<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
Anergen, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Corixa Corporation Common Stock, $0.001 par value ("Corixa Common
Stock") and Anergen, Inc. Common Stock, no par value per share
("Anergen Common Stock") to be acquired by Corixa Corporation
("Corixa").
(2) Aggregate number of securities to which transaction applies:
19,341,638 shares of Anergen Common Stock
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): Anergen
Common Stock: $0.4375.
(4) Proposed maximum aggregate value of transaction:
$8,461,966
(5) Total fee paid:
$1,693
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
* Such fee of $1,693 represents 1/50th of 1% of the value of Corixa Common
Stock to be issued to holders of Anergen Common Stock in the transaction. The
value of Corixa Common Stock was determined in accordance with Rule 0.11(a)(4)
under the Securities Exchange Act based on the value of the Anergen Common
Stock expected to be acquired in the transaction ($19,341,638) by $0.4375 which
represents the average of the high and low prices per share of Anergen Common
Stock as reported on the Nasdaq National Market on December 21, 1998.
<PAGE> 2
, 1999
[ANERGEN LOGO]
Dear Anergen Stockholder:
As you may be aware, Anergen, Inc., a Delaware corporation
("Anergen"), and Corixa Corporation, a Delaware corporation ("Corixa"), have
entered into an Agreement and Plan of Reorganization dated as of December 11,
1998 (the "Merger Agreement"), providing for the acquisition of Anergen by
Corixa (the "Merger"). The Merger is more fully described in the accompanying
Proxy Statement/Prospectus. A special meeting of the stockholders of Anergen
will be held at Anergen's corporate offices located at 301 Penobscot Drive,
Redwood City, California 94063 on , 1999 at a.m. local time.
At the Anergen Special Meeting, you will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement and approve the
Merger.
After careful consideration, the Anergen Board of Directors has
unanimously approved the Merger Agreement and the Merger, and has concluded they
are fair to, and in the best interests of, Anergen and its stockholders. The
Anergen Board of Directors unanimously recommends that you vote in favor of the
adoption and approval of the Merger Agreement and approval of the Merger.
In the materials accompanying this letter you will find a Notice of
Special Meeting of Stockholders, a Proxy Statement/Prospectus relating to the
proposal to be voted upon at the Anergen Special Meeting and a Proxy Card. The
Proxy Statement/ Prospectus more fully describes the proposed transaction and
the proposal before the Anergen stockholders.
All Anergen stockholders are cordially invited to attend the Anergen
Special Meeting in person. If you attend the Anergen Special Meeting, you may
vote in person even though you have previously returned your completed proxy
card.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANERGEN SPECIAL MEETING, IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED. APPROVAL OF THE MERGER
REQUIRES THE AFFIRMATIVE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING
SHARES OF ANERGEN COMMON STOCK. THEREFORE, PLEASE COMPLETE, SIGN, DATE AND
RETURN YOUR PROXY CARD IN THE ENCLOSED ENVELOPE. PLEASE DO NOT SEND THE STOCK
CERTIFICATE(S) REPRESENTING YOUR ANERGEN COMMON STOCK AT THIS TIME.
YOUR VOTE IS IMPORTANT -- PLEASE RETURN YOUR PROXY CARD PROMPTLY.
Sincerely,
Barry M. Sherman, M.D.
Director, President and Chief
Executive Officer
<PAGE> 3
[ANERGEN LOGO]
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1999
------------------------
TO THE STOCKHOLDERS OF ANERGEN, INC.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Anergen
Special Meeting") of Anergen, Inc., a Delaware corporation ("Anergen"), will be
held on , 1999 at a.m. local time at Anergen's corporate
offices located at 301 Penobscot Drive, Redwood City, California 94063 to
consider and vote upon the following proposal:
1. To approve and adopt the Agreement and Plan of Reorganization (the
"Merger Agreement"), dated as of December 11, 1998, by and among
Anergen, Corixa Corporation, a Delaware corporation ("Corixa"), and
Yakima Acquisition Corporation, a Delaware corporation and wholly-owned
subsidiary of Corixa ("Merger Sub"), and to approve the merger of Merger
Sub with and into Anergen (the "Merger"), pursuant to which Anergen will
become a wholly-owned subsidiary of Corixa. A copy of the Merger
Agreement is attached as Appendix A to the Proxy Statement/Prospectus
accompanying this Notice.
2. To transact such other business as may properly come before the Anergen
Special Meeting or any adjournment or postponement thereof.
The Merger Agreement, the proposed Merger and other related matters are
more fully described in the attached Proxy Statement/Prospectus.
Stockholders of record at the close of business on , 199 are
entitled to notice of, and to vote at, the Anergen Special Meeting and any
adjournments or postponements thereof.
All Anergen stockholders are cordially invited to attend the Anergen
Special Meeting in person. Whether or not you expect to attend, WE URGE YOU TO
SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE
PROVIDED.
By Order of the Board of
Directors,
Barry M. Sherman, M.D.
Director, President and
Chief Executive Officer
Redwood City, California
, 1999
<PAGE> 4
PROXY
STATEMENT FOR SPECIAL MEETING OF
STOCKHOLDERS OF
[ANERGEN, INC. LOGO]
To be held on , 1999
Anergen, Inc. and Corixa Corporation have agreed to merge Yakima Acquisition
Corporation, a wholly-owned subsidiary of Corixa, with and into Anergen. Anergen
will become a wholly-owned subsidiary of Corixa, and Anergen stockholders will
receive .058751 of a share of Corixa Common Stock for each share of Anergen
Common Stock they own. Corixa will hold part of these shares in escrow until
certain events occur.
We estimate that the shares of Corixa Common Stock that will be issued to
Anergen stockholders will represent approximately 7.66% of the outstanding
Corixa shares after the Merger.
On , 1999 Corixa Common Stock closed at $ per share and Anergen
Common Stock closed at $ per share.
PROSPECTUS OF
[CORIXA LOGO]
COMMON STOCK, PAR VALUE $.001
The Merger cannot occur unless Anergen stockholders approve it. The Anergen
Board of Directors has scheduled a special meeting for Anergen stockholders to
vote on the Merger as follows:
, 1999
: a.m.
Anergen, Inc.
301 Penobscot Dr.
Redwood City, California
This document provides you detailed information about the proposed Merger.
Corixa has provided the information concerning Corixa, and Anergen has provided
the information concerning Anergen. Please see "Available Information" for
additional information about Anergen and Corixa on file with the United States
Securities and Exchange Commission (the "Commission").
This Proxy Statement/Prospectus and Proxy are being mailed to stockholders
of Anergen beginning about January , 1999.
------------------------
CORIXA COMMON STOCK TRADES ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL CRXA.
ANERGEN COMMON STOCK TRADES ON THE NASDAQ NATIONAL MARKET UNDER THE SYMBOL ANRG.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
REGULATOR HAS APPROVED OR DISAPPROVED THE CORIXA COMMON STOCK TO BE ISSUED UNDER
THIS PROXY STATEMENT/PROSPECTUS OR DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS
IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
YOU SHOULD BE AWARE THAT THIS IS A COMPLICATED TRANSACTION. WE URGE
STOCKHOLDERS OF ANERGEN TO READ AND CONSIDER CAREFULLY THIS PROXY STATEMENT/
PROSPECTUS IN ITS ENTIRETY, INCLUDING THE MATTERS REFERRED TO BEGINNING ON PAGE
26 UNDER "RISK FACTORS."
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS , 1999
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... iv
TRADEMARKS.................................................. vi
FORWARD LOOKING STATEMENTS.................................. vi
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 5
The Companies............................................. 5
Anergen Stockholders' Meeting............................. 6
Record Date; Voting Power................................. 6
What Will Happen to Anergen............................... 6
What Anergen Stockholders Will Receive.................... 6
Other Interests of Officers and Directors in the Merger... 7
Conditions to the Merger.................................. 7
Termination of the Merger Agreement; Termination Fees..... 8
Vote Required............................................. 9
Ownership of Corixa Following the Merger.................. 9
When the Merger Will Occur................................ 9
Securities Laws Compliance................................ 10
Accounting Treatment...................................... 10
Opinion of Financial Advisor.............................. 10
Important Federal Income Tax Consequences................. 10
No Rights of Dissenting Stockholders...................... 10
Voting and Affiliate Agreements........................... 10
Listing of Corixa Common Stock............................ 10
Comparative Per Share Market Price Information............ 10
SELECTED HISTORICAL FINANCIAL INFORMATION OF CORIXA......... 12
SELECTED HISTORICAL FINANCIAL INFORMATION OF ANERGEN........ 13
SUMMARY SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION............................................... 14
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS....... 16
MARKET PRICE AND DIVIDEND POLICY............................ 24
COMPARATIVE PER SHARE DATA.................................. 24
RISK FACTORS................................................ 26
Risks Related to the Merger............................... 26
Risks Related to Corixa................................... 30
Risks Related to Anergen.................................. 40
INTRODUCTION................................................ 42
THE SPECIAL MEETING......................................... 42
Date, Time and Place of Special Meeting................... 42
Purpose of the Special Meeting............................ 42
Record Date; Voting Rights; Proxies....................... 42
Quorum.................................................... 43
Required Vote; Voting Agreement........................... 43
Solicitation of Proxies; Expenses......................... 44
APPROVAL OF THE MERGER AND RELATED TRANSACTIONS............. 46
Description............................................... 46
Joint Reasons for the Merger.............................. 46
Corixa's Reasons for the Merger........................... 47
Recommendation of Anergen Board; Anergen's Reasons for the
Merger................................................. 48
Opinion of Anergen's Financial Advisor.................... 50
Material Contacts......................................... 54
Management and Operations Following the Merger............ 57
</TABLE>
i
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Interest of Certain Persons in the Merger................. 57
Certain Federal Income Tax Consequences................... 60
Accounting Treatment...................................... 63
No Dissenter's Rights..................................... 63
No Orders, Injunctions, Etc............................... 63
Resale Restrictions....................................... 63
TERMS OF THE MERGER......................................... 64
The Merger................................................ 64
Effective Time of the Merger.............................. 64
Conversion of Securities.................................. 64
Escrow Shares; Escrow Fund................................ 65
Warrants.................................................. 66
Stock Options............................................. 66
Exchange of Shares........................................ 67
Representations and Warranties............................ 68
Conduct of Anergen's Business Prior to the Merger......... 69
Certain Covenants......................................... 72
No Solicitation........................................... 73
Certain Employee Benefit Plan Matters..................... 75
Indemnification........................................... 75
Management After the Merger............................... 76
Conditions................................................ 76
Termination............................................... 78
Expenses; Cancellation Fees............................... 79
Amendment; Waiver......................................... 80
CORIXA MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 81
ANERGEN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS....................... 89
INFORMATION CONCERNING CORIXA............................... 95
Scientific Background..................................... 95
Corixa's Strategy......................................... 97
Corixa's Core Technology Platforms........................ 98
Corixa's Products in Development.......................... 102
Corporate Partnerships.................................... 108
Other Products............................................ 110
Certain Business Relationships............................ 111
Certain License Agreements................................ 112
Corixa's Antigen Discovery Methodology.................... 114
Patents and Proprietary Technology........................ 116
Government Regulation..................................... 118
Competition............................................... 121
Employees................................................. 122
Properties................................................ 122
Legal Proceedings......................................... 122
Scientific Collaborators.................................. 123
INFORMATION CONCERNING ANERGEN.............................. 125
General................................................... 125
Autoimmune Diseases....................................... 126
Anergen Technology........................................ 127
Products Under Development................................ 128
Additional Applications for Anergen Technologies.......... 131
</TABLE>
ii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Collaborative Arrangements................................ 131
Manufacturing............................................. 133
Marketing and Sales....................................... 133
Patents and Proprietary Rights............................ 134
Competition............................................... 134
Government Regulation..................................... 135
Pharmaceutical Pricing and Reimbursement.................. 138
Product Liability Insurance............................... 139
Employees................................................. 139
Properties................................................ 139
Legal Proceedings......................................... 139
MANAGEMENT OF CORIXA........................................ 140
COMPENSATION OF CORIXA EXECUTIVE OFFICERS................... 148
MANAGEMENT OF ANERGEN....................................... 151
COMPENSATION OF ANERGEN EXECUTIVE OFFICERS.................. 159
OWNERSHIP OF CORIXA CAPITAL STOCK........................... 162
OWNERSHIP OF ANERGEN CAPITAL STOCK.......................... 165
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF CORIXA.... 168
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF ANERGEN... 170
COMPARISON OF RIGHTS OF HOLDERS OF CORIXA CAPITAL STOCK AND
HOLDERS OF ANERGEN CAPITAL STOCK.......................... 171
EXPERTS..................................................... 174
LEGAL MATTERS............................................... 174
OTHER MATTERS............................................... 174
INDEX TO FINANCIAL STATEMENTS............................... F-1
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION............ A-1
APPENDIX B: OPINION OF PACIFIC GROWTH EQUITIES INC.......... B-1
</TABLE>
iii
<PAGE> 8
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN AS CONTAINED HEREIN IN CONNECTION WITH THESE MATTERS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY CORIXA AND ANERGEN. NEITHER THE DELIVERY
HEREOF NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE FACTS
HEREIN SET FORTH SINCE THE DATE HEREOF. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE SECURITIES
OFFERED BY THIS PROXY STATEMENT/PROSPECTUS WHERE, OR TO ANY PERSON TO WHOM, IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
AVAILABLE INFORMATION
Corixa and Anergen are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference room of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the public reference facilities in the New York
Regional Office, 75 Park Place, New York, New York 10007, and the Chicago
Regional Office, 500 West Madison Street, Chicago, Illinois 60661. Copies of
such material can be obtained at prescribed rates by writing to the Commission,
Public Reference Section, Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Corixa Common Stock and Anergen Common Stock are
each quoted on Nasdaq, and such reports, proxy statements and other information
can also be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006. The Commission maintains a web site at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
Corixa has filed with the Commission a registration statement on Form S-4
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"). This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Proxy Statement/Prospectus as to the contents of
any contract or other document are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. For further information, reference is hereby
made to the Registration Statement. Copies of the Registration Statement and the
exhibits and schedules thereto may be inspected, without charge, at the offices
of the Commission, or obtained at prescribed rates from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549.
-------------------------
iv
<PAGE> 9
TRADEMARKS
Corixa has applied for trademark registration for CORIXA(TM) and the
stylized Corixa logo.
The terms Anergen(TM), AnergiX(TM), MS/AnergiX(TM), MG/AnergiX(TM),
RA/AnergiX(TM), IDDM/AnergiX(TM), AnervaX(TM) and DiavaX(TM)are trademarks of
Anergen.
This Proxy Statement/Prospectus also includes trade names and trademarks of
companies other than Corixa or Anergen. The use of any such third party trade
name or trademark herein is in an editorial fashion only, and to the benefit of
the owner thereof, with no intention of commercial use or infringement of such
trade name or trademark.
-------------------------
FORWARD-LOOKING STATEMENTS
The Proxy Statement/Prospectus contains forward-looking statements. These
statements relate to future events or the future financial performance of Corixa
and Anergen. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms and other comparable terminology. These statements only reflect
managements' expectations and estimates. Actual events or results may differ
materially. Reference is made to the particular discussions set forth under
"Risk Factors," "Corixa Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Anergen Management's Discussion and
Analysis of Financial Condition and Results of Operations."
There can be no assurance that actual future performance will meet the
current expectations. In connection with forward-looking statements which appear
in these and other disclosures, stockholders of Corixa and Anergen should
carefully review the factors set forth in this Proxy Statement/Prospectus under
"Risk Factors" beginning on page 26 hereof.
v
<PAGE> 10
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE? HOW WILL I, A STOCKHOLDER OF
ANERGEN, BENEFIT?
A: THE BOARD OF DIRECTORS OF CORIXA BELIEVES, AMONG OTHER THINGS, THAT:
- The Merger will enable the combined company to pursue a number of
potential product opportunities that Anergen would otherwise be unable to
pursue due to inadequate resources.
- The Merger will strengthen the combined company's scientific expertise
and expand the combined company's existing potential product
opportunities as compared to each of Corixa and Anergen on a stand-alone
basis. For example, Corixa's Board of Directors expects the Merger to
provide Corixa with scientific expertise and access to relevant animal
models to determine whether human clinical trials of M.vaccae-derived
products in additional autoimmune diseases are warranted.
- The Merger will combine Corixa's and Anergen's complementary scientific
expertise and product discovery opportunities which may lead to increased
future potential product opportunities for the combined company. For
example, Corixa believes that additional product discovery opportunities
may exist through Anergen's research program focused on specific immune
system hormones called chemokines. Application of additional Corixa
technology to this product development area may also speed the discovery
and development of multiple proprietary products.
- The combined company's enhanced scientific and business development
expertise resulting from the Merger may lead to additional partnering
transactions that neither Corixa nor Anergen would be able to obtain on a
stand-alone basis. Also, the combined company may be able to obtain
improved commercial terms in such partnering transactions due to the
company's increased size, product development portfolio and bargaining
power.
THE BOARD OF DIRECTORS OF ANERGEN BELIEVES, AMONG OTHER THINGS, THAT:
- The Merger is necessary for Anergen to continue its operations, given
that Anergen has been unsuccessful to date in obtaining much-needed
financing.
- Given the complementary nature of the products of Anergen and Corixa, and
their scientific synergies, the Merger will enhance the opportunity for
the potential realization of Anergen's strategic objective of achieving
greater scale and presence in the pharmaceutical market.
- Anergen's stockholders would have the opportunity to participate in the
potential for growth of the combined company after the Merger.
- The combined clinical, research and product development expertise,
financial resources, size and breadth of product offerings, strategic
partnerships and research opportunities of the combined company will
allow it to respond more quickly and effectively to increased competition
and rapid change in the industry.
1
<PAGE> 11
- The combination of Corixa's products and potential products with
Anergen's potential products will allow the combined company to offer a
more comprehensive set of pharmaceutical products to its potential
customers.
- The creation of a higher market profile and greater financial strength
may present greater opportunities for marketing the potential products of
the combined company.
- The Merger may increase the opportunity for (a) effectively utilizing the
skills and resources of the companies' respective clinical teams and (b)
matching the respective corporate cultures of the two companies while
maintaining some of the most important aspects of each culture.
- The combined technological resources and scientific know-how may allow
the combined company to develop new therapies, vaccines and other
products.
- Anergen can benefit from Corixa's antigen research and discovery, while
Corixa can expand its indications to autoimmune diseases and utilize
Anergen's animal model and proprietary assay systems.
- The consideration offered by Corixa in connection with the Merger is fair
and in the best interest of Anergen and its stockholders, especially in
light of the fact that, at the time the parties signed the Merger
Agreement, the market value of Corixa Common Stock to be issued in
exchange for Anergen Common Stock represented a significant premium over
the recent price range of Anergen Common Stock.
- The Corixa Common Stock Anergen stockholders will receive in the Merger
has significantly greater liquidity than Anergen Common Stock.
- The Merger will allow Anergen to re-establish its research and
development capabilities and provide sufficient capital and resources to
support those activities.
- The Anergen product pipeline may benefit from Corixa's antigen discovery
and delivery, and adjuvant technologies, as a means to boost the clinical
efficacy of AnervaX(TM) and AnergiX(TM).
- Anergen will be in a position to benefit from Corixa's extensive network
of established corporate partnerships when trying to enter into certain
business relationships for the continued development and
commercialization of its products.
THE BOARD OF DIRECTORS OF ANERGEN UNANIMOUSLY RECOMMENDS VOTING IN FAVOR OF THE
MERGER AGREEMENT AND THE MERGER.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the Merger is completed, you will receive .058751 of a share of Corixa
Common Stock for each share of Anergen Common Stock that you own, subject to
certain shares held in escrow.
Corixa will not issue fractions of its shares to you in the Merger. Instead,
you will receive cash for any fractional shares of Corixa Common Stock owed
to you upon the Merger based on the market value of such shares on a date
close to the date of the Special Meeting.
2
<PAGE> 12
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
document, indicate on your proxy card how you want to vote, and sign and mail
the proxy card in the enclosed return envelope as soon as possible, so that
your shares may be represented at the Special Meeting. If you sign and send
in your proxy card and do not indicate how you want to vote, we will count
your proxy card as a vote in favor of the Merger Agreement and the Merger. If
you do not vote or you abstain, it will have the effect of a vote against the
Merger Agreement and the Merger.
The Special Meeting will take place on , 1999. You may attend
the meeting and vote your shares in person, rather than by signing and
mailing your proxy card. In addition, you may revoke your proxy card up to
and including the day of your stockholders' meeting and vote in person.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares according to the
directions your broker provides. Without instructions, your broker will not
vote your shares.
Q: SHOULD I SEND MY STOCK CERTIFICATES NOW?
A: No. After the Merger is completed, Corixa will send you written instructions
for exchanging your stock certificates.
Q: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A: We are working toward completing the Merger as quickly as possible. In
addition to several other closing conditions, we must obtain Anergen
stockholder approval. If all necessary approvals are obtained and closing
conditions satisfied in a timely manner, we expect to complete the Merger
during the first quarter of 1999.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: In most cases, the exchange of shares by you should be tax-free to you for
federal income tax purposes. However, you will have to report a taxable gain
or loss if you receive cash for fractional shares. To review the tax
consequences to you and to Anergen in more detail, see pages 60 through 63.
Also, you should consult your tax advisor.
3
<PAGE> 13
WHO CAN HELP ANSWER YOUR QUESTIONS?
If you have additional questions about the Merger, you should contact:
Corixa Corporation
1124 Columbia Street
Suite 200
Seattle, WA 98104
Phone Number: (206) 754-5711
Attention: Michelle Burris, Chief Financial Officer
Anergen, Inc.
301 Penobscot Drive
Redwood City, CA 94063
Phone Number: (650) 361-8901
Attention: Adrienne Hogg, Controller
If you have additional questions about Anergen's solicitation of your
proxy, you should contact:
Dan DeWeever
ChaseMellon Shareholder Services, L.L.C.
450 West 33rd Street, 14th Floor
New York, NY 10001
Phone Number: (212) 273-8293
4
<PAGE> 14
SUMMARY
This summary highlights selected information from this document and may not
contain all of the information that is important to you. To understand the
Merger fully and for a more complete description of the legal terms of the
Merger, you should carefully read this entire document and the documents to
which we have referred you.
Anergen has provided the information in this Proxy Statement/Prospectus
about Anergen and Corixa has provided the information in this Proxy
Statement/Prospectus about Corixa.
FORWARD-LOOKING STATEMENTS
The Proxy Statement/Prospectus contains forward-looking statements. These
statements relate to future events or the future financial performance of Corixa
and Anergen. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms and other comparable terminology. These statements only reflect
managements' expectations and estimates. Actual events or results may differ
materially.
In connection with forward-looking statements which appear in these and
other disclosures, stockholders of Corixa and Anergen should carefully review
the factors set forth in this Proxy Statement/Prospectus under "Risk Factors"
beginning on page 26 hereof.
THE COMPANIES
Corixa. Corixa Corporation, located in Seattle, Washington, is a
biotechnology company committed to saving lives and preventing disease by
understanding and directing the immune system. Corixa applies its advanced
immunological expertise and proprietary technology platforms to discover and
optimize vaccines and other antigen or adjuvant-based products. Corixa partners
with innovative developers and marketers of pharmaceutical and diagnostic
products to make its products and technologies available to patients around the
world. Corixa dedicates the majority of its resources to product discovery and
will also invest its own capital in direct funding of individual product
clinical trials, either to determine safety or efficacy of its products or with
the goal of adding value to the product for subsequent partner-based
commercialization.
As used herein the term "Corixa" refers to Corixa Corporation. Corixa was
incorporated in Delaware in September 1994. Corixa's principal executive offices
are located at 1124 Columbia Street, Suite 200, Seattle, Washington 98104, and
its telephone number is (206) 754-5711.
Anergen. Anergen, Inc., located in Redwood City, California, is a
biotechnology company focused on advancing the treatment of autoimmune diseases.
Anergen is developing proprietary biopharmaceutical compounds designed to
interrupt selectively antigen presentation or inactivate those T cells that
mediate the disease process. This specificity has the potential to minimize the
risk for suppressing the entire immune system. Anergen is currently pursuing the
development and clinical evaluation of promising therapeutics derived from its
two technology platforms, AnervaX(TM) and AnergiX(TM).
As used herein the term "Anergen" refers to Anergen, Inc. Anergen was
incorporated in California in April 1988 and re-
5
<PAGE> 15
incorporated in Delaware in July 1998. Anergen's principal executive offices are
located at 301 Penobscot Drive, Redwood City, California 94063, and its
telephone number is (650) 361-8901.
Merger Sub. Yakima Acquisition Corporation is a Delaware corporation and
wholly-owned subsidiary of Corixa. Corixa recently organized Merger Sub solely
for the purpose of effecting the acquisition of Anergen. It has no material
assets and has not engaged in any activities except in connection with the
proposed acquisition of Anergen by Corixa. Its executive offices are located at
1124 Columbia Street, Suite 200, Seattle, Washington 98104, and its telephone
number is (206) 754-5711.
ANERGEN STOCKHOLDERS' MEETING
The Anergen Special Meeting of Stockholders will be held at the offices of
Anergen at 301 Penobscot Dr., Redwood City, California 94063 on February ,
1999 at a.m., local time. At the meeting, Anergen will ask its
stockholders to approve the Merger.
Anergen stockholders may also consider any vote on such other matters as
may be properly brought before the Special Meeting.
RECORD DATE; VOTING POWER
You can vote at the Special Meeting if you owned shares of Anergen Common
Stock as of the close of business on , 1999 (the "Record Date").
At the close of business on the Record Date, shares of
Anergen Common Stock were outstanding and entitled to vote at the Special
Meeting. You will have one vote for each share of Anergen Common Stock you owned
as of the Record Date.
WHAT WILL HAPPEN TO ANERGEN
If the Merger is completed, Merger Sub will merge with and into Anergen
with Anergen surviving the Merger and becoming a wholly-owned subsidiary of
Corixa. Individuals who owned stock in Anergen before the Merger will own stock
in Corixa after the Merger.
WHAT ANERGEN STOCKHOLDERS WILL RECEIVE
As a result of the Merger, Anergen stockholders will receive .058751 of a
share of Corixa Common Stock for each share of Anergen Common Stock that they
own. This number is called the "Exchange Ratio." However, approximately 54,763
of the approximately 1,136,338 total shares of Corixa Common Stock to be issued
to Anergen stockholders pursuant to the Merger will be held in escrow and
thereby withheld from the Anergen stockholders proportionately, and Anergen
stockholders will not receive these shares unless Anergen has entered into an
amendment to a Product Development and License Agreement dated June 28, 1996
between Anergen and N.V. Organon within certain time limitations. Specifically,
if such amendment is signed prior to the date the Merger is effective and before
March 15, 1999, the escrow agent will release the shares held in escrow
immediately prior to the date the Merger is effective. If such amendment is
signed after the date the Merger is effective but before January 31, 1999, the
shares held in escrow will be released on the date such amendment is signed.
Otherwise, the shares held in escrow will return to Corixa and will not be
released to Anergen stockholders. If the escrow shares are not released to
Anergen stockholders, then the effective Exchange Ratio will reduce to a right
to receive .055919 of a share of Corixa Common Stock for each share of Anergen
Common Stock.
6
<PAGE> 16
Anergen stockholders will not receive fractional shares. Instead, they will
receive a check in payment for any fractional shares based on the market value
of Corixa's Common Stock.
DO NOT SEND IN YOUR STOCK CERTIFICATES UNTIL INSTRUCTED TO DO SO AFTER THE
MERGER IS COMPLETED.
OTHER INTERESTS OF OFFICERS AND
DIRECTORS IN THE MERGER
In considering the Anergen Board of Directors' recommendation that you vote
for the Merger, you should be aware that the officers and directors of Anergen
have interests in the Merger that are different from, or in addition to, their
rights as Anergen stockholders. As of December 21, 1998, directors and executive
officers of Anergen beneficially owned approximately 37.5% of the 18,923,888
outstanding shares of Anergen Common Stock, together with applicable options and
warrants held by such shareholders. See "Ownership of Anergen Capital Stock."
Note that approval of the Merger requires an affirmative vote of a majority of
the outstanding shares of Anergen Common Stock.
Certain officers of Anergen have entered into retention and employment
agreements with Anergen that provide them with interests in the Merger that are
different from, or in addition to, yours. Specifically, Dr. Sherman's employment
agreement provides that when the Merger becomes effective, he will be deemed
"constructively terminated" and will receive salary and continuation of benefits
for twelve months after effectiveness of the Merger.
In addition, certain board members of Anergen are affiliated with Warburg,
Pincus Ventures, L.P. ("Warburg") and International Biotechnology Trust PLC
("IBT"), major stockholders of Anergen who are providing a $500,000 bridge loan
to Anergen. Warburg and IBT will also provide an additional $1,000,000 bridge
loan if the Merger is not effective by January 1, 1999. These bridge loans will
be secured by Anergen's assets. If the Merger does not occur, Warburg and IBT
will receive warrants to purchase Anergen Common Stock.
For more details, see "Approval of the Merger and Related Transactions --
Interest of Certain Persons in the Merger."
CONDITIONS TO THE MERGER
The obligations of Corixa, Anergen and Merger Sub to effect the Merger are
contingent on the occurrence of the following events:
- Anergen's stockholders approve the Merger;
- The Registration Statement on Form S-4 (the "Registration Statement"
covering Corixa Common Stock issuable in connection with the Merger) is
filed, becomes effective and no stop order suspending its effectiveness
is issued;
- There is no injunction prohibiting the Merger;
- The agreement related to the escrow of shares is executed;
- Nasdaq approves of the listing of the shares of Corixa Common Stock
issuable in connection with the Merger; and
- Corixa or Anergen receive a written opinion from their respective tax
counsel that the Merger is a tax-free reorganization.
The obligations of Anergen to effect the Merger are contingent on the
occurrence of the following events:
- The representations and warranties of Corixa and Merger Sub in the Merger
agreement are true and
7
<PAGE> 17
correct as of the date the Merger Agreement was signed and as of the
effective date of the Merger (subject to certain materiality
qualifications);
- Corixa and Merger Sub comply in all material respects with the covenants
of Corixa and Merger Sub as outlined in the Merger Agreement;
- Anergen receives an opinion from counsel in the format required in the
Merger Agreement; and
- No Material Adverse Effect (as defined in the Merger Agreement) occurs
with respect to Corixa or its subsidiaries.
The obligations of Corixa and Merger Sub to effect the Merger are
contingent on the occurrence of the following events:
- The representations and warranties of Anergen in the Merger Agreement are
true and correct as of the date the Merger Agreement is signed and as of
the effective date of the Merger (subject to certain materiality
qualifications);
- Anergen complies in all material respects to the covenants of Anergen as
outlined in the Merger Agreement;
- Corixa and Merger Sub receive an opinion from counsel in the format
required in the Merger Agreement;
- No Material Adverse Effect (as defined in the Merger Agreement) occurs
with respect to Anergen;
- Anergen obtains certain third party consents required to consummate the
Merger;
- Warburg and IBT, current investors of Anergen who also have
representatives on Anergen's Board of Directors, enter into a Note
Purchase Agreement and Common Stock Purchase Agreement with Anergen
relating to a bridge loan investment in Anergen; and
- Silicon Valley Bank neither forecloses on its outstanding loan to Anergen
nor takes action to encumber, obtain title or take control of certain
property of Anergen.
For more information on the conditions to the Merger, see "Terms of the
Merger -- Conditions."
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEES
Either Corixa or Anergen may terminate the Merger Agreement at any time
prior to the effectiveness of the Merger, whether before or after Anergen
obtains the required stockholder vote, if, among other things:
- The Corixa and Anergen Boards mutually consent;
- The Merger does not become effective on or before February 15, 1999 (or
March 31, 1999 if the Commission has notified the parties that it will
review the Proxy Statement/ Prospectus);
- A governmental entity issues an order, decree or ruling or takes any
other action which prevents Corixa or Anergen from going forward with the
Merger;
- Anergen stockholders do not approve the Merger;
- Anergen's Board of Directors withdraws its unanimous recommendation in
favor of this Merger;
- Anergen's Board of Directors enters into a letter of intent or approves a
merger with an entity other than Corixa; or
8
<PAGE> 18
- A person or entity unaffiliated with Corixa and Anergen commences a
tender or exchange offer relating to securities of Anergen and Anergen
fails to send its stockholders a statement disclosing that Anergen
recommends rejection of such offer within 10 business days after the
publication of the offer.
Corixa may terminate the Merger Agreement at any time prior to the
effectiveness of the Merger, whether before or after Anergen obtains the
required stockholder approval, if, among other things:
- Anergen fails to use commercially reasonable efforts to hold a
stockholders' meeting to approve the Merger within the later of 30 days
after the Registration Statement is declared effective (with certain
exceptions) or 15 days after any amendments or supplements to the Proxy
Statement/Prospectus are mailed to stockholders of Anergen; or
- Anergen breaches any representation, warranty, covenant or agreement in
the Merger Agreement or if such provisions become untrue (subject to
certain materiality qualifications).
Anergen may terminate the Merger Agreement at any time prior to the
effectiveness of the Merger, whether before or after Anergen obtains required
stockholder approval, if, among other things:
- Corixa breaches any representation, warranty, covenant or agreement in
the Merger Agreement or if such provisions become untrue (subject to
certain materiality qualifications).
Note that under certain circumstances leading to termination of the Merger
Agreement, Corixa may receive a cancellation fee or reimbursement of certain
expenses. See "Terms of the Merger -- Termination" and "Terms of the Merger
-- Expenses; Cancellation Fees."
VOTE REQUIRED
Approval of the Merger requires a majority vote of all outstanding Anergen
Common Stock. Each of the directors and officers of Anergen and their affiliates
have executed a voting agreement with respect to a total of approximately 50.0%
of the outstanding shares of Anergen Common Stock. Under these agreements, the
directors and officers of Anergen and their affiliates agree to vote all of
their Anergen shares in favor of the Merger. They also irrevocably appoint any
board member of Corixa as a proxy to vote their Anergen shares in favor of the
Merger.
OWNERSHIP OF CORIXA FOLLOWING THE MERGER
Corixa will issue approximately 1,136,338 shares of Corixa Common Stock
(subject to the shares held in escrow and treatment of fractional shares as
described above) in connection with the Merger. In addition, Corixa will be
obligated to issue an additional aggregate of approximately 68,926 shares of
Corixa Common Stock upon exercise, if and when exercised, of the Anergen
warrants and options that Corixa assumed in the Merger with exercise prices
greater than $2.50 per share. Based further on the capitalization of Anergen on
the Record Date (not including outstanding options and warrants and including
shares held in escrow), the former holders of Anergen Common Stock will hold
approximately 7.66% of the total number of shares of Corixa Common Stock
outstanding after effectiveness of the Merger.
WHEN THE MERGER WILL OCCUR
Assuming that both Anergen and Corixa satisfy or waive all of the
conditions in the Merger Agreement, we antici-
9
<PAGE> 19
pate that the Merger will occur during the first quarter of 1999. For more
information on conditions of the Merger, see "Terms of the
Merger -- Conditions."
SECURITIES LAWS COMPLIANCE
The Merger must satisfy federal securities laws and applicable securities
laws of the various states. See "Approval of the Merger and Related
Transactions -- No Orders, Injunctions, Etc."
ACCOUNTING TREATMENT
We expect the Merger to qualify as a purchase. For more information, see
"Approval of the Merger and Related Transactions -- Accounting Treatment."
OPINION OF FINANCIAL ADVISOR
In deciding whether to approve the Merger, Anergen's Board of Directors
considered the opinion of its financial advisor, Pacific Growth Equities, Inc,
that as of December 3, 1998 and subject to certain assumptions and other matters
described therein, the Exchange Ratio in the Merger was fair, from a financial
point of view, to the stockholders of Anergen. This opinion is attached as
Appendix B. We encourage you to read this opinion, although it is limited to the
fairness, from a financial point of view, of the Exchange Ratio to Anergen
stockholders and does not constitute a recommendation as to how you should vote.
See "Approval of the Merger and Related Transactions -- Opinion of Anergen's
Financial Advisor."
IMPORTANT FEDERAL INCOME TAX CONSEQUENCES
We have structured the Merger so that Anergen stockholders will not
recognize any gain or loss for federal income tax purposes in the Merger (except
for tax payable because of cash received by Anergen stockholders instead of
fractional shares). We have conditioned the Merger on our receipt of a legal
opinion that such is the case. See "Approval of the Merger and Related
Transactions -- Certain Federal Income Tax Consequences" and "Terms of the
Merger -- Conditions."
NO RIGHTS OF DISSENTING STOCKHOLDERS
Both Corixa and Anergen are organized under Delaware law. Under Delaware
law, Corixa and Anergen stockholders are not entitled to appraisal rights in
connection with the Merger.
VOTING AND AFFILIATE AGREEMENTS
Anergen has delivered to Corixa executed affiliate and voting agreements
with certain Anergen stockholders who might be considered affiliates of Anergen
under applicable securities laws. These agreements restrict such Anergen
stockholders' ability to dispose of Corixa Common Stock received in the Merger.
The purpose of these agreements is to comply with the requirements of certain
federal securities laws. Forms of these affiliate and voting agreements are
included in Appendix A to this Proxy Statement/Prospectus. For more information
on these agreements, see "The Special Meeting -- Required Vote; Voting
Agreement."
LISTING OF CORIXA COMMON STOCK
The shares of Corixa Common Stock issued in connection with the Merger will
be listed on the Nasdaq National Market.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION
Corixa Common Stock is quoted on the Nasdaq National Market under the
symbol "CRXA." Anergen Common Stock is quoted on Nasdaq under the symbol "ANRG."
Following the consummation of the Merger, Anergen Common Stock will cease to be
quoted on Nasdaq.
10
<PAGE> 20
The following table sets forth the closing sale prices per share of Corixa
Common Stock and Anergen Common Stock on December 11, 1998, the last trading day
before Corixa and Anergen announced the signing of the Merger Agreement.
<TABLE>
<CAPTION>
- ---------------------------------------------------------
CORIXA ANERGEN ANERGEN
PER PER EQUIVALENT
SHARE SHARE PER SHARE
PRICE PRICE PRICE(1)
- ---------------------------------------------------------
<S> <C> <C> <C>
December 11,
1998 $7.5625 $0.3131 $0.4443
- ---------------------------------------------------------
</TABLE>
- -------------------------
(1) Represents the equivalent of one share of Anergen Common Stock calculated by
multiplying the price per share of Corixa Common Stock by .058751, the
Exchange Ratio.
We cannot guarantee or predict the actual prices of Corixa and Anergen
Common Stock prior to or at the time Corixa and Anergen consummate the Merger.
For more information on the risk, see "Risk Factors -- Risks Related to the
Merger."
11
<PAGE> 21
SELECTED HISTORICAL FINANCIAL INFORMATION OF CORIXA
The following selected historical financial information of Corixa should be
read in conjunction with "Corixa Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited consolidated
financial statements of Corixa and related notes thereto, included elsewhere in
this Proxy Statement/Prospectus.
CORIXA CORPORATION
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
INCEPTION
(SEPTEMBER 8,
NINE MONTHS ENDED 1994) TO
SEPTEMBER 30, YEAR ENDED DECEMBER 31, DECEMBER 31,
------------------- --------------------------- ------------------
1998 1997 1997 1996 1995 1994
--------- ------- ------- ------- ------- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Corporate partnerships................. $ 7,279 $10,037 $13,390 $ 4,402 $ 2,411 $ --
Government grants...................... 1,068 733 977 1,403 304 --
--------- ------- ------- ------- ------- -------
Total revenue........................ 8,347 10,770 14,367 5,805 2,715 --
Operating expenses:
Research and development(1)............ 19,661 11,375 16,398 9,995 7,040 439
General and administrative............. 1,766 1,267 2,033 781 532 205
In-process research and development.... 12,019 -- -- -- -- 428
--------- ------- ------- ------- ------- -------
Total operating expenses............. 33,446 12,642 18,431 10,776 7,572 1,072
Loss from operations..................... (25,099) (1,872) (4,064) (4,971) (4,857) (1,072)
Interest income (expense), net........... 1,901 363 973 476 691 83
Other income(1).......................... 271 312 415 348 16 0
--------- ------- ------- ------- ------- -------
Net loss................................. $ (22,927) $(1,197) $(2,676) $(4,147) $(4,150) $ (989)
========= ======= ======= ======= ======= =======
Basic and diluted net loss per share..... $ (1.93) $ (0.46) $ (0.55) $ (1.65) $ (1.67) $ (0.41)
========= ======= ======= ======= ======= =======
Shares used in completion of basic and
diluted net loss per share............. 11,862 2,630 4,891 2,521 2,487 2,403
========= ======= ======= ======= ======= =======
Pro forma basic and diluted net loss per
share(2)............................... $ (0.15) $ (.31) $ (.55) $ (.58) $ (0.27)
------- ------- ------- ------- -------
Shares used in computing pro forma basic
and diluted loss per share(2).......... 7,781 8,755 7,490 7,120 3,648
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 1997 1996 1995 1994
------------- -------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments..... $ 45,477 $ 56,318 $11,933 $10,773 $11,064
Working capital....................................... 42,407 53,962 10,101 9,743 10,939
Total assets.......................................... 54,700 61,807 15,185 12,340 14,334
Long term obligations less current portion............ 11,707 6,924 1,175 816 --
Accumulated deficit................................... (34,889) (11,962) (9,286) (5,126) (989)
Total stockholders' equity............................ 37,879 51,285 11,226 10,264 14,038
</TABLE>
- ---------------
(1) Other income includes proceeds received for management and administrative
services, and rental income from sublet of a portion of laboratory space.
(2) Pro forma net loss per share assumes the conversion of outstanding preferred
stock into common stock. See Note 1 of Notes to Corixa Financial Statements
for additional information regarding the computation of pro forma net loss
per share.
12
<PAGE> 22
SELECTED HISTORICAL FINANCIAL INFORMATION OF ANERGEN
The following selected historical financial information of Anergen should
be read in conjunction with "Anergen Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited consolidated
financial statements of Anergen and related notes thereto, included elsewhere in
this Proxy Statement/Prospectus.
ANERGEN, INC.
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------- -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Contract revenue........................ $ 3,121 $ 4,464 $ 5,763 $ 3,519 $ 3,001 $ 2,325 $ 339
License fee............................. -- -- -- 2,000 -- -- --
------- ------- ------- ------- ------- ------- -------
Total revenue......................... 3,121 4,464 5,763 5,519 3,001 2,325 339
Operating expenses:
Research and development................ 6,374 8,611 11,559 9,278 8,322 7,423 5,553
General and administrative.............. 2,873 2,180 2,997 2,521 1,976 1,831 1,716
------- ------- ------- ------- ------- ------- -------
Total operating expenses.............. 9,247 10,791 14,556 11,799 10,298 9,254 7,269
Loss from operations...................... (6,126) (6,327) (8,793) (6,280) (7,297) (6,929) (6,930)
Interest income (expense), net............ 194 286 363 483 211 (31) 86
------- ------- ------- ------- ------- ------- -------
Net loss.................................. (5,932) (6,041) (8,430) (5,797) (7,086) (6,960) (6,844)
======= ======= ======= ======= ======= ======= =======
Basic and diluted net loss per share...... $ (0.31) $ (0.32) $ (0.45) $ (0.35) $ (0.55) $ (0.97) $ (1.12)
------- ------- ------- ------- ------- ------- -------
Shares used in computing basic and diluted
loss per share.......................... 18,878 18,807 18,815 16,482 12,859 7,202 6,118
======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------
1998 1997 1996 1995 1994 1993
-------------- -------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term
investments.............................. $ 2,370 $ 8,403 $16,400 $11,492 $ 3,756 $ 9,585
Working capital............................ 687 6,918 14,874 10,486 2,589 8,496
Total assets............................... 3,629 11,056 18,923 14,455 6,797 11,763
Long term obligations less current
portion.................................. -- 870 366 818 990 956
Accumulated deficit........................ (56,468) (50,536) (42,106) (36,309) (29,223) (22,263)
Total stockholders' equity................. 1,896 7,787 16,003 11,714 3,870 9,251
</TABLE>
13
<PAGE> 23
SUMMARY SELECTED UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
On September 15, 1998, Corixa completed the acquisition of GenQuest Inc.
The transaction was accounted for as a purchase.
The following selected unaudited pro forma financial information of Corixa,
GenQuest, and Anergen has been derived from the pro forma consolidated financial
statements, which give effect to the Merger and the acquisition of GenQuest as
purchases, and should be read in conjunction with such pro forma statements and
the notes thereto, which are included in this Proxy Statement/ Prospectus. See
"Unaudited Pro Forma Consolidated Financial Statements." For pro forma purposes,
(i) the Corixa unaudited consolidated balance sheet as of September 30, 1998 has
been combined with the Anergen unaudited balance sheet as of September 30, 1998
as if the Merger had occurred on September 30, 1998, (ii) Corixa's unaudited
statement of operations for the nine months ended September 30, 1998 and audited
statement of operations for the year ended December 31, 1997 have been combined
with GenQuest's unaudited statement of operations for the period from January 1,
1998 to September 15, 1998 and audited statement of operations for the year
ended December 31, 1997, respectively, (iii) the Corixa/GenQuest unaudited pro
forma combined statements of operations for the nine months ended September 30,
1998 and year ended December 31, 1997 have been combined with the Anergen
unaudited statement of operations for the nine months ended September 30, 1998
and the audited statement of operations for the year ended December 31, 1997 as
if the Merger had occurred on January 1, 1997. The pro forma information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred if the
Merger had been consummated on September 30, 1998, or January 1, 1997,
respectively, nor is it necessarily indicative of future operating results or
financial position.
14
<PAGE> 24
SUMMARY SELECTED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED FOR THE YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------------- ------------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Corporate partnerships...................... $ 9,502 $ 17,230
Government grants........................... 1,126 1,010
-------- --------
Total revenue....................... 10,628 18,240
Operating expenses:
Research and development.................... 26,531 29,175
General and administrative.................. 4,672 5,667
-------- --------
Total operating expenses(3)......... 31,203 34,842
Loss from operations.......................... (20,575) (16,602)
Interest income, net.......................... 2,108 1,548
Other income(1)............................... 67 90
-------- --------
Net loss...................................... $(18,400) $(14,964)
======== ========
Pro forma basic and diluted net loss per
share(2).................................... $ (1.31) $ (1.37)
-------- --------
Shares used in computing pro forma basic and
diluted loss per share (2).................. 14,038 10,931
======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1998
------------------
<S> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $ 47,647
Working capital............................................. 41,493
Total assets................................................ 58,129
Long term obligations less current portion.................. 11,707
Accumulated deficit......................................... (43,696)
Total stockholders' equity.................................. 38,175
</TABLE>
- ------------------------
(1) Other income includes proceeds received for management and administrative
services, and rental income from sublet of a portion of laboratory space.
(2) See Notes 3 and 5 of Notes to Unaudited Pro Forma Consolidated Financial
Statements for information regarding the computation of pro forma net loss
per share.
(3) Excludes in process technology charge which is considered nonrecurring.
15
<PAGE> 25
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma consolidated financial statements give
effect to the Merger and the GenQuest acquisition using the purchase method of
accounting. The unaudited pro forma consolidated balance sheet gives effect to
the Merger as if it had occurred on September 30, 1998 (the GenQuest Acquisition
occurred on September 15, 1998. Accordingly, the unaudited balance sheet of
Corixa reflects the acquisition of GenQuest). The unaudited pro forma
consolidated statements of operations for the year ended December 31, 1997 and
for the nine months ended September 30, 1998 give effect to the Merger and
GenQuest Acquisition as if they had occurred on January 1, 1997. The Unaudited
Pro Forma Consolidated Financial Statements do not purport to represent what
Corixa's financial position or results of operations would actually have been if
the Merger had in fact occurred on such dates or to project Corixa's financial
position or results of operations as of any future date or for any future
period.
For pro forma purposes, (i) the Corixa unaudited consolidated balance sheet
as of September 30, 1998 has been combined with the Anergen unaudited balance
sheet as of September 30, 1998 as if the Merger had occurred on September 30,
1998, (ii) Corixa's unaudited statement of operations for the nine months ended
September 30, 1998 and audited statement of operations for the year ended
December 31, 1997 have been combined with GenQuest's unaudited statement of
operations for the period from January 1, 1998 to September 15, 1998 and audited
statement of operations for the year ended December 31, 1997, respectively,
(iii) the Corixa/GenQuest unaudited pro forma combined statements of operations
for the nine months ended September 30, 1998 and year ended December 31, 1997
have been combined with the Anergen unaudited statement of operations for the
nine months ended September 30, 1998 and the audited statement of operations for
the year ended December 31, 1997 as if the Merger had occurred on January 1,
1997. The unaudited pro forma adjustments have been applied to the financial
information derived from the financial statements of Corixa, GenQuest, and
Anergen to account for the Merger and the GenQuest Acquisition as a purchase;
accordingly, assets acquired and liabilities assumed are reflected at their
estimated fair values which are subject to further refinement, including
appraisals and other analysis.
The unaudited pro forma consolidated financial information has been
prepared based on the assumptions described in the notes thereto and includes
assumptions relating to the allocation of the consideration paid for the assets
and liabilities of Anergen based on preliminary estimates of their fair value.
The actual allocation of such consideration may differ from that reflected in
the unaudited pro forma consolidated financial information after valuations and
other procedures to be performed after the closing of the Merger. In the opinion
of Corixa, all adjustments necessary to present fairly such unaudited pro forma
consolidated financial information have been made based on the proposed terms
and structure of the Merger.
As a result of the Merger, Corixa expects to record a nonrecurring charge
to operations for acquired in-process technology. The pro forma consolidated
financial statements reflect an allocation to acquired in-process technology
estimated to be $8.8 million. This amount represents only an estimate, as the
valuation of the acquired tangible and intangible assets has not been performed.
The actual amount allocated to in process research and development may differ
significantly from the estimated amount. Should the amount allocated to in
process research and development be less than $8.8 million, the unaudited pro
forma balance sheet would reflect additional assets and the unaudited pro forma
statement of operations would reflect amortization of such assets. The charge
for
16
<PAGE> 26
acquired in-process technology has been reflected in the unaudited pro forma
consolidated balance sheet, but excluded from the unaudited pro forma
consolidated statement of operations, because the charge is nonrecurring.
The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results or financial
position that would have occurred if the Merger had been consummated on
September 30, 1998, January 1, 1997, respectively, nor is it necessarily
indicative of future operating results or financial position.
These unaudited pro forma consolidated financial statements and
accompanying notes should be read in conjunction with the historical
consolidated financial statements and the related notes thereto of Corixa,
GenQuest and Anergen, and other financial information pertaining to Corixa,
GenQuest and Anergen, including "Corixa Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Anergen Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Proxy Statement/Prospectus.
17
<PAGE> 27
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
CORIXA/ANERGEN
PRO FORMA PRO FORMA
CORIXA ANERGEN ADJUSTMENTS NOTE 2 COMBINED
------ ------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 4,912 $ 1,868 $ (200) (v) $ 6,580
Securities available-for-sale... 40,565 502 41,067
Accounts receivable............. 724 -- 724
Other current assets............ 1,319 50 -- 1,369
-------- -------- ------- --------
Total current assets.............. 47,520 2,420 (200) 49,740
Property and equipment, net....... 7,025 1,173 8,198
Deferred charges and deposits..... 155 36 191
-------- -------- ------- --------
Total assets...................... $ 54,700 $ 3,629 $ (200) $ 58,129
======== ======== ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities................... $ 2,380 $ 730 $ 1,400 (ii) $ 4,510
Deferred revenue................ 600 -- 600
Current portion of obligations
and commitments............... 2,134 1,003 3,137
-------- -------- ------- --------
Total current liabilities......... 5,114 1,733 1,400 8,247
Long-term obligations and
commitments, less current
portion......................... 11,707 -- 11,707
Stockholders' equity:
Preferred stock................. -- -- --
Common stock.................... 13 57,705 (57,704) (iii)(iv) 14
Additional paid-in capital...... 74,001 659 8,443 (iii)(iv) 83,103
Receivable for warrants......... -- -- --
Deferred compensation........... (1,444) -- (1,444)
Accumulated comprehensive
loss.......................... 198 -- 198
Deficit accumulated during
development stage............. (34,889) (56,468) 47,661 (43,696)
-------- -------- ------- --------
Total stockholders' equity........ 37,879 1,896 (1,600) 38,175
-------- -------- ------- --------
Total liabilities and
stockholders' equity............ $ 54,700 $ 3,629 $ (200) $ 58,129
======== ======== ======= ========
</TABLE>
18
<PAGE> 28
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORIXA/GENQUEST CORIXA/GENQUEST CORIXA/ANERGEN PRO
PRO FORMA PRO FORMA PRO FORMA FORMA
CORIXA GENQUEST ADJUSTMENTS NOTE 4 COMBINED ANERGEN ADJUSTMENTS COMBINED
-------- -------- --------------- ------ --------------- ------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Collaborative
agreements............. $ 7,279 $ 150 $(1,048) (c) $ 6,381 $ 3,121 $ 9,502
Government grants........ 1,068 58 -- 1,126 -- -- 1,126
-------- ------- ------- -------- ------- ------- --------
Total revenue...... 8,347 208 (1,048) 7,507 3,121 -- 10,628
Operating expenses:
Research and
development............ (19,661) (2,196) 1,700 (c) (20,157) (6,374) -- (26,531)
General and
administrative......... (1,766) (237) 204 (c) (1,799) (2,873) -- (4,672)
In-process research and
development............ (12,019) -- 12,019 (d) -- -- -- --
-------- ------- ------- -------- ------- ------- --------
Total operating
expenses......... (33,446) (2,433) 13,923 (21,956) (9,247) -- (31,203)
-------- ------- ------- -------- ------- ------- --------
Loss from operations....... (25,099) (2,225) 12,875 (14,449) (6,126) -- (20,575)
Interest income............ 2,414 60 -- 2,474 300 -- 2,774
Interest expense........... (513) (47) -- (560) (106) -- (666)
Other income............... 271 -- (204) (c) 67 -- 67
-------- ------- ------- -------- ------- ------- --------
Net loss................... $(22,927) $(2,212) $12,671 $(12,468) $(5,932) $ -- $(18,400)
======== ======= ======= ======== ======= ======= ========
Basic and diluted net loss
per share................ $ (1.93) $ (.96) $ (1.31)
======== ======== ========
Shares used in computation
of basic and diluted net 12,926 14,038
loss per share........... 11,862 (Note 5) (Note 3)
======== ======== ========
</TABLE>
19
<PAGE> 29
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CORIXA/GENQUEST CORIXA/GENQUEST CORIXA/ANERGEN
PRO FORMA PRO FORMA PRO FORMA
CORIXA GENQUEST ADJUSTMENTS NOTE 4 COMBINED ANERGEN ADJUSTMENTS
-------- -------- --------------- ------ --------------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Collaborative agreements....... $ 13,390 $ 25 $(1,948) (c) $ 11,467 $ 5,763
Government grants.............. 977 33 -- 1,010 -- --
-------- ------- ------- -------- -------- --------
Total revenue................ 14,367 58 (1,948) 12,477 5,763 --
Operating expenses:
Research and
development.................. (16,398) (3,654) 2,436 (c) (17,616) (11,559)
General and
administrative............... (2,033) (962) 325 (c) (2,670) (2,997) --
-------- ------- ------- -------- -------- --------
Total operating
expenses................... (18,431) (4,616) 2,761 (20,286) (14,556) --
-------- ------- ------- -------- -------- --------
Loss from operations............. (4,064) (4,558) 813 (7,809) (8,793) --
Interest income.................. 1,300 236 -- 1,536 565 --
Interest expense................. (327) (24) -- (351) (202) --
Other income..................... 415 -- (325) (c) 90 --
-------- ------- ------- -------- -------- --------
Net loss......................... $ (2,676) $(4,346) $ 488 $ (6,534) $ (8,430) $ --
======== ======= ======= ======== ======== ========
Basic and diluted net loss per
share.......................... $ (0.55) $ (1.10)
======== ========
Shares used in computation of
basic and diluted net loss per
share.......................... 4,891 5,955
======== ========
Pro forma basic and diluted net
loss per share................. $ (0.31) $ (.67)
======== ========
Shares used in computation of pro
forma basic and diluted net 9,819
loss per share................. 8,755 (Note 5)
======== ========
<CAPTION>
PRO
FORMA
COMBINED
--------
<S> <C>
Revenue:
Collaborative agreements....... $ 17,230
Government grants.............. 1,010
--------
Total revenue................ 18,240
Operating expenses:
Research and
development.................. (29,175)
General and
administrative............... (5,667)
--------
Total operating
expenses................... (34,842)
--------
Loss from operations............. (16,602)
Interest income.................. 2,101
Interest expense................. (553)
Other income..................... 90
--------
Net loss......................... $(14,964)
========
Basic and diluted net loss per
share.......................... $ (2.12)
========
Shares used in computation of
basic and diluted net loss per
share.......................... 7,067
========
Pro forma basic and diluted net
loss per share................. $ (1.37)
========
Shares used in computation of pro
forma basic and diluted net
loss per share................. 10,931(Note 3)
========
</TABLE>
20
<PAGE> 30
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The unaudited pro forma information presented is not necessarily indicative
of future consolidated results of operations of Corixa or the consolidated
results of operations which would have resulted had the Merger taken place
during the periods presented. The Unaudited Pro Forma Statements reflect the
effects of the Merger and GenQuest Acquisition, assuming the Merger occurred as
of September 30, 1998 for the purposes of the unaudited pro forma consolidated
balance sheet and the Merger and GenQuest Acquisition as of January 1, 1997 for
the purposes of the unaudited pro forma consolidated statement of operations for
the nine months ended September 30, 1998 and the year ended December 31, 1997,
respectively.
2. ANERGEN -- UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
(a) The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of Anergen capital stock into
approximately 1,111,588 shares of Corixa Common Stock pursuant to the Merger
(assuming no options to purchase Anergen Common Stock are exercised after
December 21, 1998). This calculation is based on Anergen's capitalization at
December 21, 1998 and is based on the average last reported closing price per
share on Nasdaq of Corixa Common Stock for the 15-day trading period beginning
November 23, 1998 and ending December 14, 1998 which equals $7.3042. Certain
options and warrants to purchase Anergen Common Stock will be assumed by Corixa
pursuant to the Merger and converted into options to purchase approximately
93,469 shares of Corixa Common Stock. This calculation assumes that no options
and warrants to purchase Anergen Common Stock will be exercised after December
21, 1998.
(b) The total consideration of $10.7 million consists of Corixa Common
Stock and Options valued at $9.1 million, cash of $.2 million and approximately
$1.4 million of transaction costs. The purchase price will be allocated based on
the fair value of assets acquired and liabilities assumed, netting to $1.9
million and acquired in-process research and development of $8.8 million. These
amounts represent only an estimate, as the valuation has not been performed. The
actual allocation may differ significantly from the estimated amounts.
In-process research and development charges have not been reflected in the pro
forma consolidated statement of operations, as they are considered non-recurring
charges.
(c) The unaudited pro forma consolidated balance sheet includes the
adjustments necessary to give effect to the Merger as if it had occurred on
September 30, 1998, and to reflect the allocation of the proposed acquisition to
the fair value of tangible and intangible assets acquired, including the charge
to operations for in-process technology acquired and the elimination of
Anergen's equity accounts. Also included are the transaction costs, inclusive of
payments to financial advisors, independent accountants, attorneys and other
related costs, including severance costs, and costs associated with the
elimination of redundant facilities and assets. Approximate adjustments included
in the unaudited pro forma consolidated balance sheet are summarized as follows:
(i) Write-off of in-process technology acquired by Corixa, $8,807,000;
(ii) Transaction and other costs associated with the Merger of $1,400,000;
(iii) Elimination of Anergen equity accounts, $1,896,000;
21
<PAGE> 31
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(iv) Issuance of Corixa Common Stock, $0.001 par value, as discussed above.
The value of Corixa Common Stock is equal to the product of
approximately 1,111,588 shares multiplied by approximately $8.1875 per
share.
(v) Cash payment of $200,000
3. ANERGEN -- UNAUDITED CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended December 31, 1997 and the nine months ended September 30,
1998 are based upon the historical weighted average common shares outstanding
adjusted to reflect the issuance, as of January 1, 1997 of approximately
1,111,588 shares of Corixa Common Stock as described in Note 2 to these Notes to
Unaudited Pro Forma Consolidated Financial Statements. Options to purchase
Anergen Common Stock will be assumed by Corixa pursuant to the Merger and
converted into options to purchase approximately 93,469 shares of Corixa Common
Stock. The Corixa Common Stock issuable upon exercise of the stock options to be
assumed in the Merger have been excluded as the effect would be anti-dilutive.
4. GENQUEST -- UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
(a) The unaudited pro forma consolidated financial statements reflect the
conversion of all the outstanding shares of GenQuest capital stock into
1,063,695 shares of Corixa Common Stock as a result of the acquisition by Corixa
on September 15, 1998 which was accounted for as a purchase transaction. Options
to purchase shares of GenQuest Common Stock were assumed by Corixa pursuant to
the Merger and converted into options to purchase 12,325 shares of Corixa Common
Stock which have an estimated value of approximately $77,000.
(b) The total consideration of $12.4 million consisted of Corixa Common
Stock and Options valued at $7.3 million, cash of $4.5 million and approximately
$.6 million of transaction costs. The purchase price was allocated to assets
acquired and liabilities assumed, netting to $.4 million and acquired in-process
research and development of $12.0 million. In process research and development
charges have not been reflected in the pro forma consolidated statement of
operations for the nine months ended September 30, 1998 and the year ended
December 31, 1997, as they are considered a non-recurring charge.
(c) Elimination of inter-company revenue and expenses including
amortization of the warrant previously issued to GenQuest.
(d) Elimination of in process technology acquired by Corixa, which is
considered nonrecurring.
22
<PAGE> 32
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
5. GENQUEST -- UNAUDITED CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended December 31, 1997 and the nine months ended September 30,
1998 are based upon the historical weighted average common shares outstanding
adjusted to reflect the issuance, as of January 1, 1997 and January 1, 1998 of
1,063,695 shares of Corixa Common Stock as described in Note 2 to these Notes to
Unaudited Pro Forma Consolidated Financial Statements. Options to purchase
shares of GenQuest Common Stock will be assumed by Corixa pursuant to the Merger
and converted into options to purchase 12,325 shares of Corixa Common Stock. The
Corixa Common Stock issuable upon exercise of the stock options to be assumed in
the Merger has been excluded as the effect would be anti-dilutive.
23
<PAGE> 33
MARKET PRICE AND DIVIDEND POLICY
Corixa Common Stock began trading on Nasdaq under the symbol "CRXA" on
October 3, 1997. Anergen Common Stock began trading on Nasdaq under the symbol
"ANRG" on February 14, 1995. The table below shows the high and low sale prices
of Corixa Common Stock and Anergen Common Stock on Nasdaq for each three month
period beginning fiscal 1996.
<TABLE>
<CAPTION>
CORIXA ANERGEN
COMMON STOCK COMMON STOCK
--------------- --------------
HIGH LOW HIGH LOW
------ ----- ----- -----
<S> <C> <C> <C> <C>
1996 CALENDAR YEAR
First Quarter............................ NA NA 4.000 3.375
Second Quarter........................... NA NA 6.250 4.375
Third Quarter............................ NA NA 4.500 3.375
Fourth Quarter........................... NA NA 4.188 3.125
1997 CALENDAR YEAR
First Quarter............................ NA NA 4.375 3.375
Second Quarter........................... NA NA 3.750 2.688
Third Quarter............................ NA NA 3.250 2.375
Fourth Quarter........................... 11.500 8.750 2.938 1.688
1998 CALENDAR YEAR
First Quarter............................ 8.375 7.125 1.813 0.875
Second Quarter........................... 7.750 6.438 2.313 1.438
Third Quarter............................ 6.875 3.313 1.438 0.875
Fourth Quarter (through December 21st)... 9.125 8.500 0.438 0.375
</TABLE>
On , 1999, the Anergen Record Date, there were approximately
record holders of Corixa Common Stock and approximately record holders
of Anergen Common Stock. Anergen has never paid cash dividends on its common
stock. The policy of Anergen is to retain earnings for use in its business.
The following table sets forth the closing sale price per share of Corixa
Common Stock on Nasdaq and the estimated equivalent per share price (as
explained below) of Anergen Common Stock on December 11, 1998, the last trading
day before the public announcement of the proposed Merger, and on December 21,
1998:
<TABLE>
<CAPTION>
CORIXA ESTIMATED EQUIVALENT ANERGEN
COMMON STOCK PER SHARE PRICE
------------ ----------------------------
<S> <C> <C>
December 11, 1998...................... $7.5625 $0.4443
December 21, 1998...................... $ 9.125 $0.5361
</TABLE>
The estimated equivalent per share price of Anergen Common Stock represents
application of the Exchange Ratio of .058751 to the average closing price on
Nasdaq for Corixa Common Stock. Because the average closing price on Nasdaq for
Corixa Common Stock fluctuates continuously, the estimated equivalent per share
price of Anergen Common Stock may be substantially different from the above
table.
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share data of Corixa
and Anergen and combined per share data on an unaudited pro forma basis after
giving effect to the Merger and the GenQuest acquisition as purchases, based on
an average last reported closing price on Nasdaq of Corixa Common Stock and
Anergen Common Stock for the 15 trading days immediately preceding and including
December 14, 1998, the date of the first
24
<PAGE> 34
public announcement of the Merger, equal to $7.3042 and based on 1,111,588
shares of Corixa Common Stock to be issued in exchange for outstanding shares of
Anergen Common Stock in the Merger (assuming no options or warrants to purchase
Anergen Common Stock are exercised after December 21, 1998). The historical per
share data of Corixa and Anergen presented below is presented as of and for the
nine months ended September 30, 1998 and for the fiscal year ended December 31,
1997, respectively. The pro forma consolidated per share data presented below
combines Corixa's unaudited pro forma per share data as of and for the nine
months ended September 30, 1998 and the audited pro forma per share data for the
fiscal year ended December 31, 1997, (both periods assume the Genquest
acquisition occurred on January 1, 1997) with Anergen's unaudited per share data
as of and for the nine months ended September 30, 1998 and audited per share
data for the fiscal year ended December 31, 1997, respectively. This data should
be read in conjunction with the selected historical financial information, the
unaudited pro forma consolidated financial statements and the separate
historical financial statements of Corixa and Anergen and the notes thereto
incorporated or included elsewhere in this Proxy Statement/ Prospectus. The
unaudited pro forma consolidated financial data is not necessarily indicative of
the operating results or financial position that would have been achieved had
the Merger been consummated on January 1, 1997 and should not be construed as
representative of future operating results of the combined company.
<TABLE>
<CAPTION>
AS OF OR FOR THE AS OF OR FOR THE
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
Historical -- Corixa:
Basic and diluted net loss per share....... $(1.93) $(0.55)
Pro forma basic and diluted net loss per
share................................... -- (0.31)
Book value per share(1).................... 3.19 5.86
Historical -- Anergen:
Basic and diluted net loss per share....... (0.31) (0.45)
Book value per share(1).................... 0.10 0.41
Pro Forma Consolidated:
Basic and diluted net loss per share....... (2.06) (1.02)
Book value per share(1).................... 2.72 --
Equivalent Pro Forma Consolidated -- per
Anergen share:
Basic and diluted net loss per share(2).... (0.12) (0.16)
Book value per share(1).................... 0.16 --
</TABLE>
- -------------------------
(1) The historical book value per share of capital stock is computed by dividing
total stockholders' equity by the number of shares of capital stock
outstanding at the end of the period. The pro forma consolidated book value
per share is computed by dividing pro forma stockholders' equity by the pro
forma number of shares of capital stock as of each of the periods presented.
(2) Represents the pro forma combined amounts multiplied by the Exchange Ratio.
25
<PAGE> 35
RISK FACTORS
The Proxy Statement/Prospectus contains forward-looking statements. These
statements relate to future events or the future financial performance of Corixa
and Anergen. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms and other comparable terminology. These statements only reflect
managements' expectations and estimates. Actual events or results may differ
materially. In evaluating these statements, you should specifically consider
various factors, including the risks outlined below. These factors may cause
Corixa's, Anergen's and/or the combined company's results to differ materially
from any forward-looking statements. Neither Corixa, Anergen nor the combined
company undertake any obligation to update any forward-looking statements
contained in this Proxy Statement/Prospectus to reflect any future events or
developments.
The Anergen stockholders should consider carefully the following risk
factors in evaluating whether to adopt the Merger Agreement and approve the
Merger. The Anergen stockholders should consider the following risk factors in
conjunction with any additional risk factors in documents incorporated by
reference in this Proxy Statement/Prospectus and any other information included
or incorporated by reference herein, including in conjunction with
forward-looking statements made herein.
RISKS RELATED TO THE MERGER
Integration of Operations May Be Difficult and Lead to Adverse
Effects. Corixa and Anergen believe the proposed Merger will result in long-term
benefits. These anticipated benefits will depend in part on whether the
companies can integrate their operations in an efficient and effective manner.
This may not occur. Integrating Corixa and Anergen will be a complex, time
consuming and expensive process. Successful integration requires integration of
the companies' respective research efforts and scientific cultures and
coordination of the companies' respective business development efforts. This
integration may not be accomplished smoothly or successfully. The diversion of
the attention of management and any difficulties encountered in the process of
combining operations could cause the interruption of, or a loss of momentum in,
the activities of either or both of the companies' businesses. Furthermore,
there could be a material adverse effect on employee morale and on the ability
of Anergen and Corixa to retain key scientific and managerial personnel.
Combining both companies' operations may be more difficult because of the
necessity to consolidate geographically separate facilities and combining
different scientific cultures. If the combined company has difficulty
integrating the operations of Anergen into Corixa, a material adverse effect may
result on the combined companies' business, operating results and financial
condition.
Failure to Achieve Synergies Could Lead to Decline in Corixa's Stock
Price. The market price of the Corixa Common Stock may decline significantly if:
- the integration of Corixa's and Anergen's operations is not successful;
- the combined company does not experience business synergies as quickly or
to the extent as may be expected by financial analysts; or
- the accretive/dilutive effect of the Merger is not in line with the
expectation of financial analysts.
26
<PAGE> 36
Fixed Exchange Ratio May Limit Value of Anergen Stock Being
Exchanged. Subject to possible adjustment for the Escrow Shares, each
outstanding share of Anergen Common Stock will convert into the right to receive
0.05875085 of a share of Corixa Common Stock at the effective time of the Merger
(the "Effective Time"). No adjustment to the Exchange Ratio will result from any
fluctuations in the price of either Corixa Common Stock or Anergen Common Stock.
The price of Corixa Common Stock may vary significantly between now and the date
on which Anergen stockholders vote on the Merger. If the market price for Corixa
Common Stock increases or decreases before the Effective Time, the market value
at the Effective Time of the Corixa Common Stock would correspondingly increase
or decrease. Anergen stockholders will not be compensated for decreases in the
market price of Corixa Common Stock. Anergen stockholders voting on the Merger
are urged to obtain recent market quotations for Corixa Common Stock and Anergen
Common Stock. No assurance can be given as to the market prices of Corixa Common
Stock or Anergen Common Stock at any time before the Effective Time or at any
time thereafter.
The Merger Will Result in Costs of Integration and Transaction
Expenses. Corixa and Anergen estimate that they will incur aggregate direct
transaction costs of approximately $1.1 million associated with the Merger and
severance costs of approximately $0.3 million. Also, the combined company
expects to incur certain costs, which may be significant, which cannot be
reasonably estimated at the current time pending finalization of certain
operating decisions by management as to the manner and timing of consolidating
the operations, to reflect actions associated with integrating Corixa and
Anergen. Such actions might include:
- elimination of duplicate facilities and operations;
- consolidation of certain administration, support and research and
development activities; and
- cancellation or continuation of certain contractual obligations.
Actual costs may substantially exceed such estimates. In addition,
unanticipated expenses associated with the integration of the two companies may
arise. Also, Corixa expects to incur a charge in the quarter ending March 31,
1999 currently estimated to be $8.8 million, to reflect Corixa's write-off of
Anergen's in-process research and development efforts. Finally, Corixa may incur
additional charges in subsequent quarters to reflect costs associated with the
Merger.
Anergen's Business Could Suffer Due to Announcement or Consummation of
Merger. The announcement or the consummation of the Merger may increase the
likelihood of a number of changes to Anergen's business, any of which could have
a material adverse effect. Such changes include but are not limited to:
- loss of key management, scientific or other personnel of Anergen;
- delays in product development; and
- actions against Anergen by its creditors to the detriment of Anergen.
If the Merger is not completed, Anergen would be materially adversely
affected by such changes and restoring Anergen's business to its
pre-announcement value could take a long time and be costly at a minimum and may
not even be possible. As a result of the factors described above, the failure to
consummate the Merger could have a material
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adverse effect on Anergen's business, operating results, financial condition and
stock trading price.
If the Combined Company is not Permitted to Write-Off Significant Amount of
Purchase Price as Attributable to In-Process Research and Development, Corixa
Stock Price Could Decline. If current accounting rules as interpreted by its
auditors and the Commission do not permit it to write off immediately a
significant amount of the purchase price of the Merger as attributable to
in-process research and development, the combined company would have to amortize
a correspondingly higher amount of the purchase price over several years. Such
amortization would be reflected as an expense item on Corixa's statement of
operations, and cause it to report higher losses, which may adversely affect its
stock price.
There May Be Unknown Risks Inherent in the Merger. Although Corixa has
conducted scientific due diligence with respect to Anergen, Corixa did not
perform many of the research and development activities itself. Consequently,
Corixa and the combined company may not be aware of all of the risks associated
with the Merger or the research and development activities of Anergen.
Additionally, many other biotechnology companies currently are filing patents in
the field of biotechnology and biopharmaceutical compounds at a rapid pace, and
Corixa or Anergen may not have timely filed patent applications covering the
scientific developments Corixa or Anergen have discovered or may not have
obtained adequate patent protection for any proprietary rights. Corixa or the
combined company may discover adverse information concerning Anergen subsequent
to the Effective Time, including, among other things, information with respect
to research management policies and intellectual property controls, such as the
possible inadequacy of Anergen's current patent protection and potential patent
infringement by Anergen. Any such discovery could have a material adverse effect
on the business, financial condition and results of operations of Corixa and the
combined company.
There Are Uncertainties Related to Early Stage of Technology. Anergen is at
an early stage in both its discovery and identification of biopharmaceutical
compounds and its research concerning therapies for the treatment of autoimmune
diseases. Additionally, Anergen has entered into few corporate partnerships and
license agreements to date, and the programs covered by such corporate
partnerships and license agreements are in the early stages. One or more of
Anergen's programs may not move beyond its current stage of development, and
Anergen's corporate partnerships or licenses may not allow it to develop
products successfully using Anergen's technology. Anergen's technology may not
be able to be incorporated into a commercialized product in a reasonable time
frame, if ever.
The Merger Has Dilutive Effects, and May Have Further Potential Dilutive
Effects, to Stockholders. Corixa's stockholders will experience immediate and
substantial dilution as a result of the shares of Corixa Common Stock to be
issued to Anergen stockholders in the Merger. Although Corixa and Anergen
believe that benefits will result from the Merger, the combining of the two
companies' businesses, even if achieved in an efficient, effective and timely
manner, may not result in combined results of operations and financial condition
superior to what would have been achieved by each company independently, or in
the same amount of time to achieve such result. The issuance of Corixa Common
Stock in connection with the Merger may have the effect of reducing Corixa's net
income per share from levels otherwise expected and could reduce the market
price of the Corixa Common Stock unless the combined company experiences revenue
growth or cost savings and other business synergies sufficient to offset the
effect of such issuance. As a consequence of the Merger, Anergen stockholders
will lose the chance to invest in the
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development and exploitation of Anergen's technologies on a stand-alone basis.
The management of the combined company may make strategic and operational
decisions that differ from those that would be made by Anergen as an independent
company. Consequently, stockholders of Anergen may not achieve greater returns
on investment in the combined company than in Anergen if Anergen were to remain
an independent company.
Need to Develop Manufacturing Capabilities. Neither Anergen nor Corixa has
any volume manufacturing capacity or experience in volume manufacturing of
pharmaceutical or other biological products. Establishing volume manufacturing
capabilities would require significant scale-up expenses and additions to
facilities and personnel. The combined company may not manage this scale-up in
as cost-effective manner as possible. In addition, the combined company may have
difficulty identifying or adding personnel with sufficient experience to manage
and operate volume manufacturing. In addition, the combined company must
successfully develop processes required for volume manufacturing. The combined
company may not succeed in developing any or all processes that may be necessary
for such manufacturing. The pharmaceutical products under development by each of
Anergen and Corixa have never been manufactured on a commercial scale. It may
not be feasible to manufacture such products at a cost or in quantities to make
them commercially viable. The combined company may be required to establish
arrangements with contract manufacturers to supply all or a portion of its
products for clinical trials as well as the manufacture, packaging, labeling and
distribution of finished products. If the combined company is unable to contract
for sufficient supply of all or a portion of its products on acceptable terms,
or is unable to develop the capability to produce products internally, clinical
testing would be delayed. Such delay would result in delayed submission of
products for regulatory approval and delayed initiation of new development
programs, either of which may have a material adverse effect on the combined
company. If the combined company should encounter delays or difficulties in
establishing relationships with manufacturers to produce, package and distribute
its finished products, market introduction and subsequent sales of such products
are likely to be adversely affected. Moreover, contract manufacturers that the
combined company may use must adhere to current GMP regulations enforced by the
FDA through its facilities inspection program. If these facilities cannot pass a
pre-approval plant inspection, the FDA pre-market approval of the products will
be adversely affected.
The Merger Involves Uncertainties Related to Integration of Scientific
Cultures. Although the scientific personnel at Anergen and the scientific
personnel at Corixa both operate in a commercial environment, the two entities
have different scientific management approaches. Consequently, the combined
company may encounter some difficulties that are associated with the integration
of the two different scientific cultures and the coordination of the research
and development programs of Corixa and Anergen in light of such scientific
cultures. The combined company may not be able to integrate successfully such
scientific cultures, and the failure to do so could have a material adverse
effect on the combined company's business, financial condition and results of
operations.
The Combined Company May Not Manage Its Growth Successfully or Integrate
Successfully Potential Future Acquisitions. In the future, the combined company
may make additional acquisitions of complementary companies, products or
technologies. Managing acquired businesses entails numerous operational and
financial risks and strains, including difficulties in assimilating acquired
operations and scientific cultures, diversion of management's attention to other
business concerns, amortization of acquired intangible
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assets and potential loss of key employees or strategic relationships of
acquired entities. The combined company may not be able to manage effectively
growth, and failure to do so could have a material adverse effect on the
combined company's operating results.
RISKS RELATED TO CORIXA
There are Uncertainties Related to Corixa's Early Stage of
Development. Corixa is at an early stage in the development of its therapeutic,
prophylactic and diagnostic products. To date, almost all of Corixa's revenues
have resulted from payments made under agreements with its corporate partners.
Corixa expects that most of its revenues for the foreseeable future will
continue to result from existing and future corporate partnerships, if any.
Corixa has generated only minimal revenues from diagnostic product sales and no
revenues from therapeutic product sales since inception. Vaccine products that
may result from Corixa's research and development programs are not expected to
be commercially available for a number of years, if at all. It will be a number
of years, if ever, before Corixa will receive any significant revenues from
commercial sales of such products. Corixa may not receive anticipated revenues
under existing corporate partnerships, and Corixa may not be able to enter into
any additional corporate partnerships. Thus, Corixa may not ever achieve
consistent profitability.
There are Uncertainties Related to Corixa's Technology and Product
Development. Corixa's technological approach to the development of therapeutic
and prophylactic vaccines and other immunotherapeutic products for cancers and
certain infectious and autoimmune diseases is unproven in humans. Products based
on Corixa's technologies are currently in the discovery, preclinical or early
clinical investigation stages, and to date, neither Corixa nor any of its
corporate partners have conducted any clinical trials that incorporate Corixa's
proprietary microsphere delivery systems or its proprietary adjuvants. In
addition, neither Corixa nor any other Company has successfully commercialized
any therapeutic vaccines for cancer or infectious diseases targeted by Corixa.
Corixa may not be able to develop successfully effective vaccines for such
diseases in a reasonable time frame, if ever, and such vaccines may not be
capable of being commercialized. In addition to its internal development
programs, Corixa in-licenses and acquires technologies to enhance its product
pipeline. Any in-licensed technologies or technologies acquired as a result of
the Merger or otherwise may not prove to be effective or may not result in the
successful development of commercial products.
A majority of Corixa's programs are currently in the discovery stage or in
preclinical development. Only four of Corixa's therapeutic vaccine products have
advanced to Phase I clinical trials. Corixa's vaccines have not been
demonstrated to be safe and effective in clinical settings. Corixa's programs
may not move beyond its current stage of development. Assuming Corixa's research
does advance, certain preclinical development efforts will be necessary to
determine whether any product is safe to enter clinical trials. Under certain of
Corixa's existing corporate partnerships, the respective corporate partner has
primary responsibility for the clinical development of a product. Any such
corporate partner may not pursue clinical development in a timely or effective
manner, if at all. If such a product receives authorization from the United
States Food and Drug Administration ("FDA") to enter clinical trials, then it
may be, and in the case of vaccine products will be, subjected to a multi-phase,
multi-center clinical studies to determine its safety and efficacy. It is
difficult to predict the number or extent of clinical trials required or the
period of mandatory patient follow-up. Assuming clinical trials of any product
are successful and other data are satisfactory, Corixa or its applicable
corporate partner will submit an
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application to the FDA and appropriate regulatory bodies in other countries to
seek permission to market the product. Typically, the review process at the FDA
takes several years, and the FDA may not approve Corixa's or its corporate
partner's application or may require additional clinical trials or other data
prior to approval. Furthermore, even if regulatory approval is ultimately
obtained, delays in the approval process could have a material adverse effect on
Corixa's business, financial condition and results of operations. In addition,
Corixa may not be able to produce any products in commercial quantities at a
reasonable cost or may not be able to market successfully such products.
Corixa's Stockholders Face Potential Dilution. Corixa's stockholders will
experience immediate and substantial dilution as a result of the shares of
Corixa Common Stock issued to Anergen stockholders in the Merger. Additional
dilution may also occur upon exercise, if at all, of outstanding options and
warrants to purchase Corixa Common Stock with an exercise price greater than
$2.50 assumed by Corixa in the Merger. Additionally, if Corixa elects to put the
sale of shares of Corixa Common Stock to SmithKline Beecham Biologicals, S.A.
("SmithKline Beecham") under the October 1998 collaboration and license
agreement, Corixa will issue shares of its Common Stock to SmithKline Beecham,
which issuance will result in additional dilution to Corixa's stockholders. See
"Information Concerning Corixa -- Corporate Partnership -- Vaccines."
Corixa is Dependent on Existing and Future Corporate Partnerships. The
success of Corixa's business strategy is largely dependent on its ability to
enter into multiple corporate partnerships and to manage effectively the
numerous relationships that may exist as a result of this strategy. Corixa has
established significant relationships with various corporate partners as of
December 11, 1998. For example, in October 1998 Corixa entered into a strategic
collaboration and license agreement with SmithKline Beecham for the research,
development and commercialization of vaccine products aimed at the prevention
and/or treatment of tuberculosis, Chlamydia trachomatis infection, Chlamydia
pneumoniae infection, breast cancer, prostate cancer, ovarian cancer and colon
cancer. Corixa derived 87% and 93% of its revenues during the nine months ended
September 30, 1998 and the year ended December 31, 1997, respectively, from
research and development and other funding under its existing corporate
partnerships. The termination of any of these corporate partnerships would have
a material adverse effect on Corixa's business, financial condition and results
of operations. Certain of Corixa's corporate partners have entered into
agreements granting them options to license certain aspects of Corixa's
technology. Any such corporate partner may not exercise its option to license
such technology. Corixa has also entered into corporate partnerships with
several companies for the development, commercialization and sale of diagnostic
products incorporating Corixa's proprietary antigen technology. Any such
diagnostic corporate partnership may not ever generate significant revenues.
Furthermore, Corixa is currently engaged in discussions with a number of
pharmaceutical and diagnostic companies with respect to potential corporate
partnering arrangements covering various aspects of Corixa's technologies.
However, due in part to the early stage of Corixa's technologies, the process of
establishing corporate partnerships is difficult and time-consuming and involves
significant uncertainty. Such discussions may not lead to the establishment of
any new corporate partnership on favorable terms, or at all. If established, any
such corporate partnership may not result in the successful development of
Corixa's products or the generation of significant revenues.
Because Corixa enters into research and development collaborations with
corporate partners at an early stage of product development, Corixa's success is
highly reliant upon the performance of its corporate partners. Under existing
corporate partnership arrange-
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ments, Corixa's corporate partners are generally required to undertake and fund
certain research and development activities with Corixa, make payments upon
achievement of certain scientific milestones and pay royalties or make
profit-sharing payments when and if a product is commercialized. Corixa does not
directly control the amount or timing of resources to be devoted to activities
by its existing or future corporate partners. Any of Corixa's existing or future
corporate partners may not commit sufficient resources to Corixa's research and
development programs or the commercialization of its products. If any corporate
partner fails to conduct its activities in a timely manner, or at all, Corixa's
preclinical or clinical development related to such corporate partnership could
be delayed or terminated. Corixa's corporate partners may not perform their
obligations as expected. Also, Corixa's current corporate partners or future
corporate partners, if any, may pursue existing or other development-stage
products or alternative technologies in preference to those being developed in
collaboration with Corixa. Further, disputes may arise with respect to ownership
of technology developed under any such corporate partnership. Finally, any of
Corixa's current corporate partnerships may be terminated by its corporate
partner, and Corixa may not be able to negotiate additional corporate
partnerships in the future on acceptable terms, or at all.
Because the success of Corixa's business is largely dependent upon its
ability to enter into multiple corporate partnerships and to manage effectively
the numerous issues that arise from such partnerships, management of these
relationships will require:
- significant time and effort from Corixa's management team;
- effective allocation of Corixa's resources to multiple projects; and
- an ability to obtain and retain management, scientific and other
personnel sufficient to accomplish the foregoing.
Corixa's need to manage simultaneously a number of corporate partnerships
may not be successful, and the failure to manage effectively such corporate
partnerships would have a material adverse effect on Corixa's business,
financial condition and results of operations.
Corixa is Dependent on In-Licensed Technology. Corixa's success is also
dependent on its ability to enter into licensing arrangements with commercial or
academic entities to obtain technology that is advantageous or necessary to the
development and commercialization of Corixa's products. Corixa is party to
various license agreements that give it rights to use certain technologies in
its and its corporate partners' discovery, research, development and
commercialization activities. Disputes may arise as to the inventorship and
corresponding rights in inventions and know-how resulting from the joint
creation or use of intellectual property by Corixa and its licensors or
scientific collaborators. Additionally, many of Corixa's in-licensing agreements
contain milestone-based termination provisions. Corixa's failure to meet any
significant milestones in a particular agreement could allow the licensor to
terminate such agreement. Corixa may not be able to negotiate additional license
agreements in the future on acceptable terms, if at all, that any of its current
license agreements will not be terminated, and it may not be able to maintain
the exclusivity of its exclusive licenses. In the event Corixa is unable to
obtain or maintain licenses to technology advantageous or necessary to Corixa's
business, Corixa and its corporate partners may be required to expend
significant time and resources to develop or in-license similar technology.
Corixa and its corporate partners may not be successful in this regard. If
Corixa cannot acquire or develop necessary technology, it may be prevented
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from commercializing certain of its products. Any such event would have a
material adverse effect on Corixa's business, financial condition and results of
operations.
Corixa is Dependent on Proprietary Technology and Its Patent Protection Is
Uncertain. Corixa's success will depend in part on its ability and that of its
corporate partners to obtain and enforce their respective patents and maintain
trade secrets, both in the United States and in other countries. As of November
30, 1998, Corixa owned or had licensed 27 issued United States patents that
expire at various times between January 2007 and August 2016, 94 corresponding
issued foreign patents, 145 pending United States patent applications, as well
as 14 corresponding international filings under the Patent Cooperation Treaty
and 267 pending foreign national patent applications. Corixa, its corporate
partners or its licensors may not have or may not develop or obtain rights to
products or processes that are patentable. Patents may not issue from any of the
pending applications owned or licensed by Corixa or its corporate partners. Any
claims allowed may not issue, or in the event of issuance, may not be sufficient
to protect the technology owned by or licensed to Corixa or its corporate
partners. Corixa has licensed certain patent applications from Southern Research
Institute ("SRI") related to Corixa's microsphere encapsulation technology, one
of which is currently the subject of an opposition proceeding before the
European Patent Office. SRI may not prevail in this opposition proceeding and
patents may not issue in Europe related to such technology. Also, Corixa's or
its corporate partners' current patents, or patents that issue on pending
applications, may be challenged, invalidated, infringed or circumvented, or the
rights granted thereunder may not provide proprietary protection or competitive
advantages to Corixa. Patent applications in the United States are maintained in
secrecy until patents issue and Patent applications in certain foreign countries
are not generally published until many months or years after they are filed.
Publication of technological developments in the scientific and patent
literature often occurs long after the date of such developments. Accordingly,
Corixa cannot be certain that it or one of its corporate partners was the first
to invent the subject matter covered by any patent application or that it or one
of its corporate partners was the first to file a patent application for any
such invention.
Patent law relating to the scope and enforceability of claims in the fields
in which Corixa operates is still evolving. The patent positions of
biotechnology and biopharmaceutical companies, including Corixa, are highly
uncertain and involve complex legal and technical questions for which legal
principles are not firmly established. For example, there is substantial
uncertainty regarding the potential for patent protection for gene fragments or
genes without known function or correlation with specific diseases. The degree
of future protection for Corixa's proprietary rights, therefore, is highly
uncertain. In this regard, independent patents may not issue from each of the 27
pending United States patent applications referenced above, which include many
interrelated applications directed to common or related subject matter. In
addition, there may be issued patents and pending applications owned by others
directed to technologies relevant to Corixa's or its corporate partners'
research, development and commercialization efforts. Corixa's or its corporate
partners' technology may not be able to be developed and commercialized without
a license to such patents. Also, such patent applications may be granted
priority over patent applications filed by Corixa or one of its corporate
partners.
The commercial success of Corixa depends significantly on its ability to
operate without infringing the patents and proprietary rights of third parties,
and Corixa's and its corporate partners' technologies may, or in the future may,
infringe the patents or proprietary rights of others. A number of pharmaceutical
companies, biotechnology
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companies, universities and research institutions may have filed patent
applications or may have received patent grants that cover technologies similar
to the technologies owned, optioned by or licensed to Corixa or its corporate
partners. In addition, Corixa is unable to determine the patents or patent
applications that may materially affect Corixa's or its corporate partners'
ability to make, use or sell any products. The existence of third party patent
applications and patents could significantly reduce the coverage of the patents
owned, optioned by or licensed to Corixa or its corporate partners and limit the
ability of Corixa or its corporate partners to obtain meaningful patent
protection. If patents containing competitive or conflicting claims are issued
to third parties, Corixa or its corporate partners may be enjoined from pursuing
research, development or commercialization of products or be required to obtain
licenses to these patents or to develop or obtain alternative technology. Corixa
or its corporate partners may be so enjoined or may not be able to obtain any
license to the patents and technologies of third parties on acceptable terms, if
at all. Corixa or its corporate partners may not be able to obtain or develop
alternative technologies. If Corixa or any of its corporate partners is enjoined
from pursuing its research, development or commercialization activities or if
any such license is not, or alternative technologies are not, obtained or
developed, Corixa or such corporate partner may be delayed or prevented from
commercializing its products, which would have a material adverse effect on
Corixa's business, financial condition and results of operations.
Third parties may independently develop similar or alternative technologies
to those of Corixa, duplicate any of the technologies of Corixa, its corporate
partners or its licensors, or design around the patented technologies developed
by Corixa, its corporate partners or its licensors. The occurrence of any of
these events would have a material adverse effect on Corixa's business,
financial condition and results of operations.
Litigation may also be necessary to enforce patents issued or licensed to
Corixa or its corporate partners or to determine the scope and validity of a
third party's proprietary rights. Corixa could incur substantial costs if
litigation is required to defend itself in patent suits brought by third
parties, if Corixa participates in patent suits brought against or initiated by
its corporate partners or if Corixa initiates such suits. Funds or resources may
not be available to Corixa in the event of any such litigation. Additionally,
Corixa or its corporate partners may not prevail in any such action. An adverse
outcome in litigation or an interference to determine priority or other
proceeding in a court or patent office could subject Corixa to significant
liabilities, require disputed rights to be licensed from other parties or
require Corixa or its corporate partners to cease using certain technology, any
of which may have a material adverse effect on Corixa's business, financial
condition and results of operations.
Corixa also relies on trade secrets and proprietary know-how, especially in
circumstances in which patent protection is not believed to be appropriate or
obtainable. Corixa attempts to protect its proprietary technology in part by
confidentiality agreements with its employees, consultants and advisors. These
agreements generally provide that all confidential information developed or made
known to the individual by Corixa during the course of the individual's
relationship with Corixa will be kept confidential and not disclosed to third
parties except in specific circumstances. These agreements also generally
provide that all inventions conceived by the individual in the course of
rendering services to Corixa shall be the exclusive property of Corixa. These
agreements may not provide meaningful protection or adequate remedies for any
breach, and Corixa's trade secrets may otherwise become known or be
independently discovered by its competitors, any of which
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could have a material adverse effect on Corixa's business, financial condition
and results of operations.
Corixa Has a History of Operating Losses. Corixa has experienced
significant operating losses in each year since its inception on September 8,
1994. As of September 30, 1998, Corixa's accumulated deficit was approximately
$34.9 million. Corixa may incur substantial additional operating losses over at
least the next several years. Such losses have been and may continue to be
principally the result of the various costs associated with Corixa's discovery,
research and development programs, preclinical studies and clinical activities.
Substantially all of Corixa's revenues to date have resulted from corporate
partnerships, other research, development and licensing arrangements, research
grants and interest income. Corixa's ability to achieve a consistent, profitable
level of operations is dependent in large part upon entering into agreements
with corporate partners for product discovery, research, development and
commercialization, obtaining regulatory approvals for its products and
successfully manufacturing and marketing commercial products. Corixa may not be
able to achieve consistent profitability. In addition, payments under corporate
partnerships and licensing arrangements will be subject to significant
fluctuations in both timing and amounts, resulting in quarters of profitability
and quarters of losses by Corixa. Therefore, Corixa's results of operations for
any period may fluctuate and may not be comparable to the results of operations
for any other period.
Corixa's Need for, and Ability to Secure, Additional Funding is
Uncertain. The combined company will require substantial capital resources in
order to conduct its operations. The combined company's future capital
requirements will depend on many factors, including, among others, the
following:
- Continued scientific progress in its discovery, research and development
programs;
- The magnitude and scope of its discovery, research and development
programs;
- The ability of the combined company to maintain existing, and establish
additional, corporate partnerships and licensing arrangements;
- Progress with preclinical studies and clinical trials;
- The time and costs involved in obtaining regulatory approvals;
- The costs involved in preparing, filing, prosecuting, maintaining,
defending and enforcing patent claims;
- The potential need to develop, acquire or license new technologies and
products; and
- Other factors not within the combined company's control.
The combined company intends to seek such additional funding through
corporate partnerships, public or private equity or debt financings and capital
lease transactions. Additional financing, however, may not be available on
acceptable terms, if at all. Additional equity financings could result in
significant dilution to stockholders. If sufficient capital is not available,
the combined company may be required to delay, reduce the scope of, eliminate or
divest one or more of its discovery, research or development programs, any of
which could have a material adverse effect on the combined company's business,
financial condition and results of operations. Corixa believes that following
the Merger, the combined company's existing capital resources, committed
payments under existing corporate partnerships and licensing arrangements, bank
credit arrangements, equipment financing and interest income will be sufficient
to fund the combined company's current and planned operations over at least the
next 18 months. Such funds, however, may not be
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sufficient to meet the capital needs of the combined company. In addition, a
substantial number of the payments to be made by Corixa's corporate partners and
other licensors are dependent upon the achievement by Corixa of development and
regulatory milestones. Failure to achieve such milestones would have a material
adverse effect on the combined company's future capital needs.
Corixa is Dependent on Key Personnel. Corixa is highly dependent on the
principal members of its scientific and management staff, the loss of whose
services might significantly delay or prevent Corixa's achievement of its
scientific or business objectives. Competition among biotechnology and
biopharmaceutical companies for qualified employees is intense, and the ability
to retain and attract qualified individuals is critical to Corixa's success.
Corixa may not be able to attract and retain such individuals currently or in
the future on acceptable terms, or at all, and the failure to do so would have a
material adverse effect on Corixa's business, financial condition and results of
operations. In addition, Corixa does not maintain "key person" life insurance on
any officer, employee or consultant of Corixa. Corixa also has relationships
with scientific collaborators at academic and other institutions, some of whom
conduct research at Corixa's request or assist Corixa in formulating its
research and development strategy. These scientific collaborators are not
employees of Corixa and may have commitments to, or consulting or advisory
contracts with, other entities that may limit their availability to Corixa.
Corixa has limited control over the activities of these scientific collaborators
and, except as otherwise required by its license, consulting and sponsored
research agreements, can expect only limited amounts of time to be dedicated to
Corixa's activities by such individuals. Failure of any such persons to devote
sufficient time and resources to Corixa's programs could have a material adverse
effect on Corixa's business, financial condition and results of operations. In
addition, these collaborators may have arrangements with other companies to
assist such companies in developing technologies that may prove competitive to
those of Corixa.
Corixa Faces Intense Competition. The biotechnology and biopharmaceutical
industries are intensely competitive. Several biotechnology and
biopharmaceutical companies, as well as certain research organizations,
currently engage in, or have in the past engaged in, efforts related to the
development of vaccines for the treatment and prevention of cancers and various
infectious diseases, as well as the development of diagnostic products for
infectious disease indications.
Many companies, including Corixa's corporate partners as well as academic
and other research organizations, are also developing alternative therapies to
treat cancers and infectious diseases and, in this regard compete with Corixa.
Moreover, technology controlled by third parties that may be advantageous to
Corixa's business may be acquired or licensed by competitors of Corixa, thereby
preventing Corixa from obtaining such technology on favorable terms, or at all.
Many of the companies developing competing technologies and products have
significantly greater financial resources and expertise in discovery, research
and development, manufacturing, preclinical and clinical testing, obtaining
regulatory approvals and marketing than Corixa or its corporate partners. Other
smaller companies may also prove to be significant competitors, particularly
through collaborative arrangements with large and established companies.
Academic institutions, government agencies and other public and private research
organizations may also conduct research, seek patent protection and establish
collaborative arrangements for discovery, research, clinical development and
marketing of products similar to those of Corixa. These companies and
institutions compete with Corixa in recruiting and retaining qualified
scientific and management
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personnel as well as in acquiring technologies complementary to Corixa's
programs. Corixa and its corporate partners will face competition with respect
to product efficacy and safety, the timing and scope of regulatory approvals,
availability of resources, reimbursement coverage, price and patent position,
including potentially dominant patent positions of others. Competitors may
develop more effective or more affordable products, or may achieve earlier
patent protection or product commercialization than Corixa and its corporate
partners. Such competitive products may render Corixa's products obsolete.
Corixa Lacks Manufacturing Experience and Relies on Contract Manufacturers.
Corixa does not have significant manufacturing facilities. Although Corixa
currently manufactures limited quantities of certain antigens and adjuvants,
including Corixa's novel Leishmania elongation Initiating Factor adjuvant, to
conduct preclinical studies and to supply corporate partners, Corixa intends to
rely on third party contract manufacturers to produce large quantities of such
substances for clinical trials and product commercialization. Additionally,
Corixa may be required to rely on contract manufacturers to produce antigens,
adjuvants and other components of its products for research and development,
preclinical and clinical purposes. Corixa's vaccines and other products have
never been manufactured on a commercial scale. Such products may not be able to
be manufactured at a cost or in quantities necessary to make them commercially
viable. Third party manufacturers may not be able to meet Corixa's needs with
respect to timing, quantity or quality. If Corixa is unable to contract for a
sufficient supply of required products and substances on acceptable terms, or if
it should encounter delays or difficulties in its relationships with
manufacturers, Corixa's preclinical and clinical testing would be delayed,
thereby delaying the submission of products for regulatory approval or the
market introduction and subsequent sales of such products. Any such delay may
have a material adverse effect on Corixa's business, financial condition and
results of operations. Moreover, contract manufacturers that Corixa may use must
continually adhere to current Good Manufacturing Practices ("GMP") regulations
enforced by the FDA through its facilities inspection program. If the facilities
of such manufacturers cannot pass a pre-approval plant inspection, the FDA
premarket approval of Corixa's products will not be granted.
Corixa Lacks Marketing Experience and is Dependent on Third Parties. Corixa
currently has no sales, marketing or distribution capability. Corixa intends to
rely on its current and future corporate partners, if any, to market its
products. Such corporate partners, however, may not have effective sales forces
and distribution systems. If Corixa is unable to maintain or establish such
relationships and is required to market any of its products directly, Corixa
will have to develop a marketing and sales force with technical expertise and
with supporting distribution capabilities. Corixa may not be able to maintain or
establish such relationships with third parties or develop in-house sales and
distribution capabilities. To the extent that Corixa depends on its corporate
partners or third parties for marketing and distribution, any revenues received
by Corixa will depend upon the efforts of such corporate partners or third
parties. Such efforts may not be successful.
Corixa Faces Much Government Regulation. The preclinical testing and
clinical trials of any products developed by Corixa or its corporate partners
and the manufacturing, labeling, sale, distribution, export or import,
marketing, advertising and promotion of any new products resulting therefrom are
subject to regulation by federal, state and local governmental authorities in
the United States, the principal one of which is the FDA, and by similar
agencies in other countries. Any product developed by Corixa or its corporate
partners must receive all relevant regulatory approvals or clearances before it
may be marketed in a particular country. The regulatory process, which includes
extensive
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preclinical studies and clinical trials of each product in order to establish
its safety and efficacy, is uncertain, can take many years and requires the
expenditure of substantial resources. Data obtained from preclinical and
clinical activities are susceptible to varying interpretations which could
delay, limit or prevent regulatory approval or clearance. In addition, delays or
rejections may be encountered based upon changes in regulatory policy during the
period of product development and/or the period of review of any application for
regulatory approval or clearance for a product. Delays in obtaining regulatory
approvals or clearances would adversely affect the marketing of any products
developed by Corixa or its corporate partners, impose significant additional
costs on Corixa and its corporate partners, diminish any competitive advantages
that Corixa or its corporate partners may attain and adversely affect Corixa's
ability to receive royalties and generate revenues and profits. Even after such
time and expenditures, any required approvals or clearances may not be obtained
for any products developed by or in collaboration with Corixa.
Regulatory approval, if granted, may entail limitations on the indicated
uses for which the new product may be marketed that could limit the potential
market for such product, and product approvals, once granted, may be withdrawn
if problems occur after initial marketing. Furthermore, manufacturers of
approved products are subject to pervasive review, including compliance with
detailed regulations governing GMP. The FDA has recently revised the GMP
regulations. The new Quality System Regulation imposes design controls and makes
other significant changes in the requirements applicable to manufacturers.
Failure to comply with applicable regulatory requirements can result in, among
other things, warning letters, fines, injunctions, civil penalties, recall or
seizure of products, total or partial suspension of production, refusal of the
government to renew marketing applications and criminal prosecution.
Corixa is also subject to numerous federal, state and local laws,
regulations and recommendations relating to safe working conditions, laboratory
and manufacturing practices, the experimental use of animals, the environment
and the use and disposal of hazardous substances, used in connection with
Corixa's discovery, research and development work, including radioactive
compounds and infectious disease agents. In addition, Corixa cannot predict the
extent of government regulations or the impact of new governmental regulations
which might have an adverse effect on the discovery, development, production and
marketing of Corixa's products. Corixa may be required to incur significant
costs to comply with current or future laws or regulations. Corixa may be
adversely affected by the cost of such compliance.
Corixa Faces Product Liability Exposure and Potential Unavailability of
Insurance. Corixa risks financial exposure to product liability claims in the
event that the use of such products results in personal injury. Corixa may
experience losses due to product liability claims in the future. Corixa has
obtained limited product liability insurance coverage. Such coverage, however,
may not be adequate or may not continue to be available in sufficient amounts or
at an acceptable cost, or at all. Corixa may not be able to obtain commercially
reasonable product liability insurance for any product approved for marketing. A
product liability claim, product recalls or other claim, as well as any claims
for uninsured liabilities or in excess of insured liabilities, may have a
material adverse effect on Corixa's business, financial condition and results of
operations.
Corixa's Products may Not be Accepted by the Market. Any products
successfully developed by Corixa or its corporate partners, if approved for
marketing, may never achieve market acceptance. Corixa's products, if
successfully developed, will compete with a number of traditional drugs and
therapies manufactured and marketed by major pharmaceutical and
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other biotechnology companies, as well as new products currently under
development by such companies and others. The degree of market acceptance of any
products developed by Corixa or its corporate partners will depend on a number
of factors, including the establishment and demonstration of the clinical
efficacy and safety of the product candidates, their potential advantage over
alternative treatment methods and reimbursement policies of government and
third-party payors. Physicians, patients or the medical community in general may
not accept and utilize any products that may be developed by Corixa or its
corporate partners. The lack of such market acceptance would have a material
adverse effect on Corixa's business, financial condition and results of
operations.
Corixa Faces Uncertainty Related to Pricing and Reimbursement and Health
Care Reform. In both domestic and foreign markets, sales of Corixa's or its
corporate partners' products, if any, will depend in part on the availability of
reimbursement from third-party payors such as government health administration
authorities, private health insurers, health maintenance organizations, pharmacy
benefit management companies and other organizations. Both the federal and state
governments in the United States and foreign governments continue to propose and
pass legislation designed to contain or reduce the cost of health care, and
regulations affecting the pricing of pharmaceuticals and other medical products
may change or be adopted before any of Corixa's or its corporate partners'
products are approved for marketing. Cost control initiatives could decrease the
price that Corixa receives for any product it or any of its corporate partners
may develop in the future and may have a material adverse effect on Corixa's
business, financial condition and results of operations. In addition,
third-party payors are increasingly challenging the price and cost-effectiveness
of medical products and services. Significant uncertainty exists as to the
reimbursement status of newly approved health care products, including
pharmaceuticals. Corixa's or its corporate partners' products, if any, may not
be considered cost effective or that adequate third-party reimbursement will be
available to enable Corixa or its corporate partners to maintain price levels
sufficient to realize a return on their investment. In any such event, Corixa's
business, financial condition and results of operations may be materially
adversely affected.
Corixa Faces Potential Volatility in Its Stock Price. The market prices
for securities of biotechnology companies have in the past been, and can in the
future be expected to be, especially volatile. The market price of Corixa's
Common Stock may be subject to substantial volatility depending upon many
factors, including:
- Announcements regarding the results of discovery efforts, preclinical and
clinical activities;
- Announcements regarding the acquisition of technologies or companies,
including the Merger;
- Technological innovations or new commercial products developed by Corixa
or its competitors;
- Changes in government regulations;
- Changes in Corixa's patent portfolio;
- Developments or disputes concerning proprietary rights, changes in
existing corporate partnerships or licensing arrangements;
- Establishment of additional corporate partnerships or licensing
arrangements;
- Progress of regulatory approvals;
- Issuance of new or changed stock market analyst reports and/or
recommendations;
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- Economic and other external factors;
- Operating losses by Corixa; and
- Fluctuations in Corixa's financial results and degree of trading
liquidity in its Common Stock.
These factors could have a material adverse effect on Corixa's business,
financial condition and results of operations and the price of its Common Stock
in the public market.
Control By Existing Stockholders. As of December 21, 1998, executive
officers and directors of Corixa, together with entities affiliated with them,
beneficially own approximately 47.6% of the outstanding Corixa Common Stock
together with applicable options and warrants held by such stockholders. The
voting power of these stockholders could have the effect of delaying or
preventing a change in control of Corixa. See "Ownership of Corixa Capital
Stock."
RISKS RELATED TO ANERGEN
Anergen faces numerous risks, including risks related to:
- Anergen's lack of commercial products;
- Anergen's limited operating history and past operating losses;
- Anergen's need to raise, and difficulty in raising, significant amounts
of capital;
- Anergen's uncertainty as to whether it can successfully conduct
preclinical and clinical trials;
- Uncertainty as to market acceptance of Anergen's products and potential
products;
- Uncertainty of Anergen's ability to obtain government approval for its
products and potential products;
- Anergen's dependence on its collaborative partners;
- Uncertainty relating to Anergen's ability to maintain partners and
proprietary rights with respect to its products;
- Anergen's need to develop additional manufacturing capabilities;
- Anergen's lack of marketing experience;
- Fierce competition and rapid technological change in the biotechnology
industry;
- Uncertainty relating to pharmaceutical pricing and reimbursement and
potential health care reform;
- Anergen's need for additional key personnel and reliance on academic
collaborators;
- Anergen's exposure to potential product liability claims;
- Anergen's exposure to potential hazardous materials and environmental
liabilities;
- Anergen's volatile stock price; and
- Concentration of Anergen's stock ownership.
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In the event the Merger is not consummated, Anergen will continue to be
exposed to the foregoing risks. In particular, during October 1998, Anergen
announced a restructuring pursuant to which it undertook a number of steps to
reduce expenses including the termination of 33 employees. Anergen has ceased
its research efforts and is focusing on clinical development of AnergiX for
rheumatoid arthritis in collaboration with N.V. Organon. As a result of the
restructuring of operations, Anergen has scaled back substantially its ability
to conduct its operations, research and clinical development. Anergen currently
requires substantial additional funds to continue its operations. Anergen has
attempted to raise additional funds and to date has not been able to raise
sufficient funds. As a result of the lack of additional funding, Anergen is out
of compliance with certain loan covenants in respect of the credit facility with
Silicon Valley Bank (the "Silicon Valley Bank Loan"), and therefore the
remaining long-term debt balance of the Silicon Valley Bank Loan has been
reclassified as short-term debt. Silicon Valley Bank has indicated that it may
undertake certain actions to collect the remaining amounts due under the Silicon
Valley Bank Loan or to encumber additional assets of Anergen to provide more
collateral as security for such loan. In the event the Merger is not consummated
(or during the period before Corixa and Anergen are able to consummate the
merger), Silicon Valley Bank may take actions to collect the outstanding balance
of the Silicon Valley Bank Loan (a "Foreclosure"). An attempted Foreclosure by
Silicon Valley Bank prior to the closing date of the Merger would enable Corixa
to terminate its obligation to consummate the Merger with Anergen. Further, in
the event the Merger is not consummated for any reason, a Foreclosure by Silicon
Valley Bank would have a material adverse affect on Anergen's business and
impede its ability to raise additional capital. In addition, Anergen's
restructured operations, loss of employees and general financial condition may
result in a greater difficulty to both retain existing employees and attract
future employees necessary to conduct business. The announcement of a failure to
consummate the Merger would exacerbate Anergen's ability to retain and attract
necessary employees. The failure to consummate the Merger will also result in
greater dilution to Anergen stockholders as a result of the warrants which
Anergen would be obligated to issue to Warburg and IGT pursuant to the Note
Purchase Agreement. Anergen stockholders may experience less liquidity in shares
of Anergen Common Stock if the Merger is not consummated as a result of the
Nasdaq's likely delisting of Anergen Common Stock from Nasdaq. In the event of
such delisting, shares of Anergen Common Stock would trade on the over-the-
counter market, which may result in less volume and fewer market makers in
Anergen Common Stock than if Anergen were to remain listed on Nasdaq. In
addition, in the event the Merger is not consummated, the ability of Anergen to
consummate an alternative merger or strategic collaboration may be materially
adversely affected.
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INTRODUCTION
This Proxy Statement/Prospectus is furnished in connection with the
solicitation of proxies by the Anergen Board of Directors to be used at the
Anergen Special Meeting. This Proxy Statement/Prospectus is also furnished by
Corixa to Anergen stockholders and option holders in connection with the
issuance of shares of Corixa Common Stock in connection with the Merger
described herein.
The information set forth herein concerning Corixa has been furnished by
Corixa and the information set forth herein concerning Anergen has been
furnished by Anergen.
THE SPECIAL MEETING
DATE, TIME AND PLACE OF SPECIAL MEETING
The Special Meeting will be held at Anergen's corporate offices, 301
Penobscot Drive, Redwood City, California 94063, on , 1999 at
, local time.
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, holders of shares of Anergen Common Stock will
consider and vote upon a proposal to approve and adopt the Merger Agreement and
approve the Merger. As a result of the Merger, all outstanding shares of Anergen
Common Stock will convert into shares of Corixa Common Stock and Merger Sub will
merge with and into Anergen. Anergen will survive the Merger and become a
wholly-owned subsidiary of Corixa. See "The Merger" and "Terms of the Merger."
ANERGEN'S BOARD OF DIRECTORS HAS CAREFULLY REVIEWED AND CONSIDERED THE
TERMS AND CONDITIONS OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY AND HAS DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR TO,
AND IN THE BEST INTERESTS OF, ANERGEN AND ITS STOCKHOLDERS. AFTER CAREFUL
CONSIDERATION, THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF
ANERGEN VOTE "FOR" APPROVAL OF THE MERGER AND THE MERGER AGREEMENT.
RECORD DATE; VOTING RIGHTS; PROXIES
Only holders of Anergen Common Stock at the close of business on
, 1999, the Record Date, are entitled to notice of and to vote at
the Special Meeting. As of the Record Date, there were shares of
Anergen Common Stock issued and outstanding, Each stockholder of record of
Anergen Common Stock on the Record Date is entitled to cast one vote per share,
exercisable in person or by properly executed proxy, on each matter properly
submitted for the vote of the stockholders of Anergen at the Special Meeting.
All shares of Anergen Common Stock represented by properly executed proxies
will, unless such proxies have been previously revoked, be voted in accordance
with the instructions indicated in such proxies. IF NO INSTRUCTIONS ARE
INDICATED,
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SUCH SHARES OF ANERGEN COMMON STOCK REPRESENTED BY SUCH PROPERLY EXECUTED
PROXIES WILL BE VOTED "FOR" ADOPTION AND APPROVAL OF THE MERGER AGREEMENT.
Anergen does not know of any matters other than as described in the Notice of
Special Meeting that are to come before the Special Meeting. If any other matter
or matters are properly presented for action at the Special Meeting, the persons
named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with such persons' best
judgment. A stockholder who has given a proxy may revoke it at any time prior to
its exercise by giving written notice thereof to the Secretary of Anergen, by
signing and returning a later dated proxy, or by voting in person at the Special
Meeting. However, mere attendance at the Special Meeting will not in and of
itself have the effect of revoking the proxy. The inspector of election
appointed for the meeting will tabulate votes cast by proxy or in person at the
Special Meeting. If an executed proxy is returned by a broker holding shares in
street name which indicates that the broker does not have discretionary
authority as to certain shares to vote on one or more matters (a "broker
non-vote"), such shares will be considered present at the meeting for purposes
of determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the votes cast with respect to such matter.
For purposes of determining whether the Merger and the Merger Agreement has been
adopted and approved, the inspector of election will include abstentions as a
portion of the number of shares deemed to have voted on such matter at the
Special Meeting. Accordingly, abstentions will have the effect of a "NO" vote on
the proposal to adopt and approve the Merger Agreement.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of all the issued and outstanding shares of Anergen Common Stock
entitled to vote is necessary to constitute a quorum at the Special Meeting. For
purposes of determining whether a quorum is present, the inspector of election
will include shares the holders of which abstain from voting on any particular
matter ("abstentions").
REQUIRED VOTE; VOTING AGREEMENT
Corixa has the right to terminate the Merger Agreement if, among other
reasons, the holders of at least a majority of the outstanding shares of Anergen
Common Stock at the Special Meeting do not vote in favor of adoption and
approval of the Merger Agreement and approval of the Merger by the later of (i)
the date that is 30 days after the Registration Statement is declared effective
by the Commission (with certain exceptions as are more fully discussed in the
Merger Agreement) and (ii) 15 days after any amendments or supplements to the
Proxy Statement/Prospectus are mailed to the Anergen stockholders. Adoption and
approval of the Merger Agreement and approval of the Merger require, as a
condition and pursuant to the terms of the Merger Agreement, the affirmative
vote of the holders of at least a majority of the outstanding shares of Anergen
Common Stock entitled to vote thereon at the Special Meeting. If stockholders
holding a majority of the outstanding shares of Anergen Common Stock do not vote
to approve the Merger Agreement at the Special Meeting, the Merger will not be
consummated. In such event, Anergen will be obligated to pay a termination fee
of $400,000 to Corixa. If the Merger Agreement is terminated by Corixa under
other certain circumstances, Anergen will be obligated to pay Corixa a
termination fee of $200,000.
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All of the directors and officers of and certain stockholders of Anergen
have entered into Voting Agreements with Corixa and Anergen pursuant to which
they have agreed, subject to certain limitations, to:
- Vote all shares of Anergen Common Stock beneficially owned by them to
approve the Merger Agreement at the Special Meeting;
- Vote against any proposal for any recapitalization, merger, sale of
assets or other business combination (other than the Merger) between
Anergen and any other person other than Corixa, subject to the terms of
the Merger Agreement; and
- Not transfer, sell, exchange, pledge or otherwise dispose of or encumber
any shares of Anergen Common Stock beneficially owned by them prior to
the date of the earlier of (A) the Effective Time of the Merger or (B)
the termination of the Merger Agreement.
Anergen stockholders holding approximately 50.0% of the total number of
outstanding shares of Anergen Common Stock have executed the Voting Agreements.
Certain Anergen stockholders who are affiliates of Anergen have also
entered into Affiliate Agreements whereby they have agreed to:
- Not transfer, sell, exchange, pledge or otherwise dispose of or encumber
any shares of Anergen Common Stock beneficially owned prior to the date
of the earlier of (A) the Effective Time of the Merger or (B) the
termination of the Merger Agreement; and
- Restrict resales or other dispositions of Corixa Common Stock received in
connection with the Merger in compliance with federal securities laws.
As of December 21, 1998, directors and executive officers of Anergen and
their affiliates beneficially owned approximately 37.5% of the 18,923,888
outstanding shares of Anergen Common Stock, together with applicable options and
warrants held by such stockholders. See "Ownership of Anergen Capital Stock."
SOLICITATION OF PROXIES; EXPENSES
The cost of the solicitation of proxies of Anergen stockholders will be
borne by Corixa. Proxies may be solicited by certain Anergen directors, officers
and employees personally or by telephone, telecopy or other means of
communication. Such directors, officers and employees will not receive
additional compensation, but may be reimbursed for reasonable out-of-pocket
expenses incurred in connection with such solicitation. Following the original
mailing of the proxies and other soliciting materials, Anergen will request that
brokers, custodians, nominees and other record holders forward copies of the
proxy and other soliciting materials to persons for whom they hold shares of
Anergen Common Stock and request authority for the exercise of proxies. In such
cases, Anergen, upon the request of the record holders, will reimburse such
record holders for their reasonable expenses. Anergen has retained ChaseMellon
Shareholder Services, L.L.C. to assist in the solicitation of proxies at a cost
of approximately $5,500.00, plus customary expenses.
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THE MATTERS TO BE CONSIDERED AT THE SPECIAL MEETING ARE OF GREAT IMPORTANCE
TO THE STOCKHOLDERS OF ANERGEN. ACCORDINGLY, ANERGEN STOCKHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY STATEMENT/
PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE. ANERGEN STOCKHOLDERS SHOULD NOT SEND ANY
STOCK CERTIFICATES WITH THEIR PROXY CARDS.
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APPROVAL OF THE MERGER AND RELATED TRANSACTIONS
The following discussion summarizes the proposed Merger and related
transactions. The following is not, however, a complete statement of all
provisions of the Merger Agreement and related agreements. Detailed terms of and
conditions to the Merger and certain related transactions are contained in the
Merger Agreement, a conformed copy of which is attached to this Proxy
Statement/Prospectus as Appendix A. Statements made in this Proxy
Statement/Prospectus with respect to the terms of the Merger and such related
transactions are qualified in their respective entireties by reference to, and
holders of Anergen Common Stock are urged to read, the more detailed information
set forth in, the Merger Agreement and the other documents annexed hereto.
DESCRIPTION
Pursuant to the Merger Agreement:
- Merger Sub will merge with and into Anergen;
- Each outstanding share of Anergen Common Stock, other than shares owned
by Anergen, will be converted into the right to receive a fraction of one
share of Corixa Common Stock, based upon the Exchange Ratio;
- Each outstanding option and warrant to purchase Anergen Common Stock will
be deemed to constitute the right to acquire, on the same terms and
conditions, a number of shares of Corixa Common Stock at a price based on
the Exchange Ratio;
- Upon consummation of the Merger, the separate corporate existence of
Merger Sub will cease, and Anergen will survive as a wholly-owned
subsidiary of Corixa. See "Terms of the Merger -- Conversion of
Securities" and "Terms of the Merger -- Stock Options."
JOINT REASONS FOR THE MERGER
The Boards of Directors of both Corixa and Anergen based their decisions to
consummate the proposed Merger upon potential joint benefits that Corixa and
Anergen believe will contribute to the success of the combined company,
including the following:
- Corixa and Anergen believe that the Merger will potentially result in the
establishment of a combined company with a significantly expanded breadth
of existing product development opportunities. As a result of the Merger,
the combined entity will now have a clinical stage product portfolio that
includes vaccines for a number of autoimmune diseases, including
arthritis, multiple sclerosis and diabetes. Corixa and Anergen believe
that the combined company's enhanced and expanded product portfolio
should serve to augment the combined company's business development
activities and financial results through the application of Corixa's
business experience to the partnering of Anergen discoveries while at the
same time allowing Corixa to bring a more diverse set of discoveries and
product opportunities to its partnering efforts.
- The Merger will significantly expand the number of potential products
that either company had previously developed to the point of clinical
evaluation. As of November 30, 1998, Corixa was providing product for or
financially supporting
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clinical trials of four vaccines. In 1998, Anergen was conducting
clinical trials of two of its AnergiX(TM) platform products as well as
one AnervaX(TM) product. As a result of the Merger, the combined company
will have a portfolio of seven products that are in or have completed
initial clinical evaluation. Corixa and Anergen believe that the
increased number of products the combined company will have in clinical
development increases the opportunity for commercial success for the
stockholders of both Corixa and Anergen while decreasing the potential
adverse financial impact to such stockholders that could result from
failure of any of such products to perform successfully in clinical
development.
- Both Corixa and Anergen believe that the Merger will allow both companies
to apply their scientific expertise to further the development of the
existing products as well as to the discovery and development of
additional products. Anergen's key products, AnergiX(TM) a complex of a
disease-specific HLA molecule and a self-antigenic peptide, and
AnervaX(TM), peptide-based vaccine function to induce immune system
responses that have the potential to interrupt the underlying disease
process responsible for a number of autoimmune diseases. Corixa possesses
multiple proprietary adjuvant preparations as well as antigen delivery
systems as a result of its research and development of cancer and
infectious disease vaccines. These technologies have been shown in animal
studies of certain vaccine immune responses to significantly improve
immune system response to such vaccination. Combining Corixa adjuvants or
delivery systems with AnervaX(TM) autoimmune disease vaccines might lead
to development of products that result in improved therapeutic benefit.
Furthermore, Anergen possesses know-how and expertise with respect to the
study of autoimmune disease and the underlying immune reactions believed
to lead to the development of diabetes, multiple sclerosis and arthritis.
Corixa and Anergen believe that a key research and product development
opportunity may lie in the discovery of specific antigens involved in
triggering the initial immune response that leads to the development of
autoimmune disease. Corixa possesses considerable expertise in the
discovery of antigens that are capable of triggering immune reactions.
Combination of both companies' expertise may result in discovery of
antigens that are responsible for the development of autoimmune disease.
Such discoveries could form the basis for development of multiple
diagnostic and therapeutic products that could assist with the
identification and treatment of autoimmune diseases.
CORIXA'S REASONS FOR THE MERGER
The Corixa Board of Directors has unanimously approved the Merger and the
Merger Agreement. In addition to the anticipated joint benefits described above,
Corixa believes that there are additional reasons the Merger will be beneficial
to Corixa and its stockholders:
- The Merger will enable the combined company to pursue a number of
potential product opportunities that Corixa and Anergen would otherwise
be unable to pursue as stand-alone companies.
- The Merger will strengthen the combined company's scientific expertise
and expand the combined company's existing potential product
opportunities as compared to each of Corixa and Anergen on a stand-alone
basis. For example, the Corixa Board of Directors expects the Merger to
provide Corixa with scientific expertise and
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access to relevant animal models to determine whether human clinical
trials of M.vaccae-derived products in additional autoimmune diseases are
warranted.
- The Merger will combine Corixa's and Anergen's complementary scientific
expertise and product discovery opportunities which may lead to increased
future potential product opportunities for the combined company. For
example, Corixa believes that additional product discovery opportunities
may exist through Anergen's research program focused on specific immune
system hormones called chemokines. Application of additional Corixa
technology to this product development area may also speed the discovery
and development of multiple proprietary products.
- The combined company's enhanced scientific and business development
expertise resulting from the Merger may lead to additional partnering
transactions that neither Corixa nor Anergen would have on a stand-alone
basis. Also, the combined company may be able to obtain improved
commercial terms in such partnering transactions due to the company's
increased size, product development portfolio and bargaining power.
RECOMMENDATION OF ANERGEN BOARD; ANERGEN'S REASONS FOR THE MERGER
The Anergen Board has unanimously approved and ratified the Merger
Agreement and the Merger, has determined that the terms of the Merger Agreement
are fair to, and that the Merger is in the best interests of, Anergen and its
stockholders and therefore unanimously recommends that the holders of Anergen
Common Stock vote in favor of approval of the approval of the Merger and the
Merger Agreement.
In reaching its determination to approve the Merger Agreement and the
transactions contemplated thereby, the Anergen Board has identified the
following potential benefits of the Merger that it believes may contribute to
the success of the combined company:
- Given the complementary nature of the products of Anergen and Corixa, and
their scientific synergies, the Merger will enhance the opportunity for
the potential realization of Anergen's strategic objective of achieving
greater scale and presence in the pharmaceutical market;
- Anergen's stockholders would have the opportunity to participate in the
potential for growth of the combined company after the Merger;
- The combined clinical, research and product development expertise,
financial resources, size and breadth of product offerings, strategic
partnerships and research opportunities of the combined company will
allow the combined company to respond more quickly and effectively to
increased competition and rapid change in the healthcare industry;
- The combination of Corixa's products and potential products with
Anergen's potential products will allow the combined company to offer a
more comprehensive set of pharmaceutical products to its potential
customers;
- The creation of a higher market profile and greater financial strength
may present greater opportunities for marketing the potential products of
the combined company;
- The Merger may increase the opportunity for (a) effectively utilizing the
skills and resources of the companies' respective clinical teams and (b)
matching the
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respective corporate cultures of the two companies while maintaining some
of the most important aspects of each culture;
- The combined technological resources and scientific know-how may allow
the combined company to develop new therapies, vaccines and other
products;
- Anergen can benefit from Corixa's antigen research and discovery, while
Corixa can expand their indications to autoimmune diseases and utilize
Anergen's animal model and proprietary assay systems;
- The consideration Anergen stockholders will receive in the Merger is fair
to Anergen stockholders and in their best interests, especially in light
of the fact that, at the time the parties signed the Merger Agreement,
the market value of Corixa Common Stock to be issued in exchange for
Anergen Common Stock represented a significant premium over the recent
price range of Anergen Common Stock;
- The Corixa Common Stock Anergen stockholders will receive in the Merger
has significantly greater liquidity than Anergen Common Stock;
- The Merger will allow Anergen to re-establish its research and
development capabilities and provide sufficient capital and resources to
support those activities;
- The Anergen product pipeline may benefit from Corixa's antigen discovery
and delivery, and adjuvant technologies, as a means to boost the clinical
efficacy of AnervaX(TM) and AnergiX(TM); and
- Anergen may benefit from Corixa's extensive network of established
corporate partnerships when trying to enter into certain business
relationships for the continued development and commercialization of its
products.
In the course of its deliberations, the Anergen Board of Directors reviewed
and considered a number of other factors relevant to the Merger. In particular,
the Anergen Board of Directors considered, among other things, the following
factors:
- The likelihood that Anergen can continue its operations without the
Merger, and its failure to date to obtain sufficient financing to fund
its operations;
- Information concerning Anergen's and Corixa's respective businesses,
financial position, results of operations, product development schedules,
technologies and properties;
- The reports of Anergen's management and Pacific Growth Equities Inc.
("PGE"), its financial advisor, including reports relating to the
extensive due diligence review which had been conducted regarding
Corixa's business, operations, technology and competitive position, and
possible synergistic opportunities for the two companies;
- With the assistance of Anergen's financial advisors, the multiples of
comparable publicly traded companies in the industry and the discounted
future cash flows of Corixa based on management's projections;
- The financial presentations of PGE, including the oral opinion of PGE
delivered at the December 3, 1998 meeting of the Anergen Board of
Directors, which concluded, subject to the assumptions made, matters
considered and limitations set forth in such opinion, that the Exchange
Ratio provided in the Merger Agreement
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was fair, from a financial point of view, to Anergen and its stockholders
on such date (as copy of the PGE fairness opinion is attached as Appendix
B hereto);
- A review with Anergen's legal counsel of the terms of the Merger
Agreement, including the Escrow Fund terms, termination fee provisions,
the circumstances under which either Anergen or Corixa can terminate the
Merger Agreement and the closing conditions to the Merger;
- The compatibility of the corporate cultures of Anergen and Corixa which
the Anergen Board of Directors believed was important for the successful
integration of the companies; and
- The fact that the issuance of Corixa Common Stock pursuant to the Merger
Agreement is conditioned upon approval by a majority of the outstanding
shares of Anergen Common Stock entitled to vote at the Anergen Special
Meeting.
The Anergen Board of Directors also considered a variety of potentially
negative factors in its deliberations concerning the Merger, including the
following factors:
- The risk that, despite the intentions and efforts of the parties, the
operational and competitive benefits sought to be achieved in the Merger
may not be achieved;
- The risk that the market value and liquidity of Corixa Common Stock might
be adversely affected;
- The risk that despite the intentions and efforts of the parties, the key
technical and management personnel of Anergen required to facilitate a
successful integration of the Merger may not be retained by Anergen
following the Merger; and
- Certain other risks described above under "Risk Factors."
The foregoing discussion of the information and factors considered by the
Anergen Board of Directors is not intended to be an exhaustive list of all
factors considered by the Anergen Board of Directors. Each member of the Anergen
Board of Directors may have considered different factors. In view of the variety
of factors considered in connection with its evaluation of the Merger, the
Anergen Board of Directors did not find it practicable to and did not quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determination. In addition, each member of the Anergen Board of
Directors may have given different weights to different factors. Based on the
factors outlined above and on the advice of PGE, its financial advisor, the
Anergen Board of Directors determined that the terms of the Merger Agreement are
fair to, and that the Merger is in the best interests of, Anergen and its
stockholders.
OPINION OF ANERGEN'S FINANCIAL ADVISOR
Anergen retained PGE to evaluate the terms of the Merger and render an
opinion as to its fairness. On December 3, 1998, PGE rendered its opinion to
Anergen's Board of Directors to the effect that, as of December 1, 1998 and
based on and subject to the matters stated in the opinion, the Merger
Consideration to be paid by Corixa to Anergen stockholders in the Merger is fair
from a financial point of view to Anergen's stockholders.
THE FULL TEXT OF PGE'S WRITTEN OPINION DATED DECEMBER 3, 1998 WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED
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AS APPENDIX B AND IS INCORPORATED HEREIN BY REFERENCE. THIS SUMMARY IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION. HOLDERS OF
ANERGEN COMMON STOCK ARE URGED TO, AND SHOULD, READ THIS OPINION CAREFULLY IN
ITS ENTIRETY. THE ENGAGEMENT OF PGE AND ITS OPINION ARE FOR THE BENEFIT OF THE
ANERGEN BOARD OF DIRECTORS AND ITS OPINION WAS DELIVERED TO THE ANERGEN BOARD OF
DIRECTORS IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER. PGE'S OPINION
ADDRESSES ONLY THE FAIRNESS OF THE MERGER CONSIDERATION FROM A FINANCIAL POINT
OF VIEW TO ANERGEN, AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER, NOR
DOES IT CONSTITUTE A RECOMMENDATION TO ANY HOLDER OF ANERGEN COMMON STOCK AS TO
HOW TO VOTE WITH RESPECT TO THE MERGER.
In connection with the PGE opinion, PGE reviewed certain publicly available
financial information and other information concerning Anergen and Corixa and
certain internal analyses and other information furnished to it by Anergen and
Corixa. PGE also held discussions with the members of senior management of
Anergen and Corixa regarding the businesses and prospects of their respective
companies and the joint prospects of a combined company. In addition, PGE
- Reviewed the historical reported prices and trading activity for both the
Anergen Common Stock and Corixa Common Stock;
- Compared certain financial information for both Anergen and Corixa with
similar information for selected companies whose securities are publicly
traded;
- Compared certain stock market information and valuations for both Anergen
and Corixa with similar information for certain companies whose
securities are publicly traded;
- Reviewed premiums paid for similar transactions; and
- Performed such other studies and analyses and considered such other
factors as it deemed appropriate.
In conducting its review and arriving at its opinion, PGE assumed and
relied upon, without independent verification, the accuracy, completeness and
fairness of the information furnished to or otherwise reviewed by or discussed
with it for the purposes of rendering its opinion. PGE assumed, with the consent
of Anergen, that the Merger would qualify for purchase accounting treatment and
as a tax-free transaction for the stockholders of Anergen for federal income tax
purposes. PGE did not make an independent evaluation or appraisal of the assets
of Anergen or Corixa nor was PGE furnished with any such evaluations or
appraisals. The PGE Opinion is based on market, economic and other conditions as
they existed and could be evaluated as of the date of the PGE Opinion.
The following is a summary of the analyses performed and factors considered
by PGE in connection with rendering of the PGE Opinion.
Historical Financial Position. In rendering its opinion, PGE reviewed and
analyzed the historical financial position of Anergen which included (i) an
assessment of each of Anergen's and Corixa's recent financial statements; (ii)
an analysis of each of Anergen's and Corixa's revenue, growth and operating
performance trends; and (iii) an assessment of Anergen's balance sheet
information.
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Current Situation. PGE reviewed and analyzed the current financial
condition of Anergen which included (i) an assessment of Anergen's current cash
position, (ii) a review of Anergen's historical cash burn rate; (iii) a review
of alternative sources of capital to fund ongoing operations and (iv) an
analysis of Anergen's debt position.
Historical Stock Price Performance. PGE reviewed and analyzed the daily
closing per share market prices and trading volume for Anergen Common Stock and
Corixa Common Stock, from November 10, 1998 through December 1, 1998. Although
PGE reviewed the trading volume of Anergen Common Stock and Corixa Common Stock,
it primarily focused on the relative stock price movements of the two companies.
PGE also reviewed the daily closing prices per share of Anergen Common Stock and
Corixa Common Stock and compared the movement of such daily closing prices with
the movement of the AMEX Biotechnology Index and the Russell 2000 Index for the
period November 24, 1997 through November 27, 1998.
Analysis of Selected Publicly Traded Companies. This analysis examines a
company's valuation in the public market as compared to the valuation in the
public market of other selected publicly traded companies. PGE compared certain
financial information (based on the commonly used valuation measurements
described below) relating to Anergen and Corixa to certain corresponding
information for a group of selected publicly traded companies including Corixa
(together, the "Selected Publicly Traded Comparable Companies"). Such financial
information included, among other things:
- common equity market capitalization;
- cash position;
- ratios adjusted for cash ("Technology Value") to
(i) ratios of market capitalization to cash;
(ii) ratios of market capitalization to Technology Value; and
(iii) discount of common stock market price relative to 52 week high per
share market price.
The financial information used in connection with the analysis provided
below with respect to Anergen and Corixa was based on the latest reported
quarterly period and derived from publicly available information. In the case of
the Selected Publicly Traded Comparable Companies, the financial information
used in connection with the analysis provided below was based on the most recent
publicly available balance sheet information. PGE noted that, based on the last
reported financial information and most recent common equity prices as of
December 1, 1998, the multiple of market capitalization to Cash was 2.3x and
1.9x for Anergen and Corixa, respectively, compared to the mean excluding the
high and low of 2.0x for companies selected as comparable to Anergen, and a
mean, excluding the high and low, of 5.3x for companies selected as comparable
to Corixa; the multiple for market capitalization to Technology Value was 1.8x
for Anergen and 2.1x for Corixa, compared to a mean, excluding the high and low,
of 2.6x for Anergen's comparable companies and a mean, excluding the high and
low, of 1.2x for Corixa's comparable companies. The discount to 52 week high was
92.2% for Anergen and 48.6% for Corixa compared to a mean, excluding the high
and low, of 63.0% in companies comparable to Anergen and to a mean, excluding
the high and low, of 42.6% in companies comparable to Corixa.
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Analysis of Selected Mergers and Acquisitions. PGE reviewed the financial
terms, to the extent publicly available, of 29 completed mergers and
acquisitions since January, 1995 in the biotechnology industry (the "Selected
Transactions"). The twenty-nine biotechnology transactions reviewed, in
chronological order of public announcement, were: Paco Pharmaceutical Services /
West Co, Inc., March 24, 1995; Circa Pharmaceuticals, Inc. / Watson
Pharmaceuticals, Inc., March 30, 1995; AUSA, Inc. (Apotex USA/Apotex) / GEN/Rx
Inc., April 13, 1995; MedChem Products, Inc. / CR Bard, Inc., May 24, 1995;
Marsam Pharmaceuticals, Inc. / Schein Pharmaceutical, Inc., May 30, 1995;
Aramed, Inc. / Gensia, June 16, 1995; Cellcor / Cytogen, June 16, 1995;
SciGenics / Genetics Institute, Inc., June 22, 1995; Univax Biologics, Inc. /
North American Biologicals, Inc., August 28, 1995; Syntro Corp. / Mallinckrodt
Veterinary Inc., September 25, 1995; Biocraft Laboratories, Inc. / Teva
Pharmaceutical Industries, January 29, 1996; International Canine Genetics /
Synbiotics Corp., July 25, 1996; Houston Biotechnology, Inc. / Medarex, Inc.,
December 9, 1996; Royce Laboratories, Inc. / Watson Pharmaceuticals, Inc.,
December 26, 1996; Biosys / Thermo Trilogy Corp., January 2, 1997; Somatix
Therapy Corp. / Cell Genesys, Inc., January 13, 1997; BioWhittaker, Inc. /
Cambrex Corp., August 25, 1997; Allergan Ligand Retinoid / Ligand
Pharmaceuticals, Inc., September 24, 1997; Sequana Therapeutics / Arris
Pharmaceuticals Corp., November 3, 1997; Allergan Specialty / Shareholders,
November 19, 1997; Sano Corp. / Elan Corp. PLC, December 15, 1997; Somatogen,
Inc. / Baxter International, Inc., February 24, 1998; International Murex Tech
Corp. / Abbott Laboratories, March 16, 1998; IBAH, Inc. / Omnicare, Inc., March
31, 1998; Neurex Corp./ Elan Corp. PLC, April 29, 1998; Seragen Inc. (Boston
University) / Ligand Pharmaceuticals, Inc., May 8, 1998; Virus Research
Institute, Inc. / T Cell Sciences, Inc., May 12, 1998; Penederm, Inc. / Mylan
Laboratories, Inc., June 24, 1998; Gull Laboratories (Fresenius) / Meridian
Diagnostics, July 27, 1998. PGE noted that the Selected Transactions were
effected at a range of premiums to the target's per share market price one day
prior to the announcement, one week prior to the announcement, and four weeks
prior to the announcement of (14.3%) to 91.6%, with a mean, excluding the high
and low of 30.8%, and (12.2%)to 75.7% with a mean excluding the high and low of
38.6%, and (41.9%) to 95.1% with a mean, excluding the high and low, of 44.4%,
respectively, versus transaction premiums of 76.0%, 29.4% or (6.1%),
respectively, for the Merger (based on the per share market price four weeks
prior to December 3, 1998, and as of December 3, 1998). All multiples for the
Selected Transactions were based on public information available at the time of
the announcement of such transaction, without taking into account specific
market and other conditions during the three-year period during which the
Selected Transactions occurred.
No company used in the analysis of Selected Publicly Traded Comparable
Companies nor any transaction used in the analysis of Selected Transactions
summarized above is identical to Anergen, Corixa, or the Merger. Accordingly,
such analyses must take into account differences in the financial and operating
characteristics of the Selected Companies and the Selected Transactions and
other factors that would affect the public trading value and acquisition value
of the Selected Companies and the Selected Transactions, respectively.
While the foregoing summary describes analyses and factors that PGE deemed
material in its presentation to the Anergen Board of Directors, it is not a
comprehensive description of all analyses and factors considered by PGE. The
preparation of a fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant methods of financial
analysis and the applications of these methods to the particular circumstances
and, therefore, such an opinion is not readily susceptible to
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summary description. PGE believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
it, without considering all analyses and factors, would create an incomplete
view of the evaluation process underlying PGE's Opinion. In performing its
analyses, PGE considered general economic, market and financial conditions and
other matters, many of which are beyond the control of Anergen and Corixa. The
analyses performed by PGE are not necessarily indicative of actual values or
future results, which may be significantly more or less favorable than those
suggested by such analyses. Accordingly such analyses are subject to substantial
uncertainty. In addition, analyses relating to the value of a business do not
purport to be appraisals or to reflect the prices at which the business actually
may be sold. Furthermore, no opinion is being expressed as to the prices at
which shares of Corixa Common Stock may trade at any future time.
Pursuant to a letter agreement dated November 24, 1998, between Anergen and
PGE, the fees to date payable to PGE for rendering the PGE Opinion have been
$100,000, of which $25,000 was payable upon execution of the letter agreement
and $75,000 at the time PGE notified Anergen of its preparedness to render the
opinion (whether in oral or written form). Anergen has agreed to indemnify PGE
and its directors, officers, agents, employees and controlling persons, for
certain costs, expenses, losses, claims, damages and liabilities related to or
arising out of its rendering of services under its engagement.
The Anergen Board of Directors retained PGE based upon PGE's
qualifications, reputation, experience and expertise. PGE, as a customary part
of it investment banking business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, public equity
underwritings, private placements and valuations for corporate and other
purposes. PGE maintains a market in the common stock of many publicly traded
biotechnology and other companies and regularly publishes research reports
regarding the biotechnology industry and publicly traded companies in the
biotechnology industry.
MATERIAL CONTACTS
During 1998, Anergen attempted to secure sources of capital to finance
continuing operations. Because of the nature of the public markets with respect
to biotechnology companies and the risk and costs associated with support of
research programs and clinical development, this effort became increasingly
difficult. A strategy for obtaining a strategic partner was deemed to be in the
best interest of Anergen and its stockholders. Anergen, therefore, began its
diligence on potential companies with whom it could merge or form a strategic
alliance.
In late September 1998, Corixa's President and CEO, Steven Gillis, was
contacted by Anergen Board Member, Dr. Bruce Carter, and informed of conclusions
the Anergen Board of Directors had reached regarding future financing of Anergen
research and clinical development opportunities. Citing a general lack of
institutional investor interest in small-capitalization, biotechnology
companies, Dr. Carter informed Dr. Gillis that Anergen was interested in
discussing a potential business combination with a partner active in vaccine
development. Dr. Carter also informed Dr. Gillis that certain institutional
investors in Anergen might be willing to assist with potential financing of such
a business combination. Dr. Carter suggested that Dr. Gillis contact Dr. Barry
Sherman, Anergen's CEO, for further information.
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Dr. Gillis contacted Dr. Sherman shortly thereafter. Dr. Sherman confirmed
Anergen's interest in potential business combination discussions as well as the
potential willingness of certain institutional investors to consider financial
assistance in the context of such a transaction. Dr. Gillis then contacted a
representative of one of these institutional investors, which representative,
Ms. Nicole Vitullo of Rothschild Asset Management, is also an Anergen board
member. Ms. Vitullo confirmed Dr. Carter's and Dr. Sherman's representations of
Anergen's interest in considering a business combination as a means of securing
additional technology as well as financial resources to help support Anergen
product development.
On September 29, Corixa and Anergen entered into a confidentiality
agreement that allowed both companies to exchange information regarding products
and technologies under development, intellectual property associated with such
products and technologies as well as corporate financial condition and
projections.
On October 15, Anergen announced a significant downsizing, including the
termination of 65% of its total workforce and most of its research and
development staff, together with additional measures aimed at conserving capital
resources.
On October 22, Dr. Gillis, Mark McDade, Corixa's Chief Operating Officer;
Michelle Burris, Corixa's Chief Financial Officer; Dr. Steven Reed, Corixa's
Chief Scientific Officer and Dr. Kenneth Grabstein, Corixa's Vice-President and
Director of Immunology, visited Anergen's facilities in Redwood City,
California. Representing Anergen at this meeting were Dr. Sherman; Dr. Michael
Shulman, Anergen's Vice President of Clinical Research; Dr. Maureen Howard,
Anergen's Vice President of Research and Ms. Maria Marmarinos, President of
Catalyst Group, Anergen's business development advisor. Drs. Sherman, Shulman
and Howard and Ms. Marmarinos provided Corixa's attendees with an in-depth
discussion of Anergen's products, technologies and intellectual property. Dr.
Gillis provided Anergen's representatives with similar information regarding
Corixa's products, technologies and intellectual property.
On October 28 the Anergen Board of Directors held a telephonic board
meeting. The Anergen Board of Directors discussed the effort to date to secure a
strategic partner or enter into a business combination. The Anergen Board of
Directors then reviewed the due diligence regarding Corixa, and discussed
possible valuation and terms and conditions of a merger. The Anergen Board of
Directors then authorized Anergen's executive officers and Ms. Marmarinos to
continue such discussions with Corixa.
On November 2, Anergen and Corixa entered into a letter agreement which
provided Corixa with an exclusivity period (the "Exclusivity Agreement"), during
which Anergen was prohibited from soliciting discussions or negotiations with
third parties regarding acquisition of Anergen. Under the terms of the
Exclusivity Agreement, Corixa provided Anergen with $50,000 per week to maintain
the exclusivity period. Corixa also agreed to reimburse Anergen for expenses
associated with securing agreements from several key Anergen research and
development employees (the "Key Employee Agreement(s)"). In these agreements,
such key employees would agree to refrain from seeking jobs from any third party
for the two-month period following execution of the Key Employee Agreements.
On November 3, 1998 a meeting was held in Chicago between Corixa,
represented by Dr. Gillis and Mr. McDade, and Anergen represented by Dr.
Sherman, Ms. Marmarinos,
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and Barry Taylor, counsel to Anergen, to discuss the possible terms of a
potential business combination. At that time, Corixa made its first offer to
Anergen.
November 4, 1998 a conference call meeting was held between Anergen
executive management, Ms. Marmarinos, and the Anergen Board. The Anergen Board
discussed the proposed terms of the Merger at length, made recommendations, and
approved and authorized Ms. Marmarinos' ongoing negotiations.
On November 5, Dr. Gillis met in New York with Ms. Marmarinos, Ms. Vitullo
and Mr. James Thomas of Warburg. Dr. Gillis delivered a presentation on Corixa's
technology, products and commercial development strategy. The group discussed
the potential of additional investment in Corixa to assist with Anergen product
development, in the event that a business combination between Anergen and Corixa
was consummated.
For the next several days, the parties participated in numerous telephone
conferences and face-to-face discussions concerning Anergen's financial
condition and projections, intellectual property positions, research and
development plans, additional due diligence issues, as well as potential terms
associated with a proposed merger of Corixa and Anergen.
On November 11, the Exclusivity Agreement was amended to clarify that
Corixa would not be a party to the Key Employee Agreements, but rather that the
Key Employee Agreements were to be entered between the key employees and
Anergen. The amendment also clarified that upon signing a Key Employee
Agreement, each key employee of Anergen agreed to refrain from accepting a job
with any third party for the two-month period following execution of the Key
Employee Agreements.
Also on November 11, Corixa's Board of Directors discussed the proposed
merger with Anergen at its regularly scheduled Board of Directors meeting. The
Board provided Dr. Gillis with authorization to conclude negotiations with
Anergen and to enter into a definitive merger agreement pending the conclusion
of such negotiations as well as the successful resolution of any outstanding due
diligence issues.
For the next two weeks, the parties engaged in numerous telephonic meetings
covering due diligence issues and continued to negotiate terms associated with
the proposed merger.
In the same time period, a Note Purchase Agreement was negotiated between
Warburg, IBT and Anergen for the issue and sale of bridge notes with a principal
amount and aggregate gross proceeds equal to up to $1,500,000. In the event of
the consummation of this Merger, the principal amount of the Note(s) shall be
automatically converted into Corixa Common Stock at a per share conversion price
equal to the closing price of Corixa Common Stock as reported on Nasdaq on the
date of the Note(s).
On November 17, Anergen held another telephonic board meeting at which a
proposed letter of intent and term sheet were reviewed and discussed at length.
Recommendations were made to proceed with negotiations, and to retain PGE for
the purpose of rendering a fairness opinion.
On November 24, Corixa and Anergen entered into a non-binding letter of
intent in which they agreed to the principal business points of a proposed
merger transaction, subject to, among other things, satisfactory completion of
Corixa's due diligence investigation of Anergen and the negotiation of
definitive agreements covering certain terms set forth in the letter of intent.
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On December 3, PGE provided the Anergen Board of Directors with a financial
presentation followed by a written opinion that the terms associated with the
proposed business combination of Anergen and Corixa as reflected in the
aforementioned letter of intent were fair. Trevor Chaplick, of Wilson Sonsini,
Goodrich & Rosati, Professional Corporation, outside legal counsel to Anergen,
provided the Anergen Board of Directors a summary of the legal implications of
the proposed Merger Agreement. Upon discussion and deliberation, the Anergen
Board of Directors, pursuant to proposed resolutions, voted unanimously to
approve the Merger and the proposed Merger Agreement and all agreements
ancillary to the Merger Agreement.
On December 10, Corixa's Board of Directors met telephonically to review
the status of the proposed business combination of Anergen and Corixa. The
Corixa Board of Directors reviewed the Merger Agreement and provided their
unanimous approval to enter into the agreement.
At 5:00 p.m., Pacific Standard Time, on December 11, 1998, the parties
executed the Merger Agreement.
MANAGEMENT AND OPERATIONS FOLLOWING THE MERGER
Merger Sub will be merged with and into Anergen, and Anergen will survive
the Merger as a wholly-owned subsidiary of Corixa as a result of the Merger.
Following the Merger, Corixa plans to integrate the operations, facilities and
personnel of Corixa and Anergen. The current officers and directors of Merger
Sub will serve as the initial officers and directors of the surviving
corporation following consummation of the Merger.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the approvals of the Corixa Board of Directors and the
Anergen Board of Directors and the recommendation of the Anergen Board with
respect to the Merger Agreement and the transactions contemplated thereby,
Anergen stockholders should be aware that certain members of Anergen management
and the Anergen Board of Directors have certain interests in the Merger that are
in addition to the interests of Anergen stockholders generally.
Anergen and Corixa entered into a letter agreement dated November 11, 1998
(the "Exclusivity Agreement") pursuant to which Corixa agreed to pay Anergen
$50,000 per week beginning on November 3, 1998 and ending on November 23, 1998,
in consideration for the agreement by Anergen to deal exclusively with Corixa
during approximately that time period (the "Weekly Exclusivity Payments"). The
parties also agreed that if the Merger is consummated, the aggregate amount of
the Weekly Exclusivity Payments made to Anergen shall be deducted from the
aggregate consideration otherwise payable by Corixa under the terms of the
Merger Agreement. The total Weekly Exclusivity Payments received by Anergen is
$200,000. In further consideration of the Weekly Exclusivity Payments, Anergen
agreed to use commercially reasonable efforts to enter into Key Employee
Agreements (defined in the paragraph below) with certain current and former
employees of Anergen.
On November 10, 1998, Anergen entered into agreements with certain former
Anergen employees to refrain from accepting employment with any person other
than Anergen or Corixa for a two-month period and to negotiate in good faith
their employment arrangement with Corixa if the Merger Agreement was signed (the
"Key Employee
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Agreements"). The former Anergen employees also agreed, by letters dated
November 23, 1998, to enter into consulting agreements with Anergen. Under the
consulting agreements, Anergen agreed to pay each consultant a fixed fee and to
reimburse such consultant for all reasonable out-of-pocket expenses incurred in
connection with the performance of consulting services. Corixa agreed to
reimburse Anergen for all consulting fees and out-of-pocket expenses paid by
Anergen. The term of each consulting arrangement is 60 days.
Anergen entered into an employment agreement with Barry Sherman, M.D. on
May 27, 1996 (the "Sherman Agreement"). The Sherman Agreement provides for
salary, bonus, stock options and benefits. The Sherman Agreement also provides
that if Dr. Sherman's employment is terminated pursuant to a transaction
involving a Change of Control (as defined in the Sherman Agreement) or if Dr.
Sherman voluntarily terminates his employment with Anergen as a result of
Constructive Termination (as defined in the Agreement), he will receive salary
continuation and benefits for 12 months following termination of his employment.
In addition, on the date of such termination he will receive accelerated vesting
of his stock options for 24 months or such longer period for which accelerated
vesting may be granted without incurring Federal excise tax imposed pursuant to
Section 4996 of the Internal Revenue Code. A "Change of Control" is defined in
the Sherman Agreement as including, an acquisition of a majority of the
outstanding voting stock of Anergen, a merger of Anergen with an unaffiliated
third-party or a sale of all or substantially all of Anergen's assets. On
December 3, 1998, the Anergen Board of Directors approved a letter agreement
providing that a Constructive Termination shall be deemed to occur upon the
earlier of the closing of a transaction involving a Change of Control (as
defined in the Sherman Agreement) and March 31, 1999.
In November 1998, Anergen entered into retention agreements with David
Smith, Dr. Jeff Winkelhake and Dr. Maureen Howard, officers of Anergen, pursuant
to which they will receive a retention bonus if they remain exclusively employed
with Anergen for a certain period of time; provided that if the Merger occurs,
they will receive the retention bonus immediately prior to the closing of the
Merger. In addition, Anergen entered into a retention agreement with Michael
Shulman, M.D., another officer of Anergen, whereby Dr. Shulman will receive a
retention bonus if he remains exclusively employed with Anergen for the period
beginning on the date of the retention agreement and ending on the later to
occur of (i) May 30, 1999 and (ii) the closing of the Merger, but in no event
later than June 30, 1999.
Anergen also entered into retention agreements with certain key employees
of Anergen, a number of whom are involved in a clinical trial in collaboration
with N.V. Organon (the "Organon Trial") pursuant to a Product Development and
License Agreement dated June 28, 1996. The retention agreements provide that the
employees will receive a retention bonus upon the expiration of the Retention
Period. The "Retention Period" is defined as the period beginning on the
effective date of the retention agreement and ending on the earlier to occur of
(a) the conclusion of the Organon Trial or (b) June 1, 1999 (or another date
upon mutual agreement between Anergen and the employee).
On December 11, 1998, Corixa entered into a Common Stock Purchase Agreement
with Warburg and IBT. Warburg beneficially owns approximately 28.9% of the
outstanding Anergen Common Stock and IBT beneficially owns approximately 12.9%
of the outstanding Anergen Common Stock. Warburg and IBT together have a total
of three representatives on Anergen's Board of Directors. The Common Stock
Purchase Agreement provides that immediately upon effectiveness of the Merger,
Warburg and IBT will
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purchase an aggregate of $1.5 million ("Private Placement Consideration") of
Common Stock of Corixa (the "Private Placement Shares"). Corixa will be
obligated to register the Private Placement Shares for resale on a Form S-3
Registration Statement within 120 days of the effectiveness of the Merger.
On December 11, 1998, Anergen entered into a Note Purchase Agreement with
Warburg and IBT (the "Note Purchase Agreement"). Pursuant to the Note Purchase
Agreement, Anergen obtained a bridge loan (the "Initial Bridge Loan") from
Warburg and IBT in the aggregate principal amount of $500,000 ($333,333 from
Warburg and $166,667 from IBT). The promissory notes, issued on December 14,
1998, accrue interest at a rate of 10% per year and mature on December 31, 1999,
with certain exceptions. However, if the closing of the Merger occurs, the
outstanding principal will be converted automatically into shares of Corixa
Common Stock at a per share conversion rate equal to the last reported sale
price of Corixa Common Stock on the date the Initial Bridge Loan was funded, and
no interest will be deemed to have accrued on the promissory notes from the date
of issuance. If the closing of the Merger has not occurred by January 1, 1999,
Anergen is entitled under the Note Purchase Agreement to obtain an additional
one-time bridge loan from Warburg and IBT of up to $1 million (the "Subsequent
Bridge Loan") based on the same terms and conditions as the Initial Bridge Loan;
provided, however, that the amount of the Private Placement Consideration which
Warburg and IBT are obligated to deliver to Corixa in exchange for the Private
Placement Shares will be reduced by the amount of the Subsequent Bridge Loan.
The Initial Bridge Loan and Subsequent Bridge Loans will be secured by Anergen's
assets, including its intellectual property. In the event the Merger does not
close, Warburg and IBT will be entitled to receive warrants to purchase Anergen
Common Stock. The number of shares issuable upon exercise of such warrants is
equal to the product of (i) 50% and (ii) the quotient of the aggregate principal
amount of the Initial Bridge Loan and Subsequent Bridge Loan divided by $.2969.
In addition, Warburg and IBT will require certain registration rights with
respect to shares of Anergen Common Stock issuable upon exercise of such
warrants.
At the Effective Time, all warrants to purchase Anergen Common Stock then
outstanding will be converted into warrants to purchase the number of shares of
Corixa Common Stock equal to the number of shares of Anergen Common Stock that
were issuable upon exercise of such Anergen warrants immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Corixa Common Stock. The per share exercise price for
the shares of Corixa Common Stock will be equal to the former exercise price per
share of such Anergen warrant immediately prior to the Effective Time divided by
the Exchange Ratio, rounded up to the nearest whole cent. Except as provided
above, the converted or substituted Anergen warrants will be subject to the same
terms and conditions as were applicable to such warrants immediately prior to
the Effective Time.
Each of the options to acquire Anergen Common Stock (each, an "Anergen
Stock Option") outstanding as of the Effective Time will be converted into an
option to purchase the number of shares of Corixa Common Stock (rounded down to
the nearest whole share) equal to the number of shares of Anergen Common Stock
subject to such option multiplied by the Exchange Ratio, at an exercise price
per share of Corixa Common Stock (rounded up to the nearest whole cent) equal to
the former exercise price per share of the Anergen Stock Option immediately
prior to the Effective Time divided by such Exchange Ratio. Except as provided
above, the converted or substituted Anergen Stock Options will
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be subject to the same terms and conditions as were applicable to Anergen Stock
Options immediately prior to the Effective Time. See "Terms of the Merger
-- Stock Options."
Venture Law Group, A Professional Corporation ("VLG"), is Corixa's counsel
in connection with the Merger. VLG is not representing Anergen or any
stockholders of Anergen in connection with the Merger. William W. Ericson, a
director of VLG, has acted as Secretary of Corixa in the past.
Pursuant to the Merger Agreement, Corixa agreed that for six years after
the consummation of the Merger, it will cause the surviving corporation to
fulfill in all respects the obligations of Anergen under its currently effective
indemnification agreements with its directors and officers. In addition, Corixa
agreed that for five years after the consummation of the Merger, it will
maintain policies of directors' and officers' liability insurance comparable to
those currently maintained by Anergen. However, Corixa will not be required to
spend more than 125% of the annual premium paid by Anergen for such coverage.
Corixa and Anergen have each entered into separate indemnification
agreements with each of their directors and officers. These agreements require
Corixa and Anergen, among other things, to indemnify each such director or
officer against certain expenses (including attorneys' fees), judgments, fines
and settlement amounts (collectively, "Liabilities") paid by such individual in
connection with any action, suit or proceeding arising out of such individual's
status or service as a director or officer of Corixa or Anergen (subject to
certain exceptions, including Liabilities arising from willful misconduct or
conduct that is knowingly fraudulent or deliberately dishonest or a violation of
Section 16(b) of the Exchange Act) and to advance expenses incurred by such
individual in connection with any proceeding against such individual with
respect to which such individual may be entitled to indemnification by Corixa or
Anergen. In addition, Corixa and Anergen have obtained an insurance policy
providing coverage for certain liabilities of its officers and directors. See
"Management of Corixa -- Limitation of Liability and Indemnification Matters."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain of the federal income tax
considerations of the Merger that are generally applicable to holders of Anergen
Common Stock upon an exchange of such shares in the Merger. This discussion is
based on currently existing provisions of the Internal Revenue Code of 1986 (the
"Code"), existing and proposed Treasury Regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any such change, which may or may not be retroactive, could alter the tax
consequences to Corixa, Anergen, or the Anergen stockholders as described
herein. Neither Anergen, Anergen's counsel, Corixa nor Corixa's counsel
undertakes to advise Anergen stockholders of any such changes in the application
or interpretation of such federal income tax law.
The following discussion does not deal with all federal income tax
considerations that may be relevant to Anergen stockholders in light of their
particular circumstances, such as Anergen stockholders who are dealers in
securities, banks, insurance companies or tax-exempt organizations, subject to
the alternative minimum tax provisions of the Code, foreign persons, persons who
do not hold their shares of Anergen Common Stock as capital assets, stockholders
who acquired their shares of Anergen Common Stock in connection with stock
option or stock purchase plans or in other compensatory transactions
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or who hold their shares as a hedge or as part of hedging, straddle, conversion
or other risk reduction transactions. In addition, the following discussion does
not address (i) the tax consequences of transactions effectuated prior or
subsequent to or concurrently with the Merger (whether or not such transactions
are in connection with the Merger), including without limitation, transactions
in which shares of Anergen Common Stock are acquired or shares of Corixa Common
Stock are disposed of, or (ii) the tax consequences to holders of options,
warrants, or convertible securities issued by Anergen which are assumed,
exercised or converted, as the case may be, in connection with the Merger.
Furthermore, no foreign, state or local tax considerations are addressed herein.
Accordingly, ANERGEN STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICABLE
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE MERGER.
The Merger is intended to constitute a "reorganization" within the meaning
of Section 368(a) of the Code, in which case, subject to the limitations and
qualifications referred to herein, the following U.S. federal tax consequences
will generally result:
(a) No gain or loss should be recognized by holders of shares of
Anergen Common Stock solely upon their receipt in the Merger of shares of
Corixa Common Stock (except to the extent of cash received in lieu of a
fractional share of Corixa Common Stock) in exchange therefor;
(b) The aggregate tax basis of the shares of Corixa Common Stock
received in the Merger (including any fractional share not actually
received) should be the same as the aggregate tax basis of shares of
Anergen Common Stock surrendered in exchange therefor, decreased by the
amount of cash and fair market value of any other payment received and
increased by the amount of gain (and any amount treated as a dividend)
recognized in the Merger;
(c) The tax holding period of the shares of Corixa Common Stock
received in the Merger should include the period for which the shares of
Anergen Common Stock surrendered in exchange therefor were held, provided
that the shares of Anergen Common Stock are held as a capital asset at the
time of the Merger;
(d) An Anergen stockholder who receives cash or other property in the
Merger in addition to shares of Corixa Common Stock will recognize gain in
an amount not in excess of the amount of such cash (and the fair market
value of any such other property); and
(e) Cash payments in lieu of a fractional share should be treated as
if a fractional share of Corixa Common Stock had been issued in the Merger
and then redeemed by Corixa. An Anergen stockholder receiving such cash
should generally recognize gain or loss upon such payment equal to the
difference (if any) between such stockholder's basis in the fractional
share and the amount of cash received. The gain or loss should be capital
gain or loss, provided that each such fractional share of Anergen Common
Stock was held as a capital asset at the Effective Time.
The parties are not requesting a ruling from the Internal Revenue Service
("IRS") in connection with the Merger. It is a condition, among others, to the
closing of the Merger that Corixa and Anergen have each received an opinion from
their respective legal counsel, Venture Law Group, A Professional Corporation,
and Wilson Sonsini Goodrich & Rosati Professional Corporation, respectively, to
the effect that, for federal income tax purposes,
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the Merger will qualify as a "reorganization" within the meaning of Section
368(a) of the Code and such opinion shall not have been withdrawn. These
opinions, which are collectively referred to herein as the "Tax Opinions,"
neither bind the IRS nor preclude the IRS from adopting a contrary position. In
addition, the Tax Opinions are subject to certain assumptions and qualifications
and are based on the truth and accuracy of certain representations made by
Corixa, Merger Sub and Anergen, including representations in certificates
delivered to counsel by the respective managements of Corixa, Merger Sub and
Anergen.
Even if the Merger qualifies as a "reorganization," a recipient of shares
of Corixa Common Stock will recognize gain to the extent that such shares are
received or considered to be received in exchange for services or property
(other than solely shares of Anergen Common Stock). All or a portion of such
gain may be taxable as ordinary income. As mentioned above, gain would also be
recognized to the extent an Anergen stockholder receives or is treated as
receiving cash or other consideration (other than shares of Corixa Common Stock)
in exchange for his, her or its Anergen Common Stock or to the extent the
Anergen Common Stock surrendered in the Merger was not equal in value to the
shares of Corixa Common Stock received in exchange therefor. This discussion
assumes such equal value.
A successful IRS challenge to the status of the Merger as a reorganization
would result in an Anergen stockholder recognizing gain or loss with respect to
each share of Anergen Common Stock surrendered equal to the difference between
the stockholder's basis in such share and the fair market value, as of the time
of the Merger, of the shares of Corixa Common Stock received in exchange
therefor (including any cash received in lieu of a fractional share). In such
event, an Anergen stockholder's aggregate basis in the shares of Corixa Common
Stock received in the exchange would equal such fair market value and his, her
or its holding period for such shares would begin the day after the closing date
of the Merger.
Certain noncorporate Anergen shareholders may be subject to backup
withholding at a rate of 31% on cash payments received in lieu of a fractional
share interest in Corixa Common Stock. Backup withholding will not apply,
however, to a shareholder who furnishes a correct taxpayer identification number
("TIN") and certifies that he is not subject to backup withholding on the
substitute Form W-9 included in the Transmittal Letter, who provides a
certificate of foreign status on Form W-8, or who is otherwise exempt from
backup withholding. A shareholder who fails to provide the correct TIN on Form
W-9 may be subject to a $50 penalty imposed by the IRS.
Each holder of Anergen Common Stock that receives Corixa Common Stock in
the Merger will be required to retain records and file with such holder's U.S.
Federal income tax return a statement setting forth certain facts relating to
the Merger.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY. IT
DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. IN
ADDITION, IT DOES NOT DISCUSS THE FEDERAL INCOME TAX CONSIDERATIONS THAT MAY BE
RELEVANT TO CERTAIN PERSONS, INCLUDING HOLDERS OF OPTIONS OR WARRANTS, AND MAY
NOT APPLY TO CERTAIN HOLDERS SUBJECT TO SPECIAL TAX RULES, INCLUDING HOLDERS WHO
ACQUIRED ANERGEN COMMON STOCK PURSUANT TO THE EXERCISE OF EMPLOYEE STOCK
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OPTIONS OR RIGHTS OR OTHERWISE RECEIVED SUCH STOCK AS COMPENSATION, DEALERS IN
SECURITIES AND FOREIGN HOLDERS.
EACH ANERGEN STOCKHOLDER SHOULD CONSULT HIS, HER OR ITS OWN TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO HIM, HER OR IT,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
Corixa intends to account for the Merger under the purchase method of
accounting in accordance with generally accepted accounting principles. Under
this method of accounting, the purchase price will be allocated to assets
acquired and liabilities assumed based on their estimated fair values at the
Effective Time. Corixa's results of operations will not include the results of
Anergen prior to the Effective Time.
NO DISSENTERS' RIGHTS
Pursuant to Section 262 of the DGCL, holders of Anergen Common Stock are
not entitled to appraisal rights in connection with the Merger because the
Corixa Common Stock and the Anergen Common Stock are both traded on Nasdaq and
holders of Anergen Common Stock will receive in the Merger only shares of Corixa
Common Stock and cash in lieu of fractional shares thereof.
NO ORDERS, INJUNCTIONS, ETC.
The obligations of Corixa and Anergen to consummate the Merger are subject
to the condition that there be no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition that prevents
consummation of the Merger. See "Terms of the Merger -- Conditions." Either
Corixa or Anergen may terminate the Merger Agreement if, without fault of the
terminating party, there shall be any applicable federal or state law that makes
consummation of the Merger illegal or otherwise prohibited or if any court of
competent jurisdiction or other governmental body shall have issued an order,
decree or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or any other action shall
have become final and nonappealable. See "Terms of the Merger -- Termination."
RESALE RESTRICTIONS
All shares of Corixa Common Stock received by Anergen stockholders in the
Merger will, once registered pursuant to the Registration Statement, be
unrestricted and freely transferable, except that shares of Corixa Common Stock
received by persons who are deemed to be "affiliates" (as such term is defined
under the Securities Act) of Anergen may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (or Rule 144 in the case of such persons who become affiliates of Corixa) or
as otherwise permitted under the Securities Act. Persons who may be deemed to be
affiliates of Anergen or Corixa generally include individuals or entities that
control, are controlled by, or are under common control with, such party and may
include certain officers and directors of such party as well as principal
stockholders of such party.
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TERMS OF THE MERGER
The following is a brief summary of certain provisions of the Merger
Agreement, a copy which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement
and other agreements annexed hereto.
THE MERGER
Pursuant to the Merger Agreement, and subject to the terms and conditions
thereof, at the Effective Time:
- Merger Sub will merge with and into Anergen;
- Merger Sub will cease to exist as a corporation;
- Anergen will remain as the surviving corporation;
- Merger Sub's certificate of incorporation and Merger Sub's bylaws will
become the surviving corporation's certificate of incorporation and bylaws. See
"Comparison of Rights of Holders of Corixa Capital Stock and Holders of Anergen
Capital Stock"; and
- The current officers and directors of Merger Sub will be the initial
officers and directors of the surviving corporation after consummation of the
Merger. See "Management of Anergen."
EFFECTIVE TIME OF THE MERGER
The closing of the transactions contemplated by the Merger Agreement (the
"Closing") will take place no later than the second business day after the date
on which all of the conditions to the Merger are satisfied or waived, or at such
other date as Corixa and Anergen agree (the "Closing Date"). See
"-- Conditions."
As soon as practicable after the Closing Date, a Certificate of Merger (the
"Certificate of Merger") will be filed with the Secretary of State of Delaware
in accordance with the relevant provisions of Delaware law. The time at which
the Certificate of Merger is filed in Delaware is referred to as the Effective
Time.
CONVERSION OF SECURITIES
As a result of the Merger, shares of Anergen Common Stock issued and
outstanding immediately prior to the Effective Time, except for shares held by
Anergen or owned by Merger Sub, Corixa, or any direct or indirect wholly-owned
subsidiary of Anergen or Corixa (the "Non-Exchanged Shares"), will by virtue of
the Merger and at the Effective Time, and without further action on the part of
any holder thereof, convert into the right to receive the number of fully paid
and nonassessable shares of Corixa Common Stock equal to the Exchange Ratio (as
defined below) multiplied by the number of shares of Anergen Common Stock held
by such stockholder as of the Effective Time.
The total number of shares of Corixa Common Stock issuable to the holders
of shares of Anergen Common Stock (the "Total Corixa Common Shares") will be
determined by dividing $8,500,000 (less $200,000 representing all payments made
to Anergen by Corixa pursuant to the Exclusivity Agreement) by $7.3041667, which
represents the average of
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the Nasdaq last reported closing prices of Corixa Common Stock on the 15 trading
days prior to and including the date of the first public announcement of the
Merger (the "Corixa Average"). The Total Corixa Common Shares will equal
approximately 1,136,338 shares.
The "Exchange Ratio" will be determined by dividing (A) the Total Corixa
Common Shares by (B) the "Total Anergen Common Shares," which shall equal all
outstanding shares of Anergen capital stock immediately prior to the Effective
Date (other than any applicable Non-Exchanged Shares) on a fully-diluted basis
assuming (1) conversion of all outstanding Anergen convertible securities and
(2) exercise of all outstanding options and warrants to purchase Anergen Common
Stock with an exercise price equal to or less than $2.50 per share, in each case
as of the date of the Merger Agreement.
Corixa will issue an aggregate of approximately 1,136,338 shares of Corixa
Common Stock to holders of Anergen Common Stock other than Anergen and Corixa,
subject to the provisions in the Merger Agreement governing the Escrow Shares
and the treatment of fractional shares. In addition, Corixa will be obligated to
issue an additional aggregate of approximately 68,926 shares of Corixa Common
Stock upon exercise, if and when exercised, of the Anergen warrants and options
that Corixa assumed in the Merger with exercise prices greater than $2.50 per
share.
Each holder of a certificate representing any such shares of Anergen Common
Stock (a "Certificate") will, upon consummation of the Merger, cease to have any
rights with respect to such Anergen Common Stock, except the right to receive,
without interest, shares of Corixa Common Stock and cash for fractional shares
upon the surrender of such Certificate (as described in "Exchange of Shares").
If prior to the Effective Time, Corixa should split or combine the shares of
Corixa Common Stock, or pay a stock dividend or other stock distribution in, or
in exchange of shares of Corixa Common Stock, or engage in any similar
transaction, then the Exchange Ratio will be appropriately adjusted to reflect
such split, combination, dividend, exchange or other distribution or similar
transaction.
Each Non-Exchanged Share will be canceled and extinguished without any
conversion thereof, and no cash, Corixa Common Stock or other consideration will
be delivered in exchange therefor.
ESCROW SHARES; ESCROW FUND
Under the terms of the Merger Agreement, as soon as practicable after the
Effective Date, Corixa will deposit into escrow certificates representing
approximately 54,763 shares of the Corixa Common Stock issued to holders of
Anergen Common Stock in the Merger. Such shares (the "Escrow Shares") will be
held as collateral to secure Anergen's obligation to enter into an amendment to
that certain Product Development and License Agreement, dated as of June 28,
1996, by and between Anergen and N.V. Organon ("Organon") (the "Organon
Agreement"). The Escrow Shares will be held by an escrow agent pursuant to an
escrow fund agreement annexed hereto as Exhibit B to the Merger Agreement
attached hereto as Appendix A and will be released (i) to the holders of record
of Anergen Common Stock immediately prior to the Effective Date if and only if
Anergen executes and delivers to Corixa an amendment, signed by Organon and in a
form reasonably acceptable to Corixa and Anergen and the respective counsel to
Corixa and Anergen (the "Organon Amendment"), to the Organon Agreement on or
prior to the later of (A) January 31, 1999 or (B) the Closing Date, but in any
event prior to March 15, 1999 (the "Organon Termination Date"), or (ii) to
Corixa (as treasury shares) if Anergen
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has not executed and delivered to Corixa the Organon Amendment prior to the
Organon Termination Date. If the Organon Amendment is not executed and delivered
to Corixa by the Organon Termination Date, the Escrow Shares held in Escrow
would not be issued to the shareholders of Anergen and would be returned to
Corixa, and in such event, the effective Exchange Ratio would be reduced to a
right to receive .055919 of a share of Corixa Common Stock for each share of
Anergen Common Stock. Stockholders will have voting rights with respect to the
Escrow Shares while in escrow, and will receive dividends, if any, attributable
to the Escrow Shares currently, although in the event that Escrow Shares are to
be delivered from the Escrow Fund to Corixa, any dividends received on such
delivered shares shall be returned to the Escrow Fund for distribution to
Corixa.
Barry M. Sherman, M.D., President and Chief Executive Officer, a director
and stockholder of Anergen (or his successor), is designated under the Escrow
Fund Agreement (i) to act as representative agent on behalf of Anergen's
stockholders (the "Stockholder Representative") to deliver Escrow Shares held in
escrow pursuant to the terms of the Escrow Fund Agreement to the Anergen
stockholders if the Organon Amendment is executed and delivered prior to the
Organon Termination Date, (ii) to agree to, to negotiate and to enter into
settlements and compromises with respect to disputes under the Escrow Fund
Agreement, and (iii) to take certain other action on behalf of Anergen's
stockholders. The out-of-pocket costs of the Stockholder Representative will be
reimbursed by Anergen in an aggregate amount not to exceed $5,000, and any
excess amounts would be borne by the Anergen Stockholders. The Stockholder
Representative shall act by vote or written consent of holders of a majority of
the shares of Corixa Common Stock received as Merger Consideration in connection
with the Merger.
WARRANTS
At the Effective Time, all warrants to purchase Anergen Common Stock then
outstanding will be converted into warrants to purchase the number of shares of
Corixa Common Stock equal to the number of shares of Anergen Common Stock that
were issuable upon exercise of such Anergen warrants immediately prior to the
Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Corixa Common Stock. The per share exercise price for
the shares of Corixa Common Stock shall be equal to the former exercise price
per share of such Anergen warrant immediately prior to the Effective Time
divided by the Exchange Ratio, rounded up to the nearest whole cent.
Except as provided above, the converted or substituted Anergen warrants
will be subject to the same terms and conditions as were applicable to such
warrants immediately prior to the Effective Time.
STOCK OPTIONS
At the Effective Time, all options to purchase Anergen Common Stock
("Anergen Stock Options") then outstanding will be converted into options to
purchase the number of shares of Corixa Common Stock equal to the number of
shares of Anergen Common Stock that were issuable upon exercise of such Anergen
Stock Options immediately prior to the Effective Time multiplied by the Exchange
Ratio, rounded down to the nearest whole number of shares of Corixa Common
Stock. The per share exercise price for the shares of Corixa Common Stock shall
be equal to the former exercise price per share of such Anergen Stock Option
immediately prior to the Effective Time divided by the
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Exchange Ratio, rounded up to the nearest whole cent; provided that in the case
of any Anergen Stock Option to which Section 421 of the Code applies by reason
of its qualification under Section 422 of the Code, the conversion formula shall
be adjusted, if necessary, to comply with Section 424(a) of the Code.
Except as provided above, the converted or substituted Anergen Stock
Options will be subject to the same terms and conditions as were applicable to
Anergen Stock Options immediately prior to the Effective Time.
As soon as practicable after the Effective Time, Corixa will file, if
necessary, one or more registration statements on Form S-8 under the Securities
Act, or amendments to its existing registration statements on Form S-8 or
amendments to such other registration statements as may be available, in order
to register the shares of Corixa Common Stock issuable upon exercise of the
assumed Anergen Stock Options.
EXCHANGE OF SHARES
As soon as reasonably practicable after the Effective Time, the Exchange
Agent will mail to each holder of record of Anergen Common Stock (i) a letter of
transmittal and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for cash and certificates representing shares of Corixa
Common Stock. Upon surrender of a Certificate to the Exchange Agent together
with such letter of transmittal, duly executed, the holder of such Certificate
will be entitled to receive in exchange therefor (1) a certificate representing
the number of whole shares of Corixa Common Stock, and (2) a check representing
the amount of cash in lieu of fractional shares, if any, and any dividends or
distributions with a record date after the Effective Time, of which such holder
has the right to receive with respect to the Certificate so surrendered pursuant
to the Merger Agreement. ANERGEN STOCKHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL FROM THE EXCHANGE AGENT.
No fractional shares of Corixa Common Stock will be issued pursuant to the
Merger. In lieu thereof, cash adjustments will be paid in an amount (rounded to
the nearest whole cent) equal to the product of the fraction of a share of
Corixa Common Stock that would otherwise be issuable multiplied by the Corixa
Average.
No dividends on shares of Corixa Common Stock will be paid to persons
entitled to receive certificates representing shares of Corixa Common Stock
until such persons surrender their Certificates. Upon such surrender, the person
in whose name the certificates representing such shares of Corixa Common Stock
will be issued will also receive any dividends that have become payable with
respect to such shares of Corixa Common Stock between the Effective Time and the
time of such surrender. In no event will the person entitled to receive such
dividends be entitled to receive interest on such dividends.
If any certificates for shares of Corixa Common Stock are to be issued in a
name other than that in which the Certificate surrendered in exchange therefor
is registered, the person requesting such exchange must (i) pay to the Exchange
Agent any transfer or other taxes required by reason thereof, or (ii) establish
that such tax has been paid or is not applicable.
At the Effective Time, the stock transfer books of Anergen will be closed
and no further transfers of shares of Anergen Common Stock will be made.
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Neither the Exchange Agent nor any party to the Merger Agreement is liable
to a holder of shares of Anergen Common Stock for any shares of Corixa Common
Stock or dividends thereon or the cash payment for fractional interests
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.
In the event that any Certificate has been lost, stolen or destroyed, upon
(i) the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed, and (ii) if required by Corixa, in
its discretion, the posting by such person of a bond in such sum as Corixa may
direct as indemnity, or such other form of indemnity as Corixa may reasonably
direct, against any claim that may be made against Corixa with respect to such
Certificate, the Exchange Agent will issue in exchange for such Certificate the
applicable number of whole shares of Corixa Common Stock and cash in lieu of
fractional shares into which the shares of Anergen Common Stock represented by
the Certificate are converted in the Merger and any dividends or distributions
with a record date after the Effective Time, of which such holder has the right
to receive with respect to such Certificate.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains certain representations and warranties by
Anergen relating to, among other things:
- Due organization, power and standing of Anergen and Anergen's certificate
of incorporation and bylaws;
- Anergen's capital structure;
- Authorization, execution, delivery and enforceability of the Merger
Agreement;
- Required consents and approvals and the absence of breaches or violations
of Anergen's certificate of incorporation and bylaws, agreements and
instruments, and law;
- Anergen's filings with the Commission and financial statements;
- Absence of certain undisclosed liabilities and certain changes or events;
- Litigation;
- Title to real and personal property;
- Intellectual property rights;
- Taxes;
- Certain contracts and agreements;
- Employee matters;
- Material contracts;
- Interested party transactions;
- Compliance with applicable laws and permits;
- Brokers' and finders' fees;
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- Accuracy of information in this Proxy Statement/Prospectus;
- Employee benefit plans;
- Environmental matters;
- Change of control payments;
- Affiliate and stockholders agreements;
- Vote required;
- Fairness opinion;
- Customs;
- Inapplicability of Section 203 of the Delaware General Corporations Law;
and
- Anergen Board of Directors' approval.
The Merger Agreement also contains certain representations and warranties
by Corixa and Merger Sub relating to, among other things:
- Due organization, power and standing of Corixa and Merger Sub;
- Capital structure of Corixa and Merger Sub;
- Authorization, execution, delivery and enforceability of the Merger
Agreement;
- Required consents and approvals and the absence of breaches or violations
of Corixa's and Merger Sub's respective certificates of incorporation and
bylaws, agreements and instruments, and law;
- Filing of required reports with the Commission;
- Corixa's financial statements;
- Accuracy of information in this Proxy Statement/Prospectus;
- Absence of certain changes; and
- Valid issuance of Corixa Common Stock.
CONDUCT OF ANERGEN'S BUSINESS PRIOR TO THE MERGER
Under the Merger Agreement, Anergen has agreed, during the period from the
date of the Merger Agreement and continuing until the earlier of the termination
of the Merger Agreement pursuant to its terms or the Effective Time, except as
contemplated by the Merger Agreement or to the extent that Corixa shall
otherwise consent in writing, which consent shall not be unreasonably withheld,
to carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted. Among other things,
Anergen has agreed to conduct its business in substantially the same manner as
previously conducted and in compliance with all applicable laws and regulations
and:
- To pay its debts and taxes when due;
- To pay or perform other obligations when due, subject to good faith
disputes over such debts or taxes;
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- To pay or perform other obligations when due;
- To use its commercially reasonable best efforts consistent with past
practices and policies to (1) preserve intact its present business
organization, (2) keep available the services of its present officers and
employees, and (3) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings; and
- To promptly notify Corixa of any material event involving its business or
operations.
In addition, except as permitted under the terms of the Merger Agreement,
during the period from the date of the Merger Agreement and continuing until the
earlier of the termination of the Merger Agreement pursuant to its terms or the
Effective Time, Anergen has agreed to not do any of the following:
- Waive any stock repurchase rights, accelerate, amend or change the period
of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans;
- Grant any severance or termination pay to any officer or employee except
pursuant to written agreements outstanding, or policies existing, on the
date hereof and as previously disclosed in writing or made available to
Corixa, or adopt any new severance plan;
- Transfer or license to any person or entity or otherwise extend, amend or
modify in any material respect any rights to Anergen's intellectual
property, or enter into grants to future patent rights;
- Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for any capital stock;
- Purchase, redeem or otherwise acquire, directly or indirectly, any shares
of capital stock of Anergen or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
- Issue, deliver, sell, authorize, pledge or otherwise encumber or propose
any of the foregoing in connection with, any shares of capital stock or
any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock,
or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than the
issuance, delivery and/or sale of (A) shares of Anergen Common Stock
pursuant to the exercise of stock options therefor outstanding as of the
date of the Merger Agreement, and (B) shares of Anergen Common Stock
issuable to participants in the Anergen Employee Stock Purchase Plan
consistent with the terms thereof;
- Cause, permit or propose any amendments to its certificate of
incorporation, bylaws or similar charter documents of any of its
subsidiaries;
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- Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets that are material,
individually or in the aggregate, to the business of Anergen or enter
into any material joint ventures, strategic partnerships or alliances;
- Sell, lease, license, encumber or otherwise dispose of any properties or
assets that are material, individually or in the aggregate, to the
business of Anergen, except sales of inventory in the ordinary course of
business consistent with past practice;
- Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities
of Anergen, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than (A) in connection with
the financing of ordinary course trade payables consistent with past
practice or (B) pursuant to existing credit facilities in the ordinary
course of business;
- Except as otherwise disclosed in the Anergen Schedules, adopt or amend
any employee benefit plan or employee stock purchase or employee stock
option plan, or enter into any employment contract or collective
bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past
practice with employees who are terminable "at will,"), pay any special
bonus or special remuneration to any director, officer or employee, or
increase the salaries or wage rates or fringe benefits (including rights
to severance or indemnification) of its directors, officers, employees or
consultants other than in the ordinary course of business, consistent
with past practice, or change in any material respect any management
policies or procedures;
- Make any payments outside of the ordinary course of business;
- Modify, amend or terminate any material contract or agreement to which
Anergen or any subsidiary thereof is a party or waive, release or assign
any material rights or claims thereunder;
- Enter into any contracts, agreements, or obligations relating to the
distribution, sale, license or marketing by third parties of Anergen's
products or products licensed by Anergen other than in the ordinary
course of business consistent with past practice;
- Revalue any of its assets or, except as required by GAAP, make any change
in accounting methods, principles or practices;
- Engage in any action with the intent to directly or indirectly adversely
impact any of the transactions contemplated in the Merger Agreement;
- Expend more than $15,000 for any individual purchase or lease of any
capital assets or related services, or $30,000 in the aggregate for all
such purchases or leases; or
- Agree in writing or otherwise to take any of the actions described above.
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CERTAIN COVENANTS
Corixa and Anergen agreed that prior to the Effective Time they will, among
other things:
- Use all commercially reasonable efforts to consummate the Merger;
- Provide each other reasonable access to certain information;
- Consult with each other before issuing any press release or making any
public disclosure regarding the Merger;
- Use their best efforts after the execution date of the Merger Agreement
to prepare and file this Proxy Statement/Prospectus; and
- Use their commercially reasonable efforts to have the Registration
Statement declared effective under the Securities Act as promptly as
practicable after such filing.
Anergen agreed that, prior to the Effective Time, it will, among other
things:
- Conduct its business only in the ordinary course of business;
- Use its commercially reasonable efforts to deliver to Corixa, as promptly
as practicable, from each affiliate of Anergen (within the meaning of
Rule 145 promulgated under the Securities Act) an executed affiliate
agreement, and an executed voting agreement, each of which will be in
full force and effect as of the Effective Time;
- Take all action necessary after the execution date of the Merger
Agreement to convene the Anergen Stockholders' Meeting as promptly as
practicable; and
- Use its commercially reasonable efforts to solicit from its stockholders
proxies in favor of approval of the Merger Agreement.
Corixa and Anergen also agreed that each will use all reasonable efforts:
- To take all actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the
Merger and the consummation of the transactions contemplated by the
Merger Agreement, subject to the appropriate vote or consent of
stockholders, and
- To obtain (and to cooperate with the other party to obtain) any consent,
authorization, order or approval of, or any exemption by, any
governmental entity or any other public or private third party which is
required to be obtained or made by such party or any of its subsidiaries
in connection with the Merger and the transactions contemplated by the
Merger Agreement.
Corixa and Anergen agreed that Corixa will use reasonable efforts to take
any action required by state securities or blue sky laws in connection with the
issuance of the shares of Corixa Common Stock pursuant to the Merger Agreement,
and that Anergen will furnish Corixa with all information concerning Anergen and
the holders of its capital stock and take such other action as Corixa may
reasonably request in connection with the Registration Statement and such
issuance of shares of Corixa Common Stock.
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Anergen has identified all persons who are "affiliates" of Anergen for
purposes of Rule 145 under the Securities Act. Anergen will use its best efforts
to cause each person identified as an affiliate of Anergen to deliver to Corixa
a written "affiliates" agreement, in customary form, restricting the disposition
by such person of the shares of Corixa Common Stock held by such person or to be
received by such person in the Merger. Certificates surrendered for exchange by
any person constituting an "affiliate" of Anergen within the meaning of Rule 145
under the Securities Act will not be exchanged by the Exchange Agent for shares
of Corixa Common Stock until the parties have received such agreement described
in the preceding sentence.
Corixa has agreed to notify Nasdaq of the listing of the shares of Corixa
Common Stock to be issued pursuant to the Merger and to cause such additional
shares to be approved for listing, and as soon as practicable following the
Effective Time to file, if necessary, one or more registration statements on
Form S-8 under the Securities Act, or amendments to its existing registration
statements on Form S-8 or amendments to such other registration statements as
may be available, in order to register the shares of Corixa Common Stock
issuable upon exercise of the assumed Anergen Stock Options.
NO SOLICITATION
Under the terms of the Merger Agreement, Anergen and its officers,
directors, employees and other agents of Anergen agreed not to, directly or
indirectly:
- Solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined below);
- Participate in any discussions or negotiations regarding, or furnish to
any person any non-public information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Acquisition
Proposal;
- Subject to certain exceptions as provided in the Merger Agreement, engage
in discussions with any person with respect to any Acquisition Proposal,
except as to the existence of these provisions;
- Subject to certain exceptions as provided in the Merger Agreement,
approve, endorse or recommend any Acquisition Proposal or
- Subject to certain exceptions as provided in the Merger Agreement, enter
into any letter of intent or similar document or any contract agreement
or commitment contemplating or otherwise relating to any Acquisition
Transaction (as defined below). Prior to the approval of the Merger
Agreement by the required Anergen Stockholder Vote, the Merger Agreement
shall not prohibit Anergen from furnishing nonpublic information
regarding Anergen and its subsidiaries to, entering into a
confidentiality agreement with or entering into discussions with, any
person or group in response to a Superior Offer (as defined below)
submitted by such person or group (and not withdrawn) if (1) neither
Anergen nor any representative of Anergen and its subsidiaries shall have
violated any of the restrictions set forth in provisions of the Merger
Agreement with respect to the solicitation of an Acquisition Proposal as
defined below, (2) Anergen's board of directors concludes in good faith,
after consultation with its outside legal counsel, that such action is
required in order for Anergen's board of directors to comply with its
fiduciary obligations to Anergen's stockholders under applicable law, (3)
prior to furnishing
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any such nonpublic information to, and as promptly as reasonably
practicable after having any discussions with, such person or group,
Anergen gives Corixa written notice of the identity of such person or
group and of Anergen's intention to furnish nonpublic information to, or
enter into discussions with, such person or group and Anergen receives
from such person or group an executed confidentiality agreement
containing customary limitations on the use and disclosure of all
nonpublic written and oral information furnished to such person or group
by or on behalf of Anergen, and (4) contemporaneously with furnishing any
such nonpublic information to such person or group, Anergen furnishes
such nonpublic information to Corixa (to the extent such nonpublic
information has not been previously furnished by Anergen to Corixa). If,
in compliance with (1)-(4) above, Anergen determines to accept a Superior
Offer, all Anergen Affiliate Agreements and all Anergen Voting Agreements
shall terminate, and Anergen shall be entitled to enter into an agreement
with such third party concerning such Superior Proposal, provided that
Anergen has made payment in full to Corixa of the appropriate termination
fee. See "Expenses; Cancellation Fees."
"Acquisition Proposal" means any offer or proposal (other than an offer or
proposal by Corixa) relating to any Acquisition Transaction. "Acquisition
Transaction" means any transaction or series of related transactions other than
the transactions contemplated in the Merger Agreement involving: (A) any
acquisition or purchase from Anergen by any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
more than a 15% interest in the total outstanding voting securities of Anergen
or any of its subsidiaries or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning 15% or more of the total outstanding voting securities of Anergen or any
of its subsidiaries or any hold less than 85% of the equity interests in the
surviving or resulting entity of such transaction, (B) any sale, lease (other
than in the ordinary course of business), exchange, transfer, license (other
than in the ordinary course of business), acquisition or disposition merger,
consolidation, business combination or similar transaction involving Anergen
pursuant to which the stockholders of Anergen immediately preceding such
transaction of more than 50% of the assets of Anergen, or (C) any liquidation or
dissolution of Anergen. "Superior Offer" means an unsolicited, bona fide written
offer made by a third party to consummate any of the following transactions:
- A merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving Anergen
pursuant to which the stockholders of Anergen immediately preceding such
transaction hold less than 50% of the equity interest in the surviving or
resulting entity of such transaction;
- A sale or other disposition by Anergen of assets (excluding inventory and
used equipment sold in the ordinary cause of business) representing in
excess of 50% of the fair market value of Anergen's business immediately
prior to such sale;
- The acquisition by any person or group (including by way of a tender
offer or an exchange offer or issuance by Anergen), directly or
indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 50% of the voting power of
the then-outstanding shares of capital stock of Anergen; and
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- Any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing, or terms
that Anergen's board of directors determines, in its judgment consistent
with applicable corporate law, after consultation with its financial
advisor, is reasonably likely to be financially superior to the Anergen
stockholders than the terms of the Merger.
Anergen also agreed to advise, as promptly as practicable, Corixa orally
and in writing of any request for non-public information which Anergen
reasonably believes would lead to an Acquisition Proposal or of any Acquisition
Proposal, or any inquiry with respect to or which Anergen reasonably should
believe would lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry and the identity of
the person or group making any such request, Acquisition Proposal or inquiry.
Anergen agreed to keep Corixa informed in all material respects of the status
and details (including material amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
CERTAIN EMPLOYEE BENEFIT PLAN MATTERS
Anergen has agreed that it will not, except as required by law:
- Adopt or amend any employee benefit or stock purchase or option plan;
- Enter into any employment contract or collective bargaining agreement
(other than offer letters and letter agreements entered into in the
ordinary course of business consistent with past practice with employees
who are terminable "at will,");
- Pay any special bonus or special remuneration to any employee or
director;
- Increase the salaries or wage rates or fringe benefits (including rights
to severance or indemnification) of its directors, officers, employees,
or consultants other than in the ordinary course of business, consistent
with past practice;
- Grant any severance or termination pay to any officer or employee except
pursuant to written agreements outstanding, or policies existing, on the
Execution Date and as previously disclosed in writing or made available
to Corixa, or adopt any new severance plan; or
- Change in any material respect any management policies or procedures.
INDEMNIFICATION
Corixa and Anergen have agreed that from and after the Effective Time,
Corixa will cause the surviving corporation to fulfill and honor in all respects
the obligations of Anergen pursuant to any indemnification agreements between
Anergen and its directors and officers as of the Effective Time (the
"Indemnified Parties") and any indemnification provisions under Anergen's
certificate of incorporation or bylaws as in effect on the date hereof. The
certificate of incorporation and bylaws of the surviving corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
certificate of incorporation and bylaws of Anergen as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
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Effective Time, were directors, officers, employees or agents of Anergen, unless
such modification is required by law.
Corixa and Anergen also agreed that for a period of five years after the
Effective Time, Corixa will cause the surviving corporation to use its
commercially reasonable efforts to maintain in effect, if available, directors'
and officers' liability insurance covering those persons who are currently
covered by Anergen's directors' and officers' liability insurance policy on
terms comparable to those applicable to the current directors and officers of
Anergen. In no event, however, will Corixa or the surviving corporation be
required to expend in excess of 125% of the annual premium currently paid by
Anergen for such coverage (or such coverage as is available for such 125% of
such annual premium).
MANAGEMENT AFTER THE MERGER
At the Effective Time, Merger Sub will cease its corporate existence and
Anergen will remain as the surviving corporation and a wholly-owned subsidiary
of Corixa. The officers and directors of Merger Sub immediately prior to the
Effective Time will be the initial officers and directors of Anergen following
consummation of the Merger, until their respective successors are duly elected
or appointed and qualified. See "Conflicts of Interest" and "Management of
Anergen."
CONDITIONS
The obligations of Corixa, Anergen, and Merger Sub to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of certain
conditions, including, among others, the following:
- The approval of the Merger by the requisite vote of the stockholders of
Anergen;
- The filing and subsequent effectiveness of the Registration Statement and
no stop order suspending the effectiveness of the Registration Statement
shall have been issued and no proceeding for that purpose and no similar
proceeding shall have been initiated or threatened in respect of this
Proxy Statement/Prospectus;
- The absence of any governmental order, decree or injunction prohibiting
consummation of the Merger;
- The execution and delivery of the Escrow Fund Agreement by Corixa,
Anergen and the Escrow Agent;
- The approval of the listing on Nasdaq of shares of Corixa Common Stock
issuable to stockholders of Anergen in connection with the Merger; and
- Corixa and Anergen each shall have received a written opinion from tax
counsel to the effect that the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code and
such opinion shall not have been withdrawn.
The obligations of Anergen to effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of certain additional conditions,
any of which may be waived, in writing, exclusively by Anergen, including among
others the following:
- Each representation and warranty of Corixa and Merger Sub contained in
the Merger Agreement shall have been true and correct as of the date of
the Merger Agreement and shall be true and correct on and as of the
Closing Date except as would not result in a Material Adverse Effect (as
defined below) to Corixa or Merger Sub and
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Anergen shall have received a certificate with respect to the foregoing
signed on behalf of Corixa and Merger Sub by an authorized officer of
Corixa and Merger Sub;
- Corixa and Merger Sub shall have performed or complied in all material
respects with all agreements and covenants required by the Merger
Agreement to be performed or complied with by them on or prior to the
Closing Date, and Anergen shall have received a certificate to such
effect signed on behalf of Corixa and Merger Sub by an authorized officer
of Corixa and Merger Sub;
- Anergen shall have received an opinion from counsel to Corixa in
substantially the form agreed to in the Merger Agreement; and
- The absence of any Material Adverse Effect to Corixa and its subsidiaries
since the date of the Merger Agreement.
The obligations of Corixa and Merger Sub to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of certain
additional conditions, any of which may be waived, in writing, exclusively by
Corixa and Merger Sub, including among others the following:
- each representation and warranty of Anergen contained in the Merger
Agreement shall have been true and correct as of the date of the Merger
Agreement and shall be true and correct on and as of the Closing Date
except as would not result in a Material Adverse Effect (as defined
below) to Anergen and Corixa shall have received a certificate with
respect to the foregoing signed on behalf of Anergen by an authorized
officer of Anergen;
- Anergen shall have performed or complied in all material respects with
all agreements and covenants required by the Merger Agreement to be
performed or complied with by it on or prior to the Closing Date, and
Corixa shall have received a certificate to such effect signed on behalf
of Anergen by an authorized officer of Anergen;
- Corixa shall have received an opinion from counsel to Anergen in
substantially the form agreed to in the Merger Agreement;
- The absence of any Material Adverse Effect to Anergen and its
subsidiaries since the date of the Merger Agreement;
- Anergen shall have obtained all consents, waivers and approvals required
in connection with the consummation of the transactions;
- each of Anergen, Warburg, and IBT shall have executed and delivered the
Note Purchase Agreement in a form reasonably acceptable to counsel to
Corixa, and each of Corixa, Warburg and IBT shall have executed and
delivered the Common Stock Purchase Agreement in a form reasonably
acceptable to counsel to Corixa;
- Silicon Valley Bank shall not have foreclosed on its loan(s) made to
Anergen or taken action to encumber, obtain a lien in respect of, obtain
title or otherwise taken control of certain Anergen property; and
- Silicon Valley Bank shall have executed and delivered the Note Purchase
Agreement.
The term "Material Adverse Effect when used with respect to an entity means
any change, event, violation, inaccuracy, circumstance or effect that is
materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity and
its subsidiaries taken as a whole, except for those changes, events, violations,
inaccuracies, circumstances and effects that (i) are caused by conditions
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affecting the United States economy as a whole or affecting the industry in
which such entity competes as a whole, which conditions do not affect such
entity in a disproportionate manner, or (ii) are related to or result from
announcement or pendency of the Merger or (iii) with respect to Anergen result
from continued losses and declines in the cash balances of Anergen which occur
in the ordinary course of business and as reasonably contemplated in the
business plan of Anergen (as made available to Corixa), which include but are
not limited to, any disputes with or actions undertaken by current creditors of
Anergen.
TERMINATION
At any time prior to the Effective Time, whether before or after approval
of the matters presented in connection with the Merger by the Anergen
stockholders, the Merger Agreement may be terminated and the Merger may be
abandoned:
- By mutual consent if duly authorized by the Boards of Directors of each
of Anergen, Corixa and Merger Sub;
- By either Corixa or Anergen, if, without fault of the terminating party,
(A) the Merger has not been consummated on or before February 15, 1999,
or (March 31, 1999, in the event that the Commission has notified the
parties that the Proxy Statement/Prospectus will be reviewed by the
Commission for any reason), or such later date as may be agreed upon in
writing by the parties to the Merger Agreement; or (B) there shall be any
applicable federal or state law that makes consummation of the Merger
illegal or otherwise prohibited or if any court of competent jurisdiction
or governmental entity shall have issued an order, decree, ruling or
taken any other action restraining, enjoining or otherwise prohibiting
the Merger and such order, decree, ruling or other action shall have
become final and nonappealable;
- By either Anergen or Corixa if the required approval of the stockholders
of Anergen contemplated in the Merger Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a
meeting of Anergen stockholders duly convened therefor or at any
adjournment thereof;
- By Corixa or Anergen (at any time prior to the adoption and approval of
the Merger Agreement and the Merger by the required vote of the
stockholders of Anergen) if a Triggering Event (as defined below) shall
have occurred;
- By Corixa (at any time prior to the adoption and approval of the Merger
Agreement and the Merger by the required vote of the stockholders of
Anergen) if a Termination Event (as defined below) shall have occurred;
- By Anergen, upon a breach of any representation, warranty, covenant or
agreement on the part of Corixa set forth in the Merger Agreement, or if
any representation or warranty of Corixa shall have become untrue in
either case resulting in a Material Adverse Effect to Corixa; or
- By Corixa, upon a breach of any representation, warranty, covenant or
agreement on the part of Anergen set forth in the Merger Agreement, or if
any representation or warranty of Anergen shall have become untrue, in
either case resulting in a Material Adverse Effect to Anergen.
A "Termination Event" shall be deemed to occur if Anergen shall not have
used commercially reasonable efforts to hold the Anergen Stockholders' Meeting
as promptly as practicable and in any event within the later of (A) the Anergen
Stockholders' Meeting
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Period or (B) 15 days after any amendments or supplement to the Proxy Statement/
Prospectus are mailed to stockholders of Anergen.
A "Triggering Event" shall be deemed to have occurred if:
- Anergen's Board of Directors or any committee thereof shall for any
reason have withdrawn or shall have amended or modified in a manner
adverse to Corixa its unanimous recommendation in favor of the adoption
and approval of the Merger Agreement or the approval of the Merger;
- Anergen shall have failed to include in the Proxy Statement/Prospectus
the unanimous recommendation of Anergen's Board of Directors in favor of
the adoption and approval of the Agreement and the approval of the
Merger;
- Anergen's Board of Directors fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the Agreement and
the approval of the Merger within 7 calendar days after Corixa requests
in writing that such recommendation be reaffirmed at any time following
the public announcement of an Acquisition Proposal;
- Anergen's Board of Directors or any committee thereof shall have approved
or publicly recommended any Acquisition Proposal;
- Anergen shall have entered into any letter of intent or similar document
or any agreement, contract or commitment accepting any Acquisition
Proposal; or
- A tender or exchange offer relating to securities of Anergen shall have
been commenced by a Person unaffiliated with Corixa and Anergen shall not
have sent to its securityholders pursuant to Rule 14e-2 promulgated under
the Exchange Act, within 10 business days after such tender or exchange
offer is first published sent or given, a statement disclosing that
Anergen recommends rejection of such tender or exchange offer.
EXPENSES; CANCELLATION FEES
Subject to the following exceptions, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby including, without
limitation, filing fees and the fees and expenses of advisors, accountants,
legal counsel and financial printers, shall be paid by the party incurring such
expense. Corixa, however, shall pay all fees and expenses, other than
attorneys', accountants' and fairness opinion fees and expenses, incurred in
relation to the printing and filing of the Proxy Statement/Prospectus (including
any preliminary materials related thereto) and the Registration Statement
(including financial statements and exhibits) and any amendments or supplements
thereto. Also, any legal fees and expenses of Anergen exceeding $100,000, any
accounting fees and expenses of Anergen exceeding $50,000, and any investment
banking fees for Anergen's fairness opinion exceeding $100,000, shall be deemed
expenses of Anergen's stockholders and not Anergen.
In the event that the Merger Agreement is terminated by Corixa or Anergen,
due to, among other things (i) failure to obtain the required approval of the
stockholders of Anergen; (ii) the Board of Directors of Anergen has withdrawn or
amended its unanimous recommendation in favor of the adoption and approval of
the Merger or failed to include its unanimous recommendation in the Proxy
Statement/Prospectus; (iii) the Board of Directors of Anergen has approved or
publicly recommended an Acquisition Proposal other than the Merger; or (iv) if
Anergen shall not have used commercially reasonable efforts to hold the
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Special Meeting as promptly as practicable and within the deadlines set forth in
the Merger Agreement, Anergen will be obligated to pay Corixa a fee of $400,000.
If the Merger Agreement is terminated by Corixa, upon a breach of any
representation, warranty, covenant or agreement on the part of Anergen resulting
in a Material Adverse Effect to Anergen, or if any representation or warranty of
Anergen shall have become untrue resulting in a Material Adverse Effect to
Anergen, and Anergen does not cure such inaccuracy within 10 days, then Anergen
will be obligated to pay Corixa a fee equal to $200,000.
AMENDMENT; WAIVER
Subject to applicable law, the Merger Agreement may be amended by written
action taken by Corixa, Merger Sub, Anergen and the Anergen stockholders that
executed the Merger Agreement at any time before or after approval thereof by
the stockholders of Anergen. At any time prior to the Effective Time, Corixa and
Anergen may, to the extent legally allowed, by written instrument (i) extend the
time for the performance of any of the obligations or other acts of the other
parties to the Merger Agreement, (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement, and (iii) waive compliance
with any of the agreements or conditions contained in the Merger Agreement.
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CORIXA MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Proxy Statement/Prospectus contains forward-looking statements. These
statements relate to future events or the future financial performance of Corixa
and Anergen. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expects," "plans," "anticipates,"
"believes," "estimates," "predicts," "potential," or "continue" or the negative
of such terms and other comparable terminology. These statements only reflect
managements' expectations and estimates. Actual events or results may differ
materially. Factors that could cause or contribute to such differences include,
but are not limited to, uncertainties related to the early stage of Corixa's
research and development programs; uncertainties related to the effectiveness of
Corixa's technology and the development of its products; dependence on and
management of existing and future corporate partnerships; dependence on
in-licensed technology; dependence on proprietary technology and uncertainty of
patent protection; history of operating losses; possible volatility of stock
price; future capital needs and uncertainty of additional funding; Corixa's lack
of manufacturing and marketing experience and reliance on third parties to
perform such functions; existing government regulations and changes in, or the
failure to comply with, government regulations; impact of alternative
technological advances and competition on the collaborative relationships
between Corixa and its corporate partners; the potential dilutive effect of
equity purchases by SmithKline Beecham to other Corixa shareholders; and the
impact of the GenQuest acquisition and other acquisitions or equity purchases of
early stage companies such as ImmGenics, as well as the risk factors discussed
above in "Risk Factors" and those listed from time to time in Corixa's public
disclosure filings with the Commission, including Corixa's Final Prospectus for
its initial public offering filed with the Commission on October 2, 1997,
Corixa's Annual Report on Form 10-K for the fiscal year ended December 31, 1997,
Corixa's Quarterly Reports on Form 10-Q filed with the Commission on May 15,
1998, August 11, 1998 and November 12, 1998, Corixa's Report on Form 10-Q/A
filed with the Commission on December 18, 1998 and Corixa's Registration
Statement Form S-4, as amended, filed with the Commission on August 5, 1998.
Corixa assumes no obligation to update the forward-looking statements included
in this Form S-4.
OVERVIEW
Corixa's objective is to be the leader in the discovery and
commercialization of products useful in preventing, treating or diagnosing
cancer, certain infectious diseases and certain autoimmune diseases. Corixa's
strategy is to dedicate its resources to the discovery of vaccines and other
antigen-based products and to establish corporate collaborations early in the
development process for all aspects of product development and
commercialization, including research, clinical development, obtaining
regulatory approval, manufacturing and marketing. Corixa believes that this
research-and partner-driven approach creates significant scientific, operational
and financial advantages for Corixa and accelerates the commercial development
of new therapeutic and prophylactic T cell vaccines and other immunotherapeutic
products. As of September 30, 1998, approximately 87% of Corixa's revenue has
resulted from such collaborative agreements. In particular, Corixa has entered
into significant corporate partnerships with SB Biologicals and SB Manufacturing
with respect to breast and prostate cancer vaccine products and tuberculosis
vaccine products pursuant to which Corixa may receive up to an aggregate of
$78.8 million, of which up to $29.8 million is payable under the breast cancer
collaboration, up to $29.8 million is
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payable under the prostate cancer collaboration and up to $19.2 million is
payable under the tuberculosis collaboration. A substantial amount of such
funding is required to be used for research and development activities pursuant
to the terms of such collaborations. Subsequent to the end of the quarter ended
September 30, 1998, Corixa and SmithKline Beecham entered into an expanded
collaboration and license agreement that superseded the previous breast cancer
collaboration, prostate cancer collaboration and tuberculosis collaboration. See
Note 8 -- Subsequent Events of the Notes to Unaudited Consolidated Financial
Statements. Additionally, since Corixa's inception, approximately 12% of
Corixa's revenue resulted from funds awarded through government grants. As of
September 30, 1998, Corixa had total stockholders' equity of $37.9 million.
Corixa has entered, and intends to continue to enter, into collaborative
agreements early in the development process. Corixa believes that this active
corporate partnering strategy enables Corixa to maintain its focus on its
fundamental strengths in vaccine discovery and research, capitalizes on its
corporate partners' strengths in product development, manufacturing and
commercialization, and significantly diminishes Corixa's financing requirements.
When entering into such corporate partnering relationships, Corixa seeks to
cover its research and development expenses through research funding, milestone
payments and collaboration agreement credit lines, technology or license fees,
while retaining significant downstream participation in product sales through
either profit-sharing or product royalties paid on annual net sales.
Corixa's income statement for the period in which the acquisition of
GenQuest occurred includes a write-off of approximately $12.0 million (or 96.6%
of the purchase price), representing the values determined by management to be
attributable to the in-process research and development assets associated with
the technology acquired in acquisition of GenQuest. Of this amount,
approximately 54% is related to potential diagnostic products, approximately 35%
is related to drug screening products and services, approximately 10% is related
to gene therapy products, and approximately 1% is related to therapeutic
antibody products. This represents the value ascribed to these programs by
Corixa's management, based on the discounted cash flows management currently
expects from the technologies and genes acquired. There can be no guarantee,
however, that any particular acquired technology will result in a particular
product or treatment or that any of the technologies acquired in the acquisition
of GenQuest will result in any products. See "Risk Factors -- Risks Related to
Corixa -- There are Uncertainties Related to Corixa's Early Stage of
Development," "-- There are Uncertainties Related to Our Technology and Product
Development," "-- Corixa is Dependent on Existing and Future Corporate
Partnerships," and "-- Corixa is Dependent on In-Licensed Technology."
Corixa management believes that the allocation of a majority of the
purchase price to these product areas is appropriate because of the future
potential that these programs may contribute to the operations of Corixa. In
evaluating the acquisition of GenQuest, Corixa management considered a number of
factors, including an analysis of GenQuest that assumed the acquired technology
would result in a commercialized product or initial product revenue as early as
2002. There can be no assurance, however, that any of such acquired technology
will result in product revenue in 2002 or at all. See "Risk Factors -- Risks
Related to Corixa -- There are Uncertainties Related to Corixa's Early Stage of
Development," "-- There are Uncertainties Related to Our Technology and Product
Development," "-- Corixa is Dependent on Existing and Future Corporate
Partnerships," and "-- Corixa is Dependent on In-Licensed Technology."
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Management has reviewed with its independent accountants the allocation of
the consideration paid for the assets (including in-process research and
development) and liabilities of GenQuest.
Corixa remains focused on the discovery and early clinical development of
proprietary vaccine products that induce specific and potent pathogen- or
tumor-reactive T cell responses for the treatment and prevention of cancer,
infectious diseases and certain autoimmune diseases. Corixa also intends to
broaden its scope to include other strategic relationships that complement its
approach to immune system based therapies for cancer, infectious diseases and
autoimmune diseases.
Corixa has experienced significant operating losses in each year since its
inception. As of September 30, 1998, Corixa's accumulated deficit was
approximately $34.9 million. Corixa may incur substantial additional operating
losses over, at a minimum, the next several years. Such losses have been and may
continue to be principally the result of various costs associated with Corixa's
discovery, research and development programs and preclinical and clinical
activities and the purchase of technology, for example the GenQuest acquisition.
Substantially all of Corixa's revenue to date has resulted from corporate
partnerships, other research, development and licensing arrangements, research
grants and interest income. Corixa's ability to achieve a consistent, profitable
level of operations is dependent in large part upon entering into collaborative
agreements with corporate partners for product discovery, research, development
and commercialization, obtaining regulatory approvals for its products and
successfully manufacturing and marketing commercial products. There can be no
assurance that Corixa will be able to achieve consistent profitability. In
addition, payments under collaborative agreements and licensing arrangements
will be subject to significant fluctuations in both timing and amounts,
resulting in quarters of profitability and quarters of losses by Corixa.
Therefore, Corixa's results of operations for any period may fluctuate
significantly and may not be comparable to the results of operations for any
other period.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
Total Revenue
Revenue decreased to $8.3 million for the nine month period ended September
30, 1998 from $10.8 million for the same period in 1997. The reduction was due
mainly to a significant technology access fee recognized in the first quarter of
1997 upon the commencement of Corixa's collaborations with SB Manufacturing in
the areas of breast cancer and prostate cancer as well as the absence of revenue
from GenQuest, due to its acquisition by Corixa. During the first nine months of
1998 and 1997, $1.0 million and $1.4 million, respectively, were recognized in
conjunction with the GenQuest collaboration agreement. Corixa expects that its
quarterly revenue will continue to vary depending on when and if it enters into
new agreements and receives license and/or milestones payments.
Research and Development Expenses
Research and development expenses increased to $19.7 million for the nine
month period ended September 30, 1998 from $11.4 million for the same period in
1997. The
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increase was primarily due to increased payroll and personnel expenses,
increased collaboration and patent expenses, increased consulting costs,
increased purchases of laboratory supplies and increased deferred compensation
costs associated with the amortization of certain stock option grants.
Additionally, increased research and development expense for the nine month
period ended September 30, 1998 includes the second quarter $489,000 charge to
reflect a write-off of the receivable for warrants issued associated with the
GenQuest collaboration and a $330,000 charge in the first quarter to reflect
expenses associated with termination of the collaboration with CellPro. The non-
cash compensation expense associated with the stock option grant amortization
will continue to be recognized over the remaining vesting period of such
options, through June 2001. Research and development expenses of approximately
$1.7 million and $1.7 million were incurred during the nine months ended
September 30, 1998 and 1997, respectively, in conjunction with the GenQuest
collaboration agreement. Corixa expects research and development expenses to
increase in the future to support the expansion of its research and development
activities.
General and Administrative Expenses
For the nine months ended September 30, 1998, general and administrative
expenses increased to $1.8 million from $1.3 million for the same period in
1997. The increase for the nine month period ended September 30, 1998 was
primarily due to increased expenses related to business development, legal fees
and other costs associated with being a public company, and the general and
administrative portions of the amortized deferred compensation expense
associated with the grant of certain stock options. Corixa expects general and
administrative expenses to increase in the future to support the expansion of
its business activities.
In Process Research and Development
For the nine months ended September 30, 1998, in process research and
development expense reflects the amount allocated to in-process technology
acquired in the GenQuest acquisition.
Interest Income
For the nine months ended September 30, 1998, interest income increased to
$2.4 million from $605,000 for the same period in 1997. The increase for the
nine month period ended September 30, 1998 resulted from higher average cash
balances in such period in 1998 as compared to 1997 as a result of the
completion of Corixa's initial public offering during the fourth quarter of
1997.
Interest Expense
For the nine months ended September 30, 1998, interest expense increased to
$513,000 from $242,000 for the same period in 1997. The increase for the nine
month period ended September 30, 1998 was the result of higher loan and capital
lease financing balances outstanding in such periods in 1998 as compared to
1997.
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Other Income
Other income for the nine months ended September 30, 1998 decreased to
$271,000 from $312,000 in the same period of 1997. The decrease was due
primarily to the absence of management services revenue from GenQuest in the
third quarter of 1998, as a result of Corixa's acquisition of GenQuest. Other
income consists of proceeds from management and administrative services
agreements with GenQuest and the Infectious Disease Research Institute; a
not-for-profit, grant-funded private research institute, pursuant to which
Corixa provides services with respect to corporate management, record keeping,
personnel administration, human resources and treasury services as required by
such agreements.
Deferred Compensation
Deferred compensation of approximately $3.9 million was recorded in 1997,
representing the difference between the exercise prices of 645,000 shares of
common stock subject to options granted during the first half of 1997 and the
deemed fair market value of Corixa's common stock on the grant dates. Deferred
compensation expense of $1.1 million and $800,000 were amortized during the nine
months ended September 30, 1998 and 1997, respectively.
FISCAL YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
TOTAL REVENUE
Revenue increased to $14.4 million for the year ended December 31, 1997,
from $5.8 million for the same period in 1996 and from $2.7 million for the same
period in 1995. This increase was attributable primarily to license revenue
resulting from the breast and prostate cancer collaboration and license
agreements with SmithKline Beecham. Revenue of approximately $1.9 million was
recognized during the year ended December 31, 1997 in conjunction with the
amended license and collaboration agreement with GenQuest. Revenue under
government grants received in 1997 was $977,000, which amount was less than the
$1.4 million received in 1996 and up $673,000 from $304,000 in 1995.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses increased to $16.4 million for the year
ended December 31, 1997, up from $10.0 million for the same period in 1996 and
from $7.0 million for the same period in 1995. The increase was primarily
attributable to increased payroll and personnel expenses incurred as Corixa
hired additional research and development personnel, the inclusion of the
research and development portion of amortized deferred compensation expense
associated with the grant of certain stock options, increased purchases of
laboratory supplies, increased equipment depreciation and facilities expenses in
connection with the expansion of Corixa's research efforts, and increased
preclinical collaboration costs. Expenses associated with amortization of
deferred compensation, a non-cash compensation expense, will continue to be
recognized over the vesting period of such options, approximately three years.
Research and development expenses of approximately $2.4 million were incurred
during the year ended December 31, 1997 in conjunction with the amended license
and collaboration agreement with GenQuest. See Note 9 of Notes to Corixa's
Financial Statements for further discussion of the GenQuest
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relationship. Corixa expects research and development expenses to increase in
the future to support the expansion of its research and development activities,
including the current development efforts of GenQuest.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased to $2.0 million for the year
ended December 31, 1997, up from $781,000 for the same period in 1996 and from
$532,000 for the same period in 1995. The increase was primarily due to
increased expenses related to business development and the general and
administrative portions of the amortized deferred compensation expense
associated with the grant of certain stock options. Corixa expects general and
administrative expenses to increase in the future to support the expansion of
its business development activities, and as a result of additional expenses
associated with being a public company.
INTEREST INCOME
Interest income increased to $1.3 million for the year ended December 31,
1997, up from $642,000 for the same period in 1996 and from $772,000 for the
same period in 1995. This increase resulted from higher average cash balances in
1997 as a result of the proceeds of Corixa's initial public offering. Interest
income for fiscal year 1996 decreased from 1995 as Corixa utilized proceeds from
the private equity offerings.
INTEREST EXPENSE
Interest expense increased to $327,000 for the year ended December 31,
1997, up from $166,000 for the same period in 1996 and from $82,000 for the same
period in 1995. Increases in 1997 and 1996 interest expense resulted from the
increased utilization of the capital lease line to finance the purchase of
property and equipment.
OTHER INCOME
Other income increased to $415,000 for the year ended December 31, 1997, up
from $348,000 for the same period in 1996 and from $17,000 for the same period
in 1995. The balance for 1997 includes $325,000 and $90,000 in proceeds from
management and administrative services agreements with GenQuest and the
Infectious Disease Research Institute, respectively. For 1996, other income
consists of $300,000 and $48,000 in proceeds from such agreements with GenQuest
and the Infectious Disease Research Institute, respectively.
YEAR 2000 COMPLIANCE
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates from 20th century dates. If noncompliant systems
are not modified, the result could be a system failure or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities. Corixa has largely completed its assessment of its internal
systems affected by the Year 2000 issue and anticipates that it will not be
required to modify or
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replace significant portions of its software so that its computer systems will
properly utilize dates past December 31, 1999.
Corixa has initiated communications, in the form of questionnaires, with
its significant suppliers and customers to determine the extent to which Corixa
is vulnerable to those third parties' failure to solve their own Year 2000
issues. At this time, Corixa cannot predict the level of Year 2000 readiness
with respect to its significant suppliers and customers. Corixa intends to
continue to monitor the progress of these third parties and will develop
contingency plans during the fiscal year 1999 in the event Corixa becomes aware
that one or more of these third parties fails to solve their Year 2000 issues in
such a way as to materially adversely affect the operations of Corixa. The total
exposure of the Year 2000 issue is estimated to be less than $100,000 and will
be funded through operating cash flows. To date Corixa has incurred no
significant costs related to the assessment of, and preliminary efforts in
connection with, its Year 2000 project and the development of a remediation
plan. Management does not currently expect Corixa's financial condition or
results of operations will be materially adversely affected by the Year 2000
issue. There can be no guarantee that the systems of other companies on which
Corixa's systems rely will be timely converted, or that a failure to convert by
another company, or a conversion that is incompatible with Corixa's systems,
would not have a material adverse effect on Corixa.
Corixa intends to complete its contingency planning based upon analysis of
results of questionnaires received from customers and suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, Corixa has financed its operations primarily through
the issuance of Corixa's equity securities, collaborative agreements and debt
instruments. The October 1997 initial public offering and preceding private
placements of equity securities have provided Corixa with aggregate proceeds of
approximately $61.1 million. Through September 30, 1998, Corixa recognized
approximately $31.2 million of revenue under corporate partnerships and grants
and has drawn $6.0 million on a bank loan and $5.0 million from credit lines
under collaborative agreements. From inception through September 30, 1998,
Corixa's operations have used cash of approximately $15.5 million.
Corixa has invested $5.0 million in property and equipment and has acquired
an additional $4.6 million of equipment through capital lease financings since
inception. Corixa expects capital expenditures to increase over the next year as
it completes its facility expansion in the first quarter of 1999. After that,
capital expenditures should stabilize.
During the nine month period ended September 30, 1998, net cash used in
Corixa's operations was $8.5 million, an increase of $8.7 million, compared to
cash provided by operations of $233,000 for the same period of the prior year.
The increase in cash used by operations was due primarily to an increase in
research and development expenses. Investing activities used $8.5 million, an
increase of $3.6 million, compared to $4.9 million over the same period in the
prior year due primarily to the third quarter 1998 acquisition of GenQuest, as
well as an increased investment in property and equipment during the second and
third quarters of 1998, offset by an increase in the net proceeds provided by
the sale of securities. As of September 30, 1998, Corixa had approximately $45.5
million in cash, cash equivalents and securities available-for-sale. Working
capital decreased to $42.4 million at September 30, 1998 from $54.0 million at
December 31, 1997.
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Corixa believes that its existing capital resources, committed payments
under its existing collaborative agreements and licensing arrangements,
equipment financing and interest income will be sufficient to fund its current
and planned operations until at least September 30, 1999. There is, however, no
assurance such sources of capital will be sufficient for such period of time.
Corixa intends to enter into additional corporate collaborations that will
provide funding for all or a part of Corixa's research and development
activities. Corixa's future capital requirements will depend on many factors,
including, among others, the following: continued scientific progress in its
discovery, research and development programs; the magnitude and scope of these
activities; the ability of Corixa to maintain existing, and enter into
additional, corporate partnerships and licensing arrangements; progress with
preclinical studies and clinical trials; the time and costs involved in
obtaining regulatory approvals; the costs of acquiring companies with
complementary technology; the costs involved in preparing, filing, prosecuting,
maintaining, defending and enforcing patent claims; and the potential need to
develop, acquire or license new technologies and products and other factors not
within Corixa's control. Corixa intends to seek additional funding through some
or all of the following methods: corporate collaborations, licensing
arrangements, public or private equity or debt financings, and capital lease
transactions. There can be no assurance, however, that additional financing will
be available on acceptable terms, if at all. If sufficient capital is not
available, Corixa may be required to delay, reduce the scope of, eliminate or
divest one or more of its discovery, research or development programs, any of
which could have a material adverse effect on Corixa's business, financial
condition and results of operations.
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ANERGEN MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis of financial condition and results of
operations contains "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act, including,
without limitation, statements regarding regulatory approvals, operating results
and capital requirements. Except for historical information, the matters
discussed herein are forward-looking statements that are subject to certain
risks and uncertainties that could cause the actual results, performance or
achievements of Anergen or its corporate partners, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. See "Risk
Factors -- Special Note Regarding Forward-Looking Statements."
LIQUIDITY AND CAPITAL RESOURCES
To date, Anergen has financed its operations primarily through private
placements of its equity securities with venture capitalists (which raised an
aggregate of approximately $7.6 million in net proceeds), through the sale of
its Common Stock to Novo Nordisk A/S (which raised approximately $8 million in
net proceeds), through the issuance of its Common Stock and warrants to purchase
shares of Common Stock through a private placement in exchange for $1.5 million
in proceeds, and through public offerings of its Common Stock which have raised
an aggregate of $38.8 million in net proceeds. Anergen's cash, cash equivalents
and short-term investments at September 30, 1998 were approximately $2.4
million. Accounts payable and accrued liabilities decreased to $730,000 at
September 30, 1998 from $1,281,000 at December 31, 1997. Long-term debt
decreased from $870,000 at December 31, 1997 to zero at September 30, 1998 due
to repayment of loans and the need to reclassify the remaining balance of long
term debt to short term as Anergen is out of compliance with certain covenants
in respect to the credit facility with Silicon Valley Bank (the "Silicon Valley
Bank Loan"). Anergen had shareholders' equity at September 30, 1998 of
approximately $1.9 million which decreased from $7.8 million at December 31,
1997 due to the net loss from operations.
During October of 1998, Anergen announced a restructuring of operations
pursuant to which it took a number of steps to reduce expenses including the
termination of 33 employees. Anergen restructured its operations due to an
inability to date to secure adequate financing. Anergen has also ceased its
research efforts and is focusing on clinical development on AnergiX for
rheumatoid arthritis in collaboration with N.V. Organon. Anergen is currently in
the process of negotiating an amendment to its collaboration agreement with N.V.
Organon. On December 11, 1998, Anergen entered into a Note Purchase Agreement
(the "Note Purchase Agreement") with Warburg and IBT, Anergen's two largest
stockholders, pursuant to which Anergen may obtain a bridge loan (the "Bridge
Loan") of up to $1,500,000 subject to certain conditions. On December 19, 1998
Anergen issued promissory notes in the aggregate amount of $500,000 under this
Bridge Loan facility. The Note Purchase Agreement was executed concurrently with
the Merger Agreement. The Merger is subject to certain conditions including (i)
approval of Anergen stockholders, (ii) securing the consent of Silicon Valley
Bank; and (iii) Silicon Valley Bank has not taken certain actions to foreclose
on the Silicon Valley Bank Loan. As a result of the restructured operations and
the Bridge Loan, Anergen believes that its current capital resources are likely
to be sufficient to continue to fund Anergen's operations through at least
February 28, 1999, assuming Silicon Valley Bank does not require
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immediate repayment of its loan. See Note 5 of "Notes to Financial Statements."
Anergen is currently in discussions with Silicon Valley Bank to restructure the
Silicon Valley Loan and to obtain its consent to the Merger. There can be no
assurance that Anergen will obtain Silicon Valley Bank's consent to the Merger
or that Silicon Valley Bank will not require immediate repayment of and will not
foreclose on its loan. If the proposed Merger with Corixa is not consummated,
Anergen will require substantial additional funds to continue its operations and
there can be no assurance that such financing can be obtained.
Anergen's capital requirements involve risks and uncertainties that could
cause actual results to differ materially. Anergen's capital requirements will
vary depending on numerous factors, many of which are outside Anergen's control.
These factors include whether the Merger is consummated, the progress of
Anergen's development programs, the results and progress of Anergen's clinical
programs, the size and complexity of these programs, the scope and results of
laboratory testing and clinical trials, the time and cost required to seek
regulatory approvals to commence clinical trials for Anergen's initial products,
the need to obtain licenses to other proprietary rights, any required
adjustments to Anergen's operating plan to respond to competitive pressures or
technological advances, the cooperation of Silicon Valley Bank to restructure
the Silicon Valley Bank Loan and to provide its consent to the Merger,
developments with respect to Anergen's existing or future collaborative
arrangements, and the availability of various methods of financing. In addition,
The Nasdaq Stock Market notified Anergen in November 1998 that it would be
delisted from the Nasdaq National Market. While Anergen is appealing the notice
of delisting, there is no assurance Anergen will remain listed on the Nasdaq
National Market, and such delisting could impair Anergen's ability to raise
additional capital. Any additional equity financing may be dilutive to
shareholders, and debt financing, if available, may involve restrictions on
stock dividends and other restrictions on Anergen. Adequate funds for Anergen's
operations, whether from equity or debt, collaborative or other arrangements
with corporate partners or from other sources, may not be available when needed
or on terms attractive to Anergen. Insufficient funds may require Anergen to
delay, scale back or eliminate some or all of its research and product
development programs, to license third parties to commercialize products or
technologies that Anergen would otherwise seek to develop itself, or to cease
its operations. Anergen's liquidity will be reduced as amounts are expended for
continuing development.
RESULTS OF OPERATIONS
NINE MONTHS ENDED, SEPTEMBER 30, 1998 AND 1997
Anergen's net loss decreased by 2% for the nine months ended September 30,
1998 compared to the corresponding period in the previous fiscal year. The
decrease was due to revenues that decreased 31% to $3,421,000 in the nine months
ended September 30, 1998 compared to $4,924,000 in the corresponding period in
the previous year. The revenue decrease was offset by a decrease in expenses of
14% to $9,247,000 for the nine months ended September 30, 1998 compared to
$10,791,000 in the corresponding period in the previous year. The decrease in
revenue was primarily due to decreasing revenue from Anergen's previous
collaborative agreement with Novo Nordisk as the phase I clinical trial of
AnergiX for the treatment of multiple sclerosis completed in August 1998. On
February 9, 1998, Anergen announced that it and Novo Nordisk had agreed to
terminate the collaboration on AnergiX for Multiple Sclerosis (MS), Myasthenia
Gravis (MG), and Insulin Dependent Diabetes Mellitus (IDDM). Pursuant to the
termination, Novo Nordisk paid Anergen $1,000,000, the estimated costs to
complete the AnergiX for multiple
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sclerosis phase I study. In addition, revenue from Anergen's collaborative
partner, N.V. Organon, has decreased as Anergen moved from reimbursement of
manufacturing expenses in 1997 to reimbursement of phase I clinical trial
expenses for AnergiX for the treatment of rheumatoid arthritis in 1998. A
contributing factor is the decrease in revenue from Anergen's current
collaborative partner, N.V. Organon and Anergen's previous collaborative partner
Novo Nordisk. Research and development expenses decreased 26% to $6,374,000 for
the nine months ended September 30, 1998 from $8,611,000 in the corresponding
period in the previous year. A contributing factor is the decrease in expenses
related to Anergen's on-going clinical trials of AnergiX RA compared to expenses
related to the clinical trials for AnervaX MS in 1997.
General and administrative expenses increased 32% to $2,873,000 for the
nine months ended September 30, 1998 compared to $2,180,000 in the corresponding
period in the previous year. Primarily due to increased personnel expenses
associated with additional officer headcount and related expenses in 1998
compared to 1997.
Interest income decreased 35% to 300,000 for the nine months ended
September 30, 1998 as compared to $460,000 in the corresponding period in the
previous year. The decrease in interest income is due to lower average cash
balances in 1998. Interest income is expected to decline gradually over future
periods as invested capital is used for operating activities. Interest expense
decreased 39% to $106,000 for the nine months ended September 30, 1998 as
compared to $174,000 in the corresponding period in the previous year due to
lower debt balances.
FISCAL YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Anergen's net losses decreased from $7.1 million in 1995, to $5.8 million
in 1996 and grew to $8.4 million in 1997. Anergen's total expenses increased
from $10.6 million in 1995 and $12.0 million in 1996 and to $14.7 million in
1997. In 1997, increased expenses were offset by contract revenues totaling
approximately $5.8 million.
Anergen began earning contract revenues in 1993 under its collaborative
agreement with Novo Nordisk A/S. Contract revenues from Novo Nordisk A/S
represent reimbursement of certain research and development costs and totaled
$2.6 million in 1997 compared with $3.1 million for fiscal 1996 and $3.0 million
in 1995. In February 1998, Anergen and Novo Nordisk announced that their
collaboration would be terminated, with all rights under the collaborative
agreement returning to Anergen.
Anergen began earning contract revenues in September 1996 under its
collaborative agreement with N.V. Organon. Contract revenues represent
reimbursement of certain research and development costs and totaled $3.1 million
in 1997 compared with $412,000 in 1996. In September 1996, Anergen received a
license fee of approximately $2.0 million related to this agreement.
Research and development expenses increased from $8.3 million in 1995 to
$9.3 million in 1996 and $11.6 million in 1997. The 12% increase from 1995 to
1996 was primarily due to clinical trial costs for the completion of Phase I and
initiation of Phase IIa trials for the Anergen's AnervaX product, costs
associated with the preparation for and initiation of a Phase I trial for its
AnergiX product for MS and initial activities related to the Anergen's research
project involving its AnergiX product for RA. The 25% increase from 1996 to 1997
was primarily due to the ongoing Phase I trial for its AnergiX product in MS,
completion of the Phase IIa trial of its AnervaX product in RA, and its
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research project in AnergiX for RA. Anergen expects research and development
spending to continue to increase during the next several years.
General and administrative expenses were approximately $2.0 million, $2.5
million and $3.0 million in 1995, 1996 and 1997, respectively. Anergen expects
general and administrative expenses to increase over the next several years to
support its expanded research and development efforts and to pursue strategic
relationships and continued funding for the Anergen's operations.
Anergen's interest income increased to $653,000 in 1996 from $533,000 in
1995 due to an increase in cash, cash equivalents and short-term investment
balances resulting from proceeds received from the follow-on financing completed
in August 1996, a license fee received in September 1996, and earlier payments
of corporate partner contract revenues. Anergen's interest income decreased to
$565,000 in 1997 from $653,000 in 1996 due to utilization of cash, cash
equivalents and short-term investment balances to fund continuing operations.
Interest expense decreased to $170,000 in 1996 from 1995 due to decreasing debt
balances in 1996. Interest expense increased to $202,000 in 1997 due to
increasing debt balances in 1997.
At December 31, 1997, Anergen had federal and state net operating loss
carryforwards of approximately $46.8 million and $9.5 million, respectively,
which expire at various dates from 1998 through 2012, if not utilized. Anergen's
stock offering in April 1995 resulted in a change in ownership and it is
expected that the entire net operating loss and credit carryforwards as of April
1995 may be subject to an annual limitation based on Anergen's pre-change value.
The annual limitation will result in the expiration of the net operating losses
and credits before utilization. See Note 8 of the December 31, 1997 Financial
Statements for a discussion of these limitations.
IMPACT OF YEAR 2000
Anergen has established a committee consisting of its Chief Financial
Officer, controller, information systems manager and the facilities manager to
ensure that its information technology (IT) and non-IT systems are Year 2000
compliant. Based on its identification and assessment efforts to date, the
committee has determined that most of the systems it currently uses (including
computer equipment and software) will not need to be replaced or modified in
order to make them Year 2000 compliant. Those systems that are not compliant are
old and will need to be replaced in the normal course of business over the next
year. Anergen currently anticipates that its Year 2000 identification,
assessment, remediation and testing efforts, which began in March 1998, will be
completed by July 1999. Anergen believes, but cannot at this time guarantee,
that such efforts will be completed before any currently anticipated impact on
its computer equipment and software. As of November 10, 1998, Anergen has
completed approximately 40% of its Year
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2000 project plan. The following is a breakdown by phase of the progress Anergen
has made to date on its project plan.
<TABLE>
<CAPTION>
PHASE TIME FRAME PERCENT COMPLETE
----- ------------ ----------------
<S> <C> <C>
Initial identification and assessment... 3/98 - 8/98 100%
Remediation............................. 3/98 - 3/99 50%
Testing................................. 12/98 - 3/99 0%
Contingency planning.................... 1/99 - 6/99 0%
Implementation.......................... 1/99 - 3/99 0%
Post-2000 audit......................... 5/99 - 7/99 0%
</TABLE>
Anergen is reliant upon third parties to provide Year 2000 compliant
systems sufficiently before December 31, 1999. Anergen has surveyed all of
Anergen's key suppliers, partners, banks, computer hardware and software
providers and its clinical sites ("Third Parties") to determine whether they are
Year 2000 compliant. Anergen has discovered that certain of the Third Parties
use systems that are not Year 2000 compliant, but all of the Third Parties have
programs in place to address these Year 2000 issues. Anergen cannot guarantee
that all of the Third Parties will achieve Year 2000 compliance in a timely
manner. The failure of Third Parties to successfully address the Year 2000 issue
could have a material adverse effect on Anergen's business, financial condition
and results of operations.
Anergen expects that the total costs associated with addressing and solving
the Year 2000 issue will not exceed $50,000. These funds will be provided from
contract revenues. As of November 10, 1998, Anergen has spent less than $500 on
addressing the Year 2000 issue.
Anergen is heavily reliant on its clinical sites to perform clinical trials
on a timely basis in order to meet certain performance milestones. Failure to
correct material Year 2000 problems in such clinical sites could result in a
delay in or disruption of the clinical trial process. This delay or disruption
could cause Anergen to miss its performance milestones, which would result in a
loss of contract revenues. Anergen has received assurances from all of its
clinical trial sites that they are either Year 2000 compliant or are actively
addressing the Year 2000 issue.
Failure of Anergen's (or Third Parties') computer systems could materially
adversely affect Anergen's results of operations, liquidity and financial
condition. Due to the general uncertainty of the Year 2000 readiness of Third
Parties, Anergen is unable to determine at this time whether the consequences of
Year 2000 failures will have a material impact on Anergen's results of
operations, liquidity and financial condition.
Anergen has not currently completed its contingency planning but intends to
implement a contingency plan in the future.
The costs of Anergen's Year 2000 project plan, the dates on which Anergen
believes it will complete each phase of its Year 2000 project plan and Anergen's
contingency planning are forward-looking statements and are based on
management's best estimates, which are derived from assumptions regarding future
events, including the continued availability of certain resources, Third Party
remediation plans and other factors. There can be no assurance that these
estimates and plans will prove to be accurate, and actual results could differ
materially from those currently anticipated.
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RESTRUCTURING
As a result of the inability to raise sufficient funds to support its
operations and programs at its current operating level, Anergen reduced its
staff approximately 65% (by 33 people) and is focusing its efforts on clinical
and business development including a possible merger of the Company. The Company
is continuing its phase I clinical trial of its AnergiX technology for
rheumatoid arthritis, which its expected to be complete in the first half of
1999. Further clinical development for AnervaX for RA AnergiX for MS and
preclinical development of DiavaX for type I diabetes will depend upon corporate
partnering. Anergen has discontinued all discovery research programs. The
Company expects to take a charge of approximately $657,000 in the fourth quarter
ended December 31, 1998. The charge includes the cost of severance payments to
the employees affected by the reduction.
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INFORMATION CONCERNING CORIXA
Corixa focuses on the discovery and early clinical development of products
useful in preventing, treating or diagnosing cancer and certain infectious
diseases as well as immunotherapeutic products for the treatment of certain
autoimmune diseases.
Included in Corixa's approach is the discovery and development of a novel
class of therapeutic and prophylactic vaccines. Although commercially available
vaccines can prevent infection by a variety of pathogens such as bacteria,
viruses and parasites through antibody-based immune responses, these responses
are not sufficient to eliminate cancers or certain infectious diseases,
including tuberculosis. To induce an effective immune response against these
diseases, pathogen- or tumor-reactive T lymphocytes ("T cells") must be
stimulated. In particular, cytotoxic T lymphocytes ("CTL"), which are
specialized T cells that have the ability to recognize and kill
pathogen-infected tissue or tumor cells, must be activated.
Corixa's therapeutic and prophylactic T cell vaccines represent a new
approach to the treatment of cancers and certain infectious diseases. The
markets for such vaccine products are extensive, particularly in oncology, given
that current treatments such as chemotherapy and radiation therapy may not lead
to lasting cure or prevention and create certain serious adverse side effects.
Immunologists and molecular biologists recently have identified certain
previously unknown molecular signals that are responsible for T cell recognition
of pathogen and/or tumor-associated proteins referred to as antigens. Corixa's
vaccine products are designed to exploit these recent developments by using each
of the three components of its core technology platform -- proprietary
microsphere delivery systems, adjuvants and antigens -- to force the immune
system to recognize antigens in such a manner that potent T cell, particularly
CTL, responses are induced. Corixa's vaccines consist of proprietary antigens
which may be encapsulated in biodegradable and biocompatible microspheres and
combined with a proprietary adjuvant, which is a molecule or substance capable
of non-specifically enhancing or boosting an immune response.
In addition to its T cell vaccine program, Corixa is engaged in the
discovery and development of novel immunotherapeutic products for the treatment
of certain autoimmune diseases, such as psoriasis. In connection with Corixa's
adjuvant discovery and development program, Corixa is investigating the
immunomodulatory activities associated with an intracellular microbe,
Mycobacterium vaccae. Corixa has determined that M. vaccae, as well as protein
derivatives from M. vaccae, have considerable adjuvant activity, and may be
capable of altering immune responses in a manner useful in the treatment of
autoimmune diseases.
On September 15, 1998, Corixa completed its acquisition of GenQuest, Inc.,
augmenting its technology portfolio with the ability to develop the potential of
GenQuest's and Corixa's proprietary genes and related gene products to be used
as diagnostics, therapeutics and drug-screening targets in the field of
oncology.
SCIENTIFIC BACKGROUND
VACCINES
A variety of prophylactic vaccine products are commercially available for
the prevention of certain infectious diseases. However, these products do not
address therapeutic treatment of such diseases. The majority of current vaccines
trigger a
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protective antibody response capable of destroying an invading pathogen in the
event the patient is exposed to the pathogen in the future. Antibodies are
protein-based products of specialized immune system cells called B lymphocytes
that recognize and attach to antigens and trigger the non-specific elimination
of the pathogen. Antigens are components of the invading pathogen that are
recognized by cells of the immune system. Current vaccines are made up of whole
organisms that contain antigens or antigens themselves, which can be peptides,
proteins or carbohydrates. Typically such vaccines are formulated by combining
antigens with an adjuvant, an immune system booster.
The immune response begins when antigens are processed by a specialized
immune system cell called an antigen presenting cell ("APC"). Antigens are
processed by APCs through two distinct pathways, the Class I and Class II
Pathways. The antibody response produced by current vaccines results from
antigen processing only through the Class II Pathway. The Class II Pathway
breaks down antigens into specific peptides that are then presented on the
surface of an APC via major histocompatibility ("MHC") Class II proteins.
Antigen presentation via MHC Class II proteins results in activation of CD4-
positive helper T cells. These cells produce immune system hormones called
cytokines that serve to "help" with the generation of various components of both
cellular and antibody-based immune responses. Depending on the specific
cytokines that helper T cells produce, the helper T cell response is classified
as either Th1 or Th2. Th1 responses help generate and activate CTL and lead to
antibody production by B cells and possible pathogen elimination.
Such antibody production can be sufficient to prevent or eliminate pathogen
infection in the case of certain diseases. However, antibody responses alone are
not sufficient in other diseases, such as cancer. In these diseases, a cellular
immune response that includes the generation of CTL is necessary in order to
achieve protective immunity. While stimulation through the Class II Pathway can
lead to Th1 responses helpful in generating CTL, CTL activation cannot occur
without antigen presentation through the Class I Pathway. The Class I Pathway
breaks down antigens into specific peptides that are then presented on the
surface of an APC via MHC Class I proteins. Antigen presentation via MHC Class I
proteins results in generation and activation of CTL. Corixa believes that CTL
are necessary to eliminate tumors and various pathogens that antibodies alone
cannot destroy.
Corixa has shown in preclinical studies that CTL are capable of eliminating
either tumors or certain pathogens in settings where antibody responses fail.
Such CTL are not only capable of preventing disease when they are activated
prior to pathogen infection but are also able to eliminate disease or a tumor
once the infection has taken place or, in the case of cancer, once a tumor has
developed.
Corixa believes vaccines that can activate specific T cell responses form
the basis for a new class of products that may be used either in the treatment
or prevention of disease. Until recently, scientists lacked sufficient
understanding to design vaccine formulations capable of promoting T cell immune
reactivity against tumors or certain pathogens. Corixa has incorporated recent
advances in the understanding of the molecular mechanism controlling how
antigens are normally presented to T cells and has designed vaccine formulations
which incorporate disease-specific antigens into biodegradable and biocompatible
microspheres that give rise to potent CTL responses. Corixa's antigen discovery
program has resulted in isolation of antigens from a variety of tumor types and
from infectious disease pathogens for which no vaccines currently exist.
Furthermore, Corixa has discovered a novel adjuvant that has been shown in
preclinical studies to significantly
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enhance the efficacy of microsphere formulated vaccines through the stimulation
and activation of Th1 helper T cells and CTL. Corixa believes that its three
proprietary core technologies -- microsphere-mediated antigen delivery, novel
adjuvants and proprietary antigen discovery -- form the basis for the successful
development of such products.
ADJUVANTS
Adjuvants are formulations and/or additives that are routinely combined
with vaccines to boost immune responses directed against the antigens in such
vaccines. Because current vaccines depend upon the generation of antibody
responses to injected antigens, commercially available adjuvants have been
developed largely to enhance such antibody responses. To date, there are no
adjuvants that have been approved for use in humans that augment helper T cell
and CTL responses.
Since its inception, Corixa has been involved in research activity aimed at
the generation of novel adjuvants for its vaccines. The only
commercially-approved adjuvant for use with human vaccines is aluminum
hydroxide, or alum. Alum is useful in boosting antibody responses to vaccine
antigens but is without effect on the type of immune responses that Corixa's
T-cell vaccines are meant to generate. Therefore the Company has been interested
in the discovery of novel adjuvants that could be used to boost T-cell immune
responses as well as antibody production following vaccine administration. Based
on the early work of one of its scientific founders, Corixa has been
particularly interested in the products of microorganisms that can infect
antigen presenting cells as a potential source for such novel adjuvants. One of
the Company's proprietary adjuvants, LeIF, is a recombinant version of a
parasite protein that has significant T-cell stimulatory activity. The parasite
from which LeIF is derived is called Leishmania. Leishmania are intracellular
parasites that infect antigen presenting cells.
As a function of its collaboration with Genesis Research and Development
Corporation Limited, Corixa has been investigating the adjuvant properties of
another intracellular microorganism, Mycobacterium vaccae. M. vaccae, as well as
certain derivative products prepared from M. vaccae, have been shown to have the
capacity to stimulate immune responses that can lead to enhanced or altered
T-cell function.
CORIXA'S STRATEGY
Corixa's objective is to be the leader in the discovery and
commercialization of products useful in preventing, treating or diagnosing
cancer and certain infectious diseases as well as immunotherapeutic products for
the treatment of certain autoimmune diseases. Corixa's strategy is to dedicate
its resources to the discovery of vaccines and other antigen-based products and
to establish corporate partnerships early in the development process for all
aspects of product development and commercialization, including research,
clinical development, obtaining regulatory approval, manufacturing and
marketing. Corixa believes that this research- and partner-driven approach
creates significant scientific, operational and financial advantages for Corixa
and accelerates the commercial development of new therapeutic and prophylactic T
cell vaccines and other immunotherapeutic products. Principal elements of
Corixa's strategy are as follows:
Integrate Corixa's Core Technologies. Corixa believes that the integration
of its three proprietary core technologies may be essential to providing
effective vaccines for cancers and certain infectious diseases. These
technologies consist of: (i) proprietary delivery
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systems; (ii) potent, novel adjuvants; and (iii) novel, specific antigens.
Corixa believes that its three component approach is unique among entities
currently undertaking the development of vaccines and that it has developed or
acquired proprietary rights in each of these technologies. Corixa also believes
that integrating one or more of its delivery systems, adjuvants or antigens with
certain other companies' proprietary technologies may improve such companies'
existing or developmental-stage vaccine products.
Establish Corporate Partnerships at an Early Stage. Corixa intends to enter
into corporate partnerships early in the development process. For those products
that show promise in the preclinical or clinical stage, Corixa will seek a
corporate partner no later than prior to the initiation of Phase II clinical
trials. Corixa believes that this active corporate partnering strategy provides
three distinct advantages: (i) it permits Corixa to focus on its fundamental
strengths in immunotherapeutic discovery and research; (ii) it capitalizes on
the corporate partner's strengths in product development, manufacturing and
commercialization; and (iii) it significantly reduces Corixa's financing
requirements. When entering into such corporate partnering relationships, Corixa
seeks to cover its research and development expenses through research funding,
milestone payments and option, technology or license fees, while retaining
significant downstream participation in product sales through either
profit-sharing or product royalties paid on annual net sales.
Partner Discrete Core Technologies and Non-Vaccine Products. Because Corixa
believes that certain other companies' immunotherapeutic products may be
enhanced by components available from Corixa, Corixa seeks to establish
corporate partnerships with major commercial entities for each of its
proprietary core technologies. For example, Corixa may partner its proprietary
antigens with companies that have developed their own delivery and adjuvant
technologies. Similarly, Corixa believes that it can partner Corixa's novel
Leishmania elongation Initiating Factor ("LeIF") adjuvant with a variety of
vaccine companies that may have vaccine antigens but lack an adjuvant with the
appropriate Th profile. Corixa also believes it can partner its antigen delivery
technology with companies whose vaccines currently suffer from sub-optimal T
cell immune stimulation in vivo. Corixa further believes that certain of the
antigens it discovers may lead to the development of useful non-vaccine
products. These products may include antibody-based therapeutics or in-vivo
imaging agents, small molecule drugs derived from use of novel antigens that
serve as drug targets, and diagnostics. For therapeutic antibodies and
potentially, use of antigens as drug targets, Corixa will seek to establish
territory-specific exclusive collaborative relationships with a number of
pharmaceutical or biopharmaceutical firms. In the use of antigens as
diagnostics, Corixa intends to establish non-exclusive collaborations with a
variety of diagnostic companies to generate near-term royalty or other revenues.
CORIXA'S CORE TECHNOLOGY PLATFORMS
Corixa seeks to discover and develop products that consist in whole or in
part of its three proprietary core technologies: (i) microsphere antigen
delivery systems that specifically activate helper T cells and CTL; (ii)
adjuvants that specifically enhance helper T cell and CTL responses; and (iii)
disease specific antigens that are essential to elicit appropriate T cell
responses.
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Microsphere Antigen Delivery Systems
Corixa has demonstrated in preclinical studies that potent antibody and CTL
responses can be generated against antigens using Corixa's proprietary
microsphere antigen delivery system. Corixa has determined that CTL generated as
a result of microsphere-mediated antigen presentation are capable of killing
antigen positive cells either in vitro (in test tubes) or in preclinical studies
of immune function. For example, injection of microsphere-encapsulated tumor
antigens in animals generated an immune response that prevented growth of
antigen positive tumors when such animals were later challenged with a lethal
dose of tumor cells. The immune cells responsible for this microsphere-mediated
tumor rejection were shown to be antigen specific CTL. Immunization with naked
(not encapsulated) antigens neither activated CTL responses nor resulted in
protective immunity in animals later challenged in the same manner.
Corixa believes that microsphere-mediated antigen delivery may be superior
in terms of versatility, stability, safety and cost to other approaches that
circumvent the antigen presentation pathways, including the use of various gene
therapies as well as liposome or recombinant-protein lipid formulations.
Microspheres of the particular size range used by Corixa are taken up only by
APCs. This is not true for formulations containing genes or lipids, where
significant amounts of the delivered product are taken up by non-APCs or lost in
the blood stream or elsewhere in the body. Microsphere delivery of antigens may
also avoid certain safety issues associated with gene therapy. Corixa uses
microspheres that are produced from synthetic co-polymers approved by the FDA.
In addition, there is no immune response to the microsphere itself, in contrast
to the immune response that can occur to other proteins encoded by viral or
bacterial vectors used in gene therapy. Additionally, a single microsphere
formulation may be useful in multiple vaccine products. This avoids the
repetitive costs associated with the construction, manufacture and testing of
different gene therapy vectors or recombinant protein-lipid formulations for
different target indications. Furthermore, Corixa believes that its microsphere
vaccine preparations will be stable as freeze-dried formulations, resulting in
multi-year shelf-life.
Corixa has an exclusive worldwide license to a number of patents and
pending patent applications from SRI covering the composition, use and
production of microspheres for augmenting immune responses. In addition, Corixa
has an exclusive worldwide license to antigen delivery technology from the
Dana-Farber Cancer Institute ("Dana-Farber") comprising patent applications
claiming the composition and use of microspheres of a particular size range for
the purpose of activating CTL. Corixa is also internally developing certain
microsphere technology. See "-- Certain License Agreements" and "-- Patents and
Proprietary Technology."
Adjuvants
Adjuvants are formulations and/or additives that are routinely combined
with vaccines to boost immune responses directed against the antigens in such
vaccines. Because current vaccines depend upon the generation of antibody
responses to injected antigens, commercially available adjuvants have been
developed largely to enhance such antibody responses. To date, there are no
adjuvants that have been approved for use in humans that augment helper T cell
and CTL responses.
Corixa has identified a protein, known as LeIF, that functions as a potent
adjuvant for enhancing immune responses directed at T cell vaccine antigens.
LeIF is a protein produced by the parasite Leishmania, which is carried by sand
flies and causes both a skin
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and visceral disease known as Leishmaniasis. In cell culture studies conducted
by Corixa, LeIF has been found to have potent immune system stimulatory effects,
both for cells from individuals who have been exposed to the parasite and from
individuals who have not been so exposed.
Preclinical studies conducted by Corixa indicate that LeIF is a unique
protein stimulator of the Th1 response. Additional research conducted by Corixa
has confirmed that the cell within the immune system that responds to LeIF is an
APC. APCs stimulated with LeIF produce large quantities of a certain cytokine
and a certain cell surface protein, both of which are molecular signals required
for the generation of potent CTL responses. Corixa has conducted further
research to determine whether LeIF functions as an adjuvant for T cell vaccines.
In preclinical studies, use of microsphere-encapsulated tumor antigens together
with LeIF resulted in tumor regression, even when administered to animals with
established tumors. In all cases, tumor regression was shown to correlate with
the in vivo development of tumor antigen reactive CTL. As a result, Corixa's
research suggests that immunity induced by the combination of microsphere-
encapsulated antigens and the LeIF adjuvant is both antigen specific and
long-lived. Treated animals were still able to reject lethal doses of antigen
positive tumors when challenged more than four months after therapy.
Corixa believes that the use of LeIF as an adjuvant may greatly enhance the
efficacy of its T cell vaccines. Corixa also believes that LeIF, together with
microsphere-encapsulation technology, may be useful in developing therapeutic
products from current prophylactic vaccines due to the ability of Corixa's
technologies to promote potent Th1 and CTL responses. Corixa has granted
licenses to or options to license its LeIF technology to several corporate
partners, including SmithKline Beecham, Pasteur Merieux Connaught, a subsidiary
of Rhone-Poulenc Group ("PMC") and Heska Corporation ("Heska"). See
"-- Corporate Partnerships -- Adjuvants" and "-- Other Products in Development."
In connection with Corixa's adjuvant discovery and development program,
Corixa, in collaboration with Genesis, has been investigating immunomodulatory
activities associated with other intracellular microbe, M. vaccae. Corixa has
determined that M. vaccae, as well as protein derivatives from M. vaccae, have
considerable adjuvant activity. Corixa believes that M. vaccae and such protein
derivatives may be useful as vaccine adjuvants and may also be capable of
altering immune responses in a manner useful in the treatment of autoimmune
diseases.
Antigen Discovery
Corixa's ability to discover and patent multiple antigens allows it to
select those that will work most effectively in a given vaccine (i.e., are
recognized by the greatest percentage of individuals, stimulate the strongest
immune response and are expressed by the greatest percentage of pathogen strains
or tumor types). To capitalize on this ability, approximately half of Corixa's
scientific personnel are devoted to antigen discovery. Discovery approaches and
technologies used by Corixa in both tumor and infectious disease vaccine
development include: (i) tumor tissue procurement and human tumor propagation in
severe combined immune deficient ("SCID") mice; (ii) differential gene
expression; (iii) cDNA subtraction; (iv) expression cloning; (v) pathogen
protein purification; (vi) antigenic peptide stripping; and (vii) immunological
characterization of candidate tumor vaccine antigens. Corixa's discovery
approaches map patient immune responses to ensure that discoveries focus on
identification of pathogen and tumor proteins
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that are recognized by the human immune system and are therefore antigenic. See
"-- Corixa's Vaccine Antigen Discovery Methodologies."
The culmination of Corixa's antigen discovery research is the isolation of
pathogen or tumor genes that encode those antigens with significant potential to
be effective components of vaccines. Such antigens (in the form of either
recombinant proteins or biosynthetically produced peptides) are then formulated
in microspheres for vaccination. Multiple pathogen and/or tumor gene and protein
sequences have been discovered by Corixa. As of November 30, 1998, Corixa had
filed numerous patent applications seeking both composition of matter and/or
vaccine and diagnostic method of use claims to: (i) approximately 364 gene
sequences based on the pattern of their expression in breast cancer cells and
normal breast tissue; (ii) approximately 372 based on the pattern of their
expression in prostate cancer cells or normal prostate tissue; (iii)
approximately 355 gene sequences expressed by Mycobacterium tuberculosis; and
(iv) approximately 239 based on the pattern of their expression in lung cancer
cells or normal lung tissue; and (v) approximately 15 based on the pattern of
their expression in ovarian cancer cells or normal ovarian tissue.
There can be no assurance that patents will issue from any of the pending
applications, or that if issued, such patents will not be challenged,
invalidated or circumvented by third parties, or that the rights granted under
any issued patents will provide adequate proprietary protection or competitive
advantages to Corixa. Corixa's three core technologies are at an early stage of
development. There can be no assurance that any of such technologies will prove
to be safe and effective, and products that may result from Corixa's research
and development programs are not expected to be commercially available for a
number of years, if at all. See "-- Patents and Proprietary Technology," "Risk
Factors -- Uncertainties Related to Early Stage of Development" and "Risk
Factors -- Uncertainties Related to Technology and Product Development."
Acquired Technology
Through its acquisition of GenQuest, Corixa believes that it has several
product development opportunities, broadly categorized as therapeutics and
diagnostics, which are summarized below:
Therapeutics
Therapeutic monoclonal antibodies. Corixa believes that its antibody
products may, when administered to patients, promote tumor elimination or
shrinkage, resulting in improved cancer patient response or survival rates. For
example, Corixa believes that monoclonal antibodies directed against surface
protein targets may be used either directly to destroy these targets or as
carriers of other therapeutic compounds for the destruction of tumor cells.
Gene therapy. Corixa believes that it or its prospective corporate partners
may be able to introduce specific Corixa genes into tumor cells to potentially
kill such tumor cells or slow their growth. Corixa believes that gene therapy
may be a viable alternative to traditional cancer therapies.
Small molecule drug-screening and the resulting small molecule
therapeutics. Corixa and its prospective corporate partners may use Corixa
methodologies or genes to search for
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low molecular weight compounds that inhibit tumor cell growth or metastasis.
These compounds may prove useful as orally bioavailable cancer therapeutics.
Diagnostics
Diagnostic monoclonal antibodies. Corixa-specific antibody products may be
used to attach in vitro to proteins or other antigens that are preferentially
produced by tumor cells, thereby providing a useful diagnostic tool. These
antibodies may also be used for in vivo detection of tumor cells in patients,
reducing the need for multiple organ biopsies. Through the identification of
genes, their products and the development of specifically reactive antibodies,
Corixa believes it may bring valuable cancer diagnostic reagents to its
corporate partners' cancer diagnostics programs.
Nucleic acid probes. Using chemical- or isotope-labeled fragments of
Corixa's proprietary cancer genes that have been demonstrated to be markedly
overexpressed in tumor cells, hybridization analysis may lead to determining
whether biopsy specimens are contaminated with infiltrating tumor cells.
Peptide and polypeptide probes. Corixa believes that gene product fragments
known as peptides and multiple peptides known as polypeptides can be used as the
basis of diagnostic tests for cancer. Sera taken from cancer patients can be
tested for their ability to interact with these peptides and polypeptides,
confirming the presence of a given malignancy in the patient whose serum is
being analyzed.
CORIXA'S PRODUCTS IN DEVELOPMENT
Corixa has a number of products in various stages of development, many of
which are the subject of collaborations with corporate partners. The following
table sets forth the type of product currently in development, the
application(s) for the particular product, its
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present stage of development and the identity of Corixa's corporate partner, if
any, for such product application.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
CORIXA'S PRODUCTS IN DEVELOPMENT
- -----------------------------------------------------------------------------------
PRODUCTS APPLICATION DEVELOPMENT PHASE(1) PARTNER
- --------------- -------------------- ---------------------- --------------------
<S> <C> <C> <C>
VACCINES Breast/Prostate/ Research SmithKline Beecham
Colon/Ovarian Cancer Biologicals S.A.
Antigen Discovery
Her-2/neu Peptide Phase I Clinical SmithKline Beecham
Vaccine for Breast Trials Biologicals S.A.
and Ovarian Cancer
Lung Cancer, Research Not Currently
Leukemia, and Other Partnered
Cancer Targets,
Antigen Discovery
Tuberculosis Antigen Preclinical Studies SmithKline Beecham
Discovery Biologicals S.A.
Chlamydia Research SmithKline Beecham
Trachomatis/ Biologicals S.A.
Chlamydia Pneumoniae
Antigen Discovery
M. vaccae derivative Phase I Clinical Not Currently
for psoriasis Trials Partnered
ADJUVANTS LeIF as an Adjuvant Preclinical Studies Pasteur Merieux
for Certain Connaught
Infectious Disease
Vaccines
LeIF as an Adjuvant Preclinical Studies SmithKline Beecham
for Breast/ Biologicals S.A.
Prostate/
Colon/Ovarian Cancer
Vaccines and
Tuberculosis and
Chlamydia
Trachomatis/
Chlamydia Pneumoniae
Vaccines
M. vaccae derivative Preclinical Studies Not Currently
as an Adjuvant for Partnered
Vaccines
DIAGNOSTICS Trypanosoma cruzi Development DiaMed S.A.
Trypanosoma cruzi Development Trinity Biotech UK
Limited (formerly
Centocor, U.K.
Limited)
Tuberculosis Development Abbott Laboratories
Tuberculosis Early Stage AMRAD-ICT, a
Commercialization division of AMRAD
Corporation PTY LTD
Leishmaniasis Early Stage Various diagnostic
Commercialization Companies
Tick-Borne Diseases Development Imugen, Inc.
OTHER PRODUCTS Adoptive Preclinical Studies Not Currently
Immunotherapy -- Partnered
Cancer
Certain Technologies Development and Early Heska Corporation
for Companion Animal Stage
Health Commercialization
- -----------------------------------------------------------------------------------
</TABLE>
(1) "Research" indicates the discovery or creation of prototype products and
includes antigen discovery and characterization.
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"Development" indicates testing of prototype diagnostic assays in a
particular format and testing of such products.
"Preclinical Studies" indicates product scale up, formulation and further
testing in animals, including toxicology.
"Phase I Clinical Trials" are performed to evaluate the safety of a vaccine
and its ability to stimulate an immune response.
"Early Stage Commercialization" indicates sales to third parties for use in
diagnostic applications which have resulted in immaterial revenues to
date.
Vaccine Products
Breast and Prostate Cancer Vaccines. Breast and prostate cancer are
currently among the most widespread malignant diseases in women and men,
respectively. According to industry sources, over 525,000 patients were
diagnosed with breast cancer and over 625,000 patients were diagnosed with
prostate cancer in Europe, Japan and North America in 1995. A large percentage
of these patients undergo chemotherapy, radiation therapy and surgery, yet the
vast majority are likely to relapse with malignant disease within ten years
following surgical intervention. Corixa believes that its vaccines will
initially be useful in those patients who have undergone such therapies.
Corixa has identified over 1000 gene sequences having tumor cell and normal
tissue expression patterns indicating that they may be either uniquely expressed
or markedly over-expressed in breast tumors and/or prostate tumors or tissue.
Analysis of comparative expression of such genes in multiple tumor specimens and
in normal tissue has resulted in patent filings on approximately 900 tumor gene
sequences. Corixa is continuing to make progress toward the immunological
characterization of these gene sequences with the goal of selecting several
antigens for use in vaccines for each of breast and prostate cancer. In October
1998, Corixa entered into a collaboration and license agreement effective
September 1, 1998 with SmithKline Beecham for the continued development of
breast and prostate vaccines. See "-- Corporate Partnerships -- Vaccines."
Her-2/neu Peptide Tumor Vaccines. According to New Medicine, Inc., over
525,000 new breast cancer patients and 80,000 new ovarian cancer patients are
diagnosed in Europe, Japan and North America each year. Of these patients, a
significant percentage markedly over-express the gene Her-2/neu on the surface
of their respective breast and ovarian carcinomas. To date, in vitro studies
with animal and human cells, peptides from the Her-2/neu protein have been shown
to generate potent T cell immune responses. In vitro data indicate that cells
from different patients respond to different Her-2/neu peptides. Consequently,
Corixa is currently developing a "cocktail" approach to vaccine formulation,
combining multiple peptides in a single vaccine. Corixa believes that a
"cocktail" of peptides may be useful as a therapeutic vaccine for breast and
ovarian cancer patients whose tumors over-express Her-2/neu.
In July 1996, pursuant to certain contractual obligations, Corixa, together
with the University of Washington, filed an investigational new drug application
to begin a clinical trial of three different Her-2/neu peptide vaccines in
breast and ovarian carcinoma patients. This Phase I clinical trial began
accruing patients in September 1996 and is currently being conducted at the
University of Washington. Safety is the primary endpoint of this clinical trial,
which currently consists of over 50 patients who are each receiving monthly
vaccinations for a period of six months. Secondary endpoints of the trial focus
on the ability of such vaccination to lead to demonstration of anti-Her-2/neu
immune reactivity. This clinical trial currently uses "naked" Her-2/neu peptides
together with
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granulocyte macrophage colony stimulating factor ("GM-CSF") as an adjuvant.
Corixa is also conducting preclinical studies with microsphere-encapsulated
formulations of Her-2/neu peptides and LeIF as an adjuvant as a prelude to
adding these components of its proprietary core technology to either the current
clinical trial or, if required by the FDA, a separate Phase I clinical trial.
Corixa believes that results to date from such clinical trials demonstrate the
safety of Her-2/neu peptides as a vaccine. Corixa has an exclusive worldwide
license to Her-2/neu peptide vaccine technology from the University of
Washington. See "-- Certain License Agreements." The September 1998
collaboration and license agreement between Corixa and SmithKline Beecham grants
SmithKline Beecham the right to continue development of Her-2/neu vaccines. See
"-- Corporate Partnerships -- Vaccines."
Lung Cancer, Leukemia and Other Vaccines. Building on Corixa's initial
progress in cancer antigen discovery aimed at the development of breast and
prostate tumor vaccines, Corixa has initiated additional discovery programs in
several other tumor types, including lung cancer, ovarian cancer, colon cancer
and leukemia. Lung cancer is now the leading cancer killer in Europe, Japan and
North America, with incidence in 1995 in those countries estimated at
approximately 520,000 people. Due to the magnitude and severity of such
diseases, and the absence of effective therapies in these areas, Corixa has
begun to undertake antigen discovery and vaccine development efforts in these
tumor types using approaches similar to those it uses in breast and prostate
cancer. See "-- Corixa's Vaccine Antigen Discovery Methodologies." SmithKline
Beecham has rights to antigens discovered in Corixa's colon and ovarian cancer
discovery programs under the October 1998 collaboration and license agreement.
See "-- Corporate Partnerships -- Vaccines." Additionally, Corixa is currently
engaged in discussions with several pharmaceutical companies with respect to
potential corporate partnering arrangements in the areas of lung cancer and
other potential vaccines. There can be no assurance, however, that such
discussions will lead to the establishment of any new corporate partnerships on
favorable terms, or at all. See "Risk Factors -- Dependence on and Management of
Existing and Future Corporate Partnerships."
Tuberculosis Vaccines. Tuberculosis ("Tb"), caused by infection with
Mycobacterium tuberculosis ("Mtb"), results in more deaths than any other
infectious disease in the world. The market for potential Tb vaccines is
extensive. According to industry sources, there are an estimated 8.8 million new
cases of Tb worldwide. Once believed to be eradicated in the United States, Tb
is now growing in prevalence. From 1985 to 1992, the number of cases increased
20% in the United States and the percentage of patients with antibiotic
resistant mycobacteria increased from less than 1% to more than 25% in some
areas of the country. Corixa's goal is to develop specific prophylactic vaccines
for both conventional and drug-resistant strains of Mtb.
From over 130 novel candidate Tb gene products, Corixa has identified
several that specifically trigger appropriate helper T cell responses in vitro.
These gene products are the subject of multiple patent applications filed by
Corixa covering compositions of matter and vaccine and diagnostic methods of
use. The in vitro tests have led to the selection of several candidate vaccine
antigens. Some of these antigens have been skin-tested in both infected-healthy
and infected-diseased individuals in South America to determine which antigens
are recognized by both patient populations. Results from such tests, together
with continued analysis of patient T cell responses, has led to the commencement
by Corixa of preclinical studies for both therapeutic and prophylactic vaccine
use. Corixa has also initiated discovery programs in additional infectious
disease areas, including Chlamydia trachomatis and Chlamydia pneumoniae. Under
the September 1998, collaboration and
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license agreement, SmithKline Beecham has rights for the continued development
of Tb vaccines as well as rights to Corixa's Chlamydia vaccine products. See
"-- Corporate Partnerships -- Vaccines."
Adjuvants
Corixa has discovered a gene from the parasite Leishmania that codes for
the protein LeIF, which is capable of stimulating Th1 helper and CTL responses.
Corixa has demonstrated in preclinical studies that when combined with certain
target antigens, LeIF induces a stronger antibody response directed against the
target antigen than was induced by such antigen alone. Co-administration of LeIF
with various T cell vaccines in preclinical studies for both infectious disease
and tumors results in enhanced generation of anti-vaccine reactive CTL.
Corixa currently produces LeIF as a recombinant protein in bacteria. Corixa
anticipates that it will use LeIF in its proprietary vaccine formulations and
will also out-license LeIF for incorporation as an adjuvant in vaccines outside
of Corixa's cancer and infectious disease targets. In December 1996, Corixa
entered into a corporate partnership with PMC. This corporate partnership
provides PMC with the option to license LeIF for use with vaccines in five
different infectious disease indications. See "-- Corporate
Partnerships -- Adjuvants."
In connection with Corixa's adjuvant discovery and development program,
Corixa, in collaboration with Genesis, has been investigating immunomodulatory
activities associated with another intracellular microbe, M. vaccae. Corixa has
determined that M. vaccae, as well as protein derivatives from M. vaccae have
considerable adjuvant activity and may be capable of altering immune responses
in a manner useful in the treatment of autoimmune disease. Based on encouraging
early-stage clinical trial results Corixa intends to continue development of M.
vaccae preparations for the treatment of psoriasis and Corixa believes it is
conceivable that the same products could also be useful in treatment of other
autoimmune diseases such as arthritis and diabetes.
Diagnostic Products
Corixa believes that many of the antigens it has discovered in the fields
of cancer and infectious disease also have applications in disease diagnosis.
Antigens are used in diagnostic tests to determine whether an individual
possesses antibodies against the antigen. The presence of such antibodies can
indicate that the individual is infected by the pathogen. Infectious disease
diagnostic products for the following indications are currently under
development at Corixa:
Trypanosoma cruzi ("T. cruzi"). T. cruzi is an intracellular blood and
tissue parasite endemic to South America, Central America, Mexico and parts of
the United States, which is most commonly transmitted by blood transfusion. T.
cruzi is responsible for the development of Chagas' disease, which can develop
into fatal infectious heart disease. Current diagnostic procedures to determine
blood exposure to T. cruzi infection are based on the detection of patient
antibodies that react with crude extracts of this parasite. These tests often
produce false results due to their inability to distinguish antibodies against
T. cruzi from antibodies against other infectious agents. Corixa has discovered
and evaluated in vitro a number of peptides encoded by genes of the T. cruzi
parasite for their ability to serve as highly specific and sensitive reagents
for detection of T. cruzi. Corixa has licensed its T. cruzi antigen technology
for the development of point-of-care diagnostic tests to several diagnostic
companies, including DiaMed S.A. ("DiaMed") and Trinity Biotech
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UK Limited ("Trinity Biotech" formerly Centocor U.K. Limited). See "-- Corporate
Partnerships -- Diagnostic Products."
Tuberculosis. Corixa believes that many antigens currently under
investigation by Corixa could be useful in the development of novel diagnostics
to determine whether patients have been infected with Mtb. Current diagnostic
assays to determine Mtb infection are expensive and labor intensive. The
majority of patients exposed to Mtb receive chest x-rays, and attempts are made
to culture the bacterium in vitro from sputum samples. Mtb grows poorly and
slowly outside the body, which can produce false negative test results. In
addition, standard skin tests are not ideal in detecting infection and cannot be
used in areas of the world where patients receive childhood vaccination with
bacterial strains related to Mtb. Corixa is developing a combination of
proprietary antigens that may be used in detecting the presence and degree of
Mtb infection. Corixa has granted Abbott Laboratories ("Abbott") and AMRAD-ICT,
a division of AMRAD Corporation PTY LTD, non-exclusive licenses to certain of
its Tb antigen technologies and intends to pursue additional out-licensing
opportunities for this product. See "-- Corporate Partnerships -- Tuberculosis
Vaccines."
Leishmaniasis. The parasite Leishmania causes a systemic disease of the
liver, spleen and bone marrow called Leishmaniasis, which can be fatal if not
treated. The disease is endemic to Southern Europe, the Middle East, Africa,
China and India, as well as Central and South America. The largest United States
population infected with Leishmania are military personnel and veterans who were
exposed to the parasite while stationed in the Middle East during the Gulf War.
Leishmania has also become a leading cause of opportunistic infection in AIDS
patients in Southern Europe. Currently, the most reliable test for this parasite
infection is an extremely costly and potentially dangerous procedure requiring
the collection of bone marrow from patients and microscopically searching for
evidence of infection. Corixa has identified and patented a Leishmania antigen
that is useful in determining whether patients are infected with the parasite.
Corixa has licensed its Leishmania diagnostic technology to various diagnostic
companies on a non-exclusive basis. Corixa is currently negotiating with other
diagnostic companies who have expressed interest in using Corixa's patented
technology. There can be no assurance, however, that such negotiations will lead
to the establishment of any new corporate partnerships on terms favorable to
Corixa, if at all. See " -- Corporate Partnerships -- Diagnostic Products."
Tick-Borne Diseases. There are multiple diseases, such as Lyme disease,
caused by pathogens harbored by several tick species in North America. Recent
scientific investigation has identified two tick-borne pathogens, Ehrlichia and
Babesia microti, infection by which can lead to Lyme disease-like symptoms and
which can also cause death. No diagnostic tests currently exist for these
pathogens. Corixa has identified multiple genes from these pathogens that Corixa
believes may form the basis of novel diagnostic products and has begun
discussions with diagnostic companies that have expressed interest in this
field. In April 1998, Corixa granted Imugen, Inc. ("Imugen") an exclusive
license to certain of its tick-borne antigen technologies for use in clinical
reference laboratory testing, and Corixa intends to pursue additional
outlicensing opportunities for these technologies. See "-- Corporate
Partnerships -- Diagnostic Products."
Other Products In Development
Adoptive Immunotherapy Products. Because T cells, particularly CTL, are
generally believed to be essential for the generation of protective immunity
against tumors, scientists
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and clinicians have for many years studied the potential of using CTL obtained
from patients and grown outside the body (ex vivo) for use in treating patients
with advanced cancer. CTL grown ex vivo have been shown to be effective in
shrinking and/or eliminating tumors, both in animal models and in clinical
trials. This therapeutic approach, called adoptive immunotherapy, has been
limited by its dependence on the ability to grow sufficient numbers of tumor
antigen reactive CTL or other T cell populations ex vivo for re-infusion into
cancer patients. Corixa believes that several of its core technologies will be
useful in the development of adoptive immunotherapy procedures for cancer
treatment, and Corixa has identified multiple tumor antigens that can be used to
stimulate in vitro growth of tumor-reactive CTL. In addition, Corixa's
microsphere and adjuvant technologies have been demonstrated to enhance the in
vitro generation and growth of tumor antigen reactive CTL. Corixa intends to
pursue corporate partnership opportunities in the field of adoptive
immunotherapy of cancer. See "-- Corporate Partnerships -- Other Products."
Animal Health Products. Corixa believes that certain of its vaccine and
diagnostic products also may have applications in the detection of infection and
treatment of disease in animals. One such disease is Leishmaniasis, which can be
carried by dogs. Europe is the primary market for these products. Corixa is
currently collaborating with Heska, a developer and marketer of companion animal
diagnostics and therapeutic products, including vaccines for certain
parasitological diseases, to develop both diagnostics and vaccines for the
treatment of Leishmaniasis in dogs. Corixa has also granted Heska a license to
use LeIF in combination with other types of vaccines in the companion animal
field. Corixa intends to explore further opportunities to out-license its
technology for use in animal health markets. See "-- Corporate
Partnerships -- Other Products."
Corixa's products are in an early stage of development and have not been
demonstrated to be safe or effective. There can be no assurance that any of
Corixa's programs will move beyond their current stages of development. In
addition, even if Corixa is able to successfully complete its development
efforts with respect to a particular product, there can be no assurance that
regulatory approvals will be obtained or that any such product can be
successfully manufactured and commercialized. See "Risk Factors --
Uncertainties Related to Technology and Product Development."
CORPORATE PARTNERSHIPS
Corixa's strategy is to establish multiple corporate partnerships with
pharmaceutical, biopharmaceutical and diagnostic companies that have the
expertise and capability to develop, manufacture, obtain regulatory approval of
and commercialize Corixa's products. In such corporate partnerships, Corixa
seeks to cover its research and development expenses through research funding,
milestone payments and option, technology or license fees, while retaining
significant downstream participation in product sales through either
profit-sharing or product royalties paid on annual net sales. Corixa has focused
initially on three areas of collaboration, including vaccine discovery programs,
diagnostic technology and out-licensing its three proprietary core technologies
for applications outside Corixa's focus.
Vaccines
SmithKline Beecham. On October 28, 1998, Corixa entered into a
collaboration and license agreement effective September 1, 1998 with SmithKline
Beecham, which superseded and significantly expanded the scope of Corixa's
then-existing agreements with SB Manufacturing and SB Biologicals. Corixa
granted SmithKline Beecham an exclusive
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worldwide license to develop, manufacture and sell vaccine products and certain
dendritic cell therapy products that incorporate antigens discovered or
in-licensed under this corporate partnership; provided that with respect to
tuberculosis, such rights are co-exclusive with Corixa in Japan. Under the
collaboration and license agreement, SmithKline Beecham agreed to provide
payment for work that is performed under Corixa's existing antigen discovery
programs in tuberculosis, breast cancer and prostate cancer. In addition,
SmithKline Beecham agreed to provide payment for work that is performed in
additional programs in the following areas: (i) ovarian and colon carcinoma
vaccine discovery and development programs and (ii) vaccine discovery programs
for two chronic infectious pathogens, Chlamydia trachomatis, which causes
sexually-transmitted diseases, and Chlamydia pneumoniae, which is associated
with the development of atherosclerosis. The discovery phase of the agreement
also allows for the selection of one additional disease field to be agreed upon
at a future date. Corixa also granted SmithKline Beecham an exclusive worldwide
license to develop, manufacture and sell vaccine products resulting from
Corixa's clinical program based on Her-2/neu for the treatment of breast and
ovarian cancer as well as Corixa's preclinical program based on Mammoglobin, a
novel gene and protein associated with breast cancer. For certain of these
disease areas, Corixa granted SmithKline Beecham certain license rights to
develop, manufacture and sell passive immune products such as T cell or antibody
therapeutics and therapeutic drug monitoring products.
SmithKline Beecham has committed to funding of $43.6 million for work that
is performed in such discovery programs during the next four years. Corixa and
SmithKline Beecham may mutually agree to extend the research and development
programs beyond the initial four-year term.
In addition, SmithKline Beecham agreed to purchase $2.5 million worth of
Corixa Common Stock at a premium to its fair market value, and Corixa has the
right in the future to require SmithKline Beecham to purchase an additional $2.5
million of Corixa Common Stock, at a premium to its then-current fair market
value. The equity component combined with the discovery program payment results
in aggregate funding of $48.6 million during the first four years of the
agreement. Additionally, with respect to the $5.0 million previously paid to
Corixa by SmithKline Beecham under the prior option agreement, which covered the
fields of ovarian and colon cancer, SmithKline Beecham may elect to have Corixa
repay such amount to SmithKline Beecham on September 1, 2003 or convert such
amounts into the purchase of Corixa Common Stock at a premium to its
then-current fair market value.
To the extent that certain clinical and commercial milestones in the
programs are achieved, Corixa is entitled to receive payments, which in the
aggregate could exceed $150 million. The individual amounts of such payments
vary depending on the milestones achieved and the types of product sold. Corixa
is also entitled to receive future royalty payments on any product sales, which
royalties vary depending on the types of products sold.
Adjuvants
Pasteur Merieux Connaught. In December 1996, Corixa entered into an option
and license agreement with PMC whereby Corixa granted PMC an option to license
its novel adjuvant LeIF for exclusive use in influenza and respiratory syncytial
virus and non-exclusive use in HIV, Tb and malaria. Under the option and license
agreement, PMC paid an up-front option fee and, in the event and to the extent
PMC exercises its option, PMC
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has agreed to pay exercise fees for each disease indication. In addition, in the
event PMC exercises its option for one or more disease fields, Corixa is
entitled to receive future payments upon the achievement of certain contractual
milestones relating to drug development and regulatory progress, as well as
royalty payments on any product sales and annual research funding to support
Corixa's preclinical development efforts related to LeIF. In July 1998, Corixa
and PMC agreed to extend PMC's option, and as a result such option will
terminate in the event PMC has not exercised its right in at least one disease
field before the earlier of (i) five months following the date that Corixa
receives sufficient amounts of PMC's influenza vaccine to allow Corixa to
perform certain additional analysis of LeIF and (ii) December 31, 1998.
Diagnostic Products
Corixa has entered into and intends to continue to pursue corporate
partnerships in the fields of cancer and infectious disease diagnostics to
complement its therapeutic research efforts and to expand its scientific
platform. Corixa has established corporate partnerships for the development of
diagnostics for infectious diseases with Abbott, DiaMed, Trinity Biotech,
AMRAD-ICT, and other small diagnostic companies. Under these arrangements,
Corixa generally grants a non-exclusive license to Corixa's antigens for use in
specified infectious disease indications in exchange for the respective
corporate partner's agreement to make certain payments upon achievement of
development milestones, a commitment to purchase a minimum number of reagents
and an agreement to pay royalties on any product sales. Corixa has also
established a corporate partnership with Imugen pursuant to which Corixa granted
Imugen an exclusive license to certain Corixa antigens for use in Imugen's
clinical reference laboratory services to detect and diagnose certain infectious
diseases related to the presence of certain tick-borne pathogens. In exchange
for this license, Imugen will pay Corixa certain annual minimum payments as well
as a percentage of revenues received in connection with the clinical reference
laboratory services.
OTHER PRODUCTS
Adoptive Immunotherapy Products
In April 1998, Corixa and CellPro, Incorporated ("CellPro") agreed to
terminate the license and collaborative research agreement originally entered
into by such parties in November 1995. The license and collaborative research
agreement covered the ex vivo use of Corixa's cancer antigens, microsphere
delivery system and adjuvant technologies for the purpose of activating and
propagating tumor reactive cells outside the body in the field of adoptive
immunotherapy of cancer. All rights to Corixa's technology in the field of
adoptive immunotherapy of cancer granted to CellPro pursuant to the license and
collaborative research agreement reverted to Corixa, and Corixa intends to
pursue additional corporate partnerships in this field.
Animal Health Products
Heska. In March 1996, Corixa entered into a license and research agreement
with Heska. Under the license and research agreement, Corixa granted Heska an
exclusive worldwide license to Corixa's LeIF adjuvant for use in certain of
Heska's vaccines and for use as a stand-alone vaccine against canine
leishmaniasis. In addition, Corixa granted Heska a license to its diagnostic
antigen, K39, for use in detecting canine leishmaniasis. The license is
exclusive worldwide, except that it is non-exclusive in Central and South
America. Heska paid an up-front license fee and agreed to make future payments
upon the
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achievement of certain development milestones, as well as royalty payments on
any product sales. In December 1996, Heska made a payment to Corixa based on
achievement of a development milestone for Corixa's K39 diagnostic product.
Heska has begun commercial sales of two different diagnostic products for canine
leishmania in Italy. In December 1997, Heska announced commercial availability
of the first product, a diagnostic test for use in clinical laboratories, and
paid a corresponding milestone payment to Corixa. In June 1998, Heska announced
commercial availability of a second product, a point-of-care diagnostic test.
Corixa's corporate partnership agreements generally provide recourse for
Corixa with respect to its existing product and technology rights in the event
of an uncured material breach of such an agreement by a corporate partner. In
such event, Corixa generally may elect to terminate the licenses granted to such
corporate partner under such agreement. However, because Corixa's strategy for
the discovery, research, development, clinical testing and commercialization of
its products is to enter into multiple corporate partnerships, the success of
Corixa is substantially dependent on its ability to enter into and maintain such
arrangements on terms favorable to Corixa, its ability to successfully manage
current or future corporate partnerships, if any, and the ability of its
corporate partners to perform their respective obligations under such
arrangements. There can be no assurance that Corixa will be able to negotiate
any additional corporate partnerships on favorable terms, or at all, that its
current corporate partnerships will be successful or that its corporate partners
will perform their obligations under such arrangements in a timely manner or at
all, any of which would have a material adverse effect on Corixa's business,
financial condition and results of operations. See "Risk Factors -- Dependence
on and Management of Existing and Future Corporate Partnerships."
CERTAIN BUSINESS RELATIONSHIPS
Relationship with Infectious Disease Research Institute
In September 1994, Corixa entered into a research services and intellectual
property agreement with Infectious Disease Research Institute, a not-for-profit,
grant-funded private research institute ("IDRI"). Under this agreement, as
amended and restated effective January 1997, Corixa has agreed to provide IDRI
with research funding and certain administrative and facilities support,
including use of Corixa's research laboratory space. IDRI pays a services fee
for the administrative and facilities support provided by Corixa. Corixa's
funded research performed by IDRI is in the area of infectious disease. Under
the agreement, IDRI is obligated to disclose to Corixa all significant
developments relating to information or inventions discovered at IDRI, and
Corixa will own, on a royalty-free basis, all of IDRI's interest in inventions
and patent rights arising out of IDRI's research during the term of the
agreement (other than inventions and patent rights arising out of research that
is or in the future may be funded by certain governmental or not-for-profit
organizations). With respect to such rights arising out of research funded by
governmental and not-for-profit organizations, Corixa has been granted a
royalty-bearing, worldwide, perpetual license, exclusive except as to rights
held by such governmental or not-for-profit organizations.
IDRI is independent of Corixa, and Corixa does not have the right to
control or direct IDRI's activities. A majority of the members of IDRI's board
of directors are not affiliated with Corixa. However, Corixa's Chief Scientific
Officer is co-founder and a member of the board of directors of IDRI. Corixa's
Chief Operating Officer is also a member of the board of directors of IDRI and
Corixa's Vice President, Chief Financial Officer is treasurer of IDRI.
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The research services and intellectual property agreement terminates on
December 31, 1999, subject to renewal for one or more three year terms at the
option of Corixa. If IDRI terminates the agreement as a result of Corixa's
failure to make required payments, Corixa would be obligated to pay royalties on
any product sales.
CERTAIN LICENSE AGREEMENTS
Corixa seeks to obtain technologies that complement and expand its existing
technology base. Where consistent with its strategy, Corixa has licensed and
intends to continue to license product and marketing rights from selected
research and academic institutions in order to capitalize on the capabilities
and technology bases of these entities. Under these license agreements, Corixa
generally seeks to obtain unrestricted sublicense rights consistent with its
partner-driven strategy. Corixa is generally obligated under these agreements to
diligently pursue product development, make development milestone payments and
pay royalties on any product sales.
Agreement with Genesis Research and Development Corporation Limited
Corixa entered into a collaborative research and development agreement with
Genesis, effective January 1, 1998, for the development and commercialization of
an M. vaccae-derived product for the treatment of psoriasis. Under the
agreement, Corixa and Genesis will share the costs of product development and
the revenues received by Genesis and Corixa related to such product. In the
event one party becomes responsible for more than fifty percent of product
development costs, such party shall also receive a prorata increased portion of
revenues received by Genesis and Corixa related to such products. Under the
agreement, Genesis also granted Corixa the worldwide, exclusive right to develop
the M. vaccae-derived product for certain other autoimmune diseases, including
rheumatoid arthritis, multiple sclerosis and diabetes, subject to payment to
Genesis of a percentage of revenues received by Corixa related to such products.
Agreement with Stanford Rook Ltd.
In December 1998, Corixa entered into a worldwide, exclusive license
agreement with Stanford Rook Ltd. ("SR") for rights under SR's M. vaccae-related
intellectual property for the development and commercialization of certain M.
vaccae-derived products for the treatment in the disease fields of psoriasis,
rheumatoid arthritis, multiple sclerosis and diabetes, with an option to certain
additional fields. Under the license agreement, Corixa agreed to pay SR license
fees, milestone payments and a percentage of revenues received by Corixa from
product sales.
Agreements With Southern Research Institute
In May 1996, Corixa entered into a license agreement with SRI. Under the
license agreement, SRI granted Corixa an exclusive, worldwide, sublicensable
license (subject to the rights of certain United States governmental agencies
and a grant-back to SRI for non-commercial research purposes) to certain polymer
microsphere technology for use in the fields of cancer and infectious disease,
to the extent a product incorporates an antigen, cytokine or adjuvant owned or
controlled by Corixa. In addition, SRI granted Corixa options to exclusive,
worldwide, sublicensable licenses in certain autoimmune and viral disease
fields. Corixa paid up-front license fees upon execution of the license
agreement. Corixa is also obligated to make future payments upon the achievement
of certain development milestones, as well as royalty payments on any product
sales, subject to an annual minimum royalty. In addition, Corixa issued SRI
15,151 shares of Common Stock
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upon execution of the license agreement and a warrant exercisable for 7,575
shares for each grant of sublicense rights to a third party, up to a maximum of
37,875 shares, and 7,575 shares for initiation of each Phase III clinical trial,
up to a maximum of 37,875 shares. In April 1997, the parties amended the license
agreement to extend Corixa's license in the field of cancer to include products
that incorporate third-party antigens or cytokines. Corixa is obligated to share
revenues from such third-party sublicense agreements with SRI. Corixa issued SRI
4,545 shares of Common Stock upon the first anniversary of the effective date of
the license agreement, and issued an additional 4,545 shares of Common Stock on
June 30, 1998. SRI may terminate the license agreement in the event Corixa fails
to perform certain obligations under such agreement.
Additionally, in January 1995, Corixa entered into a research agreement
with SRI. Under the research agreement, Corixa agreed to fund certain research
at SRI directed at the incorporation of Corixa's proprietary antigens and/or
adjuvants with SRI's microsphere technology. Rights to any related discoveries
made or obtained during the funded research are subject to the license agreement
between SRI and Corixa. Corixa is obligated to provide funding to SRI under the
research agreement through December 31, 1998.
Agreement With Dana-Farber Cancer Institute
In January 1995, Corixa entered into a licensing agreement with
Dana-Farber. Under the licensing agreement, Dana-Farber granted Corixa an
exclusive, worldwide, sublicensable license (subject to the rights of certain
United States governmental agencies and a grant-back to Dana-Farber for
non-commercial research purposes) to certain microsphere technology related to
the induction of a CTL response for use in all fields. Corixa paid up-front
license fees upon execution of the licensing agreement. Corixa is also obligated
to make future payments upon the achievement of certain development milestones,
as well as royalty payments on any product sales, subject to an annual minimum
royalty. In addition, Corixa issued Dana-Farber 15,151 shares of Common Stock
upon execution of the licensing agreement and agreed to issue an additional
15,151 shares of Common Stock upon issuance of the first patent containing
claims covering the licensed technology. Corixa must continue to meet certain
research-based obligations in order to retain its rights under the licensing
agreement. Dana-Farber may terminate the licensing agreement in the event Corixa
does not make required royalty payments or fails to perform certain obligations
under such agreement.
Agreements with ImmGenics Pharmaceuticals, Inc.
On November 5, 1998 Corixa announced that it signed an exclusive agreement
with ImmGenics Pharmaceuticals, Inc. ("ImmGenics") to utilize ImmGenics'
proprietary Selected Lymphocyte Antibody Method technology to develop high
potency therapeutic and diagnostic monoclonal antibodies targeting Corixa's
proprietary antigens in cancer and infectious disease. Under the terms of the
agreement, Corixa will make research and development payments and, if certain
milestones are achieved, additional milestone payments, as well as royalty
streams on future product sales. In addition to the collaborative agreement,
Corixa invested $1.75 million in exchange for preferred stock in ImmGenics,
convertible debt and warrants, and may be required under the terms of the
agreement to invest an additional $1.25 million in 1999, for a total investment
by Corixa of $3.0 million. Corixa may obtain additional ownership in ImmGenics
over time under certain terms of the agreement.
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Other License Agreements
Additionally, Corixa is a party to certain other option or license
agreements useful in vaccine formulation and delivery with academic
institutions, including an exclusive license agreement with the University of
Washington for the use of Her-2/neu technology in all fields. Corixa is also a
party to option or license agreements useful in its antigen discovery program,
including agreements with (i) Washington University in St. Louis, Missouri for
the use of mammaglobin, a breast cancer-related protein and genes for
prophylactic and therapeutic treatment of adenocarcinoma and an option for
diagnostic use, (ii) Health Research, Inc. for the use of a proprietary mouse
model for human cancer, (iii) Mayo Foundation for Medical Education and Research
for use of tick-borne disease antigens, (iv) Massachusetts Institute of
Technology for the use of WT-1, a leukemia-related gene and antigen in
therapeutic applications, and (v) University of Pittsburgh for Muc-1 peptide
vaccine for use in the diagnosis and therapy of cancer. Certain of these
agreements require Corixa or other parties to meet certain performance
obligations in order to retain their rights under such agreements or require
Corixa to make certain payments in order to obtain or maintain rights to the
subject technology.
CORIXA'S ANTIGEN DISCOVERY METHODOLOGY
Tumor Tissue Procurement and SCID Mouse Tumor Propagation. Corixa has
developed a variety of unique and proprietary resources that provide Corixa with
sufficient tumor tissue to enable it to conduct the types of immunological and
molecular biological research it believes are necessary for antigen discovery.
Many scientific organizations, universities and pharmaceutical and biotechnology
companies are actively pursuing the identification of gene products that are
uniquely expressed in tumor tissue. Such gene products can form the basis not
only of vaccines, but also diagnostic and therapeutic product development.
Access to large amounts of tumor tissue is therefore one of the keys to success
in this area of research. Although many people in the United States suffer from
cancer, large quantities of tumor tissue are not readily available due to
increasing early detection. In order to gain access to sufficient tumor tissue,
Corixa uses (i) agreements with multiple clinical and academic centers in the
United States and South America for provision of tumor tissue, sera and
lymphocytes obtained from cancer patients; and (ii) a proprietary system for
growing tumors of multiple types from primary biopsy specimens in mice that are
genetically pre-disposed to lack an immune system (SCID mice). SCID mice lack an
immune response and therefore are incapable of rejecting transplanted human
tumor tissues. Tumors can be transplanted and grown in multiple numbers of SCID
mice, thereby providing a stable source of tumor tissue for use in antigen
discovery. In addition, small numbers of lymphocytes present in primary biopsy
specimens continue to grow within SCID mice transplanted with biopsy tumors,
serving as a reservoir for generation of tumor reactive T cell lines and clones
as well as antibody-producing B cells.
Differential Expression. Corixa has used differential expression techniques
to identify hundreds of gene sequences that are uniquely expressed or
over-expressed by tumors. This approach allows investigators to compare genes
that are expressed in different cell types simultaneously. In tumor antigen
discovery, cells are obtained from both tumor and normal tissue from individual
cancer patients. Messenger RNA (genetic information from genes that are
expressed) is prepared from both cell types and converted into DNA (called
"cDNA"). Patterns of cDNA expression from tumor and normal cells are then
compared, leading to identification of cDNA(s) that are either uniquely
expressed or dramatically over-expressed in tumor cells. The sequence of nucleic
acids (the individual component molecules of DNA) in such cDNA(s) can be
determined and that information used to
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isolate genes from such cDNA. The protein products of such genes then can be
tested in laboratory experiments to determine whether they can function as
stimulators of immune responses in cancer patients. Positive results from such
studies indicate that such proteins are good candidates for inclusion in tumor
vaccines.
cDNA Subtraction. Corixa has used cDNA subtraction to identify genes that
are uniquely expressed or over-expressed by different tumor types. cDNA
subtraction is another molecular biology technique that allows investigators to
identify genes that are expressed in one type of tissue and not expressed, or
expressed at significantly lower levels, in another type of tissue. The
technique takes advantage of the ability of single strands of cDNA from
identical or closely related genes to bind to each other and form a complex. In
tumor antigen discovery, cDNA(s) (representing populations of expressed genes)
obtained from normal tissue are mixed with cDNA populations harvested from tumor
tissue. cDNAs from genes that are shared between both tissues form complexes and
can be eliminated from further analysis. Remaining cDNA(s) representing genes
expressed only in tumor tissue or only in normal tissue then can be separated
and further analyzed. The goal of such experimentation is to identify those
genes that are expressed only in tumor cells. The protein products of such genes
then can be tested in laboratory experiments to determine whether they can
function as stimulators of immune responses in cancer patients. Positive results
from such studies indicate that such proteins are good candidates for inclusion
in tumor vaccines.
Expression Cloning. Corixa also uses expression cloning methods to identify
potential tumor antigens for incorporation into candidate tumor vaccines. Corixa
has developed a number of proprietary improvements in expression cloning
technology. This mode of experimentation requires use of either antibodies or
immune T cells harvested from cancer or infectious disease patients. In
antibody-mediated expression cloning, genes from pathogenic organisms or tumors
are transferred into clones of bacteria in a system that will promote expression
of all transferred genes into corresponding proteins. Because of the bacteria's
rapid growth rate and capacity for protein production, pathogen or tumor
proteins are produced in significant quantity together with bacterial proteins.
These proteins are screened for their ability to react with antibody from either
pathogen-infected or cancer patients. The development of a positive
protein-antibody reaction indicates that the gene that encodes the antigen is
present in a single bacterial clone. Because CTL and T-helper cells are felt to
be extremely important in mounting an effective immune response against tumors,
tumor antigen expression cloning studies focus on the use of CTL and T-helper
cells for discovery of antigens by direct expression cloning. Corixa has
developed multiple tumor reactive CTL and T-helper cell lines and clones for
such experimentation.
Pathogen Protein Purification. Corixa uses protein purification techniques
to obtain candidate antigens from specific pathogens. Proteins are prepared from
a given pathogenic organism and separated based on their physical
characteristics such as size, electric charge and shape. Individual proteins are
then tested for their ability to stimulate appropriate T-helper lymphocyte
responses in vitro. Lymphocytes used in this screening process are obtained from
individuals who are infected with the pathogen but lack evidence of disease
(i.e., immune patients). Proteins that trigger helper T cell responses are then
purified to homogeneity and their precise amino acid sequence is determined. The
amino acid sequence information is then used to isolate the gene that encodes
the particular protein.
Antigenic Peptide Stripping. Most cells in the human body express MHC
proteins on their surface. The same MHC proteins are expressed on the surface of
all tissue cells within a given individual. One function of MHC proteins is to
attract and bind small
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peptide antigens. The complex between such peptides and MHC proteins serves as a
site of immunologic recognition by T cells. Many different types of tumor cells
also express MHC proteins. Corixa uses a combination of biochemical techniques
to purify MHC proteins and remove antigenic peptides from the region of the MHC
protein where they are bound. Such peptides can then be purified using
sophisticated peptide separation techniques, and the purified peptides can then
be sequenced using mass spectroscopy. Comparison of such sequences with
sequences of proteins from normal cells can lead to the identification of
proteins or peptides that are produced only by tumor cells. The same sequence
information can then be used to isolate the gene that encodes this putative
"tumor antigen."
Immunological Characterization of Candidate Vaccine Antigens. Corixa's
discovery techniques result in the cloning and characterization of multiple
genes for possible inclusion in tumor vaccines. A key component of Corixa's
antigen discovery technology is the ability to determine which of these gene
products can function as potent antigens for generating anti-tumor immune
responses. Once candidate antigen genes are identified, Corixa systematically
determines: (i) expression of the gene product by multiple tumors from different
individuals; (ii) expression of the gene product by primary as well as
metastatic tumor tissue; (iii) absence of expression of the gene product in
normal tissue; (iv) ability of the candidate tumor antigen to generate in vitro
immune responses from T cell populations harvested from tumor and normal
patients; (v) ability of the candidate tumor antigen to generate immune
responses in specially designed tumor models; and (vi) ability of T cells
stimulated by such antigens to mediate tumor regression in specially designed
tumor models. By such systematic evaluation of candidate antigens, Corixa is
able to determine and select which antigens are appropriate for microsphere
formulation and vaccine development.
PATENTS AND PROPRIETARY TECHNOLOGY
Corixa's success will depend in large part on the ability of Corixa and its
licensors to obtain patent and other proprietary protection for Corixa's vaccine
and diagnostic products, antigens and adjuvants, defend patents once obtained,
preserve its trade secrets and operate without infringing the patents and
proprietary rights of third parties both in the United States and in foreign
countries. Where appropriate, Corixa intends to seek patent protection for its
vaccine, discovery, screening, diagnostic and other proprietary technologies by
filing patent applications in the United States and certain other countries. As
of November 30, 1998, Corixa owned or had licensed 27 issued United States
patents that expire at various times between January 2007 and August 2016, 94
corresponding issued foreign patents, 145 pending United States patent
applications, as well as 14 corresponding international filings under the Patent
Cooperation Treaty and 267 pending foreign national patent applications.
While Corixa believes its patents and patent applications provide a
competitive advantage in its efforts to discover, develop and commercialize
useful vaccine and diagnostic products, antigens and adjuvants, the patent
positions of pharmaceutical and biopharmaceutical companies, including those of
Corixa, are highly uncertain and involve complex legal and factual questions for
which important legal principles are unresolved. For example there is
substantial uncertainty regarding the potential for patent protection for gene
fragments or genes without known function or correlation with specific diseases.
There can be no assurance that Corixa, its corporate partners or its licensors
have or will develop or obtain rights to products or processes that are
patentable, that patents will issue from any of the pending applications owned
or licensed by Corixa or its corporate partners,
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that any claims allowed will issue, or in the event of issuance, will be
sufficient to protect the technology owned by or licensed to Corixa or its
corporate partners. Corixa has licensed certain patent applications from SRI
related to Corixa's microsphere encapsulation technology, one of which is
currently the subject of an opposition proceeding before the European Patent
Office. There can be no assurance that SRI will prevail in this opposition
proceeding or that any patents will issue in Europe related to such technology.
There can also be no assurance that Corixa's or its corporate partners' current
patents, or patents that issue on pending applications, will not be challenged,
invalidated, infringed or circumvented, or that the rights granted thereunder
will provide proprietary protection or competitive advantages to Corixa. Patent
applications in the United States are maintained in secrecy until patents issue,
patent applications in certain foreign countries are not generally published
until many months or years after they are filed, and publication of
technological developments in the scientific and patent literature often occur
long after the date of such developments. Accordingly, Corixa cannot be certain
that it or one of its corporate partners was the first to invent the subject
matter covered by any patent application or that it or one of its corporate
partners was the first to file a patent application for any such invention.
The commercial success of Corixa depends significantly on its ability to
operate without infringing patents and proprietary rights of third parties, and
there can be no assurance that Corixa's and its corporate partners' technologies
do not or will not infringe the patents or proprietary rights of others. A
number of pharmaceutical companies, biotechnology companies, universities and
research institutions may have filed patent applications or may have been
granted patents that cover technologies similar to the technologies owned,
optioned by or licensed to Corixa or its corporate partners. In addition, Corixa
is unable to determine the patents or patent applications that may materially
affect Corixa's or its corporate partners' ability to make, use or sell any
products. The existence of third-party patent applications and patents could
significantly reduce the coverage of the patents owned, optioned by or licensed
to Corixa or its corporate partners and limit the ability of Corixa or its
corporate partners to obtain meaningful patent protection. If patents containing
competitive or conflicting claims are issued to third parties, Corixa or its
corporate partners may be enjoined from pursuing research, development or
commercialization of products or be required to obtain licenses to these patents
or to develop or obtain alternative technology. There can be no assurance that
Corixa or its corporate partners will not be so enjoined or will be able to
obtain any license to the patents and technologies of third parties on
acceptable terms, if at all, or will be able to obtain or develop alternative
technologies. If Corixa or any of its corporate partners is enjoined from
pursuing its research, development or commercialization activities or if any
such license is not obtained, or alternative technologies are not obtained or
developed, Corixa or such corporate partner may be delayed or prevented from
commercializing its products, which would have a material adverse effect on
Corixa's business, financial condition and results of operations.
There can be no assurance that third parties will not independently develop
similar or alternative technologies to those of Corixa, duplicate any of the
technologies of Corixa, its corporate partners or its licensors, or design
around the patented technologies developed by Corixa, its corporate partners or
its licensors. The occurrence of any of these events would have a material
adverse effect on Corixa's business, financial condition and results of
operations.
Litigation may also be necessary to enforce patents issued or licensed to
Corixa or its corporate partners or to determine the scope or validity of a
third party's proprietary rights. Corixa could incur substantial costs if
litigation is required to defend itself in patent suits
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brought by third parties, if Corixa participates in patent suits brought against
or initiated by its corporate partners or if Corixa initiates such suits, and
there can be no assurance that funds or resources would be available to Corixa
in the event of any such litigation. Additionally, there can be no assurance
that Corixa or its corporate partners would prevail in any such action. An
adverse outcome in litigation or an interference to determine priority or other
proceeding in a court or patent office could subject Corixa to significant
liabilities, require disputed rights to be licensed from other parties or
require Corixa or its corporate partners to cease using certain technology, any
of which may have a material adverse effect on Corixa's business, financial
condition and results of operations.
Corixa also relies on trade secrets and proprietary know-how, especially in
circumstances where patent protection is not believed to be appropriate or
obtainable. Corixa's policy is to require each of its employees, consultants and
advisors to execute a confidentiality agreement upon the commencement of any
employment, consulting or advisory relationship with Corixa. These agreements
generally provide that all confidential information developed or made known to
the individual during the course of such relationship will be kept confidential
and not disclosed to third parties except in specified circumstances. These
agreements also generally provide that all inventions conceived by the
individual in the course of rendering services to Corixa shall be the exclusive
property of Corixa. There can be no assurance, however, that these agreements
will provide meaningful protection or adequate remedies for any breach, or that
Corixa's trade secrets will not otherwise become known or be independently
discovered by its competitors, any of which could have a material adverse effect
on Corixa's business, financial condition and results of operations.
Corixa is a party to various license agreements that give it rights to use
certain technologies in its research, development and commercialization
activities. Disputes may arise as to the inventorship and corresponding rights
in know-how and inventions resulting from the joint creation or use of
intellectual property by Corixa and its corporate partners, licensors,
scientific collaborators and consultants. There can be no assurance that Corixa
will be able to maintain its proprietary position or that third parties will not
circumvent any proprietary protection Corixa does have. The failure of Corixa to
maintain exclusive or other rights to such technologies could have a material
adverse effect on Corixa's business, financial condition and results of
operations. See "Risk Factors -- Dependence on Proprietary Technology and
Uncertainty of Patent Protection."
GOVERNMENT REGULATION
Regulation by governmental entities in the United States and other
countries will be a significant factor in the development, production and
marketing of any products developed by Corixa or its corporate partners.
Pharmaceutical products and medical devices are subject to rigorous regulation
by the FDA in the United States and similar health authorities in foreign
countries under laws and regulations that govern, among other things, testing,
manufacturing, safety, efficacy, labeling, storage, record keeping, export and
promotion, marketing and distribution of such products. Product development and
approval within this regulatory framework is uncertain, can take a number of
years and requires the expenditure of substantial resources. Any failure to
obtain regulatory approval, or any delay in obtaining such approvals, could
adversely affect the marketing of products under development by Corixa or its
corporate partners, Corixa's ability to receive product or royalty revenues, and
its liquidity and capital resources. The nature and extent of the governmental
premarket review process for Corixa's products will vary, depending on the
regulatory categorization of particular products. Corixa believes that its
vaccine and related
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pharmaceutical products will be regulated as biologics by the FDA and comparable
regulatory bodies in other countries. The necessary steps before a new
biological product may be marketed in the United States ordinarily include: (i)
preclinical laboratory tests and in vivo preclinical studies; (ii) the
submission to the FDA of an investigational new drug application ("IND"), which
must become effective before clinical trials may commence; (iii) adequate and
well-controlled clinical trials to establish the safety and efficacy of the
product; (iv) the submission to the FDA of a biologics license application
("BLA"); and (v) FDA review and approval of the BLA prior to any commercial sale
or shipment of the product. The FDA's Modernization Act of 1997 (the
"Modernization Act") eliminated the requirement that both a product license
application and an establishment license application be filed with respect to
certain categories of biotechnology products after February 19, 1998. It is
impossible to predict what impact, if any, the Modernization Act will have upon
the regulatory review of Corixa's biological products.
Preclinical tests include laboratory evaluation of the product, as well as
animal studies to assess the potential safety and efficacy of the product.
Preclinical tests must be conducted by laboratories that comply with FDA
regulations regarding good laboratory practices. The results of preclinical
tests, together with manufacturing information and analytical data, are
submitted to the FDA as part of an IND, which must become effective before the
commencement of clinical trials. The IND will automatically become effective 30
days after receipt by the FDA unless the FDA indicates prior to the end of such
30-day period that the proposed protocol raises concerns that must be resolved
to the satisfaction of the FDA before the trials may proceed as outlined in the
IND. In such case, there can be no assurance that such resolution will be
achieved in a timely fashion, if at all. In addition, the FDA may impose a
clinical hold on an ongoing clinical trial, if, for example, safety concerns are
presented, in which case the study cannot recommence without FDA authorization
under terms sanctioned by the agency.
Clinical trials involve the administration of the product to healthy
volunteers or to patients under the supervision of a qualified principal
investigator. Clinical trials are conducted in accordance with good clinical
practices under protocols that detail the objectives of the trial, inclusion and
exclusion criteria, the parameters to be used to monitor safety and the efficacy
criteria to be evaluated. Each protocol must be submitted to the FDA as part of
the IND. Further, each clinical trial must be reviewed and approved by an
independent institutional review board ("IRB") at the institutions at which the
trial will be conducted. The IRB will consider, among other things, ethical
factors and the safety of human subjects. The IRB may require changes in a
protocol, and there can be no assurance that the submission of an IND will
enable a study to be initiated or completed.
Clinical trials generally are conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the product into
healthy human subjects or patients, the product is tested to assess safety,
metabolism, pharmacokinetics and pharmacological actions associated with
increasing doses. Phase II usually involves studies in a limited patient
population to (i) determine the efficacy of the potential product for specific,
targeted indications, (ii) determine dosage tolerance and optimum dosage and
(iii) further identify possible adverse reactions and safety risks. If a
compound is found to be effective and to have an acceptable safety profile in
Phase II evaluations, Phase III trials are undertaken to evaluate further
clinical efficacy in comparison to standard therapies, within a broader patient
population, generally at geographically dispersed clinical sites. There can be
no assurance that Phase I, Phase II or Phase III testing will be completed
successfully within any specific period of time, if at all, with respect to any
of
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Corixa's products subject to such testing. In addition, after marketing approval
is granted, the FDA may require post-marketing clinical studies, which typically
entail extensive patient monitoring and may result in restricted marketing of an
approved product for an extended period of time.
The results of pharmaceutical development, preclinical studies and clinical
trials are submitted to the FDA in the form of a BLA for approval of the
manufacture, marketing and commercial shipment of the biological product. The
testing and approval process is likely to require substantial time, effort and
resources, and there can be no assurance that any approval will be granted on a
timely basis, if at all. The FDA may deny the BLA if applicable regulatory
criteria are not satisfied, require additional testing or information, or
require postmarket testing and surveillance to monitor the safety or efficacy of
the product.
Any diagnostic products developed by Corixa or its corporate partners are
likely to be regulated as medical devices. In the United States, medical devices
are classified into one of three classes on the basis of the controls deemed by
the FDA to be necessary to reasonably ensure their safety and effectiveness:
Class I (general controls -- e.g., labeling, premarket notification and
adherence to Good Manufacturing Practices ("GMP")), Class II (general controls
and special controls -- e.g., performance standards and postmarket surveillance)
and Class III (premarket approval).
Before a new device can be introduced into the market, its manufacturer
generally must obtain marketing clearance through either a premarket clearance
under Section 510(k) of the federal Food, Drug and Cosmetic Act ("510(k)") or
approval of a premarket approval application ("PMA"). Because Corixa believes
that any diagnostic device developed by it or its corporate partners would be
classified as a Class III device, such product would be subject to the PMA
approval requirement. A 510(k) clearance typically will be granted if a company
establishes that its device is "substantially equivalent" to a legally marketed
Class I or II medical device or to a Class III device for which the FDA has not
yet required the submission of PMAs. A 510(k) clearance must contain information
to support the claim of substantial equivalence, which may include laboratory
test results or the results of clinical studies. Commercial distribution of a
device subject to the 510(k) requirement may begin only after the FDA issues an
order finding the device to be substantially equivalent to a predicate device.
It generally takes from four to 12 months from the date of submission to obtain
clearance of a 510(k) submission, but it may take longer. The FDA may determine
that a proposed device is not substantially equivalent to a legally marketed
device, that additional information is needed before a substantial equivalence
determination may be made, or that the product must be approved through the PMA
process. An FDA determination of "not substantially equivalent," a request for
additional information, or the requirement of PMA approval could delay market
introduction of products that fall into this category. Furthermore, for any
devices cleared through the 510(k) process, modifications or enhancements that
could significantly affect safety or effectiveness, or constitute a major change
in the intended use of the device, will require new 510(k) submissions.
If a device does not qualify for the premarket notification procedure, a
company must file a PMA. The PMA requires more extensive pre-filing testing than
required for a 510(k) premarket notification and usually involves a
significantly longer review process. A PMA application must be supported by
valid scientific evidence that typically includes extensive data, including
preclinical and clinical trial data, to demonstrate that safety and efficacy of
the device. If clinical trials are required, and the device presents a
"significant risk," an investigation device exemption ("IDE") application must
be filed with the FDA
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and become effective prior to the commencement of clinical trials. If the device
presents a "nonsignificant risk" to trial subjects, clinical trials may begin on
the basis of appropriate IRB approval. Clinical investigation of medical devices
may involve risks similar to those involved in the clinical investigation of
pharmaceutical products.
The PMA application must contain the results of clinical trials and
nonclinical tests, a complete description of the device, and a detailed
description of the methods, facilities and controls used to manufacture the
device. The PMA review and approval process can be expensive, uncertain and
lengthy, and there can be no assurance that any approval will be granted on a
timely basis, if at all. A PMA application may be denied if applicable
regulatory criteria are not satisfied, and the FDA may impose certain conditions
upon the applicant, such as postmarket testing and surveillance.
Regulatory approval, if granted for any biopharmaceutical or medical device
product, may entail limitations on the indicated uses for which it may be
marketed, and product approvals, once granted, may be withdrawn if problems
occur after initial marketing. Manufacturers of FDA-regulated products are
subject to pervasive and continuing governmental regulation, including record
keeping requirements and reporting of adverse experiences associated with
product use. Corixa and its corporate partners will be required to adhere to
applicable regulations setting forth detailed GMP requirements, which include
testing, control and documentation requirements. The FDA has recently revised
the GMP regulations. The new Quality System Regulation imposes design controls
and makes other significant changes in the requirements applicable to
manufacturers. These and future changes in regulatory regulations could have a
material adverse effect on Corixa's business, financial condition and results of
operations. Manufacturing facilities in the United States are subject to
periodic inspection by the FDA. Failure to comply with GMP and other applicable
regulatory requirements may result in, among other things, warning letters,
fines, injunctions, civil penalties, recall or seizure of products, total or
partial suspension of production, failure of the government to review pending
marketing approval applications, withdrawal of marketing approvals and criminal
prosecution.
For clinical investigation and marketing of products outside the United
States, Corixa and its corporate partners may be subject to regulation by
regulatory authorities in other countries. The requirements governing the
conduct of clinical trials, marketing authorization and pricing and
reimbursement vary widely from country to country. The regulatory approval
process in other countries entails risks similar to those associated with FDA
approval.
Corixa's research and development activities involve the controlled use of
hazardous materials, chemicals and various radioactive materials. Corixa is
subject to federal, state and local laws and regulations governing the use,
storage, handling and disposal of such materials and certain waste products.
Although Corixa believes that its safety procedures for using, handling, storing
and disposing of such materials comply with the standard prescribed by state and
federal laws and regulations, the risk of accidental contamination or injury
from these materials cannot be completely eliminated. In the event of such an
accident, Corixa's use of these materials could be curtailed by state or federal
authorities, Corixa could be held liable for any damages that result and any
liability could exceed the resources of Corixa. See "Risk Factors -- Government
Regulation."
COMPETITION
The biotechnology and biopharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products.
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Many entities, including pharmaceutical and biotechnology companies, academic
institutions and other research organizations are actively engaged in the
discovery, research and development of products that could compete directly with
products Corixa is seeking to develop. Many companies are also developing
alternative therapies to treat cancer and infectious disease and, in this
regard, are competitive with Corixa. Many of the entities developing and
marketing such competing products have significantly greater financial resources
and expertise in research and development, manufacturing, preclinical testing,
conducting clinical trials, obtaining regulatory approvals and marketing than
Corixa. In addition, many of these competitors have become more active in
seeking patent protection and licensing arrangements in anticipation of
collecting royalties for use of technology that they have developed. Smaller
companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These companies
and institutions compete with Corixa in recruiting and retaining qualified
scientific and management personnel, as well as in acquiring technologies
complementary to Corixa's programs. Corixa's ability to compete effectively will
depend on its ability to advance its technology platforms, license additional
technology, maintain a proprietary position in its technologies and products,
obtain required government and other public and private approvals on a timely
basis, attract and retain key personnel and enter into corporate partnerships
that enable Corixa and its corporate partners to develop effective products that
can be manufactured cost-effectively and marketed successfully. Corixa expects
that competition among products approved for sale will be based, among other
things, on efficacy, reliability, product safety, price and patent position.
There can be no assurance that competitors will not develop more effective or
more affordable products, or achieve earlier patent protection or product
commercialization than Corixa or that such products will not render Corixa's
products obsolete. See "Risk Factors -- Intense Competition."
EMPLOYEES
As of December 15, 1998, Corixa employed 132 personnel, including 94 in
research and development and 38 in research and development support and
administration. Each of Corixa's employees has signed a confidentiality
agreement and none are covered by a collective bargaining agreement. Corixa has
never experienced employment-related work stoppages and considers its employee
relations to be good.
PROPERTIES
Corixa maintains its headquarters in Seattle, Washington where it leases
approximately 72,534 square feet of laboratory, discovery, research and
development, manufacturing and general administration space. As of November 30,
1998, Corixa's monthly rent for this space, including amortization of tenant
improvements, was approximately $155,000. The lease for this facility expires in
January 2005, with an option to renew the lease for two additional periods of
five years each. Corixa believes that its existing facilities are adequate to
meet its immediate needs and that suitable additional space will be available in
the future on commercially reasonable terms as needed. Corixa is currently in
the process of building out additional contiguous laboratory and office space
which will add approximately 12,000 square feet by the end of 1998.
LEGAL PROCEEDINGS
As of the date of this Prospectus, Corixa is not a party to any material
legal proceedings.
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SCIENTIFIC COLLABORATORS
Corixa has established a network of medical, clinical and scientific
advisors and collaborators to consult with Corixa's scientists and to advise
Corixa on its research and development programs, the design of its clinical
trials and on other medical and scientific matters relating to Corixa's
business. Corixa's advisors and collaborators include the following individuals:
Roberto Badaro, M.D. is an Associate Professor and Chief of the Infectious
Disease Research Unit at the Federal University of Bahia in Salvador, Bahia,
Brazil, and a Member of the Steering Committee of Integrated Chemotherapy and
Vaccine for Leishmaniasis for the World Health Organization in Geneva,
Switzerland. Dr. Badaro collaborates with Corixa in a tuberculosis skin testing
program and a cancer-related tissue procurement program, each of which is
conducted in Brazil.
Nora Disis, M.D. is an Assistant Professor of Medicine at the University of
Washington in Seattle, Washington. Dr. Disis collaborates with Corixa in its
research and development program focusing on the use of Her-2/neu technology in
vaccines for breast cancer. Dr. Disis is the principal investigator on the Phase
I clinical trial currently being conducted by Corixa and the University of
Washington using Her-2/neu peptide vaccines for breast cancer.
Olivera Finn, Ph.D. is a Professor of Molecular Genetics and Biochemistry
at the University of Pittsburgh School of Medicine, Director of the Immunology
Program at the University of Pittsburgh Cancer Institute in Pittsburgh,
Pennsylvania and a co-founder of Corixa. Dr. Finn collaborates with Corixa in
its research and development efforts focusing on the use of the Muc-1 peptide
vaccine for the treatment of breast, pancreatic and colon cancer. Dr. Finn is
the inventor of the Muc-1 synthetic peptide vaccine that was the subject of a
Phase I clinical trial in breast, colon and pancreatic cancer recently conducted
by the University of Pittsburgh. Such vaccine is currently the subject of a
limited second dose-ranging clinical trial which will be partly funded by Corixa
and conducted by the University of Pittsburgh.
Richard Ostenson, M.D. is a Director of Research at Good Samaritan Cancer
Center. Dr. Ostenson collaborates with Corixa in its vaccine development program
and supplies Corixa with cancer cell lines and other materials used in Corixa's
various research and development programs.
David Persing, Ph.D., M.D. is an Associate Professor of Microbiology at the
Mayo Clinic's Department of Laboratory Medicine and Pathology in Rochester,
Minnesota. Dr. Persing collaborates with Corixa in its tick-borne disease
programs.
Kenneth Rock, M.D. is the Chairman of the Department of Pathology and a
Professor at the University of Massachusetts Medical Center in Worcester,
Massachusetts and a co-founder of Corixa. Dr. Rock collaborates with Corixa in
its research and development efforts focusing on the use of microsphere delivery
technology to stimulate a T cell response.
Thomas Tice, Ph.D. is the Director, Pharmaceutical Formulations Department
at SRI in Birmingham, Alabama. Dr. Tice collaborates with Corixa in its
formulations of microsphere-encapsulated antigens for vaccine research.
James Watson, Ph.D. is the Scientific Director of Genesis in Auckland, New
Zealand. Dr. Watson collaborates with Corixa in its M. vaccae discovery program
and animal and clinical testing.
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Corixa has entered into consulting or sponsored or collaborative research
agreements with its principal advisors and collaborators. Each of Corixa's
advisors and collaborators has also entered into a confidentiality and
non-disclosure agreement with Corixa. These advisors and collaborators are
generally employed by employers other than Corixa and may have commitments to or
consulting or advisory contracts with other entities that may limit their
availability to Corixa. Although generally each advisor and collaborator agrees
not to perform services for another person or entity which would create a
conflict of interest with the individual's services for Corixa, there can be no
assurance that such conflict will not arise.
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INFORMATION CONCERNING ANERGEN
GENERAL
Anergen, Inc. (the "Company" or "Anergen") is focused on the treatment of
autoimmune diseases through the discovery and development of proprietary
therapeutics that selectively interrupt the disease process. Anergen's current
research and development efforts are focused on two distinct technology
platforms, AnergiX(TM) and AnervaX(TM), that Anergen believes may be used to
treat a broad range of autoimmune diseases without generally suppressing the
immune system. Anergen has completed a Phase I clinical trial of Anergen's
AnergiX compound for the treatment of multiple sclerosis ("MS"), is currently
conducting a Phase I clinical trial of Anergen's rheumatoid arthritis ("RA")
AnergiX compound for the treatment of RA and has completed a Phase IIa clinical
trial of its AnervaX compound for the treatment of RA. In June 1996, Anergen
entered into a collaborative agreement with N. V. Organon ("Organon") to develop
the AnergiX treatment for RA.
Anergen was founded in 1988 to discover and develop biopharmaceutical
compounds for the treatment of autoimmune diseases. To achieve profitable
operations, Anergen, alone or with others, must successfully develop, obtain
regulatory approval for, manufacture and market products. Anergen does not have
any products available for sale nor does it expect to have any products
commercially available for at least several years, if at all. Anergen's
potential products are at the early stages of research and development, with
only limited human testing of certain of Anergen's products undertaken to date.
The products currently under development by Anergen will require significant
research, laboratory testing and clinical trials and investment of capital prior
to their commercialization. There can be no assurance that any potential
products will be successfully developed, prove to be safe and efficacious in
clinical trials, meet applicable regulatory standards, be capable of being
produced in commercial quantities at acceptable costs or be successfully
marketed.
In the body's immune system, T cells normally regulate the identification
and destruction of foreign substances and malignant cells. Autoimmune diseases
are caused by abnormal destruction of healthy body tissues by disease-specific T
cells. Anergen's results to date suggest that treatments based on its technology
platforms may interrupt the chain of events fundamental to the onset and
continuation of certain autoimmune diseases. Anergen's AnergiX technology is
designed to selectively destroy or inactivate (anergize) the T cells implicated
in the disease process. Anergen's second core technology, AnervaX, stimulates
the immune system to produce antibodies that may interfere with the presentation
of self-antigens to destructive T cells. Anergen believes that, because its
potential therapeutics target only disease-specific T cells, the normal function
of the immune system should remain unaffected. In contrast, currently available
therapies for autoimmune diseases treat only the symptoms of the disease or
broadly suppress the immune system, which can compromise the ability of the
immune system to protect against foreign substances.
Anergen initiated a Phase I clinical trial of its AnergiX compounds for the
treatment of MS in September 1996. This trial was completed in August 1998. The
AnergiX compound is designed to inactivate (anergize) or create cell death in
the specific T cells of the immune system responsible for disease progression
without affecting other T cells involved in the immune defense. The Phase I
results for AnergiX suggested that the pharmaceutical was safe and well
tolerated. Anergen also observed a trend toward potential patient benefit,
although this trend will require substantiation by further clinical study.
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In April 1996, Anergen initiated a multicenter, double-blind,
placebo-controlled Phase IIa clinical trial of its AnervaX compound for the
treatment of RA. This trial completed in December 31, 1997. The Phase IIa
results for AnervaX suggested that the pharmaceutical was safe, well tolerated
and provided persistent clinical benefit for symptoms of advanced rheumatoid
arthritis in a segment of the trial that utilized a vaccination administration
schedule of once every six weeks. These results must be confirmed in subsequent
Phase II clinical trials.
In July 1998 Anergen initiated a multicenter, double-blind
placebo-controlled Phase I clinical trial of its AnergiX compound for the
treatment of rheumatoid arthritis. The study is ongoing.
Anergen entered into a collaborative agreement with Novo Nordisk in August
1993 under which Novo Nordisk, in exchange for certain marketing rights, would
support research and development of Anergen's MS, Myasthenia Gravis ("MG") and
Insulin Dependent Diabetes Mellitus ("IDDM") programs, make milestone payments,
and pay royalties on product sales, if any. Anergen had the right to co-promote
any resultant products for MS and MG in North America. Anergen was to receive
royalties on any products in these three disease areas which were not
co-promoted. In addition, at the time of the agreement, Novo Nordisk made an $8
million equity investment in Anergen for 1,219,745 shares of Anergen's Common
Stock. In March 1996, the development program with Novo Nordisk was extended
through August 1998. Anergen recorded $2.6 million in contract revenues related
to this agreement in 1997 as compared to $3.1 million and $3.0 million in 1996
and 1995, respectively. On February 9, 1998, Anergen announced that it had
agreed with Novo Nordisk to terminate the collaboration, ending August, 1998.
Novo Nordisk reimbursed Anergen for the cost of completing the Phase I clinical
trial in multiple sclerosis. All rights to all programs returned to Anergen. In
February, 1998, Novo Nordisk paid Anergen $1 million, the estimated cost to
complete the trial.
In June 1996, Anergen entered into a collaborative agreement with N.V.
Organon under which Organon, in exchange for certain marketing rights, will
support research and development of an AnergiX compound to treat RA that
incorporates a proprietary peptide discovered by Organon. Under the arrangement,
Anergen received a one-time license fee of $2 million in September 1996, and
Organon will support research and development, make milestone payments and pay
royalties on sales, if any. Anergen recorded $3.1 million in research support
related to this agreement in 1997 and $412,000 in 1996.
AUTOIMMUNE DISEASES
Background. Normally, the immune system recognizes and distinguishes
between invading foreign substances or "antigens" and the body's own tissue. The
body is able to react continually to a wide variety of antigens, to remember a
foreign substance to which it has been exposed previously, and to rid itself of
a foreign substance. The ability of the immune system to distinguish between its
own tissue (self) and foreign substances is essential for its normal function.
The recognition and memory processes of the immune system are controlled by
the activity of several types of cells. One of the more important, the "T cell,"
plays a critical role in recognizing antigens, initiating an immune response and
regulating the resulting cascade of immunological events. Another type of cell,
the "B cell," secretes antibodies that are involved in the recognition and
neutralization of antigens. These processes require the involvement of proteins
called human leukocyte antigen ("HLA") molecules which are found on the surface
of certain cells in the body. The HLA molecules are encoded by
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gene complexes called major histocompatibility complexes ("MHC"). The terms HLA
and MHC are sometimes used interchangeably.
When a foreign substance enters the body, antigen presenting cells, which
act as scavenger cells, encounter and engulf the foreign substance. These
scavenger cells internally break down the antigen into smaller components called
"peptides." The antigen presenting cell then transports each individual peptide,
called an "epitope," bound to the HLA molecule as a complex, to its outer cell
membrane where it is presented to various T cells. Once a responsive T cell is
stimulated, it initiates an immune response that eliminates the foreign
substance from the body. T cells recognize HLA-epitope complexes through
receptors on their surfaces, with each type of T cell recognizing only one out
of millions of possible HLA-epitope complexes. There are several classes of HLA
molecules, with HLA Class II ("HLA II") molecules involved in the presentation
of self-antigens.
While the immune system is normally extremely efficient in seeking and
destroying foreign substances, in some cases, for reasons that are not yet
understood, the immune system is triggered to begin destroying the body's own
healthy tissue, resulting in autoimmune diseases such as RA, MS, IDDM and MG. In
these diseases, "self" tissue is presented to T cells which respond by
initiating an immune response that destroys healthy tissue. For example, T cells
are involved in the destruction of nerve structures in MS, joint tissue in RA,
and insulin-producing SS cells in IDDM.
Existing Therapeutic Approaches. Traditional therapies for autoimmune
diseases include steroids and other immunosuppressive drugs that generally treat
the symptoms rather than the cause of the disease and are unable to prevent the
activation of T cells that initiate the destructive immune response. Current
treatments are typically administered based on disease severity. For mild forms
of these diseases, drugs that ameliorate the symptoms may be given. These drugs
do not prevent the progression of tissue destruction and are relatively
ineffective in treating more severe symptoms. In advanced disease stages, more
powerful immunosuppressive drugs are used to suppress the body's entire immune
system. This has some therapeutic effect, but also limits the body's ability to
respond to invading foreign substances, which substantially increases the risk
of contracting other illnesses. In addition, such drugs generally have numerous
other unwanted and often severe side effects.
ANERGEN TECHNOLOGY
Anergen's technology programs focus on the discovery and development of
proprietary therapeutics that destroy or inactivate T cells involved in the
disease process or selectively interrupt antigen presentation to the T cells
without affecting the protective functions of the immune system. Anergen
believes that its approaches for preventing or arresting autoimmune diseases may
result in therapies that are more specific and have fewer side-effects than
currently available treatments. The two technology platforms, AnergiX and
AnervaX, under development by Anergen are summarized below.
AnergiX Technology. Anergen's AnergiX technology is currently being used to
develop products for MS, RA, IDDM and MG. An AnergiX compound consists of an
epitope of the self-antigen that would normally be associated with triggering an
autoimmune response in a particular disease, combined with a soluble HLA II
molecule. The AnergiX compound thus has two of the three primary elements
associated with the autoimmune response, but lacks the third element, the
antigen presenting cell. It is believed that the activation of T cells requires
not only the initial signal provided by binding to the T cell receptor of the
HLA-epitope complex which is on the surface of
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antigen presenting cells, but also a "second signal" provided by the antigen
presenting cell itself. Anergen believes that the binding of its AnergiX
compound to the receptor site of the destructive T cell, in the absence of the
antigen presenting cell and its "second signal" inactivates that T cell. This
inactivated or nonresponsive state is referred to as a state of "anergy."
Anergen believes that by inducing anergy, the autoimmune response can be
interrupted. In addition, Anergen has shown that in the presence of AnergiX, a
significant percentage of T cells may undergo apoptosis, or programmed cell
death, which will also serve to interrupt the autoimmune process.
Anergen believes, based on its research to date, that the state of anergy
created by the introduction of Anergen's AnergiX may last for periods of up to
several months. The results of Anergen's research demonstrated that a state of
anergy may even be induced in T cells that have already been activated,
indicating that such T cells could be inactivated even after the destructive
chain reaction has begun. Because Anergen believes that its AnergiX compounds
will bind only to T cells specific to a disease, other T cells are not expected
to be affected, and the rest of the immune system should remain responsive to
foreign substances.
AnervaX Technology. Anergen's AnervaX technology is currently being
developed to treat RA and Type I Diabetes DiavaX. AnervaX is a synthetic peptide
vaccine consisting of a small portion of the HLA II molecule. AnervaX is
designed to elicit an immune response that interferes with the presentation of
self-antigens to T cells. This immune response is intended to stimulate the
production of a patient's own antibodies to a subset of the HLA molecules on the
patient's antigen presenting cells. Anergen believes that because AnervaX
targets only the subset of HLA molecules that appear to be involved in the
particular autoimmune disease, this approach potentially will allow for the
prevention or treatment of autoimmune disease without generally suppressing the
patient's overall immune system.
PRODUCTS UNDER DEVELOPMENT
The following table sets forth the current status of Anergen's product
development programs.
<TABLE>
<CAPTION>
PATIENT POPULATION CORPORATE DEVELOPMENT
DISEASE TARGET TECHNOLOGY U.S./WORLDWIDE ALLIANCES(1) STATUS(2)
-------------- ---------- ------------------- ------------- -----------
<S> <C> <C> <C> <C>
Multiple Sclerosis.... AnergiX 350,000/600,000 Phase I
Rheumatoid
Arthritis........... AnervaX 2,500,000/7,000,000 -- Phase IIa
AnergiX 2,500,000/7,000,000 Organon Phase I
Insulin-Dependent
Diabetes Mellitus... AnergiX 1,000,000/3,000,000 Preclinical
Myasthenia Gravis..... AnergiX 25,000/50,000 Preclinical
</TABLE>
- -------------------------
(1) See "Business -- Collaborative Arrangements" for a discussion of the
relative rights of Anergen and its collaborative partners.
(2) Research: Initiation of research studies.
Preclinical: Identification of a specific molecule for potential human
testing.
Phase I: Initial phase of human clinical testing to determine safety and
measure certain biological parameters.
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Phase IIa: Multicenter, double-blind, placebo-controlled clinical trial for
safety, immunogenicity, dosage determination and initial efficacy in a
limited patient population.
Multiple Sclerosis. Multiple sclerosis is a progressive inflammatory
disease of the central nervous system that predominantly affects young adults
and causes increasing neurologic damage and disability throughout life. Symptoms
range from painful facial muscle spasms, vertigo and vomiting to a myriad of
motor and sensory problems. In the United States, the average longevity of
patients after diagnosis with MS is over thirty years. The care of MS patients
requires long-term medical, neurologic and psychological treatment and support.
Current therapies, which have limited impact on the disease state, and primarily
effect symptoms, include two beta interferon drugs. Based on published data and
other sources, Anergen believes that there are approximately 600,000 cases of MS
worldwide. Anergen does not know what side-effects, if any, may result from
treatment using Anergen's AnergiX approach. Such side-effects, if any, will be
identified during human clinical trials. If Anergen is successful in obtaining
approval to market any of its treatments, it will have to compete for market
share against other therapies which may exist at that time.
Anergen and Novo Nordisk have developed a potential AnergiX therapeutic for
MS which is a compound of an HLA molecule combined with a peptide derived from
myelin basic protein, the self-antigen believed to be involved in MS. Anergen
initiated Phase I clinical testing of its AnergiX for MS in 1996 and completed
the clinical trial in August 1998. Anergen's preclinical tests demonstrated that
the use of an AnergiX compound prevented or reduced paralysis caused by the T
cell-initiated destructive autoimmune response in an animal model of MS. The
Phase I clinical trial suggests that AnergiX for the treatment of MS is safe and
well tolerated. Anergen also observed a trend toward potential patient benefit,
although this trend will require substantiation by further clinical study.
Additionally, in vitro testing of AnergiX on human cells demonstrated
inactivation of T cells associated with MS. This study also indicated that
patients' T cells respond to the same antigen over time and that potentially
effective doses appear to be low. The collaboration with Novo Nordisk terminated
effective February 9, 1998 with all rights returning to Anergen.
Rheumatoid Arthritis. Rheumatoid arthritis is a systemic inflammatory
disease that causes joint pain, swelling and, eventually, deformities. In some
cases, people afflicted with RA experience severe musculoskeletal disability.
Over time, progression of the disease involves degradation and destruction of
the surrounding cartilage and bone. Current treatment of RA involves the use of
a variety of drugs in successive stages: first, with drugs having analgesic
actions such as aspirin and other non-steroidal and anti-inflammatory drugs;
second, with agents such as gold and penicillamine that reduce the symptoms of
RA; and third, with drugs which attempt to contain the disease, including
immunosuppressive drugs such as corticosteroids and methotrexate. Each of these
three approaches has side effects of varying intensity and risks that increase
as one moves to the more aggressive therapies. Based on published data and other
sources, Anergen believes that there are approximately 7,000,000 cases of RA
worldwide.
Anergen completed Phase I clinical testing of its AnervaX peptide vaccine
to treat RA in October 1995 and initiated Phase IIa clinical testing in April
1996. The Phase IIa study completed in December 31, 1997. Preclinical testing
demonstrated that Anergen's AnervaX approach may prevent the onset of disease
and reduce the severity of active disease in certain animal models of autoimmune
disease (experimental allergic encephalo-
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myelitis and non-obese diabetic ("NOD") mice). In vitro testing indicates that
animals treated with the AnervaX peptide vaccine generate antibodies against HLA
II molecules. Anergen believes that such antibodies bind to HLA II molecules and
that this binding may interfere with the interaction between HLA and T cells
that is involved in the progression of autoimmune disease. The results of the
Phase I study suggest that the vaccine is well tolerated and capable of inducing
an antibody response. The results of the Phase IIa study continued to suggest
that AnervaX is safe, well tolerated, and can provide a persistent clinical
benefit for symptoms of advanced Rheumatoid Arthritis in a segment of the trial
which utilized a vaccination administration schedule of once every six weeks.
These results also must be confirmed in subsequent Phase II clinical trials.
In addition, Anergen is developing an AnergiX compound to treat RA in
conjunction with Organon under an agreement entered into in June 1996. The
compound to be developed uses Anergen's proprietary AnergiX technology and
incorporates a proprietary peptide discovered by Organon. Under the agreement,
Organon, in exchange for certain marketing rights, will support research and
development, including the full cost of all clinical testing, pay a one-time
license fee, make milestone payments and pay royalties on product sales, if any.
Anergen filed an IND for AnergiX for the treatment of RA in March, 1998 and
initiated a Phase I clinical trial in July 1998.
Insulin-Dependent Diabetes Mellitus. IDDM, or Type I diabetes, is caused
by an autoimmune attack resulting in destruction of the insulin-producing SS
cells in the pancreas. Insulin regulates the cellular uptake and metabolism of
glucose, and its deficiency leads to hyperglycemia, diabetic acidosis, and
diabetic coma. Long-term complications include vision loss, renal failure and
peripheral neuropathy. Currently, individuals with IDDM are given insulin to
supplement their ability to produce sufficient amounts of the hormone. IDDM
usually appears in individuals before the age of 20 and affects about 0.5% of
the Caucasian population worldwide. Based on published data and other sources,
Anergen believes that there are approximately 3,000,000 cases of IDDM worldwide.
Anergen has performed preclinical studies using an AnergiX compound
composed of an MHC molecule coupled with a synthetic glutamic acid decarboxylase
("GAD") peptide in NOD mice, an animal model of IDDM. The GAD peptide is
suspected to be the self-antigen which leads to the autoimmune attack in
diabetes. Anergen tested this compound by treating NOD mice in a dosing regimen
designed to inactivate or anergize disease-causing T cells, thereby preventing
diabetes. Results of the study showed that treatment with the AnergiX complex
reduced the rate of destruction of insulin-producing SS cells in a dose
dependent manner, while treatment with the GAD peptide alone accelerated the
disease.
DiavaX. Anergen has performed preclinical studies using an extension of
the AnervaX technology, called DiavaX. The compound includes a portion of the
MHC molecule found in a majority of diabetes patients. The preclinical studies
have shown that DiavaX has had success in delaying and suppressing the onset of
Type I diabetes in established animal models (NOD mice).
Myasthenia Gravis. MG is a neuromuscular disorder that is characterized by
muscle weakness and, in severe cases, may lead to death. Current methods of
treatment of MG utilize drugs that only ameliorate the symptoms and generally
are not effective in most cases of moderate or progressive MG. The more powerful
of these drugs have significant unwanted side effects. Based on published data
and other sources, Anergen believes that there are approximately 50,000 cases of
MG worldwide.
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Anergen has established an in vivo experimental model of autoimmune
myasthenia gravis in rats, which is considered pathologically and clinically
comparable to human MG. Initial results indicate that Anergen's AnergiX for MG
significantly reduces clinical symptoms of this disease in rats. Additionally,
Anergen tested its therapeutic approach for MG on human cells. Through this
study, Anergen has identified what it believes to be an appropriate antigenic
peptide involved in MG. Using an AnergiX compound, Anergen has demonstrated in
vitro inactivation of T cells associated with MG and that low doses appear to be
therapeutically effective.
ADDITIONAL APPLICATIONS FOR ANERGEN TECHNOLOGIES
Anergen believes that its core technologies could be applied to a number of
the other autoimmune diseases. The creation of an effective AnergiX product
designed to inactivate the T cells associated with a specific autoimmune disease
requires correct combination of a proper epitope specific for the target
autoimmune disease with a proper HLA molecule associated with that disease.
Recent advances in the understanding of events that trigger autoimmune diseases
have accelerated the search for the epitopes associated with particular
diseases. Anergen intends to license technology developed by others and to
collaborate in the research and development of epitopes that, when combined with
Anergen's HLA molecules in a proprietary soluble form, would result in AnergiX
compounds for the treatment of other autoimmune diseases.
In order to develop additional AnervaX peptide vaccine products, Anergen
must first identify the particular HLA sub-type involved with initiation and
continuation of the particular autoimmune disease. Anergen must then identify
that portion of the HLA molecule sub-type that triggers an immune response. It
is this response that interferes with the presentation of the self antigen to
disease-related T cells. Based upon recent advances in the understanding of the
genetic clustering of HLA sub-types and their involvement in other autoimmune
diseases, Anergen believes additional product candidates may be developed
utilizing its AnervaX core technology.
While development and commercialization of Anergen's approach to altering
autoimmune disease states remains Anergen's focus, Anergen is also monitoring
other opportunities that may arise out of its technology and expertise,
including the development of diagnostics for autoimmune and related diseases and
the possibility of adapting its T cell-specific drug delivery approach to
delivering compounds that would kill particular T cells, a method that may prove
useful in severe cases where an autoimmune disease has substantially progressed.
Anergen expects to pursue funding from collaborative partners prior to extensive
research in any of these areas.
COLLABORATIVE ARRANGEMENTS
Novo Nordisk A/S. In August 1993, Anergen entered into a collaborative
agreement with Novo Nordisk with an initial three-year development term and Novo
Nordisk made an equity investment in Anergen. Under the collaborative agreement,
Novo Nordisk was to make milestone payments and support research and development
of Anergen's MS, MG and IDDM programs in exchange for exclusive worldwide rights
to products developed under the collaboration, including rights to commercialize
these products, subject to the payment of royalties to Anergen. Anergen retained
rights of co-promotion in North America for therapeutics in MS and MG. In the
event Anergen engages in co-promotion of its MS and MG products in North
America, Novo Nordisk agreed to modify the royalty payments made to Anergen to
compensate for the level of its marketing and sales
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efforts in amounts to be negotiated. In March 1996, Anergen and Novo Nordisk
extended the term of the development program by an additional two-year period
through August 1998. On February 9, 1998 Anergen announced that it and Novo
Nordisk had agreed to terminate the agreement between the two parties. All
rights returned to Anergen and it will not have any future obligation to Novo
Nordisk. Novo Nordisk reimbursed Anergen for the cost of the ongoing Phase I
clinical trial in Multiple Sclerosis. In February 1998, Novo Nordisk paid
Anergen $1 million, the estimated costs to complete the Phase I study. Anergen
recorded $2.6 million in contract revenues related to this agreement in 1997
compared to $3.1 million and $3.0 million in 1996 and 1995, respectively.
N.V. Organon. In June 1996, Anergen entered into a collaborative agreement
with Organon under which Organon paid a license fee of $2 million, will make
milestone payments, and support research and development of an AnergiX compound
intended for the treatment of RA in exchange for certain marketing rights,
including certain rights to the commercialization of these products, subject to
the payment of royalties to Anergen. The compound to be developed uses Anergen's
proprietary technology and incorporates a proprietary peptide discovered by
Organon coupled with an HLA molecule. This arrangement has no effect on
Anergen's ownership of its AnervaX therapeutic intended to treat RA. Anergen's
development program under the Organon agreement has an initial three-year term.
Under the agreement, Anergen granted to Organon exclusive worldwide rights to
any products developed under the collaborative agreement, including rights to
commercialize the products. While the agreement initially grants Organon rights
to any AnergiX compounds within the field of RA, after an initial Phase I study,
Anergen has the right, at its sole discretion, to convert Organon's rights to a
non-exclusive basis, in which case milestone payments and royalty rates would be
modified.
The agreement with respect to marketing rights continues in full force for
as long as Organon is engaged in marketing such products. Organon may terminate
the development program after thirty months by giving Anergen six months prior
written notice. Anergen has retained certain limited rights of co-promotion in
North America for therapeutics developed under the arrangement. In the event
Anergen engages in co-promotion of products in North America, Organon has agreed
to modify the royalty payments made to Anergen to compensate for the level of
its marketing and sales efforts in amounts to be negotiated. The development
program is subject to ongoing review by a research committee which includes
equal representation of both partners. The development expenses incurred by
Anergen and reimbursable by Organon are expected to be significant and increase.
Anergen recorded $3.1 million in contract revenues related to 1997,
compared to $412,000 in 1996.
Other Arrangements. Anergen has several collaborations with academic and
clinical researchers to perform certain research, development and clinical trial
activities. To the extent that Anergen is unable to maintain or establish such
collaborative arrangements, Anergen's research, development and clinical
activities and business would be adversely affected.
Anergen's strategy for the development, clinical trials, manufacturing and
commercialization of its products includes maintaining existing, and
establishing additional, collaborations with corporate partners, licensors,
licensees and others. There can be no assurance that Anergen will be able to
maintain existing collaborative arrangements in total or for each disease area
or establish new collaborative arrangements in the future. To the extent that
Anergen is unable to maintain or establish such collaborative arrangements,
Anergen's
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research and development efforts and business would be adversely affected. In
addition, Anergen's collaborative partners may develop, either alone or with
others, products that compete with the development and marketing of Anergen's
products. The development of such competing products may result in the
withdrawal of support with respect to all or a portion of Anergen's technology
which would have a material adverse effect on Anergen's business, financial
condition and results of operations.
MANUFACTURING
Manufacture of Anergen's AnergiX compounds requires the production of two
basic components: the disease specific epitope and the HLA molecule. Anergen
then combines these two component parts and puts them in a soluble form suitable
for a therapeutic product. Anergen is currently synthesizing several different
epitopes related to MS, RA, IDDM and MG for use in its research and development
operations. To date, Anergen has contracted with an outside manufacturer to
produce the selected MS specific peptide under GMP guidelines. In the future
Anergen may consider scaling up its synthesis operations in order to produce
these epitopes internally.
Production of HLA molecules can be accomplished in one of two ways: HLA
molecules can be extracted from cells cloned from commercially available cell
lines or HLA molecules can be produced using recombinant DNA technology. During
1993, Anergen began producing HLA molecules in its pilot clinical manufacturing
facility. The initial production utilizes a mammalian cell culture system to
grow cells from a human cell line from which HLA molecules are extracted. In
1995, Anergen was inspected and granted a site license to manufacture products
for human use by the California Food and Drug Administration. Anergen is
currently in the process of evaluating production of HLA molecules using
recombinant DNA technology. Anergen believes that either production methodology
will provide sufficient quantities of HLA for Anergen's anticipated clinical
trials.
Anergen has contracted with an outside manufacturer to fill, finish and
package its final compounds. Anergen's strategy is to maintain control over its
AnergiX manufacturing technology which will facilitate seeking of patent
protection and enable timely supply of products for clinical trials. Whether
Anergen will choose to develop a full-scale manufacturing facility, rely on its
corporate partner, or rely on outside contract manufacturing will be determined
in the future after consideration of Anergen's financial and scientific
resources and the potential advantages and disadvantages of these alternatives.
See "Risk Factors that May Affect Future Operating Performance" and "Need to
Develop Manufacturing Capabilities."
Manufacture of Anergen's AnervaX compounds is performed by an outside
contract manufacturer and the resultant product is filled and finished by a
second subcontractor. There can be no assurance that Anergen will be able to
find qualified outside parties to be able to perform these functions on a timely
basis or at a quality and price level that is acceptable to Anergen in the
future.
MARKETING AND SALES
Anergen currently has no sales, marketing or distribution capability.
Anergen has entered a collaborative relationship with Organon for the
commercialization of its AnergiX products for RA. For other potential products,
Anergen intends to rely on relationships with one or more pharmaceutical
companies with established distribution systems and direct sales forces to
market its products. In the event that Anergen is unable to reach
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agreement with one or more pharmaceutical companies to market its products, it
may be required to market its products directly and to develop a marketing and
sales force with technical expertise and with supporting distribution
capability. There can be no assurance that Anergen will be able to establish
in-house sales and distribution capabilities or relationships with third
parties, or that it will be successful in gaining market acceptance for its
products. To the extent Anergen enters into co-promotion or other licensing
arrangements, any revenues received by Anergen will also depend upon the efforts
of third parties, and there can be no assurance that such efforts will be
successful.
PATENTS AND PROPRIETARY RIGHTS
Anergen is pursuing patent protection for its proprietary technologies.
Anergen has five U.S. patents covering MHC-peptide complexes, methods of making
them, and their use to induce anergy in T cells. All five U.S. patents in such
series expire in 2009. Anergen has also been issued five other U.S. patents
based upon other aspects of its research. In June 1996, Anergen received five
patents directed to the MHC-peptide complexes, in certain European countries.
These patents expire in 2008. Related patents have been issued in Japan and
Korea, expiring in 2008. In addition, Anergen has filed other patent
applications in Canada, the EPO and Japan. Pending patent applications in the
U.S. and Japan include those covering different aspects of Anergen's AnergiX and
AnervaX technologies.
Anergen has also entered into a number of collaborative research
arrangements with consultants at academic institutions. These agreements
generally provide for exchanges of information and for nondisclosure of
technical information by both parties, but Anergen's current agreements do not
obligate Anergen to release any of its technology for use by any other entities
nor commit Anergen to pay royalties on any discovery made in connection with
such research agreements. Anergen has a "technology license agreement" with a
collaborator related to its AnervaX technology which provides for payment of
royalties if resultant products are commercialized. In the future, Anergen may
enter into agreements which provide for royalties in exchange for technology
rights.
Anergen's success will depend in part on its ability to maintain patent
protection for its therapeutic approach and for any developed products, to
preserve its trade secrets and to operate without infringing the proprietary
rights of third parties. Although Anergen has obtained and applied for patents
covering certain aspects of its technology, no assurances can be given that
additional patents will be issued or, if issued, that the scope of any patent
protection will be significant, or that the patents will be held valid if
subsequently challenged. Moreover, Anergen cannot ascertain with certainty that
no patent conflict will exist with other products or processes which could
compete with Anergen's approaches.
The terms Anergen, AnergiX, MS/AnergiX, MG/AnergiX, IDDM/AnergiX,
RA/AnergiX, AnervaX and DiavaX are trademarks of Anergen. Anergen's registration
of the trademarks Anergen, AnergiX, and AnervaX are currently pending, and
Anergen intends to register the remaining trademarks.
COMPETITION
The biotechnology and pharmaceutical industries are characterized by
rapidly evolving technology and intense competition. Anergen's competitors
include major pharmaceutical, chemical and specialized biotechnology companies,
most of which have financial, technical, research and development,
manufacturing, clinical and marketing resources significantly greater than those
of Anergen. Anergen believes that these other entities recognize the
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need for effective therapies for the autoimmune diseases targeted by Anergen and
are highly motivated to develop such therapies. In addition, many specialized
biotechnology companies have formed collaborations with large, established
companies to support research, development and commercialization of products
that may be competitive with those of Anergen. Academic institutions,
governmental agencies and other public and private research organizations are
also conducting research activities and seeking patent protection and may
commercialize products on their own or through joint ventures. Anergen is aware
of certain products in development by competitors that are intended to be used
for the prevention or treatment of certain diseases Anergen has targeted for
product development. The existence of these products, or other products of which
Anergen is not aware, or products or treatments that may be developed in the
future which may be more effective, may adversely affect the commercialization
or marketability of products which may be developed by Anergen or potentially
render Anergen's technology obsolete or non-competitive.
Anergen's competitive position will depend on its ability to attract and
retain qualified scientific and other personnel, develop effective proprietary
products, implement production and marketing plans, obtain patent protection and
secure adequate capital resources. In addition, the first pharmaceutical product
to reach the market in a therapeutic or preventive area is often at a
significant competitive advantage relative to later entrants to the market.
Anergen expects its products, if approved for sale, to compete primarily on the
basis of product efficacy, safety, patent position, reliability, price and
patient convenience.
There are numerous pharmaceutical and biotechnology companies developing
therapies against autoimmune diseases. Many pharmaceutical companies are working
on products to treat MS. Current therapies, which have limited impact on the
disease state and primarily affect symptoms, include two beta interferon drugs.
Other potential therapeutics which target the underlying disease state include
oral tolerance therapy and peptide-based therapies. In RA, there are also many
approaches under development which target the underlying disease state including
oral tolerance, peptide-based therapies, peptide vaccines to the T cell
receptors, humanized antibodies and antagonist of tumor necrosis factor (TNF).
In IDDM, one experimental approach is based on non-specific inhibition of T
cells using cyclosporin, a general immunosuppressant. In patients who already
have IDDM, transplantation of pancreas or insulin-producing b cells is also
being explored. Autoimmune diseases are a major target for many companies
developing therapeutics, and it is unclear which approaches will work most
effectively.
Anergen believes that the ability of its AnergiX to inactivate only the
specific T cells related to a particular autoimmune disease may provide, if
Anergen's products are successfully developed, an important competitive
advantage over companies using approaches which have broader suppressive effects
on the human immune system. Anergen also believes that its ability to inactivate
these specific T cells without the use of toxins, if successfully demonstrated,
would be advantageous. Anergen also believes that its AnervaX approach, if
successfully developed, may offer a competitive advantage if it is found to
interrupt disease progression without severely suppressing the immune system.
GOVERNMENT REGULATION
Anergen's research and development activities are subject to regulation by
numerous governmental authorities in the United States and other countries.
Further, the future production and marketing of any products developed by
Anergen would also be regulated. In the United States, vaccines, drugs and
biologics are subject to rigorous review by the
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Food and Drug Administration ("FDA"). The Federal Food, Drug, and Cosmetic Act,
the Public Health Service Act and other federal statutes and regulations govern
or influence the testing, manufacture, safety, labeling, storage, record
keeping, approval, advertising and promotion of such products. Noncompliance
with applicable requirements can result in fines, recall or seizure of products,
clinical study holds, total or partial suspension of production, refusal of the
government to approve New Drug Applications ("NDA"), Product License
Applications ("PLA"), Establishment License Applications ("ELA") or allow
Anergen to enter into supply contracts and criminal prosecution. The FDA also
has the authority to revoke PLAs and ELAs previously granted.
In order to obtain FDA approval of a new biological product, Anergen must
submit proof of safety, purity, potency and efficacy. In most cases such proof
entails extensive pre-clinical, clinical and laboratory tests. The testing,
preparation of necessary applications and processing of those applications by
the FDA is expensive and time consuming, can vary based on the type of product,
and may take several years to complete. There is no assurance that the FDA will
act favorably or quickly in making such reviews, and significant difficulties or
costs may be encountered by Anergen in its efforts to obtain FDA approvals that
could delay or preclude Anergen from marketing any products it may develop or
furnish an advantage to competitors. The FDA may also require post-marketing
testing and surveillance to monitor the effects of approved products or place
conditions on any approvals that could restrict the commercial applications of
such products. Product approvals may be withdrawn if compliance with regulatory
standards is not maintained or if problems occur following initial marketing. In
addition, delays imposed by the governmental approval process may materially
reduce the period during which Anergen may have the exclusive right to exploit
patented products or technologies.
The FDA approval process for a new biological drug involves completion of
pre-clinical studies which include laboratory tests and animal studies to assess
safety and effectiveness of the drug. Among other things, the results of these
studies as well as how the product will be manufactured are submitted to the FDA
as part of an IND. Unless the FDA objects human clinical trials may then be
conducted 30 days following the receipt of the IND by the FDA. There can be no
assurance that submission of an IND will result in FDA authorization to commence
clinical trials. The results of the clinical trials are submitted to the FDA as
part of a PLA. In addition to obtaining FDA approval for each AnergiX
indication, an ELA must be filed and the FDA must approve the manufacturing
facilities for the product. Product sales may commence if the PLA and ELA are
approved. Regulatory requirements for obtaining such FDA approvals are rigorous
and there can be no assurance that such approvals will be obtained on a timely
basis or at all.
Human clinical trials are typically conducted in three sequential phases,
but the phases may overlap. Phase I trials consist of testing the product in a
small number of patients primarily for safety at one or more dosage levels. In
Phase II, in addition to safety, the efficacy of the product is evaluated in a
patient population slightly larger than Phase I trials, and appropriate dosage
is established. Phase III trials typically involve additional testing for safety
and clinical efficacy in an expanded patient population at geographically
dispersed test sites, and with dosage that will be submitted for approval. A
clinical plan, or "protocol," accompanied by the approval of the institutional
review board at the institution participating in the trials, and patient
informed consent form must be submitted to the FDA prior to commencement of each
clinical trial. The FDA may order the temporary or permanent discontinuation of
a clinical trial at any time if it believes patient safety is at risk. Anergen's
regulatory strategy is to seek input from the FDA at all stages of clinical
testing and manufacturing process development.
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The results of the pre-clinical and clinical studies on biological drugs
such as Anergen's AnergiX are submitted to the FDA in the form of a PLA and ELA
for approval to commence commercial sales. After completion of the FDA's review
of the PLA submission, the submission may be sent to an FDA selected scientific
advisory panel composed of physicians and scientists with expertise in the
particular field. The FDA scientific advisory panel issues a recommendation to
the FDA that includes conditions for approval of the PLA. Although the
recommendation is not binding, the agency generally follows an advisory panel's
advice. Toward the end of the PLA review process, the FDA will conduct an
inspection of the manufacturer's facilities to ensure they are in compliance
with the applicable GMP requirements. If the FDA evaluation of both the ELA
application and manufacturing facilities contained in the PLA application are
favorable, the FDA will issue an approval letter, which usually contains a
number of conditions which must be met in order to secure final approval. In
responding to the PLA, the FDA may grant marketing approval, require additional
testing or information, or deny the application. Governmental approval of
products developed by Anergen may entail limitations on the indicated uses for
which such products may be marketed. Continued compliance with all FDA
requirements and the conditions in an approved application, including product
specification, manufacturing process, labeling and promotional material and
record keeping and reporting requirements, is necessary for all products.
Failure to comply, or the occurrence of unanticipated adverse effects during
commercial marketing, could lead to the need for product recall or other
FDA-initiated action, which could delay further marketing until the products are
brought into compliance.
Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug.
An orphan drug is a drug intended to treat a "rare disease or condition," which
is a disease or condition that affects populations of fewer than 200,000
individuals in the United States or, if victims of a disease number more than
200,000, the sponsor establishes that it does not realistically anticipate that
its product sales will be sufficient to recover its costs. If a product is
designated as an orphan drug, then the sponsor is entitled to receive certain
incentives to undertake the development and marketing of the product, including
limited tax credits and high priority FDA review of an NDA. In addition, the
sponsor that obtains the first marketing approval for a designated orphan drug
for a given rare disease is eligible to receive marketing exclusivity for a
period of seven years. There may be multiple designations of an orphan drug;
however, only the sponsor of the first approved NDA for a given drug for its use
in treating a given rare disease may receive marketing exclusivity. Anergen may
apply for orphan drug designation for some of its products and indications in
development. There is no assurance that the FDA would grant orphan drug
designation or marketing exclusivity for any such indications or products.
Anergen is also subject to regulation by the Occupational Safety and Health
Administration ("OSHA") and the Environmental Protection Agency ("EPA") and to
regulation under the Toxic Substances Control Act, the Resource Conservation and
Recovery Act and other regulatory statutes, and may in the future be subject to
other federal, state or local regulations. Although Anergen believes that its
safety procedures for handling and disposing of hazardous materials comply with
the standards prescribed by current laws and regulations, the risk of accidental
contamination or injury from these materials cannot be completely eliminated. In
the event of such an accident, Anergen could be held liable for any damages that
result and any such liability could exceed the resources of Anergen. In
addition, regulations may be promulgated governing biotechnology that may affect
Anergen's research and development programs. Anergen is unable
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to predict whether any agency will adopt any regulation which would have a
material adverse effect on Anergen's operations.
Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country. The
time required to obtain approvals required by foreign countries may be longer or
shorter than that required for FDA approval, and requirements for licensing may
differ from FDA requirements.
Satisfaction of these FDA requirements, or similar requirements by foreign
regulatory agencies, typically takes several years and the time needed to
satisfy them may vary substantially, based upon the type, complexity and novelty
of the pharmaceutical product. The effect of government regulation may be to
delay or to prevent marketing of potential products for a considerable period of
time and to impose costly procedures upon Anergen's activities. There can be no
assurance that the FDA or any other regulatory agency will grant approval for
any products being developed by Anergen on a timely basis, or at all. Success in
preclinical or early stage clinical trials does not assure success in later
stage clinical trials. Data obtained from preclinical or clinical activities are
susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. If regulatory approval of a product is granted, such
approval may impose limitations on the indicated uses for which a product may be
marketed. Further, even if regulatory approval is obtained, later discovery of
previously unknown problems with a product may result in restrictions on the
product, including withdrawal of the product from the market. Delay in obtaining
or failure to obtain regulatory approvals would have a material adverse effect
on Anergen's business financial condition or results of operations.
PHARMACEUTICAL PRICING AND REIMBURSEMENT
Political, economic and regulatory influences are subjecting the health
care industry in the United States to fundamental change. Initiatives to reduce
the federal deficit and to reform health care delivery are increasing these cost
containment efforts. Anergen anticipates that Congress, state legislatures and
the private sector will continue to review and assess alternative benefits,
controls on health care spending through limitations on the growth of private
health insurance premiums and Medicare and Medicaid spending, the creation of
large insurance purchasing groups, price controls on pharmaceuticals and other
fundamental changes to the health care delivery system. Any such proposed or
actual changes could cause any potential partners of Anergen to limit or
eliminate spending on collaborative development projects. Legislative debate is
expected to continue in the future, market forces are expected to demand reduced
costs and Anergen cannot predict what impact the adoption of any federal or
state health care reform measures or future private sector reforms may have on
its business.
In both domestic and foreign markets, sales of Anergen's proposed products
will depend in part upon the availability of reimbursement from third-party
payors, such as government health administration authorities, private health
insurers and other organizations. In addition, third-party payers are
increasingly challenging the price and cost effectiveness of medical products
and services. Significant uncertainty exists as to the reimbursement status of
newly approved health care products. There can be no assurance that Anergen's
potential products or products discovered in collaboration with Anergen will be
considered cost-effective or that adequate third-party reimbursement will be
available to enable Anergen to maintain price levels sufficient to realize an
appropriate return on its investment in product research, discovery and
development. Legislation and regulations affecting the pricing of
pharmaceuticals may change before Anergen's proposed products
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are approved for marketing. Adoption of such legislation could further limit
reimbursement for medical products. If adequate coverage and reimbursement
levels are not provided by the government and third-party payors for Anergen's
products, the market acceptance of these products would be adversely affected,
which would have a material adverse effect on Anergen's business, financial
condition and results of operations.
PRODUCT LIABILITY INSURANCE
The testing, marketing and sale of human health care products entail an
inherent risk of exposure to product liability claims in the event that the use
of Anergen's technology or prospective products is alleged to have resulted in
adverse effects. While Anergen has taken, and will continue to take, what it
believes are appropriate precautions to minimize exposure to product liability,
there can be no assurance that it will avoid significant liability. Anergen
possesses limited general liability and product liability insurance related to
its clinical trials of AnervaX for RA and AnergiX for MS, and certain other
types of insurance customarily obtained by business organizations. There can be
no assurance that the existing insurance coverage is adequate or that it will
avoid liability. Anergen intends to seek insurance against product liability
risks associated with the testing, manufacturing or marketing of its products.
However, there can be no assurance that it will be able to obtain such insurance
in the future, or that if obtained, such insurance will be sufficient in amount.
Consequently, a product liability claim or other claims with respect to
uninsured liabilities or in excess of insured liabilities could have a material
adverse effect on the business, financial condition or results of operations of
Anergen.
EMPLOYEES
As of December 21, 1998 Anergen had 17 full-time employees, of whom 6 hold
doctoral degrees. Of the 17 full-time employees, 9 are engaged in, or directly
support, Anergen's research and development activities. In February 1998 and
October 1998, Anergen restructured operations, eliminating 48 full time
positions. Anergen considers relations with its employees to be good. None of
Anergen's employees is covered by a collective bargaining agreement. See "Risk
Factors."
PROPERTIES
Anergen's laboratory and administrative facilities occupy approximately
27,000 square feet of space in Redwood City, California. The majority of these
facilities are subject to a lease which expires on January 31, 1999, with a
two-year renewal option. Anergen believes that this space is adequate for its
immediate needs, and that it will be able to obtain additional space as
necessary.
LEGAL PROCEEDINGS
Anergen is not a party to any legal proceedings.
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MANAGEMENT OF CORIXA
At the Effective Time, Merger Sub will cease its corporate existence and
Anergen will remain as the surviving corporation and a wholly-owned subsidiary
of Corixa. The existing officers and directors of Corixa shall remain in such
positions for Corixa following consummation of the Merger. The current officers
and directors of Merger Sub will be the initial officers and directors of the
surviving corporation following consummation of the Merger. The officers,
directors and key employees of Corixa, and their ages as of December 21, 1998,
are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steven Gillis, Ph.D............ 45 President, Chief Executive Officer and
Director
Mark McDade.................... 43 Executive Vice President, Chief Operating
Officer and Director
Steven Reed, Ph.D.............. 48 Executive Vice President and Chief
Scientific Officer
Kenneth Grabstein, Ph.D........ 48 Vice President and Director of Immunology
Michelle Burris................ 33 Vice President and Chief Financial Officer
Syamal Raychaudhuri, Ph.D...... 45 Vice President and Director of Vaccine
Research
Martin Cheever, M.D............ 51 Vice President and Director of Medical
Affairs
Joseph S. Lacob(2)............. 42 Chairman of the Board of Directors
Arnold L. Oronsky, 58 Director
Ph.D.(1)(2)..................
Andrew E. Senyei, M.D.(1)(2)... 48 Director
</TABLE>
- -------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Steven Gillis, Ph.D. has served as President and Chief Executive Officer of
Corixa since 1994. Dr. Gillis was a founder of Immunex Corporation ("Immunex"),
a biotechnology company. From 1981 to 1994, Dr. Gillis served as Executive Vice
President and Director of Research and Development of Immunex, and from 1993 to
1994, served as Acting Chief Executive Officer and Chairman of the Board of
Immunex. From 1990 to 1994, Dr. Gillis also served as President and Chief
Executive Officer of Immunex Research and Development Corporation, a
wholly-owned subsidiary of Immunex, and Chief Scientific Officer of Immunex. In
addition, Dr. Gillis is a director of both Micrologix Biotech, Inc. and Genesis
Research and Development Corporation Limited. Dr. Gillis serves on the
Scientific Advisory Board of Medarex Corporation. Dr. Gillis graduated from
Williams College with a B.A. in Biology and English in 1975 and received his
Ph.D. in Biological Sciences from Dartmouth College in 1978.
Mark McDade has served as Executive Vice President and Chief Operating
Officer of Corixa since 1994. From 1993 to 1994, Mr. McDade served as Chief
Operating Officer of Boehringer Mannheim Therapeutics, a pharmaceutical company,
heading its worldwide pharmaceutical operations. From 1991 to 1992, Mr. McDade
was an independent consultant providing business development and strategic
consulting to a number of biopharmaceutical and pharmaceutical companies. From
1983 to 1991, Mr. McDade held various positions with Sandoz, Ltd., a
pharmaceutical company. Mr. McDade graduated from Dartmouth College with a B.A.
in History in 1977 and received his M.B.A. from Harvard University in 1984.
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Steven Reed, Ph.D. has served as Executive Vice President and Chief
Scientific Officer of Corixa since 1994. From 1993 to the present, Dr. Reed has
served as an Associate Professor of Pathobiology at the University of
Washington. From 1993 to the present, he served as a director of IDRI, which he
founded. From 1984 to the present, Dr. Reed has served as a Professor (Adjunct)
of Medicine at the Cornell University Medical College. From 1984 to 1993, Dr.
Reed served as a Senior Scientist at the Seattle Biomedical Research Institute.
Dr. Reed graduated from Whitman College with a B.A. in Biology in 1973 and
received his Ph.D. in Microbiology from the University of Montana in 1979.
Kenneth Grabstein, Ph.D. has served as Vice President and Director of
Immunology of Corixa since 1994. From 1992 to 1994, Dr. Grabstein was Director
of Cellular Immunology and Director of the Flow Cytometry Facility at Immunex
Research and Development Corporation. From 1995 to the present, he has served as
Affiliate Investigator of the Clinical Research Division of the Fred Hutchinson
Cancer Research Center. Dr. Grabstein graduated from the University of
California, Berkeley with a B.A. in Zoology in 1973 and received his Ph.D. in
Immunology from the University of California, Berkeley in 1982.
Michelle Burris has served as Vice President and Chief Financial Officer of
Corixa since January 1998. From February 1997 to January 1998, she was Vice
President of Finance and Administration of Corixa. From 1996 to February 1997,
she was Director of Finance and Administration of Corixa. From 1995 to 1996, she
was Controller at Corixa. Ms. Burris held several finance and planning positions
at The Boeing Company, an aerospace company, most recently serving as Manager of
Planning and Performance for the Commercial Airplane Group. Ms. Burris is a
Certified Public Accountant, and she graduated from George Mason University with
a B.S. in Marketing and Statistics in 1987 and received her M.B.A. from Seattle
University in 1991.
Syamal Raychaudhuri has served as Vice President of Corixa since February
1997 and has served as Director of Vaccine Research since 1994. From 1993 to
1994, he was Director of Immunology for Actigen, Inc., a biotechnology company,
which merged into Corixa in May 1996. From 1987 to 1993, he was a Senior
Scientist in the Department of Cellular Immunology of IDEC Pharmaceuticals
Corporation, a biopharmaceutical company. Dr. Raychaudhuri graduated from the
University of Calcutta with a B.S. in Chemistry in 1972 and received his Ph.D.
in Biochemistry from the University of Calcutta in 1980.
Martin Cheever, M.D., Ph.D. has served as Vice President and Director of
Medical Affairs of Corixa since December 1997. During that time he also served
as an Affiliate Investigator for the Clinical Research Division for Fred
Hutchinson Cancer Research Center and as Clinical Professor of Medicine,
Division of Oncology for the University of Washington. From 1987 to December
1997, Dr. Cheever was a Professor of Medicine and a Member of the Division of
Oncology, University of Washington School of Medicine. From 1981 to 1987, Dr.
Cheever served as an Associate Professor of Medicine, Division of Oncology,
University of Washington and a Assistant Member, Fred Hutchinson Cancer Research
Center. Dr. Cheever graduated from the University of Michigan, Ann Arbor in
1966, and received his M.D. from the University of Michigan School of Medicine,
Ann Arbor, Michigan in 1970.
Joseph S. Lacob has served as Chairman of the Board of Corixa since 1994.
Mr. Lacob has been a partner of Kleiner Perkins Caufield & Byers, a venture
capital firm, since May 1987. Mr. Lacob is currently the Chairman of the Board
of CellPro,
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Incorporated, Microcide Pharmaceuticals, Inc., Corixa and Cardima, Inc. He also
serves on the Board of Directors of Heartport, Inc., IsoStent and several other
privately-held biotechnology, medical device and health care service companies.
Mr. Lacob graduated from the University of California, Irvine in 1978 with a
B.S. in Biological Sciences and received his M.P.H. from the University of
California, Los Angeles in 1979. Mr. Lacob also received his M.B.A. from the
Stanford Graduate School of Business in 1983.
Arnold L. Oronsky, Ph.D. has served as a director of Corixa since 1994. He
is currently Chairman of the Board of Directors of Coulter Pharmaceuticals Inc.
("Coulter"), a biopharmaceutical company and a director of Signal Pharmaceutical
Inc. From 1995 to 1996, Dr. Oronsky served as President and Chief Executive
Officer of Coulter. From 1994 to the present, Dr. Oronsky has been a general
partner at InterWest Partners, a venture capital firm. From 1984 to 1994, Dr.
Oronsky served as Vice President for Discovery Research at Lederle Laboratories,
a pharmaceutical division of American Cyanamid, Inc., where he was responsible
for the research of new drugs. Since 1988, Dr. Oronsky has served as a senior
lecturer in the Department of Medicine at Johns Hopkins Medical School. Dr.
Oronsky graduated from University College, New York University with a B.A. in
History in 1962 and received his Ph.D. in Biochemistry from Columbia University
in 1968.
Andrew E. Senyei, M.D. has served as a director of Corixa since 1994. Dr.
Senyei has been a general partner of Enterprise Partners, a venture capital
firm, since 1988. Dr. Senyei was a founder of Molecular Biosystems, Inc. and
serves on the board of directors of several private technology companies. Prior
to joining Enterprise Partners, Dr. Senyei was a practicing clinician and
Adjunct Associate Professor of Obstetrics, Gynecology and Pediatrics at the
University of California, Irvine. Dr. Senyei graduated from Occidental College
with a B.A. in Biology in 1972 and received his M.D. from Northwestern
University in 1979.
BOARD OF DIRECTORS COMMITTEES, COMPENSATION OF DIRECTORS AND OTHER INFORMATION
All directors hold office until the next annual meeting of stockholders of
Corixa and until their successors have been elected and qualified. The officers
of Corixa are appointed annually and serve at the discretion of the Corixa
Board.
The Corixa Board has held a total of four regular meetings during the
current year, as well as a special meeting in connection with the acquisition of
GenQuest, Inc. and a special meeting in connection with the Merger. Corixa has
an Audit Committee and a Compensation Committee of the Corixa Board. Each
incumbent director attended at least 75% of the aggregate number of meetings of
the Corixa Board and meetings of the committees of the Corixa Board on which he
serves. There are no family relationships among any of the directors or
executive officers of Corixa.
Prior to February 1998, the Compensation Committee consisted of Mr. Lacob
and Dr. Senyei, two of Corixa's non-employee directors, and acted one time by
written consent in January 1998. Its functions are to review and approve the
compensation and benefits for Corixa's executive officers, administer Corixa's
stock purchase and stock option plans and make recommendations to the Corixa
Board regarding such matters. In February 1998, Dr. Oronsky, a non-employee
director, was appointed to the Compensation Committee.
The Audit Committee currently consists of Dr. Oronsky and Dr. Senyei, two
of Corixa's non-employee directors, and met once during the current year. Its
functions are to
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review the scope and results of financial audits and other services performed by
Corixa's independent accountants and to make recommendations to the Corixa Board
regarding such matters.
Non-employee directors currently receive no cash fees for services provided
in that capacity. Corixa has adopted the 1997 Directors' Stock Option Plan under
which current and future non-employee directors will be eligible to receive
stock options in consideration of their services. See "-- Stock Option and
Incentive Plans -- 1997 Directors' Stock Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except as set forth below and in "Certain Relationships and Related
Transactions of Corixa," no interlocking relationship exists between the Corixa
Board of Directors or Compensation Committee and the board of directors or
compensation committee of any other company, nor has any such interlocking
relationship existed in the past.
Dr. Reed and Mr. McDade are directors of IDRI. Dr. Gillis is a director of
Micrologix Biotech, Inc. and Genesis Research and Development Corporation
Limited. See "Certain Relationships and Related Transactions of Corixa."
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Corixa's Fifth Amended and Restated Certificate of Incorporation limits the
liability of directors to the maximum extent permitted by Delaware law. Delaware
law provides that a director of a corporation will not be personally liable for
monetary damages for breach of such individual's fiduciary duties as a director,
except for liability (i) for any breach of such director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
(iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the DGCL, or (iv) for any transaction
from which a director derives an improper personal benefit. Delaware law does
not eliminate a director's duty of care and this provision has no effect on the
availability of equitable remedies such as an injunction or recission based upon
a director's breach of the duty of care. In addition, Corixa has obtained an
insurance policy providing coverage for certain liabilities of its officers and
directors.
Corixa's Bylaws provide that Corixa shall indemnify its directors and may
indemnify its officers, employees and other agents to the fullest extent
permitted by law. Corixa believes that indemnification under its Bylaws covers
at least negligence and gross negligence on the part of an indemnified party and
permits Corixa to advance expenses incurred by an indemnified party in
connection with the defense of any action or proceeding arising out of such
party's status or service as a director, officer, employee or other agent of
Corixa upon an undertaking by such party to repay such advances if it is
ultimately determined that such party is not entitled to indemnification.
Corixa has entered into separate indemnification agreements with each of
its directors and officers. These agreements require Corixa, among other things,
to indemnify such director or officer against certain expenses (including
attorney's fees), judgments, fines and settlement amounts (collectively,
"Liabilities") paid by such individual in connection with any action, suit or
proceeding arising out of such individual's status or service as a director or
officer of Corixa (subject to certain exceptions, including Liabilities arising
from willful misconduct or conduct that is knowingly fraudulent or deliberately
dishonest or a violation of Section 16(b) of the Exchange Act) and to advance
expenses incurred by such
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individual in connection with any proceeding against such individual with
respect to which such individual may be entitled to indemnification by Corixa.
Corixa believes that its Fifth Amended and Restated Certificate of
Incorporation, Bylaw provisions and indemnification agreements are necessary to
attract and retain qualified persons as directors and officers.
Corixa is not aware of any pending litigation or proceeding involving any
director, officer, employee or agent of Corixa where indemnification will be
required or permitted. Corixa is not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
STOCK OPTION AND INCENTIVE PLANS
Amended and Restated 1994 Stock Option Plan
Corixa's Amended and Restated 1994 Stock Option Plan (the "1994 Plan") was
originally adopted by the Corixa Board in October 1994 and approved by the
stockholders in October 1995, amended and restated in August 1996, which
amendment and restatement was approved by the stockholders in July 1997, and
amended and restated again in July 1997, which amendment and restatement was
approved by the stockholders in September 1997. The 1994 Plan provides for the
grant to employees of Corixa (including officers and employee directors) of
incentive stock options ("ISOs") within the meaning of Section 422 of the Code
and for the grant of nonstatutory stock options ("NSOs") and to employees,
directors and consultants of Corixa. The 1994 Plan is administered by the Corixa
Board or the Compensation Committee (the "Administrator"). The maximum number of
shares that may be subject to options granted to any one employee under the 1994
Plan for any fiscal year is 500,000.
The Administrator has the authority to grant ISOs to employees of Corixa
and to grant NSOs to employees, directors and consultants of Corixa. The
Administrator determines which individuals will be granted options under the
1994 Plan and the terms of such options, including the exercise price, the
number of shares subject to such options, the maximum term for which such
options are to remain outstanding, the date upon which such options are to
become exercisable and the vesting schedule, if any, applicable to such options,
provided that the Administrator, in its discretion, may determine that an
optionee shall have the right to exercise some or all of his or her options,
including options that would not otherwise be exercisable. The exercise price of
each ISO granted under the 1994 Plan must be at least equal to the fair market
value of Corixa Common Stock on the date of grant. The exercise price of each
NSO granted under the 1994 Plan must equal at least 85% of the fair market value
of Corixa Common Stock on the date of grant. The exercise price of any stock
option granted to an optionee who owns stock representing more than 10% of the
voting power of Corixa's outstanding capital stock (a "10% Stockholder") must
equal at least 110% of the fair market value of Corixa Common Stock on the date
of grant. Payment of the exercise price may be made in cash, by check, in the
Administrator's discretion, by promissory note (for optionees other than
non-employee directors), in shares of properly registered Corixa Common Stock
(valued at the fair market value as of the exercise date of the option) that
meet certain holding requirements or, to the extent the option is exercised for
vested shares, through a special sale and remittance procedure conducted by a
Corixa-designated brokerage firm whereby Corixa is paid sufficient funds to
cover the aggregate exercise price of the purchased shares as well as all taxes
that Corixa would be required to withhold as a result of such exercise.
The term of a stock option granted under the 1994 Plan may not exceed 10
years; provided, however, that the term of an ISO granted to a 10% Stockholder
may not exceed
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five years. No option may be transferred by an optionee other than by will or
the laws of descent and distribution, except that an NSO may be assigned in
accordance with the terms of a domestic relations judgment, decree or order
(substantially complying with the requirements of Section 414(p) of the Code)
conveying marital property rights to any spouse or former spouse of the optionee
pursuant to applicable state domestic relations laws, and provided that the
Administrator may, in its discretion, grant transferable NSOs pursuant to stock
option grants specifying (i) the manner in which such NSOs are transferable and
(ii) that any such transfer shall be subject to applicable laws. Except as set
forth in the foregoing sentence, each option may be exercised during the
lifetime of the optionee only by such optionee. To the extent an optionee would
have the right in any calendar year to exercise for the first time one or more
ISOs for shares having an aggregate fair market value (under all Corixa plans
and determined for each share as of the date the option to purchase the share
was granted) in excess of $100,000, any such excess options shall be treated as
NSOs. In the event of a proposed dissolution or liquidation of Corixa, the 1994
Plan requires that each outstanding option terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof) in connection with the change in control. In the event of a
proposed sale of all or substantially all of the assets of Corixa or the merger
of Corixa with or into another corporation, (i) if the options are assumed or an
equivalent option is substituted, one half of the unvested portions of option
grants shall be deemed to have vested immediately prior to such sale or merger,
(ii) if the options are not assumed or an equivalent option is not substituted,
all of the unvested portions of option grants shall be deemed to have vested
immediately prior to such sale or merger, and (iii) if an executive officer of
Corixa is terminated without cause within six months following the consummation
of such sale or merger, all of the entire unvested portion of option grants to
such executive officer shall be deemed to have vested and become fully
exercisable immediately prior to such termination. Upon the termination of an
optionee's employment or other relationship with Corixa, such optionee will have
a limited time within which to exercise any outstanding options, which time
period will vary depending on the reason for termination. The Administrator has
the discretion to grant options that are exercisable for unvested shares of
Corixa Common Stock and, to the extent that an optionee holds options for such
unvested shares of Corixa Common Stock upon termination, Corixa will have the
right to repurchase any or all of the unvested shares at the per-share exercise
price paid by the optionee for the unvested shares.
Pursuant to the July 1997 amendment to the 1994 Plan, the number of
authorized shares is subject to automatic increase, on the first trading day of
each of the ten calendar years beginning in 1998 and ending in 2007, in an
amount equal to 3% of the number of shares of Corixa Common stock outstanding on
December 31 of the immediately preceding calendar year, up to a maximum of
500,000 shares each year over the ten-year period.
The Corixa Board has the authority to amend the 1994 Plan as long as such
action does not adversely affect the rights and obligations with respect to
options or unvested stock issuances then outstanding under the 1994 Plan, and
provided further that stockholder approval is required to increase the number of
shares subject to the 1994 Plan (other than for permissible adjustments in the
event of certain changes in Corixa's capitalization and as described above), to
materially modify the eligibility requirements for 1994 Plan participation, or
to materially increase the benefits accruing to participants under the 1994
Plan. If not terminated earlier, the 1994 Plan will terminate in 2007.
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As of December 21, 1998, options to purchase a total of 289,018 shares of
Corixa Common Stock had been exercised, options to purchase a total of 1,390,287
shares at a weighted average exercise price of $2.98 per share were outstanding
and an aggregate of 685,945 shares remained available for future option grants
under the 1994 Plan.
1997 Directors' Stock Option Plan
The Directors' Plan was adopted by the Corixa Board in July 1997. A total
of 250,000 shares of Corixa Common Stock has been reserved for issuance under
the Directors' Plan. The number of authorized shares is subject to automatic
increase, on the first trading day of each of the five calendar years beginning
in 1998 and ending in 2002, in an amount equal to 50,000 shares of Corixa Common
Stock or such lesser amount as the Corixa Board may establish. The Directors'
Plan provides for the grant of NSOs to non-employee directors of Corixa. The
Directors' Plan is designed to work automatically without administration;
however, to the extent administration is necessary, it will be performed by the
Corixa Board. The Directors' Plan provides that each person who becomes a
non-employee director of Corixa after October 2, 1997, the date of Corixa's
initial public offering, shall be granted NSOs to purchase 15,000 shares of
Corixa Common Stock (the "First Option"). Thereafter, on the first day of each
fiscal year of Corixa on or after 1997, each non-employee director shall be
automatically granted an additional option to purchase 5,000 shares of Corixa
Common Stock (a "Subsequent Option"), provided that, on such date, he or she
shall have served on the Corixa Board for at least six months. The Directors'
Plan provides that the First Option shall become exercisable in installments as
to 1/36th of the total number of shares subject to the First Option each month
after the date of grant of the First Option, and each Subsequent Option shall
become exercisable in installments as to 1/12th of the total number of shares
subject to the Subsequent Option each month after of the date of grant of that
Subsequent Option. The exercise price of all options granted under the
Directors' Plan shall be equal to the fair market value of Corixa Common Stock
on the date of grant of the option. Options granted under the Directors' Plan
have a term of ten years. In the event of the dissolution or liquidation of
Corixa, a sale of all or substantially all of the assets of Corixa, the merger
of Corixa with or into another corporation in which Corixa is not the surviving
corporation or any other capital reorganization in which more than 50% of the
shares of Corixa entitled to vote are exchanged, each non-employee director
shall have either (i) a reasonable time within which to exercise the option,
including any part of the option that would not otherwise be exercisable, prior
to the effectiveness of such liquidation, dissolution, sale, merger,
consolidation or reorganization, at the end of which time the option shall
terminate or (ii) the right to exercise the option, including any part of the
option that would not otherwise be exercisable, or receive a substitute option
with comparable terms as to an equivalent number of shares of stock of the
corporation succeeding Corixa or acquiring its business by reason of such
liquidation, dissolution, sale, merger, consolidation or reorganization. The
Corixa Board may amend or terminate the Directors' Plan; provided, however, that
no such action may adversely affect any outstanding options, and the provisions
regarding the grant of options under the Directors' Plan may be amended only
once in any six-month period, other than to comport with changes in the Employee
Retirement Income Security Act of 1974, as amended, or the Code. If not
terminated earlier, the Directors' Plan will terminate on October 2, 2007.
As of December 21, 1998, options to purchase a total of 60,000 shares at a
weighted average exercise price of $12.36 per share were outstanding and an
aggregate of 190,000 shares remained available for future option grants under
the Directors' Plan.
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1997 Employee Stock Purchase Plan
The 1997 Employee Stock Purchase Plan (the "Purchase Plan") was adopted by
the Corixa Board in July 1997. A total of 125,000 shares of Corixa Common Stock
has been reserved for issuance under the Purchase Plan. The Purchase Plan, which
is intended to qualify under Section 423 of the Code, will be implemented by a
series of offering periods of twelve months duration, with new offering periods
(other than the first offering period) commencing on or about February 1 and
August 1 of each year. Each offering period will consist of two consecutive
purchase periods of six months duration, with the last day of such period being
designated a purchase date. The initial offering period began on October 2,
1997, the date of Corixa's initial public offering, and continued through July
31, 1998, with the first purchase date occurring on January 31, 1998 and
subsequent purchase dates to occur every six months thereafter. The Purchase
Plan permits eligible employees to purchase Corixa Common Stock through payroll
deductions, which may not exceed 15% of an employee's compensation, at a price
equal to the lower of 85% of the fair market value of the Corixa Common Stock at
the beginning of the offering period and on the purchase date. If the fair
market value of the Corixa Common Stock on a purchase date is less than the fair
market value at the beginning of the offering period, a new twelve month
offering period will automatically begin on the first business day following the
purchase date with a new fair market value. The maximum number of shares an
employee may purchase during each offering period will be determined on the
offering date by dividing $25,000 by the fair market value of a share of Corixa
Common Stock on the offering date (subject to certain limitations imposed by the
Code).
Employees may end their participation in an offering at any time during the
offering period prior to the purchase date, and participation ends automatically
on termination of employment with Corixa. The Purchase Plan provides that in the
event of a merger of Corixa with or into another corporation or a sale of
substantially all of Corixa's assets, each right to purchase stock under the
Purchase Plan will be assumed or an equivalent right substituted by the
successor corporation unless the Corixa Board shortens the offering period so
that employees' rights to purchase stock under the Purchase Plan are exercised
prior to the merger or sale of assets. The number of authorized shares is
subject to automatic increase, on the first trading day of each of the 20
calendar years beginning in 1998 and ending in 2017. If the number of shares
reserved for issuance at such time is less than one percent of the outstanding
Common Stock, then the number of shares reserved for issuance shall be increased
until it equals one percent of the outstanding Common Stock (up to a maximum of
125,000 in any calendar year), or such lower amount as determined by the Corixa
Board. The Corixa Board has the power to amend or terminate the Purchase Plan as
long as such action does not adversely affect any outstanding rights to purchase
stock thereunder. If not terminated earlier, the Purchase Plan will terminate in
2017.
As of December 21, 1998, 5,887 shares of Corixa Common Stock had been
purchased and 119,113 shares remained available for future purchase under the
Purchase Plan.
401(k) Plan
Corixa has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of Corixa's employees. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($10,000 in 1998) and to have the amount of
such reduction contributed to the 401(k) Plan. Corixa did not match
contributions before the fiscal year 1998. Effective January 1, 1998, Corixa
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implemented a 401(k) matching program whereby Corixa contributes twenty-five
cents for each dollar a participant contributes, with a maximum contribution of
25% of the first 8% of a participant's earnings, not to exceed 25% of the
prescribed annual limit. The 401(k) Plan is intended to qualify under Section
401 of the Code so that contributions by employees or by Corixa to the 401(k)
Plan, and income earned on 401(k) Plan contributions, are not taxable to
employees until withdrawn from the 401(k) Plan, and so that contributions by
Corixa, if any, will be deductible by Corixa when made. At the direction of each
participant, Corixa invests the assets of the 401(k) Plan in any of seven
investment options.
COMPENSATION OF CORIXA EXECUTIVE OFFICERS
The following table shows the compensation received by (a) the individual
who served as Corixa's Chief Executive Officer during the fiscal year ended
December 31, 1997; (b) the four other most highly compensated individuals who
served as executive officers of Corixa during the fiscal year ended December 31,
1997 (together with the Chief Executive Officer, the "Named Executive
Officers"); and (c) the compensation received by each such individual for
Corixa's two preceding fiscal years if such individual was employed by Corixa
during such period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------- ------------
OTHER SECURITIES
ANNUAL UNDERLYING
FISCAL SALARY BONUS($) COMPENSATION OPTIONS
NAME AND PRINCIPAL POSITION YEAR ($)(1) (2) ($)(3) (#)
--------------------------- ------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Steven Gillis................... 1997 $289,000 $47,000 $6,700 17,171
President and 1996 250,000 20,000 6,800 --
Chief Executive Officer 1995 250,000 0 6,800 36,363
Mark McDade..................... 1997 254,000 40,500 6,700 17,171
Executive Vice President and 1996 200,000 14,000 6,800 --
Chief Operating Officer 1995 200,000 0 4,300 30,303
Steven Reed..................... 1997 181,300 28,700 6,500 17,171
Executive Vice President and 1996 147,000 7,000 6,700 --
Chief Scientific Officer 1995 140,000 0 6,700 7,575
Kenneth Grabstein............... 1997 142,000 16,100 6,500 17,171
Vice President and 1996 126,000 8,400 6,700 --
Director of Immunology 1995 120,000 0 6,700 --
Syamal Raychaudhuri............. 1997 112,400 12,100 6,500 17,171
Vice President and Director of
Vaccine Research
</TABLE>
- -------------------------
(1) Includes amounts deferred under Corixa's 401(k) plan.
(2) Include bonuses paid in the indicated year.
(3) Amounts reported for fiscal years 1997, 1996 and 1995 consist of: (i)
amounts paid by Corixa to assist with relocations including $3,900 for Mr.
McDade in fiscal year 1995 and (ii) premiums paid on life and accidental
death and dismemberment and health insurance policies for the officer's
benefit.
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Dr. Gillis, Mr. McDade, Dr. Reed and Dr. Grabstein each entered into an
agreement with Corixa dated September 30, 1994 which provides that such
officer's employment is terminable at any time for any reason, with or without
cause, by either such officer or Corixa. In the event that Corixa involuntarily
terminates any of such officer's employment, other than for "good cause," then
such officer will immediately resign from all his positions with Corixa and
enter into a consulting arrangement for a one-year period commencing immediately
after the termination of his employment. In consideration for this consulting
arrangement, such officer will continue to be paid his salary and benefits for
one year and will become vested over such one-year period in the lesser of (i)
an additional one year period of vesting for shares covered by such officer's
Stock Purchase Agreement and Stock Option Agreements and (ii) the remaining
unvested shares pursuant to such Stock Purchase Agreement and Stock Option
Agreements; provided, however, if such officer obtains new employment during the
one-year consulting period, any salary paid pursuant to such new employment will
be offset from amounts due under such consulting arrangement and vesting of
shares covered by such officer's Stock Purchase Agreement and Stock Option
Agreements will cease as of the date he accepts such new employment. For
purposes of the consulting agreement, "good cause" means gross misconduct or
acts or omissions that involve fraud or embezzlement or misappropriation of any
property or proprietary information of Corixa.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table provides certain information with respect to stock
options granted to the Named Executive Officers in the last fiscal year. In
addition, as required by Commission rules, the table sets forth the hypothetical
gains that would exist for the options based on assumed rates of annual compound
stock price appreciation during the option term.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
---------------------------------------------------
PERCENT OF
TOTAL POTENTIAL REALIZABLE
OPTIONS VALUE AT ASSUMED
NUMBER OF GRANTED TO ANNUAL RATES OF STOCK
SECURITIES EMPLOYEES PRICE APPRECIATION FOR
UNDERLYING IN FISCAL EXERCISE OF OPTION TERM(2)
OPTIONS YEAR BASE PRICE EXPIRATION -----------------------
NAME GRANTED(#) (%)(#) ($/SH)(4) DATE 5%($) 10%($)
---- ----------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven Gillis.......... 17,171 2.4% $0.99 2/07 $10,700 $27,100
Mark McDade............ 17,171 2.4% $0.99 2/07 10,700 27,100
Steven Reed............ 17,171 2.4% $0.99 2/07 10,700 27,100
Kenneth Grabstein...... 17,171 2.4% $0.99 2/07 10,700 27,100
Syamal Raychaudhuri.... 17,171 2.4% $0.99 2/07 10,700 27,100
</TABLE>
- -------------------------
(1) No stock appreciation rights were granted to the Named Executive Officers in
the last fiscal year. Options vest over a four-year period on a monthly
basis after the first year.
(2) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by the Commission. There is no assurance provided to any
executive officer or any other holder of Corixa's securities that the actual
stock price appreciation over the 10-year option term will be at the assumed
5% and 10% levels or at any other defined level.
(3) Corixa granted stock options representing 710,004 shares in the last fiscal
year.
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<PAGE> 159
(4) The exercise price may be paid in cash, in shares of Corixa Common Stock
valued at fair market value on the exercise date or through a cashless
exercise procedure involving a same-day sale of the purchased shares. Corixa
may also finance the option exercise by loaning the optionee sufficient
funds to pay the exercise price for the purchased shares.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information for the Named Executive Officers
with respect to exercises of options to purchase Corixa Common Stock in the
fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT OPTIONS AT FISCAL
ACQUIRED ON VALUE FISCAL YEAR END(#) YEAR END ($)
NAME EXERCISE(#) REALIZED($) VESTED/UNVESTED(1) VESTED/UNVESTED(2)
---- ----------- ----------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Steven Gillis.......... -0- n/a 34,110/34,575 $291,000/$288,900
Mark McDade............ -0- n/a 91,055/47,328 781,200/398,600
Steven Reed............ -0- n/a 7,722/17,024 63,900/137,800
Kenneth Grabstein...... -0- n/a 3,934/13,237 31,300/105,200
Syamal Raychaudhuri.... -0- n/a 18,834/21,064 159,500/172,600
</TABLE>
- -------------------------
(1) No stock appreciation rights (SARs) were outstanding during fiscal year
1997.
(2) Based on the $8.9375 per share closing price of Corixa Common Stock on
Nasdaq on December 31, 1997, less the exercise price of the options.
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MANAGEMENT OF ANERGEN
The officers, directors and key employees of Anergen, and their ages as of
December 21, 1998 are as follows:(1)
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Barry M. Sherman, M.D............... 57 President, Chief Executive Officer,
Secretary and Director
David V. Smith...................... 39 Vice President, Finance and Chief
Financial Officer
Maureen C. Howard, Ph.D............. 45 Vice President, Research
Michael G. Shulman, M.D............. 58 Vice President, Clinical Development
Jeffrey L. Winkelhake, Ph.D......... 53 Vice President, Pharmaceutical
Development
Bruce L. A. Carter, Ph.D. .......... 55 Director
Nicholas J. Lowcock................. 34 Director
Harden M. McConnell, Ph.D. ......... 71 Director
Harry H. Penner, Jr................. 52 Director
James E. Thomas..................... 38 Director
Nicole Vitullo...................... 41 Director
</TABLE>
Barry M. Sherman, M.D., joined Anergen as President and Chief Executive
Officer and as a director in May 1996. Dr. Sherman previously served as Senior
Vice President and Chief Medical Officer at Genentech, Inc. ("Genentech"), a
biotechnology company. Dr. Sherman joined Genentech in 1985, and while there
served as a member of the Operations Committee and was responsible for
Genetech's overall clinical development activities. Since 1986, Dr. Sherman has
also been a Clinical Professor of Internal Medicine at Stanford University. From
1971 to 1985, Dr. Sherman was a Professor of Internal Medicine, Director of the
Clinical Research Center and Associate Chairman of the Department of Internal
Medicine at the University of Iowa College of Medicine. Dr. Sherman received his
M.D. in 1966 from the University of Michigan. Dr. Sherman currently serves on
the board of directors of Chrysalis International Corporation and Celtrix
Pharmaceuticals, Inc.
David V. Smith joined Anergen in June 1997 as Vice President, Finance and
Chief Financial Officer. Prior to joining Anergen, Mr. Smith served from May
1988 to June 1997 at Genentech, Inc. in the United States and Europe, most
recently as Director of Accounting. Prior to joining Genentech, Mr. Smith held
planning and accounting positions at International Business Machines Corporation
and at Syntex Corporation.
Maureen C. Howard, Ph.D., joined Anergen in September 1997 as Vice
President, Research. Prior to joining Anergen, Dr. Howard served from January
1986 to April 1997 as the Director of Immunology at DNAX Research Institute of
Molecular and Cellular Biology. Prior to that time, she was a Fulbright and
Fogarty fellow in the Laboratory of Immunology at the National Institutes of
Health.
- ---------------
1Gilbert R. Mintz, Ph.D., Anergen's former Vice President of Marketing and
Business Development, resigned in April 1998 and in October 1998 Anergen
terminated its employment relationship with Carol N. Nacy, Ph.D., Anergen's
former Chief Scientific Officer.
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<PAGE> 161
Michael G. Shulman, M.D., joined Anergen in January 1997 as Vice President,
Clinical Development. Prior to joining Anergen, Dr. Shulman served from June
1995 as a Medical Director and consultant to SangStat Medical Corporation. From
February 1994 to December 1994, he served as Associate Medical Director at
Syntex Development Research, a pharmaceutical company. Prior to that time, Dr.
Shulman served for over two years as Associate Director of Immunohematology and
Cardiovascular for Sandoz Pharmaceuticals Corporation.
Jeffrey L. Winkelhake, Ph.D., joined Anergen in April 1993 as Vice
President, Pharmaceutical Development. Prior to joining Anergen, Dr. Winkelhake
served for three years as Director of Program Management at Cytel Corporation, a
biotechnology company. Prior to that, he served for over six years as Director
of Pharmacology at Cetus Corporation, also a biotechnology company. Dr.
Winkelhake received his Ph.D. in Immunochemistry/Pharmacology from the
University of Illinois in 1974.
Bruce L.A. Carter, Ph.D., has served as a director of Anergen since
February 1994. Since 1994, Dr. Carter has served as Corporate Executive Vice
President and Chief Scientific Officer of Novo Nordisk A/S ("Novo Nordisk"), a
pharmaceutical and bio-industrial company. From 1988 to 1995, Dr. Carter served
as president of ZymoGenetics, Inc., a biotechnology company that is a subsidiary
of Novo Nordisk, and has served as Chairman of this company since 1994. Dr.
Carter was nominated to the Board of Directors in accordance with rights held by
Novo Nordisk pursuant to an equity agreement described below under
"-- Compensation Committee Interlocks and Insider Participation."
Nicholas J. Lowcock has served as a director of Anergen since April 1995.
Since August 1994 he has been employed by E. M. Warburg, Pincus & Co., LLC, a
specialized private equity firm (or its predecessors), where he currently serves
as Vice President. Prior to August, 1994, Mr. Lowcock was a consultant with The
Boston Consulting Group. Mr. Lowcock was nominated to the Board of Directors in
accordance with rights held by Warburg, Pincus Ventures, L.P. pursuant to an
equity agreement described below under "Certain Relationships and Related
Transactions of Anergen." Mr. Lowcock is also a director of Scientific Learning
Corp. and The Medicines Company, Inc.
Harden M. McConnell, Ph.D., has served as a director of Anergen since May
1989. Dr. McConnell has been a Professor of Chemistry at Stanford University
since 1964. He is also a member of Anergen's Scientific Advisory Board. Dr.
McConnell serves on the board of directors of Molecular Devices Corporation.
Harry H. Penner, Jr. has served as a director of Anergen since August 1993.
Since December of 1993 he has been President/CEO and director of Neurogen
Corporation, a neuropharmaceutical company. From 1985 to December 1993, he was
Executive Vice President of Novo Nordisk and, beginning in 1988, President of
Novo Nordisk of North America, a subsidiary of Novo Nordisk. Mr. Penner is also
a director of T Cell Sciences, Inc.
James E. Thomas has served as a director of Anergen since April 1995. Since
1989, he has been employed by E.M. Warburg, Pincus & Co., LLC, where he
currently serves as Managing Director. Prior to 1989, Mr. Thomas was a Vice
President of Goldman Sachs International in London. Mr. Thomas was nominated to
the Board of Directors in accordance with rights held by Warburg, Pincus
Ventures, L.P. pursuant to an equity agreement described below under "Certain
Relationships and Related Transactions of Anergen." Mr. Thomas is also a
director of Celtrix Pharmaceuticals, Inc., Menley &
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<PAGE> 162
James Laboratories, Inc., Xomed Surgical Products, Inc., Transkaryotic
Therapies, Inc., Oxford GlycoSciences plc and a number of privately held
companies.
Nicole Vitullo has served as a director of Anergen since April 1995. Ms.
Vitullo is Senior Vice President of Rothschild Asset Management, Ltd., a manager
of two publicly traded biotechnology funds, Biotechnology Investments Limited
and International Biotechnology Trust PLC. Prior to joining Rothschild in 1992,
Ms. Vitullo was a Director of Corporate Communications and Investor Relations at
Cephalon, Inc., a neuropharmaceutical company. Prior to 1992, Ms. Vitullo was
Manager of Healthcare Investments for Eastman Kodak, Co. Ms. Vitullo was
nominated to the Board of Directors in accordance with rights held by
International Biotechnology Trust PLC pursuant to an equity agreement described
below under "Certain Relationships and Related Transactions of Anergen." Ms.
Vitullo is also a director of Cadus Pharmaceuticals Corporation, Cytel
Corporation, Onyx Pharmaceuticals Inc. and Corvas International.
BOARD OF DIRECTOR COMMITTEES, COMPENSATION OF DIRECTORS AND OTHER INFORMATION
All directors hold office until the next annual meeting of stockholders of
Anergen and until their successors have been duly elected and qualified. The
officers are appointed annually and serve at the discretion of the Anergen
Board.
The Board of Directors held a total of five meetings and took no action by
written consent in 1997. The Audit Committee held two meetings and took no
action by written consent in 1997. The Compensation Committee held one meeting
and took no action by written consent in 1997. Each director attended at least
75% of the Board meetings held during 1997 and, where applicable, the Committee
meetings held during 1997.
The Board of Directors has a Compensation Committee (consisting of Messrs.
Penner and Thomas and Ms. Vitullo) and an Audit Committee (consisting of Dr.
Carter, Mr. Lowcock and Dr. McConnell). The Compensation Committee makes
recommendations to the Board concerning salaries and incentive compensation for
Anergen's officers and employees and determines the compensation of the
President and Chief Executive Officer. The Audit Committee reviews the results
and scope of the audit and other accounting and related services and reviews and
evaluates Anergen's internal control functions. The Board of Directors has no
nominating committee or any other committee performing a similar function.
Directors currently receive no fees for services provided in that capacity
but are reimbursed for out-of-pocket expenses in connection with attendance at
Board of Directors' meetings. During 1997, Dr. McConnell was paid $12,000 by
Anergen in connection with consulting services provided to Anergen. Outside
directors are granted nonstatutory stock options under the 1995 Director Option
Plan. Currently there are six outside directors, but only two have elected to
receive grants of options under the 1995 Director Option Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No director or executive officer of Anergen has a relationship that would
constitute an interlocking relationship with executive officers or directors of
another entity. Mr. Thomas and Ms. Vitullo are affiliates of Warburg and IBT,
respectively, and were nominated to the Board of Directors pursuant to an equity
agreement described below under "Certain Relationships and Related Transactions
of Anergen." Mr. Carter is an officer of Novo Nordisk and in the past was
nominated to the Board of Directors pursuant to the Novo Nordisk Common Stock
Purchase Agreement described below, although Anergen is no longer obligated to
nominate Dr. Carter.
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<PAGE> 163
Novo Nordisk A/S. In August 1993, Anergen entered into a collaborative
agreement with Novo Nordisk A/S with an initial three-year development term and
Novo Nordisk made an equity investment in Anergen. In March 1996, Anergen and
Novo Nordisk extended the term of the development program by an additional
two-year period through August 1998. On February 9, 1998, Anergen announced that
it and Novo Nordisk had agreed to terminate the agreement between the two
parties. All rights returned to Anergen and it will not have any future
obligation to Novo Nordisk. Novo Nordisk will reimburse Anergen for the cost of
the ongoing Phase I clinical trial in Multiple Sclerosis. In February 1998, Novo
Nordisk paid Anergen $1 million, the estimated costs to complete the Phase I
study. Anergen recorded $2.6 million in contract revenues related to this
agreement in 1997 compared to $3.1 million and $3.0 million in 1996 and 1995,
respectively.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
Anergen's Certificate of Incorporation limits the liability of directors to
the maximum extent permitted by Delaware law. Delaware law provides that a
director of a corporation will not be personally liable for monetary damages for
breach of such individual's fiduciary duties as a director, except for liability
(i) for any breach of such director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the DGCL, or (iv) for any transaction from which a director
derives an improper personal benefit. Delaware law does not eliminate a
director's duty of care and this provision has no effect on the availability of
equitable remedies such as an injunction or recission based upon a director's
breach of the duty of care. In addition, Anergen has obtained an insurance
policy providing coverage for certain liabilities of its officers and directors.
Anergen's Bylaws provide that Anergen shall indemnify its directors and
officers, and may indemnify its employees and other agents to the fullest extent
permitted by law. Anergen believes that indemnification under its Bylaws covers
at least negligence and gross negligence on the part of an indemnified party and
permits Anergen to advance expenses incurred by an indemnified party in
connection with the defense of any action or proceeding arising out of such
party's status or service as a director, officer, employee or other agent of
Anergen upon an undertaking by such party to repay such advances if it is
ultimately determined that such party is not entitled to indemnification.
Anergen has entered into separate indemnification agreements with each of
its directors and officers. These agreements require Anergen, among other
things, to indemnify such director or officer against certain expenses
(including attorney's fees), judgments, fines and settlement amounts paid by
such individual in connection with any action, suit or proceeding arising out of
such individual's status or service as a director or officer of Anergen (subject
to certain exceptions, including liabilities arising from willful misconduct or
conduct that is knowingly fraudulent or deliberately dishonest or a violation of
Section 16(b) of the Exchange Act) and to advance expenses incurred by such
individual in connection with any proceeding against such individual with
respect to which such individual may be entitled to indemnification by Anergen.
Anergen believes that its Certificate of Incorporation, Bylaw provisions and
indemnification agreements are necessary to attract and retain qualified persons
as directors and officers.
Anergen is not aware of any pending litigation or proceeding involving any
director, officer, employee or agent of Anergen where indemnification will be
required or permitted.
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<PAGE> 164
Anergen is not aware of any threatened litigation or proceeding that might
result in a claim for such indemnification.
STOCK OPTION AND INCENTIVE PLANS
1988 Stock Option Plan
A total of 1,800,000 shares of Anergen's Common Stock has been reserved for
issuance under Anergen's 1988 Stock Option Plan (the "1988 Plan") adopted by the
Board of Directors in 1988 and amended in 1990, 1991, 1992 and 1995. The 1988
Plan expires by its own terms in 1998. At November 30, 1998, options to purchase
703,439 shares were outstanding at a weighted average exercise price of $3.78
per share and options to purchase 434,708 shares had been exercised. A total of
662,483 shares remained available for the grant of options.
The 1988 Plan provides for the grant of "incentive stock options" within
the meaning of Section 422 of the Code and nonqualified stock options to
employees, directors and consultants of Anergen. Incentive stock options may be
granted only to employees. The 1988 Plan is administered by the Board of
Directors, which determines the terms of options granted, including the exercise
price, the number of shares subject to the option, and the option's
exercisability. Options granted to employees typically become exercisable at the
rate of 1/8 of the shares after six months and an additional 1/48 of the shares
per month thereafter.
The 1988 Plan requires that the exercise price of incentive stock options
must be at least equal to the fair market value of such shares on the date of
grant and the exercise price of nonqualified stock options must be at least 85%
of the fair market value of such shares on the date of the grant. The maximum
term of options granted under the 1988 Plan is ten years. With respect to any
participant who owns stock possessing more than 10% of the voting rights of
Anergen's outstanding capital stock, the exercise price of any option must be at
least equal to 110% of fair market value on the date of grant and the term may
be no longer than five years.
Pursuant to the 1988 Plan, in the event of certain mergers of Anergen with
other entities, transfers of voting control of Anergen's capital stock or sales
of all or substantially all of Anergen's assets, Anergen will request that the
acquiring entity assume Anergen's rights and obligations under the 1988 Plan or
provide similar options in substitution therefor. If the acquiring entity
chooses not to assume such rights and obligations or provide substitute options,
then Anergen's Board of Directors will cause all outstanding options (together
with shares purchased upon exercise thereof) to become fully vested prior to the
event causing such acceleration and all unexercised options will terminate upon
completion of such event.
1996 Stock Plan
A total of 2,000,000 shares of Anergen's Common Stock has been reserved for
issuance under Anergen's 1996 Stock Plan (the "1996 Plan") adopted by the Board
of Directors in 1996 and amended in 1998. The 1996 Plan provides for the
issuance of options and stock purchase rights and expires by its own terms in
2006. At November 30, 1998, options to purchase 757,019 shares were outstanding
at a weighted average exercise price of $2.07 per share and no options had been
exercised. A total of 1,242,981 shares remained available for the grant of
options.
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The 1996 Plan provides for the grant of "incentive stock options" within
the meaning of Section 422 of the Code and nonqualified stock options to
employees, directors and consultants of Anergen. Incentive stock options may be
granted only to employees. The 1996 Plan is administered by the Board or a
committee appointed by the Board, which determines the terms of options granted,
including the exercise price, the number of shares subject to the option, and
the option's exercisability. Options granted to employees typically become
exercisable at the rate of 1/8 of the shares after 6 months and an additional
1/48 of the shares every month thereafter.
The 1996 Plan requires that the exercise price of incentive stock options
must be at least equal to the fair market value of such shares on the date of
grant and the exercise price of nonqualified stock options must be at least 85%
of the fair market value of such shares on the date of the grant. The maximum
term of options granted under the 1996 Plan is ten years. With respect to any
participant who owns stock possessing more than 10% of the voting rights of
Anergen's outstanding capital stock, the exercise price of any option must be at
least equal to 110% of fair market value on the date of grant and the term may
be no longer than five years.
Pursuant to the 1996 Plan, in the event of certain mergers of Anergen with
other entities, transfers of voting control of Anergen's capital stock or sales
of all or substantially all of Anergen's assets, Anergen will request that the
acquiring entity assume Anergen's rights and obligations under the 1996 Plan or
provide similar options or stock purchase rights in substitution therefor. If
the acquiring entity chooses not to assume such rights and obligations or
provide substitute options, then Anergen's Board of Directors will cause all
outstanding options (together with shares purchased upon exercise thereof) to
become fully vested prior to the event causing such acceleration and all
unexercised options will terminate upon completion of such event.
1992 Consultant Stock Plan
A total of 50,000 shares of Anergen's Common Stock has been reserved for
issuance under Anergen's 1992 Consultant Stock Plan (the "Consultant Plan")
adopted by the Board of Directors in 1992. The Consultant Plan allows Anergen to
compensate consultants in Anergen stock rather than cash in certain situations
where Anergen deems it desirable. At November 30, 1998, 15,000 shares were
outstanding at a weighted average exercise price of $0.344 per share, 33,097
shares had been issued under the Consultant Plan pursuant to option exercises
and 1,903 shares remain available for future grant.
1995 Director Option Plan
A total of 200,000 shares of Anergen's Common Stock has been reserved for
issuance under Anergen's 1995 Director Option Plan (the "Director Plan"),
adopted by the Board of Directors in 1995. The Director Plan expires by its own
terms in 2005. At November 30, 1998, options to purchase 40,000 shares were
outstanding at a weighted average exercise price of $3.06 per share, no options
had been exercised and 160,000 shares remained available for issuance.
The Director Plan provides for the grant of "nonstatutory options" to
non-employee directors of Anergen and is administered by the Board of Directors.
All grants of options under the Director Plan are automatic and
non-discretionary pursuant to the terms of the Director Plan. Each non-employee
director is automatically granted a nonstatutory option to purchase 25,000
shares of Common Stock on the date such person first becomes a director
(provided that non-employee directors who were directors on the effective date
of
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<PAGE> 166
the Director Plan were granted a nonstatutory option to purchase 5,000 shares in
lieu of such grant). On the first day of each fiscal year thereafter, each
incumbent non-employee director will automatically be granted a nonstatutory
option to purchase 5,000 shares of Common Stock (provided such person has served
on the Board at least six months). Options granted to directors typically become
exercisable at the rate of 1/48 of the shares per month after the date of grant.
The Director Plan requires that the exercise price of nonstatutory stock options
is equal to the fair market value of such shares on the date of grant. The term
of options granted under the Director Plan is ten years. In the event of certain
mergers of Anergen with other entities, transfers of voting control of Anergen's
capital stock or sales of all or substantially all of Anergen's assets, all
outstanding options shall become fully vested.
As of November 30, 1998, only Dr. Harden McConnell and Mr. Harry H. Penner,
Jr. had participated in the Director Plan.
1991 Employee Stock Purchase Plan
The Anergen 1991 Employee Stock Purchase Plan (the "Purchase Plan") is
intended to qualify under Section 423 of the Code. A total of 750,000 shares of
Anergen Common Stock has been reserved for issuance under the Purchase Plan. The
Purchase Plan is implemented by a series of consecutive and overlapping 24-month
offering periods, with new offering periods (other than the first offering
period) commencing on or about April 1 and October 1 of each year. Each offering
period will consist of four consecutive purchase periods of approximately six
months duration, with the last day of each period being designated as the
exercise date. The Purchase Plan permits eligible employees to purchase at each
exercise date Anergen Common Stock through payroll deductions, which may not
exceed 10% of an employee's compensation, at a price equal to the lower of 85%
of the fair market value of the Anergen Common Stock on the date of commencement
of the offering and on the exercise date. If the fair market value of the
Anergen Common Stock on an exercise date is less than the fair market value at
the beginning of the offering period, a new 24-month offering period will
automatically begin on the first business day following the exercise date with a
new fair market value. The maximum number of shares an employee may purchase
during each offering period will be determined on the offering date by dividing
$12,500 by the fair market value of a share of Anergen Common Stock on the
offering date (subject to certain limitations imposed by the Code).
Employees may end their participation in an offering at any time during the
offering period, and participation ends automatically on termination of
employment with Anergen. The Purchase Plan provides that in the event of a
merger of Anergen with or into another corporation or a sale of substantially
all of Anergen's assets, each right to purchase stock under the Purchase Plan
will be assumed or an equivalent right substituted by the successor corporation
unless the Anergen Board shortens the offering period so that employees' rights
to purchase stock under the Purchase Plan are exercised prior to the merger or
sale of assets. The Anergen Board has the power to amend or terminate the
Purchase Plan as long as such action does not adversely affect any outstanding
rights to purchase stock thereunder. If not terminated earlier, the Purchase
Plan will terminate in 2011.
As of November 30, 1998, 275,497 shares of Anergen Common Stock had been
purchased and 474,503 shares remained available for future purchase under the
Purchase Plan.
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401(k) Plan
In January of 1992 Anergen adopted a tax-qualified employee savings and
retirement plan (the "401(k) Plan"), which generally covers all of Anergen's
full-time employees who have attained age 21. Pursuant to the 401(k) Plan,
employees may elect to defer up to 15% of their current compensation (subject to
certain statutorily prescribed limits, including an annual limit of $9,500 in
1997). These deferred amounts are contributed to the 401(k) Plan. The 401(k)
Plan permits, but does not require, additional matching and contributions from
Anergen on behalf of participants. Since the 401(k) Plan's inception, Anergen
has contributed an amount equal to 50% of each participant's contribution for up
to 2% of their eligible compensation. The 401(k) Plan is intended to qualify
under Sections 401(k) and 401(a) of the Code. Contributions to such a qualified
plan are deductible to Anergen when made, and neither the contributions nor the
income earned on those contributions is taxable to participants until withdrawn.
All 401(k) Plan contributions are credited to separate accounts maintained in
trust by two individual trustees. Contributions are invested, at the
participant's direction, in one or more of the investment funds available under
the 401(k) Plan. All account balances are adjusted at least annually to reflect
the investment earnings and losses of the trust fund. Each participant is fully
vested in his or her salary deferral accounts under the 401(k) Plan.
Distributions may be made from a participant's account pursuant to the 401(k)
Plan's hardship withdrawal provisions as well as upon a participant's
termination of employment, disability or attainment of age 59 1/2. Distributions
will be in the form of a lump sum, installment payments or an annuity, at the
participant's discretion. Federal tax laws limit the amount that may be added to
a participant's accounts for any one year under a qualified plan such as the
401(k) Plan to the lesser of (i) $30,000 or (ii) 25% of the participant's
compensation (net of salary deferral contributions) for the year.
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COMPENSATION OF ANERGEN EXECUTIVE OFFICERS
The following shows the compensation received by (a) the individual who
served as Anergen's Chief Executive Officer during the fiscal year ended
December 31, 1997; (b) the four other most highly compensated individuals who
served as executive officers of Anergen during the fiscal year ended December
31, 1997; (c) the executive officer who would have been among the four most
highly compensated executive officers as of the end of fiscal year 1997 but for
the fact that he resigned before the end of the year (collectively, the "Named
Executive Officers"); and (c) the compensation received by each such individual
for Anergen's three preceding fiscal years if such individual was employed by
Anergen during such period:
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ----------------
-------------------------- AWARD OF OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) (# OF SHARES) COMPENSATION(2)
--------------------------- ---- -------- -------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Barry M. Sherman, M.D.............. 1997 $262,250 $31,250 -- $5,880
President, Chief Executive 1996 149,680 36,500 400,000 3,310
Officer and Secretary 1995 -- -- -- --
David V. Smith(3).................. 1997 82,872 5,000 75,000 1,831
Vice President, Finance and 1996 -- -- -- --
Chief Financial Officer 1995 -- -- -- --
John W. Varian(4).................. 1997 200,199 -- 117,500 3,869
Vice President, Finance and 1996 145,000 25,000 25,000 3,054
Chief Financial Officer 1995 135,000 45,000 130,740 3,520
Gilbert R. Mintz, Ph.D.(5)......... 1997 122,250 5,000 50,000 2,218
Vice President, Marketing 1996 -- -- -- --
and Business Development 1995 -- -- -- --
Michael G. Shulman, M.D.(6)........ 1997 155,000 -- 50,000 3,939
Vice President, 1996 -- -- -- --
Clinical Development 1995 -- -- -- --
Jeffrey L. Winkelhake, Ph.D. ...... 1997 160,000 30,000 -- 2,938
Vice President, 1996 153,750 30,000 -- 3,191
Pharmaceutical Development 1995 145,000 45,000 130,000 3,719
</TABLE>
- -------------------------
(1) Represents payments for achievements of corporate objectives. The amounts
stated for Mr. Smith and Dr. Mintz represent one-time signing bonuses of
$5,000.
(2) Amounts included in "All Other Compensation" for 1997 represent Anergen
matching contributions to the Anergen Retirement Savings Plan ("401(k)
Contributions"), payments by Anergen on term life insurance policies ("Life
Insurance Payments"), and relocation expenses. Specifically, the amount
stated for Dr. Sherman in 1997 consists of 401(k) Contributions of $2,570
and Life Insurance Payments of $3,310; the amount stated for Mr. Smith in
1997 consists of 401(k) Contributions of $1,500 and Life Insurance Payments
of $331; the amount stated for Mr. Varian in 1997 consists of 401(k)
Contributions of $3,308 and Life Insurance Payments of $561; the amount
stated for Dr. Mintz in 1997 consists of 401(k) Contributions of $1,500 and
Life Insurance Payments of $718; the amounts stated for Dr. Shulman in 1997
consists of 401(k) Contributions of $1,450 and Life Insurance Payments of
$2,489; and the amount stated for Dr. Winkelhake in 1997 consists of 401(k)
Contributions of $1,733 and Life Insurance Payments of $1,205.
(3) Mr. Smith joined Anergen in June 1997 as Vice President, Finance and Chief
Financial Officer.
(4) Mr. Varian resigned as Vice President, Finance and Chief Financial Officer
in April 1997.
159
<PAGE> 169
(5) Dr. Mintz joined Anergen in March 1997 as Vice President, Marketing and
Business Development. He resigned in April 1998.
(6) Dr. Shulman joined Anergen in January 1997 as Vice President, Clinical
Development.
Option Grants in Fiscal Year 1997. The following table sets forth each
grant of stock options made during the year ended December 31, 1997 to each
Named Executive Officer:
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM(3)
OPTIONS EMPLOYEES IN BASE EXPIRATION -------------------
NAME GRANTED(1) 1997 PRICE(2) DATE 5% 10%
---- ---------- ------------ ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Barry M. Sherman, M.D........ -- -- -- -- -- --
David W. Smith............... 75,000 9.52% $2.625 7/28/07 $123,814 $313,768
John W. Varian(4)............ 25,000 3.17 9.000 5/1/99 23,063 47,250
12,500 1.59 5.500 5/1/99 7,047 14,438
25,000 3.17 2.750 5/1/99 7,047 14,438
30,000 3.81 3.250 5/1/99 9,994 20,475
25,000 3.17 3.625 5/1/99 9,289 19,031
Gilbert R. Mintz, Ph.D(5).... 50,000 6.35 2.625 5/2/07 82,542 209,179
Michael G. Shulman, M.D...... 50,000 6.35 3.875 2/12/07 121,848 308,788
Jeffrey L. Winkelhake,
Ph.D....................... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) The listed options become exercisable as to 1/8 of the shares after 6 months
and an additional 1/48 of the shares every month thereafter, with full
vesting occurring four years after the date of grant. Under the terms of
Anergen's 1988 Plan and 1996 Plan, the Board of Directors retains
discretion, subject to plan limits, to modify the terms of outstanding
options and to reprice the options.
(2) The exercise price and tax withholding obligations related to exercise may
be paid, in some cases, by delivery of other shares or by offset of the
shares subject to the options.
(3) The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the SEC and therefore are not intended to forecast
the possible future appreciation, if any, of Anergen's stock price. Anergen
did not use an alternative formula for a grant date valuation, as Anergen
does not believe that any formula will determine with reasonable accuracy a
present value based on future unknown or volatile factors.
(4) In connection with Mr. Varian's termination of employment in April 1997,
Anergen agreed to amend certain option agreements to accelerate the unvested
portion of such options. The table reflects the number of shares which were
subject to the unvested portions of such options that upon amendment became
immediately exercisable.
(5) Mr. Mintz resigned in April 1998.
160
<PAGE> 170
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Values. The following table sets forth, for each of the Named Executive
Officers, each exercise of stock options during the year ended December 31, 1997
and the year-end value of unexercised options:
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES VALUE(2) OF UNEXERCISED
ACQUIRED UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
ON VALUE OPTIONS AT YEAR-END YEAR-END
NAME EXERCISE REALIZED(1) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- -------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Barry M. Sherman, M.D...... -- -- 158,329/241,671 $336,449/$513,551
David W. Smith............. -- -- 9,372/65,628 19,916/139,460
John W. Varian(3).......... -- -- 117,500/-- 249,688/--
Gilbert R. Mintz,
Ph.D(4).................. -- -- 9,378/40,622 19,928/86,322
Michael G. Shulman, M.D.... -- -- 11,462/38,538 24,357/81,893
Jeffrey L. Winkelhake,
Ph.D..................... -- -- 89,898/21,871 191,033/46,476
</TABLE>
- -------------------------
(1) Based on the closing price of Anergen's Common Stock on the date of
exercise.
(2) Based on a fair market value of $2.125 which was the closing price of
Anergen's stock on December 31, 1997.
(3) Mr. Varian resigned in April 1997.
(4) Mr. Mintz resigned in April 1998.
EMPLOYMENT CONTRACTS, TERMINATION AND CHANGE OF CONTROL ARRANGEMENTS
In May 1996, Anergen entered into an employment agreement with Dr. Sherman.
See "The Merger -- Conflicts of Interest" for a description of the employment
agreement.
Anergen entered into a transition agreement and mutual release (the
"Transition Agreement") with Mr. Varian in connection with Mr. Varian's
termination of employment with Anergen on April 30, 1997 (the "Termination
Date"). Pursuant to the Transition Agreement, Anergen paid Mr. Varian $113,250
(less applicable withholdings), COBRA benefits until October 1997 and
immediately accelerated the vesting of all unvested shares of Mr. Varian's stock
options and extended the period of exercisability of all options to acquire
shares of the Common Stock to two years from the Termination Date.
Pursuant to retention agreements entered into between Anergen and certain
officers of Anergen in connection with the Merger, Anergen agreed to accelerate
payment of retention bonuses if the Merger closes prior to the end of a
specified period of time. See Section "Terms of the Merger -- Conflicts of
Interest" for a description of the retention agreements.
The 1995 Director Option Plan provides that upon a change in control of
Anergen, the unvested portion of all outstanding options under such Plan shall
become immediately exercisable. The 1988 Stock Option Plan, the 1996 Stock Plan
and the 1992 Consultant Stock Plan each provides that in the event of a change
in control of Anergen, outstanding stock options and stock purchase rights under
such Plans shall be assumed or equivalent options or rights shall be substituted
by the successor entity. If such successor corporation does not agree to such
assumption or substitution, Anergen's Board of Directors must provide for such
options or rights to become immediately exercisable in full. There are no other
compensatory plans or arrangements with respect to an executive officer that
will result in payments upon resignation, retirement, or any other termination
of such executive officer's employment or from a change of control of Anergen.
See "Management of Anergen -- Stock Option and Incentive Plans."
161
<PAGE> 171
OWNERSHIP OF CORIXA CAPITAL STOCK
The following table sets forth certain information regarding the beneficial
ownership of Corixa Common Stock as of December 21, 1998, by (i) each person who
is known by Corixa to own beneficially more than five percent of the Corixa
Common Stock, (ii) each director of Corixa, (iii) each of the Named Executive
Officers, and (iv) by all of Corixa's directors and executive officers as a
group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) COMMON STOCK
---------------- ----------------------- ------------
<S> <C> <C>
Entities affiliated with Kleiner Perkins..... 2,464,843 18.4%
Caufield & Buyers(2)
2750 Sand Hill Road
Menlo Park, CA 94025
Entities affiliated with Enterprise
Partners(3)................................ 1,475,416 11.0
5000 Birch Street, Suite 6200
Newport Beach, CA 92660
Entities affiliated with InterWest
Investors(4)............................... 1,390,797 10.4
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Entities affiliated with SmithKline
Beecham(5)................................. 932,858 7.0
New Horizons Court
Brentford, Middlesex TWB 9EP
United Kingdom
Steven Gillis(6)............................. 335,833 2.5
Steven Reed(7)............................... 234,755 1.8
Mark McDade(8)............................... 218,205 1.6
Kenneth Grabstein(9)......................... 201,787 1.5
Syamal Raychaudhuri(10)...................... 172,865 1.3
Joseph S. Lacob(11).......................... 2,438,632 18.2
Andrew E. Senyei(12)......................... 1,487,083 11.1
Arnold L. Oronsky(13)........................ 1,402,464 10.5
All directors and executive officers as a
group
(9 persons)(14)............................ 6,531,354 47.6
</TABLE>
- -------------------------
(1) Applicable percentage of beneficial ownership is based on 13,399,537 shares
of Corixa Common Stock outstanding as of December 21, 1998, together with
applicable options and warrants for such stockholder. Beneficial ownership
is determined in accordance with the rules of the Commission. The number of
shares beneficially owned by a person includes shares of Corixa Common
Stock subject to options held by that person that are currently exercisable
or exercisable within 60 days of November 30, 1998. Such shares issuable
pursuant to such options are deemed outstanding for computing the
percentage ownership of the person holding such options but are not deemed
outstanding for the purposes of computing the percentage ownership of each
other person. To Corixa's knowledge, the persons named in this table have
sole voting and investment power with respect to all shares of Corixa
Common Stock shown as owned by them, subject to community property laws
where applicable and except as indicated in the other footnotes to this
table. Unless otherwise indicated, the address of each of the individuals
named above is Corixa Corporation, 1124 Columbia Street, Suite 200,
Seattle, Washington 98104.
162
<PAGE> 172
(2) Includes 2,364,292 shares held by Kleiner Perkins Caufield & Byers VII,
62,673 shares held by Kleiner Perkins Caufield & Byers VI and 37,878 shares
held by Cynthia Healy, Director Life Science Research at Kleiner Perkins
Caufield & Byers. Joseph S. Lacob, the Chairman of Board of Directors, is a
general partner of Kleiner Perkins Caufield & Byers VII and Kleiner Perkins
Caufield & Byers VI, and, as such, may be deemed to share voting and
investment power with respect to such shares except for the shares held by
Dr. Healy. Mr. Lacob disclaims beneficial ownership of such shares, except
to the extent of his pecuniary interest in such shares.
(3) Includes 1,357,384 shares held by Enterprise Partners III, L.P. and 118,032
shares held by Enterprise Partners III Associates, L.P. Andrew E. Senyei, a
Director, is a general partner of Enterprise Partners III, L.P. and
Enterprise Partners III Associates, and, as such, may be deemed to share
voting and investment power with respect to such shares. Dr. Senyei
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest in such shares.
(4) Includes 1,382,107 shares held by InterWest Partners V, L.P. and 8,690
shares held by InterWest Investors V, L.P. Arnold L. Oronsky, a Director,
is a general partner of InterWest Partners V, L.P. and, as such, may be
deemed to share voting and investment power with respect to such shares.
Dr. Oronsky disclaims beneficial ownership of shares held by InterWest
Partners V, L.P., except to the extent of his pecuniary interest in such
shares, and disclaims beneficial ownership to all shares held by InterWest
Investors V, L.P.
(5) Includes 505,051 shares held by S.R. One Ltd., a wholly-owned subsidiary of
SmithKline Beecham and 427,807 shares held by SmithKline Beecham.
(6) Includes 63,106 shares issuable upon the exercise of outstanding options
held by Dr. Gillis exercisable within 60 days of December 21, 1998.
(7) Includes 18,324 shares issuable upon the exercise of outstanding options
held by Dr. Reed exercisable within 60 days of December 21, 1998, 15,151
shares were held in the name of Steven James N. Reed, UGMA WA Merrill Lynch
and 15,151 shares were held in the name of Sarah Mariko Reed, UGMA WA
Merrill Lynch, both of which accounts name Dr. Reed as custodian. Dr. Reed
disclaims beneficial ownership of such shares, except to the extent of his
pecuniary interest in such shares.
(8) Includes 127,296 shares issuable upon the exercise of outstanding options
held by Mr. McDade exercisable within 60 days of December 21, 1998.
(9) Includes 12,397 shares issuable upon the exercise of outstanding options
held by Dr. Grabstein exercisable within 60 days of December 21, 1998, and
9,090 shares held in the name of the Benjamin H. Grabstein Irrevocable
Trust, 9,090 shares were held in the name of the Daniel J. Grabstein
Irrevocable Trust, 9,090 shares were held in the name of the Naomi K.
Grabstein Irrevocable Trust. Dr. Grabstein is the Trustee for each of his
children's trusts and he disclaims beneficial ownership of the shares held
in such trusts, except to the extent of his pecuniary interest therein.
(10) Includes 32,915 shares issuable upon the exercise of outstanding options
held by Dr. Raychaudhuri exercisable within 60 days of December 21, 1998.
(11) Includes 11,667 shares issuable upon the exercise of outstanding options
held by Joseph S. Lacob exercisable within 60 days of December 21, 1998,
2,364,292 shares held by Kleiner Perkins Caufield & Byers VII and 62,673
shares held by Kleiner Perkins Caufield & Byers VI. Mr. Lacob, Chairman of
the Corixa Board, is a
163
<PAGE> 173
general partner of Kleiner Perkins Caufield & Byers VII and Kleiner Perkins
Caufield & Byers VI, and, as such, may be deemed to share voting and
investment power with respect to such shares. Mr. Lacob disclaims
beneficial ownership of such shares, except to the extent of his pecuniary
interest in such shares.
(12) Includes 11,667 shares issuable upon the exercise of outstanding options
held by Andrew E. Senyei exercisable within 60 days of December 21, 1998,
1,357,384 shares held by Enterprise Partners III, L.P. and 118,032 shares
held by Enterprise Partners III Associates, L.P. Dr. Senyei, a Director, is
a general partner of Enterprise Partners III, L.P. and Enterprise Partners
III Associates, and, as such, may be deemed to share voting and investment
power with respect to such shares. Dr. Senyei disclaims beneficial
ownership of such shares, except to the extent of his pecuniary interest in
such shares.
(13) Includes 11,667 shares issuable upon the exercise of outstanding options
held by Arnold L. Oronsky exercisable within 60 days of December 21, 1998,
1,382,107 shares held by InterWest Partners V, L.P. and 8,690 shares held
by InterWest Investors V, L.P. Dr. Oronsky, a Director, is a general
partner of InterWest Partners V, L.P. and, as such, may be deemed to share
voting and investment power with respect to such shares. Dr. Oronsky
disclaims beneficial ownership of shares held by InterWest Partners V,
L.P., except to the extent of his pecuniary interest in such shares, and
disclaims beneficial ownership to all shares held by InterWest Investors V,
L.P.
(14) Includes shares referred to in footnotes (6)-(13). Includes 39,730 shares
issuable upon the exercise of outstanding options held by Michelle Burris,
an executive officer of Corixa, exercisable within 60 days of December 21,
1998.
164
<PAGE> 174
OWNERSHIP OF ANERGEN CAPITAL STOCK
The following table sets forth certain information regarding the beneficial
ownership of Anergen Common Stock as of December 21, 1998, by (i) each person
who is known by Anergen to own beneficially more than five percent of the
Anergen Common Stock, (ii) each director of Anergen, (iii) each of the Named
Executive Officers, and (iv) by all of Anergen's directors and executive
officers as a group.
<TABLE>
<CAPTION>
APPROXIMATE
SHARES OF
PERCENTAGE OF CORIXA
ANERGEN COMMON
COMMON STOCK
STOCK BENEFICIALLY
OUTSTANDING OWNED
NUMBER OF SHARES PRIOR TO THE AFTER THE
NAME(1) BENEFICIALLY OWNED MERGER(2) MERGER
------- ------------------ ------------- ------------
<S> <C> <C> <C>
Warburg, Pincus Ventures,
L.P.(3).......................... 5,478,049 28.9% 321,840
466 Lexington Avenue,
New York, NY 10017
International Biotechnology Trust
PLC.............................. 2,439,024 12.9% 143,295
Five Arrows House
St. Swithin's Lane
London, EC4N 8NR
England
Novo Nordisk A/S................... 1,219,745 6.4% 71,661
Novo Alle
2880 Basgvaerd
Denmark
Barry M. Sherman, M.D.(4).......... 309,101 1.6% 8,160
David V. Smith(5).................. 35,616 * 2,092
John W. Varian(6).................. 0 * --
Jeffrey L. Winkelhake, Ph.D.(7).... 113,804 * 6,686
Michael G. Shulman, M.D.(8)........ 32,508 * 1,910
Maureen C. Howard, Ph.D.(9)........ 56,660 * 3,329
Gilbert R. Mintz, Ph.D.(10)........ 0 * --
Bruce L.A. Carter, Ph.D.(11)....... 1,219,745 6.4% 71,661
Harden M. McConnell, Ph.D.(12)..... 37,276 * 2,190
Harry H. Penner, Jr.(13)........... 37,276 * 2,190
James E. Thomas(14)................ 5,478,049 28.9% 321,840
Nicholas J. Lowcock(15)............ 0 *
Nicole Vitullo(16)................. 0 *
All directors and executive
officers as a group (11
persons)(17)..................... 7,320,035 37.5%
</TABLE>
- -------------------------
* Represents less than 1% of the outstanding Common Stock.
(1) The persons named in the table, to Anergen's knowledge, have sole voting
and investment power with respect to all shares of Common Stock shown as
beneficially owned by them, subject to community property laws where
applicable and the information contained in the footnotes hereunder.
(2) Applicable percentage of ownership is based on 18,923,888 shares of Common
Stock outstanding as of December 21, 1998, together with applicable options
and warrants
165
<PAGE> 175
held by such shareholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission, and includes
voting and investment power with respect to shares. Shares of Common Stock
subject to options exercisable within 60 days of December 21, 1998 are
deemed outstanding for computing the percentage ownership of the person
holding such options, but are not deemed outstanding for computing the
percentage ownership of any other person.
(3) The sole general partner of Warburg is Warburg, Pincus & Co., a New York
general partnership ("WP"). E.M. Warburg, Pincus & Co., LLC, a New York
limited liability company ("EMW LLC"), manages Warburg. The members of EMW
LLC are substantially the same as the partners of WP. Lionel I. Pincus is
the managing partner of WP and the managing member of EMW LLC and may be
deemed to control both WP and EMW LLC. WP has a 15% interest in the profits
of Warburg as the general partner and also owns approximately 1.3% of the
limited partnership interests in Warburg.
(4) Includes 299,987 shares subject to options exercisable within 60 days of
December 21, 1998.
(5) Includes 35,616 shares subject to options exercisable within 60 days of
December 21, 1998.
(6) Mr. Varian resigned in May 1997.
(7) Includes 113,442 shares subject to options exercisable within 60 days of
December 21, 1998.
(8) Includes 32,508 shares subject to options exercisable within 60 days of
December 21, 1998.
(9) Includes 56,660 shares subject to options exercisable within 60 days of
December 21, 1998.
(10) Mr. Mintz resigned in April 1998.
(11) Represents 1,219,745 shares held by Novo Nordisk A/S, of which Dr. Carter
is an executive officer. Dr. Carter disclaims beneficial ownership of these
shares.
(12) Includes 37,276 shares subject to options exercisable within 60 days of
November 30, 1998.
(13) Includes 37,276 shares subject to options exercisable within 60 days of
December 21, 1998.
(14) All of the shares indicated as owned by Mr. Thomas are owned directly by
Warburg and are included because of Mr. Thomas' affiliation with Warburg.
Mr. Thomas, a director of Anergen, is a Managing Director of EMW LLC and a
general partner of WP. As such, Mr. Thomas may be deemed to have an
indirect pecuniary interest (within the meaning of Rule 16a-1 under the
Securities Exchange Act of 1934) in an indeterminate portion of the shares
beneficially owned by Warburg and WP. Mr. Thomas disclaims "beneficial
ownership" of these shares within the meaning of Rule 13d-3 under the
Exchange Act.
(15) Does not include shares held by Warburg. Mr. Lowcock is employed by EMW LLC
and is a director of Anergen. Mr. Lowcock disclaims beneficial ownership of
the shares held by Warburg and WP.
(16) Does not include shares held by IBT. Ms. Vitullo, a director of Anergen, is
an employee of Rothschild, Inc., a corporation affiliated with Rothschild
Asset Management, Ltd., investment manager for IBT. Ms. Vitullo disclaims
beneficial ownership of the shares held by IBT.
166
<PAGE> 176
(17) Includes 612,765 shares subject to options exercisable within 60 days of
December 21, 1998. Reflects the shares of Warburg of which Mr. Thomas may
be deemed to have an indirect pecuniary interest (within the meaning of
Rule 16a-1 of the Securities Exchange Act of 1934) and the shares of Novo
Nordisk A/S of which Dr. Carter is an executive officer. Does not reflect
beneficial ownership of Mr. Lowcock of Warburg and Ms. Vitullo of IBT who
do not have beneficial ownership of the shares of such entities,
respectively.
167
<PAGE> 177
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF CORIXA
Infectious Disease Research Institute. In September 1994, Corixa entered
into a research services and intellectual property agreement with IDRI. Under
this agreement, as amended and restated effective January 1997, Corixa has
agreed to provide IDRI with research funding and certain administrative and
facilities support, including use of Corixa's research laboratory space. IDRI
pays a services fee for the administrative and facilities support provided by
Corixa. Corixa's funded research performed by IDRI is in the area of infectious
disease. Under the agreement, IDRI is obligated to disclose to Corixa all
significant developments relating to information or inventions discovered at
IDRI, and Corixa will own, on a royalty-free basis, all of IDRI's interest in
inventions and patent rights arising out of IDRI's research during the term of
the agreement (other than inventions and patent rights arising out of research
that is or in the future may be funded by certain governmental or not-for-profit
organizations). With respect to such rights arising out of research funded by
governmental and not-for-profit organizations, Corixa has been granted a
royalty-bearing, worldwide, perpetual license, exclusive except as to rights
held by such governmental or not-for-profit organizations.
IDRI is independent of Corixa, and Corixa does not have the right to
control or direct IDRI's activities. A majority of the members of IDRI's board
of directors are not affiliated with Corixa. However, Corixa's Chief Scientific
Officer is co-founder and a member of the board of directors of IDRI. Corixa's
Chief Operating Officer is also a member of the board of directors of IDRI and
Corixa's Vice President, Chief Financial Officer is treasurer of IDRI.
The research services and intellectual property agreement terminates on
December 31, 1999, subject to renewal for one or more three year terms at the
option of Corixa. If IDRI terminates the agreement as a result of Corixa's
failure to make required payments, Corixa would be obligated to pay royalties on
any product sales.
Genesis Research and Development Corporation Limited. Effective January 1,
1998, Corixa entered into a series of agreements with Genesis Research and
Development Corporation Limited, a corporation organized and existing pursuant
to the laws of New Zealand ("Genesis") related to the development and
commercialization of Genesis M. vaccae-related technology in the fields of
vaccine adjuvants and certain autoimmune disease immunotherapeutics. Under the
agreements, Genesis granted Corixa a worldwide exclusive license to use Genesis'
M. vaccae adjuvant technology in Corixa's proprietary vaccines, subject to
Corixa's payment to Genesis of a percentage of revenues received by Corixa
related to such products. In addition, Corixa and Genesis agreed to collaborate
in the development and commercialization of an M. vaccae-derived product for the
treatment of psoriasis. See "Certain License Agreements." Dr. Gillis, President,
Chief Executive Officer and a Director of Corixa, is a member of the Board of
Directors of Genesis.
ImmGenics Pharmaceuticals, Inc. On November 5, 1998, Corixa entered into a
collaborative agreement with ImmGenics Pharmaceuticals, Inc. ("ImmGenics") to
utilize ImmGenics' proprietary antibody method technology. In addition, Corixa
invested $1.75 million in exchange for ImmGenics preferred stock. See "Certain
License Agreements." In connection with the ImmGenics investment, Corixa was
granted a seat on ImmGenics' Board of Directors, which seat is held by Corixa's
Vice President, Chief Financial Officer.
INDEMNIFICATION AGREEMENTS
Corixa has entered into an indemnification agreement with each of its
officers and directors. See "The Merger -- Conflicts of Interest."
168
<PAGE> 178
Corixa believes that all of the transactions set forth above were made on
terms no less favorable to Corixa than could have been obtained from
unaffiliated third parties. All future transactions, including loans, between
Corixa and its officers, directors, principal stockholders and their affiliates
will be approved by a majority of the Corixa Board, including a majority of the
independent and disinterested directors and will continue to be on terms no less
favorable to Corixa than could be obtained from unaffiliated third parties and
will be made only for bona fide business purposes.
169
<PAGE> 179
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS OF ANERGEN
On March 10, 1995 Anergen signed a Common Stock Purchase Agreement (the
"Agreement") with Warburg and IBT (collectively, the "Purchasers") to purchase
7,317,073 shares of Common Stock for approximately $15 million. The new shares
were priced at the average closing bid price for Anergen's Common Stock over a
30 day trading period. This transaction was approved by Anergen's shareholders
and was completed on April 13, 1995. The Purchasers have certain registration
rights with respect to the shares of Common Stock purchased. The Purchasers also
have certain rights of representation on Anergen's Board of Directors based on
certain minimum levels of ownership of Anergen's Common Stock. Under the
Agreement, Anergen is currently obligated to include in the slate of nominees
recommended by the Board of Directors and management at each election of
directors two candidates selected by Warburg, one candidate selected by IBT and
one candidate as mutually agreed to by IBT and Warburg. Upon the closing of this
transaction, the Board of Directors appointed to the Board to fill vacancies two
new members representing Warburg, Mr. Nicholas J. Lowcock and Mr. James E.
Thomas, and one new member representing IBT, Ms. Nicole Vitullo. These three
individuals have been nominated for re-election to the Board in connection with
the current election of directors. On December 11, 1998, Warburg and IBT signed
an agreement terminating their rights granted under the Warburg/IBT Purchase
Agreement, including the registration rights and board representation rights,
contingent upon the closing of the Merger.
In November 1998, Anergen entered into retention agreements with Messrs.
Smith, Winkelhake and Shulman and Ms. Howard, officers of Anergen. See "The
Merger -- Conflicts of Interest" for a description of the retention agreements.
On December 11, 1998, Anergen entered into a Note Purchase Agreement with
Warburg and IBT. See "The Merger -- Conflicts of Interest" for a description of
the Note Purchase Agreement.
Anergen entered into an employment agreement with Barry M. Sherman, M.D. on
May 27, 1996 (the "Sherman Agreement"). The Sherman Agreement provides for
salary, bonus, stock options and benefits. The Sherman Agreement also provides
that if Dr. Sherman's employment is terminated pursuant to a transaction
involving a Change of Control (as defined in the Sherman Agreement) or if Dr.
Sherman voluntarily terminates his employment with Anergen as a result of
Constructive Termination (as defined in the Agreement), he will receive salary
continuation and benefits for 12 months following termination of his employment.
In addition, on the date of such termination he will receive accelerated vesting
of his stock options for 24 months or such longer period for which accelerated
vesting may be granted without incurring Federal excise tax imposed pursuant to
Section 4996 of the Internal Revenue Code. A "Change of Control" is defined in
the Sherman Agreement as including, an acquisition of a majority of the
outstanding voting stock of Anergen, a merger of Anergen with an unaffiliated
third-party or a sale of all or substantially all of Anergen's assets. On
December 3, 1998, the Anergen Board of Directors approved a letter agreement
providing that a Constructive Termination shall be deemed to occur upon the
earlier of the closing of a transaction involving a Change of Control (as
defined in the Sherman Agreement) and March 31, 1999.
170
<PAGE> 180
COMPARISON OF RIGHTS OF HOLDERS OF CORIXA CAPITAL STOCK AND HOLDERS OF ANERGEN
CAPITAL STOCK
The following summary of certain characteristics of capital stock of Corixa
and Anergen does not purport to be complete and is subject to, and qualified in
its entirety by, the provisions of the DGCL and by the respective bylaws and
certificates of incorporation of Anergen and Corixa, as applicable.
Description of Corixa Capital Stock
The authorized capital stock of Corixa consists of 40,000,000 shares of
Common Stock, $0.001 par value per share, and 10,000,000 shares of Preferred
Stock, $0.001 par value per share.
Corixa Common Stock. As of December 21, 1998, there were approximately
13,399,537 shares of Corixa Common Stock outstanding. Pursuant to Corixa's Fifth
Amended and Restated Certificate of Incorporation (the "Corixa Certificate"),
the holders of Corixa Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. No Corixa stockholder will be
entitled to cumulate votes at any election of directors. Subject to preferences
that may be applicable to any outstanding Corixa Preferred Stock, the holders of
Corixa Common Stock are entitled to receive such dividends, if any, as may be
declared from time to time by the Corixa Board out of legally available funds.
In the event of a liquidation, dissolution or winding up of Corixa, the holders
of Corixa Common Stock are entitled to share ratably in all assets remaining
after payment of liabilities, subject to prior rights of Corixa Preferred Stock,
if any, then outstanding. Holders of Corixa Common Stock have no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions available to the holders of Corixa Common Stock. All
outstanding shares of Corixa Common Stock are fully paid and non-assessable, and
the shares of Corixa Common Stock to be issued upon completion of the Merger,
when issued in accordance with the Merger Agreement, will be fully paid and
non-assessable.
Corixa Preferred Stock. Pursuant to the Corixa Certificate, the Corixa
Board of Directors has the authority, without further action by the Corixa
stockholders, to issue up to 10,000,000 shares of Corixa Preferred Stock in one
or more series. The Corixa Board of Directors has the authority to issue such
undesignated Corixa Preferred Stock and to determine the powers, preferences and
rights and the qualifications, limitations or restrictions granted to or imposed
upon any wholly-unissued series of undesignated Corixa Preferred Stock, and to
fix the number of shares constituting any series and the designation of such
series, without any further vote or action by the Corixa stockholders. The
issuance of Corixa Preferred Stock may have the effect of delaying, deferring or
preventing a change in control of Corixa without further action by the Corixa
stockholders and may adversely affect the voting and other rights of the holders
of Corixa Common Stock. As of November 30, 1998, there are no shares of Corixa
Preferred Stock outstanding and Corixa currently has no plans to issue any
shares of Corixa Preferred Stock.
Corixa Registration Rights of Certain Holders. Certain holders of shares of
Corixa Common Stock and warrants exercisable for Corixa Common Stock
(collectively, the "Registrable Securities") are entitled to certain rights with
respect to the registration of such shares under the Securities Act. The
registration rights are provided for under the terms of an amended and restated
investors' rights agreement (the "Corixa Investors' Rights Agreement") between
Corixa and the holders of Registrable Securities. Pursuant to
171
<PAGE> 181
the Corixa Investors' Rights Agreement, and under certain conditions, holders of
Registrable Securities have the right to request that Corixa pay the expenses of
and file for the registration of shares of Corixa Common Stock under the
Securities Act, as well as the right to request secondary registrations on Form
S-3 under the Securities Act and the right to participate in Corixa-initiated
registrations of Corixa Common Stock.
Transfer Agent and Registrar. The Transfer Agent and Registrar for Corixa
Common Stock is The Harris Trust Company. Its address is Suite 4900, 601 South
Figueroa Street, Los Angeles, California 90017 and its telephone number is (213)
239-0600.
Description of Anergen Capital Stock
The authorized capital stock of Anergen consists of 60,000,000 shares of
Common Stock, no par value per share, and 10,000,000 shares of Preferred Stock,
no par value per share.
Anergen Common Stock. As of December 21, 1998, there were approximately
18,923,888 shares of Anergen Common Stock outstanding. Pursuant to Anergen's
Certificate of Incorporation (the "Anergen Certificate"), the holders of Anergen
Common Stock are entitled to one vote per share on all matters to be voted upon
by the stockholders. No Anergen stockholder will be entitled to cumulate votes
at any election of directors. Subject to preferences that may be applicable to
any outstanding Anergen Preferred Stock, the holders of Anergen Common Stock are
entitled to receive such dividends, if any, as may be declared from time to time
by the Anergen Board of Directors out of legally available funds. In the event
of a liquidation, dissolution or winding up of Anergen, the holders of Anergen
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities, subject to prior rights of Anergen Preferred Stock, if any, then
outstanding. Holders of Anergen Common Stock have no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions available to the holders of Anergen Common Stock. All outstanding
shares of Anergen Common Stock are fully paid and non-assessable, and the shares
of Anergen Common Stock to be issued upon completion of the Merger, when issued
in accordance with the Merger Agreement, will be fully paid and non-assessable.
Anergen Preferred Stock. Pursuant to the Anergen Certificate, the Anergen
Board of Directors has the authority, without further action by the Anergen
stockholders, to issue up to 10,000,000 shares of Anergen Preferred Stock in one
or more series. The Anergen Board of Directors has the authority to issue such
undesignated Anergen Preferred Stock and to determine the powers, preferences
and rights and the qualifications, limitations or restrictions granted to or
imposed upon any wholly unissued series of undesignated Anergen Preferred Stock,
and to fix the number of shares constituting any series and the designation of
such series, without any further vote or action by the Anergen stockholders. The
issuance of Anergen Preferred Stock may have the effect of delaying, deferring
or preventing a change in control of Anergen without further action by the
Anergen stockholders and may adversely affect the voting and other rights of the
holders of Anergen Common Stock. As of November 30, 1998, there are no shares of
Anergen Preferred Stock outstanding and Anergen currently has no plans to issue
any shares of Anergen Preferred Stock.
Anergen Registration Rights of Certain Holders. Certain holders of shares
of Anergen Common Stock (the "Registrable Securities") are entitled to certain
rights with
172
<PAGE> 182
respect to the registration of such shares under the Securities Act. The
registration rights are provided for under the terms of common stock purchase
agreement (the "Anergen Common Stock Purchase Rights Agreement") between Anergen
and the holders of Registrable Securities Certain holders of warrants to
purchase Common Stock have registration rights that are the same as the
registration rights granted under the Anergen Common Stock Purchase Agreement.
Pursuant to the Anergen Common Stock Purchase Rights Agreement, and under
certain conditions, holders of Registrable Securities have the right to request
that Anergen pay the expenses of and file for the registration of shares of
Anergen Common Stock under the Securities Act, as well as the right to request
secondary registrations on Form S-3 under the Securities Act and the right to
participate in Anergen-initiated. See "Certain Relationships and Related
Transactions of Anergen."
Transfer Agent and Registrar. The Transfer Agent and Registrar for Anergen
Common Stock is ChaseMellon Shareholder Services, L.L.C. Its address is 85
Challenger Road, Ridgefield Park, NJ 07660 and its telephone number is
1-800-356-2017.
Comparison of Certificates of Incorporation, Bylaws and Governing Law
Because both Anergen and Corixa are incorporated under the laws of the
State of Delaware, the rights and privileges of stockholders of Anergen and
Corixa, respectively, which rights and privileges are governed by the DGCL, are
identical, except (i) to the extent that their respective certificates of
incorporation and bylaws differ, (ii) for the rights and privileges of the
holders of Corixa Common Stock under the Corixa Rights Agreement, and (iii) for
the rights and privileges of the holders of Anergen capital stock under the
Anergen Common Stock Purchase Agreement. Upon consummation of the Merger, the
holders of Anergen Common Stock who receive Corixa Common Stock under the terms
of the Merger Agreement will become stockholders of Corixa. Although it is not
practical to compare all the differences among the Corixa Certificate, the
bylaws of Corixa (the "Corixa Bylaws"), the Anergen Certificate and the bylaws
of Anergen (the "Anergen Bylaws"), the following is a summary of certain
material differences of the rights of holders of Anergen capital stock and
Corixa Common Stock that may significantly affect the rights of Anergen
stockholders. This summary does not purport to be complete and is subject to,
and qualified in its entirety by, the provisions of the DGCL and by the bylaws
and certificates of incorporation of Anergen and Corixa, as applicable.
Size of the Board of Directors. The Anergen Certificate and the Anergen
Bylaws provide that the authorized number of directors is eight, which number
may not be changed without the approval of the holders of a majority of the
outstanding Anergen capital stock. The election of Anergen directors need not be
by written ballot. The Corixa Certificate and the Corixa Bylaws provide that the
authorized number of directors is five, and may be fixed from time to time by a
bylaw or amendment thereof duly adopted by at least 66 2/3% of the Corixa Board
of Directors. The election of Corixa directors need not be by written ballot.
Cumulative Voting. In an election of directors under cumulative voting,
each share of stock normally having one vote is entitled to a number of votes
equal to the number of directors to be elected. A stockholder may then cast all
such votes for a single candidate or may allocate them among as many candidates
as the stockholder may choose. Under the DGCL, cumulative voting in the election
of directors is not available unless specifically provided for in the
certificate of incorporation. The Corixa Certificate specifically provides that
cumulative voting is not available to Corixa stockholders. The Anergen
Certificate
173
<PAGE> 183
does not specifically provide for cumulative voting, and accordingly, under the
DGCL, cumulative voting is not available to Anergen stockholders.
Amendment of Bylaws. The Anergen Certificate provides that the Anergen
Board may make, amend, supplement or repeal the Anergen Bylaws; provided that
the Anergen stockholders may change or repeal any bylaw adopted by the Anergen
Board of Directors by the affirmative vote of the holders of a majority of
Anergen capital stock then outstanding. The Corixa Certificate provides that the
Corixa Board of Directors may make, amend, supplement or repeal the Corixa
Bylaws; provided that the affirmative vote of the holders of 66 2/3% of Corixa
capital stock then outstanding, voting together as a single class, is required
to amend, alter, repeal or adopt certain bylaw provisions, including any bylaw
provision changing the number of authorized directors of Corixa.
Stockholder Agreements. The Corixa Investors' Rights Agreement and the
rights thereunder are described above under "-- Description of Corixa Capital
Stock." The Anergen Common Stock Purchase Agreement and the rights thereunder
are described above under "-- Description of Anergen Capital Stock."
EXPERTS
The financial statements of Corixa, as of December 31, 1997, and 1996, and
for each of the three years in the period ended December 31, 1997, the financial
statements of GenQuest, Inc. as of December 31, 1997 and 1996 and for each of
the two years in the period ended December 31, 1997 and for the period from July
14, 1995 (date of inception) to December 31, 1997, and the financial statements
of Anergen, Inc. as of December 31, 1997 and 1996 and for each of the three
years in the period ended December 31, 1997, appearing in this Proxy
Statement/Prospectus have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports thereon appearing elsewhere herein and
are included in reliance upon such reports given upon the authority of such firm
as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Corixa Common Stock issuable pursuant to the Merger and
certain other legal matters relating thereto will be passed upon for Corixa by
Venture Law Group, A Professional Corporation, Kirkland, Washington. Wilson
Sonsini Goodrich & Rosati, Professional Corporation, is acting as counsel to
Anergen.
OTHER MATTERS
The Anergen Board currently does not intend to bring any matters before the
Special Meeting other than those specifically set forth in the notices of such
Special Meeting, and the Anergen Board does not know of any matters to be
brought before the Special Meeting by others. If any other matters properly come
before the Special Meeting, it is the intention of the persons named in the
accompanying proxies to vote such proxies in accordance with the judgment of the
Anergen Board.
174
<PAGE> 184
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CORIXA CORPORATION
Report of Ernst & Young LLP, Independent Auditors........... F-2
Financial Statements
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Stockholders' Equity.......................... F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
ANERGEN, INC.
Report of Ernst & Young LLP, Independent Auditors........... F-26
Financial Statements
Balance Sheets.............................................. F-27
Statements of Operations.................................... F-28
Statements of Stockholders' Equity.......................... F-29
Statements of Cash Flows.................................... F-30
Notes to Financial Statements............................... F-31
GENQUEST, INC.
Report of Ernst & Young LLP, Independent Auditors........... F-43
Financial Statements
Balance Sheets.............................................. F-44
Statements of Operations.................................... F-45
Statements of Stockholders' Equity.......................... F-46
Statements of Cash Flows.................................... F-47
Notes to Financial Statements............................... F-48
</TABLE>
F-1
<PAGE> 185
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Corixa Corporation
We have audited the accompanying balance sheets of Corixa Corporation as of
December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
Corixa's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Corixa Corporation at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997 in conformity
with generally accepted accounting principles.
ERNST & YOUNG LLP
Seattle, Washington
January 28, 1998
F-2
<PAGE> 186
CORIXA CORPORATION
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------
1998 1997 1996
------------- -------- -------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................... $ 4,912 $ 16,458 $ 2,088
Securities available-for-sale....................... 40,565 39,860 9,845
Accounts receivable (including $89, $79 and $211
receivable from an affiliated company at September
30, 1998, December 31, 1997 and December 31, 1996,
respectively)..................................... 724 602 682
Interest receivable................................. 719 134 5
Prepaid expenses.................................... 600 506 265
-------- -------- -------
Total current assets......................... 47,520 57,560 12,885
Property and equipment, net........................... 7,025 4,046 2,237
Deferred charges and deposits......................... 155 201 63
-------- -------- -------
Total assets................................. $ 54,700 $ 61,807 $15,185
======== ======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities............ $ 2,380 $ 1,571 $ 978
Deferred revenue.................................... 600 1,097 1,318
Current portion of obligations and commitments...... 2,134 930 488
-------- -------- -------
Total current liabilities.................... 5,114 3,598 2,784
Long-term obligations and commitments, less current
portion............................................. 11,707 6,924 1,175
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Authorized shares -- 10,000,000 (1998 and 1997)
and 23,100,000 (1996 -- 16,100,000 designated
as Series A and 1,666,667 designated as Series
B);
Issued and outstanding Series A shares:
4,646,131 in 1996.............................. -- -- 5
Issued and outstanding Series B shares:
505,050 in 1996................................ -- -- 1
Common stock, $0.001 par value:
Authorized shares -- 40,000,000
Issued and outstanding shares -- 12,907,738 in
1998, 11,774,214 in 1997 and 2,594,137 in
1996........................................... 13 12 3
Additional paid-in capital.......................... 74,001 66,467 21,655
Receivable for warrants............................. -- (652) (1,140)
Deferred compensation............................... (1,444) (2,575) --
Other accumulated comprehensive income (loss)....... 207 (5) (12)
Accumulated deficit................................. (34,898) (11,962) (9,286)
-------- -------- -------
Total stockholders' equity................... 37,879 51,285 11,226
-------- -------- -------
Total liabilities and stockholders' equity... $ 54,700 $ 61,807 $15,185
======== ======== =======
</TABLE>
See accompanying notes
F-3
<PAGE> 187
CORIXA CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Collaborative agreements.................................. $ 7,279 $ 10,037 $ 13,390 $ 4,402 $ 2,411
Government grants......................................... 1,068 733 977 1,403 304
-------- -------- -------- -------- -------
Total revenue....................................... 8,347 10,770 14,367 5,805 2,715
Operating expenses:
Research and development.................................. (19,661) (11,375) (16,398) (9,995) (7,040)
General and administrative................................ (1,766) (1,267) (2,033) (781) (532)
In-process research and development....................... (12,019) -- -- -- --
-------- -------- -------- -------- -------
Total operating expenses............................ (33,446) (12,642) (18,431) (10,776) (7,572)
-------- -------- -------- -------- -------
Loss from operations........................................ (25,099) (1,872) (4,064) (4,971) (4,857)
Interest income............................................. 2,414 605 1,300 642 772
Interest expense............................................ (513) (242) (327) (166) (82)
Other income................................................ 271 312 415 348 17
-------- -------- -------- -------- -------
Net loss.................................................... $(22,927) $ (1,197) $ (2,676) $ (4,147) $(4,150)
======== ======== ======== ======== =======
Basic and diluted net loss per share........................ $ (1.93) $ (0.46) $ (0.55) $ (1.65) $ (1.67)
======== ======== ======== ======== =======
Shares used in computation of basic and diluted net loss per
share..................................................... 11,862 2,630 4,891 2,521 2,487
======== ======== ======== ======== =======
Pro forma basic and diluted net loss per share.............. $ (0.15) $ (0.31) $ (0.55) $ (0.58)
======== ======== ======== =======
Shares used in computation of pro forma basic and diluted
net loss per share........................................ 7,781 8,755 7,490 7,120
======== ======== ======== =======
</TABLE>
See accompanying notes.
F-4
<PAGE> 188
CORIXA CORPORATION
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CONVERTIBLE OTHER
PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE ACCUMULATED
--------------- --------------- PAID-IN FOR DEFERRED COMPREHENSIVE
SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS COMPENSATION INCOME
------ ------ ------ ------ ---------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995............. 4,543 $ 5 2,454 $ 3 $15,029 $ -- $ -- $ --
Issuance of Series A convertible
preferred stock at $3.30 per share,
for cash........................... 103 -- -- -- 340 -- -- --
Issuance of common stock, valued at
$0.33 per share, for services...... -- -- 42 -- 14 -- -- --
Repurchase of common stock at $0.017
per share.......................... -- -- (3) -- -- -- -- --
Issuance of warrants, for cash to
purchase common stock.............. -- -- -- -- -- -- -- --
Net unrealized gain on securities
available-for-sale................. -- -- -- -- -- -- -- 22
Net loss............................. -- -- -- -- -- -- -- --
------ --- ------ --- ------- ------- ------- ----
Balance at December 31, 1995........... 4,646 5 2,493 3 15,384 -- -- 22
Issuance of common stock, valued at
$0.33 per share for services....... -- -- 33 -- 13 -- -- --
Stock options exercised.............. -- -- 68 -- 22 -- -- --
Issuance of Series B convertible
preferred stock for cash, at $9.90
per share.......................... 505 1 -- -- 4,999 -- -- --
Issuance of Series A convertible
preferred stock and common stock
warrants for acquired technology... -- -- -- -- 97 -- -- --
Net unrealized loss on securities
available-for-sale................. -- -- -- -- -- -- -- (25)
Warrants issued in exchange for
receivable......................... -- -- -- -- 1,140 (1,140) -- --
Net loss............................. -- -- -- -- -- -- -- --
------ --- ------ --- ------- ------- ------- ----
Balance at December 31, 1996........... 5,151 6 2,594 3 21,655 (1,140) -- (3)
Warrants payment received............ -- -- -- -- -- 488 -- --
Stock options exercised.............. -- -- 126 -- 69 -- -- --
Issuance of common stock, valued at
$8.25 and $9.08 per share for
services........................... -- -- 8 -- 65 -- -- --
Deferred compensation related to
stock option grants................ -- -- -- -- 3,904 -- (3,904) --
Amortization of deferred
compensation....................... -- -- -- -- -- -- 1,329 --
Proceeds from initial public offering
(IPO) (net of offering costs of
$932,404 and commissions of
$3,139,500)........................ -- -- 3,450 4 40,774 -- -- --
Preferred stock conversion upon
IPO................................ (5,151) (6) 5,151 5
Stock warrants net exercised......... -- -- 445 -- -- -- -- --
Net unrealized gain on securities
available-for-sale................. -- -- -- -- -- -- -- 7
Net loss............................. -- -- -- -- -- -- --
------ --- ------ --- ------- ------- ------- ----
<CAPTION>
ACCUMULATED
DEFICIT TOTAL
----------- --------
<S> <C> <C>
Balance at January 1, 1995............. $ (998) $ 14,039
Issuance of Series A convertible
preferred stock at $3.30 per share,
for cash........................... -- 340
Issuance of common stock, valued at
$0.33 per share, for services...... -- 15
Repurchase of common stock at $0.017
per share.......................... -- --
Issuance of warrants, for cash to
purchase common stock.............. -- --
Net unrealized gain on securities
available-for-sale................. 22
Net loss............................. (4,150) (4,150)
-------- --------
Balance at December 31, 1995........... (5,148) 10,266
Issuance of common stock, valued at
$0.33 per share for services....... -- 13
Stock options exercised.............. -- 22
Issuance of Series B convertible
preferred stock for cash, at $9.90
per share.......................... -- 5,000
Issuance of Series A convertible
preferred stock and common stock
warrants for acquired technology... -- 97
Net unrealized loss on securities
available-for-sale................. (25)
Warrants issued in exchange for
receivable......................... -- --
Net loss............................. (4,147) (4,147)
-------- --------
Balance at December 31, 1996........... (9,295) 11,226
Warrants payment received............ -- 488
Stock options exercised.............. -- 69
Issuance of common stock, valued at
$8.25 and $9.08 per share for
services........................... -- 65
Deferred compensation related to
stock option grants................ -- --
Amortization of deferred
compensation....................... -- 1,329
Proceeds from initial public offering
(IPO) (net of offering costs of
$932,404 and commissions of
$3,139,500)........................ -- 40,778
Preferred stock conversion upon
IPO................................ (1)
Stock warrants net exercised......... -- --
Net unrealized gain on securities
available-for-sale................. -- 7
Net loss............................. (2,676) (2,676)
-------- --------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997. -- -- 11,774 12 66,467 (652) (2,575) 4
Adjustment to receivable for warrants
(unaudited)........................ -- -- -- -- -- 652 -- --
Stock options exercised
(unaudited)........................ -- -- 47 -- 52 -- -- --
Issuance of common stock for GenQuest
acquisition (unaudited)............ -- -- 1,064 1 7,351
Issuance of common stock in exchange
for technology and services
(unaudited)........................ -- -- 23 -- 131 -- -- --
Amortization of deferred compensation
(unaudited)........................ -- -- -- -- -- -- 1,131 --
Net unrealized gain on securities
available-for-sale (unaudited)..... -- -- -- -- -- -- -- 203
Net loss (unaudited)................. -- -- -- -- -- -- -- --
------ --- ------ --- ------- ------- ------- ----
Balance at September 30, 1998
(unaudited).......................... -- $-- 12,908 $13 $74,001 $ -- $(1,444) $207
====== === ====== === ======= ======= ======= ====
</TABLE>
<TABLE>
<S> <C> <C>
Balance at December 31, 1997........... 11,971) 51,285
Adjustment to receivable for warrants
(unaudited)........................ -- 652
Stock options exercised
(unaudited)........................ -- 52
Issuance of common stock for GenQuest
acquisition (unaudited)............ 7,352
Issuance of common stock in exchange
for technology and services
(unaudited)........................ -- 131
Amortization of deferred compensation
(unaudited)........................ 1,131
Net unrealized gain on securities
available-for-sale (unaudited)..... -- 203
Net loss (unaudited)................. (22,927) (22,927)
-------- --------
Balance at September 30, 1998
(unaudited).......................... $(34,898) $ 37,879
======== ========
</TABLE>
See accompanying notes
F-5
<PAGE> 189
CORIXA CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------- -------------------------------
1998 1997 1997 1996 1995
-------- ------- -------- -------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss........................................ $(22,927) $(1,197) $ (2,676) $ (4,147) $(4,150)
Adjustments to reconcile net loss to net cash
used in operating activities:
In-process research and development........... 12,019 -- -- -- --
Amortization of deferred compensation......... 1,131 850 1,329 -- --
Depreciation and amortization................. 1,093 770 1,091 571 293
Equity instruments issued in exchange for
technology
and services................................ 131 65 65 97 14
Write-off of warrant receivables.............. 489 --
Changes in certain assets and liabilities:
Accounts receivable........................... (119) 492 80 (635) (52)
Interest receivable........................... (585) -- (129) 50 109
Prepaid expenses.............................. 24 (502) (242) (87) (165)
Other assets.................................. 47 (879) (138) 6 76
Accounts payable and accrued expenses......... 806 606 592 409 414
Deferred revenue.............................. (597) 27 (221) 905 413
-------- ------- -------- -------- -------
Net cash used in operating activities........... (8,488) 232 (249) (2,831) (3,048)
INVESTING ACTIVITIES
Purchases of securities available-for-sale...... (77,973) (9,715) (35,802) (11,270) (5,223)
Proceeds from maturities of securities
available-for-sale............................ 56,510 5,532 5,794 9,118 9,450
Proceeds from sale of securities................ 20,961 -- -- -- --
Purchases of property and equipment............. (3,267) (685) (888) (544) (270)
Purchase of subsidiary, net of cash acquired.... (4,735) -- -- -- --
-------- ------- -------- -------- -------
Net cash provided by (used in) investing
activities.................................... (8,504) (4,868) (30,896) (2,696) 3,957
FINANCING ACTIVITIES
Net proceeds from issuance of stock............. 52 69 40,847 5,035 340
Proceeds from long term debt.................... 4,000 -- 2,000 -- --
Borrowings from collaborative agreement......... 2,000 3,000 3,000 -- --
Principal payments on capital leases............ (769) (584) (820) (425) (151)
Payments on receivables for warrants............ 163 348 488 -- --
Other........................................... -- -- -- -- (141)
-------- ------- -------- -------- -------
Net cash provided by financing activities....... 5,446 2,833 45,515 4,610 48
Net increase (decrease) in cash and cash
equivalents................................... (11,546) (1,803) 14,370 (916) 957
Cash and cash equivalents at beginning of
period........................................ 16,458 2,088 2,088 3,004 2,047
-------- ------- -------- -------- -------
Cash and cash equivalents at end of period...... $ 4,912 $ 285 $ 16,458 $ 2,088 $ 3,004
======== ======= ======== ======== =======
SUPPLEMENTAL DISCLOSURES
Interest paid................................. $ 394 $ 242 $ 327 $ 166 $ 82
SUPPLEMENTAL SCHEDULE OF NONCASH OPERATING,
INVESTING, AND FINANCING ACTIVITIES
Equity instruments issued --
GenQuest acquisition........................ $ 7,352 $ -- $ -- $ -- $ --
Assets acquired pursuant to capital leases.... 308 1,786 2,067 996 1,244
Equity instruments issued in exchange for
technology
and services................................ 131 65 65 97 14
</TABLE>
See accompanying notes
F-6
<PAGE> 190
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS
INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997 IS UNAUDITED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF ACTIVITIES
Corixa Corporation, is focused on the discovery and early clinical
development of products useful in preventing, treating or diagnosing cancer and
certain infectious diseases as well as immunotherapeutic products for the
treatment of certain autoimmune diseases. Corixa was previously considered a
development stage company.
INTERIM FINANCIAL INFORMATION
The financial information at September 30, 1998 and for the nine months
ended September 30, 1998 and 1997 is unaudited, but includes all adjustments
(consisting only of normal recurring adjustments) that Corixa considers
necessary for a fair presentation of the financial position at such date and the
operating results and cash flows for those periods. Operating results for the
nine months ended September 30, 1998 are not necessarily indicative of the
results that may be expected for the entire year.
The unaudited interim financial statements of Corixa Corporation ("Corixa"
or the "Company") include the accounts of its wholly-owned subsidiary, Chinook,
a Delaware corporation (formerly known as Chinook Acquisition Corporation)
("Chinook") created to effect the merger with GenQuest, Inc., a Delaware
corporation ("GenQuest"). Pursuant to the terms set forth in the Agreement and
Plan of Merger by and among the Company, Chinook and GenQuest, GenQuest merged
with and into Chinook and the separate corporate existence of GenQuest ceased,
with Chinook surviving as a wholly-owned subsidiary of Corixa.
The merger with GenQuest was accounted for as a purchase transaction. The
assets and liabilities of GenQuest have been recorded on the books of the
Company at their fair market values. The operating results of the acquired
business have been included in the consolidated statements of operations from
September 15, 1998, the effective date of the acquisition. All significant
intercompany account balances and transactions have been eliminated in
consolidation.
CASH AND CASH EQUIVALENTS
All short-term investments, which consist primarily of bankers' acceptances
and certificates of deposit, with maturities of three months or less at date of
purchase are considered to be cash equivalents. The amounts are recorded at
cost, which approximates fair market value.
SECURITIES AVAILABLE-FOR-SALE
The Company's investment portfolio is classified as available-for-sale. The
Company's main investment objectives are preservation of principal, a high
degree of liquidity and a maximum total return. The Company invests primarily in
(U.S. denominated only):
F-7
<PAGE> 191
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
commercial paper; corporate notes/bonds, with no more than 10% of the portfolio
in any one corporate issuer; and U.S. Treasury instruments with terms not
exceeding four years. Such securities are stated at fair value, with the
unrealized gains and losses reflected in stockholders' equity. Interest earned
on securities is included in interest income. The amortized cost of investments
is adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization and accretions are included in interest income. The cost of
securities sold is calculated using the specific identification method.
MANAGEMENT OF CREDIT RISK
The Company is subject to concentration of credit risk, primarily from its
cash investments. Credit risk for cash investments is managed by purchase of
investment grade securities, A1/P1 for money market instruments and A or better
for debt instruments, and diversification of the investment portfolio among
issuers and maturities.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost and is depreciated on the
straight-line method over the assets' estimated useful lives, which range from
three to four years. Leasehold improvements are amortized over the lesser of
their estimated useful lives or the term of the lease. Amortization of assets
recorded under capital leases is included in depreciation.
STOCK-BASED COMPENSATION
In 1995, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"). The Company has adopted the disclosure-only
provisions of Statement 123, and applies Accounting Principles Board Opinion No.
25 ("APB 25") and related Interpretations in accounting for its stock option
plans. Accordingly, Corixa's employee stock-based compensation expense is
recognized based on the intrinsic value of the option on the date of grant.
Non-employee stock-based compensation expense is recognized based on the
Black-Scholes valuation methodology. Pro forma disclosure of net loss and net
loss per share under Statement 123 is provided in Note 4.
Under the intrinsic value method, Corixa records deferred compensation for
the difference between the exercise price and the deemed fair value for
financial reporting purposes of stock options granted. The compensation expense
related to such grants is amortized over the vesting period.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-8
<PAGE> 192
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
OTHER FINANCIAL INSTRUMENTS
At September 30, 1998 and December 31, 1997, the carrying value of
financial instruments such as receivables and payables approximated their fair
values, based on the short-term maturities of these instruments. Additionally,
the carrying value of long-term liabilities approximated fair values because the
underlying interest rates reflect market rates at the balance sheet dates.
REVENUE
Revenue under collaborative agreements typically consists of nonrefundable
up-front fees, ongoing research, development and technology access payments, and
milestone and royalty payments. Revenue from nonrefundable up-front fees is
recognized upon satisfaction of related obligations. Revenue from ongoing
research and co-development payments is recognized ratably over the term of the
agreement, as the Company believes such payments approximate the research and
development expense being incurred associated with the agreement. Revenue from
milestone, royalty, and other contingent payments will be recognized as earned.
Advance payments received under any agreements in excess of amounts earned are
recorded as deferred revenue. Revenue under cost reimbursement contracts is
recognized as the related costs are incurred. The Company recognized 74%, 41%
and 59% of its revenue in fiscal years 1997, 1996 and 1995, respectively from
two collaborative partners. Two collaborative partners made up 65% and 13% of
the Company's revenue during the nine month period ended September 30, 1998 and
62% and 13% during the same period in 1997. Grant revenue represented 13% of the
Company's revenue during the nine month period ended September 30, 1998 and 7%
during the same period in 1997.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development costs are expensed as incurred.
INCOME TAXES
Corixa accounts for income taxes using the liability method under Statement
of Accounting Standards No. 109, "Accounting for Income Taxes."
NET EARNING PER SHARE CALCULATIONS
Corixa adopted the FASB issued Statement No. 128, "Earnings per Share."
Statement 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Basic earnings per share is
based on the weighted average number of common shares outstanding for the
period, and excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share assumes the conversion of all dilutive
securities, such as options, warrants and convertible preferred stock.
As all preferred stock converted to common stock at the closing of Corixa's
initial public offering, (the "Offering") pro forma basic and diluted loss per
share is computed on
F-9
<PAGE> 193
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
the basis of the average number of common shares outstanding plus the effect of
preferred shares using the "if-converted" method. All pro forma losses per share
amounts for all periods have been presented to conform to the Statement 128
requirements.
COMPREHENSIVE LOSS
As of January 1, 1998, the Company adopted SFAS NO. 130, "Reporting
Comprehensive Income," which establishes standard for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and requires reclassification of financial statements for
earlier periods to be provided for comparative purposes. Such adoption had no
effect on the Company's financial condition or results of operations. Prior year
financial statements have been restated to conform to the requirements of SFAS
No. 130. The Company's comprehensive loss includes all items which comprise net
loss plus/(minus) the unrealized gains/(losses) on available-for-sale
securities. For the nine month periods ended September 30, 1998 and 1997, the
Company's comprehensive loss was as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------
1998 1997 1997 1996 1995
------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net loss...................... $(22,926,792) $(1,196,805) $(2,675,857) $(4,146,763) $(4,149,973)
Other comprehensive income:
Unrealized holding gains
(losses) arising during
period.................... 203,519 1,910 6,553 (25,137) 22,437
------------ ----------- ----------- ----------- -----------
Total comprehensive loss...... $(22,723,273) $(1,194,895) $(2,669,304) $(4,171,900) $(4,127,536)
============ =========== =========== =========== ===========
</TABLE>
SEGMENT REPORTING
In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS NO. 131 establishes standards for
the manner in which public companies report information about operating segments
in annual and interim financial statements. The statement shall be effective for
fiscal years beginning after December 15, 1997. Segment information for earlier
years that is reported with corresponding information for the initial year of
application shall be restated to conform to the requirements of Statement No.
131 unless it is impracticable to do so. Statement No. 131 need not be applied
to interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
shall be reported in financial statements for interim period in the second year
of application. The Company does not anticipate that Statement No. 131 will have
a significant impact on its financial statement reporting.
RECLASSIFICATIONS
Certain reclassifications have been made to the prior years' financial
statements to conform to the 1997 presentation.
F-10
<PAGE> 194
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
2. SECURITIES AVAILABLE-FOR-SALE
Securities available-for-sale consist of the following:
<TABLE>
<CAPTION>
GROSS GROSS
MARKET UNREALIZED UNREALIZED AMORTIZED
VALUE GAINS LOSSES COST
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
September 30, 1998
(Unaudited)
U.S. Treasury
obligations............. $ 3,558,777 $ 17,807 $ $ 3,540,970
U.S. Corporate
obligations............. 37,005,988 181,523 (1,166) 36,825,631
----------- -------- -------- -----------
$40,564,765 $199,330 $ (1,166) $40,366,601
=========== ======== ======== ===========
December 31, 1997
U.S. Treasury
obligations............. $13,978,189 $ 10,474 $ (7,969) $13,975,685
U.S. Corporate
obligations............. 25,881,460 1,927 (9,787) 25,889,320
----------- -------- -------- -----------
$39,859,649 $ 12,401 $(17,756) $39,865,005
=========== ======== ======== ===========
December 31, 1996
U.S. Treasury
obligations............. $ 9,845,180 $ 842 $(12,750) $ 9,857,088
=========== ======== ======== ===========
</TABLE>
Corixa had no gross realized gains or losses on sales of available-for-sale
securities for the fiscal years 1997, 1996 and 1995. The contractual maturities
of Corixa's available-for-sale securities are shown below:
<TABLE>
<CAPTION>
ESTIMATED
FAIR MARKET AMORTIZED
VALUE COST
----------- -----------
<S> <C> <C>
September 30, 1998 (Unaudited)
Due in one year or less................... $18,584,025 $18,458,673
Due in one year through three years....... 21,980,740 21,907,928
----------- -----------
$40,564,765 $40,366,601
=========== ===========
December 31, 1997
Due in one year or less................... $25,914,319 $25,915,022
Due after one year through three years.... 13,945,330 13,949,983
----------- -----------
$39,859,649 $39,865,005
=========== ===========
December 31, 1996
Due in one year or less................... $ 9,854,180 $ 9,857,088
=========== ===========
</TABLE>
F-11
<PAGE> 195
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, -------------------------
1998 1997 1996
------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Laboratory equipment........... $ 4,422,298 $ 3,577,341 $2,088,170
Computers and office
equipment.................... 1,741,962 1,151,114 370,471
Leasehold improvements......... 1,268,764 1,256,002 628,940
Construction in progress....... 2,621,297 -- --
----------- ----------- ----------
10,054,321 5,984,457 3,087,581
Accumulated depreciation and
amortization................. (3,029,189) (1,937,973) (850,385)
----------- ----------- ----------
$ 7,025,132 $ 4,046,484 $2,237,196
=========== =========== ==========
</TABLE>
Construction in progress includes expenditures related to leasehold
improvements on the Company's leased office and research facilities.
4. STOCKHOLDERS' EQUITY
COMMON STOCK
On July 25, 1997, Corixa's Board of Directors authorized Corixa to file a
Registration Statement with the Securities and Exchange Commission to permit
Corixa to proceed with the Offering of its common stock. In connection with the
Offering, Corixa's Board of Directors and stockholders authorized a class of
10,000,000 shares of Preferred Stock (the "New Preferred Stock") and approved a
reverse stock split of the outstanding shares of common stock and Series A and
Series B convertible preferred stock on the basis of one new share of stock for
every 3.3 outstanding shares of stock. The reverse stock split became effective
September 24, 1997 concurrent with the filing of an Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of
Delaware. All outstanding convertible preferred stock, common and common
equivalent shares and per-share amounts in the accompanying financial statements
and related notes to financial statements have been retroactively adjusted to
give effect to the reverse stock split. In October 1997, Corixa completed the
Offering of its common stock by selling 3,450,000 shares at $13 per share,
resulting in proceeds to Corixa of $40,778,096 net of underwriting discounts,
commissions and offering expenses incurred by Corixa.
PREFERRED STOCK
In connection with the Offering, Corixa's Series A Preferred Stock and
Series B Preferred Stock were converted, after obtaining the consent of a
majority of the holders of each class of such shares, into 5,151,181 shares of
common stock based upon the then-effective (one for one) respective conversion
prices of the Series A and Series B shares.
F-12
<PAGE> 196
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1994 STOCK OPTION PLAN
Corixa has a stock option plan, the Amended and Restated 1994 Stock Option
Plan (the "1994 Plan") under which an aggregate of 2,364,208 shares of common
stock were reserved for grants to employees, members of the Board of Directors,
and consultants as of March 31, 1998. Options granted under the 1994 Plan may be
designated as incentive or nonqualified at the discretion of the Plan
Administrator (as defined in the 1994 Plan). On July 25, 1997, Corixa amended
and restated the 1994 Plan, whereby the number of shares authorized under the
1994 Plan was increased by 700,000 shares and is subject to automatic increase
on the first trading day of each of the ten calendar years beginning in 1998 and
ending in 2007, in an amount equal to 3% of the number of shares of common stock
outstanding on December 31 of the immediately preceding calendar year, up to a
maximum of 500,000 shares each year over the ten-year period.
Generally, the options vest over a four-year period with 25% vesting upon
the first year and the remainder vesting monthly thereafter. All options expire
no later than ten years from the date of grant. Incentive stock options are
exercisable at not less than the fair market value of the stock at the date of
grant, and nonqualified stock options are exercisable at prices determined at
the discretion of the Plan Administrator, but not less than 85% of the fair
market value of the stock at the date of grant. The Administrator has the
discretion to grant options that are exercisable for unvested shares of Corixa
Common Stock and, to the extent that an optionee holds options for such unvested
shares of Corixa Common Stock upon termination, Corixa will have the right to
repurchase any or all of the unvested shares at the per-share exercise price
paid by the optionee for the unvested shares.
1997 EMPLOYEE STOCK PURCHASE PLAN
On July 25, 1997, Corixa adopted the 1997 Employee Stock Purchase Plan (the
"Purchase Plan"). As of March 31, 1998, a total of 125,000 shares of common
stock were reserved for issuance under the Purchase Plan. The Purchase Plan
permits eligible employees to purchase shares of Corixa's common stock through
payroll deductions at a price equal to 85% of the fair market value of Corixa's
common stock on the first day or the last day of the applicable six-month
offering period, whichever is lower. The Purchase Plan began on the effective
date of Corixa's Offering.
The number of authorized shares is subject to automatic increase on the
first trading day of each of the 20 calendar years beginning in 1998 and ending
in 2017. If the number of shares reserved for issuance is less than 1% of the
outstanding common stock, the number of shares reserved for issuance shall be
increased until it equals 1% of the outstanding common stock (up to a maximum of
125,000 in any calendar year), or such lower amount as determined by the Board
of Directors. The Board of Directors has the power to amend or terminate the
Purchase Plan as long as such action does not adversely affect any outstanding
rights to purchase stock thereunder. If not terminated earlier, the Purchase
Plan will have a term of 20 years.
F-13
<PAGE> 197
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1997 DIRECTORS' STOCK OPTION PLAN
The Directors' Plan was adopted by Corixa on July 25, 1997. As of March 31,
1998, a total of 250,000 shares of Corixa's common stock were reserved for
issuance under the Directors' Plan. The number of authorized shares is subject
to automatic increase, on the first trading day of each of the five calendar
years beginning in 1998 and ending in 2002 in an amount equal to 50,000 shares
of common stock or such lesser amount as the Board of Directors may establish.
The Directors' Plan provides for the grant of nonqualified stock options to
non-employee directors of Corixa. The Directors' Plan provides that each person
who first became a non-employee director of Corixa shall be granted nonqualified
stock options to purchase 15,000 shares of common stock (the "First Option").
Thereafter, on the first day of each fiscal year, commencing fiscal year 1998,
each non-employee director shall be automatically granted an additional option
to purchase 5,000 shares of common stock (a "Subsequent Option") if, on such
date, he or she shall have served on Corixa's Board of Directors for at least
six months. The First Options and Subsequent Options generally vest over 36 and
12 months, respectively, and have 10-year terms. The exercise price of such
options shall be equal to the fair market value of the Corixa's common stock on
the date of grant of the option. The Plan has a 10-year term unless terminated
earlier.
A summary of Corixa's stock option activity and related information
follows:
<TABLE>
<CAPTION>
WEIGHTED
SHARES UNDER AVERAGE
OUTSTANDING PRICE PER EXERCISE
OPTIONS SHARE PRICE
------------ ------------ --------
<S> <C> <C> <C>
Balance at January 1, 1995............... 167,127 0.33 0.33
Options granted........................ 341,643 0.33 0.33
Options canceled....................... (11,969) 0.33 0.33
---------
Balance at December 31, 1995............. 496,801 0.33 0.33
Options granted........................ 182,413 0.33 - 0.99 0.58
Options exercised...................... (67,999) 0.33 0.33
Options canceled....................... (6,090) 0.33 - 0.99 0.38
---------
Balance at December 31, 1996............. 605,125 0.33 - 0.99 0.40
Options granted........................ 710,004 0.99 - 13.50 2.08
Options exercised...................... (126,188) 0.33 - 0.99 0.55
Options canceled....................... (19,852) 0.33 - 0.99 0.67
---------
Balance at December 31, 1997............. 1,169,089 0.33 - 13.50 1.40
Options granted (Unaudited)............ 417,775 5.00 - 9.50 7.79
Options exercised (Unaudited).......... (68,574) 0.33 - 0.99 0.60
Options canceled (Unaudited)........... (40,878) 0.99 - 11.50 4.96
---------
Balance at September 30, 1998
(Unaudited)............................ 1,477,412 0.33 - 13.50 3.28
=========
</TABLE>
F-14
<PAGE> 198
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The following table summarizes information about the stock options
outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ (WITHOUT RESTRICTION)
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE AVERAGE
RANGE OF OUTSTANDING CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES 12/31/97 LIFE PRICE VESTED PRICE
- --------------- ----------- ----------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
$ 0.33 - 0.99 1,104,089 8.5 years $ 0.72 508,373 $0.47
$11.50 - 13.50 65,000 9.8 years $12.88 -- --
--------- -------
$ 0.33 - 13.50 1,169,089 8.6 years $ 1.40 508,373 $0.47
========= =======
</TABLE>
Deferred compensation of approximately $3.9 million was recorded during
1997 representing the difference between the exercise prices of options granted
during that period and the deemed fair market value.
Options of 24,945 and 96,845 shares had been exercised as of September 30,
1998 and December 31, 1997 respectively for which the underlying stock continues
to be restricted. At September 30, 1998 and December 31, 1997, 875,077 and
847,706, respectively, shares remain available for grant.
Pro forma information regarding net loss and loss per share required by
Statement 123 has been determined as if Corixa had accounted for its employee
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions on the option
grant date for 1997, 1996 and 1995, respectively: risk-free interest rates of
6.4%, 6.5% and 6.3%, expected volatility of 57%, 0% and 0%, and expected option
lives of four years and dividend yields of 0.0%.
The weighted average fair value of options granted during 1997, 1996 and
1995 was $6.60, $0.17 and $0.11 per option, respectively.
Under Statement 123, if Corixa had elected to recognize the compensation
cost based upon the fair value of the options granted at the grant date, net
loss would have been increased as follows (the estimated fair value of the
options is amortized to expense over the options' vesting period or upon the
achievement of certain milestones):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net loss:
As reported................. $(2,675,857) $(4,146,763) $(4,149,973)
Pro forma................... (2,914,188) (4,170,558) (4,158,556)
Pro forma net loss per share:
As reported................. $ (0.31) $ (0.55) $ (0.58)
Pro forma................... (0.33) (0.56) (0.58)
</TABLE>
The Statement 123 pro forma disclosures above are not necessarily
indicative of future pro forma disclosures because of the manner in which the
pro forma impact of Statement 123 calculations is phased in over time.
F-15
<PAGE> 199
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
STOCK WARRANTS
In connection with sales of Series A shares in 1995 and 1994, Corixa issued
stock warrants to certain stockholders at an aggregate purchase price of $0.003
per share to purchase 413,191 shares of Corixa's common stock at an exercise
price of $0.33 per share.
During 1996, Corixa issued warrants to purchase 114,342 shares of common
stock at exercise prices ranging from $0.003 to $6.60 per share and 163,636
Series A shares at an exercise price of $6.60 per share. These warrants were
issued in connection with certain collaborative agreements and the leasing of
office and research facilities. Vesting of the warrants to purchase 75,757
shares of common stock and warrants to purchase 163,636 shares of Series A stock
is contingent upon the achievement of certain milestones. The weighted average
grant-date fair value ranges from $0.99 to negligible per share, and negligible
per share for common stock and Series A shares, respectively. Warrants to
purchase 31,818 shares of Series A Preferred Stock were issued in 1994. (See
Note 7 of these Corixa financial statements.) Additional warrants to purchase
454,533 shares of Series B stock were issued in 1996. (See Note 9 of these
Corixa financial statements.)
Corixa recognizes research and development expense for the calculated fair
value of milestone specific warrants, for which milestone achievement has been
deemed probable by management. No warrant-related milestones were reached during
the nine months ended September 30, 1998 or in 1997. Final valuation of the
warrant costs is calculated at the actual achievement of these milestones based
on the fair value of the underlying stock at that date.
In connection with the Offering, all Series A and Series B share warrants
were converted to warrants to purchase common shares on a share-for-share basis.
445,139 shares of common stock were issued upon the net exercise of 483,008
stock warrants during 1997. The number of common shares purchased reflect the
difference between the aggregate exercise price of the warrants and the market
price per share of the common stock of the aggregate number of shares
purchasable under the warrant.
Corixa had 684,893 common stock warrants outstanding as of September 30,
1998 and December 31, 1997 at a weighted average exercise price of $8.04 and
expire between 2001 and 2008. Corixa had no Series A or Series B share warrants
outstanding as of March 31, 1998. Common stock, Series A share and Series B
share warrants outstanding at December 31, 1996 were 527,533, 195,454, and
454,533, respectively, at weighted average exercise prices of $.075, $6.07, and
$9.90 per share, respectively.
STOCK REPURCHASE AGREEMENTS
Since its inception, Corixa has sold approximately 945,185 shares of common
stock at a price of $0.017 per share to employees and scientific founders of
Corixa under agreements which allow Corixa, at its option, to repurchase the
shares at the original purchase price if the employment or consulting
relationship with Corixa ceases for any reason. Under the repurchase agreements,
the shares subject to repurchase are generally reduced in cumulative pro rata
increments over a four-year period beginning at the issuance date. As of
September 30, 1998 and December 31, 1997, 118,148 shares and 177,223 shares,
respectively, were subject to repurchase.
F-16
<PAGE> 200
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Under the terms of all of the repurchase agreements, if Corixa is acquired
by merger, consolidation, or sale of assets, the repurchase agreements will
cease to apply.
SHARES RESERVED
Common stock was reserved for the following purposes:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
------------- ------------
(UNAUDITED)
<S> <C> <C>
Stock options................................ 2,352,489 2,016,795
Warrants to purchase common stock............ 684,893 694,512
Employee Stock Purchase Plan................. 120,212 125,000
License, technology, and patent rights
agreements................................. 16,659 34,838
--------- ---------
3,157,594 2,871,145
========= =========
</TABLE>
NET LOSS PER SHARE
Basic and diluted loss per share are calculated using the average number of
common shares outstanding (see Note 1 of these Corixa financial statements). Pro
forma basic and diluted loss per share are computed on the basis of the average
number of common shares outstanding plus the effect of convertible preferred
shares using the "if-converted" method as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------------- ---------------------------------------
1998 1997 1997 1996 1995
------------ ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net loss(A).............. $(22,926,792) $(1,196,805) $(2,675,857) $(4,146,763) $(4,149,973)
Weighted average
outstanding:
Common stock(B)........ 11,862,434 2,630,018 4,891,342 2,520,668 2,486,746
Convertible preferred
stock................ 0 5,151,196 3,863,396 4,969,433 4,633,075
------------ ----------- ----------- ----------- -----------
Proforma weighted
average
outstanding(C).... 11,862,434 7,781,214 8,754,738 7,490,101 7,119,821
============ =========== =========== =========== ===========
Loss per share:
Basic and
diluted(A/B)......... $ (1.93) $ (0.46) $ (0.55) $ (1.65) $ (1.67)
============ =========== =========== =========== ===========
Pro forma basic and
diluted(A/C)......... $ (1.93) $ (0.15) $ (0.31) $ (0.55) $ (0.58)
============ =========== =========== =========== ===========
</TABLE>
5. INCOME TAXES
At September 30, 1998 and December 31, 1997, Corixa had net operating loss
carryforwards of approximately $10.6 million and $9.9 million, respectively, and
research and experimentation credit carryforwards of approximately $1.1 million
and $0.8 million, respectively, which begin to expire in 2009. Utilization of
net operating losses and research
F-17
<PAGE> 201
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and development tax credit carryforwards is subject to change of certain
limitations under Section 382 of the Internal Revenue Code. During the period
1995 through 1997, Corixa experienced ownership changes as defined by the
Internal Revenue Code. Accordingly, Corixa's use of losses incurred through the
date of any ownership changes will be limited during the carryforward period.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Corixa has recognized a
valuation allowance equal to the deferred tax assets due to the uncertainty of
realizing the benefits of the assets. The valuation allowance for deferred tax
assets increased $3,824,000, $1,291,000 and $1,475,000 during the nine months
ended September 30, 1998 and during the years ended December 31, 1997 and 1996,
respectively. The effects of temporary differences and carryforwards that give
rise to deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------
1998 1997 1996
------------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards...... $ 6,969,000 $ 3,361,000 $ 2,547,000
Research and experimentation credit
and foreign tax credit
carryforwards....................... 1,153,000 861,000 339,000
Deferred revenue...................... 170,000 373,000 448,000
Financial statement expenses not
deducted on tax return.............. 180,000 162,000 33,000
----------- ----------- -----------
8,472,000 4,757,000 3,367,000
----------- ----------- -----------
Deferred tax liabilities:
Depreciation.......................... (25,000) 37,000 34,000
Tax return expenses not charged
against financial statements........ 49,000 96,000 0
----------- ----------- -----------
24,000 133,000 34,000
----------- ----------- -----------
Net deferred tax asset................ 8,448,000 4,624,000 3,333,000
Less valuation allowance.............. (8,448,000) (4,624,000) (3,333,000)
----------- ----------- -----------
Net deferred tax assets............... $ 0 $ 0 $ 0
=========== =========== ===========
</TABLE>
6. 401(k) PLAN
Corixa has a tax-qualified employee savings and retirement plan (the
"401(k) Plan") covering all of Corixa's employees. Pursuant to the 401(k) Plan,
employees may elect to reduce their current compensation by up to the
statutorily prescribed annual limit ($10,000 in 1998) and to have the amount of
such reduction contributed to the 401(k) Plan. Corixa did not match
contributions before fiscal 1998. Effective January 1, 1998, Corixa implemented
a 401(k) matching program whereby Corixa contributes twenty-five cents for
F-18
<PAGE> 202
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
each dollar a participant contributes, with a maximum contribution of 25% of the
first 8% of a participants earnings not to exceed 25% of the prescribed annual
limit. The 401(k) Plan is intended to qualify under Section 401 of the Internal
Revenue Code so that contributions by employees or by Corixa to the 401(k) Plan,
and income earned on 401(k) Plan contributions, are not taxable to employees
until withdrawn from the 401(k) Plan, and so that contributions by Corixa, if
any, will be deductible by Corixa when made. At the direction of each
participant, Corixa invests the assets of the 401(k) Plan in any of five
investment options.
7. LONG-TERM OBLIGATIONS AND COMMITMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------
1998 1997 1996
------------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C>
Capital lease obligations............. $ 2,841,132 $2,854,215 $1,663,112
Advance from corporate partner........ 5,000,000 3,000,000 -0-
Bank loan............................. 6,000,000 2,000,000 -0-
----------- ---------- ----------
13,841,132 7,854,215 1,663,112
Less current portion of capital lease
obligations......................... 2,133,889 930,429 487,758
----------- ---------- ----------
$11,707,243 $6,923,786 $1,175,354
=========== ========== ==========
</TABLE>
A $1,500,000 lease line was obtained in 1996, and in 1997 Corixa
renegotiated the remaining lease line (of approximately $384,000) to $1,450,000.
As of September 30, 1998, Corixa had fully utilized the lease line. Both leases
are secured by the underlying equipment.
The $5 million advance from a corporate partner at September 30, 1998
represents payments received in exchange for options to license two of Corixa's
early-stage cancer targets. Refer to Note 8 to these Corixa financial statements
with regard to the terms and conditions of the advance and Note 10 to these
Corixa financial statements with regard to subsequent events related to an
extension of a license relating to one of the two early-stage cancer targets.
As of December 31, 1997, Corixa has an unsecured note that includes a
commitment expiring December 31, 1998 for up to $7 million of borrowings.
Borrowings under the terms of the note bear interest a rate that is a function
of either the prime rate of a major bank or federal fund rates. Under the terms
of the note, Corixa is required to meet minimum (i) tangible net worth, (ii) net
cash calculated based upon the sum of the principal balance under the note and
the greater of a multiple of Corixa's net cash burn or $10,000,000, (iii) total
debt to net worth ratios and (iv) current ratio. As of September 30, 1998 Corixa
had borrowed $6 million against the facility. The note includes provisions for
quarterly interest-only payments based upon the outstanding loan balance until
December 1998 followed by 48 payments of interest and principal beginning
January 1999 based upon the outstanding amount on the note as of December 31,
1998. No
F-19
<PAGE> 203
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
additional amounts may be drawn against the note after December 31, 1998. As of
September 30, 1998, Corixa was in compliance with the note covenants.
Corixa rents office and research facilities under noncancelable operating
leases which expire in January 2005. Corixa has issued an irrevocable standby
letter of credit in the amount of $750,000 as a security deposit on the lease.
Corixa has options to renew the lease for two additional terms of five years
each.
Minimum future rental payments under all lease agreements at December 31,
1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEAR ENDED DECEMBER 31, LEASES LEASES
----------------------- ---------- -----------
<S> <C> <C>
1998................................................. $1,226,229 $ 1,322,200
1999................................................. 1,010,732 2,447,508
2000................................................. 809,315 2,466,114
2001................................................. 403,054 2,540,097
2002................................................. -0- 2,616,300
Thereafter........................................... -0- 5,589,543
---------- -----------
Total minimum payments............................... $3,449,330 $16,981,762
===========
Less interest........................................ 595,115
----------
Present value of minimum lease payments.............. 2,854,215
Less current portion................................. 930,429
----------
Capital lease obligations, less current portion...... $1,923,786
==========
</TABLE>
Rent expense was $1,290,000, $1,532,282, $638,037 and $364,240, for the
nine months ended September 30, 1998 and for the years ended December 31, 1997,
1996 and 1995, respectively.
8. SCIENTIFIC COLLABORATIVE AND LICENSE AGREEMENTS
Corixa has various collaborative research agreements with academic
universities and research institutions, which expire at various intervals
through 2000. Certain agreements stipulate the reimbursement by Corixa of
research costs incurred by these universities and institutions on behalf of
Corixa. Included in research and development expenses for the nine months ended
September 30, 1998 and years ended December 31, 1997, 1996 and 1995 are
reimbursements approximating $1,400,000, $1,400,000 and $900,000, respectively.
Certain 1997 collaborative agreements extend into fiscal years 1998 and 1999. As
of September 30, 1998, Corixa is committed to reimburse these universities and
institutions approximately $804,000 and $474,000 in 1998 and 1999, respectively.
Corixa has entered into certain license agreements and obtained options to
negotiate license agreements under the terms of which Corixa received license,
technology, and patent rights. During the nine months ended September 30, 1998
and the years ended December 31, 1997, 1996 and 1995, Corixa paid initial
license and/or option fees
F-20
<PAGE> 204
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
approximating $1,084,000, $480,000, $185,000 and $80,000, respectively. Corixa
issued 33,328 and 36,363 shares of common stock during 1996 and 1995, (plus a
commitment to issue an additional 21,212 shares, upon the achievement of certain
events of which 19,697 were issued in 1997) for such rights. No shares of common
stock issued during 1997 were attributable to license agreements. In conjunction
with certain 1996 collaboration agreements, Corixa also issued options to
purchase 129,393 shares of common stock and warrants to purchase 75,757 and
163,636 shares of common stock and Series A Preferred Stock, respectively. See
Note 4 of these Corixa financial statements.
Certain agreements call for royalty and milestone payments to be paid by
Corixa. The agreements are for terms from 10 to 17 years or the expiration of
the last issued patent within the licensed technology, unless terminated earlier
for certain specified events, as defined in the respective agreements.
Additionally, Corixa has entered into research and license agreements and
granted options to other parties to negotiate license agreements under the terms
of which Corixa provides license, technology, and patent rights. Under the terms
of the agreements, Corixa will receive additional license fees, option fees
and/or reimbursement of certain research and development costs through 1998. The
agreements provide for one-time payments upon the achievement of certain
milestones and the payment of royalties based on product sales.
Corixa entered into an exclusive option agreement ("Exclusive Option")
during 1997 with a third party ("Option Partner") pursuant to which the third
party agreed to advance consideration in exchange for exclusive options to
license two of Corixa's early-stage programs in two cancer targets (see Note 7
of these Corixa financial statements). In the event such options are exercised,
the consideration will be credited against future milestone payments or
converted to common stock of Corixa, as per the agreement. In January 1998, the
Option Partner advanced $2 million to Corixa to extend the first option
expiration from March 1, 1998 to September 1, 1999. If such options are not
exercised or extended before September 1, 1999 in the case of one cancer target
option or before September 1, 1998 in the case of the second cancer target
option, Corixa will be required to refund the consideration for the option(s)
over a three-year period beginning March 2000.
In April 1998, Corixa announced that it had agreed to terminate its ex-vivo
adoptive immunotherapy collaboration agreement with CellPro, Incorporated
("CellPro"). The agreement, which covered the ex-vivo use of Corixa's cancer
antigens, microsphere delivery system and adjuvant technologies for the purpose
of activating and propagating tumor reactive cells outside the body, was entered
into in November, 1995 and provided less than 10% of Corixa's fiscal year 1997
revenue. Under the terms of the termination agreement, all rights previously
granted to CellPro in respect to Corixa technology in the field of adoptive
immunotherapy reverted to Corixa.
9. INVESTMENTS IN AND AGREEMENTS WITH GENQUEST, INC.
In February 1996, Corixa entered a license and research collaboration
agreement with GenQuest for the purpose of discovering, characterizing,
developing, and commercializing novel genes for use in the treatment,
prevention, or diagnosis of cancer or pre-neoplastic cell proliferation disease.
F-21
<PAGE> 205
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
In February 1996, Corixa acquired an aggregate of 4,412,613 shares of
Series A preferred stock of GenQuest in exchange for the transfer of certain
intellectual property rights in connection with the collaboration. The Series A
preferred shares represent approximately 16% of GenQuest's outstanding capital
stock at December 31, 1997. As a result of its ownership of Series A preferred
stock of GenQuest, Corixa has certain registration rights with respect to public
offerings of GenQuest and rights of first offer that allow Corixa to participate
ratably in future issuances of stock to maintain its ownership percentage of
GenQuest.
Additionally, Corixa is entitled to voting rights equivalent to the number
of shares of common stock of GenQuest into which such shares of Series A
preferred stock can be converted and is a party to a voting agreement among
GenQuest and all but two of its stockholders. Under the terms of the voting
agreement, Corixa has a right to designate two of seven nominees to the Board of
Directors of GenQuest and the stockholders of GenQuest who are parties to the
voting agreement have agreed to vote their shares in favor of such nominees.
Corixa's right to designate such nominees will terminate when Corixa owns less
than 10% of the voting capital stock of GenQuest.
In December 1996, Corixa and GenQuest amended the license and collaboration
agreement and, in connection with this amendment, entered into an administrative
services and management agreement. As part of the collaboration, GenQuest has
agreed to provide an aggregate of $5.7 million in funding in support of certain
research and development projects conducted by Corixa and GenQuest on a
collaborative basis during a three year research term. Under the license
agreement, Corixa and GenQuest agreed to cross-license certain technologies and
products owned or controlled by them as of February 1996 and technologies and
products developed under the collaborative research program. Corixa is required
to pay GenQuest, when product sales commence, certain royalties on sales of
products that use technology licensed from GenQuest, and GenQuest is required to
pay Corixa, when product sales commence, certain royalties on the sale of
products that use technology licensed from Corixa. In addition, sales of certain
products developed by GenQuest using technology developed by Corixa in the
collaborative research program would be royalty-free.
Additionally, Corixa has agreed that certain administrative and management
services will be provided to GenQuest by certain Corixa employees, including
Corixa's Chief Executive Officer, Chief Scientific Officer, Chief Operating
Officer, and Chief Financial Officer, and GenQuest has agreed to reimburse
Corixa for such services. The management services agreement terminates upon the
earlier of (i) 90 days following the expiration of Corixa's right to purchase
substantially all of the outstanding shares of GenQuest's capital stock, as
described below, (ii) 90 days following the date Corixa purchases GenQuest's
capital stock pursuant to such right, or (iii) at the option of either Corixa or
GenQuest, upon the termination of the amended license agreement.
In December 1996, in connection with the modification of the collaboration
between Corixa and GenQuest and the issuance of Series B preferred stock of
GenQuest to additional investors (18,309,271 shares at $0.50 per share), Corixa,
GenQuest and the stockholders of GenQuest entered into a call option agreement.
Under the terms of this agreement, Corixa has the right to purchase a
significant majority of the outstanding shares
F-22
<PAGE> 206
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
of GenQuest's capital stock held by the stockholders of GenQuest at a purchase
price determined in accordance with a formula stipulated in the agreement. This
right becomes effective on the earlier of June 23, 1998, the completion of a
30-day trading period following Corixa's Offering during which the average
closing sale price of a share of Corixa's common stock meets the minimum
requirement stipulated in the agreement, and a merger of Corixa with another
entity or a sale of substantially all of Corixa's assets, and terminates on the
earlier of January 23, 2000, the date that Corixa notifies GenQuest that it will
not exercise this right, the closing of the Offering of GenQuest, and 10 days
following a merger of or sale of assets by Corixa.
In conjunction with the relationship between Corixa and GenQuest, Corixa
issued warrants to purchase 454,533 shares of Corixa's Series B shares at a
price of $9.90 per share. The warrants expire on the earlier of December 23,
2001 or certain events as specified in the warrant agreements. A receivable of
$652,000 from GenQuest, which represents the outstanding amount due for the
warrants, is included in equity at December 31, 1997. Approximately $488,000 was
applied against the receivable in the year ended December 31, 1997. The
receivable was expensed in connection with the acquisition of GenQuest in the
nine months ended September 30, 1998.
Corixa's investment in GenQuest is recorded in the balance sheet at $-0-,
which was the historical cost of the technology exchanged for the preferred
stock of GenQuest issued to Corixa. Corixa did not recognize the increased value
of its equity investment resulting from the GenQuest issuance of Series B
preferred stock due to uncertainty regarding its ultimate realization.
For the nine months ended September 30, 1998 and during the years ended
December 31, 1997 and 1996, Corixa recognized other income of $204,000, $325,000
and $300,000, respectively, as a result of administrative services provided to
GenQuest.
In conjunction with its collaborative agreement with GenQuest, Corixa's
September 30, 1998 and December 31, 1997 results include collaborative revenue
and research and development expenses of approximately $1,000,000 and $1,200,000
and $1,932,000 and $2,420,000, respectively. Additionally, Corixa recognized
$652,000 and $488,000 in warrant amortization during the nine months ended
September, 1998 and during the year ended December 31, 1997, respectively.
Corixa did not recognize collaborative revenue or research and development
expenses relating to GenQuest in 1996.
On September 15, 1998 the Company completed the acquisition of GenQuest,
Inc., see Note 1.
10. SUBSEQUENT EVENTS (UNAUDITED)
SMITHKLINE BEECHAM AGREEMENT
On October 28, 1998, the Company entered into a collaboration and license
agreement with SmithKline Beecham, which superseded and significantly expanded
the scope of Company's then-existing agreements with SB Manufacturing and SB
Biologicals. The Company granted SmithKline Beecham an exclusive worldwide
license to develop, manufacture and sell vaccine products and certain dendritic
cell therapy products that incorporate antigens discovered or in-licensed under
this corporate partnership; provided
F-23
<PAGE> 207
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
that with respect to tuberculosis, such rights are co-exclusive with Corixa in
Japan. Under the collaboration and license agreement, SmithKline Beecham agreed
to provide payment for work that is performed under the Company's existing
antigen discovery programs in tuberculosis, breast cancer and prostate cancer.
In addition, SmithKline Beecham agreed to provide payment for work that is
performed in additional programs in the following areas: (i) ovarian and colon
carcinoma vaccine discovery and development programs and (ii) vaccine discovery
programs for two chronic infectious pathogens, Chlamydia trachomatis, which
causes sexually transmitted diseases, and Chlamydia pneumoniae, which is
associated with the development of atherosclerosis. The discovery phase of the
agreement also allows for the selection of one additional disease field to be
agreed upon at a future date. The Company also granted SmithKline Beecham an
exclusive worldwide license to develop, manufacture and sell vaccine products
resulting from the Company's clinical program based on Her-2/neu for the
treatment of breast and ovarian cancer as well as the Company's preclinical
program based on Mammoglobin, a novel gene and protein associated with breast
cancer. For certain of these disease areas, the Company granted SmithKline
Beecham certain license rights to develop, manufacture and sell passive immune
products such as T cell or antibody therapeutics and therapeutic drug monitoring
products.
SmithKline Beecham has committed to funding of $43.6 million for work that
is performed in such discovery programs during the next four years. The Company
and SmithKline Beecham may mutually agree to extend the research and development
programs beyond the initial four year term.
In addition, SmithKline Beecham agreed to purchase $2.5 million worth of
Corixa Common Stock at a premium to its fair market value, and Corixa has the
right to require SmithKline Beecham to purchase an additional $2.5 million of
Common Stock, at a premium in the future. The equity component combined with the
discovery program payment results in aggregate funding of $48.6 million during
the first four years of the agreement. Additionally, with respect to the $5.0
million previously paid to the Company by SmithKline Beecham under the prior
option agreement, which covered the fields of ovarian and colon cancer,
SmithKline Beecham may elect to have Corixa repay such amount to SmithKline
Beecham on September 1, 2003 or convert such amounts into the purchase of Corixa
common stock at a premium.
To the extent that certain clinical and commercial milestones in the
programs are achieved, the Company is entitled to receive payments, which in the
aggregate could exceed $150 million. The individual amounts of such payments
vary depending on the milestones achieved and the types of product sold. The
Company is also entitled to receive future royalty payments on any product
sales, which royalties vary depending on the types of products sold.
The agreement passed the requisite waiting period under the Hart Scott
Rodino Antitrust Improvements Act of 1976, as amended on November 29, 1998.
F-24
<PAGE> 208
CORIXA CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
IMMGENICS AGREEMENT
On November 5, 1998 Corixa announced it signed an exclusive agreement with
ImmGenics Pharmaceuticals, Inc. ("ImmGenics") to utilize ImmGenics' proprietary
Selected Lymphocyte Antibody Method ("SLAM") technology to develop high potency
therapeutic and diagnostic monoclonal antibodies targeting Corixa's proprietary
antigens in cancer and infectious disease. Under the terms of the agreement,
Corixa will make research and development payments and, if certain milestones
are achieved, additional milestone payments, as well as royalty streams on
future product sales. In addition to the collaborative agreement, Corixa
invested $1.75 million in exchange for preferred stock in ImmGenics, convertible
debt and warrants, and may be required to invest an additional $1.25 million in
1999, for a total investment by Corixa of $3.0 million. Corixa may obtain
additional ownership in ImmGenics over time under certain terms of the
agreements.
ACQUISITION OF ANERGEN
On December 11, 1998, Corixa Corporation agreed to buy Anergen Inc. in a
stock-for-stock merger valued at $9.1 million with a total purchase price of
10.7 million. Corixa will pay the $9.1 million in common stock and account for
the deal as a purchase. Two major shareholders of Anergen, Warburg, Pincus
Ventures, L.P. and International Biotechnology Trust, managed by Rothschild
Asset Management, will provide the Redwood City, Calif.-based biotech firm with
additional financing of up to $1.5 million. The financing will be convertible
into Corixa shares after the deal closes. Anergen's research and clinical
programs in rheumatoid arthritis, diabetes and multiple sclerosis are expected
to continue in Redwood City, while Corixa will continue to operate in both
Washington and California.
F-25
<PAGE> 209
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Anergen, Inc.
We have audited the accompanying balance sheets of Anergen, Inc. as of
December 31, 1997 and 1996, and the related statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
Since the date of completion of our audit of the accompanying financial
statements and initial issuance of our report thereon dated February 6, 1998,
the Company, as discussed in the second paragraph of Note 1, has experienced a
reduction in revenues and has been unable to secure additional financing, which
has adversely affected the Company's liquidity. The second paragraph of Note 1
describes management's plans to address these issues.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Anergen, Inc. at December
31, 1997 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Palo Alto, California
February 6, 1998,
except for the second paragraph of Note 1,
as to which the date is December 21, 1998
F-26
<PAGE> 210
ANERGEN, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1998 1997 1996
------------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................ $ 1,868 $ 1,412 $ 3,963
Short-term investments................... 502 6,991 12,437
Accounts receivable...................... -- 836 820
Prepaid expenses......................... 50 78 208
-------- -------- --------
Total current assets............. 2,420 9,317 17,428
Property and equipment, net................ 1,173 1,703 1,459
Deferred charges and deposits.............. 36 36 36
-------- -------- --------
Total assets..................... $ 3,629 $ 11,056 $ 18,923
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
liabilities........................... $ 730 $ 1,281 $ 1,326
Deferred revenue......................... -- 502 500
Current portion of obligations and
commitments........................... 1,003 616 728
-------- -------- --------
Total current liabilities.................. 1,733 2,399 2,554
Long-term obligations and commitments, less
current portion.......................... -- 870 366
Stockholders' equity:
Preferred stock, no par value; 10,000,000
shares authorized; none outstanding... -- -- --
Common stock, no par value; 60,000,000
shares authorized; 18,892,000 shares
issued and outstanding (18,846,264 and
18,780,697 at December 31, 1997 and
1996, respectively)................... 57,705 57,670 57,484
Additional paid-in capital............... 659 659 659
Accumulated other comprehensive income... -- (6) (34)
Accumulated deficit...................... (56,468) (50,536) (42,106)
-------- -------- --------
Total stockholders' equity....... 1,896 7,787 16,003
-------- -------- --------
Total liabilities and
stockholders' equity.......... $ 3,629 $ 11,056 $ 18,923
======== ======== ========
</TABLE>
See accompanying notes.
F-27
<PAGE> 211
ANERGEN, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ -----------------------------
1998 1997 1997 1996 1995
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Contract revenue related
party.................. $ 923 $ 1,797 $ 2,631 $ 3,107 $ 3,001
Contract revenue.......... 2,198 2,667 3,132 412 --
License fee............... -- -- -- 2,000 --
Interest income........... 300 460 565 653 533
------- ------- ------- ------- -------
Total revenue..... 3,421 4,924 6,328 6,172 3,534
Operating expenses:
Research and
development............ 6,374 8,611 11,559 9,278 8,322
General and
administrative......... 2,873 2,180 2,997 2,521 1,976
Interest expense.......... 106 174 202 170 322
------- ------- ------- ------- -------
9,353 10,965 14,758 11,969 10,620
------- ------- ------- ------- -------
Net loss.................... $(5,932) $(6,041) $(8,430) $(5,797) $(7,086)
======= ======= ======= ======= =======
Basic and diluted net loss
per share................. $ (0.31) $ (0.32) $ (0.45) $ (0.35) $ (0.55)
======= ======= ======= ======= =======
Shares used in computation
of basic and diluted net
loss per share............ 18,878 18,807 18,815 16,482 12,859
======= ======= ======= ======= =======
</TABLE>
See accompanying notes.
F-28
<PAGE> 212
ANERGEN, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
COMMON STOCK ADDITIONAL ACCUMULATED
---------------- PAID-IN DEFERRED COMPREHENSIVE ACCUMULATED
SHARES AMOUNT CAPITAL COMPENSATION INCOME DEFICIT TOTAL
------ ------- ---------- ------------ -------------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994........... 7,439 $32,572 $648 $(36) $(91) $(29,223) $ 3,870
Proceeds from follow-on offering,
net................................ 7,317 14,651 -- -- -- -- 14,651
Issuance of common stock to employees
under option and purchase plans.... 212 136 -- -- -- -- 136
Amortization of deferred
compensation....................... -- -- -- 36 -- -- 36
Unrealized gain on investments....... -- -- -- -- 107 -- 107
Net loss............................. -- -- -- -- -- (7,086) (7,086)
------ ------- ---- ---- ---- -------- -------
Balance at December 31, 1995........... 14,968 47,359 648 -- 16 (36,309) 11,714
Proceeds from follow-on offering,
net................................ 3,668 9,880 -- -- -- -- 9,880
Issuance of common stock to employees
under option and purchase plans.... 145 245 -- -- -- -- 245
Deferred compensation................ -- -- 11 -- -- -- 11
Unrealized loss on investments....... -- -- -- -- (50) -- (50)
Net loss............................. -- -- -- -- -- (5,797) (5,797)
------ ------- ---- ---- ---- -------- -------
Balance at December 31, 1996........... 18,781 57,484 659 -- (34) (42,106) 16,003
Issuance of common stock to employees
under option and purchase plans.... 65 186 -- -- -- -- 186
Unrealized gain on investments....... -- -- -- -- 28 28
Net loss............................. -- -- -- -- -- (8,430) (8,430)
------ ------- ---- ---- ---- -------- -------
Balance at December 31, 1997........... 18,846 57,670 659 -- (6) (50,536) 7,787
Issuance of common stock to employees
under option and purchase plans
(unaudited)........................ 46 35 -- -- -- -- 35
Unrealized gain on investments
(unaudited)........................ -- -- -- -- 6 6
Net loss (unaudited)................. -- -- -- -- -- (5,932) (5,932)
------ ------- ---- ---- ---- -------- -------
Balance at September 30, 1998
(unaudited).......................... 18,892 $57,705 $659 $ -- $ -- $(56,468) $ 1,896
====== ======= ==== ==== ==== ======== =======
</TABLE>
See accompanying notes.
F-29
<PAGE> 213
ANERGEN, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------ ------------------------------
1998 1997 1997 1996 1995
------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss............................................... $(5,932) $ (6,041) $ (8,430) $ (5,797) $ (7,086)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization........................ 625 633 874 1,096 1,031
Deferred compensation................................ -- -- -- 11 36
Changes in certain assets and liabilities:
Contract receivables -- related party.............. 836 (889) (516) (5) (223)
Prepaid expenses................................... 28 118 130 (106) 76
Other assets....................................... -- -- -- -- (16)
Accounts payable accrued liabilities and deferred
revenue.......................................... (1,053) (18) 457 786 63
------- -------- -------- -------- --------
Net cash used in operating activities.................. (5,496) (6,197) (7,485) (4,015) (6,119)
INVESTING ACTIVITIES
Purchases of securities available-for-sale............. (7,285) (20,946) (27,979) (21,783) (30,172)
Sale of investments available-for-sale................. 13,779 29,201 33,453 20,320 21,763
Purchases of equipment................................. (94) (1,021) (1,118) (545) (790)
------- -------- -------- -------- --------
Net cash provided by (used in) investing activities.... 6,400 7,234 4,356 (2,008) (9,199)
FINANCING ACTIVITIES
Repayments of capital lease obligations and debt....... (483) (452) (817) (883) (1,038)
Proceeds from facility and equipment debt financing.... -- 659 1,209 276 789
Issuance of common stock, net.......................... 35 102 186 10,125 14,787
------- -------- -------- -------- --------
Net cash provided by (used in) financing activities.... (448) 309 578 9,518 14,538
Net increase (decrease) in cash and cash equivalents... 456 1,346 (2,551) 3,495 (780)
Cash and cash equivalents at beginning of period....... 1,412 3,963 3,963 468 1,248
------- -------- -------- -------- --------
Cash and cash equivalents at end of period............. 1,868 5,309 1,412 3,963 468
Short-term investments at end of period................ 502 4,219 6,991 12,437 11,024
------- -------- -------- -------- --------
Cash, cash equivalents and short-term investments at
end of period........................................ $ 2,370 $ 9,528 $ 8,403 $ 16,400 $ 11,492
======= ======== ======== ======== ========
</TABLE>
See accompanying notes.
F-30
<PAGE> 214
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS
INFORMATION AS OF SEPTEMBER 30, 1998 AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998 IS UNAUDITED
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
Anergen, Inc. (the "Company") was incorporated on April 26, 1988 for the
purpose of developing therapies using biopharmaceutical compounds for the
treatment of autoimmune diseases. The Company devotes its efforts to research
and development on its own behalf and also on behalf of its corporate partners.
At September 30, 1998 the Company had cash, cash equivalents and short-term
investments of approximately $2,370,000 which at historical cash consumption
rates is not sufficient to fund operations through the end of the year.
Therefore, during October of 1998, Anergen announced a restructuring pursuant to
which it took a number of steps to reduce expenses including the termination of
33 employees. Anergen has also ceased its research efforts and is focusing on
clinical development on AnergiX for rheumatoid arthritis in collaboration with
N.V. Organon. Anergen restructured its operations due to an inability to date to
secure financing. On December 11, 1998, Anergen entered into a Note Purchase
Agreement (the "Note Purchase Agreement") with Warburg, Pincus Ventures, L.P.
("WPV") and International Biotechnology Trust, PLC ("IBT"), Anergen's two
largest stockholders, pursuant to which Anergen may obtain a bridge loan (the
"Bridge Loan") of up to $1,500,000 subject to certain conditions. On December
19, 1998 Anergen issued promissory notes in the aggregate amount of $500,000
under this Bridge Loan facility. The Note Purchase Agreement was executed
concurrently with an Agreement and Plan of Reorganization by and among Corixa
Corporation ("Corixa"), Yakima Acquisition Corporation ("Merger Sub") and
Anergen dated December 11, 1998 (the "Merger Agreement") pursuant to which
Merger Sub will merge with and into Anergen and Anergen will become a
wholly-owned subsidiary of Corixa (the "Merger") in consideration for shares of
Corixa Common Stock with an aggregate value of approximately $8.5 million as of
the date of the Merger Agreement. The Merger is subject to certain conditions
including (i) approval of Anergen stockholders, (ii) securing the consent of
Silicon Valley Bank; and (iii) Silicon Valley Bank has not taken certain actions
to foreclose on the Silicon Valley Bank Loan (see Note 5). Anergen is currently
in discussions with Silicon Valley Bank to restructure the Silicon Valley Loan
and to obtain its consent to the Merger. There can be no assurance that Anergen
will obtain Silicon Valley Bank's consent to the Merger or that Silicon Valley
Bank will not require immediate repayment of its loan and will not foreclose on
its loan. If the proposed Merger with Corixa is not consummated, Anergen will
require substantial additional funds to continue its operations and there can be
no assurance that such financing can be obtained.
Interim Financial Information
The interim financial statements included herein have been prepared by the
Company and have not been audited, pursuant to the rules and regulations
promulgated by the Securities and Exchange Commission (the "Commission").
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been omitted pursuant to Commission rules
F-31
<PAGE> 215
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
and regulations; nevertheless, the Company believes that the disclosures are
adequate to make the information presented not misleading. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company (subject to
year-end adjustments) with respect to the interim financial statements, and of
the results of its operations and cash flows for the interim periods then ended,
have been included. The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents are carried at cost which approximates fair value
(based on quoted market prices) and include primarily interest bearing demand
deposits and U.S. Government notes with original maturities of three months or
less upon purchase.
Securities Available-for-Sale
The Company accounts for its short-term investments in accordance with
Statement of Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" ("Statement 115"). Under Statement
115 management determines the appropriate classification of debt securities at
the time of purchase and reevaluates such designation as of each balance sheet
date. Debt securities are classified as held-to-maturity when the Company has
the positive intent and ability to hold the securities to maturity. Marketable
securities and debt securities not classified as held-to-maturity are classified
as available-for-sale. To date, all marketable securities have been classified
as available-for-sale. Available-for-sale securities are carried at fair value,
with unrealized gains and losses reported in a separate component of
shareholders' equity. The amortized cost of debt securities in this category is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in interest income. The cost of securities sold is
based on the specific identification method. Interest and dividends on
securities classified as available-for-sale are included in interest income.
Property and Equipment
Property and equipment is stated at cost, less accumulated depreciation and
amortization. Depreciation of property and equipment is provided over the
estimated useful lives (3 to 4 years) of the respective assets using the
straight-line method. Leasehold improvements are amortized over the shorter of
the life of the lease or their estimated useful lives using the straight-line
method.
F-32
<PAGE> 216
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Contract and License Fee Revenues
Contract and license fee revenues consist of revenues from the Company's
corporate partner, N.V. Organon and former corporate partner Novo Nordisk A/S.
Contract revenues derived from the corporate partner agreements are recorded as
earned based on the level of research effort performed by the Company. The
Company recognizes revenue based upon actual effort performed related to
contract projects. The Company tracks its expenditures related to projects and
these expenditures are recorded as research and development expenses as
incurred. The revenue associated with specific stages of development is recorded
as contract revenue when the related expense is incurred. Any revenues received
related to the projects are not refundable. Currently, the Company only has one
collaborative relationship on-going (please note statements under
"Collaborations" related to the termination of the Company's relationship with
Novo Nordisk) with N.V. Organon ("Organon"). Under the contract between the
Company and Organon, the Company receives quarterly payments related to research
and development activities from Organon based upon a budget agreed to between
the parties. The amounts are recorded as revenue as the actual expenditures
related to the project are incurred. When the actual effort is less than
budgeted amounts received, the variance is recorded as deferred revenue. The
Company is also eligible for certain milestones based upon completion of
activities. These payment amounts are not refundable and are recorded as revenue
when received. License fees that are non-refundable and not tied to future
performance are recorded when received. The Company is also entitled to receive
from its partners (i) development milestone payments upon the occurrence of
certain events and (ii) royalties on product sales, if any.
Research and Development
Research and development costs are expensed as incurred and include
personnel costs, materials consumed in research and development activities,
depreciation on equipment used and the cost of facilities used for research and
development as well as outside services.
Accounting and Disclosure of Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its stock options because the alternative fair
market value accounting provided for under FASB Statement No. 123, "Accounting
for Stock-Based Compensation" ("Statement 123"), requires the use of option
valuation models that were not developed for use in valuing employee stock
options. Under APB 25, because the exercise price of the Company's employee
stock options equals the market price of the underlying stock on the date of
grant, no compensation expense is recognized.
F-33
<PAGE> 217
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Income Taxes
The Company accounts for income taxes using the liability method as
prescribed by Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes."
Net Loss Per Share
Effective December 31, 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). SFAS 128
requires the presentation of basic earnings (loss) per share and diluted
earnings (loss) per share, if more diluted. Basic net loss per share is computed
using the weighted average number of shares of common stock outstanding during
the period. Diluted net loss per share has not been presented as stock options
and other common stock equivalents are antidilutive.
Comprehensive Income (Loss)
As of January 1, 1998, the Company adopted the provisions of SFAS No. 130,
"Reporting Comprehensive Income" ("SFAS 130"). SFAS 130 establishes new rules
for the reporting and presentation of comprehensive income and its components;
however, the adoption of SFAS 130 had no impact on the Company's net loss or
stockholders' equity. SFAS 130 requires unrealized gains or losses on the
Company's available-for-sale securities, which prior to adoption were reported
separately in stockholders' equity, to be included in other comprehensive income
(loss).
The table below shows comprehensive loss for the periods presented:
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1998 1997
------------- -------------
<S> <C> <C>
Net loss........................................... $(5,932,000) $(6,041,000)
Net unrealized gain (loss) on securities available
for sale......................................... 6,000 37,000
----------- -----------
Comprehensive loss................................. $(5,926,000) $(6,004,000)
=========== ===========
</TABLE>
Reclassification
Certain prior year amounts have been reclassified to conform to the current
periods presentation.
2. COLLABORATIONS
Collaboration with N.V. Organon
In June 1996, the Company entered into a development and license agreement
("Organon Agreement") with N.V. Organon for the purpose of developing and
commercializing a product for the treatment of rheumatoid arthritis ("RA") using
the Company's AnergiX technology combined with a peptide discovered by Organon.
Under the Organon Agreement, the Company is entitled to receive (i) a license
fee, (ii) research and development cost reimbursement, (iii) development
milestone payments and
F-34
<PAGE> 218
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(iv) royalties on product sales, if any. The Company has granted to N.V. Organon
exclusive worldwide rights to products developed under the Organon Agreement,
including rights to commercialize these products although the Company retains
certain co-promotion rights in North America. The Company received and recorded
a $2 million license fee in September 1996 and recorded contract revenues of
$2,198,000, $3,132,000 and $412,000 for the nine months ended September 30, 1998
and for the years ended December 31, 1997 and 1996, respectively under this
agreement.
Collaboration with Novo Nordisk A/S -- related party
In August 1993, the Company entered into a development and license
agreement ("Novo Nordisk Agreement") with Novo Nordisk A/S for the purpose of
developing and commercializing the Company's AnergiX(TM) products for multiple
sclerosis ("MS"), myasthenia gravis ("MG"), and insulin-dependent diabetes
mellitus ("IDDM"). Under the Novo Nordisk Agreement, the Company is entitled to
receive (i) research and development cost reimbursement, (ii) development
milestone payments and (iii) royalties on product sales, if any. For the nine
months ended September 30, 1998 and for the years ended December 31, 1997, 1996
and 1995, the Company recorded contract revenues of $923,000, $2,631,000,
$3,107,000 and $3,001,000 respectively, under this agreement. The Company
granted to Novo Nordisk A/S exclusive worldwide rights to products developed
under the Novo Nordisk Agreement, including rights to commercialize these
products. In April 1996, the Novo Nordisk Agreement was expanded to include
increased milestones and was extended through August of 1998. In August of 1993,
Novo Nordisk A/S purchased 1,219,745 shares of common stock for $8 million, and
an officer of Novo Nordisk A/S became a member of the Company's Board of
Directors. In February 1998, the Company and Novo Nordisk agreed to terminate
the agreement between the two parties effective February 9, 1998. All rights
returned to the Company and it does not have any future obligation to Novo
Nordisk. Novo Nordisk reimbursed the Company for the cost of the ongoing Phase I
clinical trial in Multiple Sclerosis.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1998 1997 1996
------------- ------ ------
<S> <C> <C> <C>
Research and office leasehold improvements..... $1,513 $1,513 $1,028
Research and office equipment.................. 3,836 3,741 3,202
Pilot manufacturing facility leasehold
improvements................................. 600 600 600
Pilot manufacturing facility equipment......... 1,237 1,237 1,143
------ ------ ------
7,186 7,091 5,973
Less accumulated depreciation and
amortization................................. (6,013) (5,388) (4,514)
------ ------ ------
$1,173 $1,703 $1,459
====== ====== ======
</TABLE>
F-35
<PAGE> 219
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. INVESTMENTS
At September 30, 1998, the Company's investments available-for-sale were
recorded at a fair market value of $502,000 consisting of U.S. Corporate
Securities. As of December 31, 1997, the Company's investments
available-for-sale were recorded at a fair market value of $6,991,000,
consisting of U.S. Corporate Securities, Mutual Funds and U.S. Government
obligations of $2,466,000, $853,000 and $3,672,000, respectively. As of December
31, 1996, the estimated fair market value of U.S. Corporate Securities and U.S.
Government obligations was $6,127,000 and $6,310,000, respectively. Gross
unrealized gains and losses for the nine months ended September 30, 1998, and
the years ended December 31, 1997 and 1996 were immaterial.
The net adjustment to unrealized holding gains (losses) on
available-for-sale securities included as a separate component of shareholders'
equity was $6,000, $28,000, ($50,000) and $107,000 for the nine months ended
September 30, 1998 and the years ended December 31, 1997, 1996 and 1995,
respectively. Realized gains and losses for the nine months ended September 30,
1998 and for the years ended December 31, 1997, 1996 and 1995 were immaterial.
The amortized cost and estimated fair value of debt securities at September
30, 1998, December 31, 1997 and 1996, by contractual maturity, are shown below
(in thousands). Expected maturities will differ from contractual maturities
because the issuers of the securities may have the right to prepay obligations
without prepayment penalties.
<TABLE>
<CAPTION>
ESTIMATE
FAIR
COST VALUE
------- --------
<S> <C> <C>
SEPTEMBER 30, 1998
AVAILABLE-FOR-SALE
Due in one year or less.................................... $ 503 $ 502
Due after one year through three years..................... -- --
Due after three years...................................... -- --
------- -------
$ 503 $ 502
======= =======
DECEMBER 31, 1997
AVAILABLE-FOR-SALE
Due in one year or less.................................... $ 6,997 $ 6,991
Due after one year through three years..................... -- --
Due after three years...................................... -- --
------- -------
$ 6,997 $ 6,991
======= =======
DECEMBER 31, 1996
AVAILABLE-FOR-SALE
Due in one year or less.................................... $11,971 $11,936
Due after one year through three years..................... 500 501
Due after three years...................................... -- --
------- -------
$12,471 $12,437
======= =======
</TABLE>
F-36
<PAGE> 220
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. LEASE AND DEBT OBLIGATIONS
The Company leases its facilities under noncancelable operating leases.
Facilities rent expense for the nine months ended September 30, 1998 and for the
years ended December 31, 1997, 1996, and 1995, was $431,000, $508,000, $589,000,
and $551,000, respectively.
On June 23, 1995 the Company entered into a loan agreement with Silicon
Valley Bank of California ("SVB") which provided $800,000 in financing available
through December 31, 1995, all of which is secured by equipment purchased by the
Company. At September 30, 1998, the Company had no borrowings under the original
loan agreement.
On December 27, 1996 the Company entered into an agreement with SVB which
provided up to $1,500,000 in financing available through December 31, 1997, all
of which is secured by equipment and leasehold improvements purchased by the
Company. At September 30, 1998, the Company had net borrowings of $1,003,000
under the original loan agreements. As of the end of the third quarter ended
September 30, 1998, the Company was no longer in compliance with certain
covenants related to its outstanding loan with SVB. As a result, the Company has
reclassified the long term portion of the debt obligation into the current
portion of the debt obligation. SVB has the right to demand full repayment of
the loan while the Company is out of compliance with the covenants. Immediate
repayment of the loan would have material adverse effect on the Company's
operating cash flow.
Future minimum payments, by year and in the aggregate, under the debt and
noncancelable operating leases consisted of the following at December 31, 1997
(in thousands):
<TABLE>
<CAPTION>
OPERATING
DEBT LEASES
------ ---------
<S> <C> <C>
1998................................................ $ 616 $530
1999................................................ 435 41
2000................................................ 435
------ ----
Total minimum debt and lease payments............... 1,486 $571
====
Less current portion of debt obligations............ 616
------
Long-term debt obligation........................... $ 870
======
</TABLE>
6. STOCKHOLDERS' EQUITY
Change of Control Arrangements
In the event of a change of control of the Company, the Board of Directors
has authority to issue shares of Preferred Stock with rights, preferences and
privileges designated by the Board of Directors. Further, pursuant to the
Company's option plans, under change of control of the Company, the Board of
Directors has the right, under certain circumstances, to cause all outstanding
options to become fully vested.
F-37
<PAGE> 221
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1988 Stock Option Plan, 1992 Consultant Stock Plan, 1995 Director Option Plan
and 1996 Stock Option Plan
The Company has granted certain officers, employees and consultants options
to purchase shares of the Company's common stock at prices ranging from $.16 to
$11.00 per share under its 1988 Stock Option Plan, 1992 Consultant Stock Plan,
1995 Director Option Plan and 1996 Stock Option Plan ("option plans"). The
Company has reserved 4,050,000 shares of common stock for issuance under the
option plans, of which 2,046,000 are available for grant at September 30, 1998.
These options vest over periods of up to four years and, once vested, can be
exercised at any time for a period of 9 or 10 years from the date of grant.
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
Interpretations in accounting for its stock options because, as discussed below,
the alternative fair market value accounting provided for under FASB Statement
No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"), requires
the use of option valuation models that were not developed for use in valuing
employee stock options. Under APB 25, because the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.
The Company's option plans have authorized the grant of options to Company
personnel, consultants and directors for up to 4,050,000 shares of the Company's
common stock. Options granted have 9 or 10 year terms and vest and typically
become fully exercisable at the end of 4 years of continued employment.
Pro forma information regarding net loss and loss per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options and its employee stock purchase plan subsequent to
December 31, 1994 under the fair value method of that Statement. The fair value
for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted average assumptions for 1995,
1996 and 1997, respectively; risk-free interest rates of 6.72%, 6.83% and 6.41%;
no dividend yields; volatility factor of the expected market price of the
Company's common stock of .73 for 1995 and 1996, and 1.05 for 1997; and a
weighted-average expected life of the options of 6.87 years for 1995 and 1996,
and 5.25 years for 1997.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
F-38
<PAGE> 222
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
For purposes of pro forma disclosures, the estimated fair value of the
options and Employee Stock Purchase Plan (ESPP) are amortized to expense over
the options' vesting period. The Company's pro forma information follows (in
thousands except for loss per share information):
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net loss....................... $(9,843) $(6,659) $(7,302)
Pro forma loss per share................. $ (0.52) $ (0.40) $ (0.57)
</TABLE>
Because Statement 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until 1998.
A summary of the Company's stock option activity, and related information
follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER OF SHARES PRICE PER SHARE
---------------- ----------------
(IN THOUSANDS)
<S> <C> <C>
Balance at January 1, 1995.............. 805 $4.83
Granted............................... 283 2.93
Exercised............................. (168) 0.24
Forfeited............................. (41) 7.61
-----
Balance at December 31, 1995............ 879 4.94
Granted............................... 535 3.72
Exercised............................. (76) 0.97
Forfeited............................. (11) 3.86
-----
Balance at December 31, 1996............ 1,327 4.69
Granted............................... 787 3.02
Exercised............................. (4) 3.07
Forfeited............................. (428) 5.16
-----
Balance at December 31, 1997............ 1,682 3.79
Granted............................... 436 1.02
Exercised............................. -- 0.00
Forfeited............................. (581) 2.95
-----
Balance at September 30, 1998........... 1,537 3.08
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ---------------------------------------------------------------
1998 1997 1996 1995
------------------- ------------------- ------------------- -------------------
SHARES WEIGHTED- SHARES WEIGHTED- SHARES WEIGHTED- SHARES WEIGHTED-
UNDER AVERAGE UNDER AVERAGE UNDER AVERAGE UNDER AVERAGE
OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE OPTIONS EXERCISE
(000) PRICE (000) PRICE (000) PRICE (000) PRICE
------- --------- ------- --------- ------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding-end of
year............... 1,537 $ 3.08 1,682 $3.79 1,327 $4.69 879 $4.94
Exercisable.......... 676 $ 4.03 823 $4.54 609 $5.92 430 $5.72
Weighted-average fair
value of options
granted during the
year............... $ 0.94 $ 2.01 $ 2.74 $2.19
</TABLE>
F-39
<PAGE> 223
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Exercise prices for options outstanding as of December 31, 1997 ranged from
$2.00 to $11.00. The weighted-average remaining contractual life of those
options is 6.13 years.
Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan under which a total of
750,000 shares of common stock have been reserved and made available for
purchase by eligible employees.
Eligible employees may have up to 10% of their wages withheld for purchases
of common stock of the Company. On September 30 and March 31 of each year, the
funds then in each employee's account are applied to the purchase of shares of
common stock at 85% of the fair market value at such date or at six month
retroactive intervals up to 24 months, whichever is less. As of September 30,
1998, 275,497 shares had been purchased with such funds.
Under Statement 123, the fair value for these purchase options was
estimated at the date of grant using a Black-Scholes option pricing model with
the following weighted average assumptions for 1995, 1996 and 1997,
respectively; risk-free interest rates of 5.96% and 5.52% and 5.86%; no dividend
yields; volatility factor of the expected market price of the Company's common
stock of .73 for 1995 and 1996 and 1.05 for 1997; and a weighted-average
expected life of the options of 1.25 for 1995 and 1996 and .5 years for 1997.
The weighted average fair value of those purchase rights granted in 1995, 1996
and 1997 was $0.93, $1.22 and $1.41 respectively.
Warrants
In 1997 warrants to purchase 50,000 shares of the Company's common stock at
an exercise price of $3.25 per share were issued under a collaboration agreement
and expire on December 31, 2001. No value was assigned to these warrants due to
immateriality; these warrants remain unexercised as of December 31, 1997. In
connection with facilities and equipment financings, the Company issued warrants
to purchase 16,919 and 8,577 shares of Common Stock at $9.93 per share and $5.83
per share, respectively. The warrant to purchase 16,919 shares of Common Stock,
issued on December 29, 1992, is exercisable at any time until December 29, 1999,
and the warrant to purchase 8,577 shares of Common Stock, issued on December 30,
1993, is exercisable at any time until December 30, 2000.
F-40
<PAGE> 224
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities include the following (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1998 1997 1996
------------- ------ ------
<S> <C> <C> <C>
Accounts payable................................ $184 $ 597 $ 231
Accrued collaborative expenses.................. 253 237 569
Accrued vacation pay............................ 160 186 114
Accrued professional fees....................... 31 221 189
Other........................................... 102 40 223
---- ------ ------
Total accounts payable and accrued
liabilities................................... $730 $1,281 $1,326
==== ====== ======
</TABLE>
8. INCOME TAXES
At December 31, 1997, the Company had federal and state net operating loss
carryforwards of approximately $46.8 million and $9.5 million, respectively.
Additionally, the Company has research and development tax credit carryforwards
for federal tax purposes of approximately $2.0 million. The net operating loss
and credit carryforwards will expire at various dates beginning 1998 through
2012, if not utilized.
The Company's stock offering in April 1995 resulted in a change in
ownership and it is expected that the entire net operating loss and credit carry
forwards as of April 1995 may be subject to an annual limitation based on the
Company's pre-change value. The annual limitation will result in the expiration
of the net operating losses and credits before utilization.
Net operating losses incurred subsequent to April 1995 may be subject to
annual limitation such that the net operating losses may expire before
utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 1997 and
1996 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Deferred income tax assets:
Net operating loss carryforwards.................... $16,500,000 $13,900,000
Research credits.................................... 2,900,000 2,000,000
Capitalized research and development................ 1,000,000 --
Other deferred tax assets........................... 300,000 700,000
----------- -----------
Net deferred tax assets............................. $20,700,000 $16,600,000
Valuation allowance for deferred tax assets......... (20,700,000) (16,600,000)
----------- -----------
Total deferred tax assets................. $ -- $ --
=========== ===========
</TABLE>
F-41
<PAGE> 225
ANERGEN, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The net valuation allowance increased by $2,200,000 during the year ended
December 31, 1996 ($3,200,000 in 1995).
F-42
<PAGE> 226
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors
GenQuest, Inc.
We have audited the accompanying balance sheets of GenQuest, Inc. (a
development stage company) as of December 31, 1997 and 1996, and the related
statements of operations, stockholders' equity, and cash flows for the years
ended December 31, 1997 and 1996 and the period from July 14, 1995 (date of
inception) through December 31, 1997. These financial statements are the
responsibility of GenQuest's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of GenQuest, Inc. (a
development stage company) at December 31, 1997 and 1996, and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996 and
the period from July 14, 1995 (date of inception) through December 31, 1997 in
conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Seattle Washington
January 28, 1998,
except for Note 9, as to which the date is
February 28, 1998
F-43
<PAGE> 227
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARES)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................ $ 3,600 $ 8,998
Accounts receivable (includes a $25,000 receivable from
affiliated company)................................... 58 --
Prepaid expenses......................................... 179 --
------- -------
Total current assets............................. 3,837 8,998
Property and equipment, net................................ 573 9
Warrants................................................... -- 1,140
Other assets............................................... 6 --
------- -------
Total assets..................................... 4,416 $10,147
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities................. $ 495 $ 828
Deferred revenue......................................... 100 50
Current portion of obligations and commitments........... 438 488
------- -------
Total current liabilities........................ 1,033 1,366
Long-term obligations less current portion................. 752 652
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
Authorized shares -- 25,355,903 designated as Series A
and 18,543,290 designated as Series B;
Issued and outstanding Series A shares: 6,812,613..... 7 7
Issued and outstanding Series B shares: 18,309,271.... 18 18
Common stock, $0.001 par value:
Authorized shares -- 39,260,903
Issued and outstanding shares: 1,830,000.............. 2 2
Additional paid-in capital............................... 11,264 12,416
Deficit accumulated during development stage............. (8,660) (4,314)
------- -------
Total stockholders' equity....................... 2,631 8,129
------- -------
Total liabilities and stockholders' equity....... $ 4,416 $10,147
======= =======
</TABLE>
F-44
<PAGE> 228
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
JUNE 14, 1995 JUNE 14, 1995
PERIOD FROM NINE MONTHS (DATE OF YEAR ENDED (DATE OF
JANUARY 1, 1998 ENDED INCEPTION) TO DECEMBER 31, INCEPTION) TO
TO SEPTEMBER 15, SEPTEMBER 30, SEPTEMBER 30, ----------------- DECEMBER 31,
1998 1997 1998 1997 1996 1997
---------------- ------------- ------------- ------- ------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Collaborative agreements...... $ 150 $ -- $ 175 $ 25 $ $ 25
Government grants............. 58 -- 91 33 33
------- ------- -------- ------- ------- -------
Total revenues........ 208 -- 266 58 -- 58
Operating expenses:
Research and development...... (2,196) (2,548) (7,124) (3,654) (1,146) (4,928)
In-process research and
development................ -- -- (2,219) -- (2,219) (2,219)
General and administrative.... (237) (468) (2,009) (962) (526) (1,772)
------- ------- -------- ------- ------- -------
Total operating
expenses........... (2,433) (3,016) (11,352) (4,616) (3,891) (8,919)
------- ------- -------- ------- ------- -------
Loss from operations............ (2,225) (3,016) (11,086) (4,558) (3,891) (8,861)
Interest income................. 60 183 306 236 9 246
Interest expense................ (47) (5) (92) (24) (13) (45)
======= ======= ======== ======= ======= =======
Net loss........................ $(2,212) $(2,838) $(10,872) $(4,346) $(3,895) $(8,660)
======= ======= ======== ======= ======= =======
Basic and diluted net loss per
share......................... $ (1.20) $ (1.55) $ 0.14 $ (2.94)
======= ======= ======= =======
Shares used in computation of
basic and diluted net loss per
share......................... 1,842 1,830 1,830 1,324
======= ======= ======= =======
</TABLE>
F-45
<PAGE> 229
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEFICIT
CONVERTIBLE ACCUMULATED
PREFERRED STOCK COMMON STOCK ADDITIONAL DURING
---------------- ---------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
------ ------ ------ ------ ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net loss for the period from inception
through December 31, 1995............. -- $-- -- $-- $ -- $ (419) $ (419)
------ --- ----- --- ------- -------- -------
Balance at December 31, 1995............ -- -- -- -- -- (419) (419)
Issuance of common stock for cash..... -- -- 1,570 2 6 -- 8
Issuance of Series A convertible
preferred stock for acquired
technology, valued at $0.50 per
share............................... 4,413 5 -- -- 2,202 -- 2,207
Issuance of common stock, valued at
$0.33 per share, for technology and
services............................ -- -- 260 -- 13 -- 13
Issuance of Series A convertible
preferred stock at $0.50 per share
for cash ($525) and note payable
($675).............................. 2,400 2 -- -- 1,198 -- 1,200
Issuance of Series B convertible
preferred stock at $0.50 per share
for cash and note payable ($155),
net of issuance costs of $139....... 18,309 18 -- -- 8,997 -- 9,015
Net loss............................ -- -- -- -- -- (3,895) (3,895)
------ --- ----- --- ------- -------- -------
Balance at December 31, 1996............ 25,122 25 1,830 2 12,416 (4,314) 8,129
Additional issuance costs of Series
B................................... -- -- -- -- (12) -- (12)
Corixa warrants distributed to
investors........................... -- -- -- -- (1,140) -- (1,140)
Net loss.............................. -- -- -- -- -- (4,346) (4,346)
------ --- ----- --- ------- -------- -------
Balance at December 31, 1997............ 25,122 25 1,830 2 11,264 (8,660) 2,631
Issuance of common stock for cash
(unaudited)......................... -- -- 30 -- 1 -- 1
Net loss (unaudited).................. -- -- -- -- -- (2,212) (2,212)
------ --- ----- --- ------- -------- -------
Balance at September 15, 1998
(unaudited)........................... 25,122 $25 1,860 $ 2 $11,265 $(10,872) $ 420
====== === ===== === ======= ======== =======
</TABLE>
F-46
<PAGE> 230
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM
PERIOD FROM NINE MONTHS JUNE 14, 1995 YEAR ENDED JUNE 14, 1995
JANUARY 1, 1998 ENDED (DATE OF INCEPTION) DECEMBER 31, (DATE OF INCEPTION)
TO SEPTEMBER 15, SEPTEMBER 30, TO SEPTEMBER 30, ------------------ TO DECEMBER 31,
1998 1997 1998 1997 1996 1997
---------------- ------------- ------------------- ------- ------- -------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Operating activities
Net loss...................... $(2,212) $(2,838) $(10,872) $(4,346) $(3,895) $(8,660)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation.................. 90 12 144 51 2 54
Equity instruments issued in
exchange for technology and
services.................... -- 2,219 -- 2,219 2,219
Net decrease in warrant
obligations
Changes in certain assets and
liabilities:
Accounts payable and accrued
expenses.................. (329) (476) 321 (183) 756 650
Prepaid expenses............ 58 (199) (121) (179) (179)
Deferred revenue............ -- 50 100 50 50 100
Other assets................ 35 (8) 28 (7) 7 (7)
Accounts receivable......... 25 -- (33) (58) 8 (58)
------- ------- -------- ------- ------- -------
Net cash used in operating
activities.................. (2,333) (3,459) (8,214) (4,672) (853) (5,881)
Investing
activities -- Purchases of
property and
equipment -- net............ (13) (11) (58) (33) 1 (45)
Financing activities
Net proceeds from issuance of
convertible preferred
stock....................... -- -- 9,386 -- 9,386 9,386
Payment on warrant
obligation.................. (652) (348) (1,140) (488) -- (488)
Payment on notes payable...... -- (162) (150) (150) -- (150)
Proceeds from issuance of
notes payable............... -- -- 825 -- 150 825
Principal payments on capital
leases...................... (91) (7) (134) (43) (43)
Other......................... -- -- (12) (12) -- (12)
Proceeds from issuance of
common stock................ 2 -- 10 -- 8 8
------- ------- -------- ------- ------- -------
Net cash provided by financing
activities.................. (741) (517) 8,785 (693) 9,544 9,526
Net increase (decrease) in
cash and cash equivalents... (3,087) (3,987) 513 (5,398) 8,692 3,600
Cash and cash equivalents at
beginning
of period................... 3,600 8,998 -- 8,998 306 --
------- ------- -------- ------- ------- -------
Cash and cash equivalents at
end of period............... $ 513 $ 5,011 $ 513 $ 3,600 $ 8,998 $ 3,600
======= ======= ======== ======= ======= =======
Supplemental disclosures
Interest paid................. $ 37 $ 5 $ 82 $ 24 $ 12 $ 45
Supplemental schedule of
noncash operating,
investing, and financing
activities
Assets acquired pursuant to
capital leases.............. $ -- $ 377 $ 582 $ 582 $ -- $ 582
Notes payable converted to
preferred stock............. -- -- 830 -- 830 830
Warrants distributed to
investors................... -- -- (1,140) (1,140) -- (1,140)
Warrants acquired in exchange
for warrant obligation...... -- -- 1,140 -- 1,140 1,140
Equity instruments issued in
exchange for technology and
services.................... -- -- 2,219 -- 2,219 2,219
</TABLE>
F-47
<PAGE> 231
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
INFORMATION AS OF SEPTEMBER 15, 1998 AND FOR THE PERIOD FROM
JANUARY 1, 1998 TO SEPTEMBER 15, 1998
AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 IS UNAUDITED
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Activities
GenQuest, Inc. ("GenQuest"), a development stage company, is focused on
applying functional genomics technology to discover novel genes related to the
transformation of normal cells into cancer cells and developing the potential of
such genes and related gene products to be used as diagnostics, therapeutics and
drug-screening targets in the field of oncology. GenQuest's technology platform
consists of the following proprietary technologies: (i) methodologies for the
discovery of genes associated with cancer; (ii) methodologies used to elucidate
cellular responses to DNA damage; (iii) genes and cellular processes associated
with senescence and apoptosis; (iv) technologies that enhance or inhibit
cellular proliferation; and (v) genes and cellular processes associated with
terminal cell differentiation. Principal activities to date include conducting
research and development, pursuing intellectual property protection, entering
into collaborative in- and out-licensing agreements, raising capital, recruiting
scientific and management personnel, and establishing a research facility.
On September 15, 1998, Corixa acquired all of the outstanding shares of
common stock of the Company. Pursuant to the terms set forth in the Agreement
and Plan of Merger by and among the Company and Corixa, Chinook, a wholly-owned
subsidiary and a Delaware corporation (formerly known as Chinook Acquisition
Corporation) and the Company merged with and into Chinook and the separate
corporate existence of GenQuest ceased, with Chinook surviving as a wholly-owned
subsidiary of Corixa.
Interim Financial Information
The financial information for the period from January 1, 1998 to September
15, 1998, and for the nine months ended September 30, 1997, is unaudited, but
includes all adjustments (consisting only of normal recurring adjustments) that
GenQuest considers necessary for a fair presentation of the financial position
at such date and the operating results and cash flows for those periods.
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the entire year.
Liquidity
Principal activities to date include conducting research and development,
pursuing intellectual property protection, entering into collaborative in- and
out-licensing agreements, raising capital, recruiting scientific and management
personnel, and establishing a research facility. Further development of
GenQuest's business will require additional equity financing and/or
collaboration funding. GenQuest is actively seeking to expand its funding from
current and new investors, as well as enter into additional collaborative
relationships. In the event GenQuest is not able to obtain additional financing
or sufficient operating revenues, GenQuest will take steps to reduce its
expenditures, as necessary, to enable it to
F-48
<PAGE> 232
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
continue its operations through December 1998. To that end, GenQuest would
propose amending the terms of its agreements to materially reduce GenQuest's
payment obligations.
Cash and Cash Equivalents
All short-term investments, which consist primarily of bankers' acceptances
and certificates of deposit, with maturities of three months or less at date of
purchase are considered to be cash equivalents. The amounts are recorded at
cost, which approximates fair market value. Credit risk for cash investments is
managed by purchase of investment-grade securities and diversification of the
investment portfolio among issuers and maturities.
Property and Equipment
Property and equipment is stated at cost and is depreciated on a
straight-line basis over the assets' estimated useful lives, which range from
three to four years. Leasehold improvements are amortized over the lesser of
their estimated useful lives or the term of the lease. Amortization of assets
recorded under capital leases is included in depreciation.
Stock-Based Compensation
In 1995, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("Statement 123"). GenQuest has adopted the disclosure-only
provisions of Statement 123, and applies Accounting Principles Board Opinion No.
25 ("APB 25") and related Interpretations in accounting for its stock option
plans. Accordingly, GenQuest's stock-based compensation expense is recognized
based on the intrinsic value of the option on the date of grant. Recognition of
stock-based compensation expense under Statement 123 requires the use of a fair
value method to value stock options using option valuation models that were
developed for purposes other than valuing employee stock options. Pro forma
disclosures of net loss under Statement 123 are provided in Note 3 of these
GenQuest financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Other Financial Instruments
At December 31, 1997 and 1996, the carrying value of financial instruments,
such as accounts receivables and payables, approximated their fair values, based
on the short-term maturities of these instruments. Additionally, the carrying
value of long-term liabilities approximated fair values because underlying
interest rates reflect market rates at the balance sheet dates.
F-49
<PAGE> 233
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Revenues from Collaborative Agreements
Revenues under collaborative agreements will typically consists of
nonrefundable up-front fees, ongoing research, co-development payments, and
milestone and royalty payments. Revenue from nonrefundable technology access
fees will be recognized upon satisfaction of any obligation. Revenue from
ongoing research and co-development payments will be recognized ratably over the
term of the agreement, as GenQuest believes such payments will approximate the
research and development expense being incurred associated with the agreement.
Revenue from milestone, royalty, and other contingent payments will be
recognized as earned. Advance payments received under any agreements in excess
of amounts earned are classified as deferred revenue. Revenue under cost
reimbursement contracts is recognized as the related costs are incurred.
Research and Development Expenses
Research and development costs are expensed as incurred.
Income Taxes
GenQuest accounts for income taxes using the liability method under
Statement of Accounting Standards No. 109, "Accounting for Income Taxes."
Net Earning Per Share Calculations
GenQuest adopted the FASB issued Statement No. 128, "Earnings per Share."
Statement 128 replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share. Basic earnings per share is
based on the weighted average number of common shares outstanding for the
period, and excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share assumes the conversion of all dilutive
securities, such as options, warrants and convertible preferred stock.
Comprehensive Income (Loss)
As of January 1, 1998, GenQuest adopted the FASB Statement No. 130,
"Reporting Comprehensive Income." Statement No. 130 establishes new rules for
the reporting and display of comprehensive income and its components; however,
the adoption of this Statement had no impact on GenQuest's net income or
shareholders' equity. Statement 130 did not impact GenQuest, as it had no
supplemental comprehensive income components.
Segment Reporting
In 1997, the FASB issued Statement No. 131, "Disclosures about Segments of
an Enterprise and Related Information," which is required to be adopted for the
fiscal years beginning after December 15, 1997. The new Statement supersedes
FASB Statement No. 14, "Financial Reporting for Segments of a Business
Enterprise." Companies will be required to report each segment and related
information, as defined in Statement 131, in GenQuest's notes to the financial
statements. GenQuest will be required to report its
F-50
<PAGE> 234
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
results according to Statement 131 for its year end 1998 results. As GenQuest
does not operate in more than one segment, as defined by the statement, this
statement is not applicable.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform to the 1997 presentation.
2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- -------
<S> <C> <C>
Laboratory equipment................................ $446,822 $ --
Computers and office equipment...................... 161,172 12,241
Leasehold improvements.............................. 19,398 --
-------- -------
627,392 12,241
Accumulated depreciation and amortization........... (54,237) (3,341)
-------- -------
$573,155 $ 8,900
======== =======
</TABLE>
At December 31, 1997, GenQuest held equipment under capitalized leases with
an original cost of $581,772 and an approximate net book value of $550,000,
respectively. These leases are secured by the underlying assets.
3. LONG-TERM OBLIGATIONS AND COMMITMENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Warrant obligation.............................. $ 651,567 $1,140,000
Capital lease obligation........................ 538,572 --
---------- ----------
1,190,139 1,140,000
Less current portion of obligations............. 437,982 488,432
---------- ----------
$ 752,157 $ 651,568
========== ==========
</TABLE>
F-51
<PAGE> 235
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Minimum future rental payments under the capital lease agreement at
December 31, 1997 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------
<S> <C>
1998......................................... $168,773
1999......................................... 184,116
2000......................................... 184,116
2001......................................... 137,631
--------
Total minimum lease payments................. 674,636
Less interest................................ 136,064
--------
Present value of minimum lease payments...... 538,572
Less current portion......................... 112,198
--------
Capital lease obligations, less current
portion.................................... $426,374
========
</TABLE>
A $687,500 lease line was obtained in 1997. The lease is secured by the
underlying equipment.
GenQuest rents a research facility under an operating lease, which expires
on the earlier of September 2000 or upon a 60-day notice of vacancy. In
connection with the operating lease, GenQuest is required to make monthly
payments of approximately $5,300.
Rent expense was $20,000 and $0 for the years ended December 31, 1997 and
1996, respectively.
In February 1998, GenQuest and its stockholders reached a settlement
agreement and mutual release of claims (the "Agreement") with a third party in
relation to a business dispute related to the financing of GenQuest. Under the
terms of the Agreement, the third party agreed to release GenQuest and its
stockholders from any obligation prior to or thereafter owed to such third party
by any or all of GenQuest and its stockholders. The amount payable by GenQuest
under the Agreement of $250,000 was accrued as of December 31, 1997.
4. INCOME TAXES
At December 31, 1997, GenQuest had a net operating loss carryforward of
approximately $6.4 million respectively, and research and experimentation credit
carryforwards of approximately $185,000, which begin to expire in 2010.
Utilization of net operating losses and research and development tax credit
carryforwards is subject to certain limitations under Section 382 of the
Internal Revenue Code.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. GenQuest has recognized a
valuation allowance equal to the deferred tax assets due to the uncertainty of
realizing the benefits of the assets. The valuation allowance for deferred tax
assets increased $1,639,000 and $592,000 during the years ended December 31,
1997 and 1996, respectively. The effects of temporary
F-52
<PAGE> 236
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
differences and carryforwards that give rise to deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
---------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward................. $2,183,000 $697,000
Research and experimentation credit
carryforward................................. 185,000 26,000
Deferred revenue................................ 34,000 16,000
---------- --------
2,402,000 739,000
Deferred tax liabilities:
Depreciation.................................... 24,000 -
---------- --------
Net deferred tax asset............................ 2,378,000 739,000
Less valuation allowance........................ (2,378,000) (739,000)
---------- --------
Net deferred tax assets........................... $ 0 $ 0
========== ========
</TABLE>
5. STOCKHOLDERS' EQUITY
Common Stock
At December 31, 1997, 650,000 shares of common stock outstanding are
subject to certain contractual voting restrictions (see Note 8 of these GenQuest
financial statements).
Convertible Preferred Stock
During 1996, GenQuest issued approximately 6.8 million shares of "Series A"
convertible preferred stock ("Series A") in exchange for technology, a note
payable of $675,000 and cash of $525,000. During 1997, GenQuest also received
net proceeds approximating $9 million from the sale of approximately 18.3
million shares of Series B convertible preferred stock ("Series B"). Series B
shares have preferential dividend rights over the Series A and common stock. In
the event of a dividend declared by the Board of Directors (the Board), Series B
stockholders shall be entitled to be paid out of the legally available assets of
GenQuest an amount per share equal to $0.04 per share. After the payment of the
full dividend preference of the Series B, the holders of Series A shall be
entitled to be paid out of the legally available assets of GenQuest; therefore,
an amount per share equal to $0.04 per share. After payment of the full dividend
amount set forth above, the remaining amounts of dividends declared by the Board
available for distribution to stockholders, if any, shall be distributed ratably
to the holders of the common stock, Series A, and Series B on an "as if
converted to common stock basis." Such dividends shall be payable only when, as,
and if declared by the Board and shall be noncumulative. As of December 31,
1997, the Board has not declared any dividends.
Series A and B shares have registration rights and vote equally with the
shares of the common stock and, at the option of the holder, may be converted at
any time into common shares. The conversion ratios at December 31, 1997 were 1
for 1. The conversion
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<PAGE> 237
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
rate may be adjusted from time to time, based on provisions included in the
Certificate of Incorporation.
Each share of Series A and Series B shall automatically be converted into
shares of common stock, based on the then-effective respective Series A and
Series B conversion prices, immediately upon (1) the closing of a firmly
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
common stock for the account of GenQuest in which the per share price is at
least $2.50 and the gross cash proceeds to GenQuest are at least $10,000,000, or
(2) the date specified by written consent of the holders of a majority of the
outstanding shares of Series A and B shares voting as a class.
Series A and B shares also have preferential liquidation rights over the
common stock. In the event of liquidation, Series B stockholders shall be
entitled to be paid out of the assets of GenQuest an amount per share equal to
the sum of $0.50 per share, plus all declared and unpaid dividends on such
share, if any. After the payment of the full liquidation preference of Series B
shares, the holders of Series A shares shall be entitled to be paid out of the
assets of GenQuest legally available for distribution, an amount per share equal
to the sum of $0.50 per share, plus all declared and unpaid dividends on such
share. Any remaining assets of GenQuest shall be distributed ratably to the
holders of the common stock, Series A, and Series B.
Stock Option Plan
GenQuest has a stock option plan under which 2,000,000 shares of common
stock are reserved for grants to employees, members of the Board of Directors,
and consultants. Options granted under this plan may be designated as qualified
or nonqualified at the discretion of the Plan Administrator (as defined in such
plan).
Generally, the options vest over a four-year period, with 25% vesting in
the first year and the remainder vesting monthly thereafter. All options expire
not later than ten years from the date of grant. Qualified stock options are
exercisable at not less than the fair market value of the stock at the date of
grant, and nonqualified stock options are exercisable at prices determined at
the discretion of the Plan Administrator, but not less than 85% of the fair
market value of the stock at the date of grant.
A summary of GenQuest's stock option activity and related information
follows:
<TABLE>
<CAPTION>
SHARES UNDER WEIGHTED
OUTSTANDING PRICE PER AVERAGE
OPTION SHARE EXERCISE PRICE
------------ --------- --------------
<S> <C> <C> <C>
Balance at January 1, 1997........... -- $ -- $ --
Options granted.................... 448,000 0.05 0.05
------- ----- -----
Balance at December 31, 1997......... 448,000 0.05 0.05
======= ===== =====
</TABLE>
The weighted average fair value of options granted during 1997 was $0.02
per option and the weighted average remaining contractual life of the
outstanding options at
F-54
<PAGE> 238
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
December 31, 1997 was 9.6 years. At December 31, 1997, 1,552,000 shares remain
available for grant and 26,083 options were considered fully vested.
Pro forma information regarding net loss and loss per share required by
Statement 123 has been determined as if GenQuest had accounted for its employee
stock options under the fair value method of that Statement. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions on the option
grant date for 1997: risk-free interest rate of 6.32%, expected volatility of
0%, expected option lives of five years, and dividend yield of 0.0%.
Under Statement 123, if GenQuest had elected to recognize the compensation
cost based upon the fair value of the options granted at the grant date, net
loss would have been increased as follows (the estimated fair value of the
options is amortized to expense over the options' vesting period or upon the
achievement of certain milestones):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
<S> <C>
Net loss:
As reported..................... $(4,345,906)
Pro forma....................... (4,348,283)
Net loss per share:
As reported..................... $ (2.37)
Pro forma....................... (2.38)
</TABLE>
The Statement 123 pro forma disclosures above are not necessarily
indicative of future pro forma disclosures because of the manner in which the
pro forma impact of Statement 123 calculations is phased in over time.
Stock Warrants
In connection with sales of convertible Series A, GenQuest issued stock
warrants to a certain stockholder to purchase 34,019 shares of Series B at an
exercise price of $0.50 per share. These warrants expire on the earlier of 2004
or on the occurrence of certain events, as defined in the agreement.
Stock Repurchase Agreements
Since its inception, GenQuest has sold approximately 125,000 shares of
common stock for $.005 to employees and scientific founders of GenQuest under
agreements that allow GenQuest, at its option, to repurchase the shares at the
original purchase price if the employment or consulting relationship with
GenQuest ceases for any reason. Under the repurchase agreements, the shares
subject to repurchase are generally reduced in specific increments over a two-
to four-year period beginning at the issuance date. As of December 31, 1997,
63,542 shares remained subject to repurchase.
Under the terms of all of the repurchase agreements, if GenQuest is
acquired by merger, consolidation, or sale of assets, the repurchase agreements
will lapse in their
F-55
<PAGE> 239
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
entirety, except to the extent the repurchase rights are to be assigned to the
successor corporation, in connection with such transaction.
Shares Reserved
At December 31, 1997, common stock was reserved for the following purposes:
<TABLE>
<S> <C>
Conversion of preferred stock.............. 25,121,884
Stock options.............................. 2,000,000
Scientific agreement....................... 75,000
Warrants for preferred stock, convertible
to common stock.......................... 34,019
----------
27,230,903
==========
</TABLE>
Net Loss
Basic and diluted loss per share are calculated using the average number of
common shares outstanding (see Note 1 to these GenQuest financial statements).
Pro forma basic and diluted loss per share are computed on the basis of the
average number of common shares outstanding plus the effect of convertible
preferred shares using the "if-converted" method as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SEPTEMBER 15, SEPTEMBER 30, -------------------------
1998 1998 1997 1996
------------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss(A)............... $(2,212,000) $(2,838,000) $(4,345,906) $(3,894,761)
Weighted average
outstanding:
Common stock(B)......... 1,842,000 1,830,000 1,830,000 1,323,796
=========== =========== =========== ===========
Loss per share:
Basic and diluted
(A/B)................ $ (1.20) $ (1.55) $ (2.37) $ (2.94)
=========== =========== =========== ===========
</TABLE>
6. SCIENTIFIC COLLABORATIVE AND LICENSE AGREEMENTS
GenQuest has various collaborative research agreements with collaborative
partners, academic universities, and research institutions, which expire on the
earlier of the expiration of patents or the occurrence of certain events, as
stipulated in the agreements. Certain agreements stipulate the reimbursement by
GenQuest of research costs incurred by these universities and institutions on
behalf of GenQuest. Included in research and development expenses for the period
from January 1, 1998 to September 15, 1998 and the years ending December 31,
1997 and 1996 are reimbursements approximating $639,000, $2.4 million and
$365,000, respectively. Refer to Note 7 of these GenQuest financial statements
with regards to amounts paid to Corixa.
Certain collaborative agreements that were in effect in 1997 extend into
fiscal years 1998 and 1999. As of December 31, 1997, GenQuest is committed to
reimburse the
F-56
<PAGE> 240
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
collaborative partners, universities, and institutions amounts aggregating $2.1
million and $1.7 million in 1998 and 1999, respectively. GenQuest is also
committed to pay annual fees of $25,000 to a university until expiration of
underlying patents, which are creditable against future royalties which may be
owed.
GenQuest has entered into certain research agreements, license agreements,
and obtained options to negotiate license agreements under the terms of which
GenQuest received license, technology, and patent rights. During the period from
January 1, 1998 to September 15, 1998 and in 1997 and 1996, GenQuest paid
initial license and/or option fees approximating $0, $62,000 and $40,000,
respectively, and in 1996 issued 260,000 shares of common stock valued at
$13,000 (plus a commitment to issue an additional 75,000 shares, respectively,
upon the achievement of certain events) for such rights. Expense was recorded
based on the fair market value of GenQuest's common stock at the date of
issuance.
Certain agreements call for royalty and milestone payments. The agreements
are for terms from one year or the expiration of the last issued patent within
the licensed technology, unless terminated earlier for certain specified events,
as defined in the respective agreements.
Additionally, GenQuest has entered into research, license agreements, and
granted options to other parties to negotiate license agreements under the terms
of which GenQuest provides license, technology, and patent rights. During 1997
and 1996, GenQuest received and deferred initial option fees aggregating
$100,000 related to these agreements. Under the terms of the option, GenQuest
will receive additional license fees and/or reimbursement of certain research
and development costs through the end of the agreement, as defined in the
respective agreement. The agreements provide for one-time payments upon the
achievement of certain milestones and the payment of royalties based on product
sales.
7. AGREEMENTS WITH CORIXA CORPORATION
In February 1996, GenQuest entered a license and research collaboration
agreement with Corixa for the purpose of discovering, characterizing,
developing, and commercializing novel genes for use in the treatment,
prevention, or diagnosis of cancer or pre-neoplastic cell proliferation disease.
During 1996, GenQuest issued 4,412,613 of Series A to Corixa valued at
$0.50 per share, in exchange for certain intellectual property rights in
connection with the collaboration, representing approximately 16% of GenQuest's
outstanding capital stock at December 31, 1997. GenQuest expensed the value of
the issued shares in 1996 as acquired in-process research and development.
In December 1996, GenQuest and Corixa amended this license and
collaboration agreement and, in connection with this amendment, entered into an
administrative services and management agreement. As part of the collaboration,
GenQuest has agreed to provide funding in support of certain research and
development projects conducted by GenQuest and Corixa on a collaborative basis.
Additionally, GenQuest has agreed that certain administrative services will be
provided to GenQuest by certain Corixa employees,
F-57
<PAGE> 241
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
including Corixa's Chief Executive Officer, Chief Scientific Officer, Chief
Financial Officer, and Chief Operating Officer, and GenQuest has agreed to
reimburse Corixa for such services. Either GenQuest or Corixa may terminate the
license agreement within 30 days after December 31, 1997, if such party believes
that the scientific objectives of the collaboration have not been met.
Under the license agreement, GenQuest and Corixa agreed to cross-license
certain technologies and products owned or controlled by them as of February
1996 and technologies and products developed under the collaborative research
program. Corixa is required to pay GenQuest, when product sales commence,
certain royalties on sales of products that use technology licensed from
GenQuest, and GenQuest is required to pay Corixa, when product sales commence,
certain royalties on the sale of products that use technology licensed from
Corixa. In addition, sales of certain products developed by GenQuest using
technology developed by Corixa in the collaborative research program would be
royalty-free.
As a result of its ownership of Series A of GenQuest, Corixa has certain
registration rights with respect to public offerings of GenQuest and rights of
first offer that allow Corixa to participate ratably in future issuances of
stock to maintain its original ownership percentage of GenQuest. Additionally,
Corixa is entitled to voting rights equivalent to the number of shares of common
stock of GenQuest into which such shares of Series A can be converted and is a
party to a voting agreement among GenQuest and its stockholders. Under the terms
of the voting agreement, Corixa has a right to designate two of seven nominees
to the Board of Directors of GenQuest and the stockholders of GenQuest who are
parties to the voting agreement have agreed to vote their shares in favor of
such nominees. Corixa's right to designate such nominees will terminate when
Corixa owns less than 10% of the voting capital stock of GenQuest.
In December 1996, in connection with the modification of the collaboration
between GenQuest and Corixa and the issuance of Series B of GenQuest to
additional investors (18,309,271 shares at $0.50 per share), Corixa, GenQuest,
and the stockholders of GenQuest entered into a call option agreement. Under the
terms of this agreement, Corixa has the right to purchase all of the outstanding
shares of GenQuest's capital stock held by the stockholders of GenQuest at a
purchase price determined in accordance with a formula stipulated in the
agreement. This right becomes effective on the earlier of June 23, 1998, the
completion of a 30-day trading period following Corixa's initial public offering
during which the average closing sale price of a share of Corixa's common stock
meets the minimum requirement stipulated in the agreement, and a merger of
Corixa with another entity or a sale of substantially all of Corixa's assets,
and terminates on the earlier of January 23, 2000, the date that Corixa notifies
GenQuest that it will not exercise this right, the closing of the initial public
offering of GenQuest, and ten days following a merger of or sale of assets by
Corixa.
In conjunction with the relationship between GenQuest and Corixa, GenQuest
purchased warrants to purchase 454,533 shares of Corixa's Series B preferred
stock at a price of $9.90 per share. The warrants expire on the earlier of
December 23, 2001 or upon certain events as specified in the warrant agreement.
In accordance with the terms of GenQuest's own Series B preferred stock
agreement, GenQuest distributed the warrants to
F-58
<PAGE> 242
GENQUEST, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
its stockholders during 1997. The $1,140,000 purchase price of the warrants was
recorded as an obligation at December 31, 1996 and is payable over the
three-year collaborative agreement. The remaining obligation of $651,567 at
December 31, 1997 is payable in 1998 and 1999 in the amount of $325,784 and
$325,783, respectively.
During the years ended December 31, 1997 and 1996, GenQuest paid Corixa
$325,000 and $300,000, respectively, for administrative services provided to
GenQuest.
GenQuest's 1997 results include collaborative research and development
expenses paid to Corixa of approximately $1,932,000. GenQuest did not pay any
collaborative research and development expenses to Corixa in 1996.
F-59
<PAGE> 243
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
CORIXA CORPORATION,
A DELAWARE CORPORATION;
YAKIMA ACQUISITION CORPORATION,
A DELAWARE CORPORATION;
AND
ANERGEN, INC.
A DELAWARE CORPORATION.
Dated as of December 11, 1998.
A-1
<PAGE> 244
INDEX OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Anergen Voting Agreement
Exhibit B Form of Escrow Fund Agreement
Exhibit C Form of Anergen Affiliate Agreement
Exhibit D Form of Opinion of Counsel to Corixa
Exhibit E Form of Opinion of Counsel to Anergen
</TABLE>
A-2
<PAGE> 245
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
December 11, 1998, by and among CORIXA CORPORATION, a Delaware corporation
("Corixa"), Yakima Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Corixa ("Merger Sub"), and ANERGEN, INC., a Delaware
corporation ("Anergen").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("Delaware Law"), Corixa, Merger Sub and Anergen intend to enter
into a business combination transaction.
B. The respective boards of directors of Anergen and Corixa (1) have
determined that the Merger (as defined in Section 1.1) is consistent with and in
furtherance of their respective long-term business strategies and fair to, and
in the best interests of, their respective stockholders and (2) have approved
this Agreement, the Merger and the other transactions contemplated in this
Agreement.
C. Anergen has, subject to the provisions of this Agreement, determined to
recommend that the stockholders of Anergen adopt and approve this Agreement and
approve the Merger.
D. Concurrently with the execution of this Agreement, and as a condition
and inducement to Corixa's willingness to enter into this Agreement, certain
affiliates of Anergen are entering into Voting Agreements in substantially the
form attached hereto as Exhibit A (the "Anergen Voting Agreements").
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Anergen (the "Merger"), the separate corporate existence of Merger Sub shall
cease and Anergen shall continue as the surviving corporation. Anergen, in its
capacity as the surviving corporation after the Merger, is hereinafter sometimes
referred to as the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions
A-3
<PAGE> 246
of Delaware Law (the "Certificate of Merger") (the time of such filing (or such
later time as may be agreed in writing by Anergen and Corixa and specified in
the Certificate of Merger) being the "Effective Time") as soon as practicable on
or after the Closing Date (as herein defined). Unless the context otherwise
requires, the term "Agreement" as used herein refers collectively to this
Agreement and Plan of Reorganization and the Certificate of Merger. The closing
of the Merger (the "Closing") shall take place at the offices of Venture Law
Group, a Professional Corporation, 4750 Carillon Point, Kirkland, Washington
98033-7355, or via facsimile, at a time and date to be specified by the parties,
which shall be no later than the second business day after the satisfaction or
waiver of the conditions set forth in Article VI of this Agreement, or at such
other time, date and location as the parties hereto agree in writing (the
"Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time all the property, rights, privileges, powers and franchises
of Anergen and Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Anergen and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the certificate of incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the certificate
of incorporation of the Surviving Corporation until thereafter amended as
provided by law and such certificate of incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the certificate of
incorporation of the Surviving Corporation shall be amended so that the name of
the Surviving Corporation shall be "Anergen, Inc."
(b) The bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, Anergen or the holders
of any of the following securities:
(a) Conversion of Anergen Common Stock. Each share of Common Stock,
One-Tenth of One Cent ($0.001) par value per share, of Anergen (the
"Anergen Common Stock") issued and outstanding immediately prior to the
Effective Time, other than any shares of Anergen Common Stock to be
canceled pursuant to Section 1.6(b), will be canceled and extinguished and
automatically converted (subject to Sections 1.6(e) and (f)) into the right
to receive the number of shares of Common Stock, One-Tenth of One Cent
($0.001) par value per share, of Corixa (the "Corixa Common Stock") equal
to the Exchange Ratio (as defined below) upon surrender of the certificate
representing such share of Anergen Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate,
upon delivery of an affidavit (and bond, if required) in the manner
A-4
<PAGE> 247
provided in Section 1.9), in each case subject to the provisions of Section
1.6(g). The "Exchange Ratio" shall be equal to a fraction, the numerator of
which is equal to the quotient resulting from dividing Eight Million Five
Hundred Thousand Dollars ($8,500,000) (less all payments made to Anergen by
Corixa pursuant to that certain amended and restated agreement, dated as of
November 11, 1998, by and between Corixa and Anergen) by the average of the
last reported sale price of Corixa Common Stock for the fifteen (15)
trading days immediately preceding and including the date of the first
public announcement of the Merger (the "Corixa Average"); provided,
however, that in the event that the Corixa Average (i) is below Six Dollars
($6.00) per share, the Corixa Average will be deemed to be Six Dollars
($6.00) per share, and (ii) is above Eight Dollars ($8.00) per share, the
Corixa Average will be deemed to be Eight Dollars ($8.00) per share, and
the denominator of which is equal to all outstanding shares of Anergen
capital stock on a fully-diluted basis assuming (1) conversion of all
outstanding convertible securities and (2) exercise of all outstanding
options and warrants to purchase Anergen Common Stock with an exercise
price equal to or less than Two Dollars and Fifty Cents ($2.50) per share,
in each case as of the date of this Agreement ("Fully-Diluted Basis"). It
is acknowledged and agreed by the parties that all Anergen options and
warrants with an exercise price greater than Two Dollars and Fifty Cents
($2.50) per share will be excluded from the calculation of Fully-Diluted
Basis. As promptly as practicable, but in any event within five (5)
business days, after the date of this Agreement, the parties will compile,
sign and attach hereto as Schedule A a schedule setting forth the amount
and computation of the Exchange Ratio.
(b) Cancellation of Corixa-Owned Stock. Each share of Anergen Common
Stock held by Anergen or owned by Merger Sub, Corixa or any direct or
indirect wholly-owned subsidiary of Anergen or of Corixa immediately prior
to the Effective Time shall be canceled and extinguished without any
conversion thereof.
(c) Stock Options; Employee Stock Purchase Plans. At the Effective
Time, all options to purchase Anergen Common Stock then outstanding under
the Anergen, Inc. 1988 Stock Option Plan (the "1988 Plan"), the Anergen,
Inc. 1992 Consultant Stock Plan (the "1992 Plan"), the Anergen Inc. 1995
Director Option Plan (the "Director Plan"), and the Anergen Inc. 1996 Stock
Plan (the "1996 Plan," and together with the 1988 Plan, the 1992 Plan, the
Director Plan and the 1996 Plan, the "Anergen Stock Option Plans") shall be
assumed by Corixa in accordance with Section 5.8 hereof. Rights outstanding
under the Anergen Inc. 1991 Employee Stock Purchase Plan (the "ESPP") shall
be treated as set forth in Section 5.8.
(d) Capital Stock of Merger Sub. Each share of Common Stock, One-Tenth
of One Cent ($0.00l) par value per share, of Merger Sub (the "Merger Sub
Common Stock") issued and outstanding immediately prior to the Effective
Time shall be converted into one validly issued, fully paid and
nonassessable share of Common Stock, One-Tenth of One Cent ($0.001) par
value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be
adjusted to reflect appropriately the effect of any stock split, reverse
stock split, stock dividend (including any dividend or distribution of
securities convertible into Corixa Common Stock or Anergen Common Stock),
reorganization, recapitalization, reclassification or
A-5
<PAGE> 248
other like change with respect to Corixa Common Stock or Anergen Common
Stock occurring on or after the date hereof and prior to the Effective
Time.
(f) Fractional Shares. No fraction of a share of Corixa Common Stock
will be issued by virtue of the Merger, but in lieu thereof each holder of
shares of Anergen Common Stock who would otherwise be entitled to a
fraction of a share of Corixa Common Stock (after aggregating all
fractional shares of Corixa Common Stock that otherwise would be received
by such holder) shall receive from Corixa an amount of cash (rounded to the
nearest whole cent) equal to the product of (i) such fraction, multiplied
by (ii) the average closing price of one share of Corixa Common Stock for
the fifteen (15) trading days preceding and including December 14, 1998, as
reported on the Nasdaq National Market System ("Nasdaq").
(g) Escrow Shares, Escrow Fund Agreement. As soon as practicable after
the Effective Date, Corixa will deposit into escrow certificates
representing that number of shares of the Corixa Common Stock issued to
holders of Anergen Common Stock in the Merger pursuant to Section 1.6(a)
equal to the quotient resulting from dividing Four Hundred Thousand Dollars
($400,000) by the Corixa Average, on a pro rata basis. Such shares (the
"Escrow Shares") will be held as collateral to secure Anergen's obligation
to enter into an amendment to that certain Product Development and License
Agreement, dated as of June 28, 1996, by and between Anergen and N.V.
Organon ("Organon") (the "Organon Agreement") pursuant to this Section
1.6(g) and the provisions of an escrow fund agreement in the form attached
hereto as Exhibit B (the "Escrow Fund Agreement") to be executed and
delivered by Corixa, Anergen and an escrow agent mutually acceptable to
Corixa and Anergen (the "Escrow Agent"). The Escrow Shares will be held by
the Escrow Agent pursuant to the Escrow Fund Agreement and will be released
(i) to the holders of record of Anergen Common Stock immediately prior to
the Effective Date if and only if Anergen executes and delivers to Corixa
an amendment, signed by Organon and in a form reasonably acceptable to
Corixa and Anergen and the respective counsel to Corixa and Anergen (the
"Organon Amendment"), to the Organon Agreement on or prior to the later of
(A) January 31, 1999 or (B) the Closing Date, but in any event prior to
March 15, 1999 (the "Organon Termination Date"), or (ii) to Corixa (as
treasury shares) if Anergen has not executed and delivered to Corixa the
Organon Amendment prior to the Organon Termination Date. Corixa agrees to
retain Michael Shulman, Jeff Winkelhake, Jan Baughman, Nancy Corbelatta,
Simonetta Mocci and Nanette Solvason (and Maria Marmarinos of the Catalyst
Group as a consultant) through the earlier to occur of (1) the delivery by
Anergen to Corixa of the Organon Amendment or (2) the Organon Termination
Date, and further agrees to review and provide comments on any drafts of
the Organon Amendment as promptly as reasonably practicable.
1.7 Surrender of Certificates.
(a) Exchange Agent. Corixa shall select a bank or trust Company reasonably
acceptable to Anergen to act as the exchange agent (the "Exchange Agent") in the
Merger.
(b) Corixa to Provide Common Stock. Promptly after the Effective Time,
Corixa shall make available to the Exchange Agent for exchange in accordance
with this Article I, the shares of Corixa Common Stock issuable pursuant to
Section 1.6 (less the Escrow Shares) in exchange for outstanding shares of
Anergen Common Stock, and cash
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in an amount sufficient for payment in lieu of fractional shares pursuant to
Section 1.6(f) and any dividends or distributions to which holders of shares of
Anergen Common Stock may be entitled pursuant to Section 1.7(d).
(c) Exchange Procedures. Promptly after the Effective Time, Corixa shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "Certificates"), which immediately
prior to the Effective Time represented outstanding shares of Anergen Common
Stock whose shares were converted into shares of Corixa Common Stock pursuant to
Section 1.6, cash in lieu of any fractional shares pursuant to Section 1.6(f)
and any dividends or other distributions pursuant to Section 1.7(d), (i) a
letter of transmittal in customary form (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall contain such
other provisions as Corixa may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing shares of Corixa Common Stock, cash in lieu of any fractional
shares pursuant to Section 1.6(f) and any dividends or other distributions
pursuant to Section 1.7(d). Upon surrender of Certificates for cancellation to
the Exchange Agent or to such other agent or agents as may be appointed by
Corixa, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holders of such
Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Corixa Common Stock into which their
shares of Anergen Common Stock were converted at the Effective Time (less their
respective pro rata interests in the Escrow Shares), payment of cash in lieu of
fractional shares which such holders have the right to receive pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(d) as to the
payment of dividends, to evidence only the ownership of the number of full
shares of Corixa Common Stock into which such shares of Anergen Common Stock
shall have been so converted (less the holder's respective pro rata interests in
the Escrow Shares) and the right to receive an amount in cash in lieu of the
issuance of any fractional shares in accordance with Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the date of this Agreement with respect to
Corixa Common Stock with a record date after the Effective Time will be paid to
the holders of any unsurrendered Certificates with respect to the shares of
Corixa Common Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Corixa Common Stock issued in exchange therefor (less their pro rata
interest in the Escrow Shares) along with payment in lieu of fractional shares
pursuant to Section 1.6(f) hereof and the amount of any such dividends or other
distributions with a record date after the Effective Time payable with respect
to such whole shares of Corixa Common Stock.
(e) Transfers of Ownership. If certificates representing shares of Corixa
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for
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transfer and that the persons requesting such exchange will have paid to Corixa
or any agent designated by it any transfer or other taxes required by reason of
the issuance of certificates representing shares of Corixa Common Stock in any
name other than that of the registered holder of the Certificates surrendered,
or established to the satisfaction of Corixa or any agent designated by it that
such tax has been paid or is not payable.
(f) No Liability. Notwithstanding anything to the contrary in this Section
1.7, neither the Exchange Agent, the Escrow Agent, Corixa, the Surviving
Corporation nor any party hereto shall be liable to a holder of shares of Corixa
Common Stock or Anergen Common Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Anergen Common Stock. All shares of
Corixa Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Anergen Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Anergen
Common Stock which were outstanding immediately prior to the Effective Time. If
after the Effective Time Certificates are presented to the Surviving Corporation
for any reason, they shall be canceled and exchanged as provided in this Article
I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Corixa Common Stock into which the shares of Anergen
Common Stock represented by such Certificates were converted pursuant to Section
1.6 (less the applicable pro rata interest of the Escrow Shares), cash for
fractional shares, if any, as may be required pursuant to Section 1.6(f) and any
dividends or distributions payable pursuant to Section 1.7(d); provided,
however, that Corixa may, in its discretion and as a condition precedent to the
issuance of such certificates representing shares of Corixa Common Stock, cash
and other distributions, require the owner of such lost, stolen or destroyed
Certificates to deliver a bond in such sum as it may reasonably direct as
indemnity against any claim that may be made against Corixa, the Surviving
Corporation or the Exchange Agent with respect to the Certificates alleged to
have been lost, stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations.
1.11 Taking of Necessary Action; Further Action. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Anergen and Merger Sub, the officers and directors of Anergen
and Merger Sub will take all such lawful and necessary action. Corixa shall
cause Merger Sub to perform all of its obligations relating to this Agreement
and the transactions contemplated herein.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ANERGEN
Anergen hereby represents and warrants to Corixa and Merger Sub, subject to
the exceptions specifically disclosed in writing in the disclosure letter and
referencing a specific representation made by Anergen to Corixa and Merger Sub
pursuant to this Article II dated as of the date hereof and certified on behalf
of Anergen by a duly authorized officer of Anergen (the "Anergen Schedules"), as
follows:
2.1 Organization of Anergen.
(a) Anergen and each of its subsidiaries (i) is a corporation or other
legal entity duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it is organized, (ii) has the corporate or
other power and authority to own, lease and operate its assets and properties
and to carry on its business as now being conducted and (iii) is duly qualified
or licensed to do business in each jurisdiction where the character of the
properties owned, leased or operated by it or the nature of its activities makes
such qualification or licensing necessary, except for such failures to be so
duly qualified or licensed and in good standing that would not, either
individually or in the aggregate, have a Material Adverse Effect (as defined in
Section 8.3(c)) on Anergen.
(b) Anergen has delivered or made available to Corixa a true and complete
list of all of Anergen's subsidiaries as of the date of this Agreement,
indicating the jurisdiction of organization of each subsidiary and Anergen's
equity interest therein.
(c) Anergen has delivered or made available to Corixa a true and correct
copy of the certificate of incorporation and bylaws of Anergen and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither Anergen nor any of its
subsidiaries is in violation of any of the provisions of its certificate of
incorporation or bylaws or equivalent governing instruments.
2.2 Anergen Capital Structure. The authorized capital stock of Anergen
consists of sixty million (60,000,000) shares of Common Stock, One-Tenth of One
Cent ($0.001) par value per share, of which there were eighteen million nine
hundred twenty-three thousand eight hundred-eight (18,923,888) shares issued and
outstanding as of December 8, 1998 (excluding shares held in treasury of which
there are none, and ten million (10,000,000) shares of Preferred Stock,
One-Tenth of One Cent ($0.001) par value per share, of which no shares are
issued or outstanding. All outstanding shares of Anergen Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the certificate of incorporation or bylaws
of Anergen or any agreement or document to which Anergen is a party or by which
it is bound. As of December 8, 1998, Anergen had reserved an aggregate of four
million fifty thousand (4,050,000) shares of Anergen Common Stock, for issuance
pursuant to the Anergen Stock Option Plans, of which four hundred sixty-seven
thousand eight hundred five (467,805) shares have been issued pursuant to option
exercises, and one million five hundred fifteen thousand four hundred
fifty-eight (1,515,458) shares are subject to outstanding, unexercised options.
As of December 8, 1998, Anergen had reserved one million eight hundred thousand
(1,800,000) shares of Anergen Common Stock for issuance to employees, directors
and consultants pursuant to the 1988 Plan, of which four hundred thirty-four
thousand seven hundred eight (434,708) shares have been issued pursuant to
option exercises, and seven hundred three thousand four hundred thirty-nine
(703,439) shares are subject to outstanding, unexercised options. As of December
8, 1998,
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Anergen had reserved fifty thousand (50,000) shares of Anergen Common Stock for
issuance to consultants pursuant to the 1992 Plan, of which thirty-three
thousand ninety-seven (33,097) shares have been issued pursuant to option
exercises, and fifteen thousand (15,000) shares are subject to outstanding,
unexercised options. As of December 8, 1998, Anergen had reserved two hundred
thousand (200,000) shares of Anergen Common Stock for issuance to directors
pursuant to the Director Plan, of which no shares have been issued pursuant to
option exercises, and forty thousand (40,000) shares are subject to outstanding,
unexercised options. As of December 8, 1998, Anergen had reserved two million
(2,000,000) shares of Anergen Common Stock for issuance to employees, directors
and consultants pursuant to the 1996 Plan, of which no shares haven been issued
pursuant to option exercises, and seven hundred fifty-seven thousand and
nineteen (757,019) shares are subject to outstanding, unexercised options. As of
December 8, 1998, Anergen had reserved an aggregate of seven hundred fifty
thousand (750,000) shares of Anergen Common Stock for issuance pursuant to the
ESPP, of which two hundred seventy-five thousand four hundred ninety-seven
(275,497) shares have been issued to employees. All shares of Anergen Common
Stock subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they are issuable,
would be duly authorized, validly issued, fully paid and nonassessable. The
Anergen Schedules list for each person who holds options to acquire shares of
Anergen Common Stock as of December 8, 1998, the name of the holder of such
option, the exercise price of such option, the number of shares as to which such
option had vested at such date and the vesting schedule for such option.
2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, there are no equity securities, partnership interests or similar
ownership interests of any class of Anergen equity security, or any securities
exchangeable or convertible into or exercisable for such equity securities,
partnership interests or similar ownership interests, issued, reserved for
issuance or outstanding. Except for securities Anergen owns free and clear of
all claims and encumbrances directly or indirectly through one or more
subsidiaries, as of the date of this Agreement, there are no equity securities,
partnership interests or similar ownership interests of any class of equity
security of any subsidiary of Anergen, or any security exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. Except as set forth in Section 2.2, there are no subscriptions,
options, warrants, equity securities, partnership interests or similar ownership
interests, calls, rights (including preemptive rights), commitments or
agreements of any character to which Anergen or any of its subsidiaries is a
party or by which it is bound obligating Anergen or any of its subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold, or repurchase,
redeem or otherwise acquire, or cause the repurchase, redemption or acquisition
of, any shares of capital stock, partnership interests or similar ownership
interests of Anergen or any of its subsidiaries or obligating Anergen or any of
its subsidiaries to grant, extend, accelerate the vesting of or enter into any
such subscription, option, warrant, equity security, call, right, commitment or
agreement. As of the date of this Agreement, except as contemplated in this
Agreement, there are no registration rights and there is no voting trust, proxy,
rights plan, antitakeover plan or other agreement or understanding to which
Anergen is a party or by which it is bound with respect to any equity security
of any class of Anergen or with respect to any equity security, partnership
interest or similar ownership interest of any class of any of its subsidiaries.
Stockholders of Anergen will not be entitled to dissenters' rights under
applicable state law in connection with the Merger.
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2.4 Authority.
(a) Anergen has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated herein. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein have been duly authorized by all necessary
corporate action on the part of Anergen, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Anergen's
stockholders and the filing of the Certificate of Merger pursuant to Delaware
Law. A vote of the holders of a majority of the outstanding shares of the
Anergen Common Stock is sufficient for Anergen's stockholders to approve and
adopt this Agreement and approve the Merger. This Agreement has been duly
executed and delivered by Anergen and, assuming the due authorization, execution
and delivery by Corixa and Merger Sub, constitutes a valid and binding
obligation of Anergen, enforceable against Anergen in accordance with its terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity. The execution and delivery of this Agreement by
Anergen do not, and the performance of this Agreement by Anergen will not, (i)
conflict with or violate the certificate of incorporation or bylaws of Anergen
or the equivalent governing instruments of any of its subsidiaries, (ii) subject
to obtaining the approval and adoption of this Agreement and the approval of the
Merger by Anergen's stockholders as contemplated in Section 5.2 and compliance
with the requirements set forth in Section 2.4(b) below, conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to
Anergen or any of its subsidiaries or by which Anergen or any of its
subsidiaries or any of its or their respective properties is bound or affected
or (iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair
Anergen's rights or alter the rights or obligations of any third party under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Anergen or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise, concession, or other instrument or obligation to which Anergen or any
of its subsidiaries is a party or by which Anergen or any of its subsidiaries or
its or any of their respective assets are bound or affected which such breach,
default, impairment, alteration, giving of rights or creation of a lien or
encumbrance would result in material damages to Anergen. To the knowledge of
Anergen after reasonable inquiry, the Anergen Schedules list all consents,
waivers and approvals under any of Anergen's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated in this Agreement, which,
if individually or in the aggregate not obtained, would result in a material
loss of benefits to Anergen, Corixa or the Surviving Corporation as a result of
the Merger.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality, foreign or domestic
("Governmental Entity"), is required to be obtained or made by Anergen in
connection with the execution and delivery of this Agreement or the consummation
of the Merger, except for (i) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (ii) the filing of the Proxy
Statement/ Prospectus (as defined in Section 2.18) with the Securities and
Exchange Commission ("SEC") in accordance with the Securities Exchange Act of
1934, as amended (the "Exchange Act"), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws, and the
securities or antitrust laws of any foreign country and
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(iv) such other consents, authorizations, filings, approvals and registrations
which if not obtained or made would not be material to Anergen or Corixa or have
a material adverse effect on the ability of the parties hereto to consummate the
Merger.
2.5 SEC Filings; Anergen Financial Statements.
(a) Anergen has filed all forms, reports and documents required to be filed
by Anergen with the SEC since January 1, 1996 and has made available to Corixa
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Anergen may file
subsequent to the date hereof) are referred to herein as the "Anergen SEC
Reports." As of their respective dates, the Anergen SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), or the Exchange Act, as the case may be, and the
rules and regulations of the SEC thereunder applicable to such Anergen SEC
Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date of this Agreement, then on the date of
such filing) contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. None of Anergen's subsidiaries is required to file any
forms, reports or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Anergen SEC Reports (the "Anergen
Financials"), including each Anergen SEC Reports filed after the date hereof
until the Closing, (i) complied as to form with the published rules and
regulations of the SEC with respect thereto, (ii) was prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto or, in the case of unaudited interim financial statements,
as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iii)
fairly presented the consolidated financial position of Anergen and its
subsidiaries as at the respective dates thereof and the consolidated results of
Anergen's operations and cash flows for the periods indicated, except that the
unaudited interim financial statements may not contain footnotes and were or are
subject to normal and recurring year-end adjustments. The balance sheet of
Anergen contained in Anergen SEC Reports as of September 30, 1998 is hereinafter
referred to as the "Anergen Balance Sheet." Except as disclosed in the Anergen
Financials, since the date of the Anergen Balance Sheet neither Anergen nor any
of its subsidiaries has any liabilities required under GAAP to be set forth on a
balance sheet (absolute, accrued, contingent or otherwise) which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Anergen and its subsidiaries taken as a
whole, except for liabilities incurred since the date of the Anergen Balance
Sheet in the ordinary course of business consistent with past practices.
(c) Anergen has heretofore furnished or made available to Corixa a complete
and correct copy of any amendments or modifications, which have not yet been
filed with the SEC but which are required to be filed, to agreements, documents
or other instruments which previously had been filed by Anergen with the SEC
pursuant to the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Anergen
Balance Sheet there has not been: (a) any Material Adverse Effect (as defined in
Section 8.3(c)) on Anergen, (b) any declaration, setting aside or payment of any
dividend on, or other
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distribution (whether in cash, stock or property) in respect of, any of
Anergen's or any of its subsidiaries' capital stock, or any purchase, redemption
or other acquisition by Anergen of any of Anergen's capital stock or any other
securities of Anergen or its subsidiaries or any options, warrants, calls or
rights to acquire any such shares or other securities except for repurchases
from employees following their termination pursuant to the terms of their
pre-existing stock option or purchase agreements, (c) any split, combination or
reclassification of any of Anergen's or any of its subsidiaries' capital stock,
(d) any granting by Anergen or any of its subsidiaries of any increase in
compensation or fringe benefits, except for normal increases of cash
compensation in the ordinary course of business consistent with past practice,
or any payment by Anergen or any of its subsidiaries of any bonus, except for
bonuses made in the ordinary course of business consistent with past practice,
or any granting by Anergen or any of its subsidiaries of any increase in
severance or termination pay or any entry by Anergen or any of its subsidiaries
into any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent
or the terms of which are altered upon the occurrence of a transaction involving
Anergen of the nature contemplated herein, (e) entry by Anergen or any of its
subsidiaries into any licensing or other agreement with regard to the
acquisition or disposition of any Intellectual Property (as defined in Section
2.9), (f) any change by Anergen in its accounting methods, principles or
practices, except as required by concurrent changes in GAAP or (g) any
revaluation by Anergen of any of its assets, including, without limitation,
writing down the value of capitalized inventory or writing off notes or accounts
receivable other than in the ordinary course of business.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits.
(i) To the knowledge of Anergen after reasonable inquiry, Anergen and
each of its subsidiaries have timely filed all federal, state, local and
foreign returns, estimates, information statements and reports ("Returns")
relating to Taxes required to be filed by Anergen and each of its
subsidiaries with any Tax authority, such Returns are true and correct and
have been completed in all material respects in accordance with applicable
law and Anergen and its subsidiaries have paid all Taxes shown to be due on
such Returns.
(ii) Anergen and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees all federal and state
income taxes, Taxes pursuant to the Federal Insurance Contribution Act
("FICA"), Taxes pursuant to the Federal Unemployment Tax Act ("FUTA") and
other Taxes required to be withheld.
(iii) Neither Anergen nor any of its subsidiaries has been delinquent
in the payment of any Tax nor is there any Tax deficiency outstanding,
proposed or assessed
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against Anergen or any of its subsidiaries, nor has Anergen or any of its
subsidiaries executed any unexpired waiver of any statute of limitations on
or extending the period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Anergen or any of
its subsidiaries by any Tax authority is presently in progress, nor has
Anergen or any of its subsidiaries been notified of any request for such an
audit or other examination.
(v) No adjustment relating to any Returns filed by Anergen or any of
its subsidiaries has been proposed in writing formally or informally by any
Tax authority to Anergen or any of its subsidiaries or any representative
thereof.
(vi) To the knowledge of Anergen after reasonable inquiry, neither
Anergen nor any of its subsidiaries has, or will as of the Effective Time
have, any liability for unpaid Taxes which has not been accrued for or
reserved on the Anergen Balance Sheet, whether asserted or unasserted,
contingent or otherwise, other than any liability for unpaid Taxes that may
have accrued since the date of the Anergen Balance Sheet in connection with
the operation of the business of Anergen and its subsidiaries in the
ordinary course.
(vii) As of the date of this Agreement there is no, and as of the
Effective Time there will not be any, contract, agreement, plan or
arrangement to which Anergen is a party including but not limited to the
provisions of this Agreement, covering any employee or former employee of
Anergen or any of its subsidiaries that, individually or collectively,
could give rise to the payment of any amount that would not be deductible
pursuant to Sections 280G, 404 or 162(m) of the Code.
(viii) Neither Anergen nor any of its subsidiaries has filed any
consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as defined in Section 341(f)(4) of the Code) owned by Anergen.
(ix) Neither Anergen (except for customary arrangements relating to
property taxes and sales taxes in leases) nor any of its subsidiaries is
party to or has any obligation under any tax-sharing, tax indemnity or tax
allocation agreement or arrangement.
(x) Except as may be required as a result of the Merger, Anergen and
its subsidiaries have not been and will not be required to include any
adjustment in Taxable income for any Tax period (or portion thereof)
pursuant to Section 481 or Section 263A of the Code or any comparable
provision under state or foreign Tax laws as a result of transactions,
events or accounting methods employed prior to the Closing.
(xi) None of Anergen's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(xii) The Anergen Schedules list (A) any foreign Tax holidays, (B) any
intercompany transfer pricing agreements, or other arrangements that have
been established by Anergen or any of its subsidiaries with any Tax
authority and (C) any expatriate programs or policies affecting Anergen or
any of its subsidiaries.
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(xiii) To the knowledge of Anergen after reasonable inquiry, as of the
Effective Time, there will be no liens or other encumbrances of any kind
relating to Taxes on the assets of Anergen or any subsidiary of Anergen.
(xiv) Each of Anergen and its subsidiaries have provided or made
available to Corixa copies of all federal and state income and sales taxes,
as applicable, and all Tax Returns for all periods since 1994.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) The Anergen Schedules list the real property interests owned by Anergen
as of the date of this Agreement. The Anergen Schedules list all real property
leases to which Anergen is a party as of the date of this Agreement and each
amendment thereto that is in effect as of the date of this Agreement. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default) that would give rise to a
claim in an amount greater than Fifteen Thousand Dollars ($15,000).
(b) Anergen has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any liens, pledges, charges, claims, security
interests or other encumbrances of any sort ("Liens"), except as reflected in
the Anergen Financials and except for liens for taxes not yet due and payable
and such Liens or other imperfections of title and encumbrances, if any, which
are not material in character, amount or extent, and which do not materially
detract from the value, or materially interfere with the present use, of the
property subject thereto or affected thereby.
2.9 Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, (ii) all inventions (whether patentable or
not), invention disclosures, improvements, trade secrets, proprietary
information, know how, technology, technical data and customer lists, and
all documentation relating to any of the foregoing, (iii) all copyrights,
copyrights registrations and applications therefor, and all other rights
corresponding thereto throughout the world, (iv) all industrial designs and
any registrations and applications therefor throughout the world, (v) all
trade names, logos, common law trademarks and service marks, trademark and
service mark registrations and applications therefor throughout the world,
(vi) all databases and data collections and all rights therein throughout
the world, (vii) all moral and economic rights of authors and inventors,
however denominated, throughout the world, and (viii) any similar or
equivalent rights to any of the foregoing anywhere in the world.
"Anergen Intellectual Property" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Anergen.
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications), (ii) registered
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trademarks, applications to register trademarks, intent-to-use
applications, or other registrations or applications related to trademarks,
(iii) registered copyrights and applications for copyright registration and
(iv) any other Intellectual Property that is the subject of an application,
certificate, filing, registration or other document issued, filed with, or
recorded by any state, government or other public legal authority.
"Anergen Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, Anergen.
(a) To the knowledge of Anergen after reasonable inquiry, no Anergen
Intellectual Property or product or service of Anergen is subject to any
proceeding or outstanding decree, order, judgment, agreement, or stipulation
restricting in any manner the use, transfer, or licensing thereof by Anergen, or
which may affect the validity, use or enforceability of such Anergen
Intellectual Property.
(b) To the knowledge of Anergen after reasonable inquiry, each item of
Anergen Registered Intellectual Property is valid and subsisting, all necessary
registration, maintenance and renewal fees currently due in connection with such
Registered Intellectual Property have been made, and all necessary documents,
recordations and certificates in connection with such Registered Intellectual
Property have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Registered Intellectual Property.
(c) Anergen owns and has good and exclusive title to, or has license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to, each material item of Anergen Intellectual
Property free and clear of any lien or encumbrance (excluding licenses and
related restrictions); and Anergen is the exclusive owner of all trademarks and
trade names used in connection with the operation or conduct of the business of
Anergen, including the sale of any products or the provision of any services by
Anergen, except where the failure to own such trade marks and trade names would
not result in a Material Adverse Effect on Anergen.
(d) Anergen owns exclusively, and has good title to, all copyrighted works
that are Anergen products or which Anergen otherwise expressly purports to own,
except where the failure to own such copyrighted works would not result in a
Material Adverse Effect on Anergen.
(e) To the extent that any Intellectual Property that is or was material to
Anergen's business has been developed or created by a third party for Anergen,
Anergen has a written agreement with such third party with respect thereto and
Anergen thereby either (i) has obtained ownership of, and is the exclusive owner
of or (ii) has obtained a license (sufficient for the conduct of its business as
currently conducted and as proposed to be conducted) to all such third party's
Intellectual Property in such work, material or invention by operation of law or
by valid assignment, to the extent it is necessary to do so.
(f) Anergen has not transferred ownership of, or granted any exclusive
license with respect to, any Intellectual Property that is or was material
Anergen Intellectual Property, to any third party.
(g) To the knowledge of Anergen after reasonable inquiry, the Anergen
Schedules list all material contracts, licenses and agreements currently in
force to which Anergen is a party (i) with respect to Anergen Intellectual
Property licensed or transferred to any third
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party (other than end-user licenses in the ordinary course) or (ii) pursuant to
which a third party has licensed or transferred any material Intellectual
Property to Anergen.
(h) All material contracts, licenses and agreements relating to the Anergen
Intellectual Property are in full force and effect. The consummation of the
transactions contemplated in this Agreement will neither violate nor result in
the breach, modification, cancellation, termination, or suspension of such
contracts, licenses and agreements. Anergen is in material compliance with, and
has not materially breached any term any of such contracts, licenses and
agreements and, to the knowledge of Anergen, all other parties to such
contracts, licenses and agreements are in compliance with, and have not
materially breached any term of, such contracts, licenses and agreements.
Following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Anergen's material rights under such contracts, licenses and
agreements to the same extent Anergen would have been able to had the
transactions contemplated in this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which Anergen would otherwise be required to pay.
(i) To the knowledge of Anergen after reasonable inquiry, the operation of
the business of Anergen as such business currently is conducted, including
Anergen's design, development, manufacture, marketing and sale of the products
or services of Anergen (including with respect to products currently under
development) has not, does not and will not infringe or misappropriate the
Intellectual Property of any third party (provided that with respect to patent
rights, such representation is limited to Anergen's knowledge) or, to its
knowledge, constitute unfair competition or trade practices under the laws of
any jurisdiction.
(j) Anergen has not received notice from any third party that the operation
of the business of Anergen or any act, product or service of Anergen, infringes
or misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
(k) To the knowledge of Anergen, no person has or is infringing or
misappropriating any Anergen Intellectual Property.
(l) Anergen has taken commercially reasonable steps to protect Anergen's
rights in Anergen's confidential information and trade secrets that it wishes to
protect or any trade secrets or confidential information of third parties
provided to Anergen, and, without limiting the foregoing, Anergen has and
enforces a policy requiring each employee and contractor to execute a
proprietary information/confidentiality agreement substantially in the form
provided to Corixa and all current and former employees and contractors of
Anergen have executed such an agreement, except where the failure to do so is
not reasonably expected to be material to Anergen.
2.10 Compliance; Permits; Restrictions.
(a) To the knowledge of Anergen after reasonable inquiry, neither Anergen
nor any of its subsidiaries is, in any material respect, in conflict with, or in
default or in violation of (i) any law, rule, regulation, order, judgment or
decree applicable to Anergen or any of its subsidiaries or by which Anergen or
any of its subsidiaries or any of their respective properties is bound or
affected or (ii) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Anergen or any of its subsidiaries is a party or by which Anergen or
any of its subsidiaries or its or any of their respective properties is bound or
affected, except for
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conflicts, violations and defaults that (individually or in the aggregate) would
not cause Anergen to lose any material benefit or incur any material liability.
No investigation or review by any Governmental Entity is pending or, to
Anergen's knowledge, has been threatened in a writing delivered to Anergen
against Anergen or any of its subsidiaries, nor, to Anergen's knowledge, has any
Governmental Entity indicated an intention to conduct an investigation of
Anergen or any of its subsidiaries. There is no agreement, judgment, injunction,
order or decree binding upon Anergen or any of its subsidiaries which has or
could reasonably be expected to have a Material Adverse Effect on Anergen.
(b) Anergen and its subsidiaries hold, to the extent legally required, all
permits, licenses, variances, exemptions, orders and approvals from governmental
authorities that are material to and required for the operation of the business
of Anergen as currently conducted (collectively, the "Anergen Permits"). Anergen
and its subsidiaries are in compliance in all material respects with the terms
of the Anergen Permits, except where the failure to be in compliance with the
terms of the Anergen Permits would not have a Material Adverse Effect on
Anergen.
2.11 Litigation. Except as disclosed in the Anergen Schedules, there are
no claims, suits, actions or proceedings pending or, to the knowledge of the
Anergen, threatened against, relating to or affecting Anergen or any of its
subsidiaries, before any court, governmental department, commission, agency,
instrumentality or authority, or any arbitrator that seeks to restrain or enjoin
the consummation of the transactions contemplated in this Agreement or which
could reasonably be expected, either singularly or in the aggregate with all
such claims, actions or proceedings, to have a Material Adverse Effect on
Anergen. No Governmental Entity has at any time challenged or questioned in a
writing delivered to Anergen the legal right of Anergen to design, manufacture,
offer or sell any of its products in the present manner or style thereof.
2.12 Brokers' and Finders' Fee. Anergen has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated herein, except as otherwise set forth in that
certain Services and Consulting Agreement entered into as of July 15, 1998 by
and between Anergen and Maria Marmarinos as principal of Catalyst Group, a true
and accurate copy of which has been delivered by Anergen to Corixa.
2.13 Employee Benefit Plans.
(a) Definitions. With the exception of the definition of "Affiliate" set
forth in Section 2.13(a)(i) below (which definition shall apply only to this
Section 2.13), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with Anergen within the meaning of Section 414(b), (c), (m) or (o)
of the Code and the regulations issued thereunder;
(ii) "Anergen Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or
remuneration of any kind, whether written or unwritten or otherwise, funded
or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been
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maintained, contributed to, or required to be contributed to, by Anergen or
any Affiliate for the benefit of any Employee;
(iii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iv) "DOL" shall mean the Department of Labor;
(v) "Employee" shall mean any current, former, or retired employee,
officer, or director of Anergen or any Affiliate;
(vi) "Employee Agreement" shall mean each material management,
employment, retention, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between
Anergen or any Affiliate and any Employee or consultant;
(vii) "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of 1993, as
amended;
(ix) "International Employee Plan" shall mean each Anergen Employee
Plan that has been adopted or maintained by Anergen, whether informally or
formally, for the benefit of Employees outside the United States;
(x) "IRS" shall mean the Internal Revenue Service;
(xi) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xii) "PBGC" shall mean the Pension Benefit Guaranty Corporation; and
(xiii) "Pension Plan" shall mean each Anergen Employee Plan which is
an "employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) Schedules. The Anergen Schedules contain an accurate and complete list
of each Anergen Employee Plan and each Employee Agreement. Anergen does not have
any plan or commitment to establish any new Anergen Employee Plan, to modify any
Anergen Employee Plan or Employee Agreement (except to the extent required by
law or to conform any such Anergen Employee Plan or Employee Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Corixa in writing, or as required by this Agreement), or to enter into any
Anergen Employee Plan or material Employee Agreement, nor does it have any
intention or commitment to do any of the foregoing.
(c) Documents. Anergen has provided or made available to Corixa: (i)
correct and complete copies of all documents embodying to each Anergen Employee
Plan and forms of Employee Agreements, including all amendments thereto and
written interpretations thereof, (ii) the most recent annual actuarial
valuations, if any, prepared for each Anergen Employee Plan, (iii) the three (3)
most recent annual reports (Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under ERISA or the Code in
connection with each Anergen Employee Plan or related trust, (iv) if the Anergen
Employee Plan is funded, the most recent annual and periodic accounting of
Anergen Employee Plan assets, (v) the most recent summary plan description
together with the summary of material modifications thereto, if any, required
under ERISA with respect to each Anergen Employee Plan, (vi) all IRS
determination, opinion, notification and
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advisory letters, and rulings relating to Anergen Employee Plans and copies of
all applications and correspondence to or from the IRS or the DOL with respect
to any Anergen Employee Plan, (vii) all material written agreements and
contracts relating to each Anergen Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts, (viii) all communications material to any Employee or Employees
relating to any Anergen Employee Plan and any proposed Anergen Employee Plans,
in each case, relating to any amendments, terminations, establishments,
increases or decreases in benefits, acceleration of payments or vesting
schedules or other events which would result in any material liability to
Anergen, (ix) all COBRA forms and related notices and (x) all registration
statements and prospectuses prepared in connection with each Anergen Employee
Plan.
(d) Employee Plan Compliance. (i) To the knowledge of Anergen after
reasonable inquiry, Anergen has performed in all material respects all
obligations required to be performed by it under, is not in default or violation
of and has no knowledge of any default or violation by any other party to each
Anergen Employee Plan, and each Anergen Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Anergen Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination letter from the IRS with respect to each such Plan as to its
qualified status under the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent legislation, or has remaining a
period of time under applicable Treasury regulations or IRS pronouncements in
which to apply for such a determination letter and make any amendments necessary
to obtain a favorable determination (iii) to the knowledge of Anergen after
reasonable inquiry, no "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 408 of ERISA, has occurred with respect to any Anergen Employee
Plan, (iv) there are no actions, suits or claims pending, or, to the knowledge
of Anergen, threatened or reasonably anticipated (other than routine claims for
benefits) against any Anergen Employee Plan or against the assets of any Anergen
Employee Plan, (v) each Anergen Employee Plan can be amended, terminated or
otherwise discontinued after the Effective Time in accordance with its terms,
without liability to Corixa, Anergen or any of its Affiliates (other than
ordinary administration expenses typically incurred in a termination event),
(vi) there are no audits, inquiries or proceedings pending or, to the knowledge
of Anergen or any Affiliates, threatened by the IRS or DOL with respect to any
Anergen Employee Plan, and (vii) neither Anergen nor any Affiliate is subject to
any penalty or tax with respect to any Anergen Employee Plan under Section
402(i) of ERISA or Sections 4975 through 4980 of the Code.
(e) Pension Plans. Anergen does not now, nor has it ever, maintained,
established, sponsored, participated in, or contributed to, any Pension Plan
which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Anergen contributed to or been
requested to contribute to any Multiemployer Plan.
(g) No Post-Employment Obligations. No Anergen Employee Plan provides, or
has any liability to provide, retiree life insurance, retiree health or other
retiree employee welfare benefits to any person for any reason, except as may be
required by COBRA or other applicable statute, and Anergen has never
represented, promised or contracted
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(whether in oral or written form) to any Employee (either individually or to
Employees as a group) or any other person that such Employee(s) or other person
would be provided with retiree life insurance, retiree health or other retiree
employee welfare benefit, except to the extent required by statute.
(h) To the knowledge of Anergen after reasonable inquiry, neither Anergen
nor any Affiliate has, prior to the Effective Time, and in any material respect,
violated any of the health care continuation requirements of COBRA, the
requirements of FMLA or any similar provisions of state law applicable to its
Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of the
transactions contemplated herein will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event
under any Anergen Employee Plan, Employee Agreement, trust or loan that
will or may result in any material payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund benefits with
respect to any Employee.
(ii) To the knowledge of Anergen after reasonable inquiry, no payment
or benefit which will or may be made by Anergen or its Affiliates with
respect to any Employee as a result of the transactions contemplated by
this Agreement will be characterized as an "excess parachute payment,"
within the meaning of Section 280G(b)(1) of the Code.
(j) Employment Matters. Anergen: (i) is in compliance in all material
respects with all applicable foreign, federal, state and local laws, rules and
regulations respecting employment, employment practices, terms and conditions of
employment and wages and hours, in each case, with respect to Employees, (ii)
has withheld all amounts required by law or by agreement to be withheld from the
wages, salaries and other payments to Employees, (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing, and (iv) is not liable for any material payment to any trust or
other fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no material
pending, or to the knowledge of Anergen either any threatened or reasonably
anticipated, claims or actions against Anergen under any worker's compensation
policy or long-term disability policy. To Anergen's knowledge, no employee of
Anergen has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such employee is bound due to such employee
being employed by Anergen and disclosing to Anergen or using trade secrets or
proprietary information of any other person or entity.
(k) Labor. No work stoppage or labor strike against Anergen is pending,
threatened or reasonably anticipated. Anergen does not know of any activities or
proceedings of any labor union to organize any Employees. There are no actions,
suits, claims, labor disputes or grievances pending, or, to the knowledge of
Anergen, any threatened or reasonably anticipated, relating to any labor, safety
or discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to Anergen. To the knowledge of Anergen after reasonable
inquiry,
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neither Anergen nor any of its subsidiaries has engaged in any unfair labor
practices within the meaning of the National Labor Relations Act. Anergen is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by Anergen.
(l) International Employee Plan. Each International Employee Plan has been
established, maintained and administered in material compliance with its terms
and conditions and with the requirements prescribed by any and all statutory or
regulatory laws that are applicable to such International Employee Plan.
Furthermore, no International Employee Plan has unfunded liabilities, that as of
the Effective Time, will not be offset by insurance or fully accrued. Except as
required by law, no condition exists that would prevent Anergen or Corixa from
terminating or amending any International Employee Plan at any time for any
reason.
2.14 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and no amount of any
substance that has been designated by any Governmental Entity or by applicable
federal, state or local law to be radioactive, toxic, hazardous or otherwise a
danger to health or the environment, including, without limitation, PCBs,
asbestos, petroleum, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies, (a "Hazardous Material") are present, as a result of the
actions of Anergen or any of its subsidiaries or any affiliate of Anergen, or,
to Anergen's knowledge, as a result of any actions of any third party or
otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof that Anergen or any of its
subsidiaries has at any time owned, operated, occupied or leased, except where
the presence of any of the foregoing substances (i) is authorized by permit or
license in the ordinary course of Anergen's business, or (ii) would not result
in a Material Adverse Effect on Anergen.
(b) Hazardous Materials Activities. Neither Anergen nor any of its
subsidiaries has transported, stored, used, manufactured, disposed of released
or exposed its employees or others to Hazardous Materials in violation of any
law in effect on or before the Closing Date, except where any such violation,
individually or in the aggregate, would not result in a material adverse effect
on Anergen. Neither Anergen nor any of its subsidiaries has disposed of,
transported, sold, used, released, exposed its employees or others to or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of any rule, regulation, treaty
or statute promulgated by any Governmental Entity in effect prior to or as of
the date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity, except where any such violation, individually or in
the aggregate, would not result in a material adverse effect on Anergen.
(c) Permits. Anergen and its subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "Anergen
Environmental Permits") necessary for the conduct of Anergen's and its
subsidiaries' Hazardous Material Activities and other businesses of Anergen and
its subsidiaries as such activities and businesses are
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currently being conducted, except where the failure to hold such Anergen
Environmental Permits would not have a material adverse effect on Anergen.
(d) Environmental Liabilities. No action, proceeding, revocation
proceeding, amendment procedure, writ or injunction is pending, and to Anergen's
knowledge, no action, proceeding, revocation proceeding, amendment procedure,
writ or injunction has been threatened by any Governmental Entity against
Anergen or any of its subsidiaries in a writing delivered to Anergen concerning
any Anergen Environmental Permit, Hazardous Material or any Hazardous Materials
Activity of Anergen or any of its subsidiaries. Anergen is not aware of any fact
or circumstance which could involve Anergen or any of its subsidiaries in any
environmental litigation or impose upon Anergen any material environmental
liability, except where the existence of such fact or circumstance would not
result in a material adverse effect on Anergen.
2.15 Agreements, Contracts and Commitments. Except as otherwise set forth
in the Anergen Schedules, neither Anergen nor any of its subsidiaries is a party
to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of
Anergen's board of directors, other than those that are terminable by
Anergen or any of its subsidiaries on no more than thirty (30) days notice
without liability or financial obligation, except to the extent general
principles of wrongful termination law may limit Anergen's or any of its
subsidiaries' ability to terminate employees at will;
(b) any material agreement or plan currently in force, including,
without limitation, any stock option plan, stock appreciation right plan or
stock purchase plan, any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of any
of the transactions contemplated in this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated in this Agreement;
(c) any material agreement of indemnification or any guaranty
currently in force other than any agreement of indemnification entered into
in connection with the sale or license of software products in the ordinary
course of business;
(d) any material agreement, contract or commitment currently in force
containing any covenant limiting in any respect the right of Anergen or any
of its subsidiaries to engage in any line of business or to compete with
any person or granting any exclusive distribution rights;
(e) any material agreement, contract or commitment currently in force
relating to the disposition or acquisition (by license or otherwise) by
Anergen or any of its subsidiaries after the date of this Agreement of a
material amount of assets not in the ordinary course of business or
pursuant to which Anergen has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise other
than Anergen's subsidiaries;
(f) any material joint marketing or development agreement currently in
force under which Anergen or any of its subsidiaries have continuing
material obligations to jointly market any product, technology or service
and which may not be canceled without penalty upon notice of ninety (90)
days or less, or any material agreement pursuant to which Anergen or any of
its subsidiaries have continuing material
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obligations to jointly develop any intellectual property that will not be
owned, in whole or in part, by Anergen or any of its subsidiaries and which
may not be canceled without penalty upon notice of ninety (90) days or
less;
(g) any material agreement, contract or commitment currently in force
to license any third party to manufacture or reproduce any Anergen product,
service or technology except as a distributor in the normal course of
business.
Neither Anergen nor any of its subsidiaries, nor to Anergen's knowledge any
other party to a Anergen Contract (as defined below), is in breach, violation or
default under, and neither Anergen nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Anergen or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Anergen Schedules pursuant to clauses
(a) through (g) above or pursuant to Section 2.9 hereof (any such agreement,
contract or commitment, a "Anergen Contract") in such a manner as would permit
any other party to cancel or terminate any such Anergen Contract, or would
permit any other party to seek damages or other remedies.
2.16 Change of Control Payments. The Anergen Schedules set forth each plan
or agreement pursuant to which any amounts may become payable (whether currently
or in the future) to current or former officers and directors of Anergen as a
result of or in connection with the Merger.
2.17 Statements; Proxy Statement/Prospectus. The information supplied by
Anergen for inclusion in the Registration Statement (as defined in Section
3.3(b)) shall not, at the time the Registration Statement is filed with the SEC
and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
information supplied by Anergen for inclusion in the proxy statement/prospectus
to be sent to (a) the stockholders of Anergen in connection with the meeting of
Anergen's stockholders to consider the approval and adoption of this Agreement
and the approval of the Merger (the "Anergen Stockholders' Meeting") (such proxy
statement/prospectus as amended or supplemented is referred to herein as the
"Proxy Statement/Prospectus") shall not, on the date the Proxy
Statement/Prospectus is first mailed to Anergen's stockholders or at the time of
the Anergen Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Anergen Stockholders'
Meeting which has become false or misleading. The Proxy Statement/Prospectus
will comply as to form in all material respects with the provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. If at
any time prior to the Effective Time any event relating to Anergen or any of its
affiliates, officers or directors should be discovered by Anergen which is
required to be set forth in an amendment to the Registration Statement or a
supplement to the Proxy Statement/Prospectus, Anergen shall promptly inform
Corixa. Notwithstanding the foregoing, Anergen makes no representation or
warranty with respect to any information supplied by Corixa or Merger Sub which
is contained in any of the foregoing documents.
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2.18 Board Approval. The board of directors of Anergen has, as of the date
of this Agreement, determined (a) that the Merger is fair to, and in the best
interests of Anergen and its stockholders and (b) to recommend that the
stockholders of Anergen approve and adopt this Agreement and approve the Merger.
2.19 Fairness Opinion. Anergen's Board of Directors has received a written
opinion from Pacific Growth Equities dated as of the date hereof to the effect
that, as of the date hereof, the Merger and the Exchange Ratio are fair to
Anergen's stockholders from a financial point of view and has delivered to
Corixa a copy of such opinion.
2.20 Section 203 of the Delaware General Corporation Law Not
Applicable. The Board of Directors of Anergen has taken all actions so that the
restrictions contained in Section 203 of the Delaware General Corporation Law
applicable to a "business combination" (as defined in such Section 203) will not
apply to the execution, delivery or performance of this Agreement or to the
consummation of the Merger or the other transactions contemplated by this
Agreement.
2.21 Customs. Anergen has acted with reasonable care to properly value and
classify, in accordance with applicable tariff laws, rules and regulations, all
goods that Anergen or any of its subsidiaries import into the United States or
into any other country (the "Imported Goods"). To Anergen's knowledge, there are
currently no material claims pending against Anergen by the U.S. Customs Service
(or other foreign customs authorities) relating to the valuation, classification
or marking of the Imported Goods.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF YAKIMA AND MERGER SUB
Corixa and Merger Sub hereby represent and warrant to Anergen, subject to
the exceptions specifically disclosed in writing in the disclosure letter and
referencing a specific representation made by Corixa and Merger Sub to Anergen
pursuant to this Article III dated as of the date hereof and certified by a duly
authorized officer of Corixa and Merger Sub (the "Corixa Schedules"), as
follows:
3.1 Organization of Corixa and Merger Sub.
(a) Each of Corixa and Merger Sub (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is organized, (ii) has the corporate or other power and authority to
own, lease and operate its assets and property and to carry on its business as
now being conducted and (iii) except as would not be material to Corixa, is duly
qualified or licensed to do business in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its activities
makes such qualification or licensing necessary.
(b) Corixa has delivered or made available to Anergen a true and correct
copy of the certificate of incorporation and bylaws of Corixa, each as amended
to date, and each such instrument is in full force and effect. Neither Corixa
nor any of its subsidiaries is in violation of any of the provisions of its
certificate of incorporation or bylaws or equivalent governing instruments.
3.2 Corixa and Merger Sub Capital Structure. The authorized capital stock
of Corixa consists of forty million (40,000,000) shares of Common Stock,
One-Tenth of One Cent ($0.001) par value per share, of which there were twelve
million six hundred ninety
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three thousand eight hundred thirty seven (12,693,837) shares issued and
outstanding as of December 8, 1998, and ten million (10,000,000) shares of
Preferred Stock, One-Tenth of One Cent ($0.001) par value per share, none of
which shares are issued and outstanding. All outstanding shares of Corixa Common
Stock are duly authorized, validly issued, fully paid and nonassessable, free of
any liens or encumbrances and are not subject to preemptive rights created by
statute, the certificate of incorporation or bylaws of Corixa or any agreement
or document to which Corixa is a party or by which it is bound. As of December
8, 1998, Corixa had reserved an aggregate of two million seven hundred thirty
nine thousand two hundred eight (2,739,208) shares of Corixa Common Stock, net
of exercises, for issuance under the Corixa Corporation 1994 Amended and
Restated Stock Option Plan (the "Corixa Stock Option Plan"), the Corixa
Corporation Directors' Stock Option Plan (the "Corixa Directors' Plan"), and the
Corixa Corporation 1997 Employee Stock Purchase Plan (the "Corixa ESPP", and
together with the Corixa Stock Option Plan and the Corixa Directors' Plan, the
"Corixa Plans"). As of December 8, 1998, Corixa had reserved two million three
hundred sixty four thousand two hundred eight (2,364,208) shares of Corixa
Common Stock for issuance to employees, directors and consultants pursuant to
the Corixa Stock Option Plan, of which two hundred eighty three thousand eight
hundred nine (283,809) shares have been issued pursuant to option exercises, and
one million three hundred ninety five thousand five hundred eighty nine
(1,395,589) shares are subject to outstanding, unexercised options. As of
December 8, 1998, Corixa had reserved two hundred fifty thousand (250,000)
shares of Corixa Common Stock for issuance to directors pursuant to the Corixa
Directors' Plan, of which sixty thousand (60,000) are subject to outstanding,
unexercised options. As of December 8, 1998, Corixa had reserved one hundred
twenty five thousand (125,000) shares of Corixa Common Stock for issuance to
employees pursuant to the Corixa ESPP, of which five thousand eight hundred
eighty seven (5,887) shares have been issued to employees. The authorized
capital stock of Merger Sub consists of one thousand (1,000) shares of Common
Stock, One-Tenth of One Cent ($0.001) par value, all of which, as of the date
hereof are issued and outstanding and are held by Corixa. Merger Sub was formed
on or about December 3, 1998 for the purpose of consummating the Merger and has
no material assets or liabilities except as necessary for such purpose. Other
than as set forth in the Corixa Schedules or as contemplated in this Agreement,
there are no other options, warrants, calls, rights, commitments or agreements
of any character to which Corixa or Merger Sub is a party or by which either
Corixa or Merger Sub is bound obligating Corixa or Merger Sub to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the capital stock of Corixa or obligating Corixa or
Merger Sub to grant, extend or enter into any such option, warrant, call, right,
commitment or agreement.
3.3 Authority.
(a) Each of Corixa and Merger Sub, as applicable, has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated herein. The execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate action on the part of Corixa and Merger
Sub, subject only to the filing of the Certificate of Merger pursuant to
Delaware Law. This Agreement has been duly executed and delivered by each of
Corixa and Merger Sub and, assuming the due authorization, execution and
delivery by Anergen, constitutes the valid and binding obligation of Corixa and
Merger Sub, enforceable against Corixa and Merger Sub in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general
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principles of equity. The execution and delivery of this Agreement by each of
Corixa and Merger Sub does not, and the performance of this Agreement by each of
Corixa and Merger Sub will not, (i) conflict with or violate the certificate of
incorporation or bylaws of Corixa or Merger Sub, (ii) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Corixa or
Merger Sub or by which any of their respective properties is bound or affected
or (iii) result in any material breach of or constitute a material default (or
an event that with notice or lapse of time or both would become a material
default) under, or impair Corixa's rights or alter the rights or obligations of
any third party under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a material lien or
encumbrance on any of the material properties or assets of Corixa or Merger Sub
pursuant to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to which
Corixa or Merger Sub is a party or by which Corixa or Merger Sub or any of their
respective properties are bound or affected.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required to be obtained or
made by Corixa or Merger Sub in connection with the execution and delivery of
this Agreement or the consummation of the Merger, except for (i) the filing of a
Form S-4 (or any similar successor form thereto) Registration Statement (the
"Registration Statement") with the SEC in accordance with the Securities Act,
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware, (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
federal, foreign and state securities (or related) laws and the securities or
antitrust laws of any foreign country and (v) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not be material to Corixa or Anergen or have a material adverse
effect on the ability of the parties hereto to consummate the Merger.
3.4 SEC Filings; Corixa Financial Statements.
(a) Corixa has filed all forms, reports and documents required to be filed
by Corixa with the SEC since January 1, 1997, and has made available to Anergen
such forms, reports and documents in the form filed with the SEC. All such
required forms, reports and documents (including those that Corixa may file
subsequent to the date hereof) are referred to herein as the "Corixa SEC
Reports." As of their respective dates, the Corixa SEC Reports (i) were prepared
in accordance with the requirements of the Securities Act or the Exchange Act,
as the case may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Corixa SEC Reports and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. None of Corixa's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Corixa SEC Reports (the "Corixa
Financials"), including any Corixa SEC Reports filed after the date hereof until
the Closing, (i) complied as to form in all material respects with the published
rules and regulations of the SEC with respect thereto, (ii) was prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes
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thereto or, in the case of unaudited interim financial statements, as may be
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented the consolidated financial position of Corixa and its subsidiaries as
at the respective dates thereof and the consolidated results of Corixa's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of Corixa
contained in Corixa SEC Reports as of December 31, 1997, is hereinafter referred
to as the "Corixa Balance Sheet." Except as disclosed in the Corixa Financials,
since the date of the Corixa Balance Sheet neither Corixa nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise)
which are, individually or in the aggregate, material to the business, results
of operations or financial condition of Corixa and its subsidiaries taken as a
whole, except for liabilities incurred since the date of the Corixa Balance
Sheet in the ordinary course of business consistent with past practices.
3.5 Absence of Certain Changes or Events. Since the date of the Corixa
Balance Sheet there has not been any Material Adverse Effect on Corixa.
3.6 Statements; Proxy Statement/Prospectus. The information supplied by
Corixa for inclusion in the Registration Statement shall not at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The information supplied by Corixa
for inclusion in the Proxy Statement/Prospectus shall not, on the date the Proxy
Statement/Prospectus is first mailed to Anergen's stockholders or at the time of
the Anergen Stockholders' Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not false or misleading, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Anergen Stockholders'
Meeting which has become false or misleading. If at any time prior to the
Effective Time, any event relating to Corixa or any of its affiliates, officers
or directors should be discovered by Corixa which is required to be set forth in
an amendment to the Registration Statement or a supplement to the Proxy
Statement/Prospectus, Corixa shall promptly so inform Anergen. Notwithstanding
the foregoing, Corixa makes no representation or warranty with respect to any
information supplied by Anergen which is contained in any of the foregoing
documents.
3.7 Valid Issuance. The Corixa Common Stock to be issued in the Merger,
when issued in accordance with the provisions of this Agreement: (a) will be
validly issued, fully paid and nonassessable and (b) will not be subject to any
restrictions on resale under the Securities Act other than restrictions imposed
by Rule 145 promulgated under the Securities Act.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Anergen. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Anergen and each of its
subsidiaries shall, except to the
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extent that Corixa shall otherwise consent in writing (which consent shall not
be unreasonably withheld, it being acknowledged and agreed by the parties that
Corixa will respond as promptly as reasonably practicable to Anergen's requests
for such consent), carry on its business, in the usual, regular and ordinary
course, in substantially the same manner as heretofore conducted and in
compliance with all applicable laws and regulations, pay its debts and taxes
when due subject to good faith disputes over such debts or taxes, pay or perform
other obligations when due, and use its commercially reasonable efforts
consistent with past practices and policies to (i) preserve intact its present
business organization, (ii) keep available the services of its present officers
and employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings. In addition, Anergen will promptly notify Corixa of any material event
involving its business or operations.
In addition, except as permitted by the terms of this Agreement (including
entering into the Organon Amendment and the Bridge Financing), and except as
provided in Article IV of the Anergen Schedules, without the prior written
consent of Corixa not to be unreasonably withheld (it being acknowledged and
agreed by the parties that Corixa will respond reasonably promptly to Anergen's
requests for such prior written consent of Corixa), during the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, Anergen shall not do
any of the following and shall not permit its subsidiaries to do any of the
following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of
such plans;
(b) Except as otherwise provided in the Anergen Schedules, grant any
severance or termination pay to any officer or employee except pursuant to
written agreements outstanding, or policies existing, on the date hereof
and as previously disclosed in writing or made available to Corixa, or
adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend,
amend or modify in any material respect any rights to the Anergen
Intellectual Property, or enter into grants to future patent rights;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Anergen or its subsidiaries, except repurchases
of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber or
propose any of the foregoing of, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions,
rights, warrants or options to acquire any shares of capital stock or any
securities convertible into shares of capital stock, or enter into other
agreements or commitments of any character obligating it to issue any such
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shares or convertible securities, other than the issuance delivery and/or
sale of (i) shares of Anergen Common Stock pursuant to the exercise of
stock options therefor outstanding as of the date of this Agreement, and
(ii) shares of Anergen Common Stock issuable to participants in the ESPP
consistent with the terms thereof;
(g) Cause, permit or propose any amendments to its certificate of
incorporation, bylaws or similar charter documents of any of its
subsidiaries;
(h) Acquire or agree to acquire by merging or consolidating with, or
by purchasing any equity interest in or a portion of the assets of, or by
any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to the business of Anergen or enter into any material joint
ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate,
to the business of Anergen, except sales of inventory in the ordinary
course of business consistent with past practice;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
options, warrants, calls or other rights to acquire any debt securities of
Anergen, enter into any "keep well" or other agreement to maintain any
financial statement condition or enter into any arrangement having the
economic effect of any of the foregoing other than (i) in connection with
the financing of ordinary course trade payables consistent with past
practice or (ii) pursuant to existing credit facilities in the ordinary
course of business;
(k) Except as otherwise disclosed in the Anergen Schedules, adopt or
amend any employee benefit plan or employee stock purchase or employee
stock option plan, or enter into any employment contract or collective
bargaining agreement (other than offer letters and letter agreements
entered into in the ordinary course of business consistent with past
practice with employees who are terminable "at will,"), pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants other
than in the ordinary course of business, consistent with past practice, or
change in any material respect any management policies or procedures;
(l) Make any payments outside of the ordinary course of business;
(m) Modify, amend or terminate any material contract or agreement to
which Anergen or any subsidiary thereof is a party or waive, release or
assign any material rights or claims thereunder;
(n) Enter into any contracts, agreements, or obligations relating to
the distribution, sale, license or marketing by third parties of Anergen's
products or products licensed by Anergen other than in the ordinary course
of business consistent with past practice;
(o) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
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(p) Engage in any action with the intent to directly or indirectly
adversely impact any of the transactions contemplated in this Agreement;
(q) Expend more than Fifteen Thousand Dollars ($15,000) for any
individual purchase or lease of any capital assets or related services, or
Thirty Thousand Dollars ($30,000) in the aggregate for all such purchases
or leases; or
(r) Agree in writing or otherwise to take any of the actions described
in Article VI (a) through (q) above.
4.2 Conduct of Business by Corixa. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, except as permitted by the terms of
this Agreement and except as provided in Article IV of the Corixa Schedules,
without the prior written consent of Anergen which consent shall not be
unreasonably withheld, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Corixa shall not declare, set aside or pay any
dividends on or make any other distributions (whether in cash, stock, equity
securities or property) in respect of any capital stock or split, combine or
reclassify any capital stock or issue or authorize the issuance of any other
securities in respect of in lieu of or in substitution for any capital stock.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement/Prospectus; Registration Statement; Other Filings;
Board Recommendations.
(a) As promptly as practicable after the execution of this Agreement,
Anergen and Corixa will prepare, and file with the SEC, the Proxy
Statement/Prospectus and Corixa will prepare and file with the SEC the
Registration Statement in which the Proxy Statement/Prospectus will be included
as a prospectus. Each of Anergen and Corixa will respond to any comments of the
SEC and will use its respective commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing, Anergen will cause the Proxy Statement/
Prospectus to be mailed to its stockholders at the earliest practicable time
after the Registration Statement is declared effective by the SEC. As promptly
as practicable after the date of this Agreement, each of Anergen and Corixa will
prepare and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other Federal, foreign or Blue Sky or related
laws relating to the Merger and the transactions contemplated in this Agreement
(the "Other Filings"). Each of Anergen and Corixa will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement/Prospectus or any Other Filing or for additional
information and will supply the other with copies of all correspondence between
such party or any of its representatives, on the one hand, and the SEC, or its
staff or any other government officials, on the other hand, with respect to the
Registration Statement, the Proxy Statement/Prospectus, the Merger or any Other
Filing. Each of Anergen and Corixa will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under this
Section 5.1(a) to comply in all material respects with all applicable
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requirements of law and the rules and regulations promulgated thereunder.
Whenever any event occurs which is required to be set forth in an amendment or
supplement to the Proxy Statement/Prospectus, the Registration Statement or any
Other Filing, Anergen or Corixa, as the case may be, will promptly inform the
other of such occurrence and cooperate in filing with the SEC or its staff or
any other government officials, and/or mailing to stockholders of Anergen, such
amendment or supplement.
(b) The Proxy Statement/Prospectus will include the recommendation of the
Board of Directors of Anergen in favor of adoption and approval of this
Agreement and approval of the Merger.
5.2 Meeting of Anergen Stockholders.
(a) Promptly after the date hereof, Anergen will take all action necessary
in accordance with the Delaware Law and its certificate of incorporation and
bylaws to convene the Anergen Stockholders' Meeting to be held as promptly as
practicable, and in any event (to the extent permissible under applicable law)
within thirty (30) days after the declaration of effectiveness of the
Registration Statement; provided, however, that in the event Anergen's board of
directors receives a Superior Offer during the last five (5) business days of
such thirty (30) day period, such thirty (30) day period shall be extended for
seven (7) calendar days from the time Anergen's board of directors receives such
Superior Offer (the "Anergen Stockholder's Meeting Period"), for the purpose of
voting upon this Agreement and the Merger or the issuance of shares of Corixa
Common Stock pursuant to the Merger, respectively. Anergen will use its
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the adoption and approval of this Agreement and the approval of the
Merger and will take all other action reasonably necessary or advisable to
secure the vote or consent of its stockholders required by the rules of Nasdaq
or Delaware Law to obtain such approvals. Notwithstanding anything to the
contrary contained in this Agreement, Anergen may adjourn or postpone the
Anergen Stockholders' Meeting to the extent necessary to ensure that any
necessary supplement or amendment to the Prospectus/Proxy Statement is provided
to Anergen's stockholders in advance of a vote on the Merger and this Agreement
or, if as of the time for which Anergen Stockholders' Meeting is originally
scheduled (as set forth in the Prospectus/ Proxy Statement) there are
insufficient shares of Anergen Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Anergen's
Stockholders' Meeting. Anergen shall ensure that the Anergen Stockholders'
Meeting is called, noticed, convened, held and conducted, and subject to Section
5.2(c) that all proxies solicited by Anergen in connection with the Anergen
Stockholders' Meeting are solicited, in compliance with the Delaware Law, its
certificate of incorporation and bylaws, the rules of Nasdaq and all other
applicable legal requirements. Anergen's obligation to call, give notice of,
convene and hold the Anergen Stockholders' Meeting in accordance with this
Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Anergen of any
Acquisition Proposal (as defined in Section 5.4(a)), or by any withdrawal,
amendment or modification of the recommendation of Anergen's board of directors
with respect to the Merger.
(b) Subject to Section 5.2(c): (i) Anergen's board of directors shall
unanimously recommend that Anergen's stockholders vote in favor of and adopt and
approve this Agreement and the Merger at the Anergen Stockholders' Meeting, (ii)
the Prospectus/ Proxy Statement shall include a statement to the effect that
Anergen's board of directors has unanimously recommended that Anergen's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at the Anergen Stockholders' Meeting and
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(iii) neither Anergen's board of directors nor any committee thereof shall
withdraw, amend or modify, or propose or resolve to withdraw, amend or modify in
a manner adverse to Corixa, the unanimous recommendation of Anergen's board of
directors that Anergen's stockholders vote in favor of and adopt and approve
this Agreement and the Merger.
(c) Nothing in this Agreement shall prevent Anergen's board of directors
from withholding, withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Offer (as defined below)
is made to Anergen and is not withdrawn, (ii) neither Anergen nor any of its
representatives shall have violated any of the restrictions set forth in Section
5.4, and (iii) Anergen's board of directors or any committee thereof concludes
in good faith, after consultation with its outside counsel, that, in light of
such Superior Offer, the withholding, withdrawal, amendment or modification of
such recommendation is required in order for Anergen's board of directors or any
committee thereof to comply with its fiduciary obligations to Anergen's
stockholders under applicable law. Subject to applicable laws, nothing contained
in this Section 5.2 shall limit Anergen's obligation to hold and convene the
Anergen Stockholders' Meeting (regardless of whether the unanimous
recommendation of the Anergen's board of directors shall have been withdrawn,
amended or modified). For purposes of this Agreement, the term "Superior Offer"
shall mean an unsolicited, bona fide written offer made by a third party to
consummate any of the following transactions: (1) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving Anergen pursuant to which the stockholders of Anergen
immediately preceding such transaction hold less than fifty percent (50%) of the
equity interest in the surviving or resulting entity of such transaction, (2) a
sale or other disposition by Anergen of assets (excluding inventory and used
equipment sold in the ordinary course of business) representing in excess of
fifty percent (50%) of the fair market value of Anergen's business immediately
prior to such sale, (3) the acquisition by any person or group (including by way
of a tender offer or an exchange offer or issuance by Anergen), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of fifty percent (50%) of the voting power of
the then-outstanding shares of capital stock of Anergen or (4) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing, on terms that Anergen's board of
directors determines, in its judgment consistent with applicable corporate law,
after consultation with its financial advisor, is reasonably likely to be
financially superior to the Anergen stockholders than the terms of the Merger.
5.3 Confidentiality: Access to Information.
(a) The parties acknowledge that Anergen and Corixa have previously
executed a Confidential Disclosure Agreement, dated as of September 29, 1998
(the "Confidentiality Agreement"), which Confidentiality Agreement will continue
in full force and effect in accordance with its terms.
(b) Access to Information. Anergen will afford Corixa and its accountants,
counsel and other representatives reasonable access during normal business hours
to the properties, books, records and personnel of Anergen during the period
prior to the Effective Time to obtain all information concerning the business,
including the status of product development efforts, properties, results of
operations and personnel of Anergen, as Corixa may reasonably request. No
information or knowledge obtained by Corixa in any investigation pursuant to
this Section 5.3 will affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the parties to
consummate
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the Merger. Corixa will cooperate reasonably with Anergen and respond to
reasonable requests for information from Anergen's accountants, counsel and
other representatives.
5.4 No Solicitation.
(a) From and after the date of this Agreement until the earlier of the
Effective Time or termination of this Agreement pursuant to Article VII, Anergen
and its subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly, (i) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as hereinafter defined),
(ii) participate in any discussions or negotiations regarding, or furnish to any
person any non-public information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, (iii) subject to
Section 5.2(c), engage in discussions with any person with respect to any
Acquisition Proposal, except as to the existence of these provisions, (iv)
subject to Section 5.2(c), approve, endorse or recommend any Acquisition
Proposal or (v) subject to Section 5.2(c), enter into any letter of intent or
similar document or any contract agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction (as hereinafter defined);
provided, however, that prior to the approval of this Agreement by the required
Anergen Stockholder Vote, this Section 5.4(a) shall not prohibit Anergen from
furnishing nonpublic information regarding Anergen and its subsidiaries to,
entering into a confidentiality agreement with or entering into discussions
with, any person or group in response to a Superior Offer submitted by such
person or group (and not withdrawn) if (1) neither Anergen nor any
representative of Anergen and its subsidiaries shall have violated any of the
restrictions set forth in this Section 5.4, (2) Anergen's board of directors
concludes in good faith, after consultation with its outside legal counsel, that
such action is required in order for Anergen's board of directors to comply with
its fiduciary obligations to Anergen's stockholders under applicable law, (3)
prior to furnishing any such nonpublic information to, and as promptly as
reasonably practicable after having any discussions with, such person or group,
Anergen gives Corixa written notice of the identity of such person or group and
of Anergen's intention to furnish nonpublic information to, or enter into
discussions with, such person or group and Anergen receives from such person or
group an executed confidentiality agreement containing customary limitations on
the use and disclosure of all nonpublic written and oral information furnished
to such person or group by or on behalf of Anergen, and (4) contemporaneously
with furnishing any such nonpublic information to such person or group, Anergen
furnishes such nonpublic information to Corixa (to the extent such nonpublic
information has not been previously furnished by Anergen to Corixa); and
provided further, however, that upon compliance with clauses (1) - (4) and
Anergen determines to accept a Superior Offer, all Anergen Affiliate Agreements
and all Anergen Voting Agreements shall terminate, and Anergen shall be entitled
to enter into an agreement with such third party concerning such Superior
Proposal, provided that Anergen has made payment in full to Corixa of the
Termination Fee subject and pursuant to Section 7.3(b). Anergen and its
subsidiaries will immediately cease any and all existing activities, discussions
or negotiations with any parties conducted heretofore with respect to any
Acquisition Proposal. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding two sentences by any
officer, director or employee of Anergen or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Anergen or any
of its subsidiaries shall be deemed to be a material breach of this Section 5.4
by Anergen. In addition to the foregoing, Anergen
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shall provide Corixa with at least the same notice as provided to the members of
Anergen's board of directors of any meeting of Anergen's board of directors at
which Anergen's board of directors is reasonably expected to consider a Superior
Offer or to recommend a Superior Offer to its stockholders and together with
such notice a copy of the definitive documentation relating to such Superior
Offer.
For purposes of this Agreement, "Acquisition Proposal" shall mean any offer
or proposal (other than an offer or proposal by Corixa) relating to any
Acquisition Transaction. For the purposes of this Agreement, "Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated in this Agreement involving: (A) any
acquisition or purchase from Anergen by any person or "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder) of
more than a fifteen percent (15%) interest in the total outstanding voting
securities of Anergen or any of its subsidiaries or any tender offer or exchange
offer that if consummated would result in any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning fifteen percent (15%) or more of the total
outstanding voting securities of Anergen or any of its subsidiaries or any
merger, consolidation, business combination or similar transaction involving
Anergen pursuant to which the stockholders of Anergen immediately preceding such
transaction hold less than eighty-five percent (85%) of the equity interests in
the surviving or resulting entity of such transaction, (B) any sale, lease
(other than in the ordinary course of business), exchange, transfer, license
(other than in the ordinary course of business), acquisition or disposition of
more than fifty percent (50%) of the assets of Anergen, or (C) any liquidation
or dissolution of Anergen.
(b) In addition to the obligations of Anergen set forth in paragraph (a) of
this Section 5.4, Anergen as promptly as practicable shall advise Corixa orally
and in writing of any request for non-public information which Anergen
reasonably believes would lead to an Acquisition Proposal or of any Acquisition
Proposal, or any inquiry with respect to or which Anergen reasonably should
believe would lead to any Acquisition Proposal, the material terms and
conditions of such request, Acquisition Proposal or inquiry and the identity of
the person or group making any such request, Acquisition Proposal or inquiry.
Anergen will keep Corixa informed in all material respects of the status and
details (including material amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
5.5 Public Disclosure. Corixa and Anergen will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law or any listing agreement with a national securities exchange. The parties
have agreed to the text of the joint press release announcing the signing of
this Agreement.
5.6 Reasonable Efforts Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all commercially reasonable efforts
to take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated in this
Agreement, including using reasonable efforts to
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accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iv) the
defending of any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated herein, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (v) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated in, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, Anergen and its board of directors shall, if any state
takeover statute or similar statute or regulation is or becomes applicable to
the Merger, this Agreement or any of the transactions contemplated in this
Agreement, use all reasonable efforts to ensure that the Merger and the other
transactions contemplated in this Agreement may be consummated as promptly as
practicable on the terms contemplated in this Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger, this Agreement
and the transactions contemplated herein. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall be deemed to require Corixa or Anergen
or any subsidiary or affiliate thereof to agree to any divestiture by itself or
any of its affiliates of shares of capital stock or of any business, assets or
property, or the imposition of any material limitation on the ability of any of
them to conduct their businesses or to own or exercise control of such assets,
properties and stock.
(b) Anergen shall give prompt notice to Corixa of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate in
any material respect, or any failure of Anergen to comply with or satisfy in any
material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.3(a) or 6.3(b) would not be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties or the conditions to the obligations of
the parties under this Agreement.
(c) Corixa shall give prompt notice to Anergen of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate in any material respect, or any failure of Corixa or Merger Sub to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 6.2(a) or 6.2(b) would not
be satisfied, provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date
hereof, Corixa and Anergen will each use its commercially reasonable efforts to
obtain any consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated herein.
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5.8 Stock Options and Employee Benefits.
(a) At the Effective Time, each outstanding option to purchase shares of
Anergen Common Stock (each an "Anergen Stock Option") under the Anergen Stock
Option Plans, whether or not exercisable, will be assumed by Corixa. Each
Anergen Stock Option so assumed by Corixa under this Agreement will continue to
have, and be subject to, the same terms and conditions set forth in the
applicable Anergen Stock Option Plan immediately prior to the Effective Time
(including, without limitation, any repurchase rights or vesting provisions),
except that (i) each Anergen Stock Option will be exercisable (or will become
exercisable in accordance with its terms) for that number of whole shares of
Corixa Common Stock equal to the product of the number of shares of Anergen
Common Stock that were issuable upon exercise of such Anergen Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Corixa Common Stock and
(ii) the per share exercise price for the shares of Corixa Common Stock issuable
upon exercise of such assumed Anergen Stock Option will be equal to the quotient
determined by dividing the exercise price per share of Anergen Common Stock at
which such Anergen Stock Option was exercisable immediately prior to the
Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(b) It is intended that Anergen Stock Options assumed by Corixa shall
qualify following the Effective Time as incentive stock options as defined in
Section 422 of the Code to the extent Anergen Stock Options qualified as
incentive stock options immediately prior to the Effective Time and the
provisions of this Section 5.8 shall be applied consistent with such intent.
(c) Rights outstanding under the ESPP shall be treated in a manner
reasonably acceptable to Corixa and Anergen.
5.9 Form S-8. Corixa agrees to file a registration statement on Form S-8
for the shares of Corixa Common Stock issuable with respect to assumed Anergen
Stock Options as soon as is reasonably practicable after the Effective Time and
intends to maintain the effectiveness of such registration statement thereafter
for so long as any of such options or other rights remain outstanding.
5.10 Indemnification.
(a) From and after the Effective Time, Corixa will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Anergen
pursuant to any indemnification agreements between Anergen and its directors and
officers as of the Effective Time (the "Indemnified Parties") and any
indemnification provisions under Anergen's certificate of incorporation or
bylaws as in effect on the date hereof. The certificate of incorporation and
bylaws of the Surviving Corporation will contain provisions with respect to
exculpation and indemnification that are at least as favorable to the
Indemnified Parties as those contained in the certificate of incorporation and
bylaws of Anergen as in effect on the date hereof, which provisions will not be
amended, repealed or otherwise modified for a period of six (6) years from the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who, immediately prior to the Effective Time, were directors,
officers, employees or agents of Anergen, unless such modification is required
by law.
(b) For a period of five (5) years after the Effective Time, Corixa will
cause the Surviving Corporation to use its commercially reasonable efforts to
maintain in effect, if
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available, directors' and officers' liability insurance covering those persons
who are currently covered by Anergen's directors' and officers' liability
insurance policy on terms comparable to those applicable to the current
directors and officers of Anergen; provided, however, that in no event will
Corixa or the Surviving Corporation be required to expend in excess of one
hundred twenty-five percent (125%) of the annual premium currently paid by
Anergen for such coverage (or such coverage as is available for such one hundred
twenty-five percent (125%) of such annual premium).
5.11 Nasdaq Listing. Corixa agrees to authorize for listing on Nasdaq the
shares of Corixa Common Stock issuable, and those required to be reserved for
issuance, in connection with the Merger, upon official notice of issuance.
5.12 Anergen Affiliate Agreements and Voting Agreements. Set forth on the
Anergen Schedules is a list of those persons who may be deemed to be, in
Anergen's reasonable judgment, affiliates of Anergen within the meaning of Rule
145 promulgated under the Securities Act (each a "Anergen Affiliate"). Anergen
will provide Corixa with such information and documents as Corixa reasonably
requests for purposes of reviewing such list. Anergen will use its commercially
reasonable efforts to deliver or cause to be delivered to Corixa, as promptly as
practicable on or immediately following the date hereof, from each Anergen
Affiliate an executed affiliate agreement in substantially the form attached
hereto as Exhibit C (the "Anergen Affiliate Agreement"), and an executed voting
agreement in substantially the form attached hereto as Exhibit A (the "Anergen
Voting Agreement"), each of which will be in full force and effect as of the
Effective Time. Corixa will be entitled to place appropriate legends on the
certificates evidencing any Corixa Common Stock to be received by a Anergen
Affiliate pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Corixa Common Stock,
consistent with the terms of the Anergen Affiliate Agreement.
5.13 Corixa Guarantee of Certain Employment Agreement Benefits. Corixa
shall guarantee the performance by Anergen of all obligations due to Barry
Sherman, M.D. under that certain letter agreement dated December 3, 1998 to the
Employment Agreement of Barry Sherman, M.D., dated as of May 1996, true and
accurate copies of which have been delivered to Corixa by Anergen.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Anergen Stockholder Approval. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the stockholders of Anergen.
(b) Registration Statement Effective; Proxy Statement. The SEC shall
have declared the Registration Statement effective. No stop order
suspending the effectiveness of the Registration Statement or any part
thereof shall have been issued, and no proceeding for that purpose, and no
similar proceeding in respect of the Proxy Statement/Prospectus, shall have
been initiated or threatened in writing by the SEC.
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(c) No Order. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger.
(d) Escrow Fund Agreement. Each of Corixa, Anergen and the Escrow
Agent shall have executed and delivered the Escrow Fund Agreement.
(e) Nasdaq Listing. The shares of Corixa Common Stock issuable to
stockholders of Anergen pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall
have been authorized for listing on the Nasdaq National Market upon
official notice of issuance.
(f) Tax Opinion. Corixa shall have received a written opinion from its
tax counsel, Venture Law Group, a Professional Corporation, and Anergen
shall have received a written opinion from its tax counsel, Wilson Sonsini
Goodrich & Rosati, Professional Corporation, to the effect that the Merger
will constitute a reorganization within the meaning of Section 368(a) of
the Code and such opinion shall not have been withdrawn; provided, however,
that if tax counsel to either Corixa or Anergen does not render such
opinion, this condition will nonetheless be deemed to be satisfied with
respect to such party if counsel to the other party renders such opinion to
such party. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering
such opinions.
6.2 Additional Conditions to Obligations of Anergen. The obligation of
Anergen to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Anergen:
(a) Representations and Warranties. Each representation and warranty
of Corixa and Merger Sub contained in this Agreement (i) shall have been
true and correct as of the date of this Agreement and (ii) shall be true
and correct on and as of the Closing Date with the same force and effect as
if made on the Closing Date, except (A) in the case of either clause (i) or
clause (ii), individually or in the aggregate, as does not constitute a
Material Adverse Effect on Corixa and Merger Sub, (B) for changes
contemplated in this Agreement and (C) for those representations and
warranties which address matters only as of a particular date (which
representations shall have been true and correct except as does not
constitute a Material Adverse Effect on Corixa and Merger Sub as of such
particular date) (it being understood that, for purposes of determining
whether or not a breach or inaccuracy of a representation or warranty of
Corixa or Merger Sub contained in this Agreement constitutes a Material
Adverse Effect as contemplated in Section 6.2(a)(A), (1) all "Material
Adverse Effect" qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and
warranties shall be disregarded and (2) any update of or modification to
the Corixa Schedules made or purported to have been made after the date of
this Agreement shall be disregarded). Anergen shall have received a
certificate with respect to the foregoing signed on behalf of Corixa and
Merger Sub by an authorized officer of Corixa and Merger Sub.
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(b) Agreements and Covenants. Corixa and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Closing Date, and Anergen shall have received a
certificate to such effect signed on behalf of Corixa and Merger Sub by an
authorized officer of Corixa and Merger Sub.
(c) Opinion of Corixa's Counsel. Anergen shall have received from
counsel to Corixa an opinion substantially in the form attached hereto as
Exhibit D ("Opinion of Counsel to Corixa").
(d) Material Adverse Effect. No Material Adverse Effect with respect
to Corixa and its subsidiaries shall have occurred since the date of this
Agreement.
6.3 Additional Conditions to the Obligations of Corixa and Merger Sub. The
obligations of Corixa and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Corixa and Merger Sub:
(a) Representations and Warranties. Each representation and warranty
of Anergen contained in this Agreement (i) shall have been true and correct
as of the date of this Agreement and (ii) shall be true and correct on and
as of the Closing Date with the same force and effect as if made on and as
of the Closing Date, except (A) in the case of either clause (i) or clause
(ii), individually or in the aggregate, as does not constitute a Material
Adverse Effect on Anergen (B) for changes contemplated in this Agreement
and (C) for those representations and warranties which address matters only
as of a particular date (which representations shall have been true and
correct except as does not constitute a Material Adverse Effect on Anergen
as of such particular date) (it being understood that, for purposes of
determining whether or not a breach or inaccuracy of a representation or
warranty of Anergen contained in this Agreement constitutes a Materiel
Adverse Effect as contemplated in Section 6.3(a)(A), (1) all "Material
Adverse Effect" qualifications and other qualifications based on the word
"material" or similar phrases contained in such representations and
warranties shall be disregarded and (2) any update of or modification to
the Anergen Schedules made or purported to have been made after the date of
this Agreement shall be disregarded). Corixa shall have received a
certificate with respect to the foregoing signed on behalf of Anergen by an
authorized officer of Anergen.
(b) Agreements and Covenants. Anergen shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Corixa shall have received a certificate to such effect signed on
behalf of Anergen by the Chief Executive Officer and the Chief Financial
Officer of Anergen.
(c) Material Adverse Effect. No Material Adverse Effect with respect
to Anergen and its subsidiaries shall have occurred since the date of this
Agreement.
(d) Consents. Anergen shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated herein in connection with the agreements, contracts, licenses
or leases set forth on Schedule 6.3(d).
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(e) Bridge Investment. Each of Anergen, Warburg, Pincus Ventures, L.P.
("WPV"), and International Biotechnology Trust PLC ("IBT") shall have
executed and delivered that certain Note Purchase Agreement in a form
reasonably acceptable to counsel to Corixa, and each of Corixa, WPV and IBT
shall have executed and delivered a Common Stock Purchase Agreement in a
form reasonably acceptable to counsel to Corixa.
(f) Silicon Valley Bank Loan. Silicon Valley Bank shall not have (i)
foreclosed on its loan(s) made to Anergen pursuant to that certain Loan and
Security Agreement, dated as of June 23, 1995, as amended from time to
time, and taken action to encumber, obtain a lien in respect of, obtain
title or otherwise take control of (A) any Anergen Intellectual Property,
(B) equipment utilized in Anergen's research and development efforts or (C)
cash balances in an aggregate amount exceeding Two Hundred Fifty Thousand
Dollars ($250,000) or (ii) exercised legal remedies which (x) cause Anergen
to seek voluntary relief under Chapter 7 or 11 of the United State
Bankruptcy Code (the "Bankruptcy Code"), (y) have placed Anergen
involuntarily in a proceeding under Chapter 7 or 11 under the Bankruptcy
Code or (z) cause Anergen to become insolvent i.e., unable to meet its
current obligations as such obligations become due.
(g) Opinion of Anergen's Counsel. Corixa shall have received from
counsel to Anergen an opinion substantially in the form attached hereto as
Exhibit E ("Opinion of Counsel to Anergen").
(h) Note Purchase Agreement. Silicon Valley Bank shall have executed
and delivered that certain Note Purchase Agreement dated as of December 11,
1998, by and between Anergen, Warburg, Pincus Ventures, L.P., International
Biotechnology Trust PLC and Silicon Valley Bank.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approvals of the
stockholders of Anergen or Corixa:
(a) by mutual written consent duly authorized by the boards of
directors of Corixa and Anergen;
(b) by either Anergen or Corixa if the Merger shall not have been
consummated by February 15, 1999 (or March 31, 1999, in the event that the
SEC has notified the parties that the Proxy Statement/Prospectus will be
reviewed by the SEC for any reason); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available
to any party whose action or failure to act has been a principal cause of
or resulted in the failure of the Merger to occur on or before such date
and such action or failure to act constitutes a breach of this Agreement;
(c) by either Anergen or Corixa if a Governmental Entity shall have
issued an order, decree or ruling or taken any other action, in any case
having the effect of permanently restraining, enjoining or otherwise
prohibiting the Merger, which order, decree, ruling or other action is
final and nonappealable;
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(d) by either Anergen or Corixa if the required approval of the
stockholders of Anergen contemplated in this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting
of Anergen stockholders duly convened therefor or at any adjournment
thereof (provided that the right to terminate this Agreement under this
Section 7.1(d) shall not be available to Anergen where the failure to
obtain Anergen stockholder approval shall have been caused by the action or
failure to act of Anergen and such action or failure to act constitutes a
breach by Anergen of this Agreement);
(e) by Corixa or Anergen (at any time prior to the adoption and
approval of this Agreement and the Merger by the required vote of the
stockholders of Anergen) if a Triggering Event (as defined below) shall
have occurred;
(f) by Corixa (at any time prior to the adoption and approval of this
Agreement and the Merger by the required vote of the stockholders of
Anergen) if a Termination Event (as defined below) shall have occurred;
(g) by Anergen, upon a breach of any representation, warranty,
covenant or agreement on the part of Corixa set forth in this Agreement, or
if any representation or warranty of Corixa shall have become untrue, in
either case such that the conditions set forth in Section 6.2(a) or Section
6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue; provided,
however, that if such inaccuracy in Corixa's representations and warranties
or breach by Corixa is curable by Corixa through the exercise of its
commercially reasonable efforts, then Anergen may not terminate this
Agreement under this Section 7.1(g) for ten (10) days after delivery of
written notice from Anergen to Corixa of such breach; and provided further,
however, Corixa continues to exercise commercially reasonable efforts to
cure such breach (it being understood that Anergen may not terminate this
Agreement pursuant to this paragraph (g) if it shall have materially
breached this Agreement or if such breach by Corixa is cured during such
ten (10) day period); or
(h) by Corixa, upon a breach of any representation, warranty, covenant
or agreement on the part of Anergen set forth in this Agreement, or if any
representation or warranty of Anergen shall have become untrue, in either
case such that the conditions set forth in Section 6.3(a) or Section 6.3(b)
would not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue; provided, however,
that if such inaccuracy in Anergen's representations and warranties or
breach by Anergen is curable by Anergen through the exercise of its
commercially reasonable efforts, then Corixa may not terminate this
Agreement under this Section 7.1(h) for ten (10) days after delivery of
written notice from Corixa to Anergen of such breach, and provided further,
however, Anergen continues to exercise commercially reasonable efforts to
cure such breach (it being understood that Corixa may not terminate this
Agreement pursuant to this paragraph (h) if it shall have materially
breached this Agreement or if such breach by Anergen is cured during such
ten (10) day period).
For the purposes of this Agreement, a "Termination Event" shall be deemed
to occur if Anergen shall not have used commercially reasonable efforts to hold
the Anergen Stockholders' Meeting as promptly as practicable and in any event
within the later of (A) the Anergen Stockholders' Meeting Period or (B) fifteen
(15) days after any
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amendments or supplement to the Proxy Statement/Prospectus are mailed to
stockholders of Anergen.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to
have occurred if: (i) Anergen's board of directors or any committee thereof
shall for any reason have withdrawn or shall have amended or modified in a
manner adverse to Corixa its unanimous recommendation in favor of the adoption
and approval of this Agreement or the approval of the Merger, (ii) Anergen shall
have failed to include in the Proxy Statement/ Prospectus the unanimous
recommendation of Anergen's board of directors in favor of the adoption and
approval of the Agreement and the approval of the Merger, (iii) Anergen's board
of directors fails to reaffirm its unanimous recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger within
seven (7) calendar days after Corixa requests in writing that such
recommendation be reaffirmed at any time following the public announcement of an
Acquisition Proposal, (iv) Anergen's board of directors or any committee thereof
shall have approved or publicly recommended any Acquisition Proposal, (v)
Anergen shall have entered into any letter of intent or similar document or any
agreement, contract or commitment accepting any Acquisition Proposal or (vi) a
tender or exchange offer relating to securities of Anergen shall have been
commenced by a Person unaffiliated with Corixa and Anergen shall not have sent
to its securityholders pursuant to Rule 14e-2 promulgated under the Securities
Act, within ten (10) business days after such tender or exchange offer is first
published sent or given, a statement disclosing that Anergen recommends
rejection of such tender or exchange offer.
7.2 Notice of Termination Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto.
In the event of the termination of this Agreement as provided in Section 7.1,
this Agreement shall be of no further force or effect, except (i) as set forth
in this Section 7.2, Section 7.3 and Article VIII (Miscellaneous), each of which
shall survive the termination of this Agreement and (ii) nothing herein shall
relieve any party from liability for any willful breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
herein shall be paid by the party incurring such fees and expenses whether or
not the Merger is consummated; provided, however, that Corixa shall pay all fees
and expenses, other than attorneys', accountants' and fairness opinion fees and
expenses, incurred in relation to the printing and filing (with the SEC) of the
Proxy Statement/Prospectus (including any preliminary materials related thereto)
and the Registration Statement (including financial statements and exhibits) and
any amendments or supplements thereto; and provided further, however, that (i)
any legal fees and expenses of Anergen exceeding One Hundred Thousand Dollars
($100,000), any accounting fees and expenses of Anergen exceeding Fifty Thousand
Dollars ($50,000), and any investment banking fees for Anergen's fairness
opinion exceeding One Hundred Thousand Dollars ($100,00), shall be deemed
expenses of Anergen's stockholders and not Anergen.
(b) Anergen Payments. In the event that this Agreement is terminated by
Corixa or Anergen, as applicable, pursuant to (i) Section 7.1(d), (e) or (f),
Anergen shall promptly,
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but in no event later than five (5) business days after the date of such
termination, pay Corixa a fee equal to Four Hundred Thousand Dollars ($400,000)
in immediately available funds (the "Termination Fee") or (ii) Section 7.1(h),
Anergen shall promptly but in no event later than five (5) business days after
the date of such termination, pay Corixa a fee equal to Two Hundred Thousand
Dollars ($200,000) in immediately available funds (the "M.A.E. Termination
Fee"); provided, however, that the Termination Fee shall not be due if in the
case of termination under Section 7.1(d), the failure to obtain the required
stockholder approval is primarily the result of a Material Adverse Effect on
Corixa. Anergen acknowledges and agrees that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated in this
Agreement, and that, without these agreements, Corixa would not enter into this
Agreement; accordingly, if Anergen fails promptly to pay the amounts due
pursuant to this Section 7.3(b), and, in order to obtain such payment, Corixa
commences a suit which results in a judgment against Anergen for the amounts set
forth in this Section 7.3(b), Anergen shall pay to Corixa its reasonable costs
and expenses (including reasonable attorneys' fees and expenses) in connection
with such suit, together with interest on the amounts set forth in this Section
7.3(b) at the prime rate of The Chase Manhattan Bank in effect on the date such
payment was required to be made.
(c) Payment of the fees described in Section 7.3(b) above shall not be in
lieu of damages incurred in the event of willful breach of this Agreement.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Corixa and Anergen.
7.5 Extension; Waiver. At any time prior to the Effective Time any party
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The representations
and warranties of Anergen, Corixa and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
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8.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Corixa or Merger Sub, to:
Corixa Corporation
1124 Columbia Street
Seattle, Washington 98104
Attention: Steven Gillis, Ph.D., President and Chief Executive Officer
Telephone No.: (206) 754-5711
Telecopy No.: (206) 754-5994
with a copy to:
Venture Law Group
A Professional Corporation
4750 Carillon Point
Kirkland, Washington 98033-7355
Attention: William W. Ericson
Telephone No.: (425) 739-8731
Telecopy No.: (425) 739-8750
(b) if to Anergen, to:
Anergen Inc.
301 Penobscot Drive
Redwood City, California 94063
Attention: Barry Sherman, M.D., President
Telephone No.: (650) 361-8901
Telecopy No.: (650) 361-8958
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Barry Taylor, Esq.
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
8.3 Interpretation Knowledge.
(a) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitations." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the
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subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
(b) For purposes of this Agreement the term "knowledge" means with respect
to a Anergen, with respect to any matter in question, that any of the President
and Chief Executive Officer, Chief Financial Officer, Controller, the Vice
President of Research, the Vice President of Clinical Development and the Vice
President of Pharmaceutical Development of Anergen, has actual knowledge of such
matter, and with respect to Corixa, with respect to any matter in question, that
any of the President and Chief Executive Officer, Chief Operating Officer, Chief
Financial Officer and the General Counsel of Corixa, has actual knowledge of
such matter.
(c) For purposes of this Agreement, the term "Material Adverse Effect" when
used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is materially adverse to the business,
assets (including intangible assets), capitalization, financial condition or
results of operations of such entity and its subsidiaries taken as a whole,
except for those changes, events, violations, inaccuracies, circumstances and
effects that (i) are caused by conditions affecting the United States economy as
a whole or affecting the industry in which such entity competes as a whole,
which conditions do not affect such entity in a disproportionate manner, or (ii)
are related to or result from announcement or pendency of the Merger or (iii)
with respect to Anergen result from continued losses and declines in the cash
balances of Anergen which occur in the ordinary course of business and as
reasonably contemplated in the business plans of Anergen delivered by Anergen to
Corixa, which include but are not limited to, any disputes with or actions
undertaken by current creditors of Anergen as disclosed on the Anergen
Schedules.
(d) For purposes of this Agreement, the term "person" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, Anergen or Corixa, as applicable, (including any limited
liability Anergen or Corixa, as applicable, or joint stock Anergen or Corixa, as
applicable), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Anergen Schedules and the
Corixa Schedules (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder except as otherwise provided in Section
5.10.
8.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in lull force
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and effect and the application of such provision to other persons or
circumstances will be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such void or unenforceable
provision of this Agreement with a valid and enforceable provision that will
achieve, to the extent possible, the economic, business and other purposes of
such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof;
provided, however, that issues involving the corporate governance of any of the
parties hereto shall be governed by their respective jurisdictions of
incorporation. Each of the parties hereto irrevocably consents to the exclusive
jurisdiction of any state or federal court within the Western District of
Washington, in connection with any matter based upon or arising out of this
Agreement or the matters contemplated herein, other than issues involving the
corporate governance of any of the parties hereto, agrees that process may be
served upon them in any manner authorized by the laws of the State of Washington
for such persons and waives and covenants not to assert or plead any objection
which they might otherwise have to such jurisdiction and such process.
8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.
8.10 Assignment. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF CORIXA, ANERGEN AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF CORIXA, ANERGEN OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
CORIXA CORPORATION,
a Delaware corporation
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
YAKIMA ACQUISITION CORPORATION,
a Delaware corporation
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
ANERGEN, INC.,
a Delaware corporation
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
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ANERGEN, INC.
VOTING AGREEMENT
This Voting Agreement (this "Voting Agreement") is made and entered into as
of December 11, 1998, by and between Corixa Corporation, a Delaware corporation
("Acquiror"), and the undersigned stockholder ("Holder") of Anergen, Inc., a
Delaware corporation ("Target").
RECITALS
Pursuant to an Agreement and Plan of Reorganization dated as of December
11, 1998 (the "Reorganization Agreement") by and among Acquiror, Yakima
Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of
Acquiror ("Sub"), and Target, Sub is merging with and into Target (the
"Acquisition") and Target, as the surviving corporation of the Acquisition, will
thereby become a wholly-owned subsidiary of Acquiror. Pursuant to Section 6.2(f)
of the Reorganization Agreement, Target has agreed to cause certain significant
stockholders of Target to execute and deliver to Acquiror voting agreements in
the form hereof. The Holder is the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
such number of shares of the outstanding capital stock and all rights, warrants
and options to acquire shares of capital stock of Target as is indicated on the
final page of this Voting Agreement (the "Shares").
In consideration of the execution of the Reorganization Agreement by
Acquiror, Holder agrees not to transfer or otherwise dispose of any of the
Shares, or any other shares of capital stock of Target acquired by Holder
hereafter and prior to the Expiration Date (as defined in Section 1(a) below),
and agrees to vote the Shares and any other such shares of capital stock of
Target in favor of and so as to facilitate consummation of the Acquisition.
AGREEMENT
The parties agree as follows:
1. Agreement to Retain Shares.
(a) Transfer and Encumbrance. Holder agrees not to transfer (except as may
be specifically required by court order), sell, exchange, pledge (except in
connection with a bona fide loan transaction, provided that any pledgee agrees
not to transfer, sell, exchange, pledge or otherwise dispose of or encumber the
Shares or any New Shares (as defined in Section 1(b)) prior to the Expiration
Date and also agrees to be subject to the Proxy (as defined in Section 3)), or
otherwise dispose of or encumber the Shares or any New Shares, or to make any
offer or agreement relating thereto, at any time prior to the Expiration Date.
As used herein, the term "Expiration Date" shall mean the earlier to occur of
(i) such date and time as the Acquisition shall become effective in accordance
with the terms and provisions of the Reorganization Agreement, and (ii) upon the
termination of the Reorganization Agreement pursuant to its terms.
(b) New Shares. Until the Expiration Date, Holder agrees that any shares of
capital stock of Target that Holder purchases or with respect to which Holder
otherwise acquires
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beneficial ownership after the date of this Voting Agreement and prior to the
Expiration Date ("New Shares") shall be subject to the terms and conditions of
this Voting Agreement to the same extent as if they constituted Shares.
(c) Superior Offer. In the event that (A) Target's board of directors
approves, and recommends that Target's stockholders approve, a Superior Offer
(as defined in the Reorganization Agreement), (B) Target's board of directors
provides written notice of such approval and recommendation to Acquiror and (C)
Target has paid in full Acqurior the Termination Fee (as defined in the
Reorganization Agreement), Holder's obligations under this Voting Agreement
shall immediately terminate.
2. Agreement to Vote Shares. Until the Expiration Date, at every meeting of
the stockholders of Target called with respect to any of the following, and at
every adjournment thereof, and on every action or approval by written consent of
the stockholders of Target with respect to any of the following, Holder shall
vote the Shares and any New Shares (a) in favor of approval of the
Reorganization Agreement and the Acquisition and any matter that could
reasonably be expected to facilitate the Acquisition, and (b) against any
proposal for any recapitalization, merger, sale of assets or other business
combination (other than the Acquisition) between Target and any person or entity
other than Acquiror or any other action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of Target under the Reorganization Agreement or which could result in
any of the conditions to Target's obligations under the Reorganization Agreement
not being fulfilled. This Voting Agreement is intended to bind Holder as a
stockholder of Target only with respect to the specific matters set forth
herein.
3. Irrevocable Proxy. Until the Expiration Date, concurrently with the
execution of this Voting Agreement, Holder agrees to deliver to Acquiror a proxy
in the form attached hereto as Exhibit A (the "Proxy"), which shall be
irrevocable (until the Expiration Date) to the extent provided in Section 212 of
the Delaware General Corporation Law, covering the total number of Shares and
New Shares beneficially owned or as to which beneficial ownership is acquired
(as such term is defined in Rule 13d-3 under the Exchange Act) by Holder set
forth therein.
4. Representations, Warranties and Covenants of Holder. Holder hereby
represents, warrants and covenants to Acquiror that Holder (a) is the beneficial
owner of the Shares, which at the date of this Voting Agreement and at all times
up until the Expiration Date will be free and clear of any liens, claims,
options, charges or other encumbrances, (b) does not beneficially own any shares
of capital stock of Target other than the Shares (excluding shares as to which
Holder currently disclaims beneficial ownership in accordance with applicable
law) and (c) has full power and authority to make, enter into and carry out the
terms of this Voting Agreement and the Proxy.
5. Additional Documents. Holder hereby covenants and agrees to execute and
deliver any additional documents necessary or desirable, in the reasonable
opinion of Acquiror, to carry out the purpose and intent of this Voting
Agreement.
6. Consent and Waiver. Holder hereby gives any consents or waivers that are
reasonably required for the consummation of the Acquisition under the terms of
any agreement to which Holder is a party or pursuant to any rights Holder may
have.
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7. Termination. This Voting Agreement and the Proxy delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
8. Miscellaneous.
(a) Amendments and Waivers. Any term of this Voting Agreement may be
amended or waived with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with this
Section 8(a) shall be binding upon the parties and their respective successors
and assigns.
(b) Governing Law. This Voting Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.
(c) Counterparts. This Voting Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(d) Titles and Subtitles. The titles and subtitles used in this Voting
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Voting Agreement.
(e) Notices. Any notice required or permitted by this Voting Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth on the final page of this Voting Agreement, or as
subsequently modified by written notice.
(f) Severability. If one or more provisions of this Voting Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Voting Agreement, (ii) the balance of this Voting Agreement
shall be interpreted as if such provision were so excluded and (iii) the balance
of this Voting Agreement shall be enforceable in accordance with its terms.
(g) Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Voting Agreement, the prevailing party will be entitled to recover,
as an element of the costs of suit and not as damages, reasonable attorneys'
fees to be fixed by the court (including without limitation, costs, expenses and
fees on any appeal). The prevailing party will be entitled to recover its costs
of suit proceeds to final judgment.
(h) Specific Performance; Injunctive Relief. The parties hereto acknowledge
and agree that Acquiror will be irreparably harmed and that there will be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, the parties acknowledge and agree that,
in addition to any other remedies that may be available to Acquiror upon any
such violation, Acquiror shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to Acquiror at law or in equity.
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The parties have caused this Voting Agreement to be duly executed on the
date first above written.
"ACQUIROR"
CORIXA CORPORATION,
a Delaware corporation
By:
--------------------------------------
Name:
--------------------------------------
(print)
Title:
--------------------------------------
Address:
--------------------------------------
--------------------------------
Facsimile:
--------------------------------------
"HOLDER"
By:
--------------------------------------
Name:
--------------------------------------
(print)
Title:
--------------------------------------
Holder's Address for Notice:
--------------------------------------
--------------------------------------
--------------------------------------
Facsimile:
--------------------------------------
Shares beneficially owned:
shares of Common Stock
of Anergen, Inc.
shares of Common Stock
of Anergen, Inc.
issuable upon exercise
of outstanding options
and warrants
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EXHIBIT A
IRREVOCABLE PROXY
TO VOTE STOCK OF
ANERGEN, INC.
Subject to the terms of that certain Voting Agreement, dated as of December
11, 1998, by and between Acquiror (as defined below) and Stockholder (as defined
below), (the "Voting Agreement") the undersigned stockholder ("Stockholder") of
Anergen, Inc., a Delaware corporation ("Target"), hereby irrevocably (to the
full extent permitted by Section 212 of the Delaware General Corporation Law)
appoints the members of the board of directors of Corixa Corporation, a Delaware
corporation ("Acquiror"), and each of them, as the sole and exclusive attorneys
and proxies of the undersigned, with full power of substitution and
resubstitution, to vote and exercise all voting and related rights (to the full
extent that the undersigned is entitled to do so) with respect to all of the
shares of capital stock of Target that now are or hereafter may be beneficially
owned by the undersigned, and any and all other shares or securities of Target
issued or issuable in respect thereof on or after the date hereof (collectively,
the "Shares") in accordance with the terms of this Proxy. The Shares
beneficially owned by the undersigned stockholder of Target as of the date of
this Proxy are listed on the final page of this Proxy. Upon the undersigned's
execution of this Proxy, any and all prior proxies given by the undersigned with
respect to any Shares are hereby revoked and the undersigned agrees not to grant
any subsequent proxies with respect to the Shares until after the earlier to
occur of (i) the Expiration Date (as defined below) and (ii) Superior Offer
Event (as defined below).
This Proxy is irrevocable (to the extent permitted by Section 212 of the
Delaware General Corporation Law) is granted pursuant to that certain Voting
Agreement of even date herewith, by and among Acquiror and the undersigned
stockholder (the "Voting Agreement"), and is granted in consideration of
Acquiror entering into that certain Agreement and Plan of Reorganization, of
even date herewith, by and among Target, Acquiror and Yakima Acquisition
Corporation, a Delaware corporation ("Sub") and wholly-owned subsidiary of
Acquiror (the "Reorganization Agreement"). The Agreement provides for the merger
of Sub with and into Target (the "Acquisition"). As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) such date and time as
the Acquisition shall become effective in accordance with the terms and
provisions of the Reorganization Agreement and (ii) upon termination of the
Reorganization Agreement pursuant to its terms. As used herein, the term
"Superior Offer Event" shall mean the determination of Target's board of
directors to accept an unsolicited, bona fide written offer made by a third
party to consummate any of the following transactions: (1) a merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction involving Target's pursuant to which the stockholders of
Target immediately preceding such transaction hold less than fifty percent (50%)
of the equity interest in the surviving or resulting entity of such transaction,
(2) a sale or other disposition by Target of assets (excluding inventory and
used equipment sold in the ordinary course of business) representing in excess
of fifty percent (50%) of the fair market value of Target's business immediately
prior to such sale, (3) the acquisition by any person or group (including by way
of a tender offer or an exchange offer or issuance by Target), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of fifty percent (50%) of the voting power of
the then-outstanding shares of capital stock of the Target or (4) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing, on terms that Target's board of
directors determines, in its judgment consistent with applicable corporate
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law, after consultation with its financial advisor, is reasonably likely to be
financially superior to the Target stockholders than the terms of the Merger.
Subject to the terms of the Voting Agreement, the attorneys and proxies
named above, and each of them, are hereby authorized and empowered by the
undersigned, at any time prior to the Expiration Date, to act as the
undersigned's attorney and proxy to vote the Shares, and to exercise all voting
and other rights of the undersigned with respect to the Shares (including,
without limitation, the power to execute and deliver written consents pursuant
to Section 228 of the Delaware General Corporation Law), at every annual,
special or adjourned meeting of the stockholders of Target and in every written
consent in lieu of such meeting (i) in favor of approval of the Acquisition and
the Merger Agreement and in favor of any matter that could reasonably be
expected to facilitate the Acquisition, and (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination (other
than the Acquisition) between Target and any person or entity other than
Acquiror or any other action or agreement that would result in a breach of any
covenant, representation or warranty or any other obligation or agreement of
Target under the Merger Agreement or which could result in any of the conditions
to Target's obligations under the Merger Agreement not being fulfilled. The
attorneys and proxies named above may not exercise this Proxy on any other
matter except as provided above. The undersigned stockholder may vote the Shares
on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
This Proxy is irrevocable (to the extent provided in Section 212 of the
Delaware General Corporation Law) subject to the limitations set forth in the
Voting Agreement.
Dated: December 11, 1998
-------------------------------------
(Signature of Holder)
-------------------------------------
(Print Name of Holder)
Shares beneficially owned:
Shares of Common Stock of
Anergen Inc. owned by Holder
as of the date of this
Voting Agreement
Shares of Common Stock of
Anergen, Inc. issuable upon
exercise or conversion of
outstanding options,
warrants or other securities
owned by Holder as of the
date of this Voting
Agreement
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ESCROW FUND AGREEMENT
This Escrow Fund Agreement (this "Escrow Agreement") is entered into as of
January , 1999 by and among Corixa Corporation, a Delaware corporation (the
"Acquiror"), Anergen, Inc., a Delaware corporation (the "Target"), Barry
Sherman, an individual acting in his capacity as representative of Target's
stockholders (the "Stockholders' Representative"), and Harris Trust and Savings
Bank (the "Escrow Agent").
RECITALS
Acquiror, Yakima Acquisition Corporation, a Delaware corporation and
wholly-owned subsidiary of Acquiror (the "Merger Sub"), and Target have entered
into an Agreement and Plan of Reorganization, dated as of December 11, 1998 (the
"Reorganization Agreement"), pursuant to which Acquiror will acquire Target
through the statutory merger of Merger Sub with and into Target (the "Merger").
The Reorganization Agreement provides that the escrow fund provided for herein
and in Section 1.6(g) of the Reorganization Agreement will be held as collateral
to secure the obligation of Target to enter into the Organon Amendment pursuant
to Section 1.6(g) of the Reorganization Agreement. Pursuant to the
Reorganization Agreement, Target's stockholders will receive shares of common
stock of Acquiror ("Acquiror Common Stock"), a portion of which is to be
deposited into the escrow fund provided for herein. The parties desire to
establish the terms and conditions pursuant to which such escrow fund will be
established and maintained.
AGREEMENT
The parties agree as follows:
1. Defined Terms. Capitalized terms used in this Escrow Agreement and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Reorganization Agreement.
2. Consent of Target Stockholders. By virtue of the approval by the
stockholders of Target immediately prior to the Effective Time ("Target
Stockholders") of the Reorganization Agreement and the exhibits thereto, Target
Stockholders have, without any further act of any Target Stockholder, consented
to: (a) the establishment of the Escrow Fund (as defined below) to secure the
obligations of Target under Section 1.6(g) of the Reorganization Agreement, (b)
the appointment of Stockholders' Representative as their representative for
purposes of this Escrow Agreement and as attorney-in-fact and agent for and on
behalf of each Target Stockholder with respect to the subject matter of this
Escrow Agreement, and the taking by Stockholders' Representative of any and all
actions and the making of any decisions required or permitted to be taken or
made by the Target Stockholders under this Escrow Agreement and (c) all of the
other terms, conditions and limitations set forth in this Escrow Agreement.
3. Escrow and Indemnification.
(a) Escrow Fund. As soon as practicable after the Effective Time, Acquiror
shall deposit with the Escrow Agent shares of Acquiror Common
Stock registered in the name of as nominee for Escrow Agent,
pursuant to Section 1.6(g) of the Reorganization Agreement (the "Initial Escrow
Shares"). In
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addition, from time to time thereafter, Acquiror shall deposit with Escrow Agent
additional shares of Acquiror Common Stock or other equity securities or other
rights or property issued or distributed by Acquiror (including shares issued
upon a stock split) in respect of the Initial Escrow Shares (the "New Shares,"
and together with the Initial Escrow Shares, the "Escrow Shares"). The Escrow
Shares are referred to herein as the "Escrow Fund." The value of the Escrow
Shares, as determined in accordance with the terms of the Reorganization
Agreement, contributed by each Target Stockholder divided by the aggregate value
of the Escrow Shares, as determined in accordance with the terms of the
Reorganization Agreement, contributed by all Target Stockholders to the Escrow
Fund shall be each such Target Stockholder's "proportionate interest" in the
Escrow Shares. The Escrow Fund shall be held as a trust fund and shall not be
subject to any lien, attachment, trustee process or any other judicial process
of any creditor of any party hereto. Escrow Agent agrees to accept delivery of
the Escrow Fund and to hold such Escrow Fund in escrow subject to the terms and
conditions of this Escrow Agreement and Section 1.6(g) of the Reorganization
Agreement.
(b) Organon Amendment. Target and Target Stockholders (by virtue of Target
Stockholders' approval of the Reorganization Agreement) have agreed in Section
1.6(g) of the Reorganization Agreement that the Escrow Fund shall be collateral
to secure Target's obligations to enter into and deliver to Corixa the Organon
Amendment.
4. Administration of Escrow Fund. Escrow Agent shall administer the Escrow
Fund as follows:
(a) Escrow Agent will (i) hold and safeguard the Escrow Fund during
the Escrow Period (as defined in Section 5 below), (ii) treat such fund as
a trust fund in accordance with the terms of this Escrow Agreement and the
Reorganization Agreement and not as the property of Acquiror and (iii) hold
and dispose of the Escrow Fund only in accordance with the terms hereof.
(b) Upon receipt by Escrow Agent at any time on or before the last day
of the Escrow Period of a certificate signed by any officer of Acquiror and
the Stockholders' Representative (an "Escrow Certificate") stating that
Target has executed and delivered to Acquiror the Organon Amendment signed
by Organon and in a form reasonably acceptable to Acquiror and Target and
to counsel to Acquiror and Target, Escrow Agent will, subject to the
provisions of Section 4(c) below, deliver to Stockholders' Representative
out of the Escrow Fund, as promptly as practicable, all of the Escrow
Shares or other assets held in the Escrow Fund. If on the last day of the
Escrow Period the Escrow Agent has not received an Escrow Certificate,
signed by any officer of Acquiror and the Stockholders' Representative,
stating that Target has executed and delivered the Organon Amendment,
signed by Organon and in a form reasonably acceptable to Acquiror and
Target and to counsel to Acquiror and Target, Escrow Agent will, subject to
the provisions of Section 4(c) below, deliver to Acquiror, as promptly as
practicable, all of the Escrow Shares or other assets held in the Escrow
Fund.
(c) Resolution of Conflicts; Arbitration.
(i) In case Stockholders' Representative or Acquiror shall so
object in writing to release of the Escrow Shares and/or property from
the Escrow Fund, Stockholders' Representative and Acquiror shall attempt
in good faith to agree upon the rights of the respective parties with
respect to the dispute within forty-
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five (45) days after Escrow Agent's receipt of the written objection to
the release pursuant to Section 4(c) (the "Negotiation Period"). If
Stockholders' Representative and Acquiror should so agree during the
Negotiation Period, a memorandum setting forth such agreement shall be
prepared and signed by both parties and shall be furnished to Escrow
Agent. Escrow Agent shall be entitled to rely on any such memorandum and
distribute the Escrow Shares and/or other property from the Escrow Fund
in accordance with the terms thereof.
(ii) If no such agreement has been reached by the end of the
Negotiation Period, either Acquiror or Stockholders' Representative may
demand arbitration of the matter by three arbitrators as follows. Within
fifteen (15) days after delivery of a written demand for arbitration to
the other party, Acquiror and Stockholders' Representative shall each
select one arbitrator. The third arbitrator shall be selected as soon as
practicable by agreement of the first two arbitrators or, failing such
agreement, by the American Arbitration Association. The arbitration
shall be conducted in King County, Washington. The written decision of a
majority of the three arbitrators as to the validity and amount of any
claim shall be binding and conclusive upon the parties to this Escrow
Agreement, and notwithstanding anything in this Section 4(c), Escrow
Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith. The
arbitrators shall award reimbursement to the prevailing party in the
arbitration of its reasonable expenses of the arbitration (including
costs and reasonable attorneys' fees). The award of the arbitrators
shall be the sole and exclusive monetary remedy of the parties and shall
be enforceable in any court of competent jurisdiction. Notwithstanding
the foregoing, any party shall be entitled to seek injunctive relief or
other equitable remedies from any court of competent jurisdiction.
5. Release of Escrow Fund. Subject to Section 4(c) above and subject to the
following requirements:
(a) the Escrow Fund shall remain in existence during the period (the
"Escrow Period") commencing on the Effective Time and continuing until the
earlier of the date (i) the Escrow Agent receives an Escrow Certificate
stating that Target has executed and delivered to Acquiror the Organon
Amendment, (signed by Organon and in a form reasonably acceptable to
Acquiror and Target and to counsel to Acquiror and Target), or (ii) March
15, 1999.
(b) Upon receipt of an Escrow Certificate stating that Target has
executed and delivered to Acquiror the Organon Amendment (signed by Organon
and in a form reasonably acceptable to Acquiror and Target and to counsel
to Acquiror and Target), Escrow Agent shall deliver all Escrow Shares and
other property then remaining in the Escrow Fund to Stockholder's
Representative. If upon the Escrow Termination Date, no such Escrow
Certificate has been received by the Escrow Agent, all Escrow Shares and
other property then remaining in the Escrow Fund shall be delivered to
Acquiror.
(c) In the event of a claim made pursuant to Section 4(c), the Escrow
Fund shall remain in existence until such claim has been resolved;
provided, however, that Acquiror agrees to notify Escrow Agent in writing
of the expiration of the Escrow Period.
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(d) Deliveries of Escrow Shares and other property to Target
Stockholders pursuant to this Section 5 shall be made in accordance with
each Target Stockholder's proportionate interest in the Escrow Shares.
6. Stockholders' Representative.
(a) Stockholders' Representative may be changed by Target Stockholders
holding a majority of the Corixa Common Stock received in the Merger from time
to time upon not less than ten (10) days' prior written notice to Acquiror;
provided, however, that Stockholders' Representative may not be removed unless
holders of a majority in interest of the Escrow Fund agree to such removal and
to the identity of the substituted agent. No bond shall be required of
Stockholders' Representative, and Stockholders' Representative shall not receive
compensation for his or her services. Notices or communications to or from
Stockholders' Representative shall constitute notice to or from each of the
Target Stockholders. Stockholders' Representative shall be entitled to submit a
claim and receive reasonable reimbursement from Corixa, not to exceed Five
Thousand Dollars ($5,000), for all reasonable, documented out-of-pocket expenses
incurred by Stockholders' Representative as a result of acting as the
Stockholders' Representative.
(b) Stockholders' Representative shall not be liable for any act done or
omitted hereunder as Stockholders' Representative while acting in good faith and
in the absence of gross negligence or willful misconduct. Target Stockholders on
whose behalf Escrow Shares were contributed to the Escrow Fund shall severally
indemnify Stockholders' Representative and hold Stockholders' Representative
harmless against any loss, liability or expense incurred without gross
negligence, bad faith or willful misconduct on the part of Stockholders'
Representative and arising out of or in connection with the acceptance or
administration of Stockholders' Representative's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by Stockholders'
Representative.
(c) Stockholders' Representative shall act by vote or written action or
consent of holders of a majority of the Corixa Common Stock received in the
Merger. A decision, act, consent or instruction of Stockholders' Representative
shall constitute a decision of all Target Stockholders and shall be final,
binding and conclusive upon each of such stockholders, and Escrow Agent,
Acquiror, Surviving Corporation, and all other Indemnified Persons may rely upon
any such decision, act, consent or instruction of Stockholders' Representative
as being the decision, act, consent or instruction of each and every such Target
Stockholder. Escrow Agent, Acquiror, Surviving Corporation, and all other
Indemnified Persons are hereby relieved from any liability to any person for any
acts done by them in accordance with such decision, act, consent or instruction
of Stockholders' Representative.
7. Escrow Agent's Duties.
(a) Acquiror and Stockholders' Representative acknowledge and agree that
Escrow Agent (i) shall not be responsible for any of the agreements referred to
herein but shall be obligated only for the performance of such duties as are
specifically set forth in this Escrow Agreement and as set forth in any
additional written escrow instructions which Escrow Agent may receive after the
date of this Escrow Agreement that are signed by an officer of Acquiror and
Stockholders' Representative, (ii) shall not be obligated to take any legal or
other action hereunder which might in its reasonable judgment involve expense or
liability unless it shall have been furnished with indemnity reasonably
acceptable to it and (iii) may rely on and shall be protected in acting or
refraining from acting upon any
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written notice, instruction, instrument, statement, request or document
furnished to it hereunder and reasonably believed by it to be genuine and to
have been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof.
(b) Escrow Agent is hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person, excepting
only orders or process of courts of law or written decision of arbitrators
pursuant to Section 4(c), and is hereby expressly authorized to comply with and
obey orders, judgments or decrees of any court or written decision of
arbitrators. In case Escrow Agent obeys or complies with any such order,
judgment or decree of any court or written decision of arbitrators, Escrow Agent
shall not be liable to any of the parties hereto or to any other person by
reason of such compliance, notwithstanding any such order, judgment or decree
being subsequently reversed, modified, annulled, set aside, vacated or found to
have been entered without jurisdiction.
(c) Escrow Agent shall not be liable in any respect on account of the
identity, authority or rights of the parties executing or delivering or
purporting to execute or deliver this Escrow Agreement or any documents or
papers deposited or called for hereunder.
(d) Escrow Agent shall not be liable for the expiration of any rights under
any statute of limitations with respect to this Escrow Agreement or any
documents deposited with Escrow Agent.
(e) Neither Escrow Agent nor any of its directors, officers or employees
shall be liable to anyone for any action taken or omitted to be taken by it or
any of its directors, officers or employees hereunder except in the case of
gross negligence, bad faith or willful misconduct. Subject to Section 7(g)
below, Acquiror and Target Stockholders (collectively, the "Indemnifying
Parties") covenant and agree to jointly and severally indemnify Escrow Agent and
hold it harmless from and against any fee, loss, liability or expense (including
reasonable attorney's fees and expenses) (a "Loss") incurred by Escrow Agent
arising out of or in connection with the performance of its obligations in
accordance with the provisions of this Escrow Agreement or with the
administration of its duties hereunder, unless such Loss shall arise out of or
be caused by Escrow Agent's gross negligence, bad faith or willful misconduct;
provided, however, that indemnification for Escrow Agent's standard fees and
expenses set forth on the fee schedule attached hereto as Exhibit A shall be
borne exclusively by Acquiror, and provided further that the indemnity agreement
contained in this Section 7(e) shall not apply to amounts paid in settlement of
any Loss if such settlement is effected without the consent of Acquiror and
Stockholders' Representative.
(f) To the extent that Escrow Agent becomes liable for the payment of any
taxes in respect of income derived from the investment of funds held or payments
made hereunder, Escrow Agent shall satisfy such liability to the extent possible
from the Escrow Fund. Subject to Section 7(g) below, Indemnifying Parties agree
to jointly and severally indemnify and hold Escrow Agent harmless from and
against any taxes, additions for late payment, interest, penalties and other
expenses, that may be assessed against Escrow Agent on any payment or other
activities under this Escrow Agreement unless any such tax, addition for late
payment, interest, penalty or other expense shall arise out of or be caused by
the actions of, or a failure to act by, Escrow Agent. No distributions will be
made to Target Stockholders unless Escrow Agent is supplied with an original,
signed Form W-9 or its equivalent prior to distribution.
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(g) Notwithstanding the joint and several nature of the obligations of
Indemnifying Parties under Section 7(e) and 7(f), Target Stockholders' total
collective share of the liability for indemnification of Escrow Agent under
Sections 7(e) and 7(f) hereof (the "Indemnification Liability") shall in no
event exceed the value of the Escrow Fund then available to pay such liability.
Any and all amounts to be paid by Target Stockholders for their share of the
Indemnification Liability shall be payable only out of the Escrow Fund. Subject
to the foregoing, each of the Indemnifying Parties shall contribute to the
Indemnification Liability in such proportion as is appropriate to reflect the
relative fault of each individual Indemnifying Party, including up to all such
Indemnification Liability in the case of any tax liability arising from failure
to provide correct information with respect to any taxes pursuant to Section
7(f) above. In all cases where there is no such basis for allocating
contribution for such Indemnification Liability or except as otherwise provided
in Section 7(e), one half of the total Indemnification Liability shall be paid
out of the Escrow Fund and allocated pro rata among each of the Target
Stockholders according to their respective percentage ownership of the Escrow
Fund, and one half of the total Indemnification Liability shall be paid by
Acquiror.
(h) Escrow Agent may resign at any time upon giving at least thirty (30)
days' written notice to Acquiror and Stockholders' Representative; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent, which shall be accomplished as follows: Acquiror
and Stockholders' Representative shall use their best efforts to mutually agree
upon a successor agent within thirty (30) days after receiving such notice. If
the parties fail to agree upon a successor escrow agent within such time,
Stockholders' Representative with the consent of Acquiror, which shall not be
unreasonably withheld, shall have the right to appoint a successor escrow agent
authorized to do business in Washington. The successor escrow agent selected in
the preceding manner shall execute and deliver an instrument accepting such
appointment and it shall thereupon be deemed Escrow Agent hereunder and it shall
without further acts be vested with all the estates, properties, rights, powers,
and duties of the predecessor Escrow Agent as if originally named as Escrow
Agent. If no successor escrow agent is named, Escrow Agent may apply to a court
of competent jurisdiction for the appointment of a successor escrow agent.
Thereafter, the predecessor Escrow Agent shall be discharged from any further
duties and liabilities under this Escrow Agreement. The provisions of paragraphs
7(e) and 7(f) shall survive the resignation or removal of Escrow Agent or the
termination of this Escrow Agreement.
8. Fees, Expenses and Taxes. Acquiror agrees to pay or reimburse Escrow
Agent for its normal services hereunder in accordance with the fee schedule
attached hereto as Exhibit A. The Escrow Agent shall be entitled to
reimbursement upon thirty (30) days' written notice for all expenses incurred in
connection with Sections 7(e) and 7(f) above, and payment of any legal fees and
expenses incurred by the Escrow Agent in connection with the resolution of any
claim by any party hereunder. Taxes incurred with respect to the earnings of the
Escrow Fund and payments made hereunder shall be borne by the party to whom such
earnings are distributed (or to be distributed) or to whom such payment is made.
9. Miscellaneous.
(a) Amendments and Waivers. Any term of this Escrow Agreement may be
amended or waived with the written consent of the parties or their respective
successors and assigns. Any amendment or waiver effected in accordance with this
Section 9(a) shall be binding upon the parties and their respective successors
and assigns.
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(b) Successors and Assigns. The terms and conditions of this Escrow
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Escrow Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Escrow Agreement, except as expressly
provided in this Escrow Agreement.
(c) Governing Law; Jurisdiction. This Escrow Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of Washington, without giving effect to principles of conflicts of
law. Each of the parties to this Escrow Agreement consents to the exclusive
jurisdiction and venue of the courts of the state and federal courts of King
County, Washington.
(d) Counterparts. This Escrow Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(e) Titles and Subtitles. The titles and subtitles used in this Escrow
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Escrow Agreement.
(f) Notices. Any notice required or permitted by this Escrow Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
forty-eight (48) hours after being deposited in the regular mail as certified or
registered mail (airmail if sent internationally) with postage prepaid, if such
notice is addressed to the party to be notified at such party's address or
facsimile number as set forth below, or as subsequently modified by written
notice.
If to the Acquiror:
Corixa Corporation
1124 Colombia Street
Seattle, Washington 98104
Attention: Steven Gillis, Ph.D.,
President and Chief Executive Officer
Telephone No.: (206) 754-5711
Telecopy No.: (206) 754-5994
with a copy to:
Venture Law Group, A Professional Corporation
4750 Carillon Point
Kirkland, Washington 98033-7355
Attention: William W. Ericson
Telephone No.: (425) 739-8731
Telecopy No.: (425) 739-8750
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If to Target:
Anergen, Inc.
301 Penobscot Drive
Redwood City, California 94063
Attention: Barry Sherman, M.D., President
Telephone No.: (650) 361-8901
Telecopy No.: (650) 361-8958
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Barry Taylor, Esq.
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
If to Stockholders' Representative:
Barry Sherman, M.D.
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
Telephone No.: -----------------
--------------------------
Telecopy No.: -----------------
--------------------------
If to Escrow Agent:
Harris Trust and Savings Bank
601 South Figueroa Street, 49th Fl.
Los Angeles, California 90017
Telephone No.:(213) 239-0678
Telecopy No.:(213) 239-0631
(g) Severability. If one or more provisions of this Escrow Agreement are
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith, in order to maintain the economic position enjoyed
by each party as close as possible to that under the provision rendered
unenforceable. In the event that the parties cannot reach a mutually agreeable
and enforceable replacement for such provision, then (i) such provision shall be
excluded from this Escrow Agreement, (ii) the balance of this Escrow Agreement
shall be interpreted as if such provision were so excluded and (iii) the balance
of this Escrow Agreement shall be enforceable in accordance with its terms.
(h) Entire Agreement. Except as set forth in the Reorganization Agreement,
this Escrow Agreement is the product of all of the parties hereto, and
constitutes the entire agreement between such parties pertaining to the subject
matter hereof, and merges all prior negotiations and drafts of the parties with
regard to the transactions contemplated herein. Any and all other written or
oral agreements existing between the parties hereto regarding such transactions
are expressly canceled.
(i) Advice of Legal Counsel. Each party acknowledges and represents that,
in executing this Escrow Agreement, it has had the opportunity to seek advice as
to its legal
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rights from legal counsel and that the person signing on its behalf has read and
understood all of the terms and provisions of this Escrow Agreement. This Escrow
Agreement shall not be construed against any party by reason of the drafting or
preparation thereof.
The parties have executed this Escrow Agreement as of the date first above
written.
ACQUIROR:
CORIXA CORPORATION,
a Delaware corporation
By:
--------------------------------------
Name:
--------------------------------------
(print)
Title:
--------------------------------------
TARGET:
ANERGEN, INC.,
a Delaware corporation
By:
--------------------------------------
Name:
--------------------------------------
(print)
Title:
--------------------------------------
ESCROW AGENT:
HARRIS TRUST AND SAVINGS BANK
By:
--------------------------------------
Name:
--------------------------------------
(print)
Title:
--------------------------------------
STOCKHOLDERS' REPRESENTATIVE:
BARRY SHERMAN, M.D.
By:
--------------------------------------
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EXHIBIT A
FEE SCHEDULE
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AFFILIATE AGREEMENT
This Agreement (this "Affiliate Agreement") is made and entered into as of
December 11, 1998 (the "Effective Date") by and among Anergen, Inc., a Delaware
corporation ("Anergen"), Corixa Corporation, a Delaware corporation ("Corixa"),
and the undersigned stockholder ("Stockholder") who is an affiliate of Anergen.
RECITALS
A. This Affiliate Agreement is entered into pursuant to that certain
Agreement and Plan of Reorganization dated as of December 11, 1998 (as such may
be amended, the "Reorganization Agreement") entered into by and among Anergen,
Corixa and Yakima Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Corixa ("Merger Sub"). The Reorganization Agreement
provides for the merger of Merger Sub with and into Anergen in a reverse
triangular merger (the "Merger"), with Anergen to be the surviving corporation
of the Merger, all pursuant to the terms and conditions of the Reorganization
Agreement. Capitalized terms used herein and not defined herein shall have the
meanings ascribed to such terms in the Reorganization Agreement.
B. The Reorganization Agreement provides that, in the Merger, the shares of
Anergen Common Stock that are issued and outstanding at the Effective Time of
the Merger will be converted into shares of Corixa's Common Stock, all as set
forth in more detail in the Reorganization Agreement.
AGREEMENT
1. Tax Treatment. Stockholder understands and agrees that it is intended
that the Merger will be treated as a tax-free reorganization for federal income
tax purposes. Stockholder will rely on Stockholder's own tax advisers as to the
tax attributes of the Merger to Stockholder and understands that neither Corixa,
Corixa's counsel, Anergen nor Anergen's counsel has guaranteed nor will
guarantee to Stockholder that the Merger will be a tax-free reorganization.
Stockholder understands that counsel to Corixa (Venture Law Group) and counsel
to Anergen (Wilson Sonsini Goodrich & Rosati) have not acted as counsel for
Stockholder with respect to any matter related to the Merger, and that
Stockholder has not relied on Corixa or its counsel, or Anergen or its counsel,
with respect to any legal matter related to the Merger or its tax consequences,
including, without limitation, any U.S. federal income tax consequences.
2. Reliance Upon Representations, Warranties and Covenants. Stockholder
understands that the representations, warranties and covenants of Stockholder
set forth herein will be relied upon by Corixa and Anergen and their respective
counsel and by Anergen's stockholders.
3. Representations, Warranties and Covenants of Stockholder. Stockholder
represents, warrants and covenants to Corixa and Anergen as follows:
(a) Authority; Affiliate Status. Stockholder has full power and
authority to enter into, execute, deliver and perform Stockholder's
obligations under this Affiliate Agreement, to make the representations,
warranties and covenants herein contained and to perform Stockholder's
obligations hereunder. Stockholder further understands
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and agrees that Stockholder is deemed to be an "affiliate" of Anergen
within the meaning of the Securities Act (as defined below).
(b) Anergen Securities Owned. Exhibit A hereto sets forth all shares
of Anergen capital stock and any other securities of Anergen owned by
Stockholder, including all securities of Anergen as to which Stockholder
has sole or shared voting or investment power, and all rights, options and
warrants to acquire shares of capital stock or other securities of Anergen
granted to or held by Stockholder (such shares of Anergen capital stock,
other securities of Anergen and rights, options and warrants to acquire
shares of Anergen capital stock and other securities of Anergen are
hereinafter collectively referred to as "Anergen Securities").
(c) New Anergen Securities. As used herein, the term "New Anergen
Securities" means, collectively, any and all shares of Anergen capital
stock, other securities of Anergen and rights, options and warrants to
acquire shares of Anergen capital stock and other securities of Anergen
that Stockholder may purchase or otherwise acquire any interest in (whether
of record or beneficially), on and after the Effective Date of this
Affiliate Agreement and prior to the Expiration Date (as defined below).
All New Anergen Securities will be subject to the terms of this Affiliate
Agreement to the same extent and in the same manner as if they were Anergen
Securities. As used herein, the term "Expiration Date" means the earliest
to occur of (i) the closing, consummation and effectiveness of the Merger,
or (ii) such time as the Reorganization Agreement may be terminated in
accordance with its terms.
(d) Transfer Restrictions on Anergen and New Anergen
Securities. Stockholder agrees with Anergen not to sell, transfer, encumber
or dispose of, or offer to sell, transfer, encumber or dispose of (i) any
Anergen Securities or (ii) any New Anergen Securities until the Expiration
Date; provided, however, that in the event that (A) Anergen's board of
directors approves, and recommends that Anergen's stockholders approve, a
Superior Proposal (as defined in the Reorganization Agreement), (B)
Anergen's board of directors provides written notice of such approval and
recommendation to Corixa and (C) Anergen has paid in full to Corixa the
Termination Fee (as defined in the Reorganization Agreement), Stockholder's
obligations under this Affiliate Agreement shall immediately terminate.
(e) Waivers. Stockholder hereby waives, effective as of the Effective
Time, any liquidation, redemption, anti-dilution, registration rights,
information rights, preemptive rights, priority rights, rights of first
refusal, co-sale or other similar rights, if any, relating to the Anergen
Common Stock to be issued pursuant to the Reorganization Agreement under
the terms of the certificate of incorporation or bylaws of Anergen or any
agreement to which Stockholder is a party in effect immediately prior to
the Effective Time.
(f) Further Assurances. Stockholder agrees to execute and deliver any
additional documents reasonably necessary or desirable, in the opinion of
Corixa, to carry out the purposes and intent of this Affiliate Agreement.
(g) Intent. Stockholder is not aware of or participating in any plan
or intention on the part of Corixa, directly or indirectly (through one or
more related parties) to reacquire any Corixa Common Stock issued in the
Merger. For these purposes, "related parties" include corporations which
are members of the same affiliated group as defined in Section 1504 of the
Code (determined without regard to
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Section 1504(b) of the Code), or two corporations if the first corporation
purchases the stock of the second corporation in a transaction which would
be treated as a distribution of the stock of the first corporation under
Section 304(a)(2) of the Code (determined without regard to Treas. Reg.
Section 1.1502-80(b)). In addition, a corporation will be treated as
related to another corporation if such relationship exists immediately
before or immediately after the acquisition of the stock involved.
Moreover, a corporation, other than Anergen or a person related to Anergen,
will be treated as related to Corixa if the relationship is created in
connection with the Merger. For purposes of this representation, it is
acknowledged and agreed that Corixa may from time to time repurchase some
of its issued and outstanding Common Stock in repurchase transactions
unrelated to the Merger.
(h) Dissenters' Rights. Stockholder has no plan or intention to
exercise dissenters' rights in connection with the Acquisition.
(i) No Violation of Securities Act. Stockholder shall not make any
sale, transfer or other disposition of Corixa Common Stock in violation of
the Securities Act of 1933, as amended (the "Securities Act") or Rule 145
of the rules and regulations of the Securities Act.
5. Stop Transfer Instructions. Stockholder also understands and agrees that
stop transfer instructions may be given to Corixa's transfer agent with respect
to certificates evidencing the Corixa Common Stock to enforce Stockholder's
compliance with Stockholder's representations in Section 3 and that there will
be placed on the certificate evidencing the Corixa Common Stock legends stating
in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED,
SOLD, PLEDGED, EXCHANGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
ACCORDANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS
AMENDED."
6. Notices. Any notice or other communication required or permitted to be
given under this Affiliate Agreement will be in writing, will be delivered
personally, by telecopier (with a hard copy also mailed) or by registered or
certified mail, postage prepaid and will be deemed given upon delivery, if
delivered personally, one business day after transmission by telecopier with
confirmation of receipt, or two (2) days after deposit in the mails, if mailed,
to the following addresses:
(i) If to Anergen:
Anergen, Inc.
301 Penobscott Drive
Redwood City, California 94063
Attention: Barry Sherman, M.D.,
President
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With a copy to:
Barry Taylor, Esq.
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
(ii) If to Corixa: Corixa Corporation.
1124 Columbia Street
Seattle, Washington 98104
Attention:Steven Gillis, Ph.D,
President and Chief Executive Officer
With a copy to:
William W. Ericson
Venture Law Group
4750 Carillon Point
Kirkland, Washington 98033-7355
(iii) If to Stockholder:
To the address for notice for such Stockholder
set forth on the last page hereof.
or to such other address as a party may have furnished to the other parties in
writing pursuant to this Section 5.
6. Termination. This Affiliate Agreement shall be terminated and shall be
of no further force and effect upon the termination of the Reorganization
Agreement pursuant to its terms.
7. Counterparts. This Affiliate Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Affiliate Agreement will become binding when one or more
counterparts hereof, individually or taken together, will bear the signatures of
both parties reflected hereon as signatories.
8. Assignment, Binding Upon Successors and Assigns. Neither party hereto
may assign any of its rights or obligations hereunder without the prior written
consent of the other party hereto. This Affiliate Agreement will be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
9. Waiver. The waiver by a party of any breach hereof or default in the
performance hereof will not be deemed to constitute a waiver of any other
default or any succeeding breach or default. This Affiliate Agreement may be
amended in a writing signed by the parties hereto at any time before or after
approval of the Merger by the Anergen stockholders, but, after such approval, no
amendment will be made which by applicable law requires the further approval of
the Anergen stockholders without obtaining such further approval.
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11. Governing Law. The internal laws of the State of Delaware (irrespective
of its choice of law principles) will govern the validity of this Affiliate
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto. Any litigation or other dispute
resolution proceeding among the parties relating to this Affiliate Agreement
will take place in Seattle, Washington. The parties consent to the personal
jurisdiction of and the venue in the state and federal courts within such
counties.
12. Construction of Agreement. This Affiliate Agreement has been negotiated
by the respective parties hereto and their attorneys and the language hereof
will not be construed for or against either party. A reference to a Section will
mean a Section in this Affiliate Agreement unless otherwise explicitly set
forth. The titles and headings herein are for reference purposes only and will
not in any manner limit the construction of this Affiliate Agreement which will
be considered as a whole.
13. Attorneys' Fees. Should suit be brought to enforce or interpret any
part of this Affiliate Agreement, the prevailing party will be entitled to
recover, as an element of the costs of suit and not as damages, reasonable
attorneys' fees to be fixed by the court (including without limitation, costs,
expenses and fees on any appeal). The prevailing party will be entitled to
recover its costs of suit, regardless of whether such suit proceeds to final
judgment.
IN WITNESS WHEREOF, the parties hereto have executed this Affiliate
Agreement as of the date first set forth above.
<TABLE>
<S> <C>
ANERGEN, INC., CORIXA CORPORATION,
a Delaware corporation a Delaware corporation
By: --------------------------------------------- By: ---------------------------------------------
Name: ------------------------------------------ Name: ------------------------------------------
Title: ------------------------------------------- Title: -------------------------------------------
STOCKHOLDER:
- -------------------------------------------------
Address: ---------------------------------------
- -------------------------------------------------
- -------------------------------------------------
</TABLE>
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EXHIBIT A
<TABLE>
<S> <C>
Shares of Common Stock of Anergen, Inc. owned by
Stockholder as of the date of this Affiliate
Agreement:
-------------------------------------
Shares of Common Stock of Anergen, Inc., issuable
upon exercise or conversion of outstanding options,
warrants or other securities owned by Stockholder
as of the date of this Affiliate Agreement:
-------------------------------------
</TABLE>
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EXHIBIT D
FORM OF OPINION OF COUNSEL TO CORIXA AND MERGER SUB
1. Each of Corixa and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Each of
Corixa and Merger Sub has the corporate power to own, lease and operate its
properties and to carry on its business as now being conducted.
2. The shares to be issued in the Merger are duly authorized, and, when
issued and delivered pursuant to the terms of the Reorganization Agreement, will
be validly issued, fully paid, and non-assessable and free of liens,
encumbrances or preemptive or similar rights. A sufficient number of shares of
Common Stock of Corixa have been duly and validly reserved for issuance upon
exercise of Anergen options being assumed by Corixa pursuant to Section 1.6(c)
of the Reorganization Agreement, and such reserved shares, when issued in
accordance with the terms of such options, will be validly issued, fully paid
and nonassessable.
3. The authorized capital stock of Corixa consists of forty million
(40,000,000) shares of Common Stock, One-Tenth of One Cent ($0.001) par value
per share, of which there were ( ) shares issued
and outstanding as of , 1999, and ten million (10,000,000) shares
of Preferred Stock, One-Tenth of One Cent ($0.001) par value per share, none of
which shares are issued and outstanding. All outstanding shares of Acquiror
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
4. The authorized capital stock of Merger Sub consists of one thousand
(1,000) shares of Common Stock, One-Tenth of One Cent ($0.001) par value, all of
which are issued and outstanding and are held by Corixa. All outstanding shares
of Merger Sub Common Stock are duly authorized, validly issued, fully paid and
nonassessable.
5. Both Corixa and Merger Sub have all requisite corporate power and
authority to enter into the Reorganization Agreement and the Escrow Agreement,
to perform their obligations thereunder and to consummate the transactions
contemplated therein. The execution and delivery of the Reorganization Agreement
and the Escrow Agreement and the consummation of the transactions contemplated
therein have been duly authorized by all necessary corporate action on the part
of Corixa and Merger Sub. Each of the Reorganization Agreement and the Escrow
Agreement has been duly executed and delivered by Corixa and Merger Sub and each
constitutes a valid and binding obligation of Corixa and Merger Sub in
accordance with its terms, except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights, and subject to general equity principles and to limitations
on availability of equitable relief, including specific performance.
6. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by Corixa or
Merger Sub in connection with the execution and delivery of the Reorganization
Agreement and the Escrow Agreement by Corixa, or the Merger Agreement by Merger
Sub, or the consummation by Corixa and Merger Sub of the transactions
contemplated therein, except for (a) the filing of the certificate of merger
with the Secretary of State of Delaware, (b) any filings as may be required
under applicable state or federal securities laws and the laws of any foreign
country and (c) such other consents, authorizations, filings, approvals and
registrations
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with a Governmental Entity, which if not obtained or made would not have a
material adverse effect on either Corixa or Merger Sub.
7. Except as set forth in the Acquiror Disclosure Schedule, neither the
execution or delivery of the Merger Agreement and the Escrow Agreement by
Acquiror nor the execution or delivery of the Merger Agreement by Merger Sub,
nor the consummation of the transactions contemplated thereby, (i) will result
in a violation of the Certificate of Incorporation or Bylaws of Acquiror or
Merger Sub or (ii) to our knowledge, conflicts or will conflict with, or result
in any violation of (x) any existing statute, law, ordinance, rule or regulation
applicable to Acquiror or Sub or any of their respective properties or assets,
or (y) any judgment, order or decree of any Governmental Entity of which we are
aware having jurisdiction over Acquiror or Sub or any of their respective
properties or assets except where such conflict or violation would not have a
material adverse effect on Corixa.
8. To our knowledge, there is no action, suit, proceeding, claim,
arbitration or governmental investigation pending, or as to which Acquiror or
Merger Sub has received any notice of assertion, against Acquiror or Merger Sub
by or before any Governmental Entity that seeks to prevent the consummation of
the Merger or which could have a material adverse effect on Acquiror.
9. To our knowledge, the registration statement on Form S-4 and all
post-effective amendments, if any (the "S-4"), filed by Corixa with the
Securities and Exchange Commission (the "SEC") has become effective under the
Act and to our knowledge, no stop order suspending the effectiveness of the S-4
or preventing the use of the Proxy Statement has been issued and, to our
knowledge, no proceedings for that purpose have been instituted or are pending
or are threatened by the SEC.
We hereby consent to the filing of this opinion as an exhibit to the S-4
and to the use of our name under the heading "Legal Matters" therein. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
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EXHIBIT E
FORM OF LEGAL OPINION OF COUNSEL TO ANERGEN
1. Anergen is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all corporate power to
own, lease and operate its properties and to carry on its business as now being
conducted. Anergen is duly qualified or licensed to do business and in good
standing in each jurisdiction in which the nature of its business or properties
makes such qualification or licensing necessary, except where the failure to do
so qualified or licensed would not have a Material Adverse Effect on Anergen's
business.
2. The authorized capital stock of Anergen consists of sixty million
(60,000,000) shares of Common Stock, One-Tenth of One Cent ($0.001) par value
per share, of which there were ( ) shares issued
and outstanding as of , 1999 (excluding shares held in treasury of
which there are none, and ten million (10,000,000) shares of Preferred Stock,
One-Tenth of One Cent ($0.001) par value per share, of which no shares are
issued or outstanding. All outstanding shares of Anergen Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the certificate of incorporation or bylaws
of Anergen or any agreement or document to which Anergen is a party or by which
it is bound.
3. Anergen has all requisite corporate power and authority to enter into
the Reorganization Agreement and the Escrow Agreement, to perform its
obligations thereunder and to consummate the transactions contemplated therein.
The execution and delivery of the Reorganization Agreement and the Escrow
Agreement and the consummation of the transactions contemplated therein have
been duly authorized by all necessary corporate action on the part of Anergen,
including without limitation approval by Anergen's board of directors and
Anergen's stockholders of the Reorganization Agreement.
4. Each of the Reorganization Agreement and the Escrow Agreement has been
duly executed and delivered by Anergen and, assuming due execution and delivery
thereof by the other parties thereto, constitute the legal, valid and binding
obligation of Anergen enforceable against Anergen in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights,
and subject to general equity principles and to limitations on availability of
equitable relief, including specific performance.
5. No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by Anergen in
connection with the execution and delivery of the Reorganization Agreement and
the Escrow Agreement by Anergen or the consummation by Anergen of the
transactions contemplated therein, except for (a) the filing of the certificate
of merger with the Secretary of State of Delaware, (b) any filings as may be
required under applicable state or federal securities laws and the laws of any
foreign country, and (c) such other consents, authorizations, filings, approvals
and registrations with a Governmental Entity, which if not obtained or made
would not have a Material Adverse Effect on Anergen.
6. Except as set forth in the Anergen Disclosure Schedule, neither the
execution or delivery of the Reorganization Agreement or the Escrow Agreement by
Anergen nor the consummation of the transactions contemplated therein (a) will
result in a violation of the certificate of incorporation or bylaws of Anergen
or (b) to our knowledge, conflicts or will
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conflict with, or result in any violation of (x) any existing statute, law,
ordinance, rule or regulation applicable to Anergen or any of its properties or
assets, or (y) any judgment, order or decree, of any Governmental Entity of
which we are aware having jurisdiction over Anergen or any of its properties or
assets except where such conflict or violation would not have a material adverse
effect on Anergen.
7. Except as set forth in the Anergen Disclosure Schedule, to our
knowledge, there is no action, suit, proceeding, claim, arbitration or
governmental investigation pending or threatened against Anergen by or before
any Governmental Entity that seeks to prevent the consummation of the Merger or
which could have a material adverse effect on Anergen.
We hereby consent to the filing of this opinion as an exhibit to the S-4
and to the use of our name under the heading "Legal Matters" therein. In giving
such consent, we do not thereby admit that we are in the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended.
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APPENDIX B:
OPINION OF PACIFIC GROWTH EQUITIES
December 11, 1998
Special Committee of the Board of Directors
Anergen, Inc.
301 Penobscot Drive
Redwood City, CA 94063
Members of the Special Committee of the Board of Directors:
You have asked for our opinion as to the fairness, from a financial, point
of view, to the holders of common stock, par value $0.001 per share ("Anergen
Common Stock") of Anergen, Inc., a Delaware corporation ("Anergen") of certain
transactions in which Anergen is considering participating.
Background of Transactions
Anergen proposes to enter into an Agreement and Plan of Reorganization (the
"Reorganization Agreement") with Corixa Corporation, a Delaware corporation
("Corixa"), and a subsidiary of Corixa ("Merger Sub") pursuant to which Corixa
will acquire Anergen. That acquisition (the "Merger") is to be accomplished
through a merger of Merger Sub into Anergen in which the outstanding shares of
Anergen Common Stock (excluding stock owned by Corixa or Merger Sub) will be
converted into a number of shares (the "Conversion Shares") of Corixa common
stock, $0.001 par value ("Corixa Common Stock"), at a conversion ratio specified
in the Reorganization Agreement (the "Exchange Ratio"). A letter of intent dated
November 24, 1998 between Corixa and Anergen (the "Letter of Intent") indicates
that the Exchange Ratio is to be such that the value of the Conversion Shares
will be $8.5 million less certain payments Corixa makes to Anergen pursuant to a
certain "Exclusivity Agreement," (or approximately $0.43 per share of Anergen
Common Stock, based on the average of the last reported sales price of Corixa
Common Stock for the 15 trading days immediately preceding and including the
date of the first public announcement of the merger contemplated by the
Reorganization Agreement (the "Corixa Average"); provided that if the Corixa
Average is (i) below $6.00 per share, it will be deemed to be $6.00 per share or
(ii) above $8.00 per share, it will be deemed to be $8.00 per share, and the
value of the Conversion Shares will be concomitantly affected. The Merger is to
be accounted for as a purchase and is to be a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended.
In connection with the Merger, Anergen will become obligated to enter into
an amendment (the "Organon Amendment") to a certain agreement to which Anergen
is currently a party with N.V. Organon on specified terms. A number of
Conversion Shares (the "Escrow Shares") having an aggregate value of $400,000,
determined in the same manner as the Exchange Ratio, will be placed in escrow to
secure Anergen's obligation to enter into the Organon Amendment. The Escrow
Shares will be released to the holders of Anergen Common Stock only if Anergen
has entered into the Organon Amendment on or before the later of (i) January 31,
1999 or (ii) the Closing Date, but in any event prior to March 15, 1999.
Otherwise, the Escrow Shares will be released to Corixa and the aggregate value
of the Conversion Shares delivered to holders of Anergen Stock, based on
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the Corixa Average (and assuming that average is between $6.00 and $8.00 per
share), will be $8.1 million (approximately $0.42 per share of Anergen Common
Stock).
Investigation and Analysis
In conducting our investigation and analysis and in arriving at the opinion
set forth below, we have reviewed such information and taken into account such
financial and economic factors as we have deemed relevant under the
circumstances. In that connection, we have, among other things: (i) reviewed
publicly available information about Anergen, including but not limited to
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, proxy and other
information filed with the Securities and Exchange Commission, and equity
analyst research reports prepared by various investment banking firms; (ii)
reviewed publicly available information about Corixa, including but not limited
to Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, proxy and other
information filed with the Securities and Exchange Commission, and equity
analyst research reports prepared by various investment banking firms; (iii)
reviewed a draft of the Reorganization Agreement dated November 30, 1998 and the
Letter of Intent; (iv) analyzed information regarding the market prices of
Anergen and Corixa over various periods; and (v) analyzed information on
publicly-traded comparable companies; and (vi) analyzed information about prices
paid in acquisitions of other biotechnology companies in recent periods.
We have reviewed with senior management of Anergen the state of Anergen's
business and operations prepared and furnished to us by the Company. We have
held discussions with certain members of Anergen's and Corixa's senior
management concerning Anergen's and Corixa's respective historical and current
business condition and operating results, including Anergen's prospects for
raising capital. We also have considered such other information, financial
studies, analyses and investigations and financial, economic and market criteria
that we deemed relevant for the preparation of this opinion. We have not
considered any benefits that may inure to any stockholder of the Company as a
result of the Merger or any related transactions other than in such party's
capacity as a stockholder of the Company.
In arriving at our opinion, we have assumed and relied upon the accuracy
and completeness of all of the financial and other information provided to us by
or on behalf of Anergen and Corixa, and all of the publicly available financial
and other information referred to above, and have not attempted independently to
verify any such information. We have also assumed, with your consent, that the
Merger will be consummated in accordance with the terms of the draft
Reorganization Agreement dated November 30, 1998, without any amendment thereto
and without waiver by Anergen or Corixa of any of the conditions to their
respective obligations thereunder. We have relied upon assurances of senior
management of Anergen and Corixa that such management was unaware of any fact
that would make their respective information provided to us incomplete or
misleading.
Our opinion necessarily is based upon economic, monetary and market
conditions as they exist and can be evaluated on the date hereof, and does not
predict or take into account any changes that may occur, or information that may
become available, after the date hereof, including without limitation changes in
the terms of the Reorganization Agreement from the draft. It should be
understood that subsequent developments may affect this opinion and that we do
not have any obligation to update, revise or reaffirm this opinion. Except as
noted above, this opinion does not address the relative merits of the
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Merger and any other potential transactions or business strategies considered by
the Special Committee of the Board of Directors of Anergen (the "Special
Committee"). We have not participated in the negotiation of the terms of the
Merger, provided any legal advice or provided any advice with respect to the
Merger or any possible alternatives to the Merger.
PGE will receive a fee for rendering this written opinion pursuant to the
terms of an engagement letter. PGE and/or its employees may from time to time
trade the securities of the Company for its or their own accounts or the
accounts of PGE's customers and, accordingly, may at any time hold long or short
positions in such securities.
Opinion
Based upon and subject to the foregoing, we are of the opinion that, as of
the date hereof, the Merger is fair, from a financial point of view, to the
holders of Anergen Common Stock. Our opinion has been prepared solely for the
information of the Special Committee, and may not be used for any other purpose
or disclosed to or relied upon by any other party without the prior written
consent of PGE; provided, however, that if Anergen proposes to state in any
proxy statement filed under the Securities Exchange Act of 1934 that PGE
rendered this written opinion and/or describe the conclusions reached herein,
PGE's consent shall not be unreasonably withheld.
Very truly yours,
PACIFIC GROWTH EQUITIES, INC.
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PROXY
ANERGEN, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of Anergen, Inc., a Delaware corporation
("Anergen"), hereby acknowledges receipt of the Notice of Special Meeting of
Stockholders and Proxy Statement/Prospectus, each dated January [___], 1999, and
hereby appoints the board of directors of Corixa Corporation, and each of them,
proxies and attorneys-in-fact, with full power to each of substitution, on
behalf of and in the name of the undersigned, to vote as designated on the
reverse side, all shares of Common Stock of Anergen that the undersigned is
entitled to vote at the Special Meeting of Stockholders of Anergen to be held on
February __ , 1999 at _____ a.m., local time, at the offices of Anergen, 301
Penobscot Drive, Redwood City, CA 94063 and at any adjournment thereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS INDICATED, THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED
FOR EACH OF THE PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS
AS MAY PROPERLY COME BEFORE THE MEETING AS THE PROXIES DEEM ADVISABLE.
(Continued and to be signed on the reverse side.)
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<PAGE> 321
Please mark vote
in square in the [X}
following manner
using dark ink only.
The Anergen, Inc. Board of Directors Recommends a Vote For the Proposal
FOR AGAINST ABSTAIN
Proposal to approve and adopt the Agreement and Plan of
Reorganization, dated as of December 11, 1998 (the
"Reorganization Agreement") among Anergen, Corixa
Corporation, a Delaware corporation ("Corixa") and FOR AGAINST ABSTAIN
Yakima Acquisition Corporation, a Delaware corporation [ ] [ ] [ ]
and wholly-owned subsidiary of Corixa ("Merger Sub"),
and to approve the merger of Merger Sub with and into
Anergen pursuant to which Anergen will become a
wholly-owned subsidiary of Corixa.
In their discretion, the proxies are authorized to vote
or otherwise represent the shares on any and all such
other business which may properly come before the
special meeting or any adjournment thereof.
<TABLE>
<S> <C> <C> <C>
Signature_____________________ (Signature(s) if held jointly)_____________ Title __________ Dated__________
</TABLE>
Please sign exactly as name appears on your stock certificate. Note: When shares
are held by joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee, guardian or corporate officer or partner, please give
full title as such. If a corporation, please sign in corporate name by President
or other authorized officer. If a partnership, please sign partnership name by
authorized person.
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