-----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, FfNt+AGgOVXmfgO9FhESaFxhaytve/QphCkmOYyxlroncaqjpSuGZecd1FOk/b+8 Nkmsdt/I+CSHq5phnwDq2w== 0000898430-02-000252.txt : 20020414 0000898430-02-000252.hdr.sgml : 20020414 ACCESSION NUMBER: 0000898430-02-000252 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20020125 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: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-75860 FILM NUMBER: 02517265 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 S-3/A 1 ds3a.txt FORM S-3/A As filed with the Securities and Exchange Commission on January 25, 2002 Registration No. 333-75860 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ----------------- HOLLIS-EDEN PHARMACEUTICALS, INC. (Exact name of registrant as specified in its charter) Delaware 13-3697002 (State or other (I.R.S. Employer jurisdiction of Identification No.) incorporation or organization) 9333 Genesee Avenue, Suite 200 San Diego, California 92121 (858) 587-9333 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ----------------- Richard B. Hollis Chairman of the Board and Chief Executive Officer HOLLIS-EDEN PHARMACEUTICALS, INC. 9333 Genesee Avenue, Suite 200 San Diego, California 92121 (858) 587-9333 (Name, address, including zip code, and telephone number, including area code, of agent for service) ----------------- Copies to: Eric J. Loumeau, Esq. HOLLIS-EDEN PHARMACEUTICALS, INC. 9333 Genesee Avenue, Suite 200 San Diego, California 92121 (858) 587-9333 ----------------- Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement. ----------------- If the only securities being registered on this form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [X] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ----------------- The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to Completion, Dated January 25, 2002 PROSPECTUS 1,570,641 Shares HOLLIS-EDEN PHARMACEUTICALS, INC. Common Stock ----------------- Selling stockholders identified in this prospectus are selling 1,570,641 shares of Hollis-Eden Pharmaceuticals, Inc. common stock. Hollis-Eden will not receive any of the proceeds from the sale of shares by the selling stockholders. Hollis-Eden's common stock is listed on The Nasdaq National Market under the symbol HEPH. The closing sale price of the common stock, as reported on The Nasdaq National Market on January 24, 2002, was $10.58 per share. Investing in the common stock involves a high degree of risk. See Risk Factors, beginning on page 1. ----------------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense. ----------------- The date of this prospectus is . TABLE OF CONTENTS
Page ---- Hollis-Eden Pharmaceuticals....... 1 Use of Proceeds................... 1 Risk Factors...................... 1 Where You Can Get More Information 8 Forward-Looking Statements........ 8 Selling Stockholders.............. 10 Plan of Distribution.............. 11 Legal Matters..................... 11 Experts........................... 12
This prospectus is part of a registration statement we filed with the Securities and Exchange Commission. You should rely only on the information contained in or incorporated by reference in this prospectus. The SEC allows us to incorporate by reference information that we file with them, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede this information. HOLLIS-EDEN PHARMACEUTICALS Hollis-Eden is a pharmaceutical company in the development stage. We intend to discover, develop and commercialize products for the treatment of a wide array of infectious diseases and immune system disorders including HIV/AIDS, hepatitis, and malaria. Hollis-Eden's executive offices are located at 9333 Genesee Avenue, Suite 200, San Diego, California 92121, telephone number (858) 587-9333. USE OF PROCEEDS Hollis-Eden will not receive any proceeds from the sale of the shares of common stock offered by the selling stockholders. RISK FACTORS Any investment in shares of our common stock involves a high degree of risk. You should consider carefully the following information about these risks, together with the other information contained in this prospectus before you decide to buy our common stock. If any of the following risks actually occurs, our business, financial condition, results of operations and future growth prospects would likely be materially adversely affected. In these circumstances, the market price of our common stock could decline, and you may lose all or part of the money you paid to buy our common stock. If we do not obtain government regulatory approval for our products, we cannot sell our products and we will not generate revenues. Our principal development efforts are currently centered around immune regulating hormones, a class of drug candidates which we believe shows promise for the treatment of a variety of infectious diseases and immune system disorders. However, all drug candidates require U.S. FDA and foreign government approvals before they can be commercialized. Neither HE2000, our lead drug candidate, nor any of our other drug candidates have been approved for commercial sale. We expect to incur significant additional operating losses over the next several years as we fund development, clinical testing and other expenses while seeking regulatory approval. While limited clinical trials of our drug candidates have to date produced favorable results, significant additional trials are required, and we may not be able to demonstrate that these drug candidates are safe or effective. If we are unable to demonstrate the safety and effectiveness of a particular drug candidate to the satisfaction of regulatory authorities, the product candidate will not obtain required government approval. If we do not receive FDA or foreign approvals for our products, we will not be able to sell our products and will not generate revenues. 1 If we do not successfully commercialize our products, we may never achieve profitability. We have experienced significant operating losses to date because of the substantial expenses we have incurred to acquire and fund development of our drug candidates. We have never had operating revenues and have never commercially introduced a product. Our accumulated deficit was approximately $59.3 million through September 30, 2001. Our net losses for fiscal years 2000, 1999 and 1998 were $19.5 million, $15.3 million and $5.4 million, and our net loss for the nine months ended September 30, 2001 was $11.1 million. Many of our research and development programs are at an early stage. Potential drug candidates are subject to inherent risks of failure. These risks include the possibilities that no drug candidate will be found safe or effective, meet applicable regulatory standards or receive the necessary regulatory clearances. Even safe and effective drug candidates may never be developed into commercially successful drugs. If we are unable to develop safe, commercially viable drugs, we may never achieve profitability. If we become profitable, we may not remain profitable. As a result of our intensely competitive industry, we may not gain enough market share to be profitable. The biotechnology and pharmaceutical industries are intensely competitive. We have numerous competitors in the United States and elsewhere. Because we are pursuing potentially large markets, our competitors include major, multinational pharmaceutical and chemical companies, specialized biotechnology firms and universities and other research institutions. Several of these entities have already successfully marketed and commercialized products that will compete with our products, assuming that our products gain regulatory approval. Companies such as Glaxo Wellcome Inc., Merck & Company, Roche Pharmaceuticals, Pfizer Inc. and Abbott Laboratories have significant market shares for the treatment of a number of infectious diseases such as HIV, and Schering AG and Roche Pharmaceuticals are current leaders in hepatitis therapies. In addition, biotechnology companies such as Gilead Sciences Inc., Chiron Corporation and Vertex Pharmaceuticals Inc., as well as many others, have research and development programs in these fields. A large number of companies, including Merck & Company, Pfizer Inc., Pharmacia Corporation, Johnson & Johnson Inc. and Immunex Corporation are also developing and marketing new drugs for the treatment of chronic inflammatory conditions. Many of these competitors have greater financial and other resources, larger research and development staffs and more effective marketing and manufacturing organizations than we do. In addition, academic and government institutions have become increasingly aware of the commercial value of their research findings. These institutions are now more likely to enter into exclusive licensing agreements with commercial enterprises, including our competitors, to develop and market commercial products. Our competitors may succeed in developing or licensing technologies and drugs that are more effective or less costly than any we are developing. Our competitors may succeed in obtaining FDA or other regulatory approvals for drug candidates before we do. If competing drug candidates prove to be more effective or less costly than our drug candidates, our drug candidates, even if approved for sale, may not be able to compete successfully with our competitors' existing products or new products under development. If we are unable to compete successfully, we may never be able to sell enough products at a sufficient price that would permit us to generate profits. We will need to raise additional money before we expect to achieve profitability; if we fail to raise additional money, it would be difficult to continue our business. As of September 30, 2001 our cash and cash equivalents totaled approximately $23.2 million. In addition, in December 2001 we completed a private placement of common stock and warrants in which we received net proceeds of approximately $10.7 million. Based on our current plans, we believe these financial resources, and interest earned thereon, will be sufficient to meet our operating expenses and capital requirements at least well into 2003. However, changes in our research and development plans or other events affecting our operating expenses may result in the expenditure of such cash before that time. We will require substantial additional funds 2 in order to finance our drug discovery and development programs, fund operating expenses, pursue regulatory clearances, develop manufacturing, marketing and sales capabilities, and prosecute and defend our intellectual property rights. We intend to seek additional funding through public or private financing or through collaborative arrangements with strategic partners. You should be aware that in the future: . we may not obtain additional financial resources when necessary or on terms favorable to us, if at all; and . any available additional financing may not be adequate. If we cannot raise additional funds when needed or on acceptable terms, we would not be able to continue to develop HE2000 or any of our other product candidates. If we raise additional money by issuing equity securities, your investment will be diluted. If we raise additional funding by issuing more equity securities, the new shares will dilute the voting power of your investment on a percentage basis. Failure to protect our proprietary technology could impair our competitive position. As of the date of this prospectus, we own or have obtained a license to over 60 issued U.S. and foreign patents and over 100 pending U.S. and foreign patent applications. Our success will depend in part on our ability to obtain additional United States and foreign patent protection for our drug candidates and processes, preserve our trade secrets and operate without infringing the proprietary rights of third parties. We place considerable importance on obtaining patent protection for significant new technologies, products and processes. Legal standards relating to the validity of patents covering pharmaceutical and biotechnology inventions and the scope of claims made under such patents are still developing. Our patent position is highly uncertain and involves complex legal and factual questions. The applicant or inventors of subject matter covered by patent applications or patents owned by or licensed to us may not have been the first to invent or the first to file patent applications for such inventions. Due to uncertainties regarding patent law and the circumstances surrounding our patent applications, the pending or future patent applications we own or have licensed may not result in the issuance of any patents. Existing or future patents owned by or licensed to us may be challenged, infringed upon, invalidated, found to be unenforceable or circumvented by others. Further, any rights we may have under any issued patents may not provide us with sufficient protection against competitive products or otherwise cover commercially valuable products or processes. Litigation or other disputes regarding patents and other proprietary rights may be expensive, cause delays in bringing products to market and harm our ability to operate. The manufacture, use or sale of our drug candidates may infringe on the patent rights of others. If we are unable to avoid infringement of the patent rights of others, we may be required to seek a license, defend an infringement action or challenge the validity of the patents in court. Patent litigation is costly and time consuming. We may not have sufficient resources to bring these actions to a successful conclusion. In addition, if we do not obtain a license, develop or obtain non-infringing technology, and fail to successfully defend an infringement action or to have infringing patents declared invalid, we may: . Incur substantial money damages; . Encounter significant delays in bringing our drug candidates to market; and/or . Be precluded from participating in the manufacture, use or sale of our drug candidates or methods of treatment without first obtaining licenses to do so. 3 We may not be able to obtain any required license on favorable terms, if at all. In addition, if another party claims the same subject matter or subject matter overlapping with the subject matter that we have claimed in a United States patent application or patent, we may decide or be required to participate in interference proceedings in the United States Patent and Trademark Office in order to determine the priority of invention. Loss of such an interference proceeding would deprive us of patent protection sought or previously obtained and could prevent us from commercializing our products. Participation in such proceedings could result in substantial costs, whether or not the eventual outcome is favorable. These additional costs could adversely affect our financial results. Confidentiality agreements with employees and others may not adequately prevent disclosure of trade secrets and other proprietary information. In order to protect our proprietary technology and processes, we also rely in part on confidentiality agreements with our corporate partners, employees, consultants, outside scientific collaborators and sponsored researchers and other advisors. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position. Existing pricing regulations and reimbursement limitations may reduce our potential profits from the sale of our products. The requirements governing product licensing, pricing and reimbursement vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after product licensing approval is granted. As a result, we may obtain regulatory approval for a product candidate in a particular country, but then be subject to price regulations that reduce our profits from the sale of the product. In some foreign markets pricing of prescription pharmaceuticals is subject to continuing government control even after initial marketing approval. In addition, certain governments may grant third parties a license to manufacture our product without our permission. Such compulsory licenses typically would be on terms that are less favorable to us and would have the effect of reducing our profits. Varying price regulation between countries can lead to inconsistent prices and some re-selling by third parties of products from markets where products are sold at lower prices to markets where those products are sold at higher prices. This practice of exploiting price differences between countries could undermine our sales in markets with higher prices and reduce the sales of our future products, if any. While we do not have any applications for regulatory approval of our products currently pending, the decline in the size of the markets in which we may in the future sell commercial products could cause the perceived market value of our business and the price of our common stock to decline. Our ability to commercialize our products successfully also will depend in part on the extent to which reimbursement for the cost of our products and related treatments will be available from government health administration authorities, private health insurers and other organizations. Third-party payors are increasingly challenging the prices charged for medical products and services. If we succeed in bringing any of our potential products to the market, such products may not be considered cost effective and reimbursement may not be available or sufficient to allow us to sell such products on a competitive basis. 4 Delays in the conduct or completion of our clinical trials or the analysis of the data from our clinical trials may result in delays in our planned filings for regulatory approvals, or adversely affect our ability to enter into collaborative arrangements. The current status of our drug candidates is as follows: . We are conducting Phase II clinical trials with HE2000 in South Africa and Phase I/II clinical trials with HE2000 in the United States for the treatment of HIV/AIDS; . We are conducting Phase II clinical trials with HE2000 in Thailand for the treatment of malaria; . We are conducting Phase II clinical trials with HE2000 in Singapore for the treatment of Hepatitis B; . We are conducting Phase I safety clinical trials with HE2200 in the United States; and . We have the right to acquire rights to HE2500, a compound that Aeson Therapeutics is studying in Phase II clinical trials in the United States for the treatment of cardiovascular disease and actinic keratosis. We may encounter problems with some or all of our completed or ongoing clinical studies that may cause us or regulatory authorities to delay or suspend our ongoing clinical studies or delay the analysis of data from our completed or ongoing clinical studies. If the results of our ongoing and planned clinical studies for our clinical candidates are not available when we expect or if we encounter any delay in the analysis of our clinical studies for our clinical candidates: . we may not have the financial resources to continue research and development of any of our product candidates; and . we may not be able to enter into collaborative arrangements relating to any product subject to delay in regulatory filing. Any of the following reasons could delay or suspend the completion of our ongoing and future clinical studies: . delays in enrolling volunteers; . lower than anticipated retention rate of volunteers in a trial; . unfavorable efficacy results; or . serious side effects experienced by study participants relating to the product candidate. If the manufacturers of our products do not comply with current Good Manufacturing Practices regulations, or cannot produce the amount of products we need to continue our development, we will fall behind on our business objectives. An outside manufacturer, Hovione - Soc. Quimica, S.A., is currently our primary producer of our drug candidates. Manufacturers producing our products must follow current Good Manufacturing Practices regulations enforced by the FDA and foreign equivalents. If a manufacturer of our products does not conform to the Good Manufacturing Practices regulations and cannot be brought up to such a standard, we will be required to find alternative manufacturers that do conform. This may be a long and difficult process, and may delay our ability to receive FDA or foreign regulatory approval of our products. We also rely on our manufacturers to supply us with a sufficient quantity of our drug candidates to conduct clinical trials. If we have difficulty in the future obtaining our required quantity and quality of supply, we could experience significant delays in our development programs and regulatory process. 5 Our ability to achieve any significant revenue may depend on our ability to establish effective sales and marketing capabilities. Our efforts to date have focused on the development and evaluation of our drug candidates. As we continue clinical studies and prepare for commercialization of our drug candidates, we may need to build a sales and marketing infrastructure. As a company, we have no experience in the sales and marketing of our drug candidates. If we fail to establish a sufficient marketing and sales force or to make alternative arrangements to have our products marketed and sold by others on attractive terms, it will impair our ability to commercialize our product candidates and to enter new or existing markets. Our inability to effectively enter these markets would materially and adversely affect our ability to generate significant revenues. If we were to lose the services of Richard B. Hollis, or fail to attract or retain qualified personnel in the future, our business objectives would be more difficult to implement, adversely affecting our operations. Our ability to successfully implement our business strategy depends highly upon our Chief Executive Officer, Richard B. Hollis. The loss of Mr. Hollis' services could impede the achievement of our objectives. We also highly depend on our ability to hire and retain qualified scientific and technical personnel. The competition for these employees is intense. Thus, we may not be able to continue to hire and retain the qualified personnel needed for our business. Loss of the services of or the failure to recruit key scientific and technical personnel could adversely affect our business, operating results and financial condition. We may face product liability claims related to the use or misuse of our products, which may cause us to incur significant losses. We are currently exposed to the risk of product liability claims due to administration of our product candidates in clinical trials, since the use or misuse of our product candidates during a clinical trial could potentially result in injury or death. If we are able to commercialize our products, we will also be subject to the risk of losses in the future due to product liability claims in the event that the use or misuse of our commercial products results in injury or death. We currently maintain liability insurance on a claims-made basis in an aggregate amount of $5 million. Because we cannot predict the magnitude or the number of claims that may be brought against us in the future, we do not know whether the insurance policies' coverage limits are adequate. The insurance is expensive, difficult to obtain and may not be available in the future on acceptable terms, or at all. Any claims against us, regardless of their merit, could substantially increase our costs and cause us to incur significant losses. Trading in our shares could be subject to extreme price fluctuations that could adversely affect your investment. The market prices for securities of life sciences companies, particularly those that are not profitable, have been highly volatile, especially recently. Publicized events and announcements may have a significant impact on the market price of our common stock. For example: . biological or medical discoveries by competitors; . public concern about the safety of our product candidates; . unfavorable results from clinical trials; . unfavorable developments concerning patents or other proprietary rights; or . unfavorable domestic or foreign regulatory developments; may have the effect of temporarily or permanently driving down the price of our common stock. In addition, the stock market from time to time experiences extreme price and volume fluctuations which particularly affect the market prices for emerging and life sciences companies, such as ours, and which are often unrelated to the 6 operating performance of the affected companies. For example, our stock price has ranged from $2.12 to $19.25 between January 1, 2000 and January 24, 2002. The table below shows, for the periods indicated, the reported high and low trading prices of our common stock on The Nasdaq National Market.
PRICE RANGE --------------- HIGH LOW ------- ------- CALENDAR YEAR 1999 First Quarter.. $ 25.50 $ 13.25 Second Quarter. 18.75 10.00 Third Quarter.. 16.00 11.00 Fourth Quarter. 18.625 8.625 CALENDAR YEAR 2000 First Quarter.. $ 19.25 $10.125 Second Quarter. 17.438 7.75 Third Quarter.. 13.375 7.719 Fourth Quarter. 9.188 4.00 CALENDAR YEAR 2001 First Quarter.. $ 6.125 $ 2.75 Second Quarter. 7.99 2.125 Third Quarter.. 7.36 4.01 Fourth Quarter. 14.25 6.00
These broad market fluctuations may adversely affect the ability of a stockholder to dispose of his shares at a price equal to or above the price at which the shares were purchased. In addition, in the past, following periods of volatility in the market price of a company's securities, securities class-action litigation has often been instituted against those companies. This type of litigation, if instituted, could result in substantial costs and a diversion of management's attention and resources, which could materially adversely affect our business, financial condition and results of operations. Because stock ownership is concentrated, you and other investors will have minimal influence on stockholders' decisions. Assuming that outstanding warrants and options have not been exercised, Richard B. Hollis, our Chief Executive Officer, owns approximately 21% of our outstanding common stock. Assuming the exercise of our outstanding warrants and options, Mr. Hollis would own approximately 19% of our outstanding common stock. As a result, Mr. Hollis may be able to significantly influence the management of Hollis-Eden and all matters requiring stockholder approval, including the election of directors. Such concentration of ownership may also have the effect of delaying or preventing a change in control of Hollis-Eden. 7 WHERE YOU CAN GET MORE INFORMATION We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC's public reference rooms in Washington, D.C., New York, NY and Chicago, IL. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available at the SEC's Web site at http://www.sec.gov. We incorporate by reference the documents listed below, except as modified by this registration statement, and any future filings we will make with the SEC under Section 13 (a), 13(c), 14 or 15 (d) of the Securities Exchange Act of 1934: . Annual Report on Form 10-K for the year ended December 31, 2000; . Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001, June 30, 2001, and September 30, 2001; . Notice of Annual Meeting and Proxy Statement for the 2000 Annual Meeting of Stockholders held on June 29, 2001; . Current Reports on Form 8-K filed December 18, 2001; and . Our registration statement on Form S-4, No. 333-18725, as amended, which includes a description of our common stock. You may request a copy of these filings at no cost, by writing or telephoning us at the following address or telephone number: Hollis-Eden Pharmaceuticals, Inc. 9333 Genesee Avenue, Suite 200 San Diego, CA 92121 Attn: Chief Accounting Officer (858) 587-9333 FORWARD-LOOKING STATEMENTS This prospectus contains forward-looking statements that involve risks and uncertainties. These include statements about our expectations, plans, objectives, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as ''anticipate,'' ''estimate,'' ''plans,'' ''potential,'' ''projects,'' ''continuing,'' ''ongoing,'' ''expects,'' ''management believes,'' ''we believe,'' ''we intend'' and similar expressions. These statements involve estimates, assumptions and uncertainties that could cause actual results to differ materially from those expressed for the reasons described in this prospectus. You should not place undue reliance on these forward-looking statements. You should be aware that our actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including: . failure to achieve positive results in clinical trials; . failure to obtain government regulatory approvals; . competitive factors; . our ability to raise additional capital; 8 . uncertainty regarding our patents and patent rights; . relationships with our consultants, academic collaborators and other third-party service providers; and . our ability to enter into future collaborative arrangements. You should also consider carefully the statements under ''Risk Factors'' and other sections of this prospectus, which address additional factors that could cause our actual results to differ from those set forth in the forward-looking statements and could materially and adversely affect our business, operating results and financial condition. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We use data and industry forecasts throughout this prospectus, which we have obtained from internal surveys, market research, publicly available information and industry publications. Industry publications generally state that the information they provide has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Similarly, we believe that the surveys and market research we or others have performed are reliable, but we have not independently verified this information. We do not represent that any such information is accurate. 9 SELLING STOCKHOLDERS The following table sets forth the names of the selling stockholders, and the number of shares of common stock owned beneficially by them as of December 14, 2001 which may be offered under the terms of this prospectus. This information is based upon information provided by each selling stockholder. The applicable percentages of ownership are based on an aggregate of 12,895,803 shares issued and outstanding on December 14, 2001. The number of shares beneficially owned by each selling stockholder is determined under rules promulgated by the SEC, and is not necessarily indicative of beneficial ownership for any other purpose. The term selling stockholders includes the stockholders listed below and their transferees, pledges, donees or other successors. Each selling stockholder is offering all of the shares they beneficially own, and assuming they sell every share, will not beneficially own any shares of Hollis-Eden after the offering. None of the selling stockholders has, or within the past three years has had, any position, office or other material relationship with Hollis-Eden or any of its predecessors or affiliates.
Percent of Shares Beneficially Shares Being Owned Prior to Selling Stockholders Offered the Offering - -------------------- ------------ ----------------- Vertical Ventures Investments LLC.......................... 550,000(1) 4.2% Rochdale Investment Management, LLC........................ 61,111(2) * Jackson Square Partners 2002, L.P.......................... 165,000(3) 1.3% ANDA Partnership........................................... 165,000(4) 1.3% BlackRock Funds, Micro-Cap Equity Portfolio................ 513,334(5) 4.0% BlackRock Funds, Global Science and Technology Portfolio... 513,334(6) 4.0% The Lynch Foundation....................................... 30,556(7) * Clarion Capital Corporation................................ 66,000(8) * Clarion Partners, L.P...................................... 66,000(9) * Clarion Offshore Fund Ltd.................................. 22,000(10) * H.C. Wainwright & Co., Inc................................. 162,640(11) 1.2%
- -------- * less than 1% (1) Includes 50,000 shares issuable upon the exercise of warrants. (2) Includes 5,556 shares issuable upon the exercise of a warrant. (3) Includes 7,500 shares issuable upon the exercise of a warrant. Also includes 75,000 shares owned by ANDA Partnership, and 7,500 shares issuable upon the exercise of a warrant issued to ANDA Partnership. ANDA Partnership is an affiliate of Jackson Square Partners 2002, L.P. (4) Includes 7,500 shares issuable upon the exercise of a warrant. Also includes 75,000 shares owned by Jackson Square Partners 2002, L.P., and 7,500 shares issuable upon the exercise of a warrant issued to Jackson Square Partners 2002, L.P. Jackson Square Partners 2002, L.P. is an affiliate of ANDA Partnership. (5) Includes 35,667 shares issuable upon the exercise of a warrant. Also includes 100,000 shares owned by BlackRock Funds, Global Science and Technology Portfolio, and 10,000 shares issuable upon the exercise of a warrant issued to BlackRock Funds, Global Science and Technology Portfolio. BlackRock Funds, Global Science and Technology Portfolio is an affiliate of BlackRock Funds, Micro-Cap Equity Portfolio. (6) Includes 10,000 shares issuable upon the exercise of a warrant. Also includes 366,667 owned by BlackRock Funds, Micro-Cap Equity Portfolio, and 36,667 shares issuable upon the exercise of a warrant issued to BlackRock Funds, Micro-Cap Equity Portfolio. BlackRock Funds, Micro-Cap Equity Portfolio is an affiliate of BlackRock Funds, Global Science and Technology Portfolio. (7) Includes 2,778 shares issuable upon the exercise of a warrant. (8) Includes 4,000 shares issuable upon the exercise of a warrant. Also includes 20,000 shares owned by Clarion Partners, L.P., and 2,000 shares issuable upon the exercise of a warrant issued to Clarion Partners, L.P. Clarion Partners, L.P. is an affiliate of Clarion Capital Corporation. (9) Includes 2,000 shares issuable upon the exercise of a warrant. Also includes 40,000 shares owned by Clarion Capital Corporation, and 4,000 shares issuable upon the exercise of a warrant issued to Clarion Capital Corporation. Clarion Capital Corporation is an affiliate of Clarion Partners, L.P. (10) Includes 2,000 shares issuable upon the exercise of a warrant. (11) All of such shares are issuable upon the exercise of warrants. 10 PLAN OF DISTRIBUTION The shares of common stock may be sold from time to time by the selling stockholders in one or more transactions at fixed prices, at market prices at the time of sale, at varying prices determined at the time of sale or at negotiated prices. The selling stockholders may offer their shares of common stock in one or more of the following transactions: . on any national securities exchange or quotation service at which the common stock may be listed or quoted at the time of sale, including The Nasdaq National Market; . in the over-the-counter market; . in private transactions; . through options; and . by pledge to secure debts and other obligations, or a combination of any of the above transactions. If required, we will distribute a supplement to this prospectus to describe material changes in the terms of the offering. The shares of common stock described in this prospectus may be sold from time to time directly by the selling stockholders. Alternatively, the selling stockholders may from time to time offer shares of common stock to or through underwriters, broker/dealers or agents. The selling stockholders and any underwriters, broker/dealers or agents that participate in the distribution of the shares of common stock may be deemed to be underwriters within the meaning of the Securities Act of 1933. Any profits on the resale of shares of common stock and any compensation received by any underwriter, broker/dealer or agent may be deemed to be underwriting discounts and commissions under the Securities Act of 1933. Any shares covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act of 1933 may be sold under rule 144 rather than under the terms of this prospectus. The selling stockholders may transfer, will or gift such shares by other means not described in this prospectus. To comply with the securities laws of certain jurisdictions, the common stock must be offered or sold only through registered or licensed brokers or dealers. In addition, in certain jurisdictions, the common stock may not be offered or sold unless they have been registered or qualified for sale or an exemption is available and complied with. Under the Securities Exchange Act of 1934, any person engaged in a distribution of the common stock may not simultaneously engage in market-making activities with respect to the common stock for nine business days prior to the start of the distribution. In addition, each selling stockholder and any other person participating in a distribution will be subject to the Securities Exchange Act of 1934 which may limit the timing of purchases and sales of common stock by the selling stockholders or any such other person. These factors may affect the marketability of the common stock and the ability of brokers or dealers to engage in market-making activities. We will pay all expenses of this registration. These expenses include the SEC's filing fees and fees under state securities or blue sky laws. We estimate that our expenses in connection with this offering will be approximately $28,000. LEGAL MATTERS Cooley Godward LLP, San Diego, California will pass upon the validity of the issuance of the common stock offered by this prospectus. 11 EXPERTS The financial statements of Hollis-Eden Pharmaceuticals, Inc. as of December 31, 2000 and 1999, and for each of the years ended December 31, 2000, 1999 and 1998, and for the period from August 15, 1994, the day we started doing business, to December 31, 2000, have been audited by BDO Seidman, LLP, as set forth in their report included in our Annual Report on Form 10-K for the year ended December 31, 2000. We incorporate these financial statements by reference into this prospectus in reliance upon such report given upon the authority of BDO Seidman, LLP as experts in accounting and auditing. We have not authorized any dealer, salesperson or other person to give any information or to make any representations not contained in this prospectus or any prospectus supplement. You must not rely on any unauthorized information. This prospectus is not an offer of these securities in any state where an offer is not permitted. The information in this prospectus is current as of January 24, 2002. You should not assume that this prospectus is accurate as of any other date. 12 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The expenses in connection with the issuance and distribution of the securities being registered are set forth in the following table (all amounts except the registration fee and the listing fee are estimated): SEC Registration Fee........... $ 4,178 Legal fees and expenses........ 20,000 Accounting fees and expenses... 2,000 Miscellaneous and printing fees 1,822 ------- Total.......................... $28,000 =======
Item 15. Indemnification of Officers and Directors. Under Section 145 of the Delaware General Corporation Law, the registrant has broad powers to indemnify its directors and officers against liabilities they may incur in such capacities, including liabilities under the Securities Act of 1933, as amended (the "Securities Act"). The registrant's bylaws provide that the registrant shall indemnify its directors and executive officers and may indemnify its other officers, employees and other agents to the fullest extent permitted by Delaware law. The registrant is also empowered under its bylaws to enter into indemnification contracts with its directors and officers and to purchase insurance on behalf of any person whom it is required or permitted to indemnify. In addition, the registrant is required, subject to certain exceptions, to advance all expenses incurred by any director or executive officer in connection with a completed, pending or threatened action, suit or proceeding upon receipt of an undertaking by such director or executive officer to repay all amounts advanced by the registrant on such person's behalf if it is ultimately determined that such person is not entitled to be indemnified under the bylaws or otherwise. The registrant's Certificate of Incorporation provides that to the fullest extent permitted under Delaware law, the registrant's directors will not be personally liable to the registrant and its stockholders for monetary damages for any breach of a director's fiduciary duty. The Certificate of Incorporation does not, however, eliminate the duty of care, and in appropriate circumstances, equitable remedies such as an injunction or other forms of non-monetary relief would remain available under Delaware law. Each director is subject to liability for breach of the director's duty of loyalty to the registrant, for acts or omissions not in good faith or involving intentional misconduct or knowing violations of law, for any transaction from which the director derived an improper personal benefit and for improper distributions to stockholders and loans to directors and officers. This provision does not affect a director's responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws. The registrant maintains directors' and officers' liability insurance. II-1 Item 16. Exhibits.
Exhibit No. Description --- ----------- 4.1 Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 4.1 to Registrant's Registration Statement on Form S-4 (No. 333-18725), as amended (the "Form S-4")). 4.2 Bylaws of Registrant (incorporated by reference to Exhibit 4.2 to the Form S-4). 4.3 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001). 4.4 Form of Stock and Warrant Purchase Agreement, dated as of December 11, 2001, between the Registrant and the purchasers listed on Schedule I attached thereto.* 4.5 Form of Warrant, dated December 11, 2001, issued to the purchasers listed on Schedule I attached thereto.* 4.6 Form of Warrant issued to H.C. Wainwright & Co., Inc. in the amounts and on the dates listed on Schedule I attached thereto.* 5.1 Opinion of Cooley Godward LLP.* 10.1 Patent License Agreement dated December 1, 1999 between the Registrant and Dr. Roger M. Loria.+ 23.1 Consent of BDO Seidman, LLP. 23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.* 24.1 Power of Attorney. Reference is made to page II-4.*
- -------- + Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. * Previously filed. Item 17. Undertakings. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the provisions described in Item 15, the registrant has been informed that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer, or person controlling the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or person controlling the registrant in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. The undersigned registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made pursuant to this registration statement, a post-effective amendment to this registration statement to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and II-2 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. The undersigned registrant undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-3 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this amendment No. 1 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, County of San Diego, State of California, on January 25, 2002. /s/ ROBERT W. WEBER By: _______________________________ Robert W. Weber Vice President-Controller/ Chief Accounting Officer Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- * Chairman of the Board, Chief January 25, 2002 - --------------------------- Executive Officer and Director Richard B. Hollis (Principal Executive Officer) * Chief Operating Officer/Chief January 25, 2002 - --------------------------- Financial Officer Daniel D. Burgess (Principal Financial Officer) /S/ ROBERT W. WEBER Vice President-Controller/Chief January 25, 2002 - --------------------------- Accounting Officer Robert W. Weber (Principal Accounting Officer) * Director January 25, 2002 - --------------------------- J. Paul Bagley III * Director January 25, 2002 - --------------------------- Leonard Makowka * Director January 25, 2002 - --------------------------- Brendan R. McDonnell * Scientific Advisor and Director January 25, 2002 - --------------------------- Thomas Charles Merigan, Jr. - --------------------------- Director William H. Tilley * Director January 25, 2002 - --------------------------- Salvatore J. Zizza /s/ ROBERT W. WEBER * By: _____________________ Robert W. Weber Attorney-In-Fact
II-4 EXHIBIT INDEX
Exhibit Number Description of Document - ------ ----------------------- 4.1 Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 4.1 to Registrant's Registration Statement on Form S-4 (No. 333-18725), as amended (the "Form S-4")). 4.2 Bylaws of Registrant (incorporated by reference to Exhibit 4.2 to the Form S-4). 4.3 Certificate of Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.4 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001). 4.4 Form of Stock and Warrant Purchase Agreement, dated as of December 11, 2001, between the Registrant and the purchasers listed on Schedule I attached thereto.* 4.5 Form of Warrant, dated December 11, 2001, issued to the purchasers listed on Schedule I attached thereto.* 4.6 Form of Warrant issued to H.C. Wainwright & Co., Inc. in the amounts and on the dates listed on Schedule I attached thereto.* 5.1 Opinion of Cooley Godward LLP.* 10.1 Patent License Agreement dated December 1, 1999 between the Registrant and Dr. Roger M. Loria.+ 23.1 Consent of BDO Seidman, LLP. 23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.* 24.1 Power of Attorney. Reference is made to page II-4.*
- -------- + Confidential treatment has been requested with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securities and Exchange Commission. * Previously filed. II-5 EX-10.1 3 dex101.txt PATENT LICENSE AGREEMENT DATED DECEMBER 1, 1999 Exhibit 10.1 Confidential Treatment Requested Under 17 C.F.R. (S)(S)200.80 (b)(4) and 230.406 PATENT LICENSE AGREEMENT ------------------------ 1. Parties. This license agreement is made and entered into on this 1st day ------- of December 1999 and is by and between Hollis-Eden Pharmaceuticals, Incorporated, a Delaware corporation (hereafter "Hollis-Eden"), having a principal place of business at 9333 Genesee Avenue, Suite 200, San Diego, CA 92121, and Dr. Roger M. Loria (hereafter "Licensor'), having a residence at 3219 Brook Road, Richmond, Virginia 23227 (collectively, the "Parties"). The Parties agree to the terms and conditions set forth hereinbelow ("Agreement"). This Agreement shall be effective as of the last date signed below. 2. Definitions. The following definitions apply to the capitalized words ----------- whenever they are used in this Agreement. Capitalized words that are not defined in this section have the meanings given to such words where they are otherwise defined in this Agreement. 2.1 "Affiliate" means any company or entity controlled by, controlling, or --------- under common control with Hollis-Eden 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 Hollis Eden, and any company which owns or controls, directly or indirectly, fifty percent (50%) or more of the voting stock of Hollis-Eden. 2.2 "Combination Product" means a Licensed Product sold in combination with ------------------- at least one other therapeutically active substance. 2.3 "Control(s)" or "Controlled" means possession of the ability to grant a -------------------------- license or sublicense as provided for herein without violating the terms of any agreement or other arrangement with any third party. 2.4 "Improvements" means any material change, enhancement or modification ------------ to any invention claimed by the Licensed Patents, or any part thereof, which is useful for or necessary to the development, manufacture or sale of Licensed Products. 2.5 "Know-How" means, to the extent useful for the discovery, development, -------- manufacture, use or sale of Licensed Products or the use or practice of the Licensed Patents or Improvements, all tangible know-how, trade secrets, inventions (whether or not patentable), data, preclinical and clinical results, physical, chemical or biological material, and other information that (a) Licensor Controls on the effective date of this Agreement or (b) is independently developed by Licensor during the term of this Agreement, and, in each case, any replication or any part of such information or material. 2.6 "Licensed Patents" means, collectively, those U.S. Patents and Patent ---------------- Applications and foreign patents and patent applications, including all divisions, continuations and continuations-in-part of such patent applications which Licensor exclusively or jointly owns and which are listed below under the groups designated A, B, C or D: - -------------------------------------------------------------------------------- Group Patent No. Country Licensor's Ownership Status - -------------------------------------------------------------------------------- [...***...] Patent Applications: - -------------------------------------------------------------------------------- Group Patent No. Country Assignor's Ownership Status - -------------------------------------------------------------------------------- [...***...] 2. *CONFIDENTIAL TREATMENT REQUESTED 2.7 "Licensed Process" means any method or process that is within the ---------------- scope of one or more claims of the Licensed Patents. 2.8 "Licensed Product" means a pharmaceutical product the manufacture, use ---------------- or sale of which is covered by a Valid Claim within the Licensed Patents or within any patent or patent application claiming any Improvement. 2.9 "Net Sales" means the following: --------- (a) For any Licensed Product that has received Regulatory Approval, the amount actually received by Hollis-Eden, or its Affiliates or Sublicensees on bona fide sales of Licensed Product(s) to one or more third parties or, in the event of the transfer of any Licensed Product (other than as a sale) to one or more third parties (other than bona fide samples provided for testing, development, marketing, demonstration, or similar purposes), the amount actually received for a like quantity and quality of such Licensed Product at, or about, the time of such transfer; (b) For any Combination Product that has received Regulatory Approval, the amount determined by multiplying the amount actually received by Hollis-Eden, its Affiliates or Sublicensees on bona fide sales of Combination Product(s) to one or more third parties or, in the event of transfer of any Combination Product (other than as a sale), to one or more third parties (other than bona fide samples provided for testing, develop-ment, marketing, demonstration, or similar purposes), the amount actually received for a like quantity and quality of such Combination Product at, or about, the time of such disposal, multiplied by the percentage value of Licensed Product contained in the Combination Product, such percentage value being the quotient obtained by dividing (i) the then current market value of the Licensed Product by (ii) the sum of the separate market values of the Licensed Product(s) and the other therapeutically active components which are contained in the Combination Product; provided, however, that in no event shall such formula result in royalties due under Section 4.2 hereof of less than the greater of [***] percent ([***]%) of the net sales of the entire Combination Product or the royalty which would otherwise have been due on account of the sale of the amount of Licensed Product contained in the Combination Product. (c) The following are not included in the term "Net Sales:" 1. Customary trade, quantity or cash discounts and nonaffiliated brokers' or agents' commissions actually allowed, taken or paid; 2. Amounts repaid or credited by reason of rejections or returns; and/or 3. *CONFIDENTIAL TREATMENT REQUESTED 3. Freight charges or other transportation costs, insurance charges, duties, tariffs and all sales and excise taxes and other taxes based directly on sales, turnover, or delivery to the extent such are separately stated on purchase orders, invoices, or other documents of sale and paid by, or on behalf of, Hollis-Eden. In calculating "Net Sales," any Licensed Product unit or Licensed Process unit that is sold shall be taken into account only once, even if more than one valid claims in one or more of the Licensed Patents claims the Licensed Product or Licensed Process. 2.10 "Regulatory Approval" shall mean any approval (including, without ------------------- limitation, price and reimbursement approvals), licenses, registrations or authorizations of any federal, state or local regulatory agency, department, bureau or other government entity, necessary for the manufacture, use, storage, import, transport or sale of a pharmaceutical product in a regulatory jurisdiction. 2.10 "Sublicensee" means any person, firm, corporation, partnership or ----------- limited liability company to which Hollis-Eden or any of its Affiliates elect to grant the right to use any of the Licensed Patents (defined below) subject to this Agreement. 2.11 "Sublicense Royalties" means royalties actually received by -------------------- Hollis-Eden or its Affiliates from any Sublicensee arising solely from the sale of Licensed Products by Sublicensees. 2.12 "Valid Claim" means either (a) a claim of an issued and unexpired ----------- patent included within the Licensed Patents or within the Improvements which has not been held permanently revoked, unenforceable or invalid by a decision of a court or other governmental agency of competent jurisdiction, unappealable or unappealed within the time allowed for appeal, and which has not been admitted to be invalid or unenforceable through reissue or disclaimer or otherwise or (b) a claim of a pending patent application included within the Licensed Patents or within the Improvements, which claim was filed in good faith and has not been abandoned or finally disallowed without the possibility of appeal or refiling of said application. 3. Grant. Licensor hereby grants to Hollis-Eden, subject to the terms and ----- conditions hereof, an exclusive (even as to Licensor) worldwide license under the Licensed Patents, Licensed Processes, Know-How and Improvements to discover, develop, make, use, have made, sell, have sold and import Licensed Products (the "Grant"), provided, however, that Hollis-Eden acknowledges, understands and agrees that [***] is an inventor and co-owner of the Licensed Patents described in Group [***] of Section 2.3 of this Agreement and, accordingly, he has the right to separately license the technology described therein or to otherwise exploit such technology separate and apart from Licensor or Hollis-Eden. In addition, Hollis-Eden shall have the unrestricted right to sublicense any of the rights granted hereunder to any Sublicensee; provided, however, Hollis-Eden shall promptly notify Licensor in writing of the identity of such Sublicensee and shall provide Licensor with a true and complete copy of any agreement(s) with any such Sublicensee(s). Hollis-Eden shall further have the right to extend this license to any of its Affiliate(s) provided it promptly notifies Licensor 4. *CONFIDENTIAL TREATMENT REQUESTED in writing of the identity and relationship of any such Affiliate(s) and provides Licensor with a true and complete copy of any written agreement(s) pertaining thereto. This Grant includes a grant of all of Licensor's rights in the Licensed Patents, including any abandoned or pending division, continuation, continuation-in-part, renewal, reissue, reexamination, extension, substitute application, inventor certificate, certificate of addition or certificate of correction that is based on, or derived from, any of the subject matter disclosed in any of the Licensed Patents anywhere worldwide. The Grant does not include an assignment of ownership to Hollis-Eden. The Grant is subject to the reservation by Licensor of the right to make and have made and to use Licensed Products in Licensor's laboratories for pre-clinical research purposes only, but not for any commercial purpose. Any right that the United States of America may have under any Licensed Patent shall remain in effect and shall not be affected by any provision of this Agreement. 4. Compensation. Hollis-Eden shall compensate Licensor for the Grant as ------------ follows: 4.1 License Fees. Upon execution of this Agreement, Hollis-Eden will pay ------------ a non-refundable license fee of $[...***...], receipt of which is hereby acknowledged by Licensor. In addition, Hollis-Eden shall pay Licensor the annual license fees set forth below for each group of Licensed Patents on each anniversary _date of this Agreement commencing in the year 2000. The annual license fees to be paid to Hollis-Eden to Licensor pursuant to this Agreement are as follows: $ [...***...] for Group A Licensed Patents $ [...***...] for Group B Licensed Patents $ [...***...] for Group C Licensed Patents $ [...***...] for Group D Licensed Patents With respect to the annual licensing fee for Group C Licensed Patents, the annual license fee shall increase to $[...***...] per year when and if Hollis-Eden decides to enter into Phase I clinical trials with respect to all or any part of the Licensed Patents within Group C. If Hollis-Eden enters into a separate license agreement with [...***...] with respect to the Group [...***...] Licensed Patents then, and in that event, Licensor authorizes Hollis-Eden to reduce both the annual License Fees and the Royalties hereunder applicable to the Group [...***...] Licensed Patents by [...***...]% and further authorizes Hollis-Eden to pay such funds to [***] as part of its separate license agreement with him. Hollis-Eden shall provide Licensor with a true and complete copy of any license agreement that it enters into with [...***...] in relation to the Group [...***...] Licensed Patents. 5. *CONFIDENTIAL TREATMENT REQUESTED Hollis-Eden's obligation to pay the foregoing license fees shall continue until (1) there is no longer a Valid Claim or (ii) Hollis-Eden terminates this Agreement as set forth in the next sentence and in Section 5.2 hereof. If Hollis-Eden exercises its right hereunder to terminate this Agreement with respect to all, or any group, of Licensed Patents, its obligation to pay the License Fees for that (those) group(s) of Licensed Patents shall cease and Licensor shall thereafter be free to license such patents to others. If Hollis-Eden terminates this Agreement as to one or more groups of Licensed Patents during any year, it shall not be entitled to a refund of that year's license fees applicable to the terminated group from Licensor. All fees paid by Hollis-Eden to Licensor pursuant to this Section 4.1 in any given year shall be creditable in full against earned royalties that become payable to Licensor pursuant to Sections 4.2 and 4.3 for such year, and any such credit taken shall be noted in the applicable report submitted to Licensor pursuant to Section 4.5. 4.2 Royalty Payments to Licensor. In addition to the foregoing annual ---------------------------- License Fees, subject to Sections 4.1, 4.3 and 4.4, Hollis-Eden shall pay to Licensor, commencing with calendar year 2000, a semi-annual royalty of [...***...]% of Net Sales for the preceding six month period for Net Sales related to the Licensed Patents in Group A and [...***...]% of Net Sales for the preceding six month period for Net Sales related to the Licensed Patents in Groups B, C, and D. Hollis-Eden's obligation to pay such royalties shall continue while this Agreement is in effect. Royalty payments are due to Licensor within 30 days after the end of the preceding semi-annual period. Except as provided in Section 2.9(c)(3), hereof, any tax or other assessment on any payment due Licensor under this Section in any country in which such payment accrued shall be paid by Hollis-Eden without deduction from the amount owed to Licensor. Hollis-Eden shall keep accurate records of all Licensed Products made, used, sold or otherwise disposed of under this Agreement to determine the amount of royalty due for each specific period. 4.3 Sublicense Royalties. Subject to Sections 4.1, Hollis-Eden shall pay -------------------- to Licensor an amount equal to [...***...] percent ([...***...]%) of Sublicense Royalties with respect to Net Sales derived from the Licensed Patents in Group A, and an amount equal to [...***...] percent ([...***...]%) of Sublicense Royalties with respect to Net Sales derived from the Licensed Patents in Groups B, C and D. Such royalties shall be due at the time and in the manner as specified in Section 4.2, above. 4.4 Third Party Royalties. If Hollis-Eden enters into third party licenses in --------------------- order for it to practice the License granted hereunder, Hollis-Eden's obligation to pay royalties to Licensor with respect to those sales shall be reduced to an amount equal to [...***...] percent ([...***...]%) of the Net Sales of Licensed Products and Licensed Processes with respect to the Licensed Patents in Group A and to amount equal to [...***...] percent ([...***...]%) of Net Sales of Licensed Products and Licensed Processes with respect to the Licensed 6. *CONFIDENTIAL TREATMENT REQUESTED Patents in Groups B, C and D. Such royalties shall be due at the time and in the manner as specified in Section 4.2, above. 4.5 Royalty Reports. Hollis-Eden shall provide Licensor, within sixty (60) --------------- days after each calendar half-year ending June 30 and December 31st, a true and complete report, signed by an appropriate corporate officer with knowledge and authority, setting forth the amount of Licensed Products and Licensed Processes made, used, sold, or otherwise disposed of by Hollis-Eden, its Affiliates and Sublicensees. Payment of the royalty shall accompany each such report. If no royalty is due to Licensor for any report period, the written report shall so indicate. 4.6 Patent maintenance and prosecution costs. Licensor agrees to and shall ---------------------------------------- continue prosecution and maintenance of the Licensed Patents. To this end, Licensor shall permit Hollis-Eden to have access to (and upon request copies of) any' files related to any Licensed Patents at the U.S. Patent and Trademark Office or in any foreign patent office including, without limitation, the European Patent Office. Such access (or copies if requested) shall be granted to one or more attorneys selected by Hollis-Eden; provided, however, Licensor shall have the right to hire counsel of his own choice to prosecute and maintain the Licensed Patents. Licensor shall instruct his counsel to cooperate and consult with Hollis-Eden's patent counsel with regard to responding to office actions or taking any other discretionary actions related thereto. Nothing herein shall be construed to give Hollis-Eden veto authority over Licensor's patent prosecution decisions but such decisions shall be made in a lawful and commercially reasonable manner. Hollis-Eden will pay patent maintenance and prosecution fees or costs for the Licensed Patents in countries of commercial interest, beginning with a payment of up to $5,000.00 for any fees or costs that are due and unpaid, or which have accrued and are unpaid as of the effective date of this Agreement. During the term of the Agreement, Hollis-Eden agrees to reimburse Licensor's documented costs for obtaining and maintaining rights in any Licensed Patent(s) including, but not limited to, filing fees, maintenance fees, prosecution expense, appeals to a patent office, reissue, term-extension, reexamination, interference, opposition and nullity proceedings, including costs that may arise on account of an action by Hollis-Eden, its Affiliate(s) and/or Sublicensees, but not including infringement. If litigation or other unusual legal expenses are incurred in defense of such rights, Licensor agrees to choose suitable counsel to defend or prosecute such case(s) and shall do so in consultation with Hollis-Eden. Licensor shall provide copies of invoices or other documentation to support his prosecution, maintenance and legal costs in advance of any payment. Such payments shall be paid to Licensor within 30 days of Hollis-Eden's receipt of invoices or other documentation that support these costs. If Hollis-Eden elects not to support prosecution or maintenance of a Licensed Patent in a given country, Licensor may do so at Licensor's expense. This Agreement shall be terminable by Licensor with respect to such Licensed Patent in such country. Licensor agrees to notify Hollis-Eden in writing in a timely manner that it does not desire to support the continued prosecution or appeals or maintenance of any patent 7. applications or patents included in the Licensed Patents. Licensor agrees to file, prosecute or maintain any patent application or patent included in the Licensed Patents in any country requested by Hollis-Eden. In the event Licensor declines to pursue, or does not, within thirty (i0) days following written request from Hollis-Eden, take requested action with respect to, the filing, prosecution or maintenance of any patent applications or patents included in the Licensed Patents in any given country, Hollis-Eden may, at its own expense, continue to prosecute or maintain such application or patent in such country. 4.7 Ownership of Inventions. Ownership of inventions conceived using ----------------------- any Licensed Patents, Licensed Processes, Improvements or Know-How shall be determined in accordance with United States patent laws. Hollis-Eden shall have the sole and exclusive right, but not the obligation, to file, prosecute and maintain all patent applications and patents relating to Improvements to the Licensed Patents. 4.8 Research Reports. Hollis-Eden shall provide Licensor with semi- ---------------- annual reports detailing its activities and efforts to develop Licensed Products and/or Licensed Processes by using some, or all, of the Licensed Patents. Hollis-Eden's reports shall include a description of research and development with respect to any products or processes, or both, in relation to any claims in the Licensed Patents and shall further detail any scientific, research or marketing problems that may have been encountered in relation thereto. Such information shall be Confidential Information under this Agreement. 4.9 Commitment to Preclinical Product or Process Development. From time -------------------------------------------------------- to time the Parties shall jointly confer in good faith for the purpose of identifying and evaluating Licensed Products or Licensed Processes within the scope of one or more claims of Licensed Patents for development. The evaluation will include a review of any associated Know-How owned by Licensor, including Licensor's raw data or other information related to the Licensed Patents known to Licensor at the time of the evaluation. Based on this evaluation, Hollis-Eden will select one or more candidate compound(s) and human therapeutic application(s) for preclinical development provided such are within the scope of one or more claims in the Licensed Patents. Hollis-Eden will pay for all pre-clinical research or development work reasonably needed under the law and applicable regulations enacted by relevant regulatory agenc(ies) to prepare a proper regulatory filing for submission to the regulatory agenc(ies) for initiation of a phase I or a phase I/II clinical trial. The decision to file the investigative new drug approval ("IND") and to conduct the clinical trial rests exclusively with Hollis-Eden, but Hollis-Eden will make the decision on whether to proceed with a clinical trial in good faith and after full consultation with Licensor. If Hollis-Eden decides not to proceed with a clinical trial, Hollis-Eden will fully inform Licensor of its reasons. In funding this preclinical development, Hollis-Eden will keep Licensor informed about the progress of the development and give Licensor a full opportunity to comment on, and participate in 8. the design of, any experimental work. Licensor shall, with reasonable notice, and on a periodic basis, have the right to inspect all data generated by, or related to, the preclinical development and clinical work. Hollis-Eden's obligation to continue to fund this preclinical product or process development continues until, and unless, this Agreement is terminated as set forth hereinbelow or Hollis-Eden determines in good faith that the commercial market for the Licensed Product or Licensed Process has diminished such that continued development is not commercially advisable or until the preclinical development is completed, whichever occurs earlier. Hollis-Eden shall oven all information, data and other intellectual property arising from all development projects pursuant to this Agreement, all of which is Confidential Information. 5. Term and Termination. This Agreement shall expire when the last of -------------------- the Licensed Patents expires unless terminated earlier as provided for below. 5.1 The following events will trigger Licensor's right to terminate this Agreement: (1) Hollis-Eden sells or transfers all, or substantially all, of its assets for the benefit of its creditors; (2) Hollis-Eden materially breaches any of its obligations in this Agreement; and fails to cure such breach with the following time-frame: (A) If said breach relates to non-payment of licensing fees or royalties to Licensor, the cure time shall be 30 days following written notice of such breach; (B) If said breach relates to any other claimed breach unrelated to failure to pay licensing fees or royalties then Hollis--Eden shall have 60 days following written notice of such breach to cure said breach, unless Hollis-Eden, in good faith, reasonably commences the cure of said breach within such 60-day period and pursues the cure of such breach in good faith but in no event shall such breach remain for more than 120 days. If Hollis-Eden fails to cure any such breach within the relevant time, then Licensor shall have the right to terminate this Agreement, in which event Hollis-Eden shall have no further rights whatsoever in, or related to, any Licensed Patents, but shall nevertheless be liable for and pay to Licensor, all amounts then due under this Agreement. If Licensor elects to terminate this Agreement under this Section 5.1, then Hollis-Eden shall have the right to complete all contracts for the sale of Licensed Products or Licensed Processes that Hollis-Eden is obligated to sell as of the termination date on which net sales Hollis-Eden shall owe and pay Licensor those royalties set out in Section 4.2 above. 5.2 Hollis-Eden shall have the right, upon giving Licensee 60 days advance written notice, to sever any of the groups of Licensed Patents from this Agreement. If Hollis-Eden elects to relinquish any such rights, it understands and agrees that it shall forego, give up, and relinquish any and all rights it has acquired by virtue of this Agreement related to such Licensed Patents and shall cooperate with Licensor in transferring any such Licensed Patents to Licensor, free and clear of all claims whatsoever. Upon severing of one of more groups of Licensed Patents, Licensor shall have the right to sell, assign or license the severed patents or any combination of them, and may otherwise practice the inventions described therein. Hollis-Eden shall not be 9. entitled to any refund for licensing fees paid in respect to any relinquished groups of Licensed Patents. 5.3 The right of either Party to terminate under the provisions of this Section is not an exclusive remedy, and either Party is entitled to damages for breach of this Agreement, to equitable remedies such as an order requiring performance of the obligations of this Agreement. or to any other legal or equitable remedies. Hollis-Eden may terminate this Agreement, and Hollis-Eden's obligations for each group of Licensed Patents, independently. 6. Licensor's Representations and Warranties. Licensor represents and ----------------------------------------- warrants to Hollis-Eden as follows: (A) That he has the right to license the Licensed Patents in the manner provided for herein; (B) That no license or covenant not to sue under any Licensed Patent is in effect for any third party; (C) That, to the best of Licensor's knowledge or belief, the Licensed Patents do not infringe on, or misappropriate, any copyright, patent right, trade secret or other proprietary rights (collectively "Proprietary Rights") of any third party; (D) There are no pending or threatened suits by any third party based on any alleged violation of any third party's Proprietary Rights; (E) That Licensor is not aware of any claims, or the existence of any facts that might reasonably be the basis of any claims, that the Licensed Patents or this Agreement violates any third party's Proprietary Rights; and (F) That Licensor will not grant any right or interest in any Licensed Patent to any other person or entity as long as Hollis-Eden maintains this License for the Licensed Patent. Hollis-Eden acknowledges, understands and accepts that [...***...] is [...***...] with respect to the [...***...] in [...***...] in [...***...] of [...***...] but that [...***...] to [...***...] were [...***...] to [...***...], which [...***...] to [...***...]. Hollis-Eden further acknowledges, understands and agrees that [...***...] is an inventor and co-owner of the Licensed Patents described in Group [...***...] of Section 2.6 of this Agreement and, accordingly, has the right to separately license the technology described therein or to otherwise exploit such technology separate and apart from Licensor or Hollis-Eden. Licensor agrees to use his best efforts to cause [...***...] to enter into an agreement with Hollis-Eden to grant Hollis-Eden an exclusive license to the Licensed Patents described in Group [...***...] of Section 2.6. Hollis-Eden accepts the Grant as to the Licensed Patents described in [...***...] of Section 2.6 of the Agreement after having had a full opportunity to evaluate the status of Licensor's ability to give what the Grant set forth hereinabove in Section 3 provides. 7. Third Party Infringement. During the term of this Agreement, ------------------------ Licensor shall promptly report to Hollis-Eden information that Licensor has regarding any known or suspected infringement by any third party of any claim in the Licensed Patents. Licensor will promptly provide all information and evidence available to support the known or suspected infringement. As long as Hollis-Eden maintains this license for any * CONFIDENTIAL TREATMENT REQUESTED 10. of the Licensed Patents, Hollis-Eden has, in its sole discretion, the exclusive right to initiate and prosecute any suit for infringement of the Licensed Patents or other appropriate suit in its own name and on its own behalf anywhere worldwide against such a third party, at Hollis-Eden's expense. In lieu of filing a lawsuit for any known or suspected infringement, Hollis-Eden may elect to negotiate with the known or suspected infringer for a settlement. Hollis-Eden will keep Licensor apprised of the progress of any such suit or negotiation. Hollis-Eden will not settle any such suit or negotiation without Licensor's written consent, which shall not be unreasonably withheld. If Hollis-Eden elects not to initiate or maintain a lawsuit or settlement negotiation, Hollis-Eden will promptly notify Licensor of its decision, and Licensor may then elect to initiate or prosecute the suit at Licensor's expense. Licensor will not settle any such suit or negotiation without Hollis-Eden's written consent, which shall not be unreasonably withheld. Each Party will cooperate in good faith as reasonably needed with the initiation or prosecution of any suit or negotiation. The amount of any proceeds or damages recovered from such a suit or negotiation exceeding the Parties' expenses, shall be allocated to the Parties in proportion to their economic interest after payment of expenses. Hollis-Eden may settle any claim, suit or negotiation, including by granting the infringing party a sublicense under the terms of this Agreement. 8. Confidentiality. --------------- 8.1 Confidential Information. Except to the extent expressly ------------------------ authorized by this Agreement or otherwise agreed in writing by the parties, the parties agree that, during the term of this Agreement and for five (5) years thereafter, the receiving party shall keep confidential and shall not publish or otherwise disclose and shall not use for any purpose other than as expressly provided for in this Agreement any Confidential Information furnished to it by the other party pursuant to this Agreement. Each party may use such Confidential Information only to the extent required to accomplish the purposes of this Agreement. Each party will use at least the same standard of care as it uses to protect proprietary or confidential information of its own to ensure that its employees, agents, consultants and other representatives do not disclose or make any unauthorized use of the Confidential Information. Each party will promptly notify the other upon discovery of any unauthorized use or disclosure of the Confidential Information. For purposes of this Agreement, "Confidential Information" means all information, inventions, know-how or data disclosed by a party to the other pursuant to this Agreement, including, without limitation, manufacturing, marketing, financial, personnel, scientific and other business information and plans, and the material terms of this Agreement, whether in oral, written, graphic or electronic form. 8.2 Exceptions. Confidential Information shall not include any ---------- information which the receiving party can prove by competent evidence: 11. (a) is now, or hereafter becomes, through no act or failure to act on the part of the receiving party, generally known or available; (b) is known by the receiving party at the time of receiving such information, as evidenced by its records; (c) is hereafter furnished to the receiving party by a third party, as a matter of right and without restriction on disclosure; or (d) is the subject of a written permission to disclose provided by the disclosing party. 8.3 Terms of Agreement. The parties agree that this Agreement and ------------------ the terms hereof will be considered Confidential Information of both parties. Notwithstanding the foregoing, either party may disclose such terms as are required to be disclosed under strictures of confidentiality to bona fide potential sublicensees or as otherwise required pursuant to applicable law. 8.4 Authorized Disclosure. --------------------- (a) Each party may disclose Confidential Information belonging to the other party to the extent such disclosure is reasonably necessary in the following instances: (i) filing or prosecuting patents or patent applications within the Licensed Patents; (ii) regulatory filings; (iii) prosecuting or defending litigation; (iv) complying with applicable court orders or governmental regulations; (v) conducting preclinical or clinical trials of Licensed Products; and (vi) disclosure to Affiliates, sublicensees, employees, consultants, agents or other third parties in connection with due diligence or similar investigations by such third parties, in each case who agree to be bound by similar terms of confidentiality and non-use at least equivalent in scope to those set forth in this Article 8. Notwithstanding the foregoing, in the event a party is required to make a disclosure of the other party's Confidential Information pursuant to this Section 8.4, it will, except where impracticable, give reasonable advance notice to the other party of such disclosure and use efforts to secure confidential treatment of such information at least as diligent as such 12. party would use to protect its own confidential information, but in no event less than reasonable efforts. In any event, the parties agree to take all reasonable action to avoid disclosure of Confidential Information hereunder. The parties will consult with each other on the provisions of this Agreement to be redacted in any filings made by the parties with the Securities and Exchange Commission or other similar authority in an applicable jurisdiction or as otherwise required by law. (b) Notwithstanding any other provision of this Agreement, Hollis-Eden shall have the absolute right to publish any know-how, trade secrets, inventions (whether or not patentable), data, preclinical and clinical results, physical, chemical or biological material, and other information generated, made, conceived or reduced to practice by its employees and agents through the use or practice of the Licensed Patents, the Licensed Processes, the Improvements or the Know-How. 9. Miscellaneous. ------------- 9.1 Licensor's Right to Inspect Records. During this Agreement and for ----------------------------------- two years thereafter, Hollis-Eden will keep records showing the sales of royalty-bearing and relevant related transactions in sufficient detail to enable Licensor to determine the royalties payable under this Agreement. During the term of this Agreement, and for one year thereafter, Licensor has the right; at Licensor's expense, to have a public accounting firm selected by him, but subject to Hollis-Eden's approval, which shall not unreasonably be withheld, examine the relevant books and records of account of Hollis-Eden (and the books of the appropriate Affiliate, or Sublicensee) once per calendar year pertinent to the sale of any Product or Process subject to the royalty provisions of Section 4.2 or 4.3. The inspection is solely to determine whether appropriate accounting and payments were made. Licensor will provide at least 5 working days advance notice for any inspection hereunder, which will be during normal business hours. These inspection rights are limited to inspection of the records that relate to the four most recently concluded semi-annual periods that generated royalties, but no semi-annual period is subject to inspection more than once. The accounting firm will disclose to Licensor only whether the records are correct or not and the specific details concerning any discrepancies. No other information will be shared. If such inspection determines that Hollis-Ellis has underreported and underpaid royalties due under Sections 4.2, 4.3 and/or 4.4 by more than five percent (5%), the entire cost of such inspection shall be borne by Hollis-Eden. Any information that Licensor or the public accounting firm obtains or receives under this Section is Confidential Information. 9.2 Licensor's Obligation To Keep Hollis-Eden Informed. During the -------------------------------------------------- term of this Agreement, Licensor may generate preclinical data or information related to the Licensed Patents or that utilizes one or more of the compounds recited in one or more claims in the Licensed Patents ("License-Related Information"). To keep Hollis-Eden's clinical development effort fully appraised of all potentially relevant information, 13. Licensor will provide Hollis-Eden with copies of, or access to, all License-Related Information within 90 days of its generation, unless Licensor's work is incomplete or in process, in which event the disclosures shall be made no later than 90 days after the completion of such work. Licensor shall give Hollis-Eden at least 30 days advance notice of any public disclosure or submission for publication of any License-Related Information. Licensor must take Hollis-Eden's comments, if any, into account when Licensor makes a public disclosure of License-Related Information. In the event that, in the interest of protecting its intellectual property, Hollis-Eden objects to the public disclosure by Licensor of any License-Related Information, such public disclosure shall be postponed, at the sole discretion of Hollis-Eden, for a period not to exceed 90 days. 9.3 Registration. Where this Agreement's terms require or make it ------------ appropriate that the Agreement or any part of it be registered with, or reported to, a national or supranational agency having authority, Hollis-Eden will, within 120 days of the effective date of this Agreement, and at Hollis-Eden's expense, initiate such registration or report. Hollis-Eden will keep Licensor informed of the registration or reporting. 9.4 Notices. Any notice under this Agreement must be in writing and is ------- effective when either delivered in person, sent by Federal Express, DHL, Express Mail or by facsimile transmission, or deposited as registered or certified U.S. mail, postage prepaid, addressed to the Party at the address in Section 1 or at such other address as either party may request in writing. Either Party may, by notice to the other Party designate a different address. 9.5 Governing Law; Jurisdiction. This Agreement shall be governed by, and --------------------------- construed under, the laws of the State of California. The Parties hereby submit and consent to the jurisdiction of the federal courts in the State of California or the Commonwealth Virginia (at the option of the suing party). If a federal forum is unavailable in one or both of such states, then the state courts in the State of California or the Commonwealth of Virginia may be resorted to by either party with respect to any action, dispute, proceeding or claim arising out of or under this Agreement, provided, however, nothing herein will restrict the parties from resorting to the courts of any jurisdiction in order to collect, enforce or execute any judgment obtained in the federal or state courts in any other state with jurisdiction over the party against whom the judgment was rendered. 9.6 Assignment. Neither Party may assign or transfer this Agreement, or ---------- any rights or obligations under this Agreement, without the prior written consent of the other Party; provided however, that Hollis-Eden may, without Licensor's consent, assign its rights and obligations under this Agreement to any Affiliate, but must first give Licensor written notice of such assignment; provided further, that Hollis-Eden may, without Licensor's consent but with advance written notice to Licensor, assign this Agreement to any successor by merger or sale of substantially all of its business or assets to which this 14. Agreement relates. The terms of this Agreement shall be binding on, and inure to the benefit of, the heirs and executors of Licensor and to the authorized assigns and successors of Hollis-Eden, whether by merger, consolidation, transfer of all or substantially all assets, or otherwise. 9.7 Indemnification by Hollis-Eden. Hollis-Eden hereby agrees to ------------------------------ indemnify and hold Licensor entirely harmless from, and against, any and all liabilities, demands, damages, expenses, or losses, arising out of Hollis-Eden's, any of its Affiliate's or any of its Sublicensee's exercise of any right under any Licensed Patent under this Agreement. Such indemnification shall include payment of Licensor's reasonable attorney's fees and litigation expenses if Licensor is called upon to defend against any such claims, liabilities, or demands or to pay any such damages, expenses or losses. 9.8 Indemnification by Licensor. Licensor hereby agrees to indemnify and --------------------------- hold Hollis-Eden harmless from, and against, all liabilities, demands, damages, expenses, or losses under this Agreement that arise from any (i) false, fraudulent, or misleading representations made to Hollis-Eden in this Agreement or (ii) grossly negligent or intentional act or omission by the Licensor which harms Hollis-Eden. Such indemnification shall include payment of Hollis-Eden's reasonable attorney's fees and litigation expenses if Hollis-Eden is called upon to defend against any such claims, liabilities, or demands or to pay any such damages, expenses or losses. 9.9 Severability. The Parties agree that each provision herein is a ------------ separate and independent clause, and the unenforceability of any one clause in no way impairs the enforceability of any of the other clauses. If a final judgment of the highest competent authority holds that one or more of the provisions of this Agreement is unenforceable, the Parties intend modification of such provision so as to be enforceable to the maximum extent that is compatible with applicable law and consistent with the intent expressed in this Agreement. 9.10 Equitable Relief. Licensor agrees that any breach of this Agreement ---------------- by him will cause irreparable damage to Hollis-Eden and, in the event of such a breach, Hollis-Eden has, in addition to any and all remedies of law, the right to an injunction, specific performance, or other equitable relief to prevent the violation of Licensor's obligations hereunder. Hollis-Eden agrees that any breach of this Agreement by Hollis--Eden will cause irreparable damage to Licensor and, in the event of such breach Licensor shall have, in addition to any and all remedies of law, the right to an injunction, specific performance or other equitable relief to prevent the violation of Hollis-Eden's obligations hereunder. 9.11 Entire Agreement; Amendments. This Agreement contains the entire ---------------------------- agreement of the Parties with respect to the matters covered, and no other previous agreement, statement or promise made by either Party not contained in the terms of this 15. Agreement are binding or valid. The Parties may amend this Agreement only by a writing that both Parties sign. IN WITNESS WHEREOF, the parties have set their hands hereto, the corporate party acting by and through a duly authorized officer on this 1st day of December 1999. HOLLIS-EDEN PHARMACEUTICALS, INC. (Licensee) Date: 12-3-99 By: /s/ Richard B. Hollis ------- ------------------------------ ITS: Chairman and CEO ------------------------------ DR. ROGER M. LORIA (Licensor) Date: Dec. 01, 1999 By: /s/ Dr. Roger M. Loria ------------- ------------------------------- 16. EX-23.1 4 dex231.txt CONSENT OF EDO SEIDMAN, LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Hollis-Eden Pharmaceuticals, Inc. San Diego, California We hereby consent to the incorporation by reference in the Prospectus constituting a part of the Registration Statement on Form S-3 of our report dated January 19, 2001, relating to the financial statements of Hollis-Eden Pharmaceuticals, Inc. appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 2000. We also consent to the reference to us under the caption "Experts" in the Prospectus. /s/ BDO Seidman, LLP New York, New York January 22, 2002 -----END PRIVACY-ENHANCED MESSAGE-----