-----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, E0ebyEpZWaM4uRKPPnxmlItawDuer/KDZcwSTB/YUOCZiwTB/b2M8C+noP3xxb1U EcUQ+HTF40tJYz+AehgxnA== 0000950148-98-000088.txt : 19980123 0000950148-98-000088.hdr.sgml : 19980123 ACCESSION NUMBER: 0000950148-98-000088 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19980122 SROS: NONE SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LIDAK PHARMACEUTICALS CENTRAL INDEX KEY: 0000858803 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 330314804 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-41430 FILM NUMBER: 98511203 BUSINESS ADDRESS: STREET 1: 11077 N TORREY PINES RD CITY: LA JOLLA STATE: CA ZIP: 92037 BUSINESS PHONE: 6195580364 MAIL ADDRESS: STREET 1: 11077 NORTH TORREY PINES RD CITY: LA JOLLA STATE: CA ZIP: 92037 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: HEALTHMED INC CENTRAL INDEX KEY: 0001053422 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 911878972 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 8306 WILSHIRE BLVD STREET 2: STE 7056 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3104481331 MAIL ADDRESS: STREET 1: 8306 WILSHIRE BLVD STREET 2: STE 7056 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 SC 13D 1 SCHEDULE 13D 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Lidak Pharmaceuticals --------------------- (Name of Issuer) Class A Common Stock -------------------- (Title of Class of Securities) 531707107 (CUSIP Number of Class of Securities) Michael D. Donahue, Esq. Asher M. Leids, Esq. Donahue, Mesereau & Leids LLP 1900 Avenue of the Stars Suite 2700 Los Angeles, California 90067 (310) 277-1441 ----------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) January 12, 1998 ---------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Statement because of Rule 13d-1(b)(3) or (4), check the following [ ] Check the following box if a fee is being paid with this Statement: [ ] Page 1 of 9 Pages 2 - -------------------------------------------------------------------------------- CUSIP No. 531707107 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: HealthMed, Inc. S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSON: 91-1878972 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* 00 HealthMed, Inc. is obligated to pay an aggregate of $1,791,238.98 in promissory notes for the shares purchased from Dr. Katz and Medical Biology Institute - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Nevada - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 2,200,424 NUMBER OF ---------------------------------------------------------- SHARES 8 SHARED VOTING POWER BENEFICIALLY -0- OWNED BY ---------------------------------------------------------- EACH 9 SOLE DISPOSITIVE POWER REPORTING 1,165,821 PERSON ---------------------------------------------------------- WITH 10 SHARED DISPOSITIVE POWER -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 2,200,424 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.5% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* CO - -------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUT! Page 2 of 9 Pages 3 This statement on Schedule 13D (the "Schedule 13D"), relates to the Class A Common Stock, no par value (the "Class A Common Stock" or the "Shares"), issued by Lidak Pharmaceuticals, a California corporation (the "Company"), and is being filed pursuant to Rule 13d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The information set forth in the Exhibits attached hereto is hereby expressly incorporated herein by reference and the response to each item of this Schedule 13D is qualified in its entirety by the provisions of such exhibits. ITEM 1. SECURITY AND ISSUER This statement on Schedule 13D relates to shares of the Class A Common Stock, no par value (the "Shares"), of the Company. The principal executive offices of the Company are located at 11077 N. Torrey Pines Road, La Jolla, California 92037. ITEM 2. IDENTITY AND BACKGROUND This Schedule 13D is being filed by HealthMed, Inc., a Nevada Corporation (the "Reporting Person"). The Reporting Person's principal business is providing consulting services to healthcare companies. The address of the Reporting Person's principal business and principal office is 8306 Wilshire Boulevard, Suite 7056, Beverly Hills, California 90211. During the past five years neither the Reporting Person and, to the best knowledge of the Reporting Person, none of the executive officers, directors, trustees or controlling persons of the Reporting Person has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). Neither the Reporting Person, and, to the best knowledge of the Reporting Person, none of the executive officers, directors, trustees or control persons of the Reporting Person has, during the last five years, been a party to a civil proceeding or subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to Federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Pursuant to the terms of a Stock Purchase Agreement dated January 12, 1998 by and between David H. Katz, M.D. ("Dr. Katz") and the Reporting Person (the "Katz Stock Purchase Agreement"), Dr. Katz sold 308,100 shares of Class A Common Stock and 70,200 shares of Class B Common Stock, no par value of the Company (the "Class B Common Stock")to the Reporting Person for a total purchase price of $1,528,234.98 (the "Katz Promissory Note"). The purchase price was paid by the Reporting Person in the form Page 3 of 9 Pages 4 of a promissory note in the principal amount of $1,528,234.98. Said promissory note matures on January 12, 2000. Pursuant to the terms of a Stock Purchase Agreement dated January 12, 1998 by and between Medical Biology Institute, a California nonprofit public benefit corporation ("MBI") and the Reporting Person (the "MBI Stock Purchase Agreement"), MBI sold 65,100 shares of Class A Common Stock to the Reporting Person for a total purchase price of $263,004. The purchase price was paid by the Reporting Person in the form of a promissory note in the principal amount of $263,004 (the "MBI Promissory Note"). Said promissory note matures on January 12, 2000. ITEM 4. PURPOSE OF TRANSACTION The Reporting Person purchased the Shares for purposes of investment and for the purposes otherwise specified hereinbelow in this Item 4. Subject to applicable legal and contractual requirements, and depending upon its evaluation of the Company's business and prospects, future developments, market conditions and other factors, the Reporting Person may, from time to time, purchase additional Shares or sell or cause to be sold, all or a portion of these Shares for which the Reporting Person exercises voting or dispositive power, either in open market or privately negotiated transactions or otherwise. Subject to the foregoing, the Reporting Persons have no plans or proposals which relate to Items 4(a) through (j) of Schedule 13D except as follows: (a) The Reporting Person is seeking to achieve voting control over 30% to 40% of the Company through open market purchases, privately negotiated transactions, placement of shares of the Company into voting trusts over which the Reporting Person will have voting control, or otherwise. (b) Not Applicable. (c) Not Applicable. (d) The Reporting Person's intent is to seek to replace everyone on the Board of Directors of the Company. (e) Pursuant to the terms of a non-binding letter proposal (the "Proposal") dated January 13, 1998 from the President of the Reporting Person to Dr. Katz, the Chief Executive Officer of the Company, the Reporting Person, in conjunction with National Century Financial Enterprises, Inc., an affiliate of the Reporting Person, has proposed to provide to the Company up to $130 million of financing, such as loans, lines of credit and/or accounts receivable facilities, in order to fund completion of the Company's pharmaceutical technologies. The proposal is subject to certain conditions, including, without limitation, the following: (i) satisfaction with a due diligence review of the Company, (ii) receiving sufficient entry of shareholders of the Company in voting trusts with the Reporting Page 4 of 9 Pages 5 Person, and (iii) reconfiguring the Board of Directors of the Company. (f) If the proposal is accepted, the Company's outstanding debt would increase, thereby effecting the Company's debt-to-equity ratio. (g) Not Applicable. (h) Not Applicable. (i) Not Applicable. (j) Not Applicable. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The Reporting Person is the direct beneficial owner of 443,400 Shares. Further, the Reporting Person has voting power over an additional 1,034,603 Shares pursuant to the terms of Voting Trust Agreements with Dr. Katz and MBI (see below). Moreover, the Reporting Person may be deemed to have a beneficial interest in 722,421 Shares which the Reporting Person may acquire pursuant to the terms of the Purchase Rights Agreement (as hereinafter defined). Accordingly, the Reporting Person may be deemed to beneficially own approximately 2,200,424 Shares, representing approximately 5.5% of the Shares outstanding. The percentage of Shares outstanding reported as beneficially owned by the Reporting Person on the date hereof is based upon the Company's Form 10-K for the Fiscal Year Ended September 30, 1997 so that the Reporting Person's information is that the total shares of Class A Common Stock issued and outstanding as of December 29, 1997 was 38,742,511 Shares. The calculation as to percentage ownership gives effect to (i) the automatic conversion of the 234,000 shares of Class B Common Stock of the Company into 234,000 Shares of Class A Common Stock upon the transfer of such Shares as required by the Company's Restated Articles of Incorporation (the "Articles") and (ii) the exercise by Dr. Katz of options to acquire up to 1,918,400 shares of Class A Common Stock and 375,000 shares of Class B Common Stock, aggregating 2,293,400, the Reporting Person's right to acquire 31.5% of such shares representing an aggregate of 604,296 shares of Class A Common Stock and 118,125 shares of Class B Common Stock, aggregating 722,421 shares and the automatic conversion of the 118,125 shares of Class B Common Stock into 118,125 shares of Class A Common Stock, and results, for purposes of calculating the percent of class owned by the Reporting Person, in there being 39,698,932 shares of Class A Common Stock issued and outstanding. (b) The Reporting Person has sole voting and dispositive power with respect to the 443,400 Shares of Class A Common Stock purchased pursuant to the Katz Stock Purchase Agreement and the MBI Stock Purchase Agreement. Page 5 of 9 Pages 6 Pursuant to the terms of a Voting Trust Agreement dated January 12, 1998 by and between Dr. Katz and the Reporting Person (the "Katz Voting Trust Agreement"), Dr. Katz transferred 718,903 shares of Class A Common Stock and 163,800 shares of Class B Common Stock (which automatically converted into 163,800 shares of Class A Common Stock) into a voting trust with the Reporting Person. The Reporting Person is the trustee of such voting trust and has the sole power to vote the 1,034,603 Shares transferred into such voting trust. The term of the Katz Voting Trust Agreement is ten (10) years. Under the terms of the Katz Voting Trust Agreement, Dr. Katz has retained the power to dispose of all of the Shares held in such trust; provided, however, Dr. Katz may not dispose of more than twenty percent (20%) of such Shares within any thirty (30) day period. Pursuant to the terms of a Voting Trust Agreement dated January 12, 1998 by and between MBI and the Reporting Person (the "MBI Voting Trust Agreement"), MBI transferred 151,900 Shares of Class A Common Stock into a voting trust with the Reporting Person. The Reporting Person is the trustee of such voting trust and has the sole power to vote the 151,900 Shares of Class A Common Stock transferred into such voting trust. The term of the MBI Voting Trust Agreement is ten (10) years. Under the terms of the MBI Voting Trust Agreement, MBI has retained the power to dispose of all of the Shares held in such trust; provided, however, MBI may not dispose of more than twenty percent (20%) of such Shares within any thirty (30) day period. Dr. Katz and the Reporting Person have also entered into a Purchase Rights Agreement (the "Purchase Rights Agreement") dated January 12, 1998 pursuant to which Dr. Katz has granted to the Reporting Person the irrevocable right to receive either (i) 31.5% of the shares received by Dr. Katz upon the exercise of his stock options (the "Options") to purchase 1,918,400 shares of Class A Common Stock and 375,000 shares of Class B Common Stock or (ii) 31.5% of the net proceeds from the sale of the shares received upon exercise of the Options. The Purchase Rights Agreement expires on June 21, 2007. The Options are exercisable within 60 days. Accordingly, the Reporting Person may be deemed to beneficially own 722,421 shares of Class A Common Stock. (c) Within the last sixty days, the Reporting Person has effected the transactions described in the Katz Stock Purchase Agreement, the MBI Stock Purchase Agreement, the Katz Voting Trust Agreement, the MBI Voting Trust Agreement, the Purchase Rights Agreement, the Katz Promissory Note and the MBI Promissory Note (collectively, the "Operative Agreements"). A detailed description of these transactions is set forth in Item 3, Item 5(a) and Item 5(b) of this Schedule 13D (and the exhibits hereto) and is hereby incorporated herein by this reference and includes the following: (1) The Reporting Person effected the transactions; Page 6 of 9 Pages 7 (2) The date of the transaction was January 12, 1998. (3) The transactions involved an aggregate of 2,200,424 shares of Class A Common Stock. (4) 378,300 shares of Class A Common Stock were purchased from Dr. Katz by the Reporting Person and 65,100 shares of Class A Common Stock were purchased from MBI, in each case at $4.04 per share. (5) The transactions were privately negotiated and were effected in San Diego, California pursuant to the terms of the Operative Agreements. (d) Pursuant to the terms of the Purchase Rights Agreement, Dr. Katz has the right to exercise the Options, to sell the shares of stock received upon such exercise and to either (i) to retain 68.5% of the net proceeds from the sale of such shares or (ii) to retain 68.5% of the shares received upon exercise of the Options. (e) Not Applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The discussion contained in Item 3, Item 5(a) and Item 5(b) is hereby incorporated herein by this reference. Page 7 of 9 Pages 8 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit 1: Katz Stock Purchase Agreement Exhibit 2: MBI Stock Purchase Agreement Exhibit 3: Katz Voting Trust Agreement Exhibit 4: MBI Voting Trust Agreement Exhibit 5: Purchase Rights Agreement Exhibit 6: Katz Promissory Note Exhibit 7: MBI Promissory Note Exhibit 8: Proposal Page 8 of 9 Pages 9 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: January 22, 1998 HEALTHMED, INC. By: /S/ T. Daniel Neveau --------------------------------- Name: T. Daniel Neveau Title: Vice President-Development Page 9 of 9 Pages EX-1 2 EXHIBIT 1 1 EXHIBIT 1 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into this 12th day of January, 1998, by and between HealthMed, Inc., a Nevada corporation ("Purchaser") and David Katz, M.D. ("Seller"). RECITALS A. LIDAK Pharmaceuticals, a California corporation (the "Corporation") presently has outstanding two classes of common stock (individually, "Class A Shares" and "Class B Shares" and collectively, the "Shares"), of which 1,027,003 Class A Shares and 234,000 of Class B Shares have been issued to Seller. B. The Shares are collectively the only issued and outstanding capital stock of the Corporation held by Seller. C. The parties hereto are parties to that certain Purchase Rights Agreement dated of even date herewith, which agreement is appended hereto as Exhibit A and incorporated herein by this reference. D. The Purchaser desires to purchase from Seller and Seller desires to sell to the Purchaser 308,100 of the Class A Shares and 70,200 of the Class B Shares owned by Seller on the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, IT IS AGREED AS FOLLOWS: 1. Purchase of Shares. 1.1 Purchase of Shares. Subject to the terms and conditions set forth herein, at the Closing (as defined below) Seller will sell 308,100 of the Class A Shares and 70,200 of the Class B Shares owned by Seller to the Purchaser and the Purchaser will purchase all of such Shares owned by Seller from Seller, such Shares constituting thirty percent (30%) of all of the issued and outstanding capital stock of the Corporation owned by Seller as of the Closing. 1.2 Purchase Price. The Purchase Price shall be One Million Five Hundred Twenty Eight Thousand Two Hundred Thirty Four and 98/100 Dollars ($1,528,234.98) for the Shares purchased hereby (referred herein to as the "Purchase Price"). 1.3 Payment of Purchase Price. The Purchase Price will be paid to Seller by Purchaser's delivery to Seller of a promissory note in the principal sum of the Purchase Price and in substantially the form of Exhibit 1.3 hereto at the Closing (the "Note"), such Note to be at the 2 rate of ten percent (10%) per annum computed on the basis of a year of 360 days for the actual number of days elapsed and shall additionally provide for annual payments of interest only with principal due and payable on the second (2nd) anniversary of such Note, and the Note shall not be subject to any prepayment penalties; provided, however, that in the event the last stock purchase price on the first (1st) anniversary date of this Agreement of the Company's Class A common stock on the public market equals or exceeds Nine and No/100 Dollars ($9.00), then Seven Hundred Seventy One Thousand Eight Hundred Thirty Two and 98/100 ($771,832.98) of the amount due on the Note shall be accelerated from the maturity date thereof and shall be due and payable no later than fifteen (15) days thereafter. 2. Representations and Warranties of Seller. As a material inducement to the Purchaser to enter into this Agreement and purchase the Shares, the Seller represents and warrants that: 2.1 Ownership of the Shares. Seller is the owner, beneficially and of record, of the Shares being transferred pursuant to this Agreement free and clear of all liens, charges, claims, encumbrances, security interests, equities, restrictions on transfer or other defects in title of any kind or description. 2.2 Authority to Enter into Agreements; Enforceability. Seller has the right, power and authority to enter into and to carry out the terms and provisions of this Agreement, including the transfer and delivery of the Shares being transferred pursuant to this Agreement, without obtaining the approval or consent of any other party or authority, and this Agreement is a legal, valid and binding agreement of Seller, enforceable in accordance with its terms. 2.3 No Conflict. The execution and performance of this Agreement by Seller will not violate any agreement, promissory note, security arrangement, order or other instrument to which Seller is a party or by which Seller may be bound. 2.4 Litigation. To the best knowledge of Seller, there are no suits, actions or legal, administrative, arbitration or other proceedings pending, filed or initiated by or against the Corporation occurring since the issuance of the Corporation's Form 10K dated September 30, 1997. 2.5 Disclosure. Neither this Agreement nor any of the schedules, attachments, written statements, documents, certificates, or other items prepared or supplied to the Purchaser by or on behalf of the Seller with respect to this purchase contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. The Seller has not intentionally concealed any fact known by him to have a material adverse effect upon the Corporation's existing or expected financial condition, operating results, assets, customer relations, employee relations, or business prospects taken as a whole. 2 3 3. Representations and Warranties of Purchaser. As a material inducement to the Seller to enter into this Agreement and sell the Shares, the Purchaser hereby represents and warrants to the Seller as follows: 3.1 Organization; Power. The Purchaser is a corporation duly incorporated and validly existing under the laws of the State of California, and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 3.2 Authorization. The execution, delivery, and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party have been duly and validly authorized by all necessary corporate action of the Purchaser, and this Agreement and each such other agreement, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Purchaser enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, and similar statutes affecting creditors' rights generally and judicial limits on equitable remedies. 3.3 No Conflict with Other Instruments or Agreements. The execution, delivery, and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party will not result in a breach or violation of, or constitute a default under, its Articles of Incorporation or Bylaws or any material agreement to which the Purchaser is a party or by which the Purchaser is bound. 3.4 Litigation. There are no actions, suits, proceedings, or governmental investigations or inquiries pending or, to the knowledge of the Purchaser, threatened against the Purchaser or its properties, assets, operations, or businesses that might delay, prevent, or hinder the consummation of this purchase. 3.5 Investment Representations. 3.5.1 The Purchaser is an "accredited investor" as defined by the SEC's Rule 501(a), and the Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Corporation so that the Purchaser is capable of evaluating the merits and risks of the Purchaser's investment in the Corporation and has the capacity to protect the Purchaser's own interests. 3.5.2 The Purchaser is acquiring the Shares for investment for the Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Purchaser understands that the Shares to be purchased have not been, and will not be, registered under the Securities Act or the securities laws of any state by reason of a specific exemption from the registration provisions of the Securities Act and the applicable state securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser is acquiring the Shares without 3 4 expectation, desire, or need for resale and not with the view toward distribution, resale, subdivision, or fractionalization of the Shares. 3.5.3 During the course of the negotiation of this Agreement, the Purchaser has had an opportunity to discuss the Corporation's business, management and financial affairs with the Corporation's management and the opportunity to review the Corporation's financial statements, books and records, facilities and business plan. The Purchaser has also had an opportunity to ask questions of officers of the Corporation, which questions were answered to the Purchaser's satisfaction. 3.5.4 The Purchaser understands that the Shares to be purchased have not been registered under Securities Act of 1933 ("1933 Act"), or under any state securities law. 3.5.5 The Purchaser understands that the Shares cannot be resold in a transaction to which the 1933 Act and state securities laws apply unless (i) subsequently registered under the 1933 Act and applicable state securities laws or (ii) exemptions from such registrations are available. The Purchaser is aware of the provisions of Rule 144 promulgated under the 1933 Act which permit limited resale of shares purchased in a private transaction subject to the satisfaction of certain conditions. 3.5.6 The Purchaser understands that no public market now exists for the Shares and that it is uncertain that a public market will ever exist for the Shares. 3.5.7 The Purchaser understands that the certificates for the Shares will bear the following legend: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OF THE CORPORATION OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 3.6 Tax Liability. To the extent the Purchaser deems necessary, the Purchaser has reviewed with the Purchaser's own tax advisors the federal, state, local and foreign tax 4 5 consequences of this investment and the transactions contemplated by this Agreement. The Purchaser relies solely on such advisors and not on any statements or representations of the Seller or any of its agents. The Purchaser understands that the Purchaser (and not the Seller) shall be responsible for the Purchaser's own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 3.7 Disclosure. To the Purchaser's knowledge, this Agreement, with the Exhibits hereto, when taken as a whole, does not contain any untrue statement of a material fact concerning the Purchaser or omit to state a material fact necessary in order to make the statements concerning the Purchaser contained herein not misleading in light of the circumstances under which they were made. 3.8 Compliance with Other Instruments. The execution, delivery and performance of and compliance with this Agreement, and the issuance of shares will not result in any material violation of, or conflict with, or constitute a material default under, any Purchaser's articles of incorporation or bylaws or any of the Purchaser's material agreements nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of the Corporation or the Shares. 4. Covenants of Seller. The Seller covenants and agrees with the Purchaser as follows: 4.1 Satisfaction of Conditions. The Seller will use reasonable efforts to obtain as promptly as practicable the satisfaction of the conditions to Closing described in this Agreement and any necessary consents or waivers under or amendments to agreements by which the Seller is bound. 4.2 Supplements to Schedules. From time to time prior to the Closing, the Seller will promptly supplement or amend the Exhibits and Schedules with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in any Exhibit or Schedule and will promptly notify the Purchaser of any breach by either of them that either of them discovers of any representation, warranty, or covenant contained in this Agreement. No supplement or amendment of any Exhibit or Schedule made pursuant to this Section will be deemed to cure any breach of any representation of or warranty made in this Agreement unless the Purchaser specifically agrees thereto in writing; provided, however, that if this purchase is closed, the Purchaser will be deemed to have waived its rights with respect to any breach of a representation, warranty, or covenant or any supplement to any Schedule of which it shall have been notified pursuant to this Subsection. 4.3 No Solicitation. Until the Closing or termination pursuant to Section 9 of this Agreement, the Seller shall not encourage, solicit, initiate, or enter into any discussions or negotiations concerning any disposition of any of the capital stock of Seller (other than pursuant to this Agreement), or any proposal therefor. The Seller will promptly inform the Purchaser of any inquiry (including the terms thereof and the person making such inquiry) received by the 5 6 Seller after the date hereof and believed by such person to be a bona fide, serious inquiry relating to any such proposal. 5. Covenant of Purchaser. The Purchaser will use its best efforts to cause the conditions set forth in Section 7 to be satisfied. 6. Conditions Precedent to the Obligations of Purchaser; Legal Opinion. Each and every obligation of the Purchaser under this Agreement is subject to the delivery, at or before the Closing, of an opinion of Luce, Forward, Hamilton & Scripps LLP, in form and content reasonably acceptable to the Purchaser and its legal counsel, to the effect that (i) this Agreement has been duly executed and delivered by Seller; (ii) this Agreement and each other agreement contemplated hereby, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Seller, enforceable against the Seller in accordance with its terms except as the enforceability thereof may be limited by the application of bankruptcy, insolvency, moratorium, or similar laws affecting the rights of creditors generally or judicial limits on the right of specific performance; (iii) except as set forth in Schedule 6, the execution and delivery by the Seller of this Agreement and all other agreements contemplated hereby to which the Seller is a party, the offering and sale of the Shares hereunder and the fulfillment of and compliance with the respective terms hereof and thereof by the Seller, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in the creation of any lien, security interest, charge, or encumbrance upon the capital stock or assets of the Seller, (d) give any third party the right to accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption, or other action by or notice to any court or administrative or governmental body, or any law, statute, rule, or regulation to which the Seller is subject, or any agreement, instrument, order, judgment, or decree to which the Seller is subject; and (iv) to such counsel's knowledge, Seller owns the Shares. 7. Conditions Precedent to the Obligations of Seller. Each and every obligation of the Seller under this Agreement is subject to the satisfaction, at or before the Closing, of each of the following conditions: 7.1 Representations and Warranties; Performance. Each of the representations and warranties made by the Purchaser herein will be true and correct in all material respects as of the Closing with the same effect as though made at that time except for changes contemplated, permitted, or required by this Agreement; the Purchaser will have performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it prior to the Closing; and the Seller will have received, at the Closing, a certificate of the Purchaser, signed by the President and the Secretary or the Chief Financial Officer of the Purchaser, stating that each of the representations and warranties made by the Purchaser herein is true and correct in all material respects as of the Closing except for changes contemplated, permitted, or required by this Agreement and that the Purchaser has performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it prior to the Closing. 6 7 7.2 Corporate Action. The Purchaser will have furnished to the Seller a copy, certified by the Secretary of an Assistant Secretary of the Purchaser, of the resolutions of the Purchaser authorizing the execution, delivery, and performance of this Agreement. 8. Closing. 8.1 Time, Place, and Manner of Closing. Unless this Agreement has been terminated and this purchase has been abandoned pursuant to the provisions of Section 9, the closing ("Closing") will be held at the offices of Stein Perlman & Hawk, or such other place as the parties may agree, on January 12, 1998, or as soon as practicable after the satisfaction of the various conditions precedent to the Closing set forth herein. At the Closing the parties to this Agreement will exchange certificates, Notes, and other instruments and documents in order to determine whether the terms and conditions of this Agreement have been satisfied. Upon the determination of each party that its conditions to consummate this purchase have been satisfied or waived, the Seller shall deliver to the Purchaser the certificate(s) evidencing the Shares, duly endorsed for transfer, and the Purchaser shall deliver to the Seller the Note referred to in Section 1.3, in a manner to be agreed upon by the parties. After the Closing, the Seller, at the Purchaser's cost, will execute, deliver, and acknowledge all such further instruments of transfer and conveyance and will perform all such other acts as the Purchaser may reasonably request to effectively transfer the Shares. 8.2 Consummation of Closing. All acts, deliveries, and confirmations comprising the Closing regardless of chronological sequence shall be deemed to occur contemporaneously and simultaneously upon the occurrence of the last act, delivery, or confirmation of the Closing and none of such acts, deliveries, or confirmations shall be effective unless and until the last of the same shall have occurred. The time of the Closing has been scheduled to correspond with the close of business at the principal office of the Corporation and, regardless of when the last act, delivery, or confirmation of the Closing shall take place, the transfer of the Shares shall be deemed to occur as of the close of business at the principal office of the Corporation on the date of the Closing. 9. Termination. 9.1 Termination for Cause. If, pursuant to the provisions of Section 6 or 7 of this Agreement, the Seller or the Purchaser is not obligated at the Closing to consummate this Agreement, then the party who is not so obligated may terminate this Agreement. 9.2 Termination Without Cause. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and abandoned at any time without further obligation or liability on the part of any party in favor of any other by mutual consent of the Purchaser and the Seller. 9.3 Termination Procedure. Any party having the right to terminate this Agreement due to a failure of a condition precedent contained in Sections 6 or 7 hereto may 7 8 terminate this Agreement by delivering to the other party written notice of termination, and thereupon, this Agreement will be terminated without obligation or liability of any party. 10. Miscellaneous Provisions. 10.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified, or supplemented only by a written agreement signed by the Purchaser and the Seller. 10.2 Waiver of Compliance; Consents 10.2.1 Any failure of any party to comply with any obligation, covenant, agreement, or condition herein may be waived by the party entitled to the performance of such obligation, covenant, or agreement or who has the benefit of such condition, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 10.2.2 Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent will be given in a manner consistent with the requirements for a waiver of compliance as set forth above. 10.3 Payment of Fees and Expenses. Each party to this Agreement will be responsible for, and will pay, all of its own fees and expenses, including those for its own counsel and accountants, incurred in the negotiation, preparation, and consumption of this Agreement and this purchase and sale. 10.4 Costs. Each party hereto shall bear, pay and discharge all of his/its respective expenses incurred in connection with the execution and performance of this Agreement, except as otherwise provided specifically herein. 10.5 Entire Agreement; Successors and Assigns; and Amendment; Third Parties. Except for that certain Voting Trust Agreement executed concurrently herewith and appended hereto as Exhibit B and the Purchase Rights Agreement executed concurrently herewith and appended hereto as Exhibit A, this Agreement and the exhibits appended hereto constitute the entire agreement between the parties concerning the subject matter hereof and no party shall be liable or bound to the other in any manner by any warranties, representations or covenants except as specifically set forth herein. Any previous or concurrent agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the exhibits appended hereto. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. Except as expressly provided herein, nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 8 9 10.6 Governing Law and Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties irrevocably (i) submit to the exclusive jurisdiction of the state courts of the State of California over any action or proceeding arising out of a breach of this Agreement, (ii) agree that all claims in respect of such action or proceeding may be heard and determined in such courts, (iii) waive, to the fullest extent they may effectively do so, the defense of an inconvenient or inappropriate forum to the maintenance of such action or proceeding, (iv) agree that any communication given in accordance with Section 10.9, to the fullest extent permitted by law, shall be taken and held to be valid personal service and personal delivery to such party for the purposes set forth in this Section, and (v) waive any defense based on lack of personal jurisdiction for any such purpose. 10.7 Legal Action and Fees. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the prevailing party shall be entitled to recovery from the non-prevailing party its reasonable expenses, including but not limited to its reasonable attorneys' fees. 10.8 Headings. The headings of the sections of this Agreement are for convenience only and shall not determine the interpretation of this Agreement. 10.9 Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, 24 hours after transmission by telecopy, telex, or five (5) days after deposit in the United States mail by registered or certified mail, addressed as set forth below or at such other address as such party may designate by ten (10) days' advance written notice to the other party: If to Seller: David Katz, M.D. 1775 La Jolla Rancho Road La Jolla, CA 92037 If to Purchaser: HealthMed, Inc. 8306 Wilshire Boulevard, Suite 7056 Beverly Hills, California 90211 Attention: President 10.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.11 Other Documents. Seller shall, at any time after the Closing and upon the request of the Purchaser, execute and deliver to the Purchaser such documents or instruments of conveyance, license or assignment or take such other action as is reasonably necessary to complete the transfer of the Shares or other transactions contemplated by this Agreement or to perfect the interest of the Purchaser therein. Further, the parties agree to take all actions and file such documents required to comply with California securities laws. 9 10 10.12 Legal Advice. The parties hereby acknowledge that they have received independent legal advice from attorneys of their choice with respect to the advisability of executing this Agreement and the related documents affecting this transaction. Prior to the execution of this Agreement, each of the parties' attorneys reviewed this Agreement and discussed the Agreement with such party, and each party made all desired changes. Each of the parties and their attorneys have made such investigation of the facts pertaining to this Agreement and all of the matters appertaining thereto as they deemed necessary. Each of the parties certifies that it has read this Agreement, and fully understands this Agreement and that it has executed it voluntarily, free of any duress, force or undue influence of any party or any person. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first set forth above. SELLER: --------------------------------- DAVID KATZ, M.D. PURCHASER: HEALTHMED, INC. By:_________________________________ Mitchell J. Stein Its: President & Secretary 10 11 CONSENT OF SPOUSE, COHABITANT OR DOMESTIC PARTNER The undersigned spouse, cohabitant or domestic partner of the Shareholder acknowledges on her behalf that: I have read the foregoing Agreement and I know its contents. I am aware that by its provisions that my spouse, cohabitant or domestic partner sells to Purchaser thirty percent (30%) of his Shares in the Company, including my community interest in them. I hereby consent to and approve of the provisions of the Agreement, and agree that those Shares and my interest in them are subject to the provisions of the Agreement and that I will take no action at any time to hinder operation of the Agreement on those Shares or my interest in them. Signature:__________________________________ Print Name:____________________________ 11 12 EXHIBITS 1.3 12 13 EXHIBIT A 13 14 EXHIBIT B 14 EX-2 3 EXHIBIT 2 1 EXHIBIT 2 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT ("Agreement") is entered into this 12th day of January, 1998, by and between HealthMed, Inc., a Nevada corporation ("Purchaser") and Medical Biology Institute, a California nonprofit public benefit corporation ("Seller"). RECITALS A. LIDAK Pharmaceuticals, a California corporation (the "Corporation") presently has outstanding two classes of common stock (individually, "Class A Shares" and "Class B Shares" and collectively, the "Shares"), of which 217,000 Class A Shares have been issued to Seller. B. The Shares are collectively the only issued and outstanding capital stock of the Corporation held by Seller. C. The Purchaser desires to purchase from Seller and Seller desires to sell to the Purchaser 65,100 of the Class A Shares and thirty percent (30%) of the Class B Shares owned by Seller on the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, IT IS AGREED AS FOLLOWS: 1. Purchase of Shares. 1.1 Purchase of Shares. Subject to the terms and conditions set forth herein, at the Closing (as defined below) Seller will sell 65,100 of the Class A Shares and thirty percent (30%) of the Class B Shares owned by Seller to the Purchaser and the Purchaser will purchase all of such Shares owned by Seller from Seller, such Shares constituting thirty percent (30%) of all of the issued and outstanding capital stock of the Corporation owned by Seller as of the Closing. 1.2 Purchase Price. The Purchase Price shall be Two Hundred Sixty Three Thousand Four and No/100 Dollars ($263,004.00) for the Shares purchased hereby (referred herein to as the "Purchase Price"). 1.3 Payment of Purchase Price. The Purchase Price will be paid to Seller by Purchaser's delivery to Seller of a promissory note in the principal sum of the Purchase Price and in substantially the form of Exhibit 1.3 hereto at the Closing (the "Note"), such Note to be at the rate of ten percent (10%) per annum computed on the basis of a year of 360 days for the actual number of days elapsed and shall additionally provide for annual payments of interest only with principal due and payable on the second (2nd) anniversary of such Note, and the Note shall not be subject to any prepayment penalties; provided, however, that in the event the last stock purchase 2 price on the first (1st) anniversary date of this Agreement of the Company's Class A common stock on the public market equals or exceeds Nine and No/100 Dollars ($9.00), then One Hundred Thirty Two Thousand Eight Hundred Four and No/100 ($132,804.00) of the amount due on the Note shall be accelerated from the maturity date thereof and shall be due and payable no later than fifteen (15) days thereafter. 2. Representations and Warranties of Seller. As a material inducement to the Purchaser to enter into this Agreement and purchase the Shares, the Seller represents and warrants that: 2.1 Organization; Power; Ownership of the Shares. The Purchaser is a corporation duly incorporated and validly existing under the laws of the State of California, and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. Seller is the owner, beneficially and of record, of the Shares being transferred pursuant to this Agreement free and clear of all liens, charges, claims, encumbrances, security interests, equities, restrictions on transfer or other defects in title of any kind or description. 2.2 Authority to Enter into Agreements; Enforceability. The execution, delivery, and performance by the Seller of this Agreement and all other agreements contemplated hereby to which the Seller is a party have been duly and validly authorized by all necessary corporate action of the Seller, and this Agreement and each such other agreement, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Seller enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, and similar statutes affecting creditors' rights generally and judicial limits on equitable remedies. 2.3 No Conflict. The execution and performance of this Agreement by Seller will not violate any agreement, promissory note, security arrangement, order or other instrument to which Seller is a party or by which Seller may be bound. 2.4 Litigation. To the best knowledge of Seller, there are no suits, actions or legal, administrative, arbitration or other proceedings pending, filed or initiated by or against the Corporation. 2.5 Disclosure. Neither this Agreement nor any of the schedules, attachments, written statements, documents, certificates, or other items prepared or supplied to the Purchaser by or on behalf of the Seller with respect to this purchase contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. The Seller has not intentionally concealed any fact known by it to have a material adverse effect upon the Corporation's existing or expected financial condition, operating results, assets, customer relations, employee relations, or business prospects taken as a whole. 2 3 3. Representations and Warranties of Purchaser. As a material inducement to the Seller to enter into this Agreement and sell the Shares, the Purchaser hereby represents and warrants to the Seller as follows: 3.1 Organization; Power. The Purchaser is a corporation duly incorporated and validly existing under the laws of the State of California, and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 3.2 Authorization. The execution, delivery, and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party have been duly and validly authorized by all necessary corporate action of the Purchaser, and this Agreement and each such other agreement, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Purchaser enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, and similar statutes affecting creditors' rights generally and judicial limits on equitable remedies. 3.3 No Conflict with Other Instruments or Agreements. The execution, delivery, and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party will not result in a breach or violation of, or constitute a default under, its Articles of Incorporation or Bylaws or any material agreement to which the Purchaser is a party or by which the Purchaser is bound. 3.4 Litigation. There are no actions, suits, proceedings, or governmental investigations or inquiries pending or, to the knowledge of the Purchaser, threatened against the Purchaser or its properties, assets, operations, or businesses that might delay, prevent, or hinder the consummation of this purchase. 3.5 Investment Representations. 3.5.1 The Purchaser is an "accredited investor" as defined by the SEC's Rule 501(a), and the Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Corporation so that the Purchaser is capable of evaluating the merits and risks of the Purchaser's investment in the Corporation and has the capacity to protect the Purchaser's own interests. 3.5.2 The Purchaser is acquiring the Shares for investment for the Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Purchaser understands that the Shares to be purchased have not been, and will not be, registered under the Securities Act or the securities laws of any state by reason of a specific exemption from the registration provisions of the Securities Act and the applicable state securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser is acquiring the Shares without 3 4 expectation, desire, or need for resale and not with the view toward distribution, resale, subdivision, or fractionalization of the Shares. 3.5.3 During the course of the negotiation of this Agreement, the Purchaser has had an opportunity to discuss the Corporation's business, management and financial affairs with the Corporation's management and the opportunity to review the Corporation's financial statements, books and records, facilities and business plan. The Purchaser has also had an opportunity to ask questions of officers of the Corporation, which questions were answered to the Purchaser's satisfaction. 3.5.4 The Purchaser understands that the Shares to be purchased have not been registered under Securities Act of 1933 ("1933 Act"), or under any state securities law. 3.5.5 The Purchaser understands that the Shares cannot be resold in a transaction to which the 1933 Act and state securities laws apply unless (i) subsequently registered under the 1933 Act and applicable state securities laws or (ii) exemptions from such registrations are available. The Purchaser is aware of the provisions of Rule 144 promulgated under the 1933 Act which permit limited resale of shares purchased in a private transaction subject to the satisfaction of certain conditions. 3.5.6 The Purchaser understands that no public market now exists for the Shares and that it is uncertain that a public market will ever exist for the Shares. 3.5.7 The Purchaser understands that the certificates for the Shares will bear the following legend: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OF THE CORPORATION OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 3.6 Tax Liability. To the extent the Purchaser deems necessary, the Purchaser has reviewed with the Purchaser's own tax advisors the federal, state, local and foreign tax 4 5 consequences of this investment and the transactions contemplated by this Agreement. The Purchaser relies solely on such advisors and not on any statements or representations of the Seller or any of its agents. The Purchaser understands that the Purchaser (and not the Seller) shall be responsible for the Purchaser's own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 3.7 Disclosure. To the Purchaser's knowledge, this Agreement, with the Exhibits hereto, when taken as a whole, does not contain any untrue statement of a material fact concerning the Purchaser or omit to state a material fact necessary in order to make the statements concerning the Purchaser contained herein not misleading in light of the circumstances under which they were made. 3.8 Compliance with Other Instruments. The execution, delivery and performance of and compliance with this Agreement, and the issuance of shares will not result in any material violation of, or conflict with, or constitute a material default under, any Purchaser's articles of incorporation or bylaws or any of the Purchaser's material agreements nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of the Corporation or the Shares. 4. Covenants of Seller. The Seller covenants and agrees with the Purchaser as follows: 4.1 Satisfaction of Conditions. The Seller will use reasonable efforts to obtain as promptly as practicable the satisfaction of the conditions to Closing described in this Agreement and any necessary consents or waivers under or amendments to agreements by which the Seller is bound. 4.2 Supplements to Schedules. From time to time prior to the Closing, the Seller will promptly supplement or amend the Exhibits and Schedules with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in any Exhibit or Schedule and will promptly notify the Purchaser of any breach by either of them that either of them discovers of any representation, warranty, or covenant contained in this Agreement. No supplement or amendment of any Exhibit or Schedule made pursuant to this Section will be deemed to cure any breach of any representation of or warranty made in this Agreement unless the Purchaser specifically agrees thereto in writing; provided, however, that if this purchase is closed, the Purchaser will be deemed to have waived its rights with respect to any breach of a representation, warranty, or covenant or any supplement to any Schedule of which it shall have been notified pursuant to this Subsection. 4.3 No Solicitation. Until the Closing or termination pursuant to Section 9 of this Agreement, the Seller shall not encourage, solicit, initiate, or enter into any discussions or negotiations concerning any disposition of any of the capital stock of Seller (other than pursuant to this Agreement), or any proposal therefor. The Seller will promptly inform the Purchaser of any inquiry (including the terms thereof and the person making such inquiry) received by the 5 6 Seller after the date hereof and believed by such person to be a bona fide, serious inquiry relating to any such proposal. 5. Covenant of Purchaser. The Purchaser will use its best efforts to cause the conditions set forth in Section 7 to be satisfied. 6. Conditions Precedent to the Obligations of Purchaser; Legal Opinion. Each and every obligation of the Purchaser under this Agreement is subject to the delivery, at or within seven (7) days following the Closing, of an opinion of Seller's outside corporate counsel, in form and content reasonably acceptable to the Purchaser and its legal counsel, to the effect that (i) this Agreement has been duly executed and delivered by Seller; (ii) this Agreement and each other agreement contemplated hereby, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Seller, enforceable against the Seller in accordance with its terms except as the enforceability thereof may be limited by the application of bankruptcy, insolvency, moratorium, or similar laws affecting the rights of creditors generally or judicial limits on the right of specific performance; and (iii) except as set forth in Schedule 6, the execution and delivery by the Seller of this Agreement and all other agreements contemplated hereby to which the Seller is a party, the offering and sale of the Shares hereunder and the fulfillment of and compliance with the respective terms hereof and thereof by the Seller, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in the creation of any lien, security interest, charge, or encumbrance upon the capital stock or assets of the Seller, (d) give any third party the right to accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption, or other action by or notice to any court or administrative or governmental body, or any law, statute, rule, or regulation to which the Seller is subject, or any agreement, instrument, order, judgment, or decree to which the Seller is subject; and (iv) to such counsel's knowledge, Seller owns the rights to the Shares. 7. Conditions Precedent to the Obligations of Seller. Each and every obligation of the Seller under this Agreement is subject to the satisfaction, at or before the Closing, of each of the following conditions: 7.1 Representations and Warranties; Performance. Each of the representations and warranties made by the Purchaser herein will be true and correct in all material respects as of the Closing with the same effect as though made at that time except for changes contemplated, permitted, or required by this Agreement; the Purchaser will have performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it prior to the Closing; and the Seller will have received, at the Closing, a certificate of the Purchaser, signed by the President and the Secretary or the Chief Financial Officer of the Purchaser, stating that each of the representations and warranties made by the Purchaser herein is true and correct in all material respects as of the Closing except for changes contemplated, permitted, or required by this Agreement and that the Purchaser has performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it prior to the Closing. 6 7 7.2 Corporate Action. The Purchaser will have furnished to the Seller a copy, certified by the Secretary of an Assistant Secretary of the Purchaser, of the resolutions of the Purchaser authorizing the execution, delivery, and performance of this Agreement. 8. Closing. 8.1 Time, Place, and Manner of Closing. Unless this Agreement has been terminated and this purchase has been abandoned pursuant to the provisions of Section 9, the closing ("Closing") will be held at the offices of Stein Perlman & Hawk, or such other place as the parties may agree, on January 12, 1998, or as soon as practicable after the satisfaction of the various conditions precedent to the Closing set forth herein. At the Closing the parties to this Agreement will exchange certificates, Notes, and other instruments and documents in order to determine whether the terms and conditions of this Agreement have been satisfied. Upon the determination of each party that its conditions to consummate this purchase have been satisfied or waived, the Seller shall deliver to the Purchaser the certificate(s) evidencing the Shares, duly endorsed for transfer, and the Purchaser shall deliver to the Seller the Note referred to in Section 1.3, in a manner to be agreed upon by the parties. After the Closing, the Seller, at the Purchaser's cost, will execute, deliver, and acknowledge all such further instruments of transfer and conveyance and will perform all such other acts as the Purchaser may reasonably request to effectively transfer the Shares. 8.2 Consummation of Closing. All acts, deliveries, and confirmations comprising the Closing regardless of chronological sequence shall be deemed to occur contemporaneously and simultaneously upon the occurrence of the last act, delivery, or confirmation of the Closing and none of such acts, deliveries, or confirmations shall be effective unless and until the last of the same shall have occurred. The time of the Closing has been scheduled to correspond with the close of business at the principal office of the Corporation and, regardless of when the last act, delivery, or confirmation of the Closing shall take place, the transfer of the Shares shall be deemed to occur as of the close of business at the principal office of the Corporation on the date of the Closing. 9. Termination. 9.1 Termination for Cause. If, pursuant to the provisions of Section 6 or 7 of this Agreement, the Seller or the Purchaser is not obligated at the Closing to consummate this Agreement, then the party who is not so obligated may terminate this Agreement. 9.2 Termination Without Cause. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and abandoned at any time without further obligation or liability on the part of any party in favor of any other by mutual consent of the Purchaser and the Seller. 9.3 Termination Procedure. Any party having the right to terminate this Agreement due to a failure of a condition precedent contained in Sections 6 or 7 hereto may 7 8 terminate this Agreement by delivering to the other party written notice of termination, and thereupon, this Agreement will be terminated without obligation or liability of any party. 10. Miscellaneous Provisions. 10.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified, or supplemented only by a written agreement signed by the Purchaser and the Seller. 10.2 Waiver of Compliance; Consents 10.2.1 Any failure of any party to comply with any obligation, covenant, agreement, or condition herein may be waived by the party entitled to the performance of such obligation, covenant, or agreement or who has the benefit of such condition, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 10.2.2 Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent will be given in a manner consistent with the requirements for a waiver of compliance as set forth above. 10.3 Payment of Fees and Expenses. Each party to this Agreement will be responsible for, and will pay, all of its own fees and expenses, including those for its own counsel and accountants, incurred in the negotiation, preparation, and consumption of this Agreement and this purchase and sale. 10.4 Costs. Each party hereto shall bear, pay and discharge all of his/its respective expenses incurred in connection with the execution and performance of this Agreement, except as otherwise provided specifically herein. 10.5 Entire Agreement; Successors and Assigns; and Amendment; Third Parties. Except for that certain Voting Trust Agreement executed concurrently herewith and appended hereto as Exhibit A and the Purchase Rights Agreement executed concurrently herewith and appended hereto as Exhibit B, this Agreement and the exhibits appended hereto constitute the entire agreement between the parties concerning the subject matter hereof and no party shall be liable or bound to the other in any manner by any warranties, representations or covenants except as specifically set forth herein. Any previous or concurrent agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the exhibits appended hereto. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. Except as expressly provided herein, nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 8 9 10.6 Governing Law and Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties irrevocably (i) submit to the exclusive jurisdiction of the state courts of the State of California over any action or proceeding arising out of a breach of this Agreement, (ii) agree that all claims in respect of such action or proceeding may be heard and determined in such courts, (iii) waive, to the fullest extent they may effectively do so, the defense of an inconvenient or inappropriate forum to the maintenance of such action or proceeding, (iv) agree that any communication given in accordance with Section 10.9, to the fullest extent permitted by law, shall be taken and held to be valid personal service and personal delivery to such party for the purposes set forth in this Section, and (v) waive any defense based on lack of personal jurisdiction for any such purpose. 10.7 Legal Action and Fees. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the prevailing party shall be entitled to recovery from the non-prevailing party its reasonable expenses, including but not limited to its reasonable attorneys' fees. 10.8 Headings. The headings of the sections of this Agreement are for convenience only and shall not determine the interpretation of this Agreement. 10.9 Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, 24 hours after transmission by telecopy, telex, or five (5) days after deposit in the United States mail by registered or certified mail, addressed as set forth below or at such other address as such party may designate by ten (10) days' advance written notice to the other party: If to Seller: Medical Biology Institute 11077 North Torrey Pines Road La Jolla, California 92037 Attention: President If to Purchaser: HealthMed, Inc. 8306 Wilshire Boulevard, Suite 7056 Beverly Hills, California 90211 Attention: President 10.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 10.11 Other Documents. Seller shall, at any time after the Closing and upon the request of the Purchaser, execute and deliver to the Purchaser such documents or instruments of conveyance, license or assignment or take such other action as is reasonably necessary to complete the transfer of the Shares or other transactions contemplated by this Agreement or to 9 10 perfect the interest of the Purchaser therein. Further, the parties agree to take all actions and file such documents required to comply with California securities laws. 10.12 Legal Advice. The parties hereby acknowledge that they have received independent legal advice from attorneys of their choice with respect to the advisability of executing this Agreement and the related documents affecting this transaction. Prior to the execution of this Agreement, each of the parties' attorneys reviewed this Agreement and discussed the Agreement with such party, and each party made all desired changes. Each of the parties and their attorneys have made such investigation of the facts pertaining to this Agreement and all of the matters appertaining thereto as they deemed necessary. Each of the parties certifies that it has read this Agreement, and fully understands this Agreement and that it has executed it voluntarily, free of any duress, force or undue influence of any party or any person. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first set forth above. SELLER: MEDICAL BIOLOGY INSTITUTE By:______________________________ David Katz, M.D. Its: President By:______________________________ Christopher S. McKellar Its: Chairman of the Board PURCHASER: HEALTHMED, INC. By:_________________________________ Mitchell J. Stein Its: President & Secretary 10 11 EXHIBITS 1.3 11 12 EXHIBIT A 12 13 EXHIBIT B 13 EX-3 4 EXHIBIT 3 1 EXHIBIT 3 VOTING TRUST AGREEMENT THIS VOTING TRUST AGREEMENT ("Agreement") is made and entered into as of January 12, 1998, by and between David Katz, M.D., an individual (the "Shareholder") and HealthMed, Inc., a Nevada corporation ("Trustee"). This Agreement is made with reference to the following facts and circumstances: A. The authorized capital stock of LIDAK Pharmaceuticals, a California corporation (the "Company"), consists of (i) 99,490,000, no par value per share, Class A common shares, of which 38,613,799 are issued and outstanding, and such shares set forth on Schedule 1 have been issued to the Shareholder (the "Class A Shares"); and (ii) 510,000, no par value per share, Class B common shares, of which 283,000 are issued and outstanding, and such shares set forth on Schedule 1 have been issued to the Shareholder (the "Class B Shares") (the Class A Shares and the Class B Shares shall hereinafter be collectively referred to as the "Shares"). B. The Shareholder wishes to transfer the Shares to Trustee in order to provide Trustee the full and exclusive power to vote the shares of common stock of the Company in accordance with the Company's business plan, to elect the Company's Board of Directors, to manage the Company and to otherwise provide for the smooth and efficient operation of the Company. NOW, THEREFORE, in consideration of the covenants and conditions contained herein, and for other valuable consideration, including, without limitation (a) the extensive services Trustee has heretofore provided to the Shareholder, including, without limitation, substantial business consulting services appertaining or relating to the protection and maximization of the value of the Shareholder's equity interests, potential equity interests and prospective equity interests in the Company, including assisting the Shareholder in the development of comprehensive plans that are believed by Trustee and the Shareholder to be highly likely to lead to the creation of compelling new opportunities for the Company and the Shareholder, and (b) as specifically requested of Trustee by the Shareholder, and hereby acknowledged by the Shareholder, the extensive services the Trustee is expected to use its best efforts to provide in the future, in furtherance of the goals of both protecting and maximizing the equity interests of all shareholders of the Company, including that of the Shareholder, the parties hereby agree as follows: 1. TRUSTEE. HealthMed, Inc. is hereby appointed as Trustee for the purposes set forth in and with the powers granted to him by this Agreement, and Trustee hereby accepts such appointment and agrees to act as Trustee hereunder. 2. TERM OF VOTING TRUST. For a period of ten (10) years following the date of this Agreement, all of the Shares owned by the Shareholder as of the date of this Agreement, together with such other Shares that the Shareholder may purchase or receive from any source 2 whatsoever during the term of this Agreement, including but not limited to any Shares received as a consequence of any event described in Paragraph 3 below, shall be subject to the provisions of this Agreement (the "Voting Trust"). During said ten (10) year period, the Voting Trust shall be irrevocable, except as otherwise provided by this Agreement or by the failure to cure a default of the promissory note appended hereto as Exhibit A (the "Note") and executed in connection with a Stock Purchase Agreement dated of even date herewith and appended hereto as Exhibit B. Within two (2) years of the expiration of this Agreement, the parties may mutually agree to extend the term of the Agreement for an additional ten (10) year period. 3. ASSIGNMENT OF STOCK TO TRUSTEE. The Shareholder hereby transfers, assigns and delivers to and deposits with Trustee all of the Shares now owned or held by him. The Shareholder agrees to deliver to Trustee immediately upon the execution of this Agreement all certificates evidencing such Shares properly endorsed for transfer to Trustee. All certificates of Shares transferred to the Trustee by the Shareholder shall be surrendered to and canceled by the Company, and the Company shall issue a new certificate to the Trustee, and it shall appear upon the certificate so issued that it is issued pursuant to this Agreement. An entry shall be made in the proper books of the Company that the Trustee is the registered owner of such Shares pursuant to this Agreement, and a duplicate of this Agreement shall be filed with the Secretary of the Company and shall, at all times during the term hereof (including any extension(s) hereof), be open to inspection by any Shareholder or such Shareholder's attorney. Upon receipt by the Company of the Shareholder's Share certificates and transfer of the same into the name of the Trustee, the Trustee shall hold the certificates issued in its name pursuant to the terms of this Agreement, and the Company shall thereupon issue and deliver to the Shareholder a Voting Trust Certificate, representing the Shareholder's beneficial interest in the trust herein created, substantially in the form of Schedules 2 and 3 attached hereto and incorporated herein by this reference. If at any time during the existence of the Voting Trust, other or additional Shares are issued by the Company to the Shareholder, including, without limitation, through the exercise of stock options or warrants, or any securities issued in respect of or in exchange for all or part of any Shares owned by the Shareholder or held by Trustee pursuant to the terms of this Agreement, as a consequence of any merger, reorganization, recapitalization, reclassification, readjustment, stock split, stock dividend, or other change in the Company's capital structure, such other or additional securities likewise immediately shall be assigned, transferred and delivered to and deposited with Trustee to be held subject to the terms of this Agreement. All of such shares now or hereafter so transferred, assigned, delivered and deposited shall be held by Trustee in trust for the uses and purposes herein set forth, and such shares hereinafter will be referred to as the "Shares." 4. POWERS OF TRUSTEE. During the existence of the Voting Trust, Trustee shall possess and exercise all rights and powers inuring to such Shares as if it were the absolute owner and holder of the Shares. 5. TRUSTEE MAY BE INTERESTED PERSONALLY. Trustee's agents may serve as director, officer, employee or consultant of the Company, and Trustee may be the owner 2 3 of shares of common stock of the Company at any time during the term of this Agreement with the same rights as he or it would have had if he or it were not an agent of the Trustee or a Trustee hereunder, respectively, and, irrespective of whether such Trustee is an owner of any shares of common stock of the Company, may vote or cause votes to be cast in favor of its agent's(s') own election, appointment or employment as such director, officer, employee or consultant. 6. COMPENSATION OF TRUSTEE. Trustee shall not be entitled to compensation for its services as Trustee hereunder. 7. LIABILITY OF TRUSTEE; INDEMNITY. Trustee shall not be liable for any error of judgment nor for any act of commission or omission, nor for any mistake of law or fact, nor for anything it may do or refrain from doing in good faith, nor generally shall it have any accountability hereunder, except for its own willful misconduct or gross negligence. The Shareholder hereby agrees to indemnify and defend Trustee from and against any and all claims, demands, losses, costs, and expenses, including but not limited to attorneys' fees and costs paid or incurred by Trustee, and any and all liability therefor, that Trustee may sustain or incur in connection with any action taken in accordance with the provisions of this Agreement, except for matters arising from Trustee's own willful misconduct or gross negligence. Trustee hereby agrees to indemnify and defend the Shareholder from and against any and all claims, demands, losses, costs, and expenses, including but not limited to attorneys' fees and costs paid or incurred by the Shareholder, and any and all liability therefor, that the Shareholder may sustain or incur in connection with any action taken in accordance with the provisions of this Agreement, except for matters arising from the Shareholder's own willful misconduct or gross negligence. 8. TRANSACTIONS BY SHAREHOLDER. During the term of this Agreement, the Shareholder shall not have the right nor shall he attempt to sell, assign, hypothecate, encumber or transfer or in any other manner dispose of any of the Shares or any interest therein, including but not limited to the Voting Trust Certificate(s) representing such Shares; provided, however, that the Shareholder may publicly sell Shares in the public market upon the following conditions: (i) the Shareholder shall provide written notice to the Trustee at least twenty-four (24) hours prior to any sale of the Shares, and (ii) the number of Shares to be sold by the Shareholder in any thirty (30) day period shall not exceed twenty percent (20%) of the number of Shares deposited by the Shareholder in this trust pursuant to the terms of this Agreement. Upon the sale of the Shares as herein provided the certificates representing the Shares sold hereby and in the hands of Trustee shall be assigned to the Shareholder or purchaser of the Shares. 9. FILING OF COPY OF AGREEMENT WITH THE COMPANY. An executed copy of this Agreement shall be filed in the office of the Company and be subject to inspection by all the shareholders of the Company. 10. TERMINATION AND IRREVOCABILITY OF TRUST. The Voting Trust shall terminate upon the first to occur of the following events: (i) upon the expiration of its ten (10) 3 4 year term, unless extended, as provided by Section 2 of this Agreement, (ii) upon the written consent of Trustee and Shareholder, (iii) an uncured default on the Note, (iv) in the event of the resignation of Trustee, or (v) the death of Mitchell J. Stein, the presently qualified and acting President of Trustee. Upon the termination of the Voting Trust the certificates representing all of the Shares held under this Agreement and then remaining in the hands of Trustee shall be assigned to the Shareholder then entitled thereto. 11. MISCELLANEOUS. (a) Notices. Any notices which any party is required or may desire to give to any other party or parties under this Agreement shall be in writing, and shall be given by addressing the same to such other party or parties at the address(es) set forth below, and by depositing the same so addressed, postage prepaid, certified mail, return receipt requested, in the United States mail, by delivering the same personally to such other party or parties or by electronic facsimile. A party may change the address for the service of notice by written notice given to the other parties in the manner herein provided. If to Shareholder: David Katz, M.D. 1775 La Jolla Rancho Road La Jolla, California 92037 Facsimile: (619) 454-9054 If to Trustee: HealthMed, Inc. 8306 Wilshire Boulevard, Suite 7056 Beverly Hills, California 90211 Facsimile: (310) 652-0405 (b) Parties in Interest; Assignment. (i) Neither this Agreement nor any of the Shareholder's or Trustee's rights hereunder shall be assigned by such party without the prior written consent of the other party, except that Trustee may assign its rights and obligations hereunder to an entity to be formed or caused to be formed by Trustee. (ii) Subject to the conditions on assignment, this Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 4 5 (c) No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, whatsoever, other than the parties hereto and their permitted successors or assigns, any rights or remedies under or by reason of this Agreement. (d) Counterparts. This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) Validity and Severability. The provisions of this Agreement are severable and if any provision, clause, sentence, section or part thereof is held to be illegal, invalid, unconstitutional or inapplicable to any person or circumstance, such illegality, invalidity, unconstitutionality or inapplicability shall not affect or impair any of the remaining provision(s), sentence(s), clause(s), section(s) or part(s) of the Agreement, Trustee, or the Shareholder or to other persons or circumstances. It is understood and agreed that the terms, conditions, and covenants of this Agreement would have been made, entered into and this Agreement executed by all parties if such illegal, invalid or unconstitutional provisions, sentences, clauses, sections or parts had not been included therein. To the extent that a portion or part of this Agreement may be invalid, but may be made valid by the striking of certain words or phrases, such words or phrases shall be deemed to be stricken and the remainder of the other portions of this Agreement shall remain in full force and effect. (f) Governing Law. This Agreement shall be construed and governed by the laws of the State of California and the invalidity and unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision. The parties hereby consent to the jurisdiction of the federal and state courts located in either the county of Los Angeles or San Diego, California, for any action or suit arising out of this Agreement, and waive any defense to such jurisdiction, including, without limitation, any defense based on venue or inconvenient forum. (g) Headings. The headings herein are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. (h) Entire Agreement, Amendments and Waiver. This Agreement, recitals, Schedules, any amendments hereto or thereto, and the other writings referred to herein or therein or delivered pursuant hereto or thereto which form a part hereof or thereof contain the entire understanding of the parties with respect to the subject matter hereof. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Agreement may be amended only by a written instrument duly executed by all of the parties hereto. Any condition to a party's obligations hereunder may be waived in writing by such party to the extent permitted by law. 5 6 (i) Specific Performance. The Shareholder and Trustee acknowledge that, in view of the uniqueness of the Company's business, a party hereto would not have an adequate remedy at law for money damages in the event the other party breached any of the terms of this Agreement and, therefore, the parties agree that each party shall be entitled to specific enforcement against the other party for performance of the terms hereof in addition to any other remedy to which it may be entitled at law or in equity, and in any such action or proceeding the responding party(ies) will not raise or tender any defense to the effect that the petitioning party has an adequate remedy at law. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. "SHAREHOLDER" ------------------------------------------ DAVID KATZ, M.D. "TRUSTEE" HEALTHMED, INC. By: ------------------------------------ Mitchell J. Stein Its: President & Secretary 6 7 SCHEDULE 1 SHAREHOLDER
No. Shares of Stock Deposited ----------------------------- DAVID KATZ, M.D. 718,903 Class A Shares DAVID KATZ, M.D. 163,800 Class B Shares
7 8 SCHEDULE 2 VOTING TRUST CERTIFICATE No. 001 718,903 Shares of Class A Stock LIDAK PHARMACEUTICALS VOTING TRUST CERTIFICATE This is to certify that David Katz, M.D. ("Certificate Holder") has transferred to the person now and hereafter listed as voting trustee (the "Trustee") on the signature page of that certain Voting Trust Agreement, dated January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the above-stated number of shares of stock of LIDAK Pharmaceuticals, a California corporation ("Corporation"), to be held by the Trustee pursuant to the terms of the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted successor or successors-in-interest, is entitled to all of the rights accorded the Certificate Holder under the terms of the Voting Trust Agreement. THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION. Dated as of January 12, 1998. VOTING TRUSTEE: HEALTHMED, INC. By:_________________________________ Mitchell J. Stein Its: President & Secretary Signature No. Shares of Class A Stock Deposited ____________________________ 718,903 DAVID KATZ, M.D. 8 9 SCHEDULE 3 VOTING TRUST CERTIFICATE No. 001 163,800 Shares of Class B Stock LIDAK PHARMACEUTICALS VOTING TRUST CERTIFICATE This is to certify that David Katz, M.D. ("Certificate Holder") has transferred to the person now and hereafter listed as voting trustee (the "Trustee") on the signature page of that certain Voting Trust Agreement, dated January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the above-stated number of shares of stock of LIDAK Pharmaceuticals, a California corporation ("Corporation"), to be held by the Trustee pursuant to the terms of the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted successor or successors-in-interest, is entitled to all of the rights accorded the Certificate Holder under the terms of the Voting Trust Agreement. THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION. Dated as of January 12, 1998. VOTING TRUSTEE: HEALTHMED, INC. By:_________________________________ Mitchell J. Stein Its: President & Secretary Signature No. Shares of Class B Stock Deposited ____________________________ 163,800 DAVID KATZ, M.D. 9 10 CONSENT OF SPOUSE, COHABITANT OR DOMESTIC PARTNER The undersigned spouse, cohabitant or domestic partner of the Shareholder acknowledges on her behalf that: I have read the foregoing Agreement and I know its contents. I am aware that by its provisions that my spouse, cohabitant or domestic partner will deposit his Shares in the Company with the Trustee. I hereby consent to and approve of the provisions of the Agreement, and agree that those Shares and my interest in them are subject to the provisions of the Agreement and that I will take no action at any time to hinder operation of the Agreement on those Shares or my interest in them. Signature:__________________________________ Print Name:____________________________ 10 11 EXHIBIT A 11 12 EXHIBIT B 12 EX-4 5 EXHIBIT 4 1 EXHIBIT 4 VOTING TRUST AGREEMENT THIS VOTING TRUST AGREEMENT ("Agreement") is made and entered into as of January 12, 1998, by and between Medical Biology Institute, a California nonprofit public benefit corporation (the "Shareholder") and HealthMed, Inc., a Nevada corporation ("Trustee"). This Agreement is made with reference to the following facts and circumstances: A. The authorized capital stock of LIDAK Pharmaceuticals, a California corporation (the "Company"), consists of (i) 99,490,000, no par value per share, Class A common shares, of which 38,613,799 are issued and outstanding, and such shares set forth on Schedule 1 have been issued to the Shareholder (the "Class A Shares"); and (ii) 510,000, no par value per share, Class B common shares, of which 283,000 are issued and outstanding, and such shares set forth on Schedule 1 have been issued to the Shareholder (the "Class B Shares") (the Class A Shares and the Class B Shares shall hereinafter be collectively referred to as the "Shares"). B. The Shareholder wishes to transfer the Shares to Trustee in order to provide Trustee the full and exclusive power to vote the shares of common stock of the Company in accordance with the Company's business plan, to elect the Company's Board of Directors, to manage the Company and to otherwise provide for the smooth and efficient operation of the Company. NOW, THEREFORE, in consideration of the covenants and conditions contained herein, and for other valuable consideration, including, without limitation (a) the extensive services Trustee has heretofore provided to the Shareholder, including, without limitation, substantial business consulting services appertaining or relating to the protection and maximization of the value of the Shareholder's equity interests, potential equity interests and prospective equity interests in the Company, including assisting the Shareholder in the development of comprehensive plans that are believed by Trustee and the Shareholder to be highly likely to lead to the creation of compelling new opportunities for the Company and the Shareholder, and (b) as specifically requested of Trustee by the Shareholder, and hereby acknowledged by the Shareholder, the extensive services the Trustee is expected to use its best efforts to provide in the future, in furtherance of the goals of both protecting and maximizing the equity interests of all shareholders of the Company, including that of the Shareholder, the parties hereby agree as follows: 1. TRUSTEE. HealthMed, Inc. is hereby appointed as Trustee for the purposes set forth in and with the powers granted to him by this Agreement, and Trustee hereby accepts such appointment and agrees to act as Trustee hereunder. 2. TERM OF VOTING TRUST. For a period of ten (10) years following the date of this Agreement, all of the Shares owned by the Shareholder as of the date of this Agreement, together with such other Shares that the Shareholder may purchase or receive from any source 2 whatsoever during the term of this Agreement, including but not limited to any Shares received as a consequence of any event described in Paragraph 3 below, shall be subject to the provisions of this Agreement (the "Voting Trust"). During said ten (10) year period, the Voting Trust shall be irrevocable, except as otherwise provided by this Agreement or by the failure to cure a default of the promissory note appended hereto as Exhibit A (the "Note") and executed in connection with a Stock Purchase Agreement dated of even date herewith and appended hereto as Exhibit B. Within two (2) years of the expiration of this Agreement, the parties may mutually agree to extend the term of the Agreement for an additional ten (10) year period. 3. ASSIGNMENT OF STOCK TO TRUSTEE. The Shareholder hereby transfers, assigns and delivers to and deposits with Trustee all of the Shares now owned or held by it. The Shareholder agrees to deliver to Trustee immediately upon the execution of this Agreement all certificates evidencing such Shares properly endorsed for transfer to Trustee. All certificates of Shares transferred to the Trustee by the Shareholder shall be surrendered to and canceled by the Company, and the Company shall issue a new certificate to the Trustee, and it shall appear upon the certificate so issued that it is issued pursuant to this Agreement. An entry shall be made in the proper books of the Company that the Trustee is the registered owner of such Shares pursuant to this Agreement, and a duplicate of this Agreement shall be filed with the Secretary of the Company and shall, at all times during the term hereof (including any extension(s) hereof), be open to inspection by any Shareholder or such Shareholder's attorney. Upon receipt by the Company of the Shareholder's Share certificates and transfer of the same into the name of the Trustee, the Trustee shall hold the certificates issued in its name pursuant to the terms of this Agreement, and the Company shall thereupon issue and deliver to the Shareholder a Voting Trust Certificate, representing the Shareholder's beneficial interest in the trust herein created, substantially in the form of Schedules 2 and 3 attached hereto and incorporated herein by this reference. If at any time during the existence of the Voting Trust, other or additional Shares are issued by the Company to the Shareholder, including, without limitation, through the exercise of stock options or warrants, or any securities issued in respect of or in exchange for all or part of any Shares owned by the Shareholder or held by Trustee pursuant to the terms of this Agreement, as a consequence of any merger, reorganization, recapitalization, reclassification, readjustment, stock split, stock dividend, or other change in the Company's capital structure, such other or additional securities likewise immediately shall be assigned, transferred and delivered to and deposited with Trustee to be held subject to the terms of this Agreement. All of such shares now or hereafter so transferred, assigned, delivered and deposited shall be held by Trustee in trust for the uses and purposes herein set forth, and such shares hereinafter will be referred to as the "Shares." 4. POWERS OF TRUSTEE. During the existence of the Voting Trust, Trustee shall possess and exercise all rights and powers inuring to such Shares as if it were the absolute owner and holder of the Shares. 5. TRUSTEE MAY BE INTERESTED PERSONALLY. Trustee's agents may serve as director, officer, employee or consultant of the Company, and Trustee may be the owner 2 3 of shares of common stock of the Company at any time during the term of this Agreement with the same rights as he or it would have had if he or it were not an agent of the Trustee or a Trustee hereunder, respectively, and, irrespective of whether such Trustee is an owner of any shares of common stock of the Company, may vote or cause votes to be cast in favor of its agent's(s') own election, appointment or employment as such director, officer, employee or consultant. 6. COMPENSATION OF TRUSTEE. Trustee shall not be entitled to compensation for its services as Trustee hereunder. 7. LIABILITY OF TRUSTEE; INDEMNITY. Trustee shall not be liable for any error of judgment nor for any act of commission or omission, nor for any mistake of law or fact, nor for anything it may do or refrain from doing in good faith, nor generally shall it have any accountability hereunder, except for its own willful misconduct or gross negligence. The Shareholder hereby agrees to indemnify and defend Trustee from and against any and all claims, demands, losses, costs, and expenses, including but not limited to attorneys' fees and costs paid or incurred by Trustee, and any and all liability therefor, that Trustee may sustain or incur in connection with any action taken in accordance with the provisions of this Agreement, except for matters arising from Trustee's own willful misconduct or gross negligence. Trustee hereby agrees to indemnify and defend the Shareholder from and against any and all claims, demands, losses, costs, and expenses, including but not limited to attorneys' fees and costs paid or incurred by the Shareholder, and any and all liability therefor, that the Shareholder may sustain or incur in connection with any action taken in accordance with the provisions of this Agreement, except for matters arising from the Shareholder's own willful misconduct or gross negligence. 8. TRANSACTIONS BY SHAREHOLDER. During the term of this Agreement, the Shareholder shall not have the right nor shall it attempt to sell, assign, hypothecate, encumber or transfer or in any other manner dispose of any of the Shares or any interest therein, including but not limited to the Voting Trust Certificate(s) representing such Shares; provided, however, that the Shareholder may publicly sell Shares in the public market upon the following conditions: (i) the Shareholder shall provide written notice to the Trustee at least twenty-four (24) hours prior to any sale of the Shares, and (ii) the number of Shares to be sold by the Shareholder in any thirty (30) day period shall not exceed twenty percent (20%) of the number of Shares deposited by the Shareholder in this trust pursuant to the terms of this Agreement. Upon the sale of the Shares as herein provided the certificates representing the Shares sold hereby and in the hands of Trustee shall be assigned to the Shareholder or purchaser of the Shares. 9. FILING OF COPY OF AGREEMENT WITH THE COMPANY. An executed copy of this Agreement shall be filed in the office of the Company and be subject to inspection by all the shareholders of the Company. 10. TERMINATION AND IRREVOCABILITY OF TRUST. The Voting Trust shall terminate upon the first to occur of the following events: (i) upon the expiration of its ten (10) 3 4 year term, unless extended, as provided by Section 2 of this Agreement, (ii) upon the written consent of Trustee and Shareholder, (iii) an uncured default on the Note, (iv) in the event of the resignation of Trustee, or (v) the death of Mitchell J. Stein, the presently qualified and acting President of Trustee. Upon the termination of the Voting Trust the certificates representing all of the Shares held under this Agreement and then remaining in the hands of Trustee shall be assigned to the Shareholder then entitled thereto. 11. MISCELLANEOUS. (a) Notices. Any notices which any party is required or may desire to give to any other party or parties under this Agreement shall be in writing, and shall be given by addressing the same to such other party or parties at the address(es) set forth below, and by depositing the same so addressed, postage prepaid, certified mail, return receipt requested, in the United States mail, by delivering the same personally to such other party or parties or by electronic facsimile. A party may change the address for the service of notice by written notice given to the other parties in the manner herein provided. If to Shareholder: Medical Biology Institute 11077 North Torrey Pines Road La Jolla, California 92037 Facsimile: (619) 453-5845 If to Trustee: HealthMed, Inc. 8306 Wilshire Boulevard, Suite 7056 Beverly Hills, California 90211 Facsimile: (310) 652-0405 (b) Parties in Interest; Assignment. (i) Neither this Agreement nor any of the Shareholder's or Trustee's rights hereunder shall be assigned by such party without the prior written consent of the other party, except that Trustee may assign its rights and obligations hereunder to an entity to be formed or caused to be formed by Trustee. (ii) Subject to the conditions on assignment, this Agreement and all the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. 4 5 (c) No Third Party Beneficiaries. Nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or entity, whatsoever, other than the parties hereto and their permitted successors or assigns, any rights or remedies under or by reason of this Agreement. (d) Counterparts. This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. (e) Validity and Severability. The provisions of this Agreement are severable and if any provision, clause, sentence, section or part thereof is held to be illegal, invalid, unconstitutional or inapplicable to any person or circumstance, such illegality, invalidity, unconstitutionality or inapplicability shall not affect or impair any of the remaining provision(s), sentence(s), clause(s), section(s) or part(s) of the Agreement, Trustee, or the Shareholder or to other persons or circumstances. It is understood and agreed that the terms, conditions, and covenants of this Agreement would have been made, entered into and this Agreement executed by all parties if such illegal, invalid or unconstitutional provisions, sentences, clauses, sections or parts had not been included therein. To the extent that a portion or part of this Agreement may be invalid, but may be made valid by the striking of certain words or phrases, such words or phrases shall be deemed to be stricken and the remainder of the other portions of this Agreement shall remain in full force and effect. (f) Governing Law. This Agreement shall be construed and governed by the laws of the State of California and the invalidity and unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision. The parties hereby consent to the jurisdiction of the federal and state courts located in either the county of Los Angeles or San Diego, California, for any action or suit arising out of this Agreement, and waive any defense to such jurisdiction, including, without limitation, any defense based on venue or inconvenient forum. (g) Headings. The headings herein are for convenience of reference only and shall not control or affect the meaning or construction of any provisions hereof. (h) Entire Agreement, Amendments and Waiver. This Agreement, recitals, Schedules, any amendments hereto or thereto, and the other writings referred to herein or therein or delivered pursuant hereto or thereto which form a part hereof or thereof contain the entire understanding of the parties with respect to the subject matter hereof. This Agreement supersedes all prior agreements and understandings between the parties with respect to its subject matter. This Agreement may be amended only by a written instrument duly executed by all of the parties hereto. Any condition to a party's obligations hereunder may be waived in writing by such party to the extent permitted by law. 5 6 (i) Specific Performance. The Shareholder and Trustee acknowledge that, in view of the uniqueness of the Company's business, a party hereto would not have an adequate remedy at law for money damages in the event the other party breached any of the terms of this Agreement and, therefore, the parties agree that each party shall be entitled to specific enforcement against the other party for performance of the terms hereof in addition to any other remedy to which it may be entitled at law or in equity, and in any such action or proceeding the responding party(ies) will not raise or tender any defense to the effect that the petitioning party has an adequate remedy at law. IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date first written above. "SHAREHOLDER" MEDICAL BIOLOGY INSTITUTE By: ------------------------------------------ David Katz, M.D. Its: President By: ------------------------------------------ Christopher S. McKellar Its: Chairman of the Board "TRUSTEE" HEALTHMED, INC. By: ------------------------------------------ Mitchell J. Stein Its: President & Secretary 6 7 SCHEDULE 1 SHAREHOLDER No. Shares of Stock Deposited MEDICAL BIOLOGY INSTITUTE 151,900 Class A Shares 7 8 SCHEDULE 2 VOTING TRUST CERTIFICATE No. 001 151,900 Shares of Class A Stock LIDAK PHARMACEUTICALS VOTING TRUST CERTIFICATE This is to certify that Medical Biology Institute ("Certificate Holder") has transferred to the person now and hereafter listed as voting trustee (the "Trustee") on the signature page of that certain Voting Trust Agreement, dated January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the above-stated number of shares of stock of LIDAK Pharmaceuticals, a California corporation ("Corporation"), to be held by the Trustee pursuant to the terms of the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted successor or successors-in-interest, is entitled to all of the rights accorded the Certificate Holder under the terms of the Voting Trust Agreement. THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION. Dated as of January 12, 1998. VOTING TRUSTEE: HEALTHMED, INC. By: ------------------------------------ Mitchell J. Stein Its: President & Secretary MEDICAL BIOLOGY INSTITUTE No. Shares of Class A Stock Deposited By: 151,900 --------------------------- David Katz, M.D. Its: President 8 9 SCHEDULE 3 VOTING TRUST CERTIFICATE No. 001 ________ Shares of Class B Stock LIDAK PHARMACEUTICALS VOTING TRUST CERTIFICATE This is to certify that Medical Biology Institute ("Certificate Holder") has transferred to the person now and hereafter listed as voting trustee (the "Trustee") on the signature page of that certain Voting Trust Agreement, dated January 12, 1998, or any extension thereof (the "Voting Trust Agreement") the above-stated number of shares of stock of LIDAK Pharmaceuticals, a California corporation ("Corporation"), to be held by the Trustee pursuant to the terms of the Voting Trust Agreement. The Certificate Holder, or his/her/its permitted successor or successors-in-interest, is entitled to all of the rights accorded the Certificate Holder under the terms of the Voting Trust Agreement. THE SALE, ASSIGNMENT, HYPOTHECATION, ENCUMBRANCE OR TRANSFER OF THIS VOTING TRUST CERTIFICATE IS RESTRICTED BY THE VOTING TRUST AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE SECRETARY OF CORPORATION. Dated as of January 12, 1998. VOTING TRUSTEE: HEALTHMED, INC. By: ------------------------------------ Mitchell J. Stein Its: President & Secretary MEDICAL BIOLOGY INSTITUTE No. Shares of Class B Stock Deposited By: ---------------------------- ------------- David Katz, M.D. Its: President 9 10 EXHIBIT A 10 11 EXHIBIT B 11 EX-5 6 EXHIBIT 5 1 EXHIBIT 5 PURCHASE RIGHTS AGREEMENT THIS PURCHASE RIGHTS AGREEMENT ("Agreement") is entered into this 12th day of January, 1998, by and between HealthMed, Inc., a Nevada corporation ("Purchaser") and David Katz, M.D. ("Seller"). RECITALS A. LIDAK Pharmaceuticals, a California corporation (the "Corporation") presently has outstanding two classes of common stock (individually, "Class A Shares" and "Class B Shares" and collectively, the "Shares"), of which 1,918,400 derivative Class A Shares and 375,000 of derivative Class B Shares have been granted to Seller (the "Derivative Shares"), a schedule of the Derivative Shares granted to Seller and as reflected on Seller's January 5, 1998 Form 4 filing is appended hereto as Exhibit A and incorporated herein by this reference. B. The Derivative Shares are collectively the only issued and outstanding derivative capital stock of the Corporation held by Seller. C. The parties hereto are parties to that certain Stock Purchase Agreement dated of even date herewith, which agreement is appended hereto as Exhibit B and incorporated herein by this reference. D. As and for the consideration hereinafter set forth, the Seller desires to exercise the Derivative Shares in his sole and absolute discretion and thereafter deliver to the Purchaser thirty one and one-half percent (31.5%) of the exercised Derivative Shares or thirty one and one-half percent (31.5%) of the net proceeds from exercise and sale of the Derivative Shares owned by Seller, or exercise Purchaser's right to exercise the Derivative Shares in the event of Seller's permanent incapacity or death, on the terms and subject to the conditions set forth herein. AGREEMENT NOW, THEREFORE, in consideration of the covenants and conditions contained herein, the rights and obligations of Purchaser and Seller as set forth in the Stock Purchase Agreement by and between Seller and Purchaser of even date herewith, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows: 1. Purchase Participation. 1.1 Exercise of Derivative Shares. For good and valuable consideration the receipt and sufficiency of which are hereby acknowledged by Seller, Seller hereby grants to Purchaser the irrevocable right, for the period and on the terms herein set forth, to receive thirty 2 one and one-half percent (31.5%) of the Net Proceeds (as hereinafter defined) from Seller's exercise and sale of the Derivative Shares. 1.2 Net Proceeds. "Net Proceeds" shall mean the gross proceeds from the Seller's exercise and sale of the Derivative Shares, less the (i) exercise price paid (or payable in a cashless exercise) by Seller; (ii) broker's commissions, expenses and costs incurred by Seller in connection with the sale of the Derivative Shares; and (iii) federal and state income taxes on the exercise of the Derivative Shares paid or payable by Seller. 1.3 Seller Warranty Not to Encumber. Seller warrants and undertakes that during the term of this Agreement, he shall not assign or encumber the Derivative Shares or any rights in them, nor make any commitment with respect thereto inconsistent with the terms of this Agreement. 1.4 Expiration Date. This Agreement shall expire at midnight on June 21, 2007 (the "expiration date"). 1.5 Method of Exercise. Concurrently with the execution hereof, the parties hereto shall open three (3) brokerage accounts at Stuart Coleman & Co., Inc., 11 W. 42nd Street, 15th Floor, New York, New York 10036, telephone no. (800) 724-0761 (the "Brokerage") and Seller shall deliver notice and supporting documentation to the Brokerage depositing the Derivative Shares, as follows: (i) a joint account of Seller and Purchaser; (ii) an account of Seller ("Seller's Account"); and (iii) and account of Purchaser ("Purchaser's Account"). Thereafter, and during the term of this Agreement, the Brokerage shall execute each and every exercise of the Derivative Shares and deliver the Net Proceeds to Purchaser and Seller as follows: (a) thirty one and one-half percent (31.5%) to Purchaser's Account ("Purchaser's Interest"), and (b) the balance to Seller's Account ("Seller's Interest"). This Derivative Shares shall be exercisable, on or before the expiration date, by written notice sent to Purchaser by facsimile transmission or sent by registered mail, return receipt requested, addressed as hereinafter set forth, notifying Purchaser of such exercise and its right to participation in the Net Proceeds thereof. 1.6 Deliveries. If Seller exercises his option to purchase and sale the Derivative Shares as aforesaid, the Brokerage shall (i) deposit Purchaser's Interest into the Purchaser's Account within three (3) days after the purchase and sale of the Derivative Shares; and (ii) deposit Seller's Interest into the Seller's Account within three (3) days after the purchase and sale of the Derivative Shares; provided that in the event Purchaser shall not timely receive the Purchaser's Interest, Seller shall thereafter have three (3) days in which to deposit into the Purchaser's Account the Purchaser's Interest. 1.7 Adjustments. In the event of any change in the Shares by reason of any stock dividend, recapitalization, splitup, combination or exchange of shares, or of any similar change affecting the Derivative Shares, then in any such event, the number and kind of shares subject to this Agreement shall be appropriately adjusted consistent with such change in such 2 3 manner as to prevent substantial dilution or enlargement of the rights granted to, or available for, the Purchaser hereunder. 1.8 No Rights as Shareholder. Purchaser shall have no rights as a shareholder with respect to the Corporation prior to the date of exercise of the Derivative Shares or the issuance of a certificate or certificates for such shares. 1.9 Grant of Option. By execution of this Agreement, Seller hereby grants to the Purchaser the option to cause the Seller, or Seller's conservator, executor or authorized agent, to exercise all or a portion of the Derivative Shares ("Option"), upon the terms and conditions set forth in this subsection: (i) The permanent incapacity of the Seller where "permanent incapacity", as used herein, shall mean mental or physical incapacity, or both, reasonably determined by the Corporation's Board of Directors or the Purchaser based upon a certification of such incapacity by, in the discretion of the Purchaser or the Corporation's Board of Directors, either Seller's regularly attending physician or a duly licensed physician selected by the Purchaser or the Corporation's Board of Directors, rendering the Seller unable to perform substantially all of his duties hereunder or under his employment relationship with the Corporation and which appears reasonably certain to continue for at least three (3) consecutive months without substantial improvement. Seller shall be deemed to have "become permanently incapacitated" on the date either the Purchaser or the Corporation's Board of Directors has determined that Seller is permanently incapacitated and so notifies Seller. (ii) The death of Seller during the term of this Agreement. 1.10 Exercise of Option. Exercise of the option granted in Section 1.9 of this Agreement shall be accomplished by written notice to the Corporation and the Brokerage in accordance with Sections 1.5 and 1.6 of this Agreement. Payment of the exercise price upon the exercise of the Option of the Derivative Shares shall be made with funds of the Purchaser. 2. Representations and Warranties the Seller. As a material inducement to the Purchaser to enter into this Agreement and purchase the Shares, the Seller represents and warrants that: 2.1 Ownership of the Shares. Seller is the owner, beneficially and of record, of the Shares being transferred pursuant to this Agreement free and clear of all liens, charges, claims, encumbrances, security interests, equities, restrictions on transfer or other defects in title of any kind or description. 2.2 Authority to Enter into Agreements; Enforceability. Seller has the right, power and authority to enter into and to carry out the terms and provisions of this Agreement, 3 4 without obtaining the approval or consent of any other party or authority, and this Agreement is a legal, valid and binding agreement of Seller, enforceable in accordance with its terms. 2.3 No Conflict. The execution and performance of this Agreement by Seller will not violate any agreement, promissory note, security arrangement, order or other instrument to which Seller are a party or by which Seller may be bound. 2.4 Litigation. To the best knowledge of Seller, there are no suits, actions or legal, administrative, arbitration or other proceedings pending, filed or initiated by or against the Corporation occurring since the issuance of the Form 10K dated September 30, 1997. 2.5 Disclosure. Neither this Agreement nor any of the schedules, attachments, written statements, documents, certificates, or other items prepared or supplied to the Purchaser by or on behalf of the Seller with respect to this purchase contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. The Seller has not intentionally concealed any fact known by him to have a material adverse effect upon the Corporation's existing or expected financial condition, operating results, assets, customer relations, employee relations, or business prospects taken as a whole. 3. Representations and Warranties of Purchaser. As a material inducement to the Seller to enter into this Agreement and sell the Shares, the Purchaser hereby represents and warrants to the Seller as follows: 3.1 Organization; Power. The Purchaser is a corporation duly incorporated and validly existing under the laws of the State of California, and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 3.2 Authorization. The execution, delivery, and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party have been duly and validly authorized by all necessary corporate action of the Purchaser, and this Agreement and each such other agreement, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Purchaser enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency, and similar statutes affecting creditors' rights generally and judicial limits on equitable remedies. 3.3 No Conflict with Other Instruments or Agreements. The execution, delivery, and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party will not result in a breach or violation of, or constitute a default under, its Articles of Incorporation or Bylaws or any material agreement to which the Purchaser is a party or by which the Purchaser is bound. 4 5 3.4 Litigation. There are no actions, suits, proceedings, or governmental investigations or inquiries pending or, to the knowledge of the Purchaser, threatened against the Purchaser or its properties, assets, operations, or businesses that might delay, prevent, or hinder the consummation of this purchase. 3.5 Investment Representations. 3.5.1 The Purchaser is an "accredited investor" as defined by the SEC's Rule 501(a), and the Purchaser has substantial experience in evaluating and investing in private placement transactions of securities in companies similar to the Corporation so that the Purchaser is capable of evaluating the merits and risks of the Purchaser's investment in the Corporation and has the capacity to protect the Purchaser's own interests. 3.5.2 The Purchaser is acquiring the Shares for investment for the Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Purchaser understands that the Shares to be purchased have not been, and will not be, registered under the Securities Act or the securities laws of any state by reason of a specific exemption from the registration provisions of the Securities Act and the applicable state securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser is acquiring the Shares without expectation, desire, or need for resale and not with the view toward distribution, resale, subdivision, or fractionalization of the Shares. 3.5.3 During the course of the negotiation of this Agreement, the Purchaser has had an opportunity to discuss the Corporation's business, management and financial affairs with the Corporation's management and the opportunity to review the Corporation's financial statements, books and records, facilities and business plan. The Purchaser has also had an opportunity to ask questions of officers of the Corporation, which questions were answered to the Purchaser's satisfaction. 3.5.4 The Purchaser understands that the Shares to be purchased have not been registered under Securities Act of 1933 ("1933 Act"), or under any state securities law. 3.5.5 The Purchaser understands that the Shares cannot be resold in a transaction to which the 1933 Act and state securities laws apply unless (i) subsequently registered under the 1933 Act and applicable state securities laws or (ii) exemptions from such registrations are available. The Purchaser is aware of the provisions of Rule 144 promulgated under the 1933 Act which permit limited resale of shares purchased in a private transaction subject to the satisfaction of certain conditions. 3.5.6 The Purchaser understands that no public market now exists for the Shares and that it is uncertain that a public market will ever exist for the Shares. 5 6 3.5.7 The Purchaser understands that the certificates for the Shares will bear the following legend: THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS CERTIFICATE UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN ATTORNEY, ACCEPTABLE TO THE BOARD OF DIRECTORS OF THE CORPORATION OR ITS AGENTS, STATING THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. 3.6 Tax Liability. To the extent the Purchaser deems necessary, the Purchaser has reviewed with the Purchaser's own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. The Purchaser relies solely on such advisors and not on any statements or representations of the Seller or any of its agents. The Purchaser understands that the Purchaser (and not the Seller) shall be responsible for the Purchaser's own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. 3.7 Disclosure. To the Purchaser's knowledge, this Agreement, with the Exhibits hereto, when taken as a whole, does not contain any untrue statement of a material fact concerning the Purchaser or omit to state a material fact necessary in order to make the statements concerning the Purchaser contained herein not misleading in light of the circumstances under which they were made. 3.8 Compliance with Other Instruments. The execution, delivery and performance of and compliance with this Agreement, and the issuance of shares will not result in any material violation of, or conflict with, or constitute a material default under, any Purchaser's articles of incorporation or bylaws or any of the Purchaser's material agreements nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of the Corporation or the Shares. 4. Conditions Precedent to the Obligations of Purchaser. Each and every obligation of the Purchaser under this Agreement is subject to the satisfaction, at or before the Closing, of each of the following conditions: 6 7 4.1 Representations and Warranties; Performance. Each of the representations and warranties made by the Seller herein will be true and correct in all material respects as of the Closing with the same effect as though made at that time except for changes contemplated, permitted, or required by this Agreement; the Seller will have performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by them prior to the Closing; and the Purchaser will have received, at the Closing, a certificate of the Seller, signed by the Seller, stating that each of the representations and warranties made by the Seller herein are true and correct in all material respects as of the Closing except for changes contemplated, permitted, or required by this Agreement and that the Seller has performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by him prior to the Closing. 4.2 Legal Opinion. Each and every obligation of the Purchaser under this Agreement is subject to the delivery, at or before the Closing, of an opinion of Luce, Forward, Hamilton & Scripps LLP, in form and content reasonably acceptable to the Purchaser and its legal counsel, to the effect that (i) this Agreement has been duly executed and delivered by Seller; (ii) this Agreement and each other agreement contemplated hereby, when executed and delivered by the parties thereto, will constitute the legal, valid, and binding obligation of the Seller, enforceable against the Seller in accordance with its terms except as the enforceability thereof may be limited by the application of bankruptcy, insolvency, moratorium, or similar laws affecting the rights of creditors generally or judicial limits on the right of specific performance; and (iii) except as set forth in Schedule 4.2, the execution and delivery by the Seller of this Agreement and all other agreements contemplated hereby to which the Seller is a party, the offering and sale of the Shares hereunder and the fulfillment of and compliance with the respective terms hereof and thereof by the Seller, do not and will not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a default under, (c) result in the creation of any lien, security interest, charge, or encumbrance upon the capital stock or assets of the Seller, (d) give any third party the right to accelerate any obligation under, (e) result in a violation of, or (f) require any authorization, consent, approval, exemption, or other action by or notice to any court or administrative or governmental body, or any law, statute, rule, or regulation to which the Seller is subject, or any agreement, instrument, order, judgment, or decree to which the Seller is subject; (iv) to such counsel's knowledge, Seller owns the Shares. 5. Conditions Precedent to the Obligations of Seller. Each and every obligation of the Seller under this Agreement is subject to the satisfaction, at the Closing, of each of the representations and warranties made by the Purchaser herein and such representations will be true and correct in all material respects as of the Closing with the same effect as though made at that time except for changes contemplated, permitted, or required by this Agreement; the Purchaser will have performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it prior to the Closing; and the Sellers will have received, at the Closing, a certificate of the Purchaser, signed by the President and the Secretary or the Chief Financial Officer of the Purchaser, stating that each of the representations and warranties made by the Purchaser herein is true and correct in all material respects as of the 7 8 Closing except for changes contemplated, permitted, or required by this Agreement and that the Purchaser has performed and complied with all agreements, covenants, and conditions required by this Agreement to be performed and complied with by it prior to the Closing. 6. Closing. 6.1 Time, Place, and Manner of Closing. Unless this Agreement has been terminated and this transaction has been abandoned pursuant to the provisions of Section 7, the closing ("Closing") will be held at the offices of Stein Perlman & Hawk, or such other place as the parties may agree, on the date that Seller shall exercise its right to purchase the Shares as hereinabove set forth, the date that Purchaser instructs Seller to exercise the purchase of all or some of the Derivative Shares as hereinabove set forth or as soon as practicable after the satisfaction of the various conditions precedent to the Closing set forth herein. At the Closing the parties to this Agreement will exchange certificates and other instruments and documents in order to determine whether the terms and conditions of this Agreement have been satisfied. Upon the determination of each party that its conditions to consummate this purchase have been satisfied or waived, the Brokerage shall deliver to the parties hereto notice of the purchase and sale of the Derivative Shares sold and confirm the deposits into the Purchaser's Account and the Seller's Account. After the Closing, the Seller, at the Purchaser's cost, will execute, deliver, and acknowledge all such further instruments of transfer and conveyance and will perform all such other acts as the Purchaser may reasonably request to effectively transfer and release the Purchaser's Interest. 6.2 Consummation of Closing. All acts, deliveries, and confirmations comprising the Closing regardless of chronological sequence shall be deemed to occur contemporaneously and simultaneously upon the occurrence of the last act, delivery, or confirmation of the Closing and none of such acts, deliveries, or confirmations shall be effective unless and until the last of the same shall have occurred. The time of the Closing has been scheduled to correspond with the close of business at the office of Stein Perlman & Hawk and, regardless of when the last act, delivery, or confirmation of the Closing shall take place, the purchase and sale of the Derivative Shares shall be deemed to occur as of the close of business at the office of Stein Perlman & Hawk on the date of the Closing. 7. Termination. 7.1 Termination Without Cause. Anything herein or elsewhere to the contrary notwithstanding, this Agreement may be terminated and abandoned at any time without further obligation or liability on the part of any party in favor of any other by mutual consent of the Purchaser and the Seller. 7.2 Termination Date. This Agreement shall automatically terminate on as set forth in paragraph 1.4 above. 8 9 8. Miscellaneous Provisions. 8.1 Amendment and Modification. Subject to applicable law, this Agreement may be amended, modified, or supplemented only by a written agreement signed by the Purchaser and the Seller. 8.2 Waiver of Compliance; Consents 8.2.1 Any failure of any party to comply with any obligation, covenant, agreement, or condition herein may be waived by the party entitled to the performance of such obligation, covenant, or agreement or who has the benefit of such condition, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement, or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 8.2.2 Whenever this Agreement requires or permits consent by or on behalf of any party hereto, such consent will be given in a manner consistent with the requirements for a waiver of compliance as set forth above. 8.3 Payment of Fees and Expenses. Each party to this Agreement will be responsible for, and will pay, all of its own fees and expenses, including those for its own counsel and accountants, incurred in the negotiation, preparation, and consumption of this Agreement and this purchase and sale. 8.4 Costs. Each party hereto shall bear, pay and discharge all of his/its respective expenses incurred in connection with the execution and performance of this Agreement, except as otherwise provided specifically herein. 8.5 Entire Agreement; Successors and Assigns; and Amendment; Third Parties. This Agreement and the exhibits appended hereto constitute the entire agreement between the parties concerning the subject matter hereof and no party shall be liable or bound to the other in any manner by any warranties, representations or covenants except as specifically set forth herein. Any previous or concurrent agreement among the parties with respect to the subject matter hereof is superseded by this Agreement and the exhibits appended hereto. The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective executors, administrators, heirs, successors and assigns of the parties. Except as expressly provided herein, nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto, any rights, remedies, obligations or liabilities under or by reason of this Agreement. 8.6 Governing Law and Consent to Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of California. The parties irrevocably (i) submit to the exclusive jurisdiction of the state courts of the State of California over any action or proceeding arising out of a breach of this Agreement, (ii) agree that all claims in respect of such action or proceeding may be heard and determined in such courts, (iii) waive, to 9 10 the fullest extent they may effectively do so, the defense of an inconvenient or inappropriate forum to the maintenance of such action or proceeding, and (iv) waive any defense based on lack of personal jurisdiction for any such purpose. 8.7 Legal Action and Fees. In the event of any controversy, claim or dispute between the parties hereto arising out of or relating to this Agreement, the prevailing party shall be entitled to recovery from the non-prevailing party its reasonable expenses, including but not limited to its reasonable attorneys' fees. 8.8 Headings. The headings of the sections of this Agreement are for convenience only and shall not determine the interpretation of this Agreement. 8.9 Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery, 24 hours after transmission by telecopy, telex, or five (5) days after deposit in the United States mail by registered or certified mail, addressed as set forth below or at such other address as such party may designate by ten (10) days' advance written notice to the other party: If to Seller: David Katz, M.D. 1775 La Jolla Rancho Road La Jolla, California 92037 If to Purchaser: HealthMed, Inc. 8306 Wilshire Boulevard, Suite 7056 Beverly Hills, California 90211 Attention: President 8.10 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8.11 Other Documents. Seller shall, at any time after the Closing and upon the request of the Purchaser or the Corporation, execute and deliver to the Purchaser or the Corporation, as the case may be, such documents or instruments of conveyance, license or assignment or take such other action as is reasonably necessary to complete the transfer of the Shares or other transactions contemplated by this Agreement or to perfect the interest of the Purchaser therein. Further, the parties agree to take all actions and file such documents required to comply with California securities laws. 8.12 Legal Advice. The parties hereby acknowledge that they have received independent legal advice from attorneys of their choice with respect to the advisability of executing this Agreement and the related documents affecting this transaction. Prior to the execution of this Agreement, each of the parties' attorneys reviewed this Agreement and 10 11 discussed the Agreement with such party, and each party made all desired changes. Each of the parties and their attorneys have made such investigation of the facts pertaining to this Agreement and all of the matters appertaining thereto as they deemed necessary. Each of the parties certifies that it has read this Agreement, and fully understands this Agreement and that it has executed it voluntarily, free of any duress, force or undue influence of any party or any person. 8.13 Injunctive Relief. The parties hereby acknowledge and agree that any default under Section 1 above will cause damage to the Purchaser in an amount difficult to ascertain. Accordingly, in addition to any other relief to which the Purchaser may be entitled, the Purchaser shall be entitled to such injunctive relief as may be ordered by any court of competent jurisdiction including, but not limited to, an injunction restraining any violation of Section 1 above and without the proof of actual damages. IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first set forth above. SELLER: --------------------------------- DAVID KATZ, M.D. PURCHASER: HEALTHMED, INC. By: --------------------------------- Mitchell J. Stein Its: President & Secretary AGREED TO AND ACKNOWLEDGED BY PARAGRAPHS 1.5 AND 1.6 ONLY: STUART COLEMAN & CO., INC. By: ------------------------------- Print Name: -------------------- Its: Authorized Officer 11 12 CONSENT OF SPOUSE, COHABITANT OR DOMESTIC PARTNER The undersigned spouse, cohabitant or domestic partner of the Shareholder acknowledges on her behalf that: I have read the foregoing Agreement and I know its contents. I am aware that by its provisions that my spouse, cohabitant or domestic partner grants Purchaser an interest in his Shares in the Company, including my community interest in them. I hereby consent to and approve of the provisions of the Agreement, and agree that those Shares and my interest in them are subject to the provisions of the Agreement and that I will take no action at any time to hinder operation of the Agreement on those Shares or my interest in them. Signature: ----------------------------------- Print Name: ---------------------------------- 12 13 EXHIBIT A 13 14 EXHIBIT B 14 EX-6 7 EXHIBIT 6 1 EXHIBIT 6 PROMISSORY NOTE Los Angeles, California $1,528,234.98 January 12, 1998 FOR VALUE RECEIVED, the undersigned, HealthMed, Inc., a Nevada corporation ("Maker"), hereby promises to pay to David Katz, M.D., an individual ("Holder"), or his order, at La Jolla, California, the principal sum of One Million Five Hundred Twenty Eight Thousand Two Hundred Thirty Four and 98/100 Dollars ($1,528,234.98) on January 12, 2000 ("Maturity Date"), and to pay interest on the unpaid balance of said principal from the date hereof until payment in full at the rate of ten percent (10%) per annum computed on the basis of a year of 360 days for the actual number of days elapsed. Accrued interest due hereunder shall be payable annually, in arrears, on the 12th day of January in each year and at maturity until all unpaid principal and accrued and unpaid interest due hereunder is paid in full. Maker agrees that if for any reason it fails to make any of the monthly payments required herein, including the amount due at the Maturity Date, within ten (10) days after the due date, Holder shall be entitled to damages for the detriment caused thereby, the extent of which damages are extremely difficult and impractical to ascertain. Maker therefor agrees that a sum equal to five percent (5%) of such delinquent payment is a reasonable estimate of such damages and Maker agrees to pay such sum upon demand by Holder. Maker's tender of such late charge, without Holder's acceptance thereof, shall in no event constitute a waiver of Maker's default with respect to such overdue amount nor prevent the Holder from exercising any of the other rights and remedies granted hereunder. Principal and interest shall be paid in lawful currency of the United States of America. Maker reserves the right to prepay this Note, in whole or in part, at any time or from time to time without penalty or premium, or upon the acceleration of this Note as permitted hereunder. Any prepayments shall be credited first to the payment of costs and charges of collection, if any, then to accrued but unpaid interest hereon and the remainder to principal. This Note is issued and delivered pursuant to a Stock Purchase Agreement entered into by and between David Katz, M.D. and the undersigned (the "Agreement") of even date herewith, and the Holder of this Note is entitled to all benefits provided therein. The Agreement contains provisions for the acceleration of the Maturity Date hereof for a portion of this Note upon the happening of certain stated events. Upon the occurrence of any event of default specified in the Agreement, the entire unpaid balance shall at once become due and payable at the option of the holder of this Note. Should a default be made in any installment of interest when due hereunder, which default shall continue for a period of fifteen (15) days after written notice by the holder of this Note of 2 such default to Maker, the whole sum of principal and interest due hereunder shall, at the option of the holder of this Note, become immediately due and payable. Maker waives diligence, presentment, protest, demand and notice of protest, demand and of dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended by the holder from time to time without in any way affecting the liability of Maker. Maker agrees to reimburse the holder of this Note for all costs of collection or enforcement of this Note, including, but not limited to, reasonable attorneys' fees, incurred by such holder. Maker shall also reimburse Holder for all attorneys' fees and costs reasonably incurred in the representation of Holder in any bankruptcy, insolvency, reorganization or other debtor-relief proceeding of or relating to Maker or any collateral for the obligations hereunder. The terms of this Note shall inure to the benefit of and bind the parties hereto and their successors and assigns. Maker represents and warrants to Holder that the obligations hereunder arise out of or in connection with business purposes and do not relate to any personal, family or household purpose. As used herein the term "Maker" shall include the undersigned Maker and any other person or entity who may subsequently become liable for the payment hereof. The term "Holder" shall include the named Holder as well as any other person or entity to whom this Note or any interest in this Note is conveyed, transferred or assigned. Each person signing this Note on behalf of Maker represents and warrants that he has full authority to do so and that this Note binds the corporation. This Note shall be governed by and construed in accordance with the laws of the State of California. HEALTHMED, INC. By:_________________________________ Mitchell J. Stein Its: President & Secretary 2 EX-7 8 EXHIBIT 7 1 EXHIBIT 7 PROMISSORY NOTE Los Angeles, California $263,004.00 January 12, 1998 FOR VALUE RECEIVED, the undersigned, HealthMed, Inc., a Nevada corporation ("Maker"), hereby promises to pay to Medical Biology Institute, a California nonprofit public benefit corporation ("Holder"), or its order, at La Jolla, California, the principal sum of Two Hundred Sixty Three Thousand Four and No/100 Dollars ($263,004.00) on January 12, 2000 ("Maturity Date"), and to pay interest on the unpaid balance of said principal from the date hereof until payment in full at the rate of ten percent (10%) per annum computed on the basis of a year of 360 days for the actual number of days elapsed. Accrued interest due hereunder shall be payable annually, in arrears, on the 12th day of January in each year and at maturity until all unpaid principal and accrued and unpaid interest due hereunder is paid in full. Maker agrees that if for any reason it fails to make any of the monthly payments required herein, including the amount due at the Maturity Date, within ten (10) days after the due date, Holder shall be entitled to damages for the detriment caused thereby, the extent of which damages are extremely difficult and impractical to ascertain. Maker therefor agrees that a sum equal to five percent (5%) of such delinquent payment is a reasonable estimate of such damages and Maker agrees to pay such sum upon demand by Holder. Maker's tender of such late charge, without Holder's acceptance thereof, shall in no event constitute a waiver of Maker's default with respect to such overdue amount nor prevent the Holder from exercising any of the other rights and remedies granted hereunder. Principal and interest shall be paid in lawful currency of the United States of America. Maker reserves the right to prepay this Note, in whole or in part, at any time or from time to time without penalty or premium, or upon the acceleration of this Note as permitted hereunder. Any prepayments shall be credited first to the payment of costs and charges of collection, if any, then to accrued but unpaid interest hereon and the remainder to principal. This Note is issued and delivered pursuant to a Stock Purchase Agreement entered into by and between Medical Biology Institute and the undersigned (the "Agreement") of even date herewith, and the Holder of this Note is entitled to all benefits provided therein. The Agreement contains provisions for the acceleration of the Maturity Date hereof for a portion of this Note upon the happening of certain stated events. Upon the occurrence of any event of default specified in the Agreement, the entire unpaid balance shall at once become due and payable at the option of the holder of this Note. Should a default be made in any installment of interest when due hereunder, which default shall continue for a period of fifteen (15) days after written notice by the holder of this Note of 2 such default to Maker, the whole sum of principal and interest due hereunder shall, at the option of the holder of this Note, become immediately due and payable. Maker waives diligence, presentment, protest, demand and notice of protest, demand and of dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended by the holder from time to time without in any way affecting the liability of Maker. Maker agrees to reimburse the holder of this Note for all costs of collection or enforcement of this Note, including, but not limited to, reasonable attorneys' fees, incurred by such holder. Maker shall also reimburse Holder for all attorneys' fees and costs reasonably incurred in the representation of Holder in any bankruptcy, insolvency, reorganization or other debtor-relief proceeding of or relating to Maker or any collateral for the obligations hereunder. The terms of this Note shall inure to the benefit of and bind the parties hereto and their successors and assigns. Maker represents and warrants to Holder that the obligations hereunder arise out of or in connection with business purposes and do not relate to any personal, family or household purpose. As used herein the term "Maker" shall include the undersigned Maker and any other person or entity who may subsequently become liable for the payment hereof. The term "Holder" shall include the named Holder as well as any other person or entity to whom this Note or any interest in this Note is conveyed, transferred or assigned. Each person signing this Note on behalf of Maker represents and warrants that he has full authority to do so and that this Note binds the corporation. This Note shall be governed by and construed in accordance with the laws of the State of California. HEALTHMED, INC. By:_________________________________ Mitchell J. Stein Its: President & Secretary 2 EX-8 9 EXHIBIT 8 1 EXHIBIT 8 HEALTHMED INCORPORATED NATIONAL HEALTHCARE ALLIANCE INSIDE LINE: MITCHELL J. STEIN, (310) 246-9542 PRESIDENT INSIDE FACS: January 12, 1998 (310) 652-0405 VIA FACSIMILE David Katz, M.D. Chief Executive Officer LIDAK PHARMACEUTICALS 11077 North Torrey Pines Road La Jolla, California 92037 Dear David: As our representatives have told you, we are excited about the opportunity to assist Lidak Pharmaceuticals ("Lidak") in completing the development of its extraordinary pharmaceutical technologies, and then in swiftly and efficiently bringing them to market. As I stated to the Board of Directors on Saturday, apart from the obvious profit motive that anybody would have regarding Lidak's technologies, we are mindful of the "moral imperative" that accompanies the hopes associated with many of the technologies. The public deserves to have these technologies developed and distributed as rapidly as is practical. HEALTHMED AND NATIONAL CENTURY HealthMed, Inc. ("HealthMed") is affiliated with several large health care companies, including National Century Financial Enterprises, Inc. ("NCFE"). NCFE is one of the largest health care financiers in the country, with assets well in excess of $1,000,000,000.00 ($1 billion). HealthMed and NCFE (hereinafter sometimes "affiliates") are capable of providing a broad array of financing, from loans to credit lines to accounts receivable facilities. We are capable of arranging financing with virtually unlimited levels of creativity in order to accommodate the business objectives of the client. The overriding purpose is to provide a "life line" to companies such as Lidak which require a strategic partner to secure sufficient working capital to assure operational and strategic integrity. The financing packages placed by the affiliates are designed to underwrite advances based upon projected growth and income levels. LIDAK'S FUTURE COURSE We have decided to become involved with Lidak, if appropriate, to secure for Lidak operational integrity from the standpoint of enabling the Lidak operations to closely track the Lidak business plan. As we understand it, that business plan has as its core the billion-dollar-plus herpes pharmaceutical - -------------------------------------------------------------------------------- BEVERLY HILLS ADDRESS: LOS ANGELES ADDRESS: 8306 WILSHIRE BOULEVARD 600 WILSHIRE BOULEVARD SUITE 7056 SEVENTH FLOOR BEVERLY HILLS, CALIFORNIA 90212 LOS ANGELES, CALIFORNIA 90017 2 HEALTHMED INCORPORATED NATIONAL HEALTHCARE ALLIANCE - -------------------------------------------------------------------------------- David Katz, M.D. January 12, 1998 Page 2 market which Lidak intends to profoundly penetrate. With these kinds of revenue projections, and considering the prospective success of Lidakol, it appears to us imperative that Lidak consummate plans to saturate the market immediately upon NDA approval. Indeed, this is the best way to assure methodical development of Lidak's other revolutionary technologies. And there is obviously a salutary purpose from the standpoint of those persons afflicted with the diseases that would be treated by these technologies. THE PROPOSAL Our proposal to Lidak is to advance money to the Company in three stages, as follows: Stage 1: $13 million to $30 million (within three to four weeks of plan approval): This money will be earmarked to provide Lidak with resources to facilitate and revitalize research and development on ongoing and various other Lidak technologies which may have been temporarily scaled back to conserve precious and limited available capital. These include, but are not limited to, additional promising indications for therapeutic applications of Lidakol (both topical and systemic, such as in AIDS, etc.), further exploration of cancer vaccine therapies using LMI and dendritic cell techniques, deeper investigation of the stem cell technology potential for bone marrow transplants and rapidly ramping up chemistry requirements to bring the allergy and asthma program to the clinical trial stage as soon as possible. Concurrent with the R&D emphasis described above, we expect that Stage 1 monies will also be used to provide the necessary funds to properly assess, strategize and otherwise prepare Lidak and its staff (and potential partners) for manufacturing, marketing and distributing Lidakol in the North American markets (and throughout the world). For example, certain long lead-time issues critical for eventual marketing support (publications and other educational items) will be one focus during the next 2-3 months. Also, during this initial time-frame, we intend to work with the Lidak staff to ascertain the optimal course for marketing Lidakol in the U.S. (including partnerships with outside parties, co-marketing strategies, etc.). Stage 2: Up to $30 million (during four to seven months following Stage 1 advance): This money (amount to be determined based on assessments made during Stage 1) will be earmarked for operational use during the first phase of distribution of Lidakol once FDA approval has been granted. The bulk of this money will most likely be used in the initial marketing phase to effectively and rapidly make the general public aware of Lidakol's existence, indications and therapeutic effectiveness. Stage 3: $50 million to $70 million (during nine to eighteen months following Stage 1 advance): This money will be earmarked to support (a) continued development of existing technologies (or newly discovered or acquired ones) and (b) further advancement and indeed perfection of Lidak's business plans as crafted and matured during ongoing strategic planning taking shape during Stages 1 and 2 time-frames. 3 HEALTHMED INCORPORATED NATIONAL HEALTHCARE ALLIANCE - -------------------------------------------------------------------------------- David Katz, M.D. January 12, 1998 Page 3 CONDITIONS PRECEDENT TO IMPLEMENTATION OF THE PROPOSAL The above proposals are subject to certain conditions precedent, as follows: Stage 1 Conditions Precedent: (a) confirming the balance of due diligence items set out in prior correspondence, (b) receiving sufficient entry of shareholders into voting trust arrangements with HealthMed. (c) accomplishing the necessary reconfiguration of the Lidak Board of Directors and (d) receiving from Lidak and then confirming a realistic pro forma of the revenue stream associated with the initial roll out of Lidakol. Stage 2 Conditions Precedent: In addition to the Stage 1 prerequisites, the second stage is dependent and conditioned upon receiving an approval letter for the NDA and conducting due diligence regarding strategic alliances with the network of hospitals and other providers associated with the affiliates. Stage 3 Conditions Precedent:. The third stage would, in addition, be dependent and conditioned upon technological due diligence regarding the efficacy of the technologies other than Lidakol and projections regarding the completion of development and distribution thereof. GENERAL REPAYMENT STANDARDS Obviously, it is the intention of the affiliates to implement the above programs on a non-dilutive basis so that Lidak would be responsible for returning the financing (along with competitive interest and program costs) out of its future revenue stream. The object of the financing would be to assure that such a repayment would only occur in a manner which is sensitive and productive to Lidak's future well-being. We would, sincerely, be honored to begin working with you and Lidak on these important projects. Very truly yours, HEALTHMED, INC. By: MITCHELL J. STEIN President MJS/mlh -----END PRIVACY-ENHANCED MESSAGE-----