-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FRzGvdFAV/X22nVP+Hil4dYk7xiUmlk6Ru5VMGtW9CGSIjLUa7KPuTHhnz0sUt4U TOWtKOsgDsl0oemJYi2nlA== 0000898430-00-000263.txt : 20000207 0000898430-00-000263.hdr.sgml : 20000207 ACCESSION NUMBER: 0000898430-00-000263 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20000120 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000204 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLIS EDEN PHARMACEUTICALS INC /DE/ CENTRAL INDEX KEY: 0000899394 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 133697002 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-24672 FILM NUMBER: 523374 BUSINESS ADDRESS: STREET 1: 9333 GENESEE AVENUE STREET 2: SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 8585879333 MAIL ADDRESS: STREET 1: 9333 GENESEE AVENUE STREET 2: SUITE 200 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: INITIAL ACQUISITION CORP DATE OF NAME CHANGE: 19930329 8-K 1 FORM 8-K 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 __________________________ 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. 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. 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. 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. EX-99.1 2 PRESS RELEASE 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. EX-99.2 3 SETTLEMENT & MUTUAL RELEASE AGREEMENT 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; 1 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 2 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, 3 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. 4 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 5 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. 6 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. 7 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 8 EX-99.3 4 TECHNOLOGY ASSIGNMENT AGREEMENT 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 "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 (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 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 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 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 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 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 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 Attachment A
- ------------------------------------------------------------------------------------------------------------ Docket Filing Serial # Patent Issue Expiration Annuity Number Date (Publication #) Number Date Date Due - ------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------
10
- ------------------------------------------------------------------------------------------------------------ Docket Filing Serial # Patent Issue Expiration Annuity Number Date (Publication #) Number Date Date Due - ------------------------------------------------------------------------------------------------------------ 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 - ------------------------------------------------------------------------------------------------------------
11 EX-99.4 5 COMMON STOCK & WARRANT AGREEMENT 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. 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. 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. 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. 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. (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. (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. 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. 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. 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. 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. 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. 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. 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. EXHIBIT A WARRANT 15. 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. 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. EX-99.5 6 WARRANT 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. 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. 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. 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. (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. 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. 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. 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. 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. EX-99.6 7 SPONSORED RESEARCH & LICENSE AGREEMENT 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. 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. 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 3. 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. 4. 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. 5. (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 6. 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 7. 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. 8. 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. 9. 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. 10. 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. 11. 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 12. 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. 13. 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. 14. 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. 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. 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. 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. 18. 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. (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. (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. 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. 22. 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 23. 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. 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. 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. EXHIBIT A DEVELOPMENT TRANSFER DATES COMPOUND TRANSFER DATE - -------- ------------- 27. EXHIBIT B PATENTS AND PATENT APPLICATIONS
- -------------------------------------------------------------------------------- Docket Filing Serial # Patent # Issue Expiration Annuity Number Date (Publication #) Date Date Due - -------------------------------------------------------------------------------- [ ********** (***) *** ***** ********* ********* - "****" - -------------------------------------------------------------------------------- ***** */**/** ****/** **** ***** */*/** **/****** *** *****.* */**/** **/****** *** *****.** */**/** **/****** *** *****.** */**/** **/****** ******* **/**/** *****.** **/**/** **/****** *** ***** */**/** ******* *** *****.* */**/** ******* *** ***** */**/** ****** ******* ***** */**/** ****** *** ***** */**/** ******** *** (********) ***** */**/** ***** ***** **/*/** ***** */**/** ****** *** ***** */**/** ******/** *** ***** */**/** ****** *** ***** *********** *** ***** *****/** *** ***** ***** *** ***** ***** ***** **/******** - -------------------------------------------------------------------------------- * *** = *******, *** = ********* ********** (***) *** ******** & ********** ********* ********* - "******** ****" - -------------------------------------------------------------------------------- ***.*** */**/** ****/** *** ***.***.* */**/** **/****** *** ***.*** */**/** */**-***** ***** ***.*** */**/** ******* *** ***.***.* **/**/** ******* *** ***.***.** **/*/** ******* *** ***.*** */**/** ---- ****-* ***.*** */**/** ******* *** ***.*** */**/** ********.* *** (********) ***.*** ****/** ***]
28.
- -------------------------------------------------------------------------------- Docket Filing Serial # Patent # Issue Expiration Annuity Number Date (Publication #) Date Date Due - -------------------------------------------------------------------------------- [***.*** ******/** *** ***.*** *****/** *** ***.*** ******* **** ***.*** ***** ***** - -------------------------------------------------------------------------------- ********* (***) *** ******** & ********** ********** - "*** ** ******** **** **" - -------------------------------------------------------------------------------- ***.*** */**/** **/****** ******* */*/** */*/** ***.*** **/*/******* *** ***.*** *****/** *** ***.*** ****** *** ***.*** *** ***.*** ****/** *** ***.*** ******* *** ***.*** ***** *** - -------------------------------------------------------------------------------- *** ** ***/********* ******* ******** **** **** ** *********** **** ** ***** *****/********* *******/********** ** **** ***** - "********* **********" - -------------------------------------------------------------------------------- ***** */**/** ****/** *** ***** */**/** **/****** *** ***** */**/** */**-***** **.*** ***** */**/** ******* *** ***** */**/** ---- ****-* ***** */**/** ******* *** ***** */**/** ********.* *** (********) ***** */**/** ******* **** **/**/** "********* **********" - -------------------------------------------------------------------------------- ***.*** */**/** **-*** *** - -------------------------------------------------------------------------------- ]
29.
- -------------------------------------------------------------------------------- Docket Filing Serial # Patent # Issue Expiration Annuity Number Date (Publication #) Date Date Due - -------------------------------------------------------------------------------- [ ****-***** **** ******* (*** ****)/****-*** *** ** ***** ***** **** ******* ******* ** *** ** ** **-******** ****** ********* - "****** **********" - ------------------------------------------------------------------------------- ***.*** */*/** **-**** *** ***.*** */**/** **/****** *** ***.***.* */**/** **/****** *** ***.***.** **/**/** **/****** *** - -------------------------------------------------------------------------------- **-*********** **** ****/****/*** ********** - **** ********** /****-*** *** ** ******** ***; ****/*** ************ ******** *** - "**** *********** *******" - -------------------------------------------------------------------------------- **** */**/** **/****** *** **** */**/** ****/***** *** (*********) ***** *****/***** ***** **/**/** ******* *** ***** */**/** ********.* *** ***** ********.* *** (********) ***** */**/** ******* *** ***** *-********* ***** **/**/** ******** *** ***** ******/** *** **-*********** **** ****/**** ********** - *** ******** ******** - "**** *********** *******" - -------------------------------------------------------------------------------- ***.** **/**/** ****/***** *** (*********) ***.*** **/**/** **/****** *** - -------------------------------------------------------------------------------- *** ******* (*******) & ****-******* ** **************** * - "****** ********* *******" -------------------------------------------------------------------- **** */**/** **/****** *** **** */**/** ****/*** (*********) - -------------------------------------------------------------------------------- ]
30.
- -------------------------------------------------------------------------------- Docket Filing Serial # Patent # Issue Expiration Annuity Number Date (Publication #) Date Date Due - -------------------------------------------------------------------------------- [*** ******* (*******) & ****-******* ** **************** ** - "****** ********* *******" - -------------------------------------------------------------------------------- ***.** */**/** ****/**** *** (*********) ***.*** */** **/****** *** ***.*** */** *****/** *** ***.*** */** ******* *** ***.*** */** ******** *** ***.*** */** ******** *** (********) ***.*** */** ****** *** ***.*** */** **-****** *** ***.*** */** ****** *** ***.*** */** ********* *** - -------------------------------------------------------------------------------- *** ********/********* ** ********* (***, ***) ***/** ****** ********** - -------------------------------------------------------------------------------- **** */**/** **/****** *** **** */**/** ******* *** (*********) ***** ******* *** ***** */**/** **/**** *** ***** */**/** ******** *** *** ******** + *** ******** *******/********** ******* - *** + *** ******** *********** ******* - -------------------------------------------------------------------------------- **** */**/** **/****** *** **** */**/** ****/***** *** ]
31. EXHIBIT C COMPOUNDS AND KNOW-HOW
NAME CODE (INHOUSE) CHEMICAL FORMULA THERAPEUTIC AREA ----- -------------- ---------------- ---------------- [*-***************** ******** **** ********** ************* ***/********* ********** ********** ** *. ******** * ****** *********** ********* **** ********** ***/*********/******** *. ******** ******* ******** **** ********** ***/********* (**-******)******-*-(**-******) ***** **: ****.** ***/********* ******-*-(**-******)********* *** ****** ********* ****** **-****** *********-*' ****-* *********** ***/********* -************* *. ******** ********** *** ** ******** ****/**** *********** *** ** ******** ****/**** ***/********* *********** *** * ******* ***/********* ***/ ** *********** **** ***-** **** ************ ************* ***/********* ******** *** ** ******** ***/********* (alpha)-******** *** ** ********** ***/********* *********** ******** **** ********* **** ********* * ***/********* *-************** **** ********* ***/********* ********* ** ** ********* ***/********* ********* ** ** ********* ************* **** ********** **** * ********** **** **
32.
NAME CODE (INHOUSE) CHEMICAL FORMULA THERAPEUTIC AREA ----- -------------- ---------------- ---------------- ********** **** * ******** *** ** ********* ************* ****/**** ************* ********** *** ** ********* ***/********* ********** **** * ********** ***** ********* ***/********* ********** **** * ********** **** * *********** **** ***/********* ********** **** ***/********* ********** **** ***/********* ********* ***** **** *** *** ***/********* *********** ** ** *** ** ***/********* *** ** **** ******** *** ** *** *, ***/******* *********. ***/********* **** ***** ***/********* ******** ********* ***** ********/*********'* ********]
33. -----END PRIVACY-ENHANCED MESSAGE-----