranties of Purchaser. As a material inducement
to the Seller to enter into this Agreement and sell the Shares, the Purchaser
hereby represents and warrants to the Seller as follows:
3.1 Organization; Power. The Purchaser is a corporation duly
incorporated and validly existing under the laws of the State of California, and
has all requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
3.2 Authorization. The execution, delivery, and performance by
the Purchaser of this Agreement and all other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
necessary corporate action of the Purchaser, and this Agreement and each such
other agreement, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of the Purchaser enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, and similar statutes affecting creditors'
rights generally and judicial limits on equitable remedies.
3.3 No Conflict with Other Instruments or Agreements. The
execution, delivery, and performance by the Purchaser of this Agreement and all
other agreements contemplated hereby to which the Purchaser is a party will not
result in a breach or violation of, or constitute a default under, its Articles
of Incorporation or Bylaws or any material agreement to which the Purchaser is a
party or by which the Purchaser is bound.
3.4 Litigation. There are no actions, suits, proceedings, or
governmental investigations or inquiries pending or, to the knowledge of the
Purchaser, threatened against the Purchaser or its properties, assets,
operations, or businesses that might delay, prevent, or hinder the consummation
of this purchase.
3.5 Investment Representations.
3.5.1 The Purchaser is an "accredited investor" as
defined by the SEC's Rule 501(a), and the Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Corporation so that the Purchaser is capable of
evaluating the merits and risks of the Purchaser's investment in the Corporation
and has the capacity to protect the Purchaser's own interests.
3.5.2 The Purchaser is acquiring the Shares for
investment for the Purchaser's own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
The Purchaser understands that the Shares to be purchased have not been, and
will not be, registered under the Securities Act or the securities laws of any
state by reason of a specific exemption from the registration provisions of the
Securities Act and the applicable state securities laws, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
The Purchaser is acquiring the Shares without
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<PAGE> 4
expectation, desire, or need for resale and not with the view toward
distribution, resale, subdivision, or fractionalization of the Shares.
3.5.3 During the course of the negotiation of this
Agreement, the Purchaser has had an opportunity to discuss the Corporation's
business, management and financial affairs with the Corporation's management and
the opportunity to review the Corporation's financial statements, books and
records, facilities and business plan. The Purchaser has also had an opportunity
to ask questions of officers of the Corporation, which questions were answered
to the Purchaser's satisfaction.
3.5.4 The Purchaser understands that the Shares to be
purchased have not been registered under Securities Act of 1933 ("1933 Act"), or
under any state securities law.
3.5.5 The Purchaser understands that the Shares cannot be
resold in a transaction to which the 1933 Act and state securities laws apply
unless (i) subsequently registered under the 1933 Act and applicable state
securities laws or (ii) exemptions from such registrations are available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the 1933 Act
which permit limited resale of shares purchased in a private transaction subject
to the satisfaction of certain conditions.
3.5.6 The Purchaser understands that no public market now
exists for the Shares and that it is uncertain that a public market will ever
exist for the Shares.
3.5.7 The Purchaser understands that the certificates for
the Shares will bear the following legend:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE
UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES
REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES
A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS
OF THE CORPORATION OR ITS AGENTS, STATING THAT IN THE OPINION OF
THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
3.6 Tax Liability. To the extent the Purchaser deems
necessary, the Purchaser has reviewed with the Purchaser's own tax advisors the
federal, state, local and foreign tax
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<PAGE> 5
consequences of this investment and the transactions contemplated by this
Agreement. The Purchaser relies solely on such advisors and not on any
statements or representations of the Seller or any of its agents. The Purchaser
understands that the Purchaser (and not the Seller) shall be responsible for the
Purchaser's own tax liability that may arise as a result of this investment or
the transactions contemplated by this Agreement.
3.7 Disclosure. To the Purchaser's knowledge, this Agreement,
with the Exhibits hereto, when taken as a whole, does not contain any untrue
statement of a material fact concerning the Purchaser or omit to state a
material fact necessary in order to make the statements concerning the Purchaser
contained herein not misleading in light of the circumstances under which they
were made.
3.8 Compliance with Other Instruments. The execution, delivery
and performance of and compliance with this Agreement, and the issuance of
shares will not result in any material violation of, or conflict with, or
constitute a material default under, any Purchaser's articles of incorporation
or bylaws or any of the Purchaser's material agreements nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge against any of the
assets or properties of the Corporation or the Shares.
4. Covenants of Seller. The Seller covenants and agrees with the
Purchaser as follows:
4.1 Satisfaction of Conditions. The Seller will use reasonable
efforts to obtain as promptly as practicable the satisfaction of the conditions
to Closing described in this Agreement and any necessary consents or waivers
under or amendments to agreements by which the Seller is bound.
4.2 Supplements to Schedules. From time to time prior to the
Closing, the Seller will promptly supplement or amend the Exhibits and Schedules
with respect to any matter hereafter arising that, if existing or occurring at
the date of this Agreement, would have been required to be set forth or
described in any Exhibit or Schedule and will promptly notify the Purchaser of
any breach by either of them that either of them discovers of any
representation, warranty, or covenant contained in this Agreement. No supplement
or amendment of any Exhibit or Schedule made pursuant to this Section will be
deemed to cure any breach of any representation of or warranty made in this
Agreement unless the Purchaser specifically agrees thereto in writing; provided,
however, that if this purchase is closed, the Purchaser will be deemed to have
waived its rights with respect to any breach of a representation, warranty, or
covenant or any supplement to any Schedule of which it shall have been notified
pursuant to this Subsection.
4.3 No Solicitation. Until the Closing or termination pursuant to
Section 9 of this Agreement, the Seller shall not encourage, solicit, initiate,
or enter into any discussions or negotiations concerning any disposition of any
of the capital stock of Seller (other than pursuant to this Agreement), or any
proposal therefor. The Seller will promptly inform the Purchaser of any inquiry
(including the terms thereof and the person making such inquiry) received by the
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<PAGE> 6
Seller after the date hereof and believed by such person to be a bona fide,
serious inquiry relating to any such proposal.
5. Covenant of Purchaser. The Purchaser will use its best efforts to
cause the conditions set forth in Section 7 to be satisfied.
6. Conditions Precedent to the Obligations of Purchaser; Legal Opinion.
Each and every obligation of the Purchaser under this Agreement is subject to
the delivery, at or within seven (7) days following the Closing, of an opinion
of Seller's outside corporate counsel, in form and content reasonably acceptable
to the Purchaser and its legal counsel, to the effect that (i) this Agreement
has been duly executed and delivered by Seller; (ii) this Agreement and each
other agreement contemplated hereby, when executed and delivered by the parties
thereto, will constitute the legal, valid, and binding obligation of the Seller,
enforceable against the Seller in accordance with its terms except as the
enforceability thereof may be limited by the application of bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or judicial limits on the right of specific performance; and (iii)
except as set forth in Schedule 6, the execution and delivery by the Seller of
this Agreement and all other agreements contemplated hereby to which the Seller
is a party, the offering and sale of the Shares hereunder and the fulfillment of
and compliance with the respective terms hereof and thereof by the Seller, do
not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in the
creation of any lien, security interest, charge, or encumbrance upon the capital
stock or assets of the Seller, (d) give any third party the right to accelerate
any obligation under, (e) result in a violation of, or (f) require any
authorization, consent, approval, exemption, or other action by or notice to any
court or administrative or governmental body, or any law, statute, rule, or
regulation to which the Seller is subject, or any agreement, instrument, order,
judgment, or decree to which the Seller is subject; and (iv) to such counsel's
knowledge, Seller owns the rights to the Shares.
7. Conditions Precedent to the Obligations of Seller. Each and every
obligation of the Seller under this Agreement is subject to the satisfaction, at
or before the Closing, of each of the following conditions:
7.1 Representations and Warranties; Performance. Each of the
representations and warranties made by the Purchaser herein will be true and
correct in all material respects as of the Closing with the same effect as
though made at that time except for changes contemplated, permitted, or required
by this Agreement; the Purchaser will have performed and complied with all
agreements, covenants, and conditions required by this Agreement to be performed
and complied with by it prior to the Closing; and the Seller will have received,
at the Closing, a certificate of the Purchaser, signed by the President and the
Secretary or the Chief Financial Officer of the Purchaser, stating that each of
the representations and warranties made by the Purchaser herein is true and
correct in all material respects as of the Closing except for changes
contemplated, permitted, or required by this Agreement and that the Purchaser
has performed and complied with all agreements, covenants, and conditions
required by this Agreement to be performed and complied with by it prior to the
Closing.
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7.2 Corporate Action. The Purchaser will have furnished to the
Seller a copy, certified by the Secretary of an Assistant Secretary of the
Purchaser, of the resolutions of the Purchaser authorizing the execution,
delivery, and performance of this Agreement.
8. Closing.
8.1 Time, Place, and Manner of Closing. Unless this Agreement has
been terminated and this purchase has been abandoned pursuant to the provisions
of Section 9, the closing ("Closing") will be held at the offices of Stein
Perlman & Hawk, or such other place as the parties may agree, on January 12,
1998, or as soon as practicable after the satisfaction of the various conditions
precedent to the Closing set forth herein. At the Closing the parties to this
Agreement will exchange certificates, Notes, and other instruments and documents
in order to determine whether the terms and conditions of this Agreement have
been satisfied. Upon the determination of each party that its conditions to
consummate this purchase have been satisfied or waived, the Seller shall deliver
to the Purchaser the certificate(s) evidencing the Shares, duly endorsed for
transfer, and the Purchaser shall deliver to the Seller the Note referred to in
Section 1.3, in a manner to be agreed upon by the parties. After the Closing,
the Seller, at the Purchaser's cost, will execute, deliver, and acknowledge all
such further instruments of transfer and conveyance and will perform all such
other acts as the Purchaser may reasonably request to effectively transfer the
Shares.
8.2 Consummation of Closing. All acts, deliveries, and
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. The time of the Closing has been scheduled to
correspond with the close of business at the principal office of the Corporation
and, regardless of when the last act, delivery, or confirmation of the Closing
shall take place, the transfer of the Shares shall be deemed to occur as of the
close of business at the principal office of the Corporation on the date of the
Closing.
9. Termination.
9.1 Termination for Cause. If, pursuant to the provisions of
Section 6 or 7 of this Agreement, the Seller or the Purchaser is not obligated
at the Closing to consummate this Agreement, then the party who is not so
obligated may terminate this Agreement.
9.2 Termination Without Cause. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and abandoned at
any time without further obligation or liability on the part of any party in
favor of any other by mutual consent of the Purchaser and the Seller.
9.3 Termination Procedure. Any party having the right to
terminate this Agreement due to a failure of a condition precedent contained in
Sections 6 or 7 hereto may
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terminate this Agreement by delivering to the other party written notice of
termination, and thereupon, this Agreement will be terminated without obligation
or liability of any party.
10. Miscellaneous Provisions.
10.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written agreement
signed by the Purchaser and the Seller.
10.2 Waiver of Compliance; Consents
10.2.1 Any failure of any party to comply with any
obligation, covenant, agreement, or condition herein may be waived by the party
entitled to the performance of such obligation, covenant, or agreement or who
has the benefit of such condition, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement, or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
10.2.2 Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent will be given in a manner
consistent with the requirements for a waiver of compliance as set forth above.
10.3 Payment of Fees and Expenses. Each party to this Agreement
will be responsible for, and will pay, all of its own fees and expenses,
including those for its own counsel and accountants, incurred in the
negotiation, preparation, and consumption of this Agreement and this purchase
and sale.
10.4 Costs. Each party hereto shall bear, pay and discharge all
of his/its respective expenses incurred in connection with the execution and
performance of this Agreement, except as otherwise provided specifically herein.
10.5 Entire Agreement; Successors and Assigns; and Amendment;
Third Parties. Except for that certain Voting Trust Agreement executed
concurrently herewith and appended hereto as Exhibit A and the Purchase Rights
Agreement executed concurrently herewith and appended hereto as Exhibit B, this
Agreement and the exhibits appended hereto constitute the entire agreement
between the parties concerning the subject matter hereof and no party shall be
liable or bound to the other in any manner by any warranties, representations or
covenants except as specifically set forth herein. Any previous or concurrent
agreement among the parties with respect to the subject matter hereof is
superseded by this Agreement and the exhibits appended hereto. The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective executors, administrators, heirs, successors and assigns of the
parties. Except as expressly provided herein, nothing in this Agreement, express
or implied, is intended to confer upon any party, other than the parties hereto,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
8
<PAGE> 9
10.6 Governing Law and Consent to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California. The parties irrevocably (i) submit to the exclusive jurisdiction of
the state courts of the State of California over any action or proceeding
arising out of a breach of this Agreement, (ii) agree that all claims in respect
of such action or proceeding may be heard and determined in such courts, (iii)
waive, to the fullest extent they may effectively do so, the defense of an
inconvenient or inappropriate forum to the maintenance of such action or
proceeding, (iv) agree that any communication given in accordance with Section
10.9, to the fullest extent permitted by law, shall be taken and held to be
valid personal service and personal delivery to such party for the purposes set
forth in this Section, and (v) waive any defense based on lack of personal
jurisdiction for any such purpose.
10.7 Legal Action and Fees. In the event of any controversy,
claim or dispute between the parties hereto arising out of or relating to this
Agreement, the prevailing party shall be entitled to recovery from the
non-prevailing party its reasonable expenses, including but not limited to its
reasonable attorneys' fees.
10.8 Headings. The headings of the sections of this Agreement are
for convenience only and shall not determine the interpretation of this
Agreement.
10.9 Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
24 hours after transmission by telecopy, telex, or five (5) days after deposit
in the United States mail by registered or certified mail, addressed as set
forth below or at such other address as such party may designate by ten (10)
days' advance written notice to the other party:
If to Seller: Medical Biology Institute
11077 North Torrey Pines Road
La Jolla, California 92037
Attention: President
If to Purchaser: HealthMed, Inc.
8306 Wilshire Boulevard, Suite 7056
Beverly Hills, California 90211
Attention: President
10.10 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.
10.11 Other Documents. Seller shall, at any time after the
Closing and upon the request of the Purchaser, execute and deliver to the
Purchaser such documents or instruments of conveyance, license or assignment or
take such other action as is reasonably necessary to complete the transfer of
the Shares or other transactions contemplated by this Agreement or to
9
<PAGE> 10
perfect the interest of the Purchaser therein. Further, the parties agree to
take all actions and file such documents required to comply with California
securities laws.
10.12 Legal Advice. The parties hereby acknowledge that they have
received independent legal advice from attorneys of their choice with respect to
the advisability of executing this Agreement and the related documents affecting
this transaction. Prior to the execution of this Agreement, each of the parties'
attorneys reviewed this Agreement and discussed the Agreement with such party,
and each party made all desired changes. Each of the parties and their attorneys
have made such investigation of the facts pertaining to this Agreement and all
of the matters appertaining thereto as they deemed necessary. Each of the
parties certifies that it has read this Agreement, and fully understands this
Agreement and that it has executed it voluntarily, free of any duress, force or
undue influence of any party or any person.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
SELLER:
MEDICAL BIOLOGY INSTITUTE
By:______________________________
David Katz, M.D.
Its: President
By:______________________________
Christopher S. McKellar
Its: Chairman of the Board
PURCHASER:
HEALTHMED, INC.
By:_________________________________
Mitchell J. Stein
Its: President & Secretary
10
<PAGE> 11
EXHIBITS 1.3
11
<PAGE> 12
EXHIBIT A
12
<PAGE> 13
EXHIBIT B
13
<PAGE> 1
EXHIBIT 3
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT ("Agreement") is made and entered into as of
January 12, 1998, by and between David Katz, M.D., an individual (the
"Shareholder") and HealthMed, Inc., a Nevada corporation ("Trustee").
This Agreement is made with reference to the following facts and
circumstances:
A. The authorized capital stock of LIDAK Pharmaceuticals, a California
corporation (the "Company"), consists of (i) 99,490,000, no par value per share,
Class A common shares, of which 38,613,799 are issued and outstanding, and such
shares set forth on Schedule 1 have been issued to the Shareholder (the "Class A
Shares"); and (ii) 510,000, no par value per share, Class B common shares, of
which 283,000 are issued and outstanding, and such shares set forth on Schedule
1 have been issued to the Shareholder (the "Class B Shares") (the Class A Shares
and the Class B Shares shall hereinafter be collectively referred to as the
"Shares").
B. The Shareholder wishes to transfer the Shares to Trustee in order to
provide Trustee the full and exclusive power to vote the shares of common stock
of the Company in accordance with the Company's business plan, to elect the
Company's Board of Directors, to manage the Company and to otherwise provide for
the smooth and efficient operation of the Company.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, and for other valuable consideration, including, without
limitation (a) the extensive services Trustee has heretofore provided to the
Shareholder, including, without limitation, substantial business consulting
services appertaining or relating to the protection and maximization of the
value of the Shareholder's equity interests, potential equity interests and
prospective equity interests in the Company, including assisting the Shareholder
in the development of comprehensive plans that are believed by Trustee and the
Shareholder to be highly likely to lead to the creation of compelling new
opportunities for the Company and the Shareholder, and (b) as specifically
requested of Trustee by the Shareholder, and hereby acknowledged by the
Shareholder, the extensive services the Trustee is expected to use its best
efforts to provide in the future, in furtherance of the goals of both protecting
and maximizing the equity interests of all shareholders of the Company,
including that of the Shareholder, the parties hereby agree as follows:
1. TRUSTEE. HealthMed, Inc. is hereby appointed as Trustee for the
purposes set forth in and with the powers granted to him by this Agreement, and
Trustee hereby accepts such appointment and agrees to act as Trustee hereunder.
2. TERM OF VOTING TRUST. For a period of ten (10) years following the
date of this Agreement, all of the Shares owned by the Shareholder as of the
date of this Agreement, together with such other Shares that the Shareholder may
purchase or receive from any source
<PAGE> 2
whatsoever during the term of this Agreement, including but not limited to any
Shares received as a consequence of any event described in Paragraph 3 below,
shall be subject to the provisions of this Agreement (the "Voting Trust").
During said ten (10) year period, the Voting Trust shall be irrevocable, except
as otherwise provided by this Agreement or by the failure to cure a default of
the promissory note appended hereto as Exhibit A (the "Note") and executed in
connection with a Stock Purchase Agreement dated of even date herewith and
appended hereto as Exhibit B. Within two (2) years of the expiration of this
Agreement, the parties may mutually agree to extend the term of the Agreement
for an additional ten (10) year period.
3. ASSIGNMENT OF STOCK TO TRUSTEE. The Shareholder hereby transfers,
assigns and delivers to and deposits with Trustee all of the Shares now owned or
held by him. The Shareholder agrees to deliver to Trustee immediately upon the
execution of this Agreement all certificates evidencing such Shares properly
endorsed for transfer to Trustee. All certificates of Shares transferred to the
Trustee by the Shareholder shall be surrendered to and canceled by the Company,
and the Company shall issue a new certificate to the Trustee, and it shall
appear upon the certificate so issued that it is issued pursuant to this
Agreement. An entry shall be made in the proper books of the Company that the
Trustee is the registered owner of such Shares pursuant to this Agreement, and a
duplicate of this Agreement shall be filed with the Secretary of the Company and
shall, at all times during the term hereof (including any extension(s) hereof),
be open to inspection by any Shareholder or such Shareholder's attorney. Upon
receipt by the Company of the Shareholder's Share certificates and transfer of
the same into the name of the Trustee, the Trustee shall hold the certificates
issued in its name pursuant to the terms of this Agreement, and the Company
shall thereupon issue and deliver to the Shareholder a Voting Trust Certificate,
representing the Shareholder's beneficial interest in the trust herein created,
substantially in the form of Schedules 2 and 3 attached hereto and incorporated
herein by this reference. If at any time during the existence of the Voting
Trust, other or additional Shares are issued by the Company to the Shareholder,
including, without limitation, through the exercise of stock options or
warrants, or any securities issued in respect of or in exchange for all or part
of any Shares owned by the Shareholder or held by Trustee pursuant to the terms
of this Agreement, as a consequence of any merger, reorganization,
recapitalization, reclassification, readjustment, stock split, stock dividend,
or other change in the Company's capital structure, such other or additional
securities likewise immediately shall be assigned, transferred and delivered to
and deposited with Trustee to be held subject to the terms of this Agreement.
All of such shares now or hereafter so transferred, assigned, delivered and
deposited shall be held by Trustee in trust for the uses and purposes herein set
forth, and such shares hereinafter will be referred to as the "Shares."
4. POWERS OF TRUSTEE. During the existence of the Voting Trust, Trustee
shall possess and exercise all rights and powers inuring to such Shares as if it
were the absolute owner and holder of the Shares.
5. TRUSTEE MAY BE INTERESTED PERSONALLY. Trustee's agents may serve as
director, officer, employee or consultant of the Company, and Trustee may be the
owner
2
<PAGE> 3
of shares of common stock of the Company at any time during the term of this
Agreement with the same rights as he or it would have had if he or it were not
an agent of the Trustee or a Trustee hereunder, respectively, and, irrespective
of whether such Trustee is an owner of any shares of common stock of the
Company, may vote or cause votes to be cast in favor of its agent's(s') own
election, appointment or employment as such director, officer, employee or
consultant.
6. COMPENSATION OF TRUSTEE. Trustee shall not be entitled to
compensation for its services as Trustee hereunder.
7. LIABILITY OF TRUSTEE; INDEMNITY. Trustee shall not be liable for any
error of judgment nor for any act of commission or omission, nor for any mistake
of law or fact, nor for anything it may do or refrain from doing in good faith,
nor generally shall it have any accountability hereunder, except for its own
willful misconduct or gross negligence. The Shareholder hereby agrees to
indemnify and defend Trustee from and against any and all claims, demands,
losses, costs, and expenses, including but not limited to attorneys' fees and
costs paid or incurred by Trustee, and any and all liability therefor, that
Trustee may sustain or incur in connection with any action taken in accordance
with the provisions of this Agreement, except for matters arising from Trustee's
own willful misconduct or gross negligence. Trustee hereby agrees to indemnify
and defend the Shareholder from and against any and all claims, demands, losses,
costs, and expenses, including but not limited to attorneys' fees and costs paid
or incurred by the Shareholder, and any and all liability therefor, that the
Shareholder may sustain or incur in connection with any action taken in
accordance with the provisions of this Agreement, except for matters arising
from the Shareholder's own willful misconduct or gross negligence.
8. TRANSACTIONS BY SHAREHOLDER. During the term of this Agreement,
the Shareholder shall not have the right nor shall he attempt to sell, assign,
hypothecate, encumber or transfer or in any other manner dispose of any of the
Shares or any interest therein, including but not limited to the Voting Trust
Certificate(s) representing such Shares; provided, however, that the Shareholder
may publicly sell Shares in the public market upon the following conditions: (i)
the Shareholder shall provide written notice to the Trustee at least twenty-four
(24) hours prior to any sale of the Shares, and (ii) the number of Shares to be
sold by the Shareholder in any thirty (30) day period shall not exceed twenty
percent (20%) of the number of Shares deposited by the Shareholder in this trust
pursuant to the terms of this Agreement. Upon the sale of the Shares as herein
provided the certificates representing the Shares sold hereby and in the hands
of Trustee shall be assigned to the Shareholder or purchaser of the Shares.
9. FILING OF COPY OF AGREEMENT WITH THE COMPANY. An executed copy of
this Agreement shall be filed in the office of the Company and be subject to
inspection by all the shareholders of the Company.
10. TERMINATION AND IRREVOCABILITY OF TRUST. The Voting Trust shall
terminate upon the first to occur of the following events: (i) upon the
expiration of its ten (10)
3
<PAGE> 4
year term, unless extended, as provided by Section 2 of this Agreement, (ii)
upon the written consent of Trustee and Shareholder, (iii) an uncured default on
the Note, (iv) in the event of the resignation of Trustee, or (v) the death of
Mitchell J. Stein, the presently qualified and acting President of Trustee. Upon
the termination of the Voting Trust the certificates representing all of the
Shares held under this Agreement and then remaining in the hands of Trustee
shall be assigned to the Shareholder then entitled thereto.
11. MISCELLANEOUS.
(a) Notices. Any notices which any party is required or may
desire to give to any other party or parties under this Agreement shall be in
writing, and shall be given by addressing the same to such other party or
parties at the address(es) set forth below, and by depositing the same so
addressed, postage prepaid, certified mail, return receipt requested, in the
United States mail, by delivering the same personally to such other party or
parties or by electronic facsimile. A party may change the address for the
service of notice by written notice given to the other parties in the manner
herein provided.
If to Shareholder:
David Katz, M.D.
1775 La Jolla Rancho Road
La Jolla, California 92037
Facsimile: (619) 454-9054
If to Trustee:
HealthMed, Inc.
8306 Wilshire Boulevard, Suite 7056
Beverly Hills, California 90211
Facsimile: (310) 652-0405
(b) Parties in Interest; Assignment.
(i) Neither this Agreement nor any of the Shareholder's
or Trustee's rights hereunder shall be assigned by such party without the prior
written consent of the other party, except that Trustee may assign its rights
and obligations hereunder to an entity to be formed or caused to be formed by
Trustee.
(ii) Subject to the conditions on assignment, this
Agreement and all the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
4
<PAGE> 5
(c) No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity, whatsoever, other than the parties hereto and their permitted
successors or assigns, any rights or remedies under or by reason of this
Agreement.
(d) 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.
(e) Validity and Severability. The provisions of this Agreement
are severable and if any provision, clause, sentence, section or part thereof is
held to be illegal, invalid, unconstitutional or inapplicable to any person or
circumstance, such illegality, invalidity, unconstitutionality or
inapplicability shall not affect or impair any of the remaining provision(s),
sentence(s), clause(s), section(s) or part(s) of the Agreement, Trustee, or the
Shareholder or to other persons or circumstances. It is understood and agreed
that the terms, conditions, and covenants of this Agreement would have been
made, entered into and this Agreement executed by all parties if such illegal,
invalid or unconstitutional provisions, sentences, clauses, sections or parts
had not been included therein. To the extent that a portion or part of this
Agreement may be invalid, but may be made valid by the striking of certain words
or phrases, such words or phrases shall be deemed to be stricken and the
remainder of the other portions of this Agreement shall remain in full force and
effect.
(f) Governing Law. This Agreement shall be construed and governed
by the laws of the State of California and the invalidity and unenforceability
of any provision hereof shall not affect the validity or enforceability of any
other provision. The parties hereby consent to the jurisdiction of the federal
and state courts located in either the county of Los Angeles or San Diego,
California, for any action or suit arising out of this Agreement, and waive any
defense to such jurisdiction, including, without limitation, any defense based
on venue or inconvenient forum.
(g) Headings. The headings herein are for convenience of
reference only and shall not control or affect the meaning or construction of
any provisions hereof.
(h) Entire Agreement, Amendments and Waiver. This Agreement,
recitals, Schedules, any amendments hereto or thereto, and the other writings
referred to herein or therein or delivered pursuant hereto or thereto which form
a part hereof or thereof contain the entire understanding of the parties with
respect to the subject matter hereof. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended only by a written instrument duly executed
by all of the parties hereto. Any condition to a party's obligations hereunder
may be waived in writing by such party to the extent permitted by law.
5
<PAGE> 6
(i) Specific Performance. The Shareholder and Trustee acknowledge
that, in view of the uniqueness of the Company's business, a party hereto would
not have an adequate remedy at law for money damages in the event the other
party breached any of the terms of this Agreement and, therefore, the parties
agree that each party shall be entitled to specific enforcement against the
other party for performance of the terms hereof in addition to any other remedy
to which it may be entitled at law or in equity, and in any such action or
proceeding the responding party(ies) will not raise or tender any defense to the
effect that the petitioning party has an adequate remedy at law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
"SHAREHOLDER"
------------------------------------------
DAVID KATZ, M.D.
"TRUSTEE"
HEALTHMED, INC.
By:
------------------------------------
Mitchell J. Stein
Its: President & Secretary
6
<PAGE> 7
SCHEDULE 1
SHAREHOLDER
<TABLE>
<CAPTION>
No. Shares of Stock Deposited
-----------------------------
<S> <C>
DAVID KATZ, M.D. 718,903 Class A Shares
DAVID KATZ, M.D. 163,800 Class B Shares
</TABLE>
7
<PAGE> 8
SCHEDULE 2
VOTING TRUST CERTIFICATE
No. 001 718,903 Shares of Class A Stock
LIDAK PHARMACEUTICALS
VOTING TRUST CERTIFICATE
This is to certify that David Katz, M.D. ("Certificate Holder") has
transferred to the person now and hereafter listed as voting trustee (the
"Trustee") on the signature page of that certain Voting Trust Agreement, dated
January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the
above-stated number of shares of stock of LIDAK Pharmaceuticals, a California
corporation ("Corporation"), to be held by the Trustee pursuant to the terms of
the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted
successor or successors-in-interest, is entitled to all of the rights accorded
the Certificate Holder under the terms of the Voting Trust Agreement.
THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS
VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF
WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION.
Dated as of January 12, 1998.
VOTING TRUSTEE:
HEALTHMED, INC.
By:_________________________________
Mitchell J. Stein
Its: President & Secretary
Signature No. Shares of Class A Stock Deposited
____________________________ 718,903
DAVID KATZ, M.D.
8
<PAGE> 9
SCHEDULE 3
VOTING TRUST CERTIFICATE
No. 001 163,800 Shares of Class B Stock
LIDAK PHARMACEUTICALS
VOTING TRUST CERTIFICATE
This is to certify that David Katz, M.D. ("Certificate Holder") has
transferred to the person now and hereafter listed as voting trustee (the
"Trustee") on the signature page of that certain Voting Trust Agreement, dated
January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the
above-stated number of shares of stock of LIDAK Pharmaceuticals, a California
corporation ("Corporation"), to be held by the Trustee pursuant to the terms of
the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted
successor or successors-in-interest, is entitled to all of the rights accorded
the Certificate Holder under the terms of the Voting Trust Agreement.
THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS
VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF
WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION.
Dated as of January 12, 1998.
VOTING TRUSTEE:
HEALTHMED, INC.
By:_________________________________
Mitchell J. Stein
Its: President & Secretary
Signature No. Shares of Class B Stock Deposited
____________________________ 163,800
DAVID KATZ, M.D.
9
<PAGE> 10
CONSENT OF SPOUSE, COHABITANT OR DOMESTIC PARTNER
The undersigned spouse, cohabitant or domestic partner of the
Shareholder acknowledges on her behalf that: I have read the foregoing Agreement
and I know its contents. I am aware that by its provisions that my spouse,
cohabitant or domestic partner will deposit his Shares in the Company with the
Trustee. I hereby consent to and approve of the provisions of the Agreement, and
agree that those Shares and my interest in them are subject to the provisions of
the Agreement and that I will take no action at any time to hinder operation of
the Agreement on those Shares or my interest in them.
Signature:__________________________________
Print Name:____________________________
10
<PAGE> 11
EXHIBIT A
11
<PAGE> 12
EXHIBIT B
12
<PAGE> 1
EXHIBIT 4
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT ("Agreement") is made and entered into as of
January 12, 1998, by and between Medical Biology Institute, a California
nonprofit public benefit corporation (the "Shareholder") and HealthMed, Inc., a
Nevada corporation ("Trustee").
This Agreement is made with reference to the following facts and
circumstances:
A. The authorized capital stock of LIDAK Pharmaceuticals, a California
corporation (the "Company"), consists of (i) 99,490,000, no par value per share,
Class A common shares, of which 38,613,799 are issued and outstanding, and such
shares set forth on Schedule 1 have been issued to the Shareholder (the "Class A
Shares"); and (ii) 510,000, no par value per share, Class B common shares, of
which 283,000 are issued and outstanding, and such shares set forth on Schedule
1 have been issued to the Shareholder (the "Class B Shares") (the Class A Shares
and the Class B Shares shall hereinafter be collectively referred to as the
"Shares").
B. The Shareholder wishes to transfer the Shares to Trustee in order to
provide Trustee the full and exclusive power to vote the shares of common stock
of the Company in accordance with the Company's business plan, to elect the
Company's Board of Directors, to manage the Company and to otherwise provide for
the smooth and efficient operation of the Company.
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, and for other valuable consideration, including, without
limitation (a) the extensive services Trustee has heretofore provided to the
Shareholder, including, without limitation, substantial business consulting
services appertaining or relating to the protection and maximization of the
value of the Shareholder's equity interests, potential equity interests and
prospective equity interests in the Company, including assisting the Shareholder
in the development of comprehensive plans that are believed by Trustee and the
Shareholder to be highly likely to lead to the creation of compelling new
opportunities for the Company and the Shareholder, and (b) as specifically
requested of Trustee by the Shareholder, and hereby acknowledged by the
Shareholder, the extensive services the Trustee is expected to use its best
efforts to provide in the future, in furtherance of the goals of both protecting
and maximizing the equity interests of all shareholders of the Company,
including that of the Shareholder, the parties hereby agree as follows:
1. TRUSTEE. HealthMed, Inc. is hereby appointed as Trustee for the
purposes set forth in and with the powers granted to him by this Agreement, and
Trustee hereby accepts such appointment and agrees to act as Trustee hereunder.
2. TERM OF VOTING TRUST. For a period of ten (10) years following the
date of this Agreement, all of the Shares owned by the Shareholder as of the
date of this Agreement, together with such other Shares that the Shareholder may
purchase or receive from any source
<PAGE> 2
whatsoever during the term of this Agreement, including but not limited to any
Shares received as a consequence of any event described in Paragraph 3 below,
shall be subject to the provisions of this Agreement (the "Voting Trust").
During said ten (10) year period, the Voting Trust shall be irrevocable, except
as otherwise provided by this Agreement or by the failure to cure a default of
the promissory note appended hereto as Exhibit A (the "Note") and executed in
connection with a Stock Purchase Agreement dated of even date herewith and
appended hereto as Exhibit B. Within two (2) years of the expiration of this
Agreement, the parties may mutually agree to extend the term of the Agreement
for an additional ten (10) year period.
3. ASSIGNMENT OF STOCK TO TRUSTEE. The Shareholder hereby transfers,
assigns and delivers to and deposits with Trustee all of the Shares now owned or
held by it. The Shareholder agrees to deliver to Trustee immediately upon the
execution of this Agreement all certificates evidencing such Shares properly
endorsed for transfer to Trustee. All certificates of Shares transferred to the
Trustee by the Shareholder shall be surrendered to and canceled by the Company,
and the Company shall issue a new certificate to the Trustee, and it shall
appear upon the certificate so issued that it is issued pursuant to this
Agreement. An entry shall be made in the proper books of the Company that the
Trustee is the registered owner of such Shares pursuant to this Agreement, and a
duplicate of this Agreement shall be filed with the Secretary of the Company and
shall, at all times during the term hereof (including any extension(s) hereof),
be open to inspection by any Shareholder or such Shareholder's attorney. Upon
receipt by the Company of the Shareholder's Share certificates and transfer of
the same into the name of the Trustee, the Trustee shall hold the certificates
issued in its name pursuant to the terms of this Agreement, and the Company
shall thereupon issue and deliver to the Shareholder a Voting Trust Certificate,
representing the Shareholder's beneficial interest in the trust herein created,
substantially in the form of Schedules 2 and 3 attached hereto and incorporated
herein by this reference. If at any time during the existence of the Voting
Trust, other or additional Shares are issued by the Company to the Shareholder,
including, without limitation, through the exercise of stock options or
warrants, or any securities issued in respect of or in exchange for all or part
of any Shares owned by the Shareholder or held by Trustee pursuant to the terms
of this Agreement, as a consequence of any merger, reorganization,
recapitalization, reclassification, readjustment, stock split, stock dividend,
or other change in the Company's capital structure, such other or additional
securities likewise immediately shall be assigned, transferred and delivered to
and deposited with Trustee to be held subject to the terms of this Agreement.
All of such shares now or hereafter so transferred, assigned, delivered and
deposited shall be held by Trustee in trust for the uses and purposes herein set
forth, and such shares hereinafter will be referred to as the "Shares."
4. POWERS OF TRUSTEE. During the existence of the Voting Trust, Trustee
shall possess and exercise all rights and powers inuring to such Shares as if it
were the absolute owner and holder of the Shares.
5. TRUSTEE MAY BE INTERESTED PERSONALLY. Trustee's agents may serve as
director, officer, employee or consultant of the Company, and Trustee may be the
owner
2
<PAGE> 3
of shares of common stock of the Company at any time during the term of this
Agreement with the same rights as he or it would have had if he or it were not
an agent of the Trustee or a Trustee hereunder, respectively, and, irrespective
of whether such Trustee is an owner of any shares of common stock of the
Company, may vote or cause votes to be cast in favor of its agent's(s') own
election, appointment or employment as such director, officer, employee or
consultant.
6. COMPENSATION OF TRUSTEE. Trustee shall not be entitled to
compensation for its services as Trustee hereunder.
7. LIABILITY OF TRUSTEE; INDEMNITY. Trustee shall not be liable for any
error of judgment nor for any act of commission or omission, nor for any mistake
of law or fact, nor for anything it may do or refrain from doing in good faith,
nor generally shall it have any accountability hereunder, except for its own
willful misconduct or gross negligence. The Shareholder hereby agrees to
indemnify and defend Trustee from and against any and all claims, demands,
losses, costs, and expenses, including but not limited to attorneys' fees and
costs paid or incurred by Trustee, and any and all liability therefor, that
Trustee may sustain or incur in connection with any action taken in accordance
with the provisions of this Agreement, except for matters arising from Trustee's
own willful misconduct or gross negligence. Trustee hereby agrees to indemnify
and defend the Shareholder from and against any and all claims, demands, losses,
costs, and expenses, including but not limited to attorneys' fees and costs paid
or incurred by the Shareholder, and any and all liability therefor, that the
Shareholder may sustain or incur in connection with any action taken in
accordance with the provisions of this Agreement, except for matters arising
from the Shareholder's own willful misconduct or gross negligence.
8. TRANSACTIONS BY SHAREHOLDER. During the term of this Agreement, the
Shareholder shall not have the right nor shall it attempt to sell, assign,
hypothecate, encumber or transfer or in any other manner dispose of any of the
Shares or any interest therein, including but not limited to the Voting Trust
Certificate(s) representing such Shares; provided, however, that the Shareholder
may publicly sell Shares in the public market upon the following conditions: (i)
the Shareholder shall provide written notice to the Trustee at least twenty-four
(24) hours prior to any sale of the Shares, and (ii) the number of Shares to be
sold by the Shareholder in any thirty (30) day period shall not exceed twenty
percent (20%) of the number of Shares deposited by the Shareholder in this trust
pursuant to the terms of this Agreement. Upon the sale of the Shares as herein
provided the certificates representing the Shares sold hereby and in the hands
of Trustee shall be assigned to the Shareholder or purchaser of the Shares.
9. FILING OF COPY OF AGREEMENT WITH THE COMPANY. An executed copy of
this Agreement shall be filed in the office of the Company and be subject to
inspection by all the shareholders of the Company.
10. TERMINATION AND IRREVOCABILITY OF TRUST. The Voting Trust shall
terminate upon the first to occur of the following events: (i) upon the
expiration of its ten (10)
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year term, unless extended, as provided by Section 2 of this Agreement, (ii)
upon the written consent of Trustee and Shareholder, (iii) an uncured default on
the Note, (iv) in the event of the resignation of Trustee, or (v) the death of
Mitchell J. Stein, the presently qualified and acting President of Trustee. Upon
the termination of the Voting Trust the certificates representing all of the
Shares held under this Agreement and then remaining in the hands of Trustee
shall be assigned to the Shareholder then entitled thereto.
11. MISCELLANEOUS.
(a) Notices. Any notices which any party is required or may
desire to give to any other party or parties under this Agreement shall be in
writing, and shall be given by addressing the same to such other party or
parties at the address(es) set forth below, and by depositing the same so
addressed, postage prepaid, certified mail, return receipt requested, in the
United States mail, by delivering the same personally to such other party or
parties or by electronic facsimile. A party may change the address for the
service of notice by written notice given to the other parties in the manner
herein provided.
If to Shareholder:
Medical Biology Institute
11077 North Torrey Pines Road
La Jolla, California 92037
Facsimile: (619) 453-5845
If to Trustee:
HealthMed, Inc.
8306 Wilshire Boulevard, Suite 7056
Beverly Hills, California 90211
Facsimile: (310) 652-0405
(b) Parties in Interest; Assignment.
(i) Neither this Agreement nor any of the Shareholder's
or Trustee's rights hereunder shall be assigned by such party without the prior
written consent of the other party, except that Trustee may assign its rights
and obligations hereunder to an entity to be formed or caused to be formed by
Trustee.
(ii) Subject to the conditions on assignment, this
Agreement and all the provisions hereof shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
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(c) No Third Party Beneficiaries. Nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or entity, whatsoever, other than the parties hereto and their permitted
successors or assigns, any rights or remedies under or by reason of this
Agreement.
(d) 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.
(e) Validity and Severability. The provisions of this Agreement
are severable and if any provision, clause, sentence, section or part thereof is
held to be illegal, invalid, unconstitutional or inapplicable to any person or
circumstance, such illegality, invalidity, unconstitutionality or
inapplicability shall not affect or impair any of the remaining provision(s),
sentence(s), clause(s), section(s) or part(s) of the Agreement, Trustee, or the
Shareholder or to other persons or circumstances. It is understood and agreed
that the terms, conditions, and covenants of this Agreement would have been
made, entered into and this Agreement executed by all parties if such illegal,
invalid or unconstitutional provisions, sentences, clauses, sections or parts
had not been included therein. To the extent that a portion or part of this
Agreement may be invalid, but may be made valid by the striking of certain words
or phrases, such words or phrases shall be deemed to be stricken and the
remainder of the other portions of this Agreement shall remain in full force and
effect.
(f) Governing Law. This Agreement shall be construed and governed
by the laws of the State of California and the invalidity and unenforceability
of any provision hereof shall not affect the validity or enforceability of any
other provision. The parties hereby consent to the jurisdiction of the federal
and state courts located in either the county of Los Angeles or San Diego,
California, for any action or suit arising out of this Agreement, and waive any
defense to such jurisdiction, including, without limitation, any defense based
on venue or inconvenient forum.
(g) Headings. The headings herein are for convenience of
reference only and shall not control or affect the meaning or construction of
any provisions hereof.
(h) Entire Agreement, Amendments and Waiver. This Agreement,
recitals, Schedules, any amendments hereto or thereto, and the other writings
referred to herein or therein or delivered pursuant hereto or thereto which form
a part hereof or thereof contain the entire understanding of the parties with
respect to the subject matter hereof. This Agreement supersedes all prior
agreements and understandings between the parties with respect to its subject
matter. This Agreement may be amended only by a written instrument duly executed
by all of the parties hereto. Any condition to a party's obligations hereunder
may be waived in writing by such party to the extent permitted by law.
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(i) Specific Performance. The Shareholder and Trustee acknowledge
that, in view of the uniqueness of the Company's business, a party hereto would
not have an adequate remedy at law for money damages in the event the other
party breached any of the terms of this Agreement and, therefore, the parties
agree that each party shall be entitled to specific enforcement against the
other party for performance of the terms hereof in addition to any other remedy
to which it may be entitled at law or in equity, and in any such action or
proceeding the responding party(ies) will not raise or tender any defense to the
effect that the petitioning party has an adequate remedy at law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first written above.
"SHAREHOLDER"
MEDICAL BIOLOGY INSTITUTE
By:
------------------------------------------
David Katz, M.D.
Its: President
By:
------------------------------------------
Christopher S. McKellar
Its: Chairman of the Board
"TRUSTEE"
HEALTHMED, INC.
By:
------------------------------------------
Mitchell J. Stein
Its: President & Secretary
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SCHEDULE 1
SHAREHOLDER
No. Shares of Stock Deposited
MEDICAL BIOLOGY INSTITUTE 151,900 Class A Shares
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SCHEDULE 2
VOTING TRUST CERTIFICATE
No. 001 151,900 Shares of Class A Stock
LIDAK PHARMACEUTICALS
VOTING TRUST CERTIFICATE
This is to certify that Medical Biology Institute ("Certificate Holder")
has transferred to the person now and hereafter listed as voting trustee (the
"Trustee") on the signature page of that certain Voting Trust Agreement, dated
January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the
above-stated number of shares of stock of LIDAK Pharmaceuticals, a California
corporation ("Corporation"), to be held by the Trustee pursuant to the terms of
the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted
successor or successors-in-interest, is entitled to all of the rights accorded
the Certificate Holder under the terms of the Voting Trust Agreement.
THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS
VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF
WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION.
Dated as of January 12, 1998.
VOTING TRUSTEE:
HEALTHMED, INC.
By:
------------------------------------
Mitchell J. Stein
Its: President & Secretary
MEDICAL BIOLOGY INSTITUTE No. Shares of Class A Stock Deposited
By: 151,900
---------------------------
David Katz, M.D.
Its: President
8
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SCHEDULE 3
VOTING TRUST CERTIFICATE
No. 001 ________ Shares of Class B Stock
LIDAK PHARMACEUTICALS
VOTING TRUST CERTIFICATE
This is to certify that Medical Biology Institute ("Certificate Holder")
has transferred to the person now and hereafter listed as voting trustee (the
"Trustee") on the signature page of that certain Voting Trust Agreement, dated
January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the
above-stated number of shares of stock of LIDAK Pharmaceuticals, a California
corporation ("Corporation"), to be held by the Trustee pursuant to the terms of
the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted
successor or successors-in-interest, is entitled to all of the rights accorded
the Certificate Holder under the terms of the Voting Trust Agreement.
THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS
VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF
WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION.
Dated as of January 12, 1998.
VOTING TRUSTEE:
HEALTHMED, INC.
By:
------------------------------------
Mitchell J. Stein
Its: President & Secretary
MEDICAL BIOLOGY INSTITUTE No. Shares of Class B Stock Deposited
By:
---------------------------- -------------
David Katz, M.D.
Its: President
9
<PAGE> 10
EXHIBIT A
10
<PAGE> 11
EXHIBIT B
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<PAGE> 1
EXHIBIT 5
PURCHASE RIGHTS AGREEMENT
THIS PURCHASE RIGHTS AGREEMENT ("Agreement") is entered into this 12th
day of January, 1998, by and between HealthMed, Inc., a Nevada corporation
("Purchaser") and David Katz, M.D. ("Seller").
RECITALS
A. LIDAK Pharmaceuticals, a California corporation (the "Corporation")
presently has outstanding two classes of common stock (individually, "Class A
Shares" and "Class B Shares" and collectively, the "Shares"), of which 1,918,400
derivative Class A Shares and 375,000 of derivative Class B Shares have been
granted to Seller (the "Derivative Shares"), a schedule of the Derivative Shares
granted to Seller and as reflected on Seller's January 5, 1998 Form 4 filing is
appended hereto as Exhibit A and incorporated herein by this reference.
B. The Derivative Shares are collectively the only issued and
outstanding derivative capital stock of the Corporation held by Seller.
C. The parties hereto are parties to that certain Stock Purchase
Agreement dated of even date herewith, which agreement is appended hereto as
Exhibit B and incorporated herein by this reference.
D. As and for the consideration hereinafter set forth, the Seller
desires to exercise the Derivative Shares in his sole and absolute discretion
and thereafter deliver to the Purchaser thirty one and one-half percent (31.5%)
of the exercised Derivative Shares or thirty one and one-half percent (31.5%) of
the net proceeds from exercise and sale of the Derivative Shares owned by
Seller, or exercise Purchaser's right to exercise the Derivative Shares in the
event of Seller's permanent incapacity or death, on the terms and subject to the
conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants and conditions
contained herein, the rights and obligations of Purchaser and Seller as set
forth in the Stock Purchase Agreement by and between Seller and Purchaser of
even date herewith, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Purchase Participation.
1.1 Exercise of Derivative Shares. For good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged by
Seller, Seller hereby grants to Purchaser the irrevocable right, for the period
and on the terms herein set forth, to receive thirty
<PAGE> 2
one and one-half percent (31.5%) of the Net Proceeds (as hereinafter defined)
from Seller's exercise and sale of the Derivative Shares.
1.2 Net Proceeds. "Net Proceeds" shall mean the gross proceeds
from the Seller's exercise and sale of the Derivative Shares, less the (i)
exercise price paid (or payable in a cashless exercise) by Seller; (ii) broker's
commissions, expenses and costs incurred by Seller in connection with the sale
of the Derivative Shares; and (iii) federal and state income taxes on the
exercise of the Derivative Shares paid or payable by Seller.
1.3 Seller Warranty Not to Encumber. Seller warrants and
undertakes that during the term of this Agreement, he shall not assign or
encumber the Derivative Shares or any rights in them, nor make any commitment
with respect thereto inconsistent with the terms of this Agreement.
1.4 Expiration Date. This Agreement shall expire at midnight on
June 21, 2007 (the "expiration date").
1.5 Method of Exercise. Concurrently with the execution hereof,
the parties hereto shall open three (3) brokerage accounts at Stuart Coleman &
Co., Inc., 11 W. 42nd Street, 15th Floor, New York, New York 10036, telephone
no. (800) 724-0761 (the "Brokerage") and Seller shall deliver notice and
supporting documentation to the Brokerage depositing the Derivative Shares, as
follows: (i) a joint account of Seller and Purchaser; (ii) an account of Seller
("Seller's Account"); and (iii) and account of Purchaser ("Purchaser's
Account"). Thereafter, and during the term of this Agreement, the Brokerage
shall execute each and every exercise of the Derivative Shares and deliver the
Net Proceeds to Purchaser and Seller as follows: (a) thirty one and one-half
percent (31.5%) to Purchaser's Account ("Purchaser's Interest"), and (b) the
balance to Seller's Account ("Seller's Interest"). This Derivative Shares shall
be exercisable, on or before the expiration date, by written notice sent to
Purchaser by facsimile transmission or sent by registered mail, return receipt
requested, addressed as hereinafter set forth, notifying Purchaser of such
exercise and its right to participation in the Net Proceeds thereof.
1.6 Deliveries. If Seller exercises his option to purchase and
sale the Derivative Shares as aforesaid, the Brokerage shall (i) deposit
Purchaser's Interest into the Purchaser's Account within three (3) days after
the purchase and sale of the Derivative Shares; and (ii) deposit Seller's
Interest into the Seller's Account within three (3) days after the purchase and
sale of the Derivative Shares; provided that in the event Purchaser shall not
timely receive the Purchaser's Interest, Seller shall thereafter have three (3)
days in which to deposit into the Purchaser's Account the Purchaser's Interest.
1.7 Adjustments. In the event of any change in the Shares by
reason of any stock dividend, recapitalization, splitup, combination or exchange
of shares, or of any similar change affecting the Derivative Shares, then in any
such event, the number and kind of shares subject to this Agreement shall be
appropriately adjusted consistent with such change in such
2
<PAGE> 3
manner as to prevent substantial dilution or enlargement of the rights granted
to, or available for, the Purchaser hereunder.
1.8 No Rights as Shareholder. Purchaser shall have no rights as a
shareholder with respect to the Corporation prior to the date of exercise of the
Derivative Shares or the issuance of a certificate or certificates for such
shares.
1.9 Grant of Option. By execution of this Agreement, Seller
hereby grants to the Purchaser the option to cause the Seller, or Seller's
conservator, executor or authorized agent, to exercise all or a portion of the
Derivative Shares ("Option"), upon the terms and conditions set forth in this
subsection:
(i) The permanent incapacity of the Seller where
"permanent incapacity", as used herein, shall mean mental or physical
incapacity, or both, reasonably determined by the Corporation's Board of
Directors or the Purchaser based upon a certification of such incapacity by, in
the discretion of the Purchaser or the Corporation's Board of Directors, either
Seller's regularly attending physician or a duly licensed physician selected by
the Purchaser or the Corporation's Board of Directors, rendering the Seller
unable to perform substantially all of his duties hereunder or under his
employment relationship with the Corporation and which appears reasonably
certain to continue for at least three (3) consecutive months without
substantial improvement. Seller shall be deemed to have "become permanently
incapacitated" on the date either the Purchaser or the Corporation's Board of
Directors has determined that Seller is permanently incapacitated and so
notifies Seller.
(ii) The death of Seller during the term of this
Agreement.
1.10 Exercise of Option. Exercise of the option granted in
Section 1.9 of this Agreement shall be accomplished by written notice to the
Corporation and the Brokerage in accordance with Sections 1.5 and 1.6 of this
Agreement. Payment of the exercise price upon the exercise of the Option of the
Derivative Shares shall be made with funds of the Purchaser.
2. Representations and Warranties the Seller. As a material inducement
to the Purchaser to enter into this Agreement and purchase the Shares, the
Seller represents and warrants that:
2.1 Ownership of the Shares. Seller is the owner, beneficially
and of record, of the Shares being transferred pursuant to this Agreement free
and clear of all liens, charges, claims, encumbrances, security interests,
equities, restrictions on transfer or other defects in title of any kind or
description.
2.2 Authority to Enter into Agreements; Enforceability.
Seller has the right, power and authority to enter into and to carry out the
terms and provisions of this Agreement,
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<PAGE> 4
without obtaining the approval or consent of any other party or authority, and
this Agreement is a legal, valid and binding agreement of Seller, enforceable in
accordance with its terms.
2.3 No Conflict. The execution and performance of this Agreement
by Seller will not violate any agreement, promissory note, security arrangement,
order or other instrument to which Seller are a party or by which Seller may be
bound.
2.4 Litigation. To the best knowledge of Seller, there are no
suits, actions or legal, administrative, arbitration or other proceedings
pending, filed or initiated by or against the Corporation occurring since the
issuance of the Form 10K dated September 30, 1997.
2.5 Disclosure. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates, or other items
prepared or supplied to the Purchaser by or on behalf of the Seller with respect
to this purchase contain any untrue statement of a material fact or omit a
material fact necessary to make each statement contained herein or therein not
misleading. The Seller has not intentionally concealed any fact known by him to
have a material adverse effect upon the Corporation's existing or expected
financial condition, operating results, assets, customer relations, employee
relations, or business prospects taken as a whole.
3. Representations and Warranties of Purchaser. As a material inducement
to the Seller to enter into this Agreement and sell the Shares, the Purchaser
hereby represents and warrants to the Seller as follows:
3.1 Organization; Power. The Purchaser is a corporation duly
incorporated and validly existing under the laws of the State of California, and
has all requisite corporate power and authority to enter into this Agreement and
perform its obligations hereunder.
3.2 Authorization. The execution, delivery, and performance by
the Purchaser of this Agreement and all other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
necessary corporate action of the Purchaser, and this Agreement and each such
other agreement, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of the Purchaser enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, and similar statutes affecting creditors'
rights generally and judicial limits on equitable remedies.
3.3 No Conflict with Other Instruments or Agreements. The
execution, delivery, and performance by the Purchaser of this Agreement and all
other agreements contemplated hereby to which the Purchaser is a party will not
result in a breach or violation of, or constitute a default under, its Articles
of Incorporation or Bylaws or any material agreement to which the Purchaser is a
party or by which the Purchaser is bound.
4
<PAGE> 5
3.4 Litigation. There are no actions, suits, proceedings, or
governmental investigations or inquiries pending or, to the knowledge of the
Purchaser, threatened against the Purchaser or its properties, assets,
operations, or businesses that might delay, prevent, or hinder the consummation
of this purchase.
3.5 Investment Representations.
3.5.1 The Purchaser is an "accredited investor" as
defined by the SEC's Rule 501(a), and the Purchaser has substantial experience
in evaluating and investing in private placement transactions of securities in
companies similar to the Corporation so that the Purchaser is capable of
evaluating the merits and risks of the Purchaser's investment in the Corporation
and has the capacity to protect the Purchaser's own interests.
3.5.2 The Purchaser is acquiring the Shares for
investment for the Purchaser's own account, not as a nominee or agent, and not
with the view to, or for resale in connection with, any distribution thereof.
The Purchaser understands that the Shares to be purchased have not been, and
will not be, registered under the Securities Act or the securities laws of any
state by reason of a specific exemption from the registration provisions of the
Securities Act and the applicable state securities laws, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
The Purchaser is acquiring the Shares without expectation, desire, or need for
resale and not with the view toward distribution, resale, subdivision, or
fractionalization of the Shares.
3.5.3 During the course of the negotiation of this
Agreement, the Purchaser has had an opportunity to discuss the Corporation's
business, management and financial affairs with the Corporation's management and
the opportunity to review the Corporation's financial statements, books and
records, facilities and business plan. The Purchaser has also had an opportunity
to ask questions of officers of the Corporation, which questions were answered
to the Purchaser's satisfaction.
3.5.4 The Purchaser understands that the Shares to be
purchased have not been registered under Securities Act of 1933 ("1933 Act"), or
under any state securities law.
3.5.5 The Purchaser understands that the Shares cannot
be resold in a transaction to which the 1933 Act and state securities laws apply
unless (i) subsequently registered under the 1933 Act and applicable state
securities laws or (ii) exemptions from such registrations are available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the 1933 Act
which permit limited resale of shares purchased in a private transaction subject
to the satisfaction of certain conditions.
3.5.6 The Purchaser understands that no public market
now exists for the Shares and that it is uncertain that a public market will
ever exist for the Shares.
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<PAGE> 6
3.5.7 The Purchaser understands that the certificates
for the Shares will bear the following legend:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE
UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES
REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933
AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES
A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS
OF THE CORPORATION OR ITS AGENTS, STATING THAT IN THE OPINION OF
THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE
SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE
144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
3.6 Tax Liability. To the extent the Purchaser deems necessary,
the Purchaser has reviewed with the Purchaser's own tax advisors the federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. The Purchaser relies solely on such
advisors and not on any statements or representations of the Seller or any of
its agents. The Purchaser understands that the Purchaser (and not the Seller)
shall be responsible for the Purchaser's own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.
3.7 Disclosure. To the Purchaser's knowledge, this Agreement,
with the Exhibits hereto, when taken as a whole, does not contain any untrue
statement of a material fact concerning the Purchaser or omit to state a
material fact necessary in order to make the statements concerning the Purchaser
contained herein not misleading in light of the circumstances under which they
were made.
3.8 Compliance with Other Instruments. The execution, delivery
and performance of and compliance with this Agreement, and the issuance of
shares will not result in any material violation of, or conflict with, or
constitute a material default under, any Purchaser's articles of incorporation
or bylaws or any of the Purchaser's material agreements nor result in the
creation of any mortgage, pledge, lien, encumbrance or charge against any of the
assets or properties of the Corporation or the Shares.
4. Conditions Precedent to the Obligations of Purchaser. Each and every
obligation of the Purchaser under this Agreement is subject to the satisfaction,
at or before the Closing, of each of the following conditions:
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<PAGE> 7
4.1 Representations and Warranties; Performance. Each of the
representations and warranties made by the Seller herein will be true and
correct in all material respects as of the Closing with the same effect as
though made at that time except for changes contemplated, permitted, or required
by this Agreement; the Seller will have performed and complied with all
agreements, covenants, and conditions required by this Agreement to be performed
and complied with by them prior to the Closing; and the Purchaser will have
received, at the Closing, a certificate of the Seller, signed by the Seller,
stating that each of the representations and warranties made by the Seller
herein are true and correct in all material respects as of the Closing except
for changes contemplated, permitted, or required by this Agreement and that the
Seller has performed and complied with all agreements, covenants, and conditions
required by this Agreement to be performed and complied with by him prior to the
Closing.
4.2 Legal Opinion. Each and every obligation of the Purchaser
under this Agreement is subject to the delivery, at or before the Closing, of an
opinion of Luce, Forward, Hamilton & Scripps LLP, in form and content reasonably
acceptable to the Purchaser and its legal counsel, to the effect that (i) this
Agreement has been duly executed and delivered by Seller; (ii) this Agreement
and each other agreement contemplated hereby, when executed and delivered by the
parties thereto, will constitute the legal, valid, and binding obligation of the
Seller, enforceable against the Seller in accordance with its terms except as
the enforceability thereof may be limited by the application of bankruptcy,
insolvency, moratorium, or similar laws affecting the rights of creditors
generally or judicial limits on the right of specific performance; and (iii)
except as set forth in Schedule 4.2, the execution and delivery by the Seller of
this Agreement and all other agreements contemplated hereby to which the Seller
is a party, the offering and sale of the Shares hereunder and the fulfillment of
and compliance with the respective terms hereof and thereof by the Seller, do
not and will not (a) conflict with or result in a breach of the terms,
conditions or provisions of, (b) constitute a default under, (c) result in the
creation of any lien, security interest, charge, or encumbrance upon the capital
stock or assets of the Seller, (d) give any third party the right to accelerate
any obligation under, (e) result in a violation of, or (f) require any
authorization, consent, approval, exemption, or other action by or notice to any
court or administrative or governmental body, or any law, statute, rule, or
regulation to which the Seller is subject, or any agreement, instrument, order,
judgment, or decree to which the Seller is subject; (iv) to such counsel's
knowledge, Seller owns the Shares.
5. Conditions Precedent to the Obligations of Seller. Each and every
obligation of the Seller under this Agreement is subject to the satisfaction, at
the Closing, of each of the representations and warranties made by the Purchaser
herein and such representations will be true and correct in all material
respects as of the Closing with the same effect as though made at that time
except for changes contemplated, permitted, or required by this Agreement; the
Purchaser will have performed and complied with all agreements, covenants, and
conditions required by this Agreement to be performed and complied with by it
prior to the Closing; and the Sellers will have received, at the Closing, a
certificate of the Purchaser, signed by the President and the Secretary or the
Chief Financial Officer of the Purchaser, stating that each of the
representations and warranties made by the Purchaser herein is true and correct
in all material respects as of the
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<PAGE> 8
Closing except for changes contemplated, permitted, or required by this
Agreement and that the Purchaser has performed and complied with all agreements,
covenants, and conditions required by this Agreement to be performed and
complied with by it prior to the Closing.
6. Closing.
6.1 Time, Place, and Manner of Closing. Unless this Agreement has
been terminated and this transaction has been abandoned pursuant to the
provisions of Section 7, the closing ("Closing") will be held at the offices of
Stein Perlman & Hawk, or such other place as the parties may agree, on the date
that Seller shall exercise its right to purchase the Shares as hereinabove set
forth, the date that Purchaser instructs Seller to exercise the purchase of all
or some of the Derivative Shares as hereinabove set forth or as soon as
practicable after the satisfaction of the various conditions precedent to the
Closing set forth herein. At the Closing the parties to this Agreement will
exchange certificates and other instruments and documents in order to determine
whether the terms and conditions of this Agreement have been satisfied. Upon the
determination of each party that its conditions to consummate this purchase have
been satisfied or waived, the Brokerage shall deliver to the parties hereto
notice of the purchase and sale of the Derivative Shares sold and confirm the
deposits into the Purchaser's Account and the Seller's Account. After the
Closing, the Seller, at the Purchaser's cost, will execute, deliver, and
acknowledge all such further instruments of transfer and conveyance and will
perform all such other acts as the Purchaser may reasonably request to
effectively transfer and release the Purchaser's Interest.
6.2 Consummation of Closing. All acts, deliveries, and
confirmations comprising the Closing regardless of chronological sequence shall
be deemed to occur contemporaneously and simultaneously upon the occurrence of
the last act, delivery, or confirmation of the Closing and none of such acts,
deliveries, or confirmations shall be effective unless and until the last of the
same shall have occurred. The time of the Closing has been scheduled to
correspond with the close of business at the office of Stein Perlman & Hawk and,
regardless of when the last act, delivery, or confirmation of the Closing shall
take place, the purchase and sale of the Derivative Shares shall be deemed to
occur as of the close of business at the office of Stein Perlman & Hawk on the
date of the Closing.
7. Termination.
7.1 Termination Without Cause. Anything herein or elsewhere to
the contrary notwithstanding, this Agreement may be terminated and abandoned at
any time without further obligation or liability on the part of any party in
favor of any other by mutual consent of the Purchaser and the Seller.
7.2 Termination Date. This Agreement shall automatically
terminate on as set forth in paragraph 1.4 above.
8
<PAGE> 9
8. Miscellaneous Provisions.
8.1 Amendment and Modification. Subject to applicable law, this
Agreement may be amended, modified, or supplemented only by a written agreement
signed by the Purchaser and the Seller.
8.2 Waiver of Compliance; Consents
8.2.1 Any failure of any party to comply with any
obligation, covenant, agreement, or condition herein may be waived by the party
entitled to the performance of such obligation, covenant, or agreement or who
has the benefit of such condition, but such waiver or failure to insist upon
strict compliance with such obligation, covenant, agreement, or condition will
not operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
8.2.2 Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent will be given in a manner
consistent with the requirements for a waiver of compliance as set forth above.
8.3 Payment of Fees and Expenses. Each party to this Agreement
will be responsible for, and will pay, all of its own fees and expenses,
including those for its own counsel and accountants, incurred in the
negotiation, preparation, and consumption of this Agreement and this purchase
and sale.
8.4 Costs. Each party hereto shall bear, pay and discharge all of
his/its respective expenses incurred in connection with the execution and
performance of this Agreement, except as otherwise provided specifically herein.
8.5 Entire Agreement; Successors and Assigns; and Amendment;
Third Parties. This Agreement and the exhibits appended hereto constitute the
entire agreement between the parties concerning the subject matter hereof and no
party shall be liable or bound to the other in any manner by any warranties,
representations or covenants except as specifically set forth herein. Any
previous or concurrent agreement among the parties with respect to the subject
matter hereof is superseded by this Agreement and the exhibits appended hereto.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective executors, administrators, heirs, successors and
assigns of the parties. Except as expressly provided herein, nothing in this
Agreement, express or implied, is intended to confer upon any party, other than
the parties hereto, any rights, remedies, obligations or liabilities under or by
reason of this Agreement.
8.6 Governing Law and Consent to Jurisdiction. This Agreement
shall be governed by and construed in accordance with the laws of the State of
California. The parties irrevocably (i) submit to the exclusive jurisdiction of
the state courts of the State of California over any action or proceeding
arising out of a breach of this Agreement, (ii) agree that all claims in respect
of such action or proceeding may be heard and determined in such courts, (iii)
waive, to
9
<PAGE> 10
the fullest extent they may effectively do so, the defense of an inconvenient or
inappropriate forum to the maintenance of such action or proceeding, and (iv)
waive any defense based on lack of personal jurisdiction for any such purpose.
8.7 Legal Action and Fees. In the event of any controversy, claim
or dispute between the parties hereto arising out of or relating to this
Agreement, the prevailing party shall be entitled to recovery from the
non-prevailing party its reasonable expenses, including but not limited to its
reasonable attorneys' fees.
8.8 Headings. The headings of the sections of this Agreement are
for convenience only and shall not determine the interpretation of this
Agreement.
8.9 Notices. Any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon personal delivery,
24 hours after transmission by telecopy, telex, or five (5) days after deposit
in the United States mail by registered or certified mail, addressed as set
forth below or at such other address as such party may designate by ten (10)
days' advance written notice to the other party:
If to Seller: David Katz, M.D.
1775 La Jolla Rancho Road
La Jolla, California 92037
If to Purchaser: HealthMed, Inc.
8306 Wilshire Boulevard, Suite 7056
Beverly Hills, California 90211
Attention: President
8.10 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.
8.11 Other Documents. Seller shall, at any time after the Closing
and upon the request of the Purchaser or the Corporation, execute and deliver to
the Purchaser or the Corporation, as the case may be, such documents or
instruments of conveyance, license or assignment or take such other action as is
reasonably necessary to complete the transfer of the Shares or other
transactions contemplated by this Agreement or to perfect the interest of the
Purchaser therein. Further, the parties agree to take all actions and file such
documents required to comply with California securities laws.
8.12 Legal Advice. The parties hereby acknowledge that they have
received independent legal advice from attorneys of their choice with respect to
the advisability of executing this Agreement and the related documents affecting
this transaction. Prior to the execution of this Agreement, each of the parties'
attorneys reviewed this Agreement and
10
<PAGE> 11
discussed the Agreement with such party, and each party made all desired
changes. Each of the parties and their attorneys have made such investigation of
the facts pertaining to this Agreement and all of the matters appertaining
thereto as they deemed necessary. Each of the parties certifies that it has read
this Agreement, and fully understands this Agreement and that it has executed it
voluntarily, free of any duress, force or undue influence of any party or any
person.
8.13 Injunctive Relief. The parties hereby acknowledge and agree
that any default under Section 1 above will cause damage to the Purchaser in an
amount difficult to ascertain. Accordingly, in addition to any other relief to
which the Purchaser may be entitled, the Purchaser shall be entitled to such
injunctive relief as may be ordered by any court of competent jurisdiction
including, but not limited to, an injunction restraining any violation of
Section 1 above and without the proof of actual damages.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first set forth above.
SELLER:
---------------------------------
DAVID KATZ, M.D.
PURCHASER:
HEALTHMED, INC.
By:
---------------------------------
Mitchell J. Stein
Its: President & Secretary
AGREED TO AND ACKNOWLEDGED BY
PARAGRAPHS 1.5 AND 1.6 ONLY:
STUART COLEMAN & CO., INC.
By:
-------------------------------
Print Name:
--------------------
Its: Authorized Officer
11
<PAGE> 12
CONSENT OF SPOUSE, COHABITANT OR DOMESTIC PARTNER
The undersigned spouse, cohabitant or domestic partner of the
Shareholder acknowledges on her behalf that: I have read the foregoing Agreement
and I know its contents. I am aware that by its provisions that my spouse,
cohabitant or domestic partner grants Purchaser an interest in his Shares in the
Company, including my community interest in them. I hereby consent to and
approve of the provisions of the Agreement, and agree that those Shares and my
interest in them are subject to the provisions of the Agreement and that I will
take no action at any time to hinder operation of the Agreement on those Shares
or my interest in them.
Signature:
-----------------------------------
Print Name:
----------------------------------
12
<PAGE> 13
EXHIBIT A
13
<PAGE> 14
EXHIBIT B
14
<PAGE> 1
EXHIBIT 6
PROMISSORY NOTE
Los Angeles, California
$1,528,234.98 January 12, 1998
FOR VALUE RECEIVED, the undersigned, HealthMed, Inc., a Nevada
corporation ("Maker"), hereby promises to pay to David Katz, M.D., an individual
("Holder"), or his order, at La Jolla, California, the principal sum of One
Million Five Hundred Twenty Eight Thousand Two Hundred Thirty Four and 98/100
Dollars ($1,528,234.98) on January 12, 2000 ("Maturity Date"), and to pay
interest on the unpaid balance of said principal from the date hereof until
payment in full at the rate of ten percent (10%) per annum computed on the basis
of a year of 360 days for the actual number of days elapsed.
Accrued interest due hereunder shall be payable annually, in arrears, on
the 12th day of January in each year and at maturity until all unpaid principal
and accrued and unpaid interest due hereunder is paid in full.
Maker agrees that if for any reason it fails to make any of the monthly
payments required herein, including the amount due at the Maturity Date, within
ten (10) days after the due date, Holder shall be entitled to damages for the
detriment caused thereby, the extent of which damages are extremely difficult
and impractical to ascertain. Maker therefor agrees that a sum equal to five
percent (5%) of such delinquent payment is a reasonable estimate of such damages
and Maker agrees to pay such sum upon demand by Holder. Maker's tender of such
late charge, without Holder's acceptance thereof, shall in no event constitute a
waiver of Maker's default with respect to such overdue amount nor prevent the
Holder from exercising any of the other rights and remedies granted hereunder.
Principal and interest shall be paid in lawful currency of the United
States of America.
Maker reserves the right to prepay this Note, in whole or in part, at
any time or from time to time without penalty or premium, or upon the
acceleration of this Note as permitted hereunder. Any prepayments shall be
credited first to the payment of costs and charges of collection, if any, then
to accrued but unpaid interest hereon and the remainder to principal.
This Note is issued and delivered pursuant to a Stock Purchase Agreement
entered into by and between David Katz, M.D. and the undersigned (the
"Agreement") of even date herewith, and the Holder of this Note is entitled to
all benefits provided therein. The Agreement contains provisions for the
acceleration of the Maturity Date hereof for a portion of this Note upon the
happening of certain stated events. Upon the occurrence of any event of default
specified in the Agreement, the entire unpaid balance shall at once become due
and payable at the option of the holder of this Note.
Should a default be made in any installment of interest when due
hereunder, which default shall continue for a period of fifteen (15) days after
written notice by the holder of this Note of
<PAGE> 2
such default to Maker, the whole sum of principal and interest due hereunder
shall, at the option of the holder of this Note, become immediately due and
payable.
Maker waives diligence, presentment, protest, demand and notice of
protest, demand and of dishonor and nonpayment of this Note, and expressly
agrees that this Note, or any payment hereunder, may be extended by the holder
from time to time without in any way affecting the liability of Maker.
Maker agrees to reimburse the holder of this Note for all costs of
collection or enforcement of this Note, including, but not limited to,
reasonable attorneys' fees, incurred by such holder. Maker shall also reimburse
Holder for all attorneys' fees and costs reasonably incurred in the
representation of Holder in any bankruptcy, insolvency, reorganization or other
debtor-relief proceeding of or relating to Maker or any collateral for the
obligations hereunder.
The terms of this Note shall inure to the benefit of and bind the
parties hereto and their successors and assigns. Maker represents and warrants
to Holder that the obligations hereunder arise out of or in connection with
business purposes and do not relate to any personal, family or household
purpose. As used herein the term "Maker" shall include the undersigned Maker and
any other person or entity who may subsequently become liable for the payment
hereof. The term "Holder" shall include the named Holder as well as any other
person or entity to whom this Note or any interest in this Note is conveyed,
transferred or assigned. Each person signing this Note on behalf of Maker
represents and warrants that he has full authority to do so and that this Note
binds the corporation.
This Note shall be governed by and construed in accordance with the laws
of the State of California.
HEALTHMED, INC.
By:_________________________________
Mitchell J. Stein
Its: President & Secretary
2
<PAGE> 1
EXHIBIT 7
PROMISSORY NOTE
Los Angeles, California
$263,004.00 January 12, 1998
FOR VALUE RECEIVED, the undersigned, HealthMed, Inc., a Nevada
corporation ("Maker"), hereby promises to pay to Medical Biology Institute, a
California nonprofit public benefit corporation ("Holder"), or its order, at La
Jolla, California, the principal sum of Two Hundred Sixty Three Thousand Four
and No/100 Dollars ($263,004.00) on January 12, 2000 ("Maturity Date"), and to
pay interest on the unpaid balance of said principal from the date hereof until
payment in full at the rate of ten percent (10%) per annum computed on the basis
of a year of 360 days for the actual number of days elapsed.
Accrued interest due hereunder shall be payable annually, in arrears, on
the 12th day of January in each year and at maturity until all unpaid principal
and accrued and unpaid interest due hereunder is paid in full.
Maker agrees that if for any reason it fails to make any of the monthly
payments required herein, including the amount due at the Maturity Date, within
ten (10) days after the due date, Holder shall be entitled to damages for the
detriment caused thereby, the extent of which damages are extremely difficult
and impractical to ascertain. Maker therefor agrees that a sum equal to five
percent (5%) of such delinquent payment is a reasonable estimate of such damages
and Maker agrees to pay such sum upon demand by Holder. Maker's tender of such
late charge, without Holder's acceptance thereof, shall in no event constitute a
waiver of Maker's default with respect to such overdue amount nor prevent the
Holder from exercising any of the other rights and remedies granted hereunder.
Principal and interest shall be paid in lawful currency of the United
States of America.
Maker reserves the right to prepay this Note, in whole or in part, at
any time or from time to time without penalty or premium, or upon the
acceleration of this Note as permitted hereunder. Any prepayments shall be
credited first to the payment of costs and charges of collection, if any, then
to accrued but unpaid interest hereon and the remainder to principal.
This Note is issued and delivered pursuant to a Stock Purchase Agreement
entered into by and between Medical Biology Institute and the undersigned (the
"Agreement") of even date herewith, and the Holder of this Note is entitled to
all benefits provided therein. The Agreement contains provisions for the
acceleration of the Maturity Date hereof for a portion of this Note upon the
happening of certain stated events. Upon the occurrence of any event of default
specified in the Agreement, the entire unpaid balance shall at once become due
and payable at the option of the holder of this Note.
Should a default be made in any installment of interest when due
hereunder, which default shall continue for a period of fifteen (15) days after
written notice by the holder of this Note of
<PAGE> 2
such default to Maker, the whole sum of principal and interest due hereunder
shall, at the option of the holder of this Note, become immediately due and
payable.
Maker waives diligence, presentment, protest, demand and notice of
protest, demand and of dishonor and nonpayment of this Note, and expressly
agrees that this Note, or any payment hereunder, may be extended by the holder
from time to time without in any way affecting the liability of Maker.
Maker agrees to reimburse the holder of this Note for all costs of
collection or enforcement of this Note, including, but not limited to,
reasonable attorneys' fees, incurred by such holder. Maker shall also reimburse
Holder for all attorneys' fees and costs reasonably incurred in the
representation of Holder in any bankruptcy, insolvency, reorganization or other
debtor-relief proceeding of or relating to Maker or any collateral for the
obligations hereunder.
The terms of this Note shall inure to the benefit of and bind the
parties hereto and their successors and assigns. Maker represents and warrants
to Holder that the obligations hereunder arise out of or in connection with
business purposes and do not relate to any personal, family or household
purpose. As used herein the term "Maker" shall include the undersigned Maker and
any other person or entity who may subsequently become liable for the payment
hereof. The term "Holder" shall include the named Holder as well as any other
person or entity to whom this Note or any interest in this Note is conveyed,
transferred or assigned. Each person signing this Note on behalf of Maker
represents and warrants that he has full authority to do so and that this Note
binds the corporation.
This Note shall be governed by and construed in accordance with the laws
of the State of California.
HEALTHMED, INC.
By:_________________________________
Mitchell J. Stein
Its: President & Secretary
2
<PAGE> 1
EXHIBIT 8
HEALTHMED INCORPORATED
NATIONAL HEALTHCARE ALLIANCE
INSIDE LINE:
MITCHELL J. STEIN, (310) 246-9542
PRESIDENT
INSIDE FACS:
January 12, 1998 (310) 652-0405
VIA FACSIMILE
David Katz, M.D.
Chief Executive Officer
LIDAK PHARMACEUTICALS
11077 North Torrey Pines Road
La Jolla, California 92037
Dear David:
As our representatives have told you, we are excited about the
opportunity to assist Lidak Pharmaceuticals ("Lidak") in completing the
development of its extraordinary pharmaceutical technologies, and then in
swiftly and efficiently bringing them to market. As I stated to the Board of
Directors on Saturday, apart from the obvious profit motive that anybody would
have regarding Lidak's technologies, we are mindful of the "moral imperative"
that accompanies the hopes associated with many of the technologies. The public
deserves to have these technologies developed and distributed as rapidly as is
practical.
HEALTHMED AND NATIONAL CENTURY
HealthMed, Inc. ("HealthMed") is affiliated with several large health
care companies, including National Century Financial Enterprises, Inc. ("NCFE").
NCFE is one of the largest health care financiers in the country, with assets
well in excess of $1,000,000,000.00 ($1 billion). HealthMed and NCFE
(hereinafter sometimes "affiliates") are capable of providing a broad array of
financing, from loans to credit lines to accounts receivable facilities. We are
capable of arranging financing with virtually unlimited levels of creativity in
order to accommodate the business objectives of the client. The overriding
purpose is to provide a "life line" to companies such as Lidak which require a
strategic partner to secure sufficient working capital to assure operational and
strategic integrity. The financing packages placed by the affiliates are
designed to underwrite advances based upon projected growth and income levels.
LIDAK'S FUTURE COURSE
We have decided to become involved with Lidak, if appropriate, to secure
for Lidak operational integrity from the standpoint of enabling the Lidak
operations to closely track the Lidak business plan. As we understand it, that
business plan has as its core the billion-dollar-plus herpes pharmaceutical
- --------------------------------------------------------------------------------
BEVERLY HILLS ADDRESS: LOS ANGELES ADDRESS:
8306 WILSHIRE BOULEVARD 600 WILSHIRE BOULEVARD
SUITE 7056 SEVENTH FLOOR
BEVERLY HILLS, CALIFORNIA 90212 LOS ANGELES, CALIFORNIA 90017
<PAGE> 2
HEALTHMED INCORPORATED
NATIONAL HEALTHCARE ALLIANCE
- --------------------------------------------------------------------------------
David Katz, M.D.
January 12, 1998
Page 2
market which Lidak intends to profoundly penetrate. With these kinds of revenue
projections, and considering the prospective success of Lidakol, it appears to
us imperative that Lidak consummate plans to saturate the market immediately
upon NDA approval. Indeed, this is the best way to assure methodical development
of Lidak's other revolutionary technologies. And there is obviously a salutary
purpose from the standpoint of those persons afflicted with the diseases that
would be treated by these technologies.
THE PROPOSAL
Our proposal to Lidak is to advance money to the Company in three
stages, as follows:
Stage 1: $13 million to $30 million (within three to four weeks of plan
approval):
This money will be earmarked to provide Lidak with resources to
facilitate and revitalize research and development on ongoing and various other
Lidak technologies which may have been temporarily scaled back to conserve
precious and limited available capital. These include, but are not limited to,
additional promising indications for therapeutic applications of Lidakol (both
topical and systemic, such as in AIDS, etc.), further exploration of cancer
vaccine therapies using LMI and dendritic cell techniques, deeper investigation
of the stem cell technology potential for bone marrow transplants and rapidly
ramping up chemistry requirements to bring the allergy and asthma program to the
clinical trial stage as soon as possible.
Concurrent with the R&D emphasis described above, we expect that Stage 1
monies will also be used to provide the necessary funds to properly assess,
strategize and otherwise prepare Lidak and its staff (and potential partners)
for manufacturing, marketing and distributing Lidakol in the North American
markets (and throughout the world). For example, certain long lead-time issues
critical for eventual marketing support (publications and other educational
items) will be one focus during the next 2-3 months. Also, during this initial
time-frame, we intend to work with the Lidak staff to ascertain the optimal
course for marketing Lidakol in the U.S. (including partnerships with outside
parties, co-marketing strategies, etc.).
Stage 2: Up to $30 million (during four to seven months following Stage
1 advance):
This money (amount to be determined based on assessments made during
Stage 1) will be earmarked for operational use during the first phase of
distribution of Lidakol once FDA approval has been granted. The bulk of this
money will most likely be used in the initial marketing phase to effectively and
rapidly make the general public aware of Lidakol's existence, indications and
therapeutic effectiveness.
Stage 3: $50 million to $70 million (during nine to eighteen months
following Stage 1 advance):
This money will be earmarked to support (a) continued development of
existing technologies (or newly discovered or acquired ones) and (b) further
advancement and indeed perfection of Lidak's business plans as crafted and
matured during ongoing strategic planning taking shape during Stages 1 and 2
time-frames.
<PAGE> 3
HEALTHMED INCORPORATED
NATIONAL HEALTHCARE ALLIANCE
- --------------------------------------------------------------------------------
David Katz, M.D.
January 12, 1998
Page 3
CONDITIONS PRECEDENT TO IMPLEMENTATION OF THE PROPOSAL
The above proposals are subject to certain conditions precedent, as
follows:
Stage 1 Conditions Precedent:
(a) confirming the balance of due diligence items set out in prior
correspondence,
(b) receiving sufficient entry of shareholders into voting trust
arrangements with HealthMed.
(c) accomplishing the necessary reconfiguration of the Lidak Board of
Directors and
(d) receiving from Lidak and then confirming a realistic pro forma of
the revenue stream associated with the initial roll out of Lidakol.
Stage 2 Conditions Precedent:
In addition to the Stage 1 prerequisites, the second stage is dependent
and conditioned upon receiving an approval letter for the NDA and conducting due
diligence regarding strategic alliances with the network of hospitals and other
providers associated with the affiliates.
Stage 3 Conditions Precedent:.
The third stage would, in addition, be dependent and conditioned upon
technological due diligence regarding the efficacy of the technologies other
than Lidakol and projections regarding the completion of development and
distribution thereof.
GENERAL REPAYMENT STANDARDS
Obviously, it is the intention of the affiliates to implement the above
programs on a non-dilutive basis so that Lidak would be responsible for
returning the financing (along with competitive interest and program costs) out
of its future revenue stream. The object of the financing would be to assure
that such a repayment would only occur in a manner which is sensitive and
productive to Lidak's future well-being.
We would, sincerely, be honored to begin working with you and Lidak on
these important projects.
Very truly yours,
HEALTHMED, INC.
By: MITCHELL J. STEIN
President
MJS/mlh
