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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 20, 2000
HOLLIS-EDEN PHARMACEUTICALS, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
000-24672 13-3697002
--------------------------------- ---------------------------------
(Commission File No.) (IRS Employer Identification No.)
9333 Genesee Avenue, Suite 200
San Diego, California 92121
(Address of principal executive offices and zip code)
Registrant's telephone number, including area code: (858) 587-9333
__________________________
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Item 5. Other Events.
On January 20, 2000, the Company reached a settlement on its pending arbitration
with Patrick T. Prendergast ("Prendergast"), Colthurst Limited ("Colthurst") and
Edenland, Inc ("Edenland"). The Settlement and Mutual Release Agreement
completely disposes of all of the matters that were at issue in the pending
arbitration. In addition, the parties entered into two new technology
agreements, the Technology Assignment Agreement and the Sponsored Research and
License Agreement.
The Technology Assignment Agreement replaces the License Agreement dated May 18,
1994 among the Company, Prendergast and Colthurst (the "Colthurst Agreement").
Pursuant to the Technology Assignment Agreement, Prendergast and Colthurst
assigned to the Company ownership of all patents, patent applications and
current or future improvements of the technology under the Colthurst Agreement,
including HE2000, the Company's lead clinical compound. The annual license fee
of $500,000 and the royalty obligations under the Colthurst Agreement have been
eliminated. In consideration for the foregoing, Hollis-Eden agreed to issue to
Colthurst 660,000 shares of Common Stock and a warrant to purchase an aggregate
of 400,000 shares of Common Stock at $25 per share. Only 132,000 of such shares
of Common Stock will be issued now, with the remaining 528,000 shares to be
issued over the next four years conditioned on continued compliance with the
agreement. In addition, all of the shares under the warrant will vest over the
next four years conditioned on continued compliance with the agreement.
The Sponsored Research and License Agreement replaces both the License Agreement
and the Research, Development and Option Agreement, each dated August 25, 1994
among the Company, Prendergast and Edenland. Pursuant to the Sponsored Research
and License Agreement, Edenland exclusively licensed to the Company a number of
compounds, together with all related patents and patent applications, and the
Company agreed to fund additional pre-clinical research projects conducted by
Edenland. The Company will also have exclusive license rights to all results of
such research and will have royalty obligations to Edenland on sales of new
products, if any, resulting from such research.
As a result of the above settlement, the Company will take a one-time charge to
research and development expenses of approximately $12.7 million during the
first quarter of 2000.
1.
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Item 7. Exhibits.
99.1 Press Release dated January 21, 2000.
99.2 Settlement and Mutual Release Agreement, dated January 20, 2000,
among Registrant, Colthurst Limited, Edenland, Inc. and Patrick
T. Prendergast.
99.3 Technology Assignment Agreement, dated January 20, 2000, among
Registrant, Colthurst Limited and Patrick T. Prendergast.
99.4 Common Stock and Warrant Agreement, dated January 20, 2000, among
Registrant and Colthurst Limited.
99.5 Warrant, dated January 20, 2000, issued to Colthurst Limited.
99.6 Sponsored Research and License Agreement, dated January 20, 2000,
among Registrant, Edenland, Inc., Colthurst Limited and Patrick
T. Prendergast.
2.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Hollis-Eden Pharmaceuticals, Inc.
Dated: February 4, 2000 By: /s/ Eric J. Loumeau
---------------------------------
Eric J. Loumeau
Vice President, Corporate General
Counsel
3.
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INDEX TO EXHIBITS
99.1 Press Release dated January 21, 2000.
99.2 Settlement and Mutual Release Agreement, dated January 20, 2000,
among Registrant, Colthurst Limited, Edenland, Inc. and Patrick
T. Prendergast.
99.3 Technology Assignment Agreement, dated January 20, 2000, among
Registrant, Colthurst Limited and Patrick T. Prendergast.
99.4 Common Stock and Warrant Agreement, dated January 20, 2000, among
Registrant and Colthurst Limited.
99.5 Warrant, dated January 20, 2000, issued to Colthurst Limited.
99.6 Sponsored Research and License Agreement, dated January 20, 2000,
among Registrant, Edenland, Inc., Colthurst Limited and Patrick
T. Prendergast.
1.
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
- ---------------------
HOLLIS-EDEN PHARMACEUTICALS AND EDENLAND, INC.
ANNOUNCE SETTLEMENT OF ARBITRATION MATTERS
SAN DIEGO, CA - January 21, 2000 - Hollis-Eden Pharmaceuticals, Inc. (NASDAQ:
HEPH) today announced that it has reached a settlement on pending arbitration
issues between the Company and Patrick T. Prendergast, Chairman of Colthurst
Ltd. and Edenland, Inc. The settlement includes the transfer of technology to
Hollis-Eden for equity in the Company, and the funding by Hollis Eden of
additional pre-clinical research to be conducted by Edenland.
The parties have replaced the original Colthurst license agreement with a new
agreement in which all patents, patent applications, and current or future
improvements of the Colthurst technology, including HE2000, Hollis-Eden's lead
clinical compound, will be irrevocably assigned to Hollis-Eden on a royalty-free
basis in exchange for equity in Hollis-Eden that will vest over time.
Additionally, the parties have entered into a sponsored research agreement,
replacing both the pre-existing Edenland license agreement and research and
development agreement. Pursuant to the new agreement, Edenland will immediately
license to Hollis-Eden a number of compounds, together with related patents and
patent applications, and Hollis-Eden will fund additional pre-clinical research
projects conducted by Edenland, Inc. Hollis-Eden will also have the license
rights to all results of this research and the agreement provides for a royalty
interest back to Edenland on sales of new products resulting from this
agreement.
Commenting on the settlement, Richard Hollis, Chairman and CEO of Hollis-Eden
stated, "We are very pleased to have quickly settled this matter in an amicable
fashion. We believe the restructured agreements will benefit both parties and
align our interests toward one common vision of commercializing drugs to benefit
patients. We are committed to rewarding our shareholders for their investment in
Hollis-Eden as well as their belief in our scientific endeavors and ultimately
in our ability to build an enterprise that adds value to healthcare around the
world. We look forward to working with Edenland and Patrick T. Prendergast on
new discovery programs."
"We are pleased to have arrived at today's settlement," said Patrick
Prendergast. "Under our new research arrangement I am confident we at Edenland
can bring valuable new drug candidates to the Hollis-Eden pipeline and add to
shareholder value. Richard Hollis has always shared my vision of developing
novel medicines for unmet worldwide medical needs. His commitment and loyalty to
our drug discoveries and his incredible drive to build a worldclass
pharmaceutical company is now beginning to unfold. Hollis-Eden continues to
bring together an expert team of scientists and healthcare executives that share
our mutual vision. On behalf of Colthurst, I'm impressed with the extent of the
analytical testing and the valuable results Hollis-Eden reported from their
clinical trials with HE2000. We feel these new agreements absolutely align our
goals, and we will do everything we can to reward Hollis-Eden shareholders for
the confidence they have placed in us."
Hollis-Eden Pharmaceuticals, Inc. is a development-stage pharmaceutical company
engaged in the development of products for the treatment of infectious diseases
and immune system disorders. The company is currently testing its lead drug
candidate, HE2000, in HIV/AIDS patients both in South Africa and the United
States. HE2000 appears to operate through a novel mechanism that targets the
host cell and may alter the immune system in HIV-positive patients rather than
interfacing directly with the virus. For more information regarding Hollis-Eden,
contact the company's website at www.holliseden.com.
------------------
Statements made in this press release may constitute forward-looking statements
and are subject to numerous risks and uncertainties, including the failure to
successfully complete pivotal clinical trials, the Company's future capital
needs, the Company's ability to obtain additional funding, obtain required
regulatory approvals, the development of competitive products by other
companies, and other risks detailed from time to time in the Company's filings
with the Securities and Exchange Commission. The actual results may differ
materially from those contained in this press release.
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EXHIBIT 99.2
SETTLEMENT AND MUTUAL RELEASE AGREEMENT
This SETTLEMENT AND MUTUAL RELEASE AGREEMENT ("Agreement") is made and
entered into by and between Colthurst Limited, a corporation duly organized and
existing under the laws of Belize ("Colthurst"), Edenland, Inc., a corporation
duly organized and existing under the laws of Belize ("Edenland"), and Patrick
T. Prendergast ("Prendergast") on the one hand, and Hollis-Eden Pharmaceuticals,
Inc. (the "Company") on the other (collectively, Colthurst, Edenland,
Prendergast and the Company are referred to herein as the "Parties"). This
Agreement is entered into and effective as of January 20, 2000.
RECITALS
WHEREAS, a dispute has arisen between the parties in regard to their
respective rights, duties and obligations under: (1) the May 18, 1994 License
Agreement entered into between Colthurst and Patrick T. Prendergast on the one
hand, and Holmedco Pharmaceuticals Corporation (the predecessor-in-interest to
Hollis-Eden Pharmaceuticals, Inc.) on the other (the "Colthurst Agreement",
attached hereto as Exhibit A); (2) the August 25, 1994 License Agreement entered
into between Edenland, Inc. and Patrick T. Prendergast on the one hand, and
Holmedco Pharmaceuticals Corporation on the other (the "Edenland Agreement",
attached hereto as Exhibit B); and (3) the August 25, 1994 Research, Development
and Option Agreement entered into between Edenland, Inc. and Patrick T.
Prendergast on the one hand, and Holmedco Pharmaceuticals Corporation on the
other (the "RDO Agreement", attached hereto as Exhibit C) (collectively, the
Colthurst Agreement, the Edenland Agreement and the RDO Agreement shall be
referred to herein as the "Prior Agreements").
WHEREAS, Hollis-Eden filed on November 5, 1999 filed two separate
complaints and demands for arbitration with the American Arbitration Association
entitled Hollis-Eden Pharmaceuticals, Inc. v. Patrick T. Prendergast and
Colthurst Limited (Matter No. 50 T 133 00402 99) and Hollis-Eden Pharmaceuticals
v. Patrick T. Prendergast and Edenland, Inc. (Matter No. 50 T 133 00403 99)
(collectively, the "Actions") alleging breach of the Prior Agreements and other
non-contractual claims;
WHEREAS, Prendergast and Colthurst served on November 15, 1999 a Notice of
Termination of the Colthurst Agreement; and on November 16, 1999, the Company
filed with the American Arbitration Association a first amended complaint in the
action entitled Hollis-Eden Pharmaceuticals, Inc. v. Patrick T. Prendergast and
Colthurst Limited (Matter No. 50 T 133 00402 99), including in its declaratory
relief action a determination of the validity of Respondents' Notice of
Termination;
WHEREAS, Prendergast, Edenland, and Colthurst (collectively, "Respondents")
filed on December 1, 1999 counterclaims in the Actions alleging breach of the
Prior Agreements and other non-contractual claims against the Company;
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WHEREAS, the Parties agree that this Agreement shall supercede and replace
any previous agreements between the Parties, including the Prior Agreements and
all amendments thereto; and
WHEREAS, the Parties desire to settle and discharge any and all actual or
potential claims and controversies between them, known or unknown, and further
desire to effectuate the terms of the Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants,
waivers and releases contained herein, it is agreed by and between the Parties
hereto as follows:
1. Technology Assignment Agreement. Concurrently with the execution of
the Agreement, the Company and Respondents shall enter the Technology Assignment
Agreement attached hereto as Exhibit D.
2. Stock Issuance Agreement. Also concurrently with the execution of
this Agreement, the Company and Respondents shall enter into the Common Stock
and Warrant Agreement attached hereto as Exhibit E.
3. Sponsored Research and License Agreement. Also concurrently with the
execution of this Agreement, the Company and Respondents shall enter into the
Sponsored Research and License Agreement attached hereto as Exhibit F.
4. Support Of Management. For so long as Respondents or their agents,
subsidiaries, representatives or affiliates own shares of Company Common Stock
(or securities exercisable into shares of Company Common Stock), Prendergast,
Colthurst and Edenland agree that they shall, and shall cause their agents,
subsidiaries, representatives, affiliates and family members of Prendergast who
are stockholders of the Company to (i) support, and vote all of his, her or its
shares of Common Stock in favor of, any management or board of director
proposals subject to a stockholder vote; (ii) not submit a proposal for
stockholder approval not previously approved in writing by the Company's board
of directors (the "Board"); (iii) not vote his, her or its shares of Common
Stock in favor of proposals that are expressly opposed by Company management or
Board; and (iv) not make any short sale or maintain any short position, or
establish or maintain a "put equivalent position" (within the meaning of Rule
16a-1(h) under the Securities Exchange Act of 1934, as amended) with respect to
the Company's Common Stock. The obligations of Respondents in clauses (i), (ii)
and (iii) of the forgoing sentence shall be applicable only during such time as
Richard B. Hollis is either the Chairman or the Chief Executive Officer of the
Company, unless the reason for his failure to be either the Chairman or the
Chief Executive Officer is due to his death or disability. For purposes of this
Agreement, "affiliate" shall mean any company or entity controlled by,
controlling, or under common control with a party hereto and shall include any
company fifty percent (50%) or more of whose voting stock or participating
profit interest is owned or controlled, directly or indirectly, by a party, and
any company which owns or controls, directly or indirectly, fifty percent (50%)
or more of the voting stock of a party.
5. Stockholder Communications. Respondents further agree that they shall
not, with respect to any communication with any actual or potential stockholder
of the Company, and
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shall cause their agents, subsidiaries, affiliates, representatives and family
members who are stockholders of the Company not to (i) make any disparaging
statements regarding the Company, its management, Board members, employees or
affiliates, (ii) disclose any confidential information regarding the Company or
any aspect of its business and (iii) for so long as Respondents or their
employees, agents, directors, subsidiaries affiliates own shares of Company
Common Stock, encourage any such stockholder or potential stockholder to (a)
vote against any management or Board proposal subject to stockholder vote or (b)
submit a proposal for stockholder approval not previously approved in writing by
the Board or (c) vote in favor of proposals that are expressly opposed by
Company management the Board. Respondents shall not be deemed in breach of
clause (iii) of the foregoing sentence unless the Company demonstrates to
Respondents the occurrence of such breach by a preponderance of the evidence.
Further, the obligations of Respondents in clause (iii) above shall be
applicable only during such time as Richard B. Hollis is either the Chairman or
the Chief Executive Officer of the Company, unless the reason for the his
failure to be either the Chairman or the Chief Executive Officer is due to his
death or disability.
6. Market Standoff Agreement. Respondents further agree, so long as
Respondents, collectively, hold at least one percent (1%) of the Company's
outstanding Common Stock and upon request of the underwriters managing an
underwritten public offering of the Company's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares of Common Stock without the prior written consent of such
underwriters, for such period of time (not to exceed 180 days) from the
effective date of the registration statement relating to such underwritten
public offering as may be requested by the underwriters; provided that the
executive officers and directors of the Company who own stock of the Company
also agree to such restrictions.
7. Confidentiality and Publicity. The provisions of this Agreement, the
Technology Assignment Agreement, the Sponsored Research and License Agreement
and the Common Stock and Warrant Agreement (collectively, the "New Agreements")
shall be held in strictest confidence by the Parties and shall not be publicized
or disclosed in any manner whatsoever other than pursuant to the press release
to be issued by the Company on or soon after the date hereof, a copy of which is
attached hereto as Exhibit G (the "Press Release"). Notwithstanding the
prohibition in the preceding sentence: (a) the Parties may disclose the New
Agreements in confidence to their respective attorneys, accountants, auditors,
tax preparers, and financial advisors (and, in the case of Prendergast, to
members of his immediate family); (b) the Company may disclose the New
Agreements as legally required corporate reporting or disclosure requirements;
and (c) the Parties may disclose the New Agreements insofar as such disclosure
may be necessary to enforce the terms of any of these agreements or as otherwise
required by law.
8. Termination of Prior Agreements. Subject to the execution of the New
Agreements, the Prior Agreements are hereby terminated and are of no further
force and effect. The Parties will retain no rights, duties or obligations
under any of the Prior Agreements.
9. Release of Claims by Respondents. Except as otherwise set forth in
this Agreement, Prendergast, Colthurst and Edenland, on their behalf and on
behalf of their directors,
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successors, assigns agents, employees, subsidiaries, representatives and
affiliates, hereby release, acquit and forever discharge the Company, its
officers, directors, agents, attorneys, servants, employees, stockholders,
successors, assigns and affiliates, of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, events, acts or conduct at any time prior to
and including the execution date hereof, including but not limited to: any and
all such claims and demands directly or indirectly arising out of or in any way
connected with the Actions, the Prior Agreements; claims or demands related to
fees, royalties, stock, stock options, or any other ownership interests in the
Company, expense reimbursements or any other form of compensation; claims
pursuant to any federal, state or local law or cause of action including, but
not limited to, tort law, contract law, discrimination, fraud, defamation,
emotional distress, and breach of the implied covenant of good faith and fair
dealing. Notwithstanding the foregoing, this release shall not include any
claims based on obligations created by or reaffirmed in New Agreements.
10. Release of Claims by the Company. Except as otherwise set forth in
this Agreement, the Company, on its behalf and on behalf of its directors,
successors, assigns, agents, employees, subsidiaries, representatives and
affiliates, hereby releases, acquits and forever discharges Colthurst, Edenland,
their officers, directors, agents, attorneys, servants, employees, stockholders,
successors, subsidiaries, assigns and affiliates, and Prendergast, his heirs,
legatees, successors and assigns of and from any and all claims, liabilities,
demands, causes of action, costs, expenses, attorneys' fees, damages and
obligations of every kind and nature, in law, equity, or otherwise, known and
unknown, suspected and unsuspected, disclosed and undisclosed, arising out of or
in any way related to agreements, events, acts or conduct at any time prior to
and including the execution date hereof, including but not limited to: any and
all such claims and demands directly or indirectly arising out of or in any way
connected with the Actions, the Prior Agreements; claims or demands related to
fees, royalties, stock, stock options, or any other ownership interests in the
Company, expense reimbursements or any other form of compensation; claims
pursuant to any federal, state or local law or cause of action including, but
not limited to, tort law, contract law, discrimination, fraud, defamation,
emotional distress, and breach of the implied covenant of good faith and fair
dealing. Notwithstanding the foregoing, this release (i) shall not include any
claims based on obligations created by or reaffirmed in the New Agreements and
(ii) is not intended to release any indemnification rights that the Company may
have in connection with any third party action or claim against the Company.
11. Section 1542 Waiver. The Parties acknowledge that they have read and
understand Section 1542 of the Civil Code of the State of California, which
reads as follows:
A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the release,
which if known by him must have materially affected his settlement with the
debtor.
The Parties hereby expressly waive and relinquish all rights and benefits under
that section and any law or legal principle of similar effect in any
jurisdiction with respect to the release granted in this Agreement.
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It is understood by the Parties that the facts may turn out to be other than
or different from, the facts now believed by the parties to be true. Each party
expressly assumes the risk of the facts turning out to be different that he or
it believes them to be, and each party agrees that the Agreement shall in all
respects be effective and not subject to termination or rescission because of
any such mistake in belief.
12. No Admissions. It is understood and agreed by the Parties that this
Agreement represents a compromise settlement of various matters, and that the
promises and payments in consideration of this Agreement shall not be construed
to be an admission of any liability or obligation by either Party to the other
Party or to any other person.
13. Notices. All notices, instructions and other communications given
hereunder or in connection herewith shall be in writing. Any such notice,
instruction or communication shall be sent either (a) by registered or certified
mail, return receipt requested, postage prepaid, or (b) via a reputable
international express courier service, in each case to the address set forth
below. Any such notice, instruction or communication shall be deemed to have
been delivered three business days after it is mailed, by certified mail,
postage prepaid, return receipt requested, or one business day after it is sent
via a reputable international express courier service.
If to the Company: Hollis-Eden Pharmaceuticals, Inc.
9333 Genesee Avenue, Suite 200
San Diego, California 92121
Attn: Chief Executive Officer
With a copy to: William E. Grauer, Esq.
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
If to Prendergast
Colthurst, or
Edenland: Patrick T. Prendergast
c/o Colthurst Limited and Edenland, Inc.
Baybush, Straffan
County Kildare
Ireland
With a copy to: David. A. Donohoe, Esq.
Akin, Gump, Strauss, Hauer & Feld LLP
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Any Party may give any notice, instruction or communication in connection with
this Agreement using any other means (including personal delivery, telecopy or
ordinary mail), but no such notice, instruction or communication shall be deemed
to have been delivered unless and until it is actually received by the Party to
whom it was sent. Any Party may change the address to which
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notices, instructions or communications are to be delivered by giving the other
Party to this Agreement notice thereof in the manner set forth in this paragraph
13.
14. Entire Agreement. This Agreement, including, Exhibits D-G hereto,
constitute the complete, final and exclusive embodiment of the entire agreement
between Respondents and the Company with regard to the subject matter hereof,
and supersedes the Prior Agreements. It is entered into without reliance on any
promise or representation, written or oral, other than those expressly contained
herein. It may not be modified except in a writing signed by Prendergast and a
duly authorized officer of the Company. Each Party has carefully read this
Agreement, has been afforded the opportunity to be advised of its meaning and
consequences by his or its respective attorneys, and signed the same of his or
its own free will.
15. Successors and Assigns. This Agreement shall bind the heirs, personal
representatives, successors, assigns, executors, and administrators of each
Party, and inure to the benefit of each Party, its heirs, successors and
assigns.
16. Applicable Law. This Agreement shall be deemed to have been entered
into and shall be construed and enforced in accordance with the laws of the
State of California as applied to contracts made and to be performed entirely
within California.
17. Severability. If a court of competent jurisdiction determines that
any term or provision of this Agreement is invalid or unenforceable, in whole or
in part, then the remaining terms and provisions hereof shall be unimpaired.
Such court will have the authority to modify or replace the invalid or
unenforceable term or provision with a valid and enforceable term or provision
that most accurately represents the Parties' intention with respect to the
invalid or unenforceable term or provision.
18. Arbitration. To ensure rapid and economical resolution of any
disputes which may arise under this Agreement, the Technology Assignment
Agreement, the Sponsored Research and License Agreement or the Common Stock and
Warrant Agreement, the Parties agree that any and all disputes or controversies
of any nature whatsoever, arising from or regarding the interpretation,
performance, enforcement or breach of this Agreement, the Technology Assignment
Agreement, the Sponsored Research and License Agreement or the Common Stock and
Warrant Agreement shall be resolved by confidential, final and binding
arbitration (rather than trial by jury or court or resolution in some other
forum) to the fullest extent permitted by law. Any arbitration proceeding
pursuant to this Agreement shall be conducted by the American Arbitration
Association ("AAA") in San Diego, under the then existing AAA commercial
arbitration rules. All costs of arbitration, including reasonable attorneys'
fees, shall be paid by the parties as ordered by the final decision of the
arbitrator. Notwithstanding anything to the contrary contained herein, any
party may apply to a court of competent jurisdiction for equitable relief for
any breach or threatened breach of this Agreement, including but not limited to
restraining orders and affirmative injunctive relief, and for ancillary orders
in aid of the arbitration panel. Colthurst, Edenland, Prendergast and the
Company agree to the jurisdiction and venue in the federal and state courts
located in San Diego, California with respect to any such equitable relief.
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If for any reason all or part of this arbitration provision is held to
be invalid, illegal, or unenforceable in any respect under any applicable law or
rule in any jurisdiction, such invalidity, illegality or unenforceability will
not effect any other portion of this arbitration provision or any other
jurisdiction, but this provision will be reformed, construed and enforced in
such jurisdiction as if such invalid, illegal or unenforceable part or parts of
this provision had never been contained herein, consistent with the general
intent of the Parties insofar as possible.
19. Mutual Drafting. The parties acknowledge that each of the parties
participate in the drafting and negotiation of this Agreement. For purposes of
interpreting this Agreement, each provision, paragraph, sentence and word herein
shall be deemed to have been mutually drafted by the parties. The parties
intend for this Agreement to be construed and interpreted mutually in accordance
with the plain meaning of the language contained herein, and are presumptively
construed against any actual or purported draft or of any specific language
contained herein.
20. Further Steps. Each party shall promptly take whatever reasonable
other and further steps may be necessary to effectuate the intent of this
Agreement.
21. Authority. Each of the parties and its signatory represents that the
signatory is either a party or a business representative or assignee of a party,
and is fully authorized to execute this Agreement on behalf of the party for
whom he signs.
22. Section Headings. The section and paragraph headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
23. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed an original, all of which together shall
constitute one and the same instrument. Including signature pages, this
Agreement consists of eight (8) pages.
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IN WITNESS WHEREOF, the Parties have duly authorized and caused this Agreement
to be executed as follows:
PATRICK T. PRENDERGAST, HOLLIS-EDEN PHARMACEUTICALS, INC.
an individual
/s/ Patrick T. Prendergast By: /s/ Richard B. Hollis
- ------------------------------ -----------------------------
Patrick T. Prendergast Richard B. Hollis
COLTHURST LIMITED EDENLAND, INC.
By: /s/ Patrick T. Prendergast By: /s/ Patrick T. Prendergast
--------------------------- --------------------------------
Patrick T. Prendergast Patrick T. Prendergast
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EXHIBIT 99.3
TECHNOLOGY ASSIGNMENT AGREEMENT
This TECHNOLOGY ASSIGNMENT AGREEMENT ("Agreement") is made and entered
into as of January 20, 2000 (the "Effective Date"), by and among COLTHURST
LIMITED, a corporation duly organized and existing under the laws of Belize with
a principal place of business at Baybush, Straffan, County Kildare, Ireland
(hereinafter "Colthurst"), PATRICK T. PRENDERGAST, of Baybush, Straffan, County
Kildare, Ireland (hereinafter "Prendergast"), and HOLLIS-EDEN PHARMACEUTICALS,
INC., a Delaware corporation having a place of business at 9333 Genessee Avenue,
Suite 200, San Diego, California 92121 (hereinafter "Hollis-Eden").
RECITALS
WHEREAS, Colthurst and/or Prendergast own all right, title, and interest in
the patents and applications listed in Attachment A hereto and certain related
know-how and intellectual property (except any such interest as Hollis-Eden may
have thereto);
WHEREAS, Colthurst, Prendergast and Hollis-Eden are parties to that certain
Settlement and Mutual Release Agreement entered into concurrently herewith (the
"Settlement Agreement") that terminates that certain License Agreement executed
on August 25, 1994 by the Parties (the "Colthurst License Agreement");
WHEREAS, as provided in the terms of the Settlement Agreement, Colthurst
and Prendergast shall assign and alienate all of their right, title, and
interest in and to the Patents and Applications and the Technology (as defined
below), and Hollis-Eden shall acquire the entire ownership rights to the Patents
and Applications and Technology, pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
As used in the Agreement, the following capitalized terms shall have the
following meaning:
"Patents and Applications" means: (a) all patents and patent applications
identified in Attachment A; (b) all patents throughout the world that have
issued or may issue from the patents and applications identified in Attachment A
and including any continuation, continuation-in-part or divisional application
of any of them, and any reissue, reexamination, extension or substitution of any
of the foregoing patents, as well as renewals, reexaminations, reissues or
extensions of said patents, and all rights under the International Convention
for the Protection of Industrial Property, and (c) the Related Patents and
Applications.
1
<PAGE>
"Related Patents and Applications" means: (a) all patents and patent
applications, wherever filed in the world, that claim any aspect of the
Technology, whether filed before or after the Effective Date; (b) all
continuation applications, continuation-in-part applications, and divisional
applications of any of the foregoing; (c) any reissue, reexamination, extension
or substitution of any of such patents, as well as renewals, reexaminations,
reissues or extensions of the patents, and all rights under the International
Convention for the Protection of Industrial Property.
"Know-How" means any and all inventions, discoveries, information, trade
secrets, know-how procedures, expertise, data, results, or other technical or
scientific information which is not in the public domain, and which is not
disclosed in a patent.
"Technology" means any and all Know-How that relates in any way to (a) that
certain compound the Parties refer to as HE2000 and/or compounds related to
HE2000, or any of the DHEA analogs, derivatives or metabolites thereof,
including without limitation methods for making or using such compounds or (b)
the subject matter disclosed in the Patents and Applications.
ARTICLE II
ASSIGNMENT AND TRANSFER
2.1 In consideration of entering into the Settlement Agreement and of
Hollis-Eden's obligations under that certain Common Stock and Warrant Agreement,
the form of which is attached hereto as Attachment B (the "Common Stock and
Warrant Agreement"), by and between Hollis-Eden and Prendergast of even date
herewith, Colthurst and Prendergast, both individually and together, hereby
irrevocably, perpetually and forever assign and agree to assign, sell, transfer,
deliver and convey to Hollis-Eden all of their right, title and interest in and
to the Patents and Applications and the Technology, as of the Effective Date,
together with all powers and privileges appertaining thereto, and Hollis-Eden
hereby accepts such assignment. Accordingly, Colthurst and Prendergast
relinquish all rights and disclaim all interests in the Patents and Applications
and the Technology.
2.2 Hollis-Eden shall have the sole and exclusive right, but not the duty,
to take all measures consistent with or permitted by ownership of the Patents
and Applications and the Technology, including but not limited to patent
prosecution and enforcement, in all countries and jurisdictions in the world.
2.3 Hollis-Eden shall have the sole and exclusive right, but not the duty:
(a) to prosecute (including through reissue, reexamination, opposition
or appeal) the patent applications within Patents and Applications, and claiming
inventions in the Technology, including continuations, continuations-in-part and
divisionals thereof, as well as to prosecute any reissue patent applications and
any re-examination patent applications as a part of any reissue or re-
examination proceeding;
2
<PAGE>
(b) to enter any claim of any patent or application into interference
and to prosecute interference;
(c) to procure any patent resulting from the prosecution set forth in
Section 2.3(a) and 2.3(b); and
(d) to maintain all issued patents worldwide. Notwithstanding the
foregoing, Hollis-Eden shall not have the duty or obligation to prosecute, issue
or maintain any patent or application.
2.4 Hollis-Eden shall have the sole and exclusive right, but not the duty,
to grant licenses under the Patents and Applications and to collect royalty
and/or other payments therefor.
2.5 Hollis-Eden shall have the sole and exclusive right, but not the duty,
to sue on the patents in the Patents and Applications, and to collect all
damages and profits for any past, present and/or future infringements thereof.
2.6 Hollis-Eden shall have the sole and exclusive right, but not the duty,
to bring and maintain any action necessary to defend its rights to the Patents
and Applications, and/or the Technology, including but not limited to actions in
copyright and trade secret.
2.7 Any such licenses or suits of Sections 2.4, 2.5, and/or 2.6,
respectively, shall be undertaken at Hollis-Eden's sole discretion and for its
sole benefit.
2.8 Colthurst and Prendergast shall execute and deliver to Hollis-Eden
and/or its representatives (at Hollis-Eden's request and expense) all documents
and instruments, to be prepared by Hollis-Eden, as are reasonably necessary for
Hollis-Eden to perfect and/or record any of the rights that are granted to it
under this Agreement. Such documents shall include appropriate patent
assignment documents, which Colthurst and Prendergast shall execute within
fourteen (14) days after the execution of this Agreement. Such acts of
perfecting and recording shall be at Hollis-Eden's expense.
2.9 Colthurst and Prendergast shall deliver or cause to be delivered to
Hollis-Eden and/or its representatives within twenty-one (21) days after
execution of this Agreement any and all tangible manifestations of the Patents
and Applications and/or the Technology in Colthurst's and/or Prendergast's
possession or control; including without limitation all patent prosecution files
and all documents containing, comprising, or evidencing the Technology;
provided, however, that copies of such documents may be retained for their
records. The foregoing requirement notwithstanding, Colthurst and Prendergast
shall not be required to deliver to Hollis-Eden any documents that are subject
to the attorney-client privilege or work product doctrine; provided, that a
complete privilege log ("Privilege Log") is provided to Hollis-Eden for each
document being withheld. The Privilege Log must set forth as to each document
being withheld, its date, its identity, (e.g. letter, research memorandum, etc.)
its author, the identity of the recipient(s) of the original and any copies, and
the basis upon which the document is being withheld (attorney-client privilege
or attorney work product). Hollis-Eden shall have ten (10)
3
<PAGE>
business days to dispute the assertion of any privilege, as it pertains to the
disclosures and delivery required by this paragraph.
2.10 Colthurst and Prendergast agree that, upon execution of this
Agreement, it will instruct its legal representatives and all other relevant
third parties to provide to Hollis-Eden and/or its representatives, within
twenty-one (21) days after the execution of this Agreement, all notes, records,
files, prototypes, and other tangible items of any sort in their possession or
control pertaining to the Patents and Applications and/or the Technology;
provided, however, that copies of such documents may be retained for their
records. The foregoing requirement notwithstanding, Colthurst and Prendergast
shall not be required to deliver to Hollis-Eden any documents that are subject
to the attorney-client privilege or work product doctrine; provided, that
Privilege Log is provided to Hollis-Eden for each document being withheld.
Hollis-Eden shall have ten (10) business days to dispute the assertion of any
privilege, as it pertains to the disclosures and delivery required by this
paragraph.
2.11 Colthurst and Prendergast agree, if so requested by Hollis-Eden and at
Hollis-Eden's expense, to provide all reasonable technical assistance in
prosecution of any patent application in the Patents and Applications and/or the
Technology, related to and/or arising from the Agreement until all prosecution
of patent applications in the Patents and Applications and/or the Technology in
all patent offices worldwide is completed.
ARTICLE III
CONSIDERATION
3.1 Upon receipt by Hollis-Eden of the documents required to be delivered
pursuant to Sections 2.9 and 2.10 and the second sentence of Section 2.8,
Hollis-Eden shall issue to Colthurst (i) 132,000 shares of Hollis-Eden Common
Stock, out of the total of 660,000 shares of Hollis-Eden Common Stock to be
issued over time (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like), and (ii) warrants to purchase an aggregate of
400,000 shares of Hollis-Eden Common Stock (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like), at an exercise price of
$25.00 per share, pursuant to the vesting schedules and other terms, provisions
and conditions of the Common Stock and Warrant Agreement.
4
<PAGE>
ARTICLE IV
NO FURTHER DEVELOPMENT
4.1 Neither Colthurst nor Prendergast, nor any of their affiliates,
agents, representatives or employees, shall conduct any further research,
development or commercialization activities of any kind relating in any way to
the Technology in any country or jurisdiction in the world.
4.2 Colthurst and Prendergast hereby agree that all Know-How transferred
from Colthurst and Prendergast to Hollis-Eden pursuant to this Agreement, the
Patents and Applications and their content, and all information relating to the
Technology, are the confidential information of Hollis-Eden ("Confidential
Information of Hollis-Eden"). It is agreed and understood that Confidential
Information of Hollis-Eden shall not include any information which Colthurst and
Prendergast can prove by competent evidence is now or hereafter becomes (through
no act or failure to act on the part of Colthurst, Prendergast or any of their
affiliates, agents, representatives or employees) publicly known or available.
4.3 Colthurst and Prendergast covenant and agree that they and their
affiliates, representatives, agents and employees will not publish or disclose
any Confidential Information of Hollis-Eden unless Hollis-Eden has given
Colthurst or Prendergast the prior written permission to do so, which permission
may be withheld at Hollis-Eden's sole discretion.
4.4 Colthurst and Prendergast shall remove from their website and all
other publicly available sources within the control of Colthurst or Prendergast
all Confidential Information of Hollis-Eden, including without limitation all
clinical data and discussions, or information relating to the Technology.
ARTICLE V
WARRANTIES, REPRESENTATIONS AND ACKNOWLEDGEMENTS
5.1 Each of Colthurst and Prendergast, severally and not jointly,
represents, covenants, and warrants to Hollis-Eden, its successors, legal
representatives and assigns that as of the Effective Date hereof:
5.1.1 it or he has full legal right, power and authority to enter
into and perform this Agreement;
5.1.2 they together or individually are the sole and lawful owner
or owners of the entire right, title, and interest in and to the Patents and
Applications and the Technology (except any such interest as Hollis-Eden may
have thereto);
5
<PAGE>
5.1.3 there are no outstanding liens, licenses and/or encumbrances
burdening the Patents and Applications and the Technology or any part thereof
(except for the license to Hollis-Eden under the Colthurst License Agreement);
5.1.4 all Patents and Applications, excluding those patents and
applications that have not yet been filed, are active and in force in the U.S.
or other territories to which they apply;
5.1.5 except as set forth on Exhibit C of that certain Sponsored
Research and License Agreement, dated as of the date hereof, among Edenland,
Inc. and the parties hereto, neither Colthurst nor Prendergast (nor any of their
affiliates) possesses any Know-How or has filed any patents or patent
applications relating to a compound or composition that elicits the same or
similar biological activity as the Technology;
5.1.6 it or he has not granted, expressly or otherwise, an
assignment or any license or other right, exclusive or otherwise, to or under
the Patents and Applications and/or the Technology, which rights remain in
force;
5.1.7 it or he has received no notice of any pending or threatened
claims of infringement or misappropriation with respect to the Patents and
Applications, and knows of no reason that it would receive such notice;
5.1.8 it or he has not executed and will not execute any
agreements inconsistent with this Agreement or to the detriment of the Patents
and Applications assigned hereby; and
5.1.9 it or he shall sign all papers and documents, take all
lawful oaths, and do all acts necessary or required to be done for the
procurement, maintenance, enforcement and defense of the Patents and
Applications throughout the world at the cost and expense of Hollis-Eden, its
successors, legal representatives and assigns.
5.2 Hollis-Eden represents and warrants to Colthurst and Prendergast that
as of the Effective Date hereof it has full legal right, power and authority to
enter into and perform this Agreement.
5.3 Colthurst and Prendergast each agrees that if Colthurst or Prendergast
is unable for any reason, after reasonable effort, to secure any of relevant
signatures on any document needed in connection with the actions specified
herein relating to the Patents and Applications and the Technology, Colthurst
and Prendergast hereby irrevocably designates and appoints Hollis-Eden and its
duly authorized officers and agents as its agent and attorney in fact, which
appointment is coupled with an interest, to act for and in its behalf to
execute, verify and file any such documents and to do all other lawfully
permitted acts to further the purposes of this Agreement with the same legal
force and effect as if executed by Colthurst or Prendergast.
6
<PAGE>
ARTICLE VI
INDEMNIFICATION AND LIABILITY
6.1 Colthurst and Prendergast, severally and not jointly, hereby agree to
save, defend and hold Hollis-Eden and its directors, employees and agents
harmless from and against any and all damages, expenses, losses, suits, claims,
actions, demands, and/or liabilities, including reasonable legal expenses and
attorneys' fees, resulting from any breach of the representations, warranties or
covenants of Article V.
6.2 To the extent Hollis-Eden may maintain product liability insurance,
Hollis-Eden agrees to make Colthurst and Prendergast a named insured under such
insurance.
ARTICLE VII
MISCELLANEOUS
7.1 Notices. Notices, approvals, and consents required or permitted under
this Agreement shall be in writing and shall be sent by hand or by certified
mail, postage prepaid, to such addresses as the parties may hereafter specify;
or by facsimile with electronic confirmation of receipt.
7.2 No Waiver. No waiver of any right under this Agreement shall be
deemed effective unless contained in a writing signed by the party charged with
such waiver. Failure by either party to exercise any of its rights hereunder
shall not constitute or be deemed a waiver or forfeiture of such rights.
7.3 Entire Agreement. This Agreement, including Attachments A and B
hereto, sets forth the entire understanding of the parties with respect to the
subject matter herein and supersedes all prior agreements, whether oral or
written, between them. This Agreement may not be modified after its execution
except by a writing signed by authorized representatives of the parties hereto.
7.4 Draftsmanship. This Agreement and the wording contained herein have
been arrived at by mutual negotiations of the parties, and no provision hereof
shall be interpreted or construed against one party in favor of another party
merely by reason of draftsmanship.
7.5 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the parties hereto, their respective heirs, executors,
administrators, successors and assigns.
7.6 Severability. If any provision of this Agreement is or becomes or is
deemed invalid, illegal, or unenforceable in any jurisdiction, such provision
shall be deemed amended to conform to applicable laws so as to be valid and
enforceable, or, if it cannot be so amended
7
<PAGE>
without materially altering the intention of the parties, it shall be stricken
and the remainder of this Agreement shall remain in full force and effect.
7.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to its
conflicts of law provisions, as though it were written, executed and fully
performed within the State of California.
7.8 Dispute Resolution. In the event of any dispute arising under this
Agreement, the parties shall refer such dispute to the Chief Executive Officer
of Hollis-Eden and Prendergast for attempted resolution by good faith
negotiations within thirty (30) days after such referral is made. In the event
such officers are unable to resolve such dispute within such thirty (30) day
period, the parties may invoke the provisions of Sections 7.9 and 7.10 below.
7.9 Remedies of the Company. Colthurst and Prendergast acknowledge that
irreparable damage would result to Hollis-Eden if they breach any provision of
this Agreement, and the Company would not have an adequate remedy at law for
such a breach or threatened breach. In the event of such a breach or threatened
breach, Colthurst and Prendergast agree that Hollis-Eden may, notwithstanding
anything to the contrary herein contained, and in addition to the other remedies
which may be available to it, seek to enjoin them, together with all those
persons associated with them, from the breach or threatened breach of such
covenants, in a court of competent jurisdiction. Colthurst, Prendergast and
Hollis-Eden agree to the jurisdiction and venue in the federal and state courts
located in San Diego, California.
7.10 Arbitration. To ensure rapid and economical resolution of any
disputes which may arise under this Agreement, the parties agree that any and
all disputes or controversies of any nature whatsoever, arising from or
regarding the interpretation, performance, enforcement or breach of this
Agreement shall be resolved by confidential, final and binding arbitration
(rather than trial by jury or court or resolution in some other forum) to the
fullest extent permitted by law. Any arbitration proceeding pursuant to this
Agreement shall be conducted by the American Arbitration Association ("AAA") in
San Diego, under the then existing AAA commercial arbitration rules. If for any
reason all or part of this arbitration provision is held to be invalid, illegal,
or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not effect
any other portion of this arbitration provision or any other jurisdiction, but
this provision will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable part or parts of this provision had
never been contained herein, consistent with the general intent of the Parties
insofar as possible.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their
respective authorized representatives as of the date first set forth above.
PATRICK T. PRENDERGAST, HOLLIS-EDEN PHARMACEUTICALS, INC.
an individual
/s/ Patrick T. Prendergast By: /s/ Richard B. Hollis
- ----------------------------- -------------------------------------
Patrick T. Prendergast Richard B. Hollis
COLTHURST LIMITED
By: /s/ Patrick T. Prendergast
- ------------------------------
Patrick T. Prendergast
9
<PAGE>
Attachment A
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Docket Filing Serial # Patent Issue Expiration Annuity
Number Date (Publication #) Number Date Date Due
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
bromoepiandrosterone and analogs for retrovirus infections
- ------------------------------------------------------------------------------------------------------------
150IE 4/16/87 997/87 abn*
- ------------------------------------------------------------------------------------------------------------
* pnd = pending, abn = abandoned
bromoepiandrosterone and analogs for retrovirus infections
- ------------------------------------------------------------------------------------------------------------
150.1IE 8/27/87 2289/87 abn
150.1US 8/27/87 07/090637 abn
- ------------------------------------------------------------------------------------------------------------
bromoepiandrosterone and analogs for retrovirus infections
- ------------------------------------------------------------------------------------------------------------
150.2AT 4/15/88 88984 401470 2/15/96
150.2AU 4/15/88 14678/88 608824 9/02/91
150.2BE 4/15/88 8800428 1004315 4/15/88
150.2CA 4/15/88 564245 1325594 12/28/93
150.2CH 4/15/88 1393/88 675358-9
150.2DE 4/15/88 P3812595.1 3812595 7/3/97
150.2DK 4/15/88 882081 pnd
150.2FI 4/15/88 881773 abn
150.2FR 4/15/88 8805043 2615394 9/23/94
150.2GB 4/14/88 888864 2204237 2/6/91 abn
150.2GR 4/15/88 881002248 1002248 6/22/96
150.2IL 4/15/88 86089 86089 2/16/93
150.2IT 4/15/88 47858A/88 1227073
150.2JP 4/15/88 93293/88 2577771 11/7/96
150.2KR 4/15/88 4283/88 112076 1/3/97
150.2LU 4/15/88 87202 87202 abn
150.2NL 4/15/88 8800926 pnd
150.2NZ 4/15/88 224272 224272
150.2NZ.D 12/3/90 236303 236303
150.2OA 08729 abn
150.2PH 4/14/88 36798 25907 12/19/91
150.2PT 4/15/88 87259 87259 abn
150.2SE 4/15/88 8801406-3 0503482 6/24/96
150.2US 4/15/88 07/182480 4956355 9/11/90 9/11/07
150.2ZA 4/15/88 882667 88/2667 12/28/88
- -----------------------------------------------------------------------------------------------------------
17-ketosteroids to treat malaria & trypanosomes
- -----------------------------------------------------------------------------------------------------------
157P 11/24/98 60/109923 abn
157.1 11/24/99 09/449004 pnd
157.1F 11/24/99 US99/28079 pnd
- ------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Docket Filing Serial # Patent Issue Expiration Annuity
Number Date (Publication #) Number Date Date Due
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
17-ketosteroids to treat Togaviruses (HCV, BVDV)
- ------------------------------------------------------------------------------------------------------------
158P 11/24/98 60/109924 abn
158.1 11/24/99 09/449184 pnd
158.1F 11/24/99 US99/28082 pnd
- ------------------------------------------------------------------------------------------------------------
17-ketosteroids to treat toxoplasma & cryptosporidia
- ------------------------------------------------------------------------------------------------------------
159P 11/27/98 60/110127 abn
159.1 11/24/99 09/449042 pnd
159.1F 11/24/99 US99/28080 pnd
- ------------------------------------------------------------------------------------------------------------
therapeutic complexes
- ------------------------------------------------------------------------------------------------------------
160IE 6/8/93 93930590 95930590
- ------------------------------------------------------------------------------------------------------------
liposomes containing hydroxyl-substituted aliphatic carbocyclic compounds
- ------------------------------------------------------------------------------------------------------------
161IE 10/27/93 93930811 95930811
- ------------------------------------------------------------------------------------------------------------
colloidal suspension formulation method for therapeutic use
- ------------------------------------------------------------------------------------------------------------
162IE 5/25/95 95950377 pnd
- ------------------------------------------------------------------------------------------------------------
EBV treatment methods
- ------------------------------------------------------------------------------------------------------------
165P file January 2000
steroid therapeutic agents
- ------------------------------------------------------------------------------------------------------------
202P 3/11/99 60/124087 pnd
202.1P 3/23/99 60/126056 pnd
- ------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
EXHIBIT 99.4
COMMON STOCK AND WARRANT AGREEMENT
THIS COMMON STOCK AND WARRANT AGREEMENT (the "Agreement") is made as
of January 20, 2000 between HOLLIS EDEN PHARMACEUTICALS, INC., a Delaware
corporation (the "Company"), and COLTHURST LIMITED, a Belize corporation (the
"Purchaser").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
that certain Settlement and Mutual Release Agreement of even date herewith among
Purchaser, Edenland, Inc., a Belize corporation ("Edenland"), Patrick T.
Prendergast ("Prendergast") and the Company (the "Settlement Agreement"), that
certain Technology Assignment Agreement of even date herewith among the
Purchaser, Prendergast and the Company (the "Assignment Agreement"), the Company
and the Purchaser agree as follows:
1. AUTHORIZATION OF ISSUANCE OF THE SHARES AND THE WARRANT. Subject to the
terms and conditions of this Agreement, the Company has authorized the issuance
of (i) six hundred sixty thousand (660,000) shares of Common Stock of the
Company (the "Shares") and (ii) a Warrant to purchase four hundred thousand
(400,000) shares of the Common Stock of the Company at an exercise price of
twenty-five dollars ($25.00) per share in the form attached hereto as Exhibit A
(the "Warrant"), in consideration for Purchaser's execution and performance of
the Settlement Agreement and the Assignment Agreement. The number of Shares and
the number of shares subject to the Warrant are subject to adjustment in
accordance with Section 8.5 hereof and the terms of the Warrant, respectively.
2. AGREEMENT TO ISSUE AND PURCHASE THE SHARES AND THE WARRANT.
2.1 Issuance of the Shares and the Warrant. At the Closings (as defined
in Section 3), the Company will issue to the Purchaser, and the Purchaser will
purchase from the Company, upon the terms and conditions hereinafter set forth,
the Shares and the Warrant. The consideration for the Shares and the Warrant is
Purchaser's execution and performance of the Settlement Agreement and the
Assignment Agreement. No further payment will be required for the Shares and
the Warrant. The Shares and the shares of the Company's Common Stock issuable
upon exercise of the Warrant (the "Warrant Shares") shall have the rights,
preferences, privileges and restrictions set forth in the Company's Amended and
Restated Certificate of Incorporation, as amended to date (the "Certificate").
3. CLOSINGS. The completion of the purchase and issuance of the Shares and
the Warrant shall occur in a number of closings as set forth below
(individually, a "Closing" and collectively, the "Closings").
3.1 Delivery of Shares and the Warrant at the Initial Closing. Subject to
the provisions of Section 4.1 hereof and any applicable withholding obligations
of the Company, the completion of the purchase and issuance of the first one
hundred thirty-two thousand (132,000) shares of the Shares and the Warrant to be
issued pursuant to this Agreement (the "Initial Closing") shall occur (i) upon
receipt by the Company of (A) a copy of this Agreement together with all
exhibits and schedules hereto, each of which has been executed on Purchaser's
behalf, (B) a copy of the Settlement Agreement which has been executed by all
parties thereto, (C) a copy of the Assignment Agreement which has been executed
by all parties thereto, (D) copies of the documents specified in Section 2.9,
Section 2.10 and the second sentence of
1.
<PAGE>
Section 2.8 of the Assignment Agreement (collectively the "Assignment
Documents") and (E) a completed Warrant and Stock Certificate Questionnaire, the
form of which is attached hereto as Exhibit B, or (ii) following the occurrence
of the actions set forth in clause (i) above, on such other date as may be
agreed to by the Company and the Purchaser. At the Initial Closing, the Company
shall deliver to the Purchaser or the Purchaser's representative, in accordance
with the Purchaser's delivery instructions, (A) a copy of this Agreement
together with all exhibits and schedules hereto, each of which has been executed
on behalf of the Company, (B) a copy of the Settlement Agreement which has been
executed on behalf of the Company, (C) a copy of the Assignment Agreement which
has been executed on behalf of the Company, (D) the Warrant which has been
executed by the Company and (E) one or more stock certificates registered in the
name of the Purchaser, or in such nominee name(s) as designated by the
Purchaser, representing one hundred thirty-two thousand (132,000) of the Shares.
The name(s) in which the stock certificates are to be issued shall be set forth
in the Stock Certificate Questionnaire attached hereto as Exhibit B, as
completed by Purchaser.
3.2 Delivery of Shares at Subsequent Closings. Subject to the provisions
of Section 4.2 hereof and any applicable withholding obligations of the Company,
the completion of the purchase and issuance of the remaining five hundred
twenty-eight thousand (528,000) shares of the Shares to be issued pursuant to
this Agreement shall occur in four subsequent closings, a closing to occur on
each of the first, second, third and fourth anniversary of the date of this
Agreement (collectively, the "Subsequent Closings" and each individually a
"Subsequent Closing") (i) upon receipt by the Company of a certificate dated as
of the date of the Subsequent Closing, in which the Purchaser and Prendergast
represent and warrant, without qualification, that a Triggering Event (as
defined below) has not occurred ("Compliance Certificate"), or (ii) following
the occurrence of the actions set forth in clause (i) above on such other date
as may be agreed to by the Company and the Purchaser. At each Subsequent
Closing, the Company shall deliver to the Purchaser or the Purchaser's
representative, in accordance with the Purchaser's delivery instructions, one or
more stock certificates registered in the name of the Purchaser, or in such
nominee name(s) as designated by the Purchaser, representing one hundred thirty-
two thousand (132,000) shares of the Shares. The name(s) in which the stock
certificates are to be issued shall be as set forth in the Stock Certificate
Questionnaire delivered by Purchaser to the Company pursuant to Section 3.1,
unless the Company is otherwise instructed in writing by the Purchaser prior to
the issuance thereof.
4. CONDITIONS TO CLOSINGS.
4.1 Conditions to Initial Closing. The Company's obligation to complete
the purchase and issuance of the Warrant and initial one hundred thirty-two
thousand (132,000) shares of the Shares and deliver such stock certificate(s) to
the Purchaser at the Closing shall be subject to the following conditions, one
or more of which may be waived in writing by the Company: (i) the accuracy of
the representations and warranties made by the Purchaser herein as of the
Closing; and (ii) the execution, where appropriate, and delivery by the
Purchaser of the Assignment Documents.
4.2 Conditions to Subsequent Closings. The Company's obligation to
complete the purchase and issuance of the Shares and deliver such stock
certificate(s) to the Purchaser at each Subsequent Closing shall be subject to
the following conditions, any one or more of which may
2.
<PAGE>
be waived in writing by the Company: (i) the accuracy of the representations and
warranties made by the Purchaser in Section 6 hereof as of the date of such
Subsequent Closing; (ii) the accuracy of the representations and warranties made
by the Purchaser and Prendergast in Article V of the Assignment Agreement as of
the date of hereof; (iii) the delivery by Purchaser of an executed Compliance
Certificate; and (iv) the non-occurrence of a Triggering Breach prior to the
Subsequent Closing. For purposes of this Agreement a "Triggering Breach" shall
mean the occurrence of any of the following events following the date of this
Agreement: Purchaser, any of its employees, agents, directors, subsidiaries,
representatives or affiliates, or Prendergast or any of his family members who
are stockholders of the Company (i) fail to support, and vote all of his, her or
its shares of Common Stock of the Company in favor of, any management or board
of directors proposals subject to a stockholder vote of the Company; (ii)
encourage any of the Company's stockholders or potential stockholders to (a)
vote against any management or board of directors proposal subject to
stockholder vote of the Company, (b) submit a proposal for stockholder approval
not previously approved in writing by the Company's board of directors, or (c)
vote in favor of any proposal subject to stockholder vote of the Company not
supported by the Company's board of directors; (iii) conduct any further
research or development of any kind relating to the Technology (as defined in
the Assignment Agreement); or (iv) make any short sale or maintain any short
position, or establish or maintain a "put equivalent position" (within the
meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended)
with respect to the Company's Common Stock. The actions described in clause (ii)
of the foregoing sentence shall not constitute a Triggering Breach unless the
Company demonstrates to the Purchaser the occurrence of such actions by a
preponderance of the evidence. The actions described in clauses (i) and (ii)
above shall constitute a Triggering Breach only during such time as Richard B.
Hollis is either the Chairman or the Chief Executive Officer of the Company,
unless the reason for the his failure to be either the Chairman or the Chief
Executive Officer is due to his death or disability. In the event that a
Triggering Breach occurs, the Purchaser acknowledges and agrees that it will
have no further claim to (i) any additional Shares or (ii) the Technology or the
Patents and Applications (as such terms are defined in the Assignment Agreement.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY. The Company
hereby represents and warrants to, and covenants with, the Purchaser as of the
date of this Agreement as follows:
5.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate power and authority to conduct its
business as currently conducted and is duly qualified as a foreign corporation
and in good standing in all jurisdictions in which the character of the property
owned or leased or the nature of the business transacted by it makes
qualification necessary (except where the failure to be so qualified would not
have a material adverse effect on the business, properties, financial condition
or results or operations of the Company).
5.2 Due Execution, Delivery and Performance of the Agreements. The
Company's execution, delivery and performance of this Agreement, the Settlement
Agreement, the Warrant and the Assignment Agreement (collectively the
"Transaction Agreements") have been duly authorized by all requisite corporate
action by the Company. Upon execution and delivery, and
3.
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assuming the valid execution hereof by the Purchaser, the Transaction Agreements
will constitute valid and binding obligations of the Company, enforceable in
accordance with the terms of such agreements, except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' and contracting parties' rights generally and
except as enforceability may be subject to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law) and except as the indemnification agreement of the Company in
Section 8.3 hereof may be legally unenforceable. The execution and delivery of
the Transaction Agreements by the Company and the consummation of the
transactions contemplated hereby and thereby do not and will not (i) conflict
with or violate any provision of its certificate of incorporation, by laws or
other charter documents (each as amended through the date hereof) or (ii)
conflict with, or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument (evidencing a Company debt or otherwise) to which the
Company is a party or by which any property or asset of the Company is bound or
affected, or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or government
authority to which the Company is subject (including federal and state
securities laws and regulations), or by which any property or asset of the
Company is bound or affected, except in the case of each clauses (ii) and (iii),
as could not, individually or in the aggregate, have or result in a material
adverse effect on the Company.
5.3 Issuance and Delivery of the Shares, the Warrant and the Warrant
Shares. When issued, delivered to Purchaser or Purchaser's custodian bank and
paid for by Purchaser in accordance with the terms and conditions of this
Agreement or the Warrant, the Shares to be sold hereunder, the Warrant and the
Warrant Shares will be validly issued, fully paid and nonassessable and will be
delivered by the Company free and clear of all liens, pledges, claims,
encumbrances, security interests or other restrictions, except for restrictions
on transfer imposed to ensure compliance with the Securities Act of 1933, as
amended (the "Securities Act").
6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER.
The Purchaser represents and warrants to, and covenants with, the Company
as follows:
6.1 Investment Representations. The Purchaser represents and warrants to,
and covenants with, the Company that: (i) the Purchaser, taking into account the
personnel and resources it can practically bring to bear on the purchase of the
Shares, the Warrant and the Warrant Shares (collectively, the "Securities")
contemplated hereby, is knowledgeable, sophisticated and experienced in making,
and is qualified to make, decisions with respect to investments in shares
presenting an investment decision like that involved in the purchase of the
Securities, including investments in securities issued by the Company, and has
reviewed and considered all information it deems relevant in making an informed
decision to purchase the Securities, including all of the publicly available
documents the Company has filed with the Securities and Exchange Commission (the
"Commission") and all of the Company's press releases; (ii) the Purchaser is
acquiring the Shares for its own account for investment only and with no present
intention of distributing any of such Securities under any arrangement or
understanding with any other persons regarding the distribution of such
Securities (without
4.
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limiting the rights of the Purchaser pursuant to Section 8 hereof); (iii) the
Purchaser has completed or caused to be completed the Warrant and Stock
Certificate Questionnaire attached hereto as Exhibit B and the information
provided therein by Purchaser is true and correct to the best knowledge of the
Purchaser as of the date hereof; (iv) the Purchaser has, in connection with its
decision to purchase the Securities, relied solely upon the information reviewed
and considered by the Purchaser as described in clause (i) above and the
representations and warranties of the Company contained herein; and (v) the
Purchaser is an "accredited investor" within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act.
6.2 Requisite Power and Authority. The Purchaser further represents and
warrants to, and covenants with, the Company that (i) the Purchaser has full
right, power, authority and capacity to enter into the Transaction Agreements
and to consummate the transactions contemplated hereby and thereby and has taken
all necessary action to authorize the execution, delivery and performance of the
Transaction Agreements, and (ii) upon the execution and delivery of the
Transaction Agreements, the Transaction Agreements shall constitute valid and
binding obligations of the Purchaser enforceable in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the indemnification agreements
of the Purchaser in Section 8.3 hereof and Section 6.1 of the Assignment
Agreement may be legally unenforceable. The execution and delivery of the
Transaction Agreements by the Purchaser and the consummation of the transactions
contemplated hereby and thereby do not and will not (i) conflict with or violate
any provision of its certificate of incorporation, by laws or other charter
documents (each as amended through the date hereof) or (ii) conflict with, or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement, indenture or
instrument (evidencing a Purchaser debt or otherwise) to which the Purchaser is
a party or by which any property or asset of the Purchaser is bound or affected,
or (iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any court or government authority to
which the Purchaser is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Purchaser is bound or
affected, except in the case of each clauses (ii) and (iii), as could not,
individually or in the aggregate, have or result in a material adverse effect on
the Purchaser.
6.3 Rule 144. Purchaser acknowledges and agrees that the Securities
acquired by Purchaser hereunder must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available. Purchaser has been advised or is aware of the
provisions of Rule 144 promulgated under the Securities Act, which permits
limited resale of securities subject to the satisfaction of certain conditions,
including, among other things: the availability of certain current public
information about the Company, the resale occurring not less than one year after
a party has purchased and paid for the security to be sold, the sale being made
through an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of 1934,
as amended
5.
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(the "Exchange Act")) and the number of shares being sold during any three-month
period not exceeding specified limitations.
6.4 Covenants. The Purchaser hereby covenants with the Company as
follows: (i) prior to the effective date of the Registration Statement
referenced in Section 8.1(a) below (the "Effective Date"), the Purchaser shall
not transfer any Securities except in compliance with the Securities Act and the
rules and regulations promulgated thereunder, and any transferee of Securities
prior to the Effective Date shall agree in advance in a writing acceptable to
the Company to be subject to all of the provisions of this Agreement with
respect to the Securities; and (ii) commencing as of the Effective Date, the
Purchaser shall not make any sale of the Securities, if any, without effectively
causing the prospectus delivery requirement under the Securities Act to be
satisfied, and the Purchaser acknowledges and agrees that on and after the
Effective Date, such Securities are not transferable on the books of the Company
unless the certificate submitted to the transfer agent evidencing the Securities
is accompanied by a separate purchaser's certificate: (1) in the form of
Exhibit C hereto, (2) executed by the Purchaser or by an officer of, or other
authorized person designated by, the Purchaser, and (3) to the effect that (A)
the Securities have been sold in accordance with the Registration Statement and
(B) the requirement of delivering a current prospectus has been satisfied. The
Purchaser further covenants to promptly notify the Company of the sale or
transfer of any of its Securities.
7. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Notwithstanding
any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company and the Purchaser
herein and in the certificates for the Securities delivered pursuant hereto
shall survive the execution of this Agreement and the delivery to the Purchaser
of the Securities being purchased.
8. REGISTRATION OF THE COMMON STOCK; COMPLIANCE WITH THE SECURITIES ACT.
8.1 Registration Procedures and Expenses. The Company shall:
(a) within 90 days following each Closing, prepare and file with the
Commission a registration statement on Form S-3 (each a "Registration
Statement") in order to register with the Commission the sale of the Warrant
Shares and the Shares issued in such Closing, as applicable (collectively, the
"Registrable Securities"), by the Purchaser from time to time through
underwriters, agents or otherwise, in negotiated or market transactions or
through the automated quotation system of Nasdaq or the facilities of any
national securities exchange on which the Company's Common Stock is then traded
or in privately negotiated transactions or pursuant to such other method or
methods of distribution as Purchaser may require. It shall be a condition
precedent to the obligations of the Company to take any action pursuant to this
Section 8.1 that the Purchaser shall furnish to the Company such information
regarding itself, the Registrable Securities to be sold by Purchaser, and the
intended method of disposition of such securities as shall be required to effect
the registration of the Registrable Securities. Notwithstanding the foregoing,
the Company shall not be required to file or effect a registration pursuant to
this Section 8.1 if and for so long as any condition specified in Section 8.1(c)
shall exist and the Company shall have notified the Purchaser's thereof in
accordance with such section;
6.
<PAGE>
(b) use reasonable efforts, subject to the receipt of necessary information
from the Purchaser, to cause each Registration Statement to become effective as
soon as commercially practicable following the filing thereof with the
Commission;
(c) prepare and file with the Commission such amendments and supplements to
each Registration Statement and the prospectus used in connection therewith and
take such other actions as may be necessary to keep such Registration Statement
continually effective and not misleading until the earliest of (A) the first
anniversary date of the applicable Closing, or (B) such date as all of the
Registrable Securities registered under such Registration Statement held by the
Purchaser have been resold. Notwithstanding the foregoing, Purchaser
acknowledges that there may occasionally be times when the Company, in the good
faith judgment of its Chief Executive Officer or its Board of Directors,
determines it must suspend Purchaser's ability to sell Shares or Warrant Shares
pursuant to a Registration Statement until such time as an amendment to such
Registration Statement has been filed by the Company and declared effective by
the Commission, or until such time as the Company has filed an appropriate
report with the Commission pursuant to the Securities Exchange Act of 1934, as
amended (a "Suspension"). The Purchaser agrees that, upon receipt of any notice
from the Company of a Suspension, the Purchaser will not sell any Shares or
Warrant Shares pursuant to the Registration Statement until the Purchaser is
advised in writing by the Company that the use of the applicable prospectus may
be resumed; provided, that such limitation on selling shares of Common Stock
also applies to the executive officers and directors of the Company;
(d) furnish to the Purchaser with respect to the Registrable Securities
registered under a Registration Statement such number of copies of prospectuses
and preliminary prospectuses in conformity with the requirements of the
Securities Act, in order to facilitate the public sale or other disposition of
all or any of the Registrable Securities by the Purchaser; provided, however,
that the obligation of the Company to deliver copies of prospectuses or
preliminary prospectuses to the Purchaser shall be subject to the receipt by the
Company of reasonable assurances from the Purchaser that the Purchaser will
comply with the applicable provisions of the Securities Act and of such other
securities or blue sky laws as may be applicable in connection with any use of
such prospectuses or preliminary prospectuses;
(e) file documents required of the Company for normal blue sky clearance in
states specified in writing by the Purchaser; provided, however, that the
Company shall not be required to qualify to do business or consent to service of
process in any jurisdiction in which it is not now so qualified or has not so
consented; and
(f) bear all expenses incurred by the Company in connection with the
procedures in paragraphs (a) through (e) of this Section 8.1 and the
registration of the Registrable Securities pursuant to each Registration
Statement.
8.2 Notification of Changes. The Purchaser agrees that it will promptly
notify the Company of any changes in the material information set forth in each
Registration Statement regarding the Purchaser or its plan of distribution with
respect to the Registrable Securities, as applicable.
7.
<PAGE>
8.3 Indemnification.
(a) the term "Selling Stockholder" shall mean the Purchaser and, if the
Purchaser is an institution, the Purchaser's directors or trustees, officers and
employees and each person who controls the Purchaser within the meaning of the
Securities Act;
(b) the term "Registration Statement" shall include any final prospectus,
exhibit, supplement or amendment included in or relating to the Registration
Statements referred to in Section 8.1; and
(c) the term "untrue statement" shall include any untrue statement or
alleged untrue statement, or any omission or alleged omission, to state in the
Registration Statement a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
The Company agrees to indemnify and hold harmless each Selling Stockholder
from and against any losses, claims, damages or liabilities to which such
Selling Stockholder may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any untrue
statement contained in a Registration Statement on the Effective Date thereof,
or arise out of any failure by the Company to fulfill any undertaking herein or
included in a Registration Statement, and the Company will reimburse such
Selling Stockholder for any reasonable legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement made in such Registration
Statement in reliance upon and in conformity with written information furnished
to the Company by or on behalf of such Selling Stockholder specifically for use
in preparation of a Registration Statement, or the failure of such Selling
Stockholder to comply with the covenants and agreements contained in Section 5
or 8.2 hereof respecting sale of the Registrable Securities or any statement or
omission in any prospectus that is corrected in any subsequent prospectus that
was delivered to the Purchaser prior to the pertinent sale or sales by the
Purchaser.
The Purchaser agrees to indemnify and hold harmless the Company (and each
person, if any, who controls the Company within the meaning of Section 15 of the
Securities Act, each officer of the Company who signs a Registration Statement
and each director of the Company) from and against any losses, claims, damages
or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, any failure to
comply with the covenants and agreements contained in Section 6 or 8.2 hereof
respecting sale of the Registrable Securities, or any untrue statement contained
in a Registration Statement on the Effective Date if such untrue statement was
made in reliance upon and in conformity with written information furnished by or
on behalf of the Purchaser specifically for use in preparation of a Registration
Statement, and the Purchaser will reimburse the Company (or such officer,
director or controlling person, as the case may be) for any legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim. In no event shall the liability of the
8.
<PAGE>
Purchaser hereunder be greater in amount than the dollar amount of the gross
proceeds received by the Purchaser upon the sale of Registrable Securities
giving rise to such indemnification obligation.
Promptly after receipt by any indemnified person of a notice of a claim or
the beginning of any action in respect of which indemnity is to be sought
against an indemnifying person pursuant to this Section 8.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
commencement of such action, and, subject to the provisions hereinafter stated,
in case any such action shall be brought against an indemnified person and such
indemnifying person shall have been notified thereof, such indemnifying person
shall be entitled to participate therein, and, to the extent it shall wish, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified person. After notice from the indemnifying person to such
indemnified person of its election to assume the defense thereof, such
indemnifying person shall not be liable to such indemnified person for any legal
expenses subsequently incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or shall exist a
conflict of interest that would make it inappropriate, in the opinion of counsel
to the indemnified person, for the same counsel to represent both the
indemnified person and such indemnifying person or any affiliate or associate
thereof, the indemnified person shall be entitled to retain its own counsel at
the expense of such indemnifying person; provided, however, that no indemnifying
person shall be responsible for the fees and expenses of more than one separate
counsel for all indemnified parties.
If the indemnification provided for in this Section 8.3 is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the act or omission that resulted in such loss, claim, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that (i) no person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any party who was not guilty of such fraudulent
misrepresentation, and (ii) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Shares or the Warrant
Shares shall be limited in amount to the amount of gross proceeds received by
such seller from the sale of such Shares or the Warrant Shares.
The obligations of the Company and Purchaser under this Section 8.3 shall
survive completion of any offering of Registrable Securities in a Registration
Statement and the termination of this Agreement. No indemnifying party, in the
defense of any such claim or litigation, shall, except with the consent of each
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof
9.
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the giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
8.4 Termination of Conditions and Obligations. Notwithstanding anything
stated herein to the contrary, the conditions precedent imposed by Section 6 or
this Section 8 upon the transferability of the Shares or the Warrant Shares
shall cease and terminate as to any particular number of the Shares or Warrant
Shares, when such Shares or Warrant Shares shall have been effectively
registered under the Securities Act and sold or otherwise disposed of in
accordance with the intended method of disposition set forth in the Registration
Statement covering such or at such time as an opinion of counsel satisfactory to
the Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
Purchaser's right to have the Company register the Registrable Securities
pursuant to this Agreement shall not be assignable by Purchaser to any
transferee of all or any portion of the Registrable Securities, unless such
transferee (i) is an affiliate of the Purchaser and (ii) prior to such transfer
taking place, agrees with the Company in writing to be bound by the terms of
this Agreement.
8.5 Adjustments to Stock. If, from time to time, before the fourth and
final Subsequent Closing, there is any change affecting the Company's
outstanding Common Stock as a class that is effected without the receipt of
consideration by the Company (through merger, consolidation, reorganization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating, dividend, combination of shares, change in corporation
structure or other transaction not involving the receipt of consideration by the
Company), then in addition to the Shares not yet issued in a Subsequent Closing
(the "Unissued Shares"), the Purchaser shall be entitled to receive (when such
Unissued Shares are issued at the corresponding Subsequent Closing) any and all
new, substituted or additional securities or other property to which Purchaser
would have been entitled to receive by reason of Purchaser's ownership of the
Unissued Shares. Such additional securities shall be included in the word
"Shares" for purposes of the registration rights contained in Section 8 of this
Agreement. Conversely, if, from time to time, before the fourth and final
Subsequent Closing, the outstanding shares of Common Stock of the Company are
combined into a smaller number of shares (for example, through a reverse stock
split), the number of Unissued Shares shall be proportionately reduced.
9. LEGEND. Each certificate representing Shares or Warrant Shares shall
(unless otherwise permitted by the provisions of the Agreement) be stamped or
otherwise imprinted with a legend substantially similar to the following (in
addition to any legend required under applicable state securities laws or as
provided elsewhere in this Agreement):
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD
OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL OR BASED ON OTHER
WRITTEN EVIDENCE IN THE FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
IN COMPLIANCE THEREWITH."
10.
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10. CHANGE IN CONTROL. In the event of (a) a sale of substantially all of the
assets of the Company; (b) a merger or consolidation in which the Company is not
the surviving corporation (other than a merger or consolidation in which
shareholders immediately before the merger or consolidation have, immediately
after the merger or consolidation, greater stock voting power); (c) a reverse
merger in which the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise (other than a reverse merger in which stockholders
immediately before the merger have, immediately after the merger, greater stock
voting power); or (d) any transaction or series of related transactions in which
in excess of 50% of the Company's voting power is transferred, then, so long as
a Triggering Breach has not occurred, immediately prior to the closing or
consummation of any such event, the Company shall issue to the Purchaser any
Shares that have not already been issued to the Purchaser under this Agreement.
11. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing, shall be sent by facsimile or mailed by first
class registered or certified airmail, or nationally recognized overnight
express courier postage prepaid, and shall be deemed given when so sent by
facsimile or mailed and shall be delivered as follows:
(a) if to the Company, to:
Hollis-Eden Pharmaceuticals, Inc.
9333 Genesee Avenue, Suite 200
San Diego, California 92121
Attention: Chief Executive Officer
with a copy so mailed to:
Cooley Godward LLP
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attention: Thomas A. Coll, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
(b) if to the Purchaser, to:
Patrick T. Prendergast
c/o Colthurst Limited
Baybush, Straffan
County Kildare
Ireland
11.
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with a copy so mailed to:
David A. Donohoe, Esq.
Akin, Gump, Strauss, Hauer & Feld LLP
1333 New Hampshire Avenue, N.W., Suite 400
Washington, D.C. 200036
or at such other address or addresses as may have been furnished to the Company
in writing.
12. CHANGES. Neither this Agreement nor any provision hereof may be changed,
waived, discharged, terminated, modified or amended except pursuant to an
instrument in writing signed by the Company and the Purchaser.
13. HEADINGS. The headings of the various sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be part of
this Agreement.
14. SEVERABILITY. In case any provision contained in this Agreement should be
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as applied to contracts
entered into and performed entirely in California by California residents,
without regard to conflicts of law principles.
16. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one instrument.
17. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein,
this Agreement and the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
each of the parties hereto.
18. FURTHER ACTIONS. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in transactions of this nature in order to carry
out the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
19. ENTIRE AGREEMENT. This Agreement and other documents delivered pursuant
hereto, including the exhibits, constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
20. PAYMENT OF FEES AND EXPENSES. Except as expressly set forth herein, each
of the Company and the Purchaser shall bear its own expenses and legal fees
incurred on its behalf with respect to this Agreement and the transactions
contemplated hereby.
12.
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21. ARBITRATION. To ensure rapid and economical resolution of any disputes
which may arise under this Agreement, the Purchaser and the Company agree that
any and all disputes or controversies of any nature whatsoever, arising from or
regarding the interpretation, performance, enforcement or breach of this
Agreement, shall be resolved by confidential, final and binding arbitration
(rather than trial by jury or court or resolution in some other forum) to the
fullest extent permitted by law. Any arbitration proceeding pursuant to this
Agreement shall be conducted by the American Arbitration Association ("AAA") in
San Diego, under the then existing AAA commercial arbitration rules. If for any
reason all or part of this arbitration provision is held to be invalid, illegal,
or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not effect
any other portion of this arbitration provision or any other jurisdiction, but
this provision will be reformed, construed and enforced in such jurisdiction as
if such invalid, illegal or unenforceable part or parts of this provision had
never been contained herein, consistent with the general intent of the parties
to this Agreement insofar as possible. In no event shall the remedy for any
breach hereunder result in the ownership by Prendergast, Colthurst or any of
their affiliates in the Technology or the Patents and Applications (as such
terms are defined in the Assignment Agreement).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
13.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
HOLLIS EDEN PHARMACEUTICALS, INC.
By: /s/ Richard B. Hollis
--------------------------
Richard B. Hollis
Chairman of the Board and
Chief Executive Officer
PURCHASER
By: /s/ Patrick T. Prendergast
-----------------------------
Name: Patrick T. Prendergast
Title: MD / Edenland Inc.
LIST OF ATTACHMENTS:
EXHIBIT A - WARRANT
EXHIBIT B - STOCK CERTIFICATE QUESTIONNAIRE
EXHIBIT C - PURCHASER'S CERTIFICATE
14.
<PAGE>
EXHIBIT A
WARRANT
15.
<PAGE>
EXHIBIT B
HOLLIS-EDEN PHARMACEUTICALS, INC.
WARRANT AND STOCK CERTIFICATE QUESTIONNAIRE
Pursuant to Section 3 of the Common Stock and Warrant Agreement, please
provide us with the following information:
1. The exact name that your Warrant and Shares are to
be registered in (this is the name that will appear on ----------------
your stock certificate(s)). You may use a nominee name
if appropriate:
2. The relationship between the Purchaser of the
Warrant and the Shares and the Registered Holder ----------------
listed in response to item 1 above:
3. The mailing address of the Registered Holder listed ----------------
in response to item 1 above:
4. The Social Security Number or Tax Identification
Number of the Registered Holder listed in the response ----------------
to item 1 above:
16.
<PAGE>
EXHIBIT C
Attention:
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
________________________________ hereby certificates that he/she [said
institution] is the Purchaser of the shares evidenced by the attached
certificate, and as such, sold such shares on ____________________________ in
accordance with registration statement number
__________________________________________________ and the requirement of
delivering a current prospectus has been complied with in connection with such
sale.
Print or Type:
Name of Purchaser (Individual or Institution): ____________________________
Name of Individual representing Purchaser
(if an Institution) ____________________________
Title of Individual representing Purchaser
(if an Institution) ____________________________
Signature by:
Individual Purchaser or Individual
Representing Purchaser: _____________________________
17.
<PAGE>
EXHIBIT 99.5
No. W-00-1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
WARRANT TO PURCHASE 400,000 SHARES
OF COMMON STOCK OF
HOLLIS-EDEN PHARMACEUTICALS, INC.
(Void after January 19, 2005)
This certifies that Colthurst Limited, a Belize corporation (the "Holder"),
having a place of business at Baybush, Straffan, County Kildare, Ireland, for
value received, is entitled to purchase from Hollis-Eden Pharmaceuticals, Inc.,
a Delaware corporation (the "Company"), having a place of business at 9333
Genesee Avenue, Suite 200, San Diego, California 92121, a maximum of 400,000
fully paid and nonassessable shares of the Company's Common Stock ("Common
Stock") for cash at a price of $25.00 per share (the "Stock Purchase Price") at
any time or from time to time up to and including 5:00 p.m. (Pacific time) on
January 19, 2005 (the "Expiration Date"), upon surrender to the Company at its
principal office (or at such other location as the Company may advise the Holder
in writing) of this Warrant properly endorsed with the Notice of Exercise
attached hereto as Exhibit A (the "Notice of Exercise") duly completed and
signed and, if applicable, upon payment in cash or by check of the aggregate
Stock Purchase Price for the number of shares for which this Warrant is being
exercised determined in accordance with the provisions hereof. The Stock
Purchase Price and the number of shares purchasable hereunder are subject to
adjustment as provided in Section 4 of this Warrant.
This Warrant is subject to the following terms and conditions:
1. EXERCISE; ISSUANCE OF CERTIFICATES; PAYMENT FOR SHARES. This Warrant
is exercisable at the option of the holder of record hereof, at any time or from
time to time, up to the Expiration Date for all or any part of the shares of
Common Stock (but not for a fraction of a share) which may be purchased
hereunder that have Vested according to the vesting schedule described in
Section 12 of this Warrant. The Company agrees that the shares of Common Stock
purchased under this Warrant shall be and are deemed to be issued to the Holder
hereof as the record owner of such shares as of the close of business on the
date on which this Warrant shall have been surrendered, properly endorsed,
together with a completed Notice of Exercise, and payment made for such shares.
Certificates for the shares of Common Stock so purchased, together with any
other securities or property to which the Holder hereof is entitled upon such
exercise, shall be delivered to the Holder hereof by the Company at the
Company's expense within a reasonable time after the rights represented by this
Warrant have been so exercised. In case of a purchase of less than all the
shares which may be purchased under this Warrant, the Company shall cancel this
Warrant and execute and deliver a new Warrant or Warrants of like tenor for the
balance of the shares purchasable under the Warrant surrendered upon such
purchase to the Holder hereof within a reasonable time. Each stock certificate
so delivered shall
1.
<PAGE>
be in such denominations of Common Stock as may be requested by the Holder
hereof and shall be registered in the name or names as nominated by such Holder.
2. NET EXERCISE. Notwithstanding any provisions herein to the contrary,
if the fair market value of one share of the Company's common stock is greater
than the Stock Purchase Price (at the date of calculation as set forth below),
in lieu of exercising this Warrant by payment of cash, the Holder may elect to
receive shares equal to the value (as determined below) of this Warrant (or the
portion thereof being canceled) by surrender of this Warrant at the principal
office of the Company together with the properly endorsed Notice of Exercise in
which event the Company shall issue to the Holder a number of shares of Common
Stock computed using the following formula:
X = Y (A-B)
-------
A
Where X = the number of shares of Common Stock to be issued to the Holder
Y = the number of shares of Common Stock purchasable under this
Warrant or, if only a portion of the Warrant is being exercised,
the portion of this Warrant being canceled (at the date of such
calculation)
A = the fair market value of one share of the Company's common stock
(at the date of such calculation)
B = Stock Purchase Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one share
of common stock shall be determined by the closing price of the Company's common
stock on the Nasdaq National Market (or other exchange on which the Company's
common stock may be trading) on the business day prior to the date of the
exercise of this Warrant.
3. SHARES TO BE FULLY PAID; RESERVATION OF SHARES. The Company covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any stockholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees
that, during the period within which the rights represented by this Warrant may
be exercised, the Company will at all times have authorized and reserved, for
the purpose of issue or transfer upon exercise of the subscription rights
evidenced by this Warrant, a sufficient number of shares of authorized but
unissued Common Stock, or other securities and property, when and as required to
provide for the exercise of the rights represented by this Warrant. The Company
will take all such action as may be necessary to assure that such shares of
Common Stock may be issued as provided herein without violation of any
applicable law or regulation, or of any requirements of any domestic securities
exchange upon which the Common Stock may be listed. The Company will not take
any action which would result in any adjustment of the Stock Purchase Price (as
set forth in Section 5 hereof) if the total number of shares of Common Stock
issuable after such action upon exercise of all outstanding options, warrants
and convertible
2.
<PAGE>
securities, together with all shares of Common Stock then outstanding, would
exceed the total number of shares of Common Stock then authorized by the
Company's Certificate of Incorporation.
4. ADJUSTMENT OF STOCK PURCHASE PRICE AND NUMBER OF SHARES. The Stock
Purchase Price and the number of shares purchasable upon the exercise of this
Warrant shall be subject to adjustment from time to time upon the occurrence of
certain events described in this Section 4. Upon each adjustment of the Stock
Purchase Price, the Holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustment, the number
of shares obtained by multiplying the Stock Purchase Price in effect immediately
prior to such adjustment by the number of shares purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
4.1 Subdivision or Combination of Stock. In case the Company shall
at any time subdivide its outstanding shares of Common Stock into a greater
number of shares, the Stock Purchase Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Stock Purchase Price in effect immediately prior
to such combination shall be proportionately increased.
4.2 Dividends in Common Stock, Other Stock, Property,
Reclassification. If at any time or from time to time the Holders of Common
Stock (or any shares of stock or other securities at the time receivable upon
the exercise of this Warrant) shall have received or become entitled to receive,
without payment therefore:
(a) Common Stock or any shares of stock or other securities which
are at any time directly or indirectly convertible into or exchangeable for
Common Stock, or any rights or options to subscribe for, purchase or otherwise
acquire any of the foregoing by way of dividend or other distribution, or
(b) Common Stock or additional stock or other securities or
property (including cash) by way of spinoff, split-up, reclassification,
combination of shares or similar corporate rearrangement (other than shares of
Common Stock issued as a stock split or adjustments in respect of which shall be
covered by the terms of Section 4.1 above), then and in each such case, the
Holder hereof shall, upon the exercise of this Warrant, be entitled to receive,
in addition to the number of shares of Common Stock receivable thereupon, and
without payment of any additional consideration therefor, the amount of stock
and other securities and property (including cash in the case referred to in
this clause (b)) which such Holder would hold on the date of such exercise had
he been the holder of record of such Common Stock as of the date on which
holders of Common Stock received or became entitled to receive such shares or
all other additional stock and other securities and property.
4.3 Reorganization, Reclassification, Consolidation, Merger or Sale.
If any recapitalization, reclassification or reorganization of the capital stock
of the Company, or any consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets or other
transaction shall be effected in such a way that holders of
3.
<PAGE>
Common Stock shall be entitled to receive stock, securities, or other assets or
property (a "Transaction"), then, as a condition of such Transaction, lawful and
adequate provisions shall be made by the Company whereby the Holder hereof shall
thereafter have the right to purchase and receive (in lieu of the shares of the
Common Stock of the Company immediately theretofore purchasable and receivable
upon the exercise of the rights represented hereby) such shares of stock,
securities or other assets or property as may be issued or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such stock immediately theretofore purchasable and
receivable upon the exercise of the rights represented hereby; provided,
however, that in the event the fair market value of the stock, securities or
other assets or property (determined in good faith by the Board of Directors of
the Company) issuable or payable with respect to one share of the Common Stock
of the Company immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby is in excess of the Stock Purchase
Price hereof effective at the time of a merger and securities received in such
reorganization, if any, are publicly traded, then this Warrant shall expire
unless exercised prior to such Transaction. In the event of any Transaction,
appropriate provision shall be made by the Company with respect to the rights
and interests of the Holder of this Warrant to the end that the provisions
hereof (including, without limitation, provisions for adjustments of the Stock
Purchase Price and of the number of shares purchasable and receivable upon the
exercise of this Warrant) shall thereafter be applicable, in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company will not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation (if other
than the Company) resulting from such consolidation or the corporation
purchasing such assets shall assume by written instrument reasonably
satisfactory in form and substance to the Holders of a majority of the warrants
to purchase Common Stock then outstanding, executed and mailed or delivered to
the registered Holder hereof at the last address of such Holder appearing on the
books of the Company, the obligation to deliver to such Holder such shares of
stock, securities or assets as, in accordance with the foregoing provisions,
such Holder may be entitled to purchase.
4.4 Certain Events. If any change in the outstanding Common Stock of
the Company or any other event occurs as to which the other provisions of this
Section 4 are not strictly applicable or if strictly applicable would not fairly
protect the purchase rights of the Holder of the Warrant in accordance with such
provisions, then the Board of Directors of the Company shall make an adjustment
in the number and class of shares available under the Warrant, the Stock
Purchase Price or the application of such provisions, so as to protect such
purchase rights as aforesaid. The adjustment shall be such as will give the
Holder of the Warrant upon exercise for the same aggregate Stock Purchase Price
the total number, class and kind of shares as he would have owned had the
Warrant been exercised prior to the event and had he continued to hold such
shares until after the event requiring adjustment.
4.5 Notices of Change.
(a) Within 60 days after any adjustment in the number or class of
shares subject to this Warrant and of the Stock Purchase Price, the Company
shall give written notice thereof to the Holder, setting forth in reasonable
detail and certifying the calculation of such adjustment.
4.
<PAGE>
(b) The Company shall also give written notice to the Holder at
least 5 business days prior to the date on which a Transaction shall take place.
5. ISSUE TAX. The issuance of certificates for shares of Common
Stock upon the exercise of the Warrant shall be made without charge to the
Holder of the Warrant for any issue tax (other than any applicable income taxes
for which the Company may make requisite withholdings) in respect thereof;
provided, however, that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than that of the then Holder of the Warrant
being exercised.
6. CLOSING OF BOOKS. The Company will at no time close its transfer
books against the transfer of any warrant or of any shares of Common Stock
issued or issuable upon the exercise of any warrant in any manner which
interferes with the timely exercise of this Warrant.
7. NO VOTING OR DIVIDEND RIGHTS; LIMITATION OF LIABILITY. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder of
the Company or any other matters or any rights whatsoever as a stockholder of
the Company. No dividends or interest shall be payable or accrued in respect of
this Warrant or the interest represented hereby or the shares purchasable
hereunder until, and only to the extent that, this Warrant shall have been
exercised. No provisions hereof, in the absence of affirmative action by the
holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the holder hereof, shall give rise to any liability of
such Holder for the Stock Purchase Price or as a stockholder of the Company,
whether such liability is asserted by the Company or by its creditors.
8. WARRANTS NON-TRANSFERABLE. Neither this Warrant nor any of Holder's
rights hereunder are transferable, in whole or in part, to any third party,
unless such transfer is made to an affiliate or shareholder of Holder with the
Company's prior written consent. Any attempted assignment or transfer in
violation of the foregoing will be void.
9. RIGHTS AND OBLIGATIONS SURVIVE EXERCISE OF WARRANT. The rights and
obligations of the Company, of the holder of this Warrant and of the holder of
shares of Common Stock issued upon exercise of this Warrant shall survive the
exercise of this Warrant.
10. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
11. REGISTRATION RIGHTS. The Holder shall have such registration rights
with respect to the Common Stock issuable upon exercise of the Warrant as are
set forth in that certain Common Stock and Warrant Agreement between the Holder
and the Company dated the date hereof, to which a form of this Warrant is
attached.
12. VESTING OF WARRANT. The Warrant shall be considered "Vested"
according to the following schedule:
5.
<PAGE>
12.1 So long as a Triggering Event (as defined in Section 12.2) has
not occurred, the Warrant shall vest with respect to 25% of the shares of Common
Stock on the first anniversary of the effective date of this Warrant and the
remaining 75% shall vest monthly thereafter ratably over the next 36 months;
provided however, that in the event of a Change in Control (as defined below)
then, so long as a Triggering Event has not occurred, all of the shares of
Common Stock shall immediately vest.
12.2 For purposes of this Warrant a "Triggering Event" shall mean the
occurrence of any of the following events: (A) the Purchaser, Patrick T.
Prendergast or Edenland Inc. or any of their employees, agents, directors,
subsidiaries, representatives, affiliates or family members who are stockholders
of the Company (i) fail to support, and vote all of his, her or its shares of
the common stock of the Company in favor of, any management or board of
directors proposals subject to a stockholder vote of the Company; (ii) encourage
any of the Company's stockholders or potential stockholders to (a) vote against
any management or board of directors proposal subject to stockholder vote of the
Company, (b) submit a proposal for stockholder approval not previously approved
in writing by the Company's board of directors, or (c) vote in favor of any
proposal subject to stockholder vote of the Company not supported by the
Company's board of directors; (iii) conduct any further research or development
of any kind relating to the Technology (as defined in the that certain
Technology Assignment Agreement dated the date hereof among Colthurst Limited,
Patrick T. Prendergast and the Company (the "Assignment Agreement"); or (iv)
make any short sale or maintain any short position, or establish or maintain a
"put equivalent position" (within the meaning of Rule 16a-1(h) under the
Securities Exchange Act of 1934, as amended) with respect to the Company's
common stock; or (B) the inaccuracy of any of the representations and warranties
made by Patrick T. Prendergast or Colthurst Limited under Article V of the
Assignment Agreement as of the date of the Assignment Agreement. The actions
described in clause (A)(ii) of the foregoing sentence shall not constitute a
Triggering Event unless the Company demonstrates to the Purchaser the occurrence
of such actions by a preponderance of the evidence. The actions described in
clauses (A)(i) and (ii) above shall constitute a Triggering Event only during
such time as Richard B. Hollis is either the Chairman or the Chief Executive
Officer of the Company, unless the reason for the his failure to be either the
Chairman or the Chief Executive Officer is due to his death or disability. In
the event that a Triggering Event occurs, the Holder acknowledges and agrees
that it will have no further claim to (i) any additional Warrant Shares or (ii)
the Technology or the Patents and Applications (as such terms are defined in the
Assignment Agreement).
12.3 For purposes of this Warrant a "Change in Control" shall mean (a)
a sale of substantially all of the assets of the Company; (b) a merger or
consolidation in which the Company is not the surviving corporation (other than
a merger or consolidation in which shareholders immediately before the merger or
consolidation have, immediately after the merger or consolidation, greater stock
voting power); (c) a reverse merger in which the Company is the surviving
corporation but the shares of the Company's common stock outstanding immediately
preceding the merger are converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise (other than a reverse
merger in which stockholders immediately before the merger have, immediately
after the merger, greater stock voting power); or (d) any transaction or series
of related transactions in which in excess of 50% of the Company's voting power
is transferred.
6.
<PAGE>
13. NOTICES. Any notice, request or other document required or permitted
to be given or delivered to the holder hereof or the Company shall be delivered
or shall be sent by certified mail, postage prepaid, to each such holder at its
address as shown on the books of the Company or to the Company at the address
indicated therefor in the first paragraph of this Warrant or such other address
as either may from time to time provide to the other.
14. BINDING EFFECT ON SUCCESSORS. This Warrant shall be binding upon any
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets. All of the obligations of the
Company relating to the Common Stock issuable upon the exercise of this Warrant
shall survive the exercise and termination of this Warrant.
15. DESCRIPTIVE HEADINGS AND GOVERNING LAW. The description headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the laws of the State of Delaware.
16. LOST WARRANTS. The Company represents and warrants to the Holder
hereof that upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction, or mutilation of this Warrant and, in the case of
any such loss, theft or destruction, upon receipt of an indemnity reasonably
satisfactory to the Company, or in the case of any such mutilation upon
surrender and cancellation of such Warrant, the Company, at its expense, will
make and deliver a new Warrant, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant.
17. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share,
pay the holder entitled to such fraction a sum in cash equal to such fraction
multiplied by the then effective Stock Purchase Price.
7.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
by its officers, thereunto duly authorized this 20th day of January, 2000.
HOLLIS-EDEN PHARMACEUTICALS, INC.
a Delaware corporation
By: /s/ Richard B. Hollis
-----------------------------------
Name: Richard B. Hollis
--------------------------------
Title: Chairman and CEO
-------------------------------
8.
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
Date: _________________
Hollis-Eden Pharmaceuticals, Inc.
9333 Genesee Avenue, Suite 200
San Diego, CA 92121
Attn: Secretary
Ladies and Gentlemen:
[_] The undersigned hereby elects to exercise the warrant issued to it by
Hollis-Eden Pharmaceuticals, Inc. (the "Company") and dated January __,
2000 (the "Warrant") and to purchase thereunder
__________________________________ shares of the Common Stock of the
Company (the "Shares") at a purchase price of
___________________________________________ Dollars ($__________) per Share
or an aggregate purchase price of __________________________________
Dollars ($__________) (the "Purchase Price").
[_] The undersigned hereby elects to convert _______________________ percent
(____%) of the value of the Warrant pursuant to the provisions of Section 2
of the Warrant.
Pursuant to the terms of the Warrant the undersigned has delivered the
Purchase Price herewith in full in cash or by certified check or wire transfer.
Very truly yours,
__________________________________
Signature
__________________________________
Printed Name
1.
<PAGE>
EXHIBIT 99.6
SPONSORED RESEARCH AND LICENSE AGREEMENT
THIS SPONSORED RESEARCH AND LICENSE AGREEMENT (the "Agreement") is made and
entered into as of January 20, 2000 (the "Effective Date") by and between
PATRICK T. PRENDERGAST, of Baybush, Straffan, County Kildare, Ireland
(hereinafter "Prendergast"), EDENLAND, INC., a corporation duly organized and
existing under the laws of Belize (hereinafter "Edenland"), COLTHURST LIMITED, a
corporation duly organized and existing under the laws of Belize (hereinafter
"Colthurst"), and HOLLIS-EDEN PHARMACEUTICALS, INC., a corporation duly
organized and existing under the laws of Delaware with a principal place of
business at 9333 Genessee Avenue, Suite 200, San Diego, CA 92121 (hereinafter
"Hollis-Eden").
RECITALS
WHEREAS, Hollis-Eden researches and develops compounds for therapeutic
applications in humans and animals;
WHEREAS, Prendergast has previously made inventions and discoveries
relating to compounds which may be useful for therapeutic applications in humans
and animals;
WHEREAS, Hollis-Eden wishes to sponsor further research by Prendergast, and
to own the results of such research;
WHEREAS, Prendergast and Hollis-Eden are parties to that certain Settlement
and Mutual Release Agreement entered into concurrently herewith (the "Settlement
Agreement") that terminates that certain License Agreement (the "License
Agreement") and that certain Research, Development and Option Agreement (the
"Research Agreement"), both executed by the Parties on August 25, 1994;
WHEREAS, Prendergast made inventions and discoveries pursuant to those
terminated Agreements and inventions and discoveries related to the Related
Know-How (as defined below); and
WHEREAS, Prendergast and Edenland are willing to grant an irrevocable,
exclusive license to the Patents and Applications (as defined below) and the
Related Know-How, pursuant to the terms of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the covenants and
promises contained herein, the parties agree as follows:
*** Text Omitted and Filed Separately. Confidential Treatment Requested
Under 17 C.F.R. (S)(S)200.80(b)(4), 200.83 and 240.24b-2.
1.
<PAGE>
1. DEFINITIONS
As used herein, the following capitalized terms shall have the following
meanings:
1.1 "AFFILIATE" means any company or entity controlled by, controlling, or
under common control with a party hereto. For the purposes hereof, the term
"control" shall mean (a) that an entity or company owns, directly or indirectly,
fifty percent (50%) or more of the voting stock of the controlled entity, or (b)
that an entity, person or group has the actual ability to control and direct the
management of the controlled entity, whether by contract or otherwise.
1.2 "COMPOUND" means any compound discovered by or on behalf of Prendergast
during the Research Term or using any of the funding by Hollis-Eden pursuant to
Section 6.1 hereof, and any compound listed at Exhibit C.
1.3 "DERIVATIVE" means any compound that is a [********** ** ****** ** *
******** (********* * ******* ********), *** *** **** ****** ************ **
**** ******** **** **** ** ****** ** *******, *** *** **** ** *********** ** **
** ****** ** ******-**** (** *** ***********) ** *** ** **** ******** ** **
*********** *******.]
1.4 "DEVELOPMENT TRANSFER DATE" means, for each Compound, the date upon
which development responsibility shifts to Hollis-Eden pursuant to Section
2.1(d). The Parties shall maintain a list of the Development Transfer Date for
each Compound in the form attached hereto as Exhibit A.
1.5 "DIRECT COSTS" means all reasonable expenditures directly relating to
(i) payroll for research and development employees who are not relatives of
Prendergast, (ii) scientific consultants and laboratories for drug screening,
assays, metabolism, formulations, non-GLP toxicology and pharmacokinetics, (iii)
in-vitro testing, (iv) drug supplies and (v) animal studies.
1.6 "EXISTING PATENT RIGHTS" means (a) the United States and foreign
patents and/or patent applications listed in Exhibit B and (b) all patents
throughout the world that have issued or may issue from the patents and
applications identified in Exhibit B and including any continuation,
continuation-in-part or divisional application of any of them, and any reissue,
reexamination, extension or substitution of any of the foregoing patents, as
well as renewals, reexaminations, reissues or extensions of said patents, and
all rights under the International Convention for the Protection of Industrial
Property.
2.
<PAGE>
1.7 "FIELD" means all research and development activities relating to
Compounds and analogs or derivatives thereof.
1.8 "KNOW-HOW" means any inventions, information, know-how, trade secrets,
discoveries, procedures, expertise, data, results, or other technical or
scientific information which is not in the public domain, and which is not
disclosed in a patent.
1.9 "PATENTS AND APPLICATIONS" means (a) all patents and patent
applications, wherever filed in the world, that claim any aspect of the Related
Know-How, whether filed before or after the Effective Date; (b) all continuation
applications, continuation-in-part applications, and divisional applications of
any of the foregoing; (c) any reissue, reexamination, extension or substitution
of any of such patents, as well as renewals, reexaminations, reissues or
extensions of the patents, and all rights under the International Convention for
the Protection of Industrial Property; and (d) the Existing Patent Rights.
1.10 "NET SALES" means, with respect to sales of a Product by Hollis-Eden
or its Affiliate or sublicensee, the total amount received for such sales to
third party purchasers, less the following items to the extent actually incurred
or allowed with respect to such sales: (a) volume or trade discounts, credits or
allowances; (b) credits, refunds or allowances granted upon returns, rejections
or recalls; (c) freight, shipping and insurance charges; (d) taxes, duties or
other government tariffs; and (e) rebates mandated by the government or
managed-care organizations.
1.11 "OVERHEAD COSTS" means all costs other than Direct Costs, including
without limitation payments made, directly or indirectly, to Prendergast (or
relatives of Prendergast) and costs relating to project management, secretarial
assistance, travel, office supplies, postage and freight, insurance,
accountancy, phones and rent.
1.12 "PRODUCT" means any human or animal pharmaceutical product which (i)
incorporates a Compound (including any Related Compound) or a Derivative as its
active ingredient or (ii) embodies an Improvement. It is understood and agreed
that, notwithstanding anything to the contrary in this Agreement, in no event
shall any product that comprises, utilizes, is based upon or is covered by the
"Technology" or the "Patents and Applications" (as such terms are defined in the
Technology Assignment Agreement) be deemed a "Product" for purposes of this
Agreement.
1.13 "IMPROVEMENT" means any modifications, formulations or changes made in
chemical structure or otherwise by or on behalf of Hollis-Eden (or its
sublicensee) during the term the of this Agreement which directly relate to a
Compound, Related Compound or Derivative and result from the use of such
Compound, including without
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limitation new or improved methods of administration, improved side effect
profile, new medical indications and improvements in the manufacturing process.
1.14 "RELATED COMPOUND" means, with respect to any particular Compound, any
other Compound that is [***********************] of such Compound and has
[******* ********** ******* ** ***** ** ** ***** ********].
1.15 "RELATED KNOW-HOW" means any Know-How generated by or on behalf of
Prendergast or Edenland (a) pursuant to any work conducted under the License
Agreement; (b) that relates to the Antiserum as that term was defined by the
License Agreement, whether developed before or after the Effective Date of this
Agreement; or (c) pursuant to any work conducted under the Research Agreement,
including without limitation all the Know-How listed on Exhibit C attached
hereto.
1.16 "RESEARCH" means the research and development investigations and work
conducted by or on behalf of Prendergast pursuant to Section 2.1 of this
Agreement.
1.17 "RESEARCH RESULTS" means any and all Know-How made, created, developed
or discovered pursuant to the Research work or during the Research Term by or on
behalf of Prendergast or Edenland within the fields of medical, biochemical,
biological and/or pharmaceutical research and development, and shall include any
such Know-How made, created, developed or discovered using any funding provided
by Hollis-Eden pursuant to Section 6.1 of this Agreement.
1.18 "RESEARCH PATENTS" means (a) any and all patent applications filed
that claim any invention in the Research Results; (b) any divisionals,
continuations or continuations-in-part of the foregoing applications; (c) all
patents that issue on any of the foregoing patent applications; and (d) all
extensions, reissues, reexaminations and supplemental protection certificates
for any of the foregoing patents.
1.19 "RESEARCH TERM" means the period beginning on the Effective Date and
ending upon the later of the expiration of the Initial Research Term (as that
term is defined by Section 2.2(a)) or the expiration of the last extension of
the Research made pursuant to Sections 2.2(b) and (c).
1.20 "TECHNOLOGY ASSIGNMENT AGREEMENT" means that certain Technology
Assignment Agreement of even date herewith by and among Hollis-Eden, Prendergast
and Colthurst.
1.21 "THIRD PARTY" means any person, entity or organization other than
Prendergast or Hollis-Eden, and their Affiliates.
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1.22 "THIRD PARTY ROYALTIES" means royalties payable by Hollis-Eden, its
Affiliate or sublicensee to a Third Party in respect of the manufacture, use or
sale of a Product.
2. SPONSORED RESEARCH
2.1 CONDUCT OF RESEARCH.
(a) In consideration of the Research funding provided by Hollis-Eden
under Section 6.1, Prendergast agrees to undertake and perform the Research. The
Research will be conducted and supervised by Prendergast. Prendergast agrees to
use diligent efforts to perform the Research, and all of Prendergast's research
efforts within the fields of medical, biochemical, biological and/or
pharmaceutical research during the Research Term (as that term is defined in
Section 2.2) shall be devoted to the Research. Prendergast agrees that all work
done on the Research and all Research Results will be duly recorded and
evidenced in laboratory notebooks maintained by the persons working on the
Research, which notebooks shall be available for inspection by Hollis-Eden
pursuant to Section 2.3.
(b) Prendergast shall have the right to employ, at his sole
discretion, other persons and subcontractors to carry out the Research under
Prendergast's supervision, provided that such persons are under an obligation to
assign and transfer to Prendergast any inventions, discoveries, or other
Know-How they may make or develop in the course of performing the Research which
obligation to assign must be sufficient in scope to effectively result in
ownership by Prendergast of all Research Results produced or contributed to by
such other person or subcontractor. Such inventions, discoveries or other
Know-How shall be exclusively licensed to Hollis-Eden pursuant to Article 3.
Hollis-Eden shall provide Prendergast with a form of assignment to be used with
respect to any such assignments from third parties. Prendergast promptly will
provide to Hollis-Eden a copy of any such agreement with such persons.
(c) The Research shall be limited to discovery and preclinical
research on the Compounds and Know-How set forth in Exhibit C attached hereto
and, with the prior written consent of Hollis-Eden, any other compounds and
Know-How, including such research in any animal or other model or system up to,
and including, primate models, and specifically excluding clinical research in
humans. In addition, the Research shall not involve, and Prendergast covenants
that he shall not conduct, any research or other work on any subject matter
relating to the "Patents and Applications" or the "Technology" as such terms are
defined in the Technology Assignment Agreement.
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(d) Any and all development of Compounds beyond the primate model
stage shall be Hollis-Eden's sole right and responsibility and at Hollis-Eden's
sole discretion, subject to the provisions of Article 5. Development
responsibility for each Compound shall shift from Prendergast to Hollis-Eden on
the earlier of (i) the date Hollis-Eden receives copies of all preclinical data
regarding the Compound that Prendergast has generated and intends to generate
under the Research; or (ii) the date Hollis-Eden, at its sole discretion, elects
to begin conducting its own development activities with respect to that
Compound. No later than ninety (90) days after the foregoing shift of
development responsibility for a particular Compound (the "Development Transfer
Date" for such Compound), Prendergast shall discontinue and conduct no further
Research or other work with respect to such Compound or any Related Compound of
such Compound unless such work is expressly requested by Hollis-Eden in writing
to be conducted under the Research.
2.2 RESEARCH TERM.
(a) The initial Research Term, during which Prendergast shall conduct
the Research, shall commence on the date that Hollis-Eden makes the payment
pursuant to Section 6.1(a) and continue for one (1) year (the "Initial Research
Term").
(b) Hollis-Eden shall have the right, exercisable by written notice
within thirty (30) days after the expiration of the Initial Research Term, to
extend the Research Term for an additional two (2) years. In the event that all
of the [********************************] paid by Hollis-Eden pursuant to
Section 6.1 to support the Research during the first two (2) year extension
hereunder have not been expended at the expiration of the Research Term (as
extended pursuant to this Section 2.2), then the Research Term and further
Research work shall automatically extend until all such funds are expended to
support the Research.
(c) At the end of the Research Term as extended pursuant to subsection
(b), the Research Term shall automatically extend for another two (2) years,
unless either Hollis-Eden or Prendergast provides written notice, prior to such
date, to the other Party that it or he wishes not to so extend and to terminate
the Research Term, in which case the Research Term shall terminate at the end of
the extension period made pursuant to subsection (b).
2.3 RESEARCH REPORTS. Prendergast shall regularly inform Hollis-Eden
of the Research performed and all Research Results, and shall provide
Hollis-Eden with written summaries of the results and data of the Research and
inventions therein by making quarterly (or more frequent) written reports to
Hollis-Eden of the progress of the Research during that quarter. Prendergast
shall include in such reports, in order to
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facilitate the calculation required under Section 5.4, an allocation of
expenditures with respect to each Compound and Related Compound that is the
subject of such report. Hollis-Eden shall have the right, but not the
obligation, to discuss the conduct and results of the Research with Prendergast
at regular intervals. Hollis-Eden shall have the unrestricted right to inspect
and copy any and all of the raw data of the Research and the Research Results,
and Prendergast covenants that he shall make all such materials available to
Hollis-Eden at its request, without delay.
2.4 OWNERSHIP OF RESEARCH RESULTS. All Research Results and any inventions
therein and all intellectual property rights in any of the foregoing, including
without limitation the Research Patents, shall be owned by Prendergast but shall
be licensed exclusively to Hollis-Eden as provided in Article 3. Hollis-Eden
shall have the right to obtain, at its expense, protection in the United States
and foreign countries for any inventions in such Research Results, as provided
in Article 7.
2.5 OTHER RESEARCH.
(a) Prendergast hereby agrees and covenants not to perform or
supervise, or permit or engage any other party to perform, any research in the
Field other than the Research, but subject to the reversion option of Article 5.
(b) Upon the expiration of the Research Term, Prendergast shall have
the right to conduct, supervise, permit or engage another party to perform
research outside the Field.
(c) Upon three (3) months after the expiration of the Research Term,
if the Parties have not entered a new agreement to extend the Research Term or
that provides for further sponsored research, Prendergast shall be under no
further obligation to Hollis-Eden to disclose or assign any future inventions,
discoveries, or Know-How outside the Field.
3. EXCLUSIVE LICENSE OF THE RESEARCH RESULTS
3.1 LICENSE TO HOLLIS-EDEN. Prendergast and Edenland hereby grant to
Hollis-Eden the exclusive (even as to Prendergast and Edenland), world-wide,
perpetual, irrevocable license, with the full right to sublicense, under any and
all of the Research Results and all intellectual property rights related
thereto, including, without limitation, any inventions, discoveries and Know-How
made, produced or discovered by or on behalf of Prendergast relating to the
Research Results, whether or not patentable, and whether made or conceived or
reduced to practice alone or jointly with others, and including without
limitation the Research Patents, for any and all purposes. Prendergast
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hereby agrees to execute all documents, including without limitation all
recordations and declarations, reasonably necessary for Hollis-Eden to record
its interest in and to the Research Results and other intellectual property
described in the preceding sentence.
3.2 COVENANT NOT TO SUE. Prendergast, Edenland and Colthurst hereby
covenant and agree that none of them, and no entity or person affiliated with
any of them will make any claim, allegation or suit alleging infringement of any
Research Results or any intellectual property rights therein or seeking
compensation for those rights by Hollis-Eden or any of its sublicensees, except
with respect to the specific Option Compounds for which Prendergast has
exercised the option pursuant to Section 5.3; provided, however, that nothing in
this Section 3.2 shall limit Edenland's rights to seek remedy for non-payment of
royalties due under Section 6.
4. EXCLUSIVE LICENSE OF PREVIOUS TECHNOLOGY.
4.1 LICENSE TO HOLLIS-EDEN. Prendergast and Edenland hereby grant to
Hollis-Eden the world-wide, exclusive (even as to Prendergast and Edenland),
perpetual, irrevocable, license, with the full right to sublicense, under the
Patents and Applications and the Related Know-How, for all uses and purposes.
4.2 PROSECUTION AND MAINTENANCE. Prendergast and Edenland hereby grant to
Hollis-Eden the sole and exclusive right, but not the duty,
(a) to prosecute (including through appealing) the patent applications
within Patents and Applications, and patents and applications claiming the
Related Know-How, including continuations, continuations-in-part and divisionals
thereof, as well as to prosecute any reissue patent applications and any
re-examination patent applications as a part of any reissue or re-examination
proceeding;
(b) to enter any claim of any patent or application into interference;
(c) to procure any patent resulting from the prosecution set forth in
Sections 4.2(a) and 4.2(b); and
(d) to maintain all issued patents worldwide. Notwithstanding the
foregoing, Hollis-Eden shall not have the duty or obligation to prosecute, issue
or maintain any patent or application.
4.3 SUBLICENSES. Hollis-Eden shall have the sole and exclusive right,
but not the duty, to grant licenses under the patents and applications
exclusively licensed under this Agreement and to collect royalty payments
therefor.
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4.4 RIGHT TO SUE. Prendergast and Edenland hereby grant to Hollis-Eden the
sole and exclusive right, but not the duty, to sue on the patents in the Patents
and Applications, and to collect all damages and profits for any past, present
and/or future infringements thereof.
4.5 DEFENSE. Hollis-Eden shall have the sole and exclusive right, but not
the duty, to bring and maintain any action necessary to defend its rights to the
Patents and Applications, and/or the Know-How, including but not limited to
actions in copyright and trade secret.
4.6 SOLE DISCRETION. Any such licenses or suits of Sections 4.3, 4.4,
and/or 4.5, respectively, shall be undertaken at Hollis-Eden's sole discretion.
4.7 EXECUTION AND DELIVERY OF DOCUMENTS. Prendergast and Edenland shall
execute and deliver to Hollis-Eden (at Hollis-Eden's request and expense) all
documents and instruments, to be prepared by Hollis-Eden, reasonably necessary
for Hollis-Eden to perfect and/or record any of the rights that are granted to
it under this Agreement, provided that such acts of perfecting and recording
shall be at Hollis-Eden's expense.
4.8 TRANSFER OF TANGIBLE MANIFESTATIONS.
(a) Prendergast and Edenland shall deliver or cause to be delivered to
Hollis-Eden on or shortly after execution of this Agreement any and all tangible
manifestations of the Patents and Applications and/or the Related Know-How in
Edenland's and/or Prendergast's possession or control.
(b) Prendergast and Edenland agree that upon execution of this
Agreement, they will instruct their legal representatives and all other relevant
third parties to surrender to Hollis-Eden and/or its representatives all notes,
records, files, prototypes, and other tangible items of any sort pertaining to
the Patents and Applications, and/or the Related Know-How. The foregoing
requirement notwithstanding, Prendergast and Edenland shall not be required to
deliver to Hollis-Eden any documents that are subject to the attorney-client
privilege or work product doctrine; provided, that a complete privilege log is
provided to Hollis-Eden for each document being withheld. The privilege log must
set forth as to each document being withheld, its date, its identity, (e.g.
letter, research memorandum, etc.) its author, the identity of the recipient(s)
of the original and any copies, and the basis upon which the document is being
withheld (attorney-client privilege or attorney work product). Hollis-Eden shall
have ten (10) business days to dispute the assertion of any privilege, as it
pertains to the disclosures and delivery required by this paragraph.
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4.9 REASONABLE ASSISTANCE. Prendergast and Edenland agree to provide all
reasonable technical assistance in (i) facilitating the transfers and licenses
contemplated by this Agreement and (ii) the prosecution of any patent
application in the Patents and Applications and/or the Related Know-How, related
to and/or arising from the Agreement until all prosecution of patent
applications in the Patents and Applications and/or the Related Know-How in all
patent offices worldwide is completed.
4.10 FURTHER IMPROVEMENTS. Neiter Prendergast nor Edenland (nor any of
their Affiliates) shall conduct any further research or development of any kind
relating to the Related Know-How, except to the extent such work is conducted by
Prendergast under the Research, solely to the extent permitted by and pursuant
to this Agreement.
4.11 APPOINTMENT OF ATTORNEY IN FACT. Prendergast and Edenland agree
that if Hollis-Eden is unable for any reason, after reasonable effort, to secure
any of relevant signatures on any document needed in connection with the actions
specified herein, each of Prendergast, Edenland, and Colthurst hereby
irrevocably designates and appoints Hollis-Eden and its duly authorized officers
and agents as his or its agent and attorney in fact, which appointment is
coupled with an interest, to act for and on his or its behalf to execute, verify
and file any such documents and to do all other lawfully permitted acts to
further the purposes of this Agreement with the same legal force and effect as
if executed by Prendergast.
5. DEVELOPMENT BY HOLLIS-EDEN
5.1 RIGHT TO FURTHER DEVELOP COMPOUNDS. Subject to the provisions of this
Article 5, Hollis-Eden shall have the sole right, but not the responsibility, to
develop and commercialize any of the Compounds and Derivatives for any purpose
and in any country or jurisdiction in the world.
5.2 DEVELOPMENT REPORTS. Beginning six months after the Development
Transfer Date, Hollis-Eden shall make quarterly written reports to Prendergast
summarizing its progress towards filing an IND and obtaining NDA approval for
each such Compound or a Related Compound or Derivative thereof; provided,
however, that Hollis-Eden shall not be required to disclose in such reports any
(i) raw data, (ii) financial information or (iii) the terms of any licenses or
sublicenses it grants to Third Parties to further develop any of the Compounds,
Related Compounds or Derivatives. Hollis-Eden's obligation to make such reports
shall terminate, with respect to each Compound, (i) upon FDA rejection of an NDA
for such Compound or Related Compound or Derivative thereof; or (ii) at such
time as Hollis-Eden decides to abandon development of such Compound and all
Related Compounds and Derivatives thereof.
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5.3 DILIGENCE AND REVERSION OPTION. With respect to any specific group of
Compounds (a "Related Compound Group"), where such group is defined to include
all the Compounds that are Related Compounds to each other, for which
Hollis-Eden (or its sublicensee) has undertaken development efforts with respect
to at least one such Compound or a Derivative thereof, if Hollis-Eden or its
sublicensee has not initiated Phase I clinical trials pursuant to an IND with
respect to at least one Compound in such Related Compound Group or Derivative
thereof by the [*************] anniversary of the date that is the latest
Development Transfer Date for the Compounds in such Related Compound Group (the
"Option Date"), then all the Compounds in such Related Compound Group shall be
deemed "Option Compounds" for purposes hereof, and Prendergast shall have the
following reversion option as to such Option Compounds. Commencing on the Option
Date with respect to such Option Compounds, and continuing for sixty (60) days
thereafter, Prendergast shall have the right, exercisable during such period by
written notice to Hollis-Eden, subject to and in accordance with Section 5.5, to
elect to cause the license to Hollis-Eden to terminate with respect to such
Option Compounds.
5.4 REVERSION PAYMENTS. As to any such Option Compounds for which
Prendergast exercises the option granted in Section 5.3 within the applicable
option period, Prendergast shall, promptly after such exercise, repay to Hollis-
Eden the following amounts: (a) all amounts of Research funding paid by Hollis-
Eden to Prendergast that was expended by Prendergast in conducting Research on
any of such Option Compounds, and the allocable amounts of Overhead Costs with
respect thereto (which amounts shall be determined by the quarterly reports
provided by Prendergast pursuant to Section 2.3; and if such amounts remain
undeterminable, then such amounts shall be determined by the good-faith
discussions of Prendergast and Hollis-Eden after reviewing the applicable
records of Prendergast relating to the Research expenditures and accounting);
(b) all amounts expended by Hollis-Eden and its Affiliates and sublicensees in
conducting any research or development activities with respect to any such
Option Compounds; and (c) all actual third party costs and expenses incurred by
Hollis-Eden or its Affiliate or sublicensee in seeking to obtain proprietary
intellectual property rights in any such Option Compounds (together, the
"Development Expenses" with respect to such Option Compounds).
5.5 REVERSION AND LICENSE. Upon the date that Hollis-Eden receives full
repayment of the Development Expenses for a particular set of Option Compounds
for which Prendergast has exercised the option under Section 5.3 (the "Reversion
Date" for such Option Compounds), then the exclusive license to Hollis-Eden
shall automatically terminate solely with respect to such Option Compounds;
provided, however, that the licenses granted hereunder shall otherwise survive.
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5.6 EXCEPTION TO REVERSION RIGHTS. Notwithstanding the provisions of
Sections 5.3 and 5.5 above, in the event that a particular Compound, in a set of
Option Compounds for which Prendergast exercised the option under Section 5.3
and made full repayment of the Development Expenses for such set of Option
Compounds, was discovered or synthesized by Hollis-Eden or its Affiliate or
sublicensee prior to the date Prendergast disclosed such Compound to Hollis-Eden
under this Agreement and without use of any Research Results, as demonstrated by
Hollis-Eden's (or its Affiliate's or sublicensee's) written records, then the
termination under Section 5.5 shall not apply to such particular Compound.
5.7 PATENT PROSECUTION AFTER THE REVERSION DATE. With respect to any
particular set of Option Compounds for which Prendergast has exercised the
option granted under Section 5.3 and paid the amounts owed to Hollis-Eden under
Section 5.4, (a) for the patents and patent applications claiming solely such
set of Option Compounds and/or their manufacture or use, Prendergast shall have
the sole and exclusive rights thereafter to prosecute, maintain, enforce,
practice and license the rights under such patents and applications, and (b) as
to the patents and applications that do not claim solely such set of Option
Compounds and/or their manufacture or use, Hollis-Eden shall retain its rights
under Article 7, subject to Prendergast's rights under Section 7.2(b) with
respect thereto.
6. PAYMENTS
6.1 RESEARCH SPONSORSHIP PAYMENTS.
(a) Within one month of Hollis-Eden's receipt of all experimental
data, patents and patent applications from Prendergast, Edenland and their
Affiliates and representatives pursuant to Article 4 above, Hollis-Eden shall
pay Edenland [********************************] in a single payment to support
Prendergast's efforts under the Research for the Initial Research Term. All
payments hereunder shall be made by wire transfer payable to Edenland.
(b) If the Research Term is extended beyond the Initial Research Term
either at Hollis-Eden's election pursuant to Section 2.3(b) or pursuant to
Section 2.3(c), then Hollis-Eden shall pay [**********************************]
per year to Prendergast for each year of such extension of the Research Term
beyond the Initial Research Term. Such amounts shall be payable quarterly in the
amount of [***********************************************] per quarter, payable
within ten (10) days of the beginning of any such quarter of the Research Term
and subject to the following sentence. Prendergast shall provide to Hollis-Eden
for its review and inspection, if requested, the original invoices or other
documentation documenting the
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expenditures under the Research of all funding provided by Hollis-Eden hereunder
and proof of payment of all such expenditures. Any amounts not so documented in
writing to have been spent for the purposes of supporting the Research and the
Overhead Costs, respecting the limitation of Section 6.1(c), and any amounts
expended for any other purpose, shall be deducted from the quarterly payment
next due after Hollis-Eden discovers either (i) that the expenditure has not
been adequately documented, in Hollis-Eden's reasonable discretion, or (ii) the
other purpose for which the funds were expended.
(c) No more than forty percent (40%) per year in the first year of the
Research Term, and no more than thirty percent (30%) per year in any other year
of the Research Term, of any of the payments made to Prendergast pursuant to
this Section 6.1 may be allocated to Overhead Costs.
(d) Prendergast shall provide to Hollis-Eden quarterly reports
containing accountings for the expenditure of the funds paid to Prendergast
pursuant to this Section 6.1. In addition, Prendergast shall provide to
Hollis-Eden annual reports containing accountings for the expenditure of the
funds paid to Prendergast pursuant to this Section 6.1, which annual reports
shall be audited by independent certified public accountants from an
internationally recognized accounting firm.
6.2 ROYALTIES ON PRODUCTS. Hollis-Eden shall pay to Prendergast a royalty
of [****************] of worldwide Net Sales by Hollis-Eden and its Affiliates
and sublicensees based on sales of Products. Hollis-Eden may deduct from this
royalty payment any amounts made to Prendergast pursuant to Section 6.3.
6.3 SUBICENSEE PAYMENTS. Hollis-Eden shall pay Prendergast
[*************************] of the amounts Hollis-Eden receives from its
sublicensees, on account of the granting of licenses for the manufacture and
sale of Products, as license fees, milestone payments and royalties. For
clarification, it is understood that payments to Hollis-Eden by a sublicensee to
support research and development activities at Hollis-Eden or to purchase equity
of Hollis-Eden, or as payments for the license of products or technology that
are not Products, shall not be subject to the foregoing obligation.
6.4 THIRD PARTY ROYALTIES. In the event that Hollis-Eden or its Affiliates
or sublicensees are obligated to pay Third Party Royalties on account of the
manufacture or sale of Products, then Hollis-Eden may deduct from the royalties
or payments owed to Prendergast under Section 6.2, one hundred percent (100%) of
the amount of such Third Party Royalties, provided that the amount of royalties
or payments paid to Edenland shall not be reduced in any event by more than
[*************************] of the amount otherwise owed.
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6.5 LIMITATIONS ON ROYALTY PAYMENTS.
(a) Except as otherwise provided in Section 6.5(c), from and after the
fifth (5th) anniversary of the regulatory approval for a particular Product in a
particular country and through the tenth (10th) anniversary thereof, the
[*****************] royalty due under Section 6.2 shall be reduced to
[****************] for Net Sales generated in each such country where the
Product is not covered in whole or in part by any issued or pending claim
contained in the Research Patents or Patents and Applications in such country;
provided, however, upon the written request of Hollis-Eden, Prendergast and
Hollis-Eden shall discuss in good faith further reducing such royalties based
upon the then current competition in such country generated by competing
pharmaceutical products and its effect on Hollis-Eden's profitability for such
Product.
(b) No royalties shall be payable under Section 6.2 on Net Sales
generated from a Product sold after the tenth (10th) anniversary of the
regulatory approval for a particular Product in a particular country, in each
country where the Product is not then covered in whole or in part by any issued
claim in a patent contained in the Research Patents or Patents and Applications.
(c) In each country where the Product was covered in whole or in part
by any issued patent contained in the Research Patents or Patents and
Applications in such country, no royalties shall be payable under Section 6.2 on
Net Sales generated from a Product sold in such country after the date that all
such issued patents in such country have expired or been held invalid or
unenforceable by a final decision of a court that is no longer appealed or
appealable.
6.6 PAYMENTS AND REPORTS. All amounts payable to Edenland under this
Agreement shall be paid in U.S. dollars to a bank account specified by Edenland.
The royalty obligation under Section 6.2 shall accrue at the time of sale of the
Products to a Third Party purchaser. The payment obligations under Section 6.3
shall accrue at the time that Hollis-Eden receives payments from its
sublicensees that are subject to such a payment obligation, and such payment
obligations that accrue during a semi-annual period shall be paid within sixty
(60) days after the end of each semi-annual period. Royalty obligations that
accrue during a particular semi-annual period shall be paid within sixty (60)
days after the end of each semi-annual period. Each payment of royalties due
Edenland under Sections 6.2 and 6.3 shall be accompanied by a statement of the
amount of Net Sales during such period, the amount of payments by Hollis-Eden's
sublicensees, and such other information as is necessary to determine the
appropriate amount of such payments by Hollis-Eden.
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6.7 EXCHANGE RATE. The rate of exchange to be used in computing the amount
of currency equivalent in United States dollars due Edenland shall be made at
the period end rate of exchange quoted on the last business day of the royalty
period in the Wall Street Journal.
6.8 RECORDS AND AUDIT.
(a) PRENDERGAST AND EDENLAND. During the Research Term and for two (2)
years thereafter, Prendergast and Edenland shall maintain complete and accurate
records pertaining to the Research and expenditures of funds to support the
Research, in sufficient detail to permit Hollis-Eden to confirm that the
payments made pursuant to Section 6.1 are being used solely to support the
Research and that the limitation of Section 6.1(c) has been respected.
Hollis-Eden shall have the right to cause an independent, certified public
accountant reasonably acceptable to Prendergast to audit such records to confirm
the use of the funds to support the Research and that the limitation of Section
6.1(c) has been respected. Such audits may be exercised twice per year, within
two (2) years after the period to which such records relate, upon reasonable
notice to Prendergast and during normal business hours. Hollis-Eden shall have
the right to itself inspect and copy, at any time during normal business hours,
such records described in this Section 6.8(a).
(b) HOLLIS-EDEN. During the term of this Agreement and for a period of
two (2) years thereafter, Hollis-Eden shall keep complete and accurate records
pertaining to the sale or other disposition of the Products commercialized by
it, in sufficient detail to permit Edenland to confirm the accuracy of all
payments due hereunder. Edenland shall have the right to cause an independent,
certified public accountant reasonably acceptable to Hollis-Eden to audit such
records to confirm Hollis-Eden's Net Sales and royalty payments owed hereunder;
provided, however, that such auditor shall not disclose any confidential
information of Hollis-Eden to Prendergast or Edenland, except to the extent such
disclosure is necessary to verify the amount of royalty payments due under this
Agreement. Hollis-Eden will ensure that any agreement entered into between
Hollis-Eden and a licensee or sublicensee of Hollis-Eden shall include a
provision giving Hollis-Eden similar inspection rights with respect to such
licensee's or sublicensee's applicable records. Such records subject to
inspection by Hollis-Eden shall also be subject to audit by the accountant
referred to in the first sentence of this Section 6.8(b). Such audits may be
exercised once a year, within two (2) years after the period to which such
records relate, upon reasonable notice to Hollis-Eden and during normal business
hours. Any amounts correctly shown to be owing by such audits shall be paid
immediately with interest in the amount of [***] per month (or the maximum
amount permitted by law, if less) from the date first owed until paid.
Prendergast shall bear the full cost of such audit
15.
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unless such audit discloses a variance in the amounts paid by Hollis-Eden of
more than [*****************] from the amount of royalties actually owed. In
such case, Hollis-Eden shall bear the reasonable cost of such audit.
6.9 WITHHOLDING OF TAXES. Any withholding of taxes levied by tax
authorities on the payments hereunder shall be borne by Prendergast and deducted
by Hollis-Eden from the sums otherwise payable by it hereunder for payment to
the proper tax authorities on behalf of Prendergast. Hollis-Eden agrees to
cooperate with Prendergast in the event Prendergast claims exemption from such
withholding or seeks deductions under any double taxation or other similar
treaty or agreement from time to time in force, such cooperation to consist of
providing receipts of payment of such withheld tax or other documents reasonably
available to Hollis-Eden.
6.10 BLOCKED CURRENCY. In each country where the local currency is
blocked and cannot be removed from the country, royalties accrued in that
country may be paid to Prendergast in the country in local currency by deposit
in a local bank designated by Prendergast.
7. PATENT MATTERS
7.1 DRAFT PROVISIONAL APPLICATION. Prendergast shall have the right to
draft and submit to Hollis-Eden initial provisional patent applications covering
any Compound within the Research Results. Such initial draft provisional patent
application shall describe the invention and any data available at that time to
demonstrate, support, or enable disclosure of such invention. Hollis-Eden shall
reasonably consider such provisional patent applications in Hollis-Eden's own
drafting of any provisional or non-provisional patent applications claiming such
inventions within the Research and, to the extent permitted by applicable law,
Patrick T. Prendergast shall be acknowledged as inventor on all such
applications utilizing any data or information or concepts or content of the
provisional provided to Hollis-Eden by Prendergast. Notwithstanding the
foregoing, if (i) Hollis-Eden sends a written notice to Prendergast requesting
that he draft an initial provisional patent application covering a Compound and
(ii) Hollis-Eden does not receive such initial draft from Prendergast within
thirty (30) days of Hollis-Eden's notice, then Hollis-Eden shall have the right
to draft the initial provisional patent application for such Compound.
7.2 FILING AND PROSECUTION.
(a) GENERAL. Hollis-Eden shall have the sole and exclusive right, but
not the obligation, to conduct and control, at its expense, the filing,
prosecution and maintenance of any patents filed on, or other applications or
registrations with respect to,
16.
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the Research Results, including the Research Patents. During the term of this
Agreement, Hollis-Eden shall reasonably consider any recommendations provided by
Prendergast regarding patent filing and/or prosecution of the Research Patents,
but sole discretion as to filing and/or prosecution matters shall rest with
Hollis-Eden. Hollis-Eden shall use reasonable efforts to provide Prendergast
with copies of documents, correspondence and materials reasonably relating to
the prosecution by Hollis-Eden of the Research Patents to allow Prendergast a
reasonable time to review such materials and comment thereon. Prendergast shall
provide Hollis-Eden all reasonable assistance, at Hollis-Eden's expense, in
prosecuting such patents, including without limitation executing all documents
and instruments reasonably required for such prosecution.
(b) CERTAIN PATENTS. If Hollis-Eden, in its sole discretion, decides
that it no longer desires to prosecute or maintain any patent or application
within the Research Patents or the Patents and Applications, Hollis-Eden shall
so notify Prendergast. Prendergast shall then have the right to assume
prosecution and maintenance of such specific patent or application. Hollis-Eden
shall, upon Prendergast's request, take all actions and execute all documents
and instruments reasonably necessary to transfer such right to prosecute and
maintain, on Hollis-Eden's behalf, such specific patents and applications to
Prendergast. For any such patent application for which Prendergast has
undertaken under this subsection (b) to continue prosecution efforts,
Prendergast shall provide to Hollis-Eden copies of all documents, correspondence
and materials reasonably relating to the prosecution by Prendergast of such
patent applications in sufficient time to allow Hollis-Eden to review such
materials and comment thereon. Prendergast shall reasonably consider and
accommodate any recommendations provided by Hollis-Eden regarding patent filing
and/or prosecution of such patent applications. In addition, if Hollis-Eden has
a reasonable justification for any changes to such prosecution based on
Hollis-Eden's own patent prosecution and enforcement strategy, then Prendergast
will modify or change any such prosecution efforts as requested by Hollis-Eden,
including without limitation deleting or amending particular claims in such
applications and/or modifying any arguments made in communications with relevant
patent authorities. For clarity, it is understood and agreed that the foregoing
right in this subsection (b) of Prendergast to undertake to continue the
prosecution and maintenance, on Hollis-Eden's behalf, of specific patents and
patent applications does not affect the licenses granted to Hollis-Eden under
this Agreement.
7.3 INFRINGEMENT OF PATENTS BY THIRD PARTIES. Prendergast shall promptly
notify Hollis-Eden in writing of any alleged or threatened infringement of the
Research Patents of which he becomes aware. Prendergast hereby agrees to
cooperate reasonably in any litigation or other legal action related to
enforcing the Research Patents as reasonably requested by Hollis-Eden,
including, if required, himself bringing a legal
17.
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action or furnishing a power of attorney at the expense of Hollis-Eden. Any
recovery from such infringer obtained by settlement or otherwise shall belong to
Hollis-Eden. Notwithstanding the foregoing sentence, to the extent that it can
be demonstrated with a preponderance of the evidence that any portion of such
recovery is based upon the loss of revenues of Hollis-Eden, then Edenland shall
be entitled to an amount of such recovery that is equal to the royalties that
would have been due under this Agreement with respect to the amount of such
recovery allocated to lost revenues, provided that Edenland must first reimburse
Hollis-Eden for Edenland's proportionate share (based on the proportion of the
recovery claimed by Edenland) of all litigation fees and costs incurred by
Hollis-Eden related to the infringement dispute.
7.4 SUBLICENSES. Hollis-Eden shall have the sole and exclusive right, but
not the duty, to grant licenses under the Research Patents exclusively licensed
under this Agreement and to collect royalty payments therefor.
7.5 RIGHT TO SUE. Prendergast and Edenland hereby grant to Hollis-Eden the
sole and exclusive right, but not the duty, to sue on the patents in the
Research Patents, and to collect all damages and profits for any past, present
and/or future infringements thereof.
7.6 DEFENSE. Hollis-Eden shall have the sole and exclusive right, but not
the duty, to bring and maintain any action necessary to defend its rights to the
Research Patents, and/or the Know-How, including but not limited to actions in
copyright and trade secret.
7.7 SOLE DISCRETION. Any such licenses or suits of Sections 7.4, 7.5,
and/or 7.6, respectively, shall be undertaken at Hollis-Eden's sole discretion.
7.8 EDENLAND AND PRENDERGAST RIGHTS TO SUE AND DEFEND. Notwithstanding
Sections 7.5 and 7.6, if (i) any infringement or threatened infringement on the
Research Patents or the Know-How relating to the Research, which infringement
could reduce the amount of royalties due to Edenland under this Agreement, is
caused by anyone who is currently or was previously associated, affiliated or
employed with Hollis-Eden or its Affiliates ("Hollis-Eden Affiliate"), (ii)
Edenland or Prendergast notify Hollis-Eden in writing of its or his intent to
exercise their rights under this Section 7.8 and (iii) Hollis-Eden elects not to
exercise its rights under Sections 7.5 and 7.6 within 180 days after receipt of
the notice described in clause (ii) above, then Edenland and Prendergast shall
have the right to sue or defend against such Hollis-Eden Affiliate, at their
expense, as described in Sections 7.5 and 7.6.
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8. REPRESENTATIONS AND WARRANTIES
8.1 HOLLIS-EDEN REPRESENTATIONS AND WARRANTIES Hollis-Eden represents and
warrants to Prendergast that:
(a) CORPORATE POWER. Hollis-Eden is duly organized and validly
existing under the laws of its state of incorporation, and has full corporate
power and authority to enter into this Agreement and to carry out the provisions
hereof.
(b) DUE AUTHORIZATION. Hollis-Eden is duly authorized to execute and
deliver this Agreement and to perform its obligations hereunder.
(c) BINDING AGREEMENT. This Agreement is binding upon Hollis-Eden and
enforceable in accordance with its terms, subject to applicable protections
under bankruptcy and other debtor's rights laws.
8.2 PRENDERGAST REPRESENTATIONS AND WARRANTIES. Prendergast represents and
warrants to Hollis-Eden that:
(a) BINDING AGREEMENT. This Agreement is binding upon Prendergast and
enforceable in accordance with its terms, subject to applicable protections
under bankruptcy and other debtor's rights laws.
(b) GRANT OF RIGHTS; NO CONFLICTING ASSIGNMENT OF RESEARCH RESULTS.
Prendergast has not granted, and will not grant during the term of this
Agreement, any rights to any Third Party that would conflict with the rights
granted to Hollis-Eden hereunder. Other than the obligation to assign contained
in the Technology Assignment Agreement, Prendergast is under no obligation to
assign inventions made by him which obligation would conflict with his ownership
of the Research Results and ability to perform the obligation of Article 3 of
this Agreement.
8.3 PRENDERGAST AND EDENLAND REPRESENTATIONS AND WARRANTIES. Prendergast
and Edenland represent and warrant as follows:
(i) They together or individually are the sole and lawful owners
of the entire right, title, and interest in and to the Patents and Applications
and the Related Know-How;
(ii) They together or individually own all right, title and
interest in and to the Patents and Applications and the Related Know-How;
(iii) there are no outstanding liens, licenses and/or
encumbrances burdening the Patents and Applications and the Related Know-How or
any part thereof;
19.
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(iv) all Patents and Applications, excluding those patents and
applications that have not yet been filed, are active and in force in the U.S.
or other territories to which they apply;
(v) Exhibit B is a complete list of all Patents and Applications
that have been filed on or prior to the date hereof and have not been abandoned;
(vi) they have no knowledge of any reason that would cause any
patent or patent application in the Patents and Applications to be invalid or
unenforceable;
(vii) they have not granted, expressly or otherwise, an
assignment or any license or other right, exclusive or otherwise, to or under
the Patents and Applications and/or the Related Know-How, which rights remain in
force;
(viii) they have received no notice of any pending or threatened
claims of infringement or misappropriation with respect to the Patents and
Applications or the Related Know-How (other any such notice in connection with
the recent arbitration claims and counterclaims among the parties hereto), and
knows of no reason that they would receive such notice;
(ix) they have not executed and will not execute any agreements
inconsistent with this Agreement or to the detriment of the Patents and
Applications assigned hereby; and
(x) they shall sign all papers and documents, take all lawful
oaths, and do all acts necessary or required to be done for the procurement,
maintenance, enforcement and defense of the Patents and Applications and the
Related Know-How throughout the world at the cost and expense of Hollis-Eden,
its successors, legal representatives and assigns.
8.4 EDENLAND REPRESENTATIONS AND WARRANTIES. Edenland represents and
warrants as follows:
(a) CORPORATE POWER. It is duly organized and validly existing under
the laws of its state of incorporation, and has full corporate power and
authority to enter into this Agreement and to carry out the provisions hereof.
(b) DUE AUTHORIZATION. It is duly authorized to execute and deliver
this Agreement and to perform its obligations hereunder.
20.
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(c) BINDING AGREEMENT. This Agreement is binding upon it and
enforceable in accordance with its terms, subject to applicable protections
under bankruptcy and other debtor's rights laws.
9. CONFIDENTIALITY
9.1 LICENSED RIGHTS ARE CONFIDENTIAL INFORMATION. Edenland, Colthurst and
Prendergast hereby acknowledge and agree that all Research Results and all other
Know-How, and all rights therein, disclosed or licensed by or from Edenland,
Colthurst and/or Prendergast to Hollis-Eden pursuant to the terms of Sections
2.3, 2.4, 3.1 and/or 4.1, and all information relating to the Patents and
Applications and the Related Know-How, are the confidential information of
Hollis-Eden (the "Confidential Information").
9.2 DISCLOSED INFORMATION. During the Agreement, Hollis-Eden may disclose
to Prendergast proprietary or confidential information of Hollis-Eden, which
information shall also be deemed the "Confidential Information" of Hollis-Eden
subject to the provisions of this Article 9.
9.3 NONDISCLOSURE AND NON-USE. Edenland, Colthurst and Prendergast each
covenant and agree that they and their Affiliates, representatives, agents and
employees: (a) will not publish or disclose in any fashion any Confidential
Information to any third party, except and unless Hollis-Eden has given
Edenland, Colthurst or Prendergast the prior express written permission to do so
as to particular information, which permission may be withheld at Hollis-Eden's
sole discretion; and (b) will not use, practice or employ any of the
Confidential Information for any purpose, except for the limited purpose of
conducting further Research on Hollis-Eden's behalf under the terms of this
Agreement.
9.4 REMOVAL FROM PUBLIC DISPLAY. Edenland, Colthurst and Prendergast shall
remove from, and in the future shall not disclose on, their websites and all
other publicly available sources within the control of Edenland, Colthurst
and/or Prendergast all Confidential Information of Hollis-Eden, including
without limitation, all clinical data and discussions.
10. INDEMNIFICATION AND LIABILITY
10.1 PRENDERGAST AND EDENLAND.
(a) Each of Prendergast and Edenland, severally and not jointly,
hereby agrees to save, defend and hold Hollis-Eden and its directors, employees
and agents harmless from and against any and all damages, expenses, losses,
suits, claims, actions, demands, and/or liabilities, including reasonable legal
expenses and attorneys' fees,
21.
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resulting from any breach by Prendergast or Edenland or Colthurst of the
provisions of Sections 2.5, 8.2, 8.3, 8.4 or Section 9.
(b) Each of Prendergast and Edenland, severally and not jointly,
hereby agrees to save, defend and hold Hollis-Eden and its directors, employees
and agents harmless from and against any and all damages, expenses, losses,
suits, claims, actions, demands, and/or liabilities, including reasonable legal
expenses and attorneys' fees, resulting from any claim, allegation or suit by
(i) any Affiliate of Prendergast or Edenland or (iii) any entity that employs
Prendergast, asserting any ownership interest or other rights whatsoever in any
Research Results or any intellectual property rights therein or seeking
compensation for any of those rights.
10.2 HOLLIS-EDEN. To the extent Hollis-Eden may maintain product liability
insurance, Hollis-Eden agrees to make Edenland and Prendergast a named insured
under such insurance during the term of this Agreement.
11. TERM AND TERMINATION OF AGREEMENT
11.1 TERM. Unless earlier terminated as provided below, the term of this
Agreement shall commence upon the Effective Date and shall expire on the
expiration date of the last to expire royalty or other payment obligation of
Hollis-Eden hereunder.
11.2 ACCRUED RIGHTS. Termination of this Agreement shall not affect any
rights of either Party that accrued prior to the date of termination. Promptly
after termination of this Agreement each party shall return or dispose of any
confidential information of the other Party in accordance with its instructions.
11.3 SURVIVING OBLIGATIONS.
(a) OBLIGATIONS OF HOLLIS-EDEN. The obligation to pay royalties
pursuant to Section 6.2, and the obligation to maintain complete and accurate
records pursuant to Section 6.8 shall survive the expiration of this Agreement.
(b) OBLIGATIONS OF PRENDERGAST. The obligations to license pursuant to
Articles 3 and 4, the covenant not to conduct other research in the Field
pursuant to Section 2.5, and the obligation to maintain complete and accurate
records pursuant to Section 6.8, and the obligations of Articles 9 and 10 shall
survive the expiration of this Agreement.
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12. MISCELLANEOUS
12.1 PUBLICATION. Prendergast covenants and agrees that he and his
employees will not publish or disclose any Research or portion of the Research
Results unless Hollis-Eden has given Prendergast the prior written permission to
do so, which permission may be withheld at Hollis-Eden's sole discretion. To the
extent that Prendergast is an inventor of a Compound, Hollis-Eden shall give
Prendergast credit as inventor of such Compound in any publication by
Hollis-Eden regarding such Compound or a Product incorporating such Compound.
12.2 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without reference to its
conflicts of law provisions, as though it were written, executed and fully
performed within the State of California.
12.3 DISPUTE RESOLUTION. In the event of any dispute arising under the
Agreement, the parties shall refer such dispute to the Chief Executive Officer
of Hollis-Eden and Prendergast for attempted resolution by good faith
negotiations within thirty (30) days after such referral is made. In the event
such officers are unable to resolve such dispute within such thirty (30) day
period, either party may invoke the provisions of Section 12.4 below.
12.4 ARBITRATION. If the officers of the parties are unable to resolve a
dispute under the Agreement pursuant to good faith negotiation under Section
9.4, then the resolution of such dispute shall be by arbitration as provided
herein. Any such dispute shall be resolved by confidential, final and binding
arbitration (rather than trial by jury or court or resolution in some other
forum) to the fullest extent permitted by law. Any arbitration proceeding
pursuant to this Agreement shall be conducted by the American Arbitration
Association ("AAA") in San Diego, under the then existing AAA commercial
arbitration rules. If for any reason all or part of this arbitration provision
is held to be invalid, illegal, or unenforceable in any respect under any
applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not effect any other portion of this arbitration provision
or any other jurisdiction, but this provision will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable part
or parts of this provision had never been contained herein, consistent with the
general intent of the Parties insofar as possible.
12.5 REMEDIES. Except pursuant to Sections 5.3, 5.4 and 5.5, in no event
shall the remedy for any breach hereunder result in the termination of the
exclusive licenses under Sections 3.1 and 4.1.
12.6 NOTICES. All notices required or permitted to be given under this
Agreement shall be in writing and shall be mailed by registered or certified
mail, Federal
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Express or DHL addressed to the signatory to whom such notice is required or
permitted to be given and transmitted by facsimile to the number indicated
below. All notices shall be deemed to have been given when mailed, as evidenced
by the postmark at the point of mailing, or faxed.
All notices to Hollis-Eden shall be addressed as follows:
Hollis-Eden Pharmaceuticals, Inc.
9333 Genesee Avenue, Suite 200
San Diego, California 92121
Attn: Chief Executive Officer
with a copy to:
Cooley Godward L.L.P.
4365 Executive Drive, Suite 1100
San Diego, California 92121
Attn: Thomas A. Coll, Esq.
All notices to Prendergast shall be addressed as follows:
Patrick T. Prendergast
c/o Colthurst Limited and Edenland, Inc.
Baybush, Straffan
County Kildare
Ireland
With a copy to:
David A. Donohoe, Esq.
Akin, Gump, Strauss, Hauer & Feld LLP
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Any party may, by written notice to the other, designate a new address
or fax number to which notices to the party giving the notice shall thereafter
be mailed or faxed.
12.7 COMPLIANCE WITH LAWS. Prendergast shall provide Hollis-Eden with such
reasonable assistance as may be required for Hollis-Eden to comply with all
applicable
24.
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laws, ordinances, rules, regulations and the like of all governmental units or
agencies having jurisdiction pertaining to Hollis-Eden's activities under this
Agreement.
12.8 FORCE MAJEURE. No party shall be liable for any delay or failure of
performance to the extent such delay or failure is caused by circumstances
beyond its reasonable control and that by the exercise of due diligence it is
unable to prevent, provided that the party claiming excuse based on such
circumstances uses its best efforts to overcome the effects of such
circumstances and to recommence performance.
12.9 ENTIRETY OF AGREEMENT. This Agreement, including the Exhibits hereto,
embodies the entire, final and complete agreement and understanding between the
parties regarding the subject matter hereof and replaces and supersedes all
prior discussions and agreements between them with respect to its subject
matter. No modification or waiver of any terms or conditions hereof shall be
effective unless made in writing and signed by a duly authorized officer of each
party.
12.10 NON WAIVER. The failure of a party in any one or more instances to
insist upon strict performance of any of the terms and conditions of this
Agreement shall not constitute a waiver or relinquishment, to any extent, of the
right to assert or rely upon any such terms or conditions on any future
occasion.
12.11 DISCLAIMER OF AGENCY. Neither party is, nor will be deemed to be, the
legal representative or agent of the other, nor shall either party have the
right or authority to assume, create, or incur any third party liability or
obligation of any kind, express or implied, against or in the name of or on
behalf of another except as expressly set forth in this Agreement.
12.12 SEVERABILITY. If a court of competent jurisdiction declares any
provision of this Agreement invalid or unenforceable, or if any government or
other agency having jurisdiction over either Hollis-Eden or Hollis-Eden deems
any provision to be contrary to any laws, then that provision shall be severed
and the remainder of the Agreement shall continue in full force and effect. To
the extent possible, the parties shall revise such invalidated provision in a
manner that will render such provision valid without impairing the parties'
original intent.
12.13 AFFILIATES; ASSIGNMENT. Prendergast may not assign his rights or
delegate his duties under this Agreement without the prior written consent of
Hollis-Eden. Hollis-Eden may assign this Agreement to any of its Affiliates or
to any successor by merger, acquisition or sale of substantially all of its
business unit to which this Agreement relates in a manner such that the assignor
will remain liable and responsible for the performance
25.
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and observance of all its duties and obligations hereunder. This Agreement shall
be binding upon the successors and permitted assigns of the parties.
12.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be an original and all of which shall
constitute together the same document.
12.15 PUBLICITY. Except as otherwise provided herein or required by law,
Prendergast shall not originate any publication, news release or other public
announcement, written or oral, relating to the existence of or the performance
under this Agreement, without the prior written approval of Hollis-Eden, which
approval shall not be unreasonably withheld.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement.
HOLLIS-EDEN PHARMACUETICALS, INC. PATRICK T. PRENDERGAST
By: /s/ Richard B. Hollis By: /s/ Patrick T. Prendergast
----------------------------- -------------------------------
Name: Richard B. Hollis Name: Patrick T. Prendergast
--------------------------- -----------------------------
Title: Chairman and CEO
-------------------------
EDENLAND, INC. COLTHURST LIMITED
By: /s/ Patrick T. Prendergast By: /s/ Patrick T. Prendergast
----------------------------- -------------------------------
Name: Patrick T. Prendergast Name: Patrick T. Prendergast
--------------------------- -----------------------------
Title: MD/Edenland Inc. Title: MD/Colthurst Ltd.
-------------------------- ---------------------------
26.
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EXHIBIT A
DEVELOPMENT TRANSFER DATES
COMPOUND TRANSFER DATE
- -------- -------------
27.
<PAGE>
EXHIBIT B
PATENTS AND PATENT APPLICATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Docket Filing Serial # Patent # Issue Expiration Annuity
Number Date (Publication #) Date Date Due
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[ ********** (***) *** ***** ********* ********* - "****"
- --------------------------------------------------------------------------------
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*****.** */**/** **/****** ******* **/**/**
*****.** **/**/** **/****** ***
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***** */**/** ****** *******
***** */**/** ****** ***
***** */**/** ******** ***
(********)
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***** */**/** ****** ***
***** */**/** ******/** ***
***** */**/** ****** ***
***** *********** ***
***** *****/** ***
***** ***** ***
***** *****
***** **/********
- --------------------------------------------------------------------------------
* *** = *******, *** = *********
********** (***) *** ******** & ********** ********* ********* - "******** ****"
- --------------------------------------------------------------------------------
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(********)
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</TABLE>
28.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Docket Filing Serial # Patent # Issue Expiration Annuity
Number Date (Publication #) Date Date Due
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[***.*** ******/** ***
***.*** *****/** ***
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***.*** ***** *****
- --------------------------------------------------------------------------------
********* (***) *** ******** & ********** ********** - "*** ** ******** **** **"
- --------------------------------------------------------------------------------
***.*** */**/** **/****** ******* */*/** */*/**
***.*** **/*/******* ***
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*** ** ***/********* ******* ******** **** **** ** *********** **** ** *****
*****/*********
*******/********** ** **** ***** - "********* **********"
- --------------------------------------------------------------------------------
***** */**/** ****/** ***
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***** */**/** */**-***** **.***
***** */**/** ******* ***
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***** */**/** ******* ***
***** */**/** ********.* ***
(********)
***** */**/** ******* **** **/**/**
"********* **********"
- --------------------------------------------------------------------------------
***.*** */**/** **-*** ***
- --------------------------------------------------------------------------------
]
</TABLE>
29.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Docket Filing Serial # Patent # Issue Expiration Annuity
Number Date (Publication #) Date Date Due
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[
****-***** **** ******* (*** ****)/****-*** *** ** ***** ***** **** *******
******* ** *** ** ** **-******** ****** ********* - "****** **********"
- -------------------------------------------------------------------------------
***.*** */*/** **-**** ***
***.*** */**/** **/****** ***
***.***.* */**/** **/****** ***
***.***.** **/**/** **/****** ***
- --------------------------------------------------------------------------------
**-*********** **** ****/****/*** ********** - **** ********** /****-*** ***
** ******** ***; ****/*** ************ ******** *** - "**** *********** *******"
- --------------------------------------------------------------------------------
**** */**/** **/****** ***
**** */**/** ****/***** ***
(*********)
***** *****/*****
***** **/**/** ******* ***
***** */**/** ********.* ***
***** ********.* ***
(********)
***** */**/** ******* ***
***** *-*********
***** **/**/** ******** ***
***** ******/** ***
**-*********** **** ****/**** ********** - *** ******** ******** - "****
*********** *******"
- --------------------------------------------------------------------------------
***.** **/**/** ****/***** ***
(*********)
***.*** **/**/** **/****** ***
- --------------------------------------------------------------------------------
*** ******* (*******) & ****-******* ** **************** * - "******
********* *******"
--------------------------------------------------------------------
**** */**/** **/****** ***
**** */**/** ****/***
(*********)
- --------------------------------------------------------------------------------
]
</TABLE>
30.
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Docket Filing Serial # Patent # Issue Expiration Annuity
Number Date (Publication #) Date Date Due
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[*** ******* (*******) & ****-******* ** **************** ** - "******
********* *******"
- --------------------------------------------------------------------------------
***.** */**/** ****/**** ***
(*********)
***.*** */** **/****** ***
***.*** */** *****/** ***
***.*** */** ******* ***
***.*** */** ******** ***
***.*** */** ******** ***
(********)
***.*** */** ****** ***
***.*** */** **-****** ***
***.*** */** ****** ***
***.*** */** ********* ***
- --------------------------------------------------------------------------------
*** ********/********* ** ********* (***, ***) ***/** ****** **********
- --------------------------------------------------------------------------------
**** */**/** **/****** ***
**** */**/** ******* ***
(*********)
***** ******* ***
***** */**/** **/**** ***
***** */**/** ******** ***
*** ******** + *** ******** *******/********** ******* - *** + *** ********
*********** *******
- --------------------------------------------------------------------------------
**** */**/** **/****** ***
**** */**/** ****/***** ***
]
</TABLE>
31.
<PAGE>
EXHIBIT C
COMPOUNDS AND KNOW-HOW
<TABLE>
<CAPTION>
NAME CODE (INHOUSE) CHEMICAL FORMULA THERAPEUTIC AREA
----- -------------- ---------------- ----------------
<S> <C> <C> <C>
[*-***************** ******** **** ********** *************
***/*********
**********
********** **
*. ********
* ******
*********** ********* **** ********** ***/*********/********
*. ********
******* ******** **** ********** ***/*********
(**-******)******-*-(**-******) ***** **: ****.** ***/*********
******-*-(**-******)*********
*** ****** ********* ******
**-****** *********-*' ****-* *********** ***/*********
-*************
*. ********
********** *** ** ******** ****/****
*********** *** ** ******** ****/****
***/*********
*********** *** * ******* ***/*********
***/ ** *********** **** ***-**
****
************ ************* ***/*********
******** *** ** ******** ***/*********
(alpha)-******** *** ** ********** ***/*********
*********** ******** **** ********* ****
********* *
***/*********
*-************** **** ********* ***/*********
********* ** ** ********* ***/*********
********* ** ** ********* *************
****
********** **** *
********** **** **
</TABLE>
32.
<PAGE>
<TABLE>
<CAPTION>
NAME CODE (INHOUSE) CHEMICAL FORMULA THERAPEUTIC AREA
----- -------------- ---------------- ----------------
<S> <C> <C> <C>
********** **** *
******** *** ** ********* *************
****/****
*************
********** *** ** ********* ***/*********
********** **** *
********** ***** ********* ***/*********
********** **** *
********** **** *
*********** **** ***/*********
********** **** ***/*********
********** **** ***/*********
********* ***** **** *** *** ***/*********
*********** ** ** *** ** ***/*********
*** ** **** ******** *** ** *** *,
***/******* *********.
***/*********
**** ***** ***/*********
******** ********* ***** ********/*********'*
********]
</TABLE>
33.
