-----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, J/W5C3FzedLYI+gjlq75U9ZX8m4d1O0xhxZYW3GvC0v4d1HDZDgSgXblZfkG0zpo 3xADF8etm5liXy/87mITmw== 0000950168-99-001565.txt : 19990518 0000950168-99-001565.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950168-99-001565 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRIMERIS INC CENTRAL INDEX KEY: 0000911326 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 561808663 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23155 FILM NUMBER: 99626165 BUSINESS ADDRESS: STREET 1: 4727 UNIVERSITY DR STE 100 CITY: DURHAM STATE: NC ZIP: 27707 BUSINESS PHONE: 9194196050 MAIL ADDRESS: STREET 1: 4727 UNIVERSITY DRIVE STE 100 CITY: DURHAM STATE: NC ZIP: 27707 10-Q 1 TRIMERIS, INC. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______ -------------------------------------------------------------------- Commission File Number 0-23155 TRIMERIS, INC. (Exact name of registrant as specified in its charter) Delaware 56-1808663 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4727 University Drive Durham, North Carolina 27707 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (919) 419-6050 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [ x ] Yes [ ] No The number of shares outstanding of the registrant's common stock as of May 10, 1999 was 10,683,355. TRIMERIS, INC. (A Development Stage Company) FORM 10-Q For the Three Months Ended March 31, 1999
INDEX PART 1. FINANCIAL INFORMATION Page - ------------------------------------ ---- Item 1. Financial Statements -------------------- Balance Sheets as of March 31, 1999 (unaudited) and December 31, 1998 1 Statements of Operations (unaudited) for the Three Months Ended March 31, 1999 and 1998 and Period From Inception (January 7, 1993) Through March 31, 1999 2 Statements of Cash Flows (unaudited) for the Nine Months Ended March 31, 1999 and 1998 and Period From Inception (January 7, 1993) Through March 31, 1999 3 Notes to Financial Statements (unaudited) 4 Item 2. Management's Discussion and Analysis of Financial Condition ----------------------------------------------------------- and Results of Operations 6 ------------------------- Item 3. Quantitative and Qualitative Disclosures About Market Risk ----------------------------------------------------------- PART 2. OTHER INFORMATION - -------------------------------- Item 1. Legal Proceedings 11 ----------------- Item 2. Changes in Securities and Use of Proceeds 11 ----------------------------------------- Item 3. Defaults Upon Senior Securities 11 ------------------------------- Item 4. Submission of Matters to a Vote of Security Holders 11 --------------------------------------------------- Item 5. Other Information 11 ----------------- Item 6. Exhibits and Reports on Form 8-K 11 -------------------------------- Signature Page 12 - -------------- Exhibit Index 13 - -------------
PART 1. FINANCIAL INFORMATION Item 1. Financial Statements TRIMERIS, INC. (A Development Stage Company) BALANCE SHEETS (in thousands, except par value)
December 31, March 31, 1998 1999 ---- ---- (unaudited) ASSETS Current assets: Cash and cash equivalents $ 16,920 $ 9,831 Short-term investment 3,256 4,151 Accounts receivable 68 46 Prepaid expenses 321 333 ----------- ---------- Total current assets 20,565 14,361 Property, furniture and equipment, net 1,598 1,721 ----------- ---------- Other assets: Exclusive license agreement, net 27 27 Patent costs, net 534 541 Equipment deposits 147 147 Other, net 1 1 ----------- ---------- Total other assets 709 716 ----------- ---------- Total assets $ 22,872 $ 16,798 =========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,176 $ 387 Current installments of capital lease obligations 471 452 Accrued compensation 829 1,156 Accrued expenses 1,527 1,173 ------------- ---------- Total current liabilities 4,003 3,168 Capital lease obligations, less current installments 853 745 ----------- ---------- Total liabilities 4,856 3,913 ----------- ---------- Commitments and contingencies Stockholders' equity: Series A, B, C, and D preferred stock at $.001 par value per share, 10,000 shares authorized, zero shares issued and outstanding at December 31, 1998 and March 31, 1999 (unaudited) -- -- Common Stock at $.001 par value per share, 30,000 shares authorized, 10,637 and 10,683 shares issued and outstanding at December 31, 1998 and March 31, 1999 (unaudited) 11 11 Additional paid-in capital 68,406 68,435 Deficit accumulated during the development stage (48,395) (53,762) Deferred compensation (1,788) (1,605) Notes receivable from stockholders (218) (194) ------------ ----------- Net stockholders' equity 18,016 12,885 ----------- ---------- Total liabilities and stockholders' equity $ 22,872 $ 16,798 ============ ========== See accompanying notes to financial statements.
1 TRIMERIS, INC. (A Development Stage Company) STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) Cumulative from Inception Three Months (January 7, 1993) Ended March 31, to March 31, 1998 1999 1999 ---- ---- ---- Revenue $ 90 $ 81 $ 1,034 --------- --------- ----------- Operating expenses: Research and development 2,583 3,964 42,715 General and administrative 1,040 1,673 13,701 --------- --------- ----------- Total operating expenses 3,623 5,637 56,416 --------- --------- ----------- Operating loss (3,533) (5,556) (55,382) ---------- ---------- ------------ Other income (expense): Interest income 584 231 2,692 Interest expense (18) (42) (1,072) ---------- ---------- ------------ Total other income (expense) 566 189 1,620 --------- --------- ----------- Net loss $ (2,967) $ (5,367) $ (53,762) ========== ========== ============ Basic net loss per share $ (0.28) $ (0.50) ========== =========== Weighted average shares used in per share computations 10,620 10,777 ========= ========= See accompanying notes to financial statements. 2 TRIMERIS, INC. (A Development Stage Company) STATEMENTS OF CASH FLOWS (in thousands) (unaudited)
Cumulative from Inception Three Months Ended (January 7, 1993) March 31, to March 31, 1998 1999 1999 ---- ---- ---- Cash flows from operating activities: Net loss $(2,967) $ (5,367) $(53,762) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 104 183 2,978 Amortization of deferred compensation 150 183 1,098 Other amortization 5 5 232 401(K) plan stock match - - 236 Provision for equipment held for resale - - 61 Stock issued for consulting services - - 5 Stock issued to repay interest on notes to stockholders - - 195 Debt issued for research and development - - 194 Loss on disposal of property and equipment - - 16 Increase (decrease) in assets: Accounts receivable and loans to employees (36) 22 (46) Prepaid expenses (15) (12) (333) Other assets (26) (5) (153) Decrease (increase) in liabilities: Accounts payable (288) (789) 387 Accrued compensation (158) 327 1,156 Accrued expenses (175) (354) 1,083 -------- --------- -------- Net cash used by operating activities (3,406) (5,807) (46,653) -------- --------- --------- Cash flows from investing activities: Purchases of property, furniture and equipment (218) (306) (1,153) Net sales (purchases) of short-term investments 759 (895) (4,151) Equipment held for resale - - (61) Organization costs - - (8) Patent costs (15) (7) (555) -------- --------- --------- Net cash provided (used) by investing activities 526 (1,208) (5,928) ------- --------- --------- Cash flows from financing activities: Proceeds from issuance of notes payable - - 6,150 Lease costs - - (13) Principal payments under capital lease obligations (95) (127) (2,365) Proceeds from issuance of Common Stock - - 31 Proceeds from issuance of Preferred Stock - - 23,896 Proceeds from initial public offering, net - - 34,532 Proceeds from exercise of stock options 1 29 48 Employee stock purchase plan stock issuance - - 255 Repayment of notes receivable from stockholders - 24 74 Stock issuance costs - - (196) ------- -------- --------- Net cash provided (used) by financing activities (94) (74) 62,412 -------- --------- -------- Net increase (decrease) in cash and cash equivalents (2,974) (7,089) 9,831 Cash and cash equivalents at beginning of period 32,557 16,920 - ------- -------- -------- Cash and cash equivalents at end of period $29,583 $ 9,831 $ 9,831 ======= ======== ========
See accompanying notes to financial statements. 3 TRIMERIS, INC. (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION Trimeris, Inc. (the "Company") was incorporated on January 7, 1993 to discover and develop novel therapeutic agents that block viral infection by inhibiting viral fusion with host cells. These financial statements have been prepared in accordance with Statement of Financial Accounting Standards No. 7, "Accounting and Reporting by Development Stage Enterprises," to recognize the fact that the Company is devoting substantially all of its efforts to establishing a new business and planned principal operations have not commenced. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles and applicable Securities and Exchange Commission regulations for interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the Securities and Exchange Commission rules and regulations. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of financial position and results of operations have been made. Operating results for interim periods are not necessarily indicative of results which may be expected for a full year. The information included in this Form 10-Q should be read in conjunction with the Risk Factors and Management's Discussion and Analysis of Financial Condition and Results of Operations sections and the 1998 financial statements and notes thereto included in the Company's 1998 Form 10-K filed with the Securities and Exchange Commission on March 31, 1999. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. BASIC NET LOSS PER SHARE For periods beginning with the year ended December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share" ("SFAS No. 128"). In accordance with this statement, primary net loss per common share is replaced with basic loss per common share which is calculated by dividing net loss by the weighted-average number of common shares outstanding for the period after certain adjustments described below. Fully diluted net income per common share is replaced with diluted net income per common share reflecting the maximum dilutive effect of common stock issuable upon exercise of stock options, stock warrants, and conversion of preferred stock. Diluted net loss per common share is not shown, as common equivalent shares from stock options, and stock warrants, would have an antidilutive effect. Prior period per share data has been restated to reflect the adoption of SFAS No. 128. In accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83 ("SAB 83"), all common shares and common equivalent shares issued during the twelve-month period prior to the initial filing of the registration statement relating to the Company's initial public offering, even when anti-dilutive, have been included in the calculation as if they were outstanding for all periods, using the treasury stock method. The basic net loss per common share gives retroactive effect to the conversion of all outstanding shares of Preferred Stock into 6,261,615 shares of Common Stock upon the completion of the Company's initial public offering in October 1997. 4 3. STATEMENTS OF CASH FLOWS Interest of approximately $37,000 and $42,000 was paid during the three months ended March 31, 1998 and 1999, respectively. 4. INITIAL PUBLIC OFFERING OF STOCK In October 1997, the Company closed its initial public offering of common stock at $12 per share. The net proceeds of the offering, including the proceeds received in connection with the exercise of the Underwriters' over-allotment option which closed in November 1997, were approximately $34.5 million after deducting applicable issuance costs and expenses. In connection with the public offering, all the outstanding preferred stock was converted into 6,261,615 shares of the Company's common stock. 5. STOCK SPLIT Effective July 11, 1997, the Company declared a one for eight and one-half reverse stock split for common stockholders. This stock split has been retroactively applied and all periods presented have been restated. 6. SUBSEQUENT EVENT The Company filed a registration statement on Form S-3 proposing to sell 2.5 million shares (2.875 million shares if the underwriters' over-allotment is exercised) of common stock on April 20, 1999. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This discussion of our financial condition and the results of operations should be read together with the financial statements and notes contained elsewhere in this Form 10-Q. Certain statements in this section and other sections are forward-looking. While we believe these statements are accurate, our business is dependent on many factors, some of which are discussed in the "Risk Factors" and "Business" sections of our 1998 Form 10-K which should be read in conjunction with this Form 10-Q. Many of these factors are beyond our control and any of these and other factors could cause actual results to differ materially from the forward-looking statements made in this 10-Q. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials. Please carefully read the "Risk Factors" section set forth below. We undertake no obligation to release publicly the results of any revisions to the statements contained in this Form 10-Q to reflect events or circumstances that occur subsequent to the date hereof. OVERVIEW We began our operations in January 1993 and are a development stage company. Accordingly, we have a limited operating history. Since our inception, substantially all of our resources have been dedicated to: o the development, patenting, preclinical testing and clinical trials of T-20, o the development of a manufacturing process for T-20, o production of drug material for future clinical trials, and o research and development and preclinical testing of other potential product candidates. We have lost money since inception and, as of March 31, 1999, had an accumulated deficit of approximately $53.8 million. We have received revenue only from federal small business innovative research grants, otherwise known as SBIR grants, and an investigative contract and have not generated any revenue from product sales or royalties. We may never generate any revenue from product sales or royalties. Development of current and future drug candidates will require significant additional, time-consuming and costly research and development, preclinical testing and extensive clinical trials prior to submission of any regulatory application for commercial use. We expect to incur substantial losses for the foreseeable future and expect losses to increase as our research and development, preclinical testing, drug production and clinical trial efforts expand. The amount and timing of our operating expenses will depend on many factors, including: o the status of our research and development activities, o product candidate discovery and development efforts, including preclinical testing and clinical trials, o the timing of regulatory actions, o the costs involved in preparing, filing, prosecuting, maintaining, protecting and enforcing patent claims and other proprietary rights, o our ability to establish, internally or through relationships with third parties, manufacturing, sales, marketing and distribution capabilities, o technological and other changes in the competitive landscape, o changes in our existing research and development relationships and strategic alliances, 6 o evaluation of the commercial viability of potential product candidates, and o other factors, many of which are outside of our control. As a result, we believe that period-to-period comparisons of our financial results in the future are not necessarily meaningful. The past results of operations and results of previous clinical trials should not be relied on as an indication of future performance. If we fail to meet the clinical and financial expectations of securities analysts and investors, it could have a material adverse effect on the market price of our common stock. Our ability to achieve profitability will depend, in part, on our own or our collaborative partners' ability to successfully develop and obtain regulatory approval for T-20 and other product candidates, and our ability to develop the capacity, either internally or through relationships with third parties, to manufacture, sell, market and distribute approved products, if any. We may never generate significant revenues or achieve profitable operations. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1999 REVENUE. Total revenue was $90,000 and $81,000 for the three months ended March 31, 1998 and 1999, respectively and was entirely derived from SBIR grants. RESEARCH AND DEVELOPMENT EXPENSES. Total research and development expenses were $2.6 million and $4.0 million for the three months ended March 31, 1998 and 1999, respectively. Expenses increased during the three months ended March 31, 1999 because we: o completed one Phase II clinical trial and initiated another Phase II clinical trial for T-20, o completed preclinical studies and filed an NDA for T-1249, and o continued manufacturing process development and purchase of drug material from third party manufacturers to supply future clinical trials. Total research personnel were 38 and 41 at March 31, 1998 and 1999, respectively. We expect research and development expenses to increase substantially in the future due to: o continued preclinical research and testing of product candidates, o expanded clinical trials for T-20, T-1249 and other product candidates, o the manufacture of drug material for these trials, and o increased number of personnel to support these activities. 7 GENERAL AND ADMINISTRATIVE EXPENSES. Total general and administrative expenses were $1.0 million and $1.7 million for the three months ended March 31, 1998 and 1999, respectively. Expenses increased during the three months ended March 31, 1999 because we: o accrued severance costs for our former Chief Executive Officer, o initiated and completed market research on the sales potential of T-20, and o incurred professional fees in the patent application process. We expect administrative expenses to increase in the future to support the expansion of product development activities. OTHER INCOME (EXPENSE). Other income (expense) consists of interest income and expense. Total other income was $566,000 and $189,000 for the three months ended March 31, 1998 and 1999, respectively. The decrease was due to decreased interest income because of lower cash and investment balances during 1999. LIQUIDITY AND CAPITAL RESOURCES Since inception, we have financed our operations primarily through the private placement of equity securities, the issuance of notes to stockholders, equipment lease financing and an initial public offering in October 1997. Net cash used by operating activities was $3.4 million and $5.8 million for the three months ended March 31, 1998 and 1999, respectively. The cash used by operating activities was used primarily to fund research and development relating to T-20 and other product candidates. Cash used by financing activities was $94,000 and $74,000 for the three months ended March 31, 1998 and 1999, respectively. The cash used by financing activities was primarily payments under our capital lease obligations. As of March 31, 1999, we had $14.0 million in cash and cash equivalents and short-term-investments, compared to $20.2 million as of December 31, 1998. The decrease was primarily a result of the use of approximately $5.8 million by operations. We have experienced negative cash flows from operations since our inception and do not anticipate generating sufficient positive cash flows to fund our operations in the foreseeable future. We have expended, and expect to continue to expend in the future, substantial funds to pursue our product candidate and compound discovery and development efforts, including: o expenditures for clinical trials of T-20, T-1249 and other product candidates, o research and development and preclinical testing of other product candidates, o manufacture of drug material, and o the development of our proprietary technology platform. As of March 31, 1999, we had commitments of approximately $4 million to purchase product candidate materials and fund various clinical studies, and expect to expend approximately $1 million in capital expenditures during the remainder of 1999. These expenditures may be financed with capital or operating leases, debt or working capital. We have filed a registration statement on Form S-3 proposing to sell 2.5 million shares (2.875 million shares if the underwriters' over-allotment is exercised) of our common stock in an underwritten public stock offering. We expect that the proceeds from this proposed offering, together with the interest earned thereon, will be adequate to fund our capital requirements through 1999. We believe that substantial additional funds will be required after 1999. If we do not complete the offering, we expect that our existing capital resources together with the interest earned thereon will not be adequate to fund our capital requirements through 1999. 8 In the event we do not complete the proposed public offering, we will be required to delay, scale-back or eliminate certain preclinical testing, clinical trials and research and development programs. In addition, we will be required to obtain additional funds, which may be raised through equity or debt financings. If we raise funds by selling equity, our stockholders' interest may be diluted. Any debt financings may contain restrictive terms that limit our operating flexibility. Additionally or alternatively, we may have to attempt to obtain funds through arrangements with collaborative partners. These partners may require us to relinquish rights to our technologies or product candidates. This could have a material adverse effect on our business, financial condition or results of operations. YEAR 2000 COMPLIANCE STATE OF READINESS. We have adopted a Year 2000 compliance plan and formed a team to identify and resolve any Year 2000 issues that may affect our business. Our compliance plan has four phases: inventory, assessment, remediation and testing. We have completed an inventory of all of our computer systems, computer-related equipment and equipment with embedded processors. We are currently in the process of assessing those systems. We have completed this assessment with respect to most of our systems and expect to complete our assessment of the remaining systems by mid-1999. Although we cannot control whether and how third parties will address the Year 2000 issue, we also are in the process of contacting critical vendors and suppliers to assess their ability to ensure smooth delivery of products without disruptions caused by Year 2000 problems. In the course of our assessment, we have not yet identified any Year 2000 issues that would affect our ability to do business; however, our assessment is not complete, and there can be no assurance that there are no Year 2000 issues that may affect us. Once we complete the assessment phase, we will prioritize and implement necessary repairs or replacements to equipment and software to achieve Year 2000 compliance. We expect to complete this phase by mid-1999. The final phase will consist of a testing program for all repairs. We anticipate that all testing will be completed by October 1999. COSTS. We have not prepared estimates of costs to remediate Year 2000 problems; however, based on currently available information, including the results of our assessment to date and our replacement schedule for equipment, we do not believe that the costs associated with Year 2000 compliance will have a material adverse effect on our business, financial condition and results of operations. RISKS. Although we believe that our Year 2000 compliance plan is adequate to address Year 2000 concerns, we may experience negative consequences as a result of undetected defects or the non-compliance of third parties with whom we interact. Furthermore, there may be a delay in, or increased costs associated with, the implementation of corrections as the Year 2000 compliance plan is performed, such as unexpected costs of correcting equipment that has not yet been fully evaluated. If realized, these risks could result in a material adverse effect on our business, financial condition and results of operations. We believe that our greatest risk stems from the potential non-compliance of our suppliers. We depend on a limited number of suppliers for certain materials, components, services, including electrical service, and equipment necessary to operate our research effort and our clinical trials. Accordingly, if those suppliers are unable to process or fill our orders, provide us with services, or otherwise interact with us because of Year 2000 problems, we could experience material adverse effects to our business. We are in the process of assessing the Year 2000 status of our suppliers and are investigating alternative sources of supply. CONTINGENCIES. We have not yet developed a contingency plan to address what would happen in the event we are unable to address the Year 2000 issue. The contingency plan is expected to be completed after the inquiry of vendors and customers is completed. 9 FACTORS THAT MAY AFFECT FUTURE RESULTS AND FINANCIAL CONDITION CLINICAL DEVELOPMENT The following discussion highlights certain aspects of our on-going and planned clinical development programs. The results of our previous clinical trials are not necessarily indicative of the results of future clinical trials. T-20 PHASE II - T20-205 In March 1999, we initiated a roll-over Phase II trial to continue T-20 therapy for patients who participated in the earlier clinical trials of T-20. The primary purpose of this trial is to collect data relating to the safety of long-term administration of T-20. Patients in this trial will add T-20 to their individualized anti-HIV drug combinations and will remain on therapy for as long as they demonstrate acceptable safety and antiviral responses. Approximately two-thirds of the patient population eligible for enrollment has already enrolled in this study. We expect to have our initial long-term safety data from this trial in the third quarter of 1999. PHASE II - T20-204 (PEDIATRIC) In cooperation with the Division of AIDS of the National Institute of Allergy and Infectious Diseases, we are planning to commence a clinical trial in 1999 to assess the safety, pharmacokinetics and preliminary antiviral activity of T-20 in children. We expect to enroll 12 HIV-infected children. We expect to begin this pediatric trial in the second quarter of 1999 and complete it by early 2000. We will use the results from this trial to design larger scale pediatric trials that we expect to commence following culmination of the safety and pharmacokinetic trial. PHASE II - T20-206 Based on the results of TRI-003, a Phase II trial is planned for 1999 that should assess the long-term safety and efficacy of T-20 when used in combination with other anti-HIV drugs. The trial is designed to run for 48 weeks, with formal data collection at 16 and 48 weeks. It will be a multi-site, randomized, controlled comparison of three different doses of T-20 in combination with a background regimen of a nucleoside RT inhibitor, a protease inhibitor and a non-nucleoside RT inhibitor. We intend to collect data from up to 68 patients who complete treatment. We expect to commence the trial in the second quarter of 1999. PIVOTAL TRIAL Based on the results of these Phase II trials, we intend to begin a pivotal trial late in the fourth quarter of 1999 in a larger population of HIV-infected patients who are either resistant to, or intolerant of, currently-approved anti-HIV drugs. Historically, pivotal trials of this type involving anti-HIV drugs have included approximately 300 to 400 patients and have taken approximately 18 months to complete. T-1249 We are developing T-1249, our second drug candidate for HIV fusion inhibition. We have filed an IND for T-1249 with the FDA, and we expect to begin a Phase I clinical trial in the second quarter of 1999. In the trial, T-1249 will be administered once or twice daily, depending on the patient group, by subcutaneous injection in up to 60 HIV-infected adults for 14 days. 10 RISK FACTORS Our business is subject to certain risks and uncertainties. The following discussion highlights some of these risks. If any of the following risks materialize, our business, financial condition and results of operations could be materially adversely affected. WE ARE AN EARLY STAGE COMPANY WITH AN UNCERTAIN FUTURE. We formed our company and began operations in January 1993. Accordingly, we have only a limited operating history for you to evaluate our business. There are many business risks associated with a biopharmaceutical company in the early stage of development, such as ours. For example, we may not be able to obtain sufficient financial, personnel and other resources to continue to develop our product candidates. We also may not be successful in discovering or developing any product candidates that ultimately achieve regulatory approval or have commercial viability. We have not yet generated any revenues from product sales or royalties. We have never submitted a product candidate for approval by the FDA or any other regulatory authority for commercialization. We will have to invest significant additional time and funds in research and development and extensive clinical trials before we can submit our product candidates for regulatory approval. Our product candidates may never obtain regulatory approval, and therefore, may never be commercially available. WE HAVE NEVER MADE MONEY AND EXPECT OUR LOSSES TO CONTINUE. We have incurred losses since we began operating. As of March 31, 1999, our accumulated deficit was approximately $53.8 million. Since inception, we have spent our funds on our product development efforts, relating primarily to the development of T-20. We expect that we will incur substantial losses for the foreseeable future. We also expect our losses to significantly increase as we expand our research and development, preclinical testing and clinical trial efforts. We have not yet generated any revenues from product sales or royalties. We cannot assure you that we will ever be able to generate any such revenues or royalties or, if we generate any revenues or royalties, that we will ever be profitable. WE WILL NEED TO RAISE ADDITIONAL FUNDS IN THE NEAR FUTURE. Based on our current plan, we anticipate that our existing capital resources, together with the net proceeds of our proposed public offering and the interest earned, will be adequate to fund our capital requirements through 1999. We believe that substantial additional funds will be required after 1999. In the event this financing is not obtained, we will be required to delay, scale-back or eliminate certain preclinical testing, clinical trials and research and development programs. We may raise these additional funds through equity or debt financings. If we raise funds by selling equity, our stockholders' interest may be diluted. Any debt financings may contain restrictive terms that limit our operating flexibility. Additionally or alternatively, we may have to attempt to obtain funds through arrangements with collaborative partners. These partners may require us to relinquish rights to our technologies or product candidates. This could have a material adverse effect on our business, financial condition and results of operations. 11 OUR QUARTERLY OPERATING RESULTS ARE SUBJECT TO FLUCTUATIONS AND YOU SHOULD NOT RELY ON THEM AS AN INDICATION OF OUR FUTURE RESULTS. Our operating results are likely to fluctuate over time, due to a number of factors, many of which are outside of our control. Some of these factors include: o the status of our research and development activities, o the progress of our product candidates through preclinical testing and clinical trials, o the timing of regulatory actions, o our ability to establish manufacturing, sales, marketing and distribution capabilities, either internally or through relationships with third parties, o technological and other changes in the competitive landscape, o changes in our existing or future research and development relationships and strategic alliances, and o the commercial viability of our product candidates. As a result, we believe that comparing financial results for one period against another period is not necessarily meaningful, and you should not rely on our results of operations in prior periods as an indication of our future performance. Also, if our results of operations for a period deviate from the levels expected by securities analysts and investors, it could have a material adverse effect on the market price of our common stock. WE ARE HEAVILY DEPENDENT ON OUR LEAD PRODUCT CANDIDATE, T-20. T-20 is our lead product candidate and our only candidate that has been tested in humans. Our success will depend, to a great degree, on the success of T-20. In particular, we must be able to: o establish the safety and efficacy of T-20 in humans, o obtain regulatory approvals so that we can commercialize T-20, o establish relationships for the commercial-scale production of T-20 at an acceptable cost and with the appropriate quality, and o successfully market T-20 and achieve acceptance of T-20 by the medical community, including health care providers and third-party payors. We may rely on our collaborative partners in connection with many of these matters. We may not be able to control the amount or timing of resources that our partners may devote to these matters. If we or our collaborative partners fail to successfully develop and commercialize T-20, our business, financial condition and results of operations will be materially and adversely affected. WE FACE MANY UNCERTAINTIES RELATING TO OUR HUMAN CLINICAL TRIAL RESULTS AND CLINICAL TRIAL STRATEGY. In order to obtain the regulatory approvals that we need to sell commercially any of our product candidates, we must demonstrate that each product candidate is safe and effective for use in humans for each target indication. We attempt to demonstrate this through preclinical testing and clinical trials for each product candidate. This is a very complex and lengthy process. To date, we have conducted initial preclinical testing of some of our product candidates and a Phase I/II clinical trial of T-20 that enrolled 16 patients. We have also recently completed a Phase II clinical trial of T-20 involving 78 patients. 12 Because these clinical trials have been limited to a relatively small number of patients, we cannot assure you that the results of these early clinical trials will support further clinical trials of T-20. We may not be able to demonstrate that potential product candidates that appeared promising in preclinical testing and early clinical trials will be safe or effective in advanced clinical trials that involve larger numbers of patients. We also cannot assure you that the results of the clinical trials we have conducted and still intend to conduct will support our applications for regulatory approval. As a result, our product development programs may be curtailed, redirected or eliminated at any time. We may redesign, delay or cancel our preclinical testing and clinical trials, for some or all of the following reasons: o unanticipated, adverse or ambiguous results from our preclinical testing or clinical trials, o undesirable side effects which delay or extend the trials, o our inability to locate, recruit and qualify a sufficient number of patients for our trials, o difficulties in manufacturing sufficient quantities of the particular product candidate or any other components needed for our preclinical testing or clinical trials, o regulatory delays or other regulatory actions, o change in the focus of our development efforts, and o reevaluation of our clinical development strategy. Accordingly, our clinical trials may not commence or proceed as anticipated. This would have a material adverse effect on our business, financial condition and results of operations. HIV MAY DEVELOP RESISTANCE TO OUR DRUG CANDIDATES. HIV is prone to genetic mutations. These mutations have produced strains of HIV that are resistant to currently-approved therapeutics. The HIV virus may develop similar resistance to our viral fusion inhibitor therapeutics, including T-20 and T-1249. This could have a material adverse effect on our business, financial condition and results of operations. WE HAVE NO EXPERIENCE MANUFACTURING PHARMACEUTICAL PRODUCTS. The manufacture of pharmaceutical products requires significant expertise and capital investment. We have no experience in manufacturing pharmaceuticals, no commercial manufacturing capacity and only have limited experience in manufacturing process development. As a result, we have elected to work with third-party contract manufacturers to supply quantities of T-20 to be used in currently planned clinical trials. We expect to rely on third-party manufacturers throughout the clinical and initial commercialization phases of T-20 development. We may not be able to maintain relationships with these third-party manufacturers. Our dependence on third parties for the manufacture of products and product candidates could have a material adverse effect on our business, financial condition and results of operations. 13 WE FACE RISKS ASSOCIATED WITH MANUFACTURING T-20 AND T-1249. Peptide-based therapeutics are difficult and expensive to manufacture. We, and our third-party manufacturers, are currently using a novel method to manufacture T-20. This chemical methodology is inherently complex. We may not be able to manufacture T-20 or T-1249 on a cost-effective basis or develop an alternative, more efficient manufacturing method for T-20, T-1249 or any of our other peptide product candidates. In addition, commercial production of T-20 will require raw materials in amounts substantially greater than those being used in the current manufacturing campaigns. We may not be able to obtain these materials in sufficient quantities or on a cost-effective basis to support the commercial manufacture of T-20. If we are unable to manufacture T-20 or T-1249 on a cost-effective basis or are unable to obtain the necessary quantities of raw materials, our business, financial condition and results of operations will be materially and adversely affected. OUR BUSINESS IS BASED ON NOVEL TECHNOLOGY AND IS HIGHLY RISKY AND UNCERTAIN. Our product development programs are based on novel technology. Our technology platform is designed to discover product candidates which treat viral infection by inhibiting viral fusion, a process which prevents the virus from fusing to the cell, thereby preventing the virus from entering the cell and replicating. We are not aware of any other approved antiviral pharmaceutical products that target the inhibition of viral fusion. Accordingly, developing products that use this novel approach is highly risky and uncertain. Our products could: o experience unanticipated developments or clinical or regulatory delays, o produce unexpected adverse side effects, or o provide inadequate therapeutic effectiveness. Any of these could slow or suspend our product development efforts. If any of these unanticipated results occurs, it could have a material adverse effect on our business, financial condition and results of operations. We may not be able to use our novel technology platform to discover and successfully develop any commercially viable products. We may not be able to complete our research or product development efforts for any particular product candidate, or develop any product candidates that will prove to be safe and effective. We may not be able to obtain the required regulatory approvals for any products. Our development programs are subject to the risks inherent in the development of new products using new technologies and approaches. We may encounter unforeseen problems with these technologies or applications and technological challenges in our research and development programs that we may not be able to resolve. WE ARE DEPENDENT ON THIRD-PARTY CONTRACT RESEARCH ORGANIZATIONS. We have engaged, and intend to continue to engage, third-party contract research organizations to perform some functions for us related to the development of our product candidates. We typically design our clinical trials, but rely on these contract research organizations to actually conduct the clinical trials. The failure by the contract research organizations to perform our clinical trials satisfactorily or their breach of their obligations to us could delay or prevent the commercialization of our product candidates. This would have a material adverse effect on our business, financial condition and results of operations. 14 Because we rely on third-party contract research organizations, our preclinical testing or clinical trials may not begin or be completed on the dates we estimate for them. Any delays in our testing and trials could delay regulatory approval for or commercialization of our product candidates. These delays could: o increase our operating expenses, o cause us to need additional capital, o divert management's time and attention, and o create adverse market perception about us and our product candidates. WE HAVE NO SALES, MARKETING OR DISTRIBUTION CAPABILITIES. We have no experience in sales, marketing or distribution of pharmaceuticals and currently have no personnel employed in any of these capacities. We may develop these capabilities in certain areas in the future. We may rely on marketing partners or other arrangements with third parties which have established distribution systems and direct sales forces for the sales, marketing and distribution of products. In the event that we are unable to reach agreement with one or more marketing partners we may be required to develop internal sales, marketing and distribution capabilities. We may not be able to establish cost-effective sales, marketing or distribution capabilities or make arrangements with third parties to perform these activities on acceptable terms, if at all. This would have a material adverse effect on our business, financial condition and results of operations. If we establish sales, marketing or distribution arrangements with other parties, they may have significant control over important aspects of the commercialization of our products including: o market identification, o marketing methods, o pricing, o composition of sales force, and o promotional activities. We may not be able to control the amount or timing of resources that any third party may devote to our products. OUR STOCK PRICE IS HIGHLY VOLATILE. Our stock price has fluctuated substantially since our initial public offering, which was completed in October 1997. The market price of our common stock, like that of the securities of many other biotechnology and pharmaceutical companies, is likely to remain highly volatile. Furthermore, the stock market has from time to time experienced extreme price and volume fluctuations that may be unrelated to the operating performance of particular companies. In addition, in the past, class action lawsuits have often been instituted against biotechnology and pharmaceutical companies following periods of volatility in the market price of these companies' stock. If litigation were instituted against us on this basis, it could result in substantial costs and would divert management's attention and resources. This would have a material adverse effect on our business, financial condition and results of operations. 15 WE DEPEND ON COLLABORATIONS AND LICENSES WITH OTHERS. We have entered into license and other agreements and may enter into additional agreements with partners or collaborators to assist us in: o seeking regulatory approval for our product candidates, and o developing, manufacturing and commercializing some of our product candidates. Accordingly, our success will depend, in part, on our partners' success in: o performing preclinical testing and clinical trials, o obtaining the requisite regulatory approvals, o scaling up manufacturing, o successfully commercializing the product candidates we license to them, and o otherwise performing their obligations. We may not be able to maintain our existing collaborative arrangements or enter into arrangements in the future on terms that are acceptable to us. Moreover, our partners may not perform their obligations under our agreements with them and may choose to compete with us by seeking alternative means of developing therapeutics for the diseases we have targeted. In addition, we may not be able to: o obtain proprietary rights, or licenses under the proprietary rights which belong to others, for any technology or product candidates developed through these arrangements, or o protect the confidentiality or prevent the disclosure of any proprietary rights and information developed in our collaborative arrangements. We currently have an agreement with Duke University pursuant to which we have received an exclusive, worldwide, royalty-free license to certain discoveries and inventions, including patent rights, in the field of antiviral therapeutics that have been developed by certain researchers at Duke University. The license for the Duke inventions, including T-20, terminates upon the last-to-expire patent covering such inventions. Duke University may terminate the agreement if we fail to perform our obligations under the agreement, which include pursuing the development of the technologies licensed to us, or if we engage in fraud, willful misconduct or illegal conduct. If Duke University were to terminate the agreement, we would lose our license granted under that agreement. This would have a material and adverse effect on our business, financial condition and results of operations. The Duke agreement also provides that our license includes certain rights to discoveries and inventions developed before February 2000. We cannot assure you that we will be able to amend the Duke agreement to obtain discoveries and inventions made beyond February 2000. This could have a material and adverse effect on our business, financial condition and results of operations. The licenses that have already been granted to us under the agreement, including the license for T-20, will not be affected by our inability to amend the Duke agreement. In the future, we may find that we need additional licenses from these or other parties to effectively develop potential product candidates. We may not be able to maintain our existing license agreements or obtain additional licenses on acceptable terms. 16 THERE IS UNCERTAINTY RELATING TO THIRD-PARTY REIMBURSEMENT AND HEALTH CARE REFORM MEASURES WHICH COULD LIMIT THE AMOUNT WE WILL BE ABLE TO CHARGE FOR OUR PRODUCTS. In the United States and elsewhere, sales of prescription drugs are dependent, in part, on the consumer's ability to be reimbursed for the cost of the drugs by third-party payors, such as government agencies and private insurance plans. Third-party payors are increasingly challenging the prices charged for medical products and services in an effort to promote cost containment measures and alternative health care delivery systems. As a result, third-party payor reimbursements may not be available or may not be available at a level that will allow us or our potential collaborative partners to sell our products on a competitive basis. Economic, political and regulatory influences, including the efforts of governments and third-party payors to contain or reduce the cost of health care through various means, will continue to affect the business and financial condition of pharmaceutical companies. A number of legislative and regulatory proposals aimed at changing the health care system have been proposed in recent years. Because of the high cost of the treatment of HIV, many state legislatures are reassessing reimbursement policies for this therapy. In addition, an increasing emphasis in the United States to reduce the overall costs of health care through managed care has and will continue to increase the pressure on pharmaceutical pricing. We cannot predict whether legislative or regulatory proposals will be adopted or the effect that those proposals or managed care efforts may have. However, there is a risk that the announcement and/or adoption of these types of proposals or efforts could have a material adverse effect on our business, financial condition and results of operations. THERE IS UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS. Our success will depend, in part, on our ability and the ability of our licensors to obtain and to keep protection for our products and technologies under the patent laws of the United States and other countries, so that we can prevent others from using our inventions. Our success also will depend on our ability to prevent others from using our trade secrets. In addition, we must operate in a way that does not violate the patent, trade secret, or other intellectual property rights of other parties. The pharmaceutical and biotechnology industries place considerable importance on obtaining and maintaining patent and trade secret protection for new technologies, products and processes. We have obtained rights to certain patents and patent applications and may, in the future, seek rights from third parties to additional patents and patent applications. For further information regarding licenses we have obtained from third parties, see "Business -- Licensing and Collaborative Agreements." The standards used by the U.S. Patent and Trademark Office and the patent offices of other countries to grant patents may change. Consequently, we cannot be certain as to the type and extent of patent claims that may be issued to us in the future. The standards which courts use to interpret patents may change, particularly as new technologies develop. Consequently, we cannot be certain as to how much protection, if any, will be given to patents owned or licensed by us, if they are challenged in court. If we choose to go to court to stop someone else from using the inventions claimed in these patents, that individual or company has the right to ask the court to rule that the patents are invalid and should not be enforced against them. Such lawsuits are expensive and will consume time and other resources, even if we are successful in stopping the violation of the patents. In addition, there is a risk that the court will decide that some or all of the claims of these patents are not valid and that we do not have the right to stop the other party from using the inventions. There is also a risk that, even if the validity of the patents is upheld, the court will refuse to stop the other party on the grounds that its activities are not covered by the patent claims. 17 In addition, a third party may claim that we are using inventions covered by their patents and may go to court to stop us from engaging in our normal operations and activities, such as research and development and the manufacture and sale of products. Such lawsuits are expensive and will consume time and other resources. There is a risk that the court will decide that we are violating the third party's patent and will order us to pay the other party damages for having violated their patent. There is also a risk that the court will order us to stop the activities covered by the patent. In this case, we may attempt to obtain a license from the third party so that we may continue to use the invention. However, we cannot assure you that if this occurs we would be able to obtain the licenses we need or that we could negotiate the licenses on terms acceptable to us, or at all. Another risk we face in this area is that the laws of certain countries may not protect our proprietary rights to the same extent as United States law. We also rely in our business on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. Nonetheless, we cannot assure you that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. There is also the risk that our employees, consultants, advisors or others will not maintain the confidentiality of such trade secrets or proprietary information, or that this information may become known in some other way or be independently developed by our competitors. The occurrence of these risks could have a material adverse effect on our business, financial condition and results of operations. WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION; OUR PRODUCTS MAY NOT RECEIVE REGULATORY APPROVAL. Human pharmaceutical products must undergo lengthy and rigorous preclinical testing and clinical trials and other extensive, costly and time-consuming procedures mandated by the FDA and foreign regulatory authorities. To have a product candidate approved, we must establish that the product candidate is safe and effective for each target indication. The FDA must confirm that we and our clinical testing and manufacturing partners maintained good laboratory, clinical and manufacturing practices. The regulatory approval process typically takes a number of years, depending on the type, complexity and novelty of the pharmaceutical product. Because of the considerable time and expense required, this process gives larger companies with greater financial resources a competitive advantage over us. To date, none of our product candidates has been submitted for approval by the FDA or any other regulatory authority for commercialization. Our products may never be approved by the FDA or any other regulatory authority. T-20 has received fast track designation from the FDA for the treatment of HIV-infected individuals. Fast track designation is granted to products that may provide a significant improvement in the safety or effectiveness of the treatment for a serious or life-threatening disease, and this designation is intended to expedite the review of these drugs. However, fast track designation does not, in any way, mean that T-20 will be approved for commercialization by the FDA in the future. Our estimates of future regulatory submission dates may prove to be inaccurate. Our regulatory submissions can be delayed or we may cancel plans to submit proposed products for a number of reasons, including: o unanticipated preclinical testing or clinical trial reports, o changes in regulations, or the adoption of new regulations, o unanticipated enforcement of existing regulations, o unexpected technological developments, and o developments by our competitors. 18 Consequently, we cannot assure you that our anticipated submissions will be made on their target dates, or at all. Delays in these submissions would have a material adverse effect on our business, financial condition and results of operations. A number of federal, state and local laws regulate safe working conditions, laboratory and manufacturing practices, the experimental use of animals and the use and disposal of hazardous or potentially hazardous substances, including radioactive compounds and infectious disease agents. We must comply with these laws. We use some of these hazardous substances in our product development programs. It is expensive and time-consuming to comply with these laws. If we fail to comply, our business, financial condition and results of operations could be materially and adversely affected. WE FACE INTENSE COMPETITION. We are engaged in segments of the biopharmaceutical industry, including the treatment of HIV, that are intensely competitive and change rapidly. We expect that new developments in the areas in which we are conducting our research and development will continue at a rapid pace in both industry and academia. If we successfully develop our product candidates and gain approval for those products, they will compete with numerous existing therapies. For example, at least 16 drugs are currently approved for the treatment of HIV. We also believe that a significant number of drugs are currently under development and will become available in the future for the treatment of HIV. We expect to face intense and increasing competition in the future as these new products enter the market and advanced technologies become available. Even if we are able to successfully develop T-20 or T-1249 and either product candidate receives regulatory approval, we cannot assure you that existing or new products for the treatment of HIV developed by our competitors will not be more effective, less expensive or more effectively marketed and sold, than T-20, T-1249 or any other therapeutic for HIV that we may develop. Many of our competitors have significantly greater financial, technical, human and other resources than we do. Smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large pharmaceutical and biotechnology companies. Furthermore, academic institutions, governmental agencies and other public and private research organizations are becoming increasingly aware of the value of their inventions and are more actively seeking to commercialize the technology they have developed. Several factors will help determine whether we will be able to compete successfully in our market, including the following: o the safety and effectiveness of our products, o the speed with which we can gain regulatory approval for our products and the scope of those approvals, o our ability to manufacture, sell, market and distribute our products, or to find someone else to handle these functions for us in a timely and cost-efficient manner, o the availability of reimbursement coverage for our products, o our ability to offer our products at a competitive price, and o the strength of our patents and the speed with which we can obtain patents on our products and technologies. We may not be able to effectively compete with our competitors in some or all of these areas. This could have a material adverse effect on our business, financial condition and results of operations. 19 WE USE HAZARDOUS MATERIALS. We use hazardous materials, chemicals, viruses and various radioactive compounds in our product development programs. We believe that our handling and disposal of these materials comply with the standards prescribed by state and federal regulations, but we cannot completely eliminate the risk of accidental contamination or injury from these materials. If there were such an accident or injury, we could be held liable for any damages or penalized with fines. The amount of the liability and fines could exceed our resources. Additionally, if we develop internal manufacturing capability, we may incur substantial additional costs to comply with environmental regulations. WE ARE EXPOSED TO PRODUCT LIABILITY RISKS. Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of pharmaceutical products. We cannot assure you that product liability claims will not be asserted against us. In addition, the use in our clinical trials of pharmaceutical products that our potential collaborators may develop and the subsequent sale of these products by us or our potential collaborators may cause us to bear a portion of product liability risks. A successful product liability claim or series of claims brought against us could have a material adverse effect on our business, financial condition and results of operations. We do not currently have any product liability insurance relating to clinical trials or any products or compounds we have or may develop. We cannot assure you that we will be able to obtain or maintain adequate product liability insurance on acceptable terms, if at all, or that such insurance will provide adequate coverage against our potential liabilities. Furthermore, our collaborators or licensees may not be willing to indemnify us against these types of liabilities and may not themselves be sufficiently insured or have a net worth sufficient to satisfy any product liability claims. Claims or losses in excess of any product liability insurance coverage that may be obtained by us could have a material adverse effect on our business, financial condition and results of operations. WE DEPEND UPON CERTAIN KEY PERSONNEL AND FACE RISKS RELATING TO OUR ABILITY TO ATTRACT AND RETAIN KEY PERSONNEL. We depend on members of our senior management and scientific staff, including Dr. Dani P. Bolognesi, our Chief Executive Officer and Chief Scientific Officer. Dr. Bolognesi has limited experience acting as an executive officer at a company such as ours, and has held this position at Trimeris only since March 1999. The future recruitment and retention of management personnel and qualified scientific personnel is also critical to our success. We cannot be certain that we will attract and retain qualified personnel on acceptable terms given the competition among biotechnology, pharmaceutical and health care companies, universities and non-profit research institutions for experienced management personnel and scientists. In addition, we rely on scientific advisors and other consultants to assist us in formulating our research and development strategy. These consultants are employed by other parties and may have commitments to, or advisory or consulting agreements with, other entities, which may limit their availability to us. WE MAY BE ADVERSELY AFFECTED BY YEAR 2000 ISSUES. Beginning on January 1, 2000, some computer systems and software will produce erroneous results or fail unless they have been modified or upgraded to process date information correctly. We have adopted a Year 2000 compliance plan and formed a team to identify and resolve any Year 2000 issues that may affect our business. The plan includes identifying all critical applications, including those of vendors and suppliers, assessing their compliance with Year 2000 issues, and developing contingency plans for any non-compliant critical applications. 20 We expect to complete our review and assessment of all critical systems and applications by mid-1999. To date, we have not identified any critical applications or vendors that are Year 2000 non-compliant. Our most significant Year 2000 risk is that the systems of other parties on which we rely, specifically our key suppliers, will not be compliant on a timely basis. This could result in a disruption in our business or cause us to incur significant expenses to remedy any problems. In addition, we may encounter some unexpected costs or encounter delays during the completion of our Year 2000 plan. These costs or delays could have a material adverse effect on our business, financial condition and results of operations. FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT OUR STOCK PRICE. The market price of our common stock could decline as a result of sales by our existing stockholders of shares of common stock in the market after this offering, or the perception that these sales could occur. These sales also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. WE HAVE IMPLEMENTED CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions of our Certificate of Incorporation and Bylaws and Delaware law could make it more difficult for a third party to acquire us, even if the acquisition would be beneficial to our stockholders. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN OUR FORWARD-LOOKING STATEMENTS. This 10-Q contains forward-looking statements based on our current expectations, assumptions, estimates and projections about our business and industry. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including all the risks and uncertainties discussed above and elsewhere in this 10-Q. We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future. Item 3. Quantitative and Qualitative Disclosures About Market Risk Our exposure to market risk is primarily in our investment portfolio. We do not use derivative financial instruments for speculative or trading purposes. We have an investment policy that sets minimum credit quality standards for our investments. The policy also limits the amount of money we can invest in any one issue, issuer or type of instrument. We have not experienced any material loss in our investment portfolio. The table below presents the carrying value, which is approximately equal to fair market value, and related weighted-average interest rates for our investment portfolio at March 31, 1999. All of our investments mature in eighteen months or less. Carrying Average Amount Interest (thousands) Rate ---------- --------- Cash equivalents - fixed rate $ 9,730 5.38 % Short-term investments - fixed rate 4,151 6.35 % Overnight cash investments - fixed rate 303 4.49 % ----------- ---------- Total investment securities $ 14,184 5.64 % ======== ========== 21 PART II. OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) Use of Proceeds: The following information updates and supplements the information regarding use of proceeds originally filed in our Form 10-Q for the quarter ended September 30, 1997, as amended to date. Through March 31, 1999, we have expended approximately $20,550,000 of the total net proceeds from our initial public offering of $34,532,000 for working capital. The unused proceeds of $13,982,000 are invested in temporary investments, primarily short-term corporate debt securities. All proceeds used or invested were direct or indirect payments to others or payments to directors and officers in the ordinary course of business.. This use of proceeds does not represent a material change in the use of proceeds described in our prospectus filed as a part of the registration statement for our initial public offering. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The exhibits filed as part of this Quarterly Report on Form 10-Q are listed on the Exhibit Index immediately preceding such exhibits and such list is incorporated herein by reference. (b) Reports on Form 8-K We filed a report on Form 8-K on March 15, 1999 under Item 5 describing certain changes in management. On March 12, 1999, Dr. Dani P. Bolognesi was appointed Chief Executive Officer and Chief Scientific Officer, and Matthew A. Megaro was appointed President and remains Chief Financial Officer. 22 We filed a report on Form 8-K on March 26, 1999 under Item 5 describing certain changes in our Board of Directors. Jeffrey M. Lipton was named Vice Chairman of our Board of Directors and will assume the chairmanship of our Board at the Annual Meeting of Stockholders on June 23, 1999. Dr. Jesse I. Treu, our current Chairman of the Board, will be stepping down from the Chairmanship, but will seek re-election to the Board at the Annual Meeting of Stockholders on June 23, 1999. 23 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Trimeris, Inc. (Registrant) May 14, 1999 By: /s/ DANI P. BOLOGNESI - ------------ --------------------------- Dani P. Bolognesi Chief Executive Officer, and Chief Scientific Officer May 14, 1999 By: /s/ MATTHEW A. MEGARO - ------------ --------------------------- Matthew A. Megaro President, Chief Financial Officer, and Secretary (Principal Accounting and Financial Officer) 24 EXHIBIT INDEX Number Description - ------ ----------- 10.1 Employment Termination and General Release Agreement between Trimeris and M. Ross Johnson dated April 13, 1999 10.2 Chief Executive Employment Agreement between Trimeris and Dani P. Bolognesi dated April 21, 1999 11.1 Computations of Basic Loss Per Share 27.1 Financial Data Schedule 25 EX-10 2 EXHIBIT 10.1 EXHIBIT 10.1 EMPLOYMENT TERMINATION AND GENERAL RELEASE AGREEMENT THIS EMPLOYMENT TERMINATION AND GENERAL RELEASE AGREEMENT ("Agreement") is made and entered into by and between M. Ross Johnson, Ph.D. ("Johnson" or "Employee") and Trimeris, Inc., a Delaware corporation ("the Company"); W I T N E S S E T H: WHEREAS, Johnson has decided voluntarily to resign from employment with the Company and to resign from membership on the Company's Board of Directors; and WHEREAS, the Company and Johnson have agreed that Johnson's employment with the Company shall terminate, effective as of the close of business on March 12, 1999, and that his membership on the Company's Board of Directors shall terminate effective as of the close of business on the same date; and WHEREAS, Johnson and the Company now desire to memorialize, by the execution of this Agreement, their understanding with respect to all matters relating to Johnson's termination of employment and resignation from the Board of Directors; NOW, THEREFORE, in consideration of the premises and mutual promises contained herein, as well as the payment of the monies and other benefits to Johnson as hereinafter recited, the receipt and sufficiency of which are hereby acknowledged by Johnson, it is agreed as follows: TERMINATION DATE. Employee's tenure as an employee and as a member of the Board of Directors of the Company shall cease as of the close of business on March 12, 1999 (the "Termination Date"). SEVERANCE BENEFITS. In return for Employee's execution of and adherence to this Agreement, including the releases that form a material part of this Agreement, and provided Employee does not revoke this Agreement by written notice to the Company or its representative pursuant to paragraph 11(g) below, the Company shall provide Employee with certain benefits, including benefits to which he would not otherwise be entitled: SALARY CONTINUATION. The Company shall pay Johnson his regular salary in effect as of his Termination Date, for the period March 13, 1999 through March 12, 2000 (the "Salary Continuation Period"), in the total amount of Two Hundred Seventy One Thousand, Seven Hundred and Four Dollars ($271,704.00). Payments shall be made on the Company's regular paydays, and shall be subject to usual and customary deductions required by law and Company policy. In the event of Johnson's death before the end of the Salary Continuation Period, any remaining payments due under this paragraph shall be paid to Johnson's estate. BONUS COMPENSATION. Johnson shall be paid a bonus for fiscal year 1998 in the amount of Sixty-Five Thousand Dollars ($65,000.00). This bonus payment shall be paid in a lump sum within thirty (30) days following April 30, 1999, and shall be subject to the usual and customary deductions required by law and Company policy. In the event of Johnson's death before the end of the Salary Continuation Period, any remaining payments due under this paragraph shall be paid to Johnson's estate. GROUP HEALTH PLAN. Johnson shall be entitled to elect for himself and any of his dependents who are currently covered under the terms and conditions of the Company's group health plan "continuation coverage" (including dental coverage) as provided under Section 4980B of the Internal Revenue Code of 1986, as amended ("COBRA"). To the extent that Johnson elects continuation coverage under COBRA, the Company will reimburse him for the cost of such continuation coverage for himself and his covered dependents during the Salary Continuation Period. Such reimbursements shall be treated as additional salary continuation and shall be subject to usual and customary deductions required by law and Company policy. After the Salary Continuation Period, Johnson shall bear the full cost of such continuation coverage. In the event of Johnson's death before the end of the Salary Continuation Period, and to the extent Johnson's surviving dependents retain continuation coverage under COBRA after his death, the Company will reimburse them for the cost through the end of the Salary Continuation Period. VACATION. Within thirty (30) days following the execution of this Agreement, the Company shall pay Johnson (or his estate in the event of his death) for the seventeen (17) vacation days accrued but unused by Johnson through the Termination Date. LIFE AND DISABILITY INSURANCE. Subject to any limitations imposed by applicable laws or by the underwriters of any group or individual life or disability insurance policies maintained by the Company, the Company shall continue its coverage of Johnson under such group or individual life and disability insurance policies through the Salary Continuation Period, and the Company shall bear a portion of the cost of such coverage in accordance with the Company's policies in effect as of the Termination Date. If the Company is unable to continue such coverage, the Company shall pay to Johnson an amount sufficient on an after-tax basis to obtain such coverage (less any amount he would have otherwise been required to contribute to the cost of Company-provided coverage) through the end of the Salary Continuation Period. Such benefits or payments shall be treated as additional salary continuation and shall be subject to usual and customary deductions required by law and Company policy. ADDITIONAL CONSIDERATION. As additional consideration for the releases hereunder, the Company shall pay Johnson (or his estate in the event of his death) One Thousand Dollars ($1,000.00) in a single lump sum payment within thirty (30) days following his execution of this Agreement. Such payment shall be treated as additional salary continuation and shall be subject to usual and customary deductions required by law and Company policy. Johnson acknowledges and agrees that he would not otherwise be entitled to this payment. ATTORNEY'S FEES. The Company shall reimburse Johnson for the reasonable attorney's fees actually incurred by him in connection with the negotiation of the terms and provisions of this Agreement, provided Johnson or his attorney provides the Company with the attorney's invoice for such fees, which invoice shall include an itemized statement of the fees charged. The Company shall reimburse Johnson for such fees within thirty (30) days following the Company's receipt of the attorney's invoice. STOCK OPTIONS. Effective on April 3, 1998, the Company granted to Johnson certain stock options as evidenced by that certain Trimeris, Inc. Incentive Stock Option Agreement executed by the Company and Johnson (the "Option Agreement"). As of the Termination Date, Johnson had a vested right to exercise options to purchase certain shares of the Company's common 2 stock. Johnson and the Company agree that paragraph 4(a) of the Option Agreement is hereby amended to provide, effective March 12, 1999, that the vesting schedule shall be accelerated by twenty-four (24) months. Accordingly, Johnson and the Company agree and acknowledge that Johnson shall have the vested right under the Option Agreement, as so amended, to exercise options to purchase up to 98,438 shares of the Company's common stock. Such right shall remain exercisable in accordance with and subject to the terms and provisions of the Option Agreement (including but not limited to terms relating early expiration following termination of employment). EMPLOYEE NOTES. As of March 31, 1999, Johnson is indebted to the Company under three (3) separate promissory notes dated May 2, 1997, June 2, 1997 and June 11, 1997 (the "Notes"). Each of the Notes is due and payable in full on the second anniversary of its issuance. As of March 31, 1999, the aggregate principal and accrued interest due on the Notes is Eighty Thousand One Hundred Forty-nine Dollars and Twenty-six Cents ($80,149.26). The Notes shall continue to bear interest in accordance with their respective terms, and shall be payable as stated therein. In the event Johnson does not make any required payments on the respective due dates thereof, the Company reserves the right in its discretion to apply any amounts otherwise payable to Johnson under Section 2 of this Agreement to the repayment of the Notes. REPURCHASE OF RESTRICTED STOCK. Johnson is a party to Stock Restriction Agreements with the Company dated May 2, 1997, June 2, 1997 and June 11, 1997 (collectively, the "Stock Restriction Agreements"). In connection with the provisions of paragraphs 2 and 3 of each of the Stock Restriction Agreements, the Company hereby waives its right to exercise its Purchase Options with respect to all unvested shares of the Company's common stock previously purchased by Johnson under such Stock Restriction Agreements. All shares of common stock previously purchased by Johnson under the Stock Restriction Agreements (the "Restricted Shares") are, therefore, fully vested in Johnson (subject to the Company's rights under Stock Pledge Agreements between Johnson and the Company dated May 2, 1997, June 2, 1997 and June 11, 1997 (collectively, the "Stock Pledge Agreements")). Upon full payment of the Notes referenced in Section 4, above, all of the Restricted Shares shall be released from the applicable Stock Pledge Agreements in accordance with the respective terms of such Stock Pledge Agreements, and any certificates in the Company's custody shall be delivered to Johnson, and shall bear applicable legends designating the shares as restricted. As transfer restrictions imposed by applicable securities laws (including but not limited to restrictions under Rule 144) lapse, the Company will cooperate with Johnson in removing the related restrictive legends appearing on certificates for the Restricted Shares. LIMITATIONS ON RELEASES. Johnson has accrued as of the Termination Date certain vested rights to benefits under one or more employee pension benefit plans (as defined in the Employee Retirement Income Security Act of 1974, as amended) maintained by the Company. Johnson shall be entitled to receive his vested accrued benefits under such employee pension benefit plans in accordance with their respective terms. The releases contained in this document do not waive or otherwise affect Johnson's rights to such vested accrued benefits. Similarly, the Company has certain rights under the Inventions Agreement, the Notes, the Stock Restriction Agreements, the Stock Pledge Agreements and the Option Agreement, as modified by the provisions of Sections 3, 4 and 5 above (the "Johnson Agreements"). The releases contained in this document do not 3 waive or otherwise affect (except as specified in Sections 3, 4 and 5 above) the Company's rights under the Johnson Agreements. RELEASE OF CLAIMS. RELEASE OF CLAIMS BY JOHNSON. In consideration of the mutual promises herein, Employee, on behalf of himself and his heirs and assigns, hereby irrevocably and unconditionally releases and forever discharges, individually and collectively, the Company, its affiliated companies, and each of their respective officers, directors, employees, shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them (hereinafter "Trimeris"), of and from any and all charges, claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys' fees and costs), known or unknown, suspected or unsuspected, that Employee may now have or has ever had against Trimeris by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement. This waiver, release and discharge includes without limitation, claims related to any wrongful or unlawful discharge, discipline or retaliation, any contract of employment, whether express or implied, any promotions or demotions, compensation including commissions, short term or long term incentives, the Company's benefit plan(s) and the management thereof, defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress, stress, breach of any covenant of good faith and fair dealing, and any other claims relating to the Employee's employment with the Company and the termination thereof. This waiver, release and discharge further applies but is not limited to any claims based on Title VII of the Civil Rights Act of 1964, the Post Civil War Civil Rights Act (41 U.S.C. ss. 1981 - 88), the Civil Rights Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act, the Older Workers' Benefit Protection Act, the Rehabilitation Act of 1973, the Americans with Disabilities Act, the Vietnam Era Veterans' Readjustment Act, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act, Executive Order 11246, the Employee Retirement Income Security Act of 1974, the Family and Medical Leave Act (all as they may be amended), and any other applicable federal, state or local laws, ordinances and regulations including those relating to discrimination to the extent permitted by law. Employee expressly waives all claims, including those which he does not know or suspect to exist in his favor as of the date of this Agreement against Trimeris. As used herein, the parties understand the word "claims" to include all actions, claims, and grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against Trimeris of the type referenced in this Section 7(a) or otherwise arising from Employee's employment with the Company, the termination thereof or any other conduct or negotiations occurring on or prior to the date Employee signs this Agreement. All such claims are forever barred by this Agreement whether they arise in contract or tort or under a statute or any other law. The final release of all claims by Employee against Trimeris constitutes a material part of the consideration flowing from 4 Employee to Trimeris under this Agreement, and each of the individuals and entities included within the term "Trimeris" is an intended beneficiary of this consideration. RELEASE OF CLAIMS BY THE COMPANY. In consideration of the mutual promises herein, the Company, on behalf of itself, its affiliated companies, and each of their respective officers, directors, employees, shareholders, representatives, parent companies, subsidiaries, predecessors, successors, assigns, attorneys and all persons acting by, through or in concert with them, hereby irrevocably and unconditionally releases and forever discharges Johnson, his heirs, agents, personal representatives and assigns, of and from any and all charges, claims, complaints, demands, liabilities, causes of action, losses, costs or expenses of any kind whatsoever (including related attorneys' fees and costs), known or unknown, suspected or unsuspected, that the Company may now have or has ever had against Johnson by reason of any act, omission, transaction, or event occurring up to and including the date of the signing of this Agreement (the "Company Claims"), except for Excepted Company Claims as defined below. For purposes of this Section 7(b), "Excepted Company Claims" means, and the waiver provisions of this Section 7(b) shall not apply to, (1) charges, claims, complaints, demands, liabilities, causes of action, losses, costs or expenses based on or in connection with any action taken by Johnson constituting fraud, or (2) charges, claims, complaints, demands, liabilities, causes of action, losses, costs or expenses based on or in connection with any action taken by Johnson, if any, without the approval of the Company's Board of Directors to the extent approval of the action would have been required under the Company's Bylaws, if: Such action was material to the business or the financial position of the Company; Such action was not or has not been otherwise ratified at any time by the Company's Board of Directors; Such action was deliberately taken by Johnson with the knowledge that prior approval of the Board of Directors was required for such action; and Such action is specifically set forth in writing by the Board of Directors of the Company and written notice of the details of the same is delivered to Johnson within six (6) months after the date of this Agreement, at the following address: 53524 Bickett, Chapel Hill, NC 27514, with a copy to: Robert H. Merritt, Jr., Merritt, Wooten & Janvier, P.A., P.O. Box 3007, Raleigh, NC 27602. Excepted Company Claims shall not include any charges, claims, complaints, demands, liabilities, causes of action, losses, costs or expenses about which any current member of the Company's Executive Management, as defined below, or Board of Directors has or had actual knowledge as of the date of this Agreement. Except as set forth in Section 7(b)(2)(iv) above, nothing herein is intended to or shall toll, extend, waive, amend or otherwise affect any statute or period of limitation or repose with respect to any Excepted Company Claims. For purposes of this Section 7(b), the term "Executive Management" shall include the following officers of the Company: Chief Executive Officer, Chief Scientific Officer, President, Chief Operating Officer, Chief Financial Officer, Secretary, and Assistant Secretary. 5 Except as specifically provided above with respect to the Excepted Company Claims, this waiver, release and discharge includes without limitation claims related to any act as an officer, director or employee of the Company and/or the management thereof, including defamation, slander, libel, invasion of privacy, misrepresentation, infliction of emotional distress, stress, breach of any covenant of good faith and fair dealing, and any other claims relating to Johnson's employment as an officer or director of the Company and the termination thereof. The Company expressly waives all Company Claims (other than the Excepted Company Claims), including those which it does not know or suspect to exist in its favor as of the date of this Agreement. As used herein, the parties understand the word "claims" to include all actions, claims, and grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against Johnson of the type referenced in this Section 7(b), or otherwise arising from Johnson's employment with the Company, the termination thereof or any other conduct or negotiations occurring on or prior to the date Johnson signs this Agreement, provided that the waiver, release and discharge of "claims" under this Section 7(b) shall not apply to the Excepted Company Claims as set forth herein. All Company Claims, except for the Excepted Company Claims, are forever barred by this Agreement whether they arise in contract or tort or under a statute or any other law. The final release of claims by the Company against Johnson constitutes a material part of the consideration flowing from the Company to Johnson under this Agreement, and each of the individuals and entities referenced in this Section 7(b) are intended beneficiaries of this consideration. CONFIDENTIAL TERMS. Employee and the Company agree that each will keep the contents of this Agreement (including its existence and the terms and provisions thereof) and the negotiations leading to it completely confidential, that neither will hereafter publish or disclose any information concerning such matters to anyone, and that each shall take every reasonable precaution to prevent the direct or indirect disclosure of such information to third parties, provided that the foregoing provisions shall not be construed to prevent Employee from disclosing such matters to his family, accountant and/or any attorney consulted by him or to prevent the Company from disclosing such matters to its accountants and attorneys, and provided further that Employee may also make such disclosures as are finally compelled by law provided Employee gives the Company immediate notice of such legal process in order that the Company shall have the opportunity to object to the disclosure of such information. Notwithstanding the foregoing, the Company shall have the right to make any and all disclosures as it determines to be necessary to comply with any judicial order or the requirements of any law (including, without limitation, any requirement to disclose the terms of this Agreement or to include this Agreement in any filing with the Securities and Exchange Commission), and any such disclosures shall not have the effect of terminating or waiving the continuing confidentiality obligations of the parties hereunder. PRESERVATION OF COMPANY CONFIDENTIAL INFORMATION. Employee shall not use for himself, publish or disclose to any third party any confidential or proprietary information concerning Trimeris or its business which was acquired or learned during the course of Employee's employment with the Company. By way of example and not limitation, such information includes management organization, salary structures, financial results and conditions, product 6 quality, product pricing, transfer pricing, production capacity, customer and vendor lists, pricing, contacts and preferences, customer product configurations, marketing and sales strategies and plans, inventions, research and product development, trade secrets, patents, severance agreements with other employees, MIS and telecommunications codes, and other business activities, strategies and plans. Employee acknowledges, ratifies and reaffirms without limitation all of the terms and conditions stated in that certain Proprietary Information and Inventions Agreement between Employee and the Company and dated January 19, 1995 (the "Inventions Agreement"), including but not limited to the Statement Regarding Proprietary Information and Inventions Agreement executed by Employee and dated January 10, 1995. AGREEMENT NOT TO COMPETE. Johnson agrees that for a period of two (2) years following the Termination Date, Johnson shall not, directly or indirectly, acting alone or as a member of a partnership or as an officer, director, stockholder, employee, consultant or representative of any company or other business entity, (i) engage in any business activity anywhere in the world involving viral membrane fusion or peptide manufacturing, or (ii) request any present or future customers or suppliers of the Company to curtail or cancel their business with the Company. Johnson further agrees that for a period of two (2) years following the Termination Date, Johnson will not induce or attempt to induce, directly or indirectly, any employees or consultants of the Company to terminate his or her employment or association with the Company or any successors or affiliates. The foregoing shall apply during the aforesaid two (2) year period whether Johnson is contacted directly by such employee or consultant or otherwise. EMPLOYEE ACKNOWLEDGEMENTS. Employee understands and agrees that Employee: Has carefully read and fully understands all of the provisions of this Agreement; Has been offered a full twenty-one (21) days from receipt of this Agreement to consider its terms, and having had adequate opportunity to consider the terms of the Agreement and consult with advisors of his choice, has elected to waive the 21 day period and sign the Agreement as of the date hereof; Is, through this Agreement, releasing Trimeris from any and all claims Employee may have against Trimeris, including but not limited to claims under the Age Discrimination in Employment Act, as amended; Knowingly and voluntarily agrees to all of the terms set forth in this Agreement; Knowingly and voluntarily intends to be legally bound by the same; Was advised and is hereby advised in writing to consider the terms of this Agreement and to consult with an attorney of Employee's choice prior to executing this Agreement; and Has a full seven (7) days following his execution of this Agreement to revoke this Agreement and has been and hereby is advised in writing that this Agreement shall not become effective or enforceable until the revocation period has expired. Revocation must occur by hand delivery of a letter of revocation to Mathew A. Megaro at Trimeris, Inc., 4727 University Drive, Durham, NC 27707, on or before the end of the business day on April 20th, 1999. 7 Will not retain any materials, supplies, equipment, originals or copies of any Trimeris or other business records, documents, or data. INJUNCTIVE RELIEF. Each of the parties acknowledges and recognizes that a violation of this Agreement and its covenants will cause irreparable damage to the other party and that the other party will have no adequate remedy at law for such violation. Accordingly, each of the parties agrees that the other party will be entitled, as a matter of right, to an injunction from any court of competent jurisdiction restraining any further violation of the Agreement. This right to injunctive relief will be cumulative and in addition to whatever remedies the parties may otherwise have at law. LEGAL PROCEEDINGS; AGREEMENT AS A DEFENSE. This Agreement may be plead as a full and complete defense to, and may be used as the basis for an injunction against, any action, suit, or other proceeding which may be instituted, prosecuted or attempted in breach of this Agreement, except for an action based on a breach of this Agreement. If, contrary to this Agreement, Johnson files a lawsuit or other legal proceeding against Trimeris, the Company shall have the option, in its sole discretion, either to raise this Agreement as a defense, or to rescind this Agreement in which case Johnson shall refund to the Company all amounts paid to him pursuant to Section 2 hereunder and no further payments shall be due to Johnson under Section 2. If the Company files a lawsuit or other legal proceeding against Johnson with respect to a Company Claim other than an Excepted Company Claim, Johnson shall have the option, in its sole discretion, either to raise this Agreement as a defense, or to rescind this Agreement in which case no further benefits shall be due to Johnson under Section 2. Notwithstanding the foregoing, nothing in this Agreement shall be construed to prevent either party from pursuing claims against the other for breach of this Agreement and from recovering appropriate legal or equitable relief in connection with such claims. GOVERNING LAW. This Agreement shall be governed by the laws of the State of North Carolina. This Agreement shall be interpreted in accordance with the plain meaning of its terms and not strictly for or against any of the parties hereto. NO OTHER BENEFITS. Johnson acknowledges that, except as set forth herein, he is not entitled to any compensation, monies or benefits from the Company, including but not limited to compensation for accrued vacation, bonuses, commissions, expenses or other forms of compensation or benefits. Except as set forth herein, Johnson hereby waives all rights to any payments other than for outstanding bona fide business expenses incurred by Johnson on behalf of the Company prior to March 12, 1999. ENTIRE AGREEMENT. This Agreement represents and contains the entire agreement and understanding between Johnson and the Company with respect to its subject matter, and it supersedes any and all prior oral and written agreements and understandings, and no representation, warranty, condition, understanding, or agreement of any kind with respect to the subject matter of this Agreement will be relied upon by Johnson or the Company unless specifically incorporated in this Agreement; provided, however, that the Option Agreement, Stock Restriction Agreements, the Notes, and the Inventions Agreement, will each remain in full force and effect, except to the extent expressly modified or amended hereunder. Further, this 8 Agreement is intended to be a binding contract between the parties and shall not be modified, except by writing signed by both parties. TAX WITHHOLDING. Certain payments made under this Agreement may be subject to required income and other tax withholdings. Johnson will be responsible for any taxes which may be due as a result of any payments made by the Company or benefits otherwise provided as described above, and Johnson agrees to indemnify and hold the Company harmless from any claim and expense that the Company may incur as a result of any failure by Johnson to pay any such taxes. NO ADMISSIONS. Johnson and the Company acknowledge and agree that the payments, releases and other consideration described in this Agreement are offered and exchanged in good faith and will not, for any purpose, be considered as admissions of liability on the part of either party, which liability is expressly denied, and no past or present wrongdoing on the part of either party is implied by such payments, releases or other consideration under the terms of this Agreement. SEVERABILITY. In the event any provision of this Agreement is determined by a court or other tribunal to be unenforceable for any reason, the remaining provisions hereof shall remain in full force and effect and the unenforceable provision(s) shall be interpreted and rewritten to give effect to the parties' economic intentions. ASSIGNMENT OF CLAIMS. Employee warrants to the Company that he has not assigned any claim or cause of action released herein. The Company warrants to the Employee that it has not assigned any claim or cause of action released herein. COUNTERPARTS. This document may be executed in multiple counterparts, each of which shall be considered an original. VOLUNTARY AGREEMENT. EMPLOYEE ACKNOWLEDGES AND AGREES THAT HE HAS BEEN ADVISED THAT THIS AGREEMENT IS A BINDING LEGAL DOCUMENT. EMPLOYEE FURTHER AGREES THAT HE HAS HAD ADEQUATE TIME AND A REASONABLE OPPORTUNITY TO REVIEW THE PROVISIONS OF THIS AGREEMENT, HAS BEEN ADVISED TO SEEK LEGAL ADVICE REGARDING ALL ITS ASPECTS, AND THAT IN EXECUTING THIS AGREEMENT EMPLOYEE HAS ACTED VOLUNTARILY AND HAS NOT RELIED UPON ANY REPRESENTATION MADE BY THE COMPANY OR ANY OF ITS EMPLOYEES OR REPRESENTATIVES REGARDING THIS AGREEMENT'S SUBJECT MATTER AND/OR EFFECT. EMPLOYEE HAS READ AND FULLY UNDERSTANDS THIS AGREEMENT AND VOLUNTARILY AGREES TO ITS TERMS. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Johnson has executed this Agreement, all as of the 13th day of April, 1999. Employee: Trimeris, Inc. M. Ross Johnson, Ph.D. /s/ M. Ross Johnson - ----------------------- By: /s/ Dani Bolognesi Title: ------------------------ 9 EX-10 3 EXHIBIT 10.2 EXHIBIT 10.2 CHIEF EXECUTIVE EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into this 21 day of April, 1999, by and between TRIMERIS, INC., a Delaware corporation (the "Company"), and DANI P. BOLOGNESI ("Executive"). W I T N E S S E T H: WHEREAS, Executive and the Company deem it to be in their respective best interests to enter into an agreement providing for the Company's employment of Executive pursuant to the terms herein stated; NOW, THEREFORE, in consideration of the premises and the mutual promises and agreements contained herein, it is hereby agreed as follows: 1. Effective Date. This Agreement shall be effective as of the 12th day of March, 1999, which date shall be referred to herein as the "Effective Date". 2. Position and Duties. (a) The Company hereby employs Executive as its Chief Executive and Scientific Officer commencing as of the Effective Date for the "Term of Employment" (as herein defined below). In this capacity, Executive shall devote his best efforts and his full business time and attention to the performance of the services customarily incident to such offices and position and to such other services of a senior executive nature as may be reasonably requested by the Board of Directors (the "Board") of the Company which may include services for one or more subsidiaries or affiliates of the Company. Executive shall in his capacity as an employee and officer of the Company be responsible to and obey the reasonable and lawful directives of the Board. (b) Executive shall devote his full time and attention to such duties, except for sick leave, reasonable vacations, and excused leaves of absences as more particularly provided herein. Executive shall use his best efforts during the Term of Employment to protect, encourage, and promote the interests of the Company. (c) Notwithstanding paragraph 2(b), and with Company consent, Executive shall be entitled to sit as a director on one (1) other board of directors so long as doing so presents no conflict of interest with Executive's performance of his duties or his positions at the Company. 3. Compensation. (a) Base Salary. The Company shall pay to Executive during the Term of Employment a minimum salary at the rate of Two Hundred Eighty Five Thousand dollars ($285,000.00) per year and agrees that such salary shall be reviewed at least annually. Such salary shall be subject to discretionary annual increases as determined by the Board of Directors. 10 Such salary shall be payable monthly and in accordance with the Company's normal payroll procedures. (Executive's annual salary, as set forth above or as it may be increased from time to time as set forth herein, shall be referred to hereinafter as "Base Salary"). At no time during the Term of Employment shall Executive's Base Salary be decreased from the amount of Base Salary then in effect. (b) Reimbursement of Lost Income. In consideration of Executive's (i) forgoing the supplemental income and career enhancement opportunities normally attendant to a distinguished professorship such as he currently enjoys at Duke University; and (ii) waiving his right to serve as an outside director on any corporate board not approved by Company; and (iii) resigning his current outside consultantships; and (iv) waiving his right, while employed by Company, to perform any outside consulting work, Company agrees to award Executive in 1999, upon receipt of confirmation of all relevant resignations, a one time payment of Forty Thousand Dollars ($40,000.00). (c) Performance Bonus. In addition to the compensation otherwise payable to Executive pursuant to this Agreement, Executive shall be eligible to receive an annual bonus up to fifty percent (50%) of his Base Salary ("Bonus") pursuant to a performance bonus plan (the "Bonus Plan") which may be established by the Company for its senior executive officers and which shall provide for bonus compensation to be payable based upon the financial and other performance of the Company and the Executive. (d) Long Term Incentive/Stock Options. Upon execution of this Agreement, the Company shall recommend that the Compensation Committee of the Board grant Executive options to purchase; (i) two hundred thousand (200,000) shares of the Company's common stock at a price equal to the fair market value of the common stock on the date of grant, vesting monthly over a period of four (4) years beginning March 12, 1999. In addition, during 1999 an additional grant of options to purchase a minimum of fifty thousand (50,000) shares of the Company's common stock at a price equal to the fair market value of the common stock on the date of grant, vesting monthly over a period of four years beginning on the date of grant will be made to Executive. All options will be subject to the terms and conditions of the Trimeris, Inc. Amended and Restated Stock Incentive Plan. In the event of any termination of Executive's employment, no additional options shall vest but stock options previously vested shall not be forfeited by Executive. 4. Benefits During the Term of Employment: (a) Executive shall be eligible to participate in any life, health and long-term disability insurance programs, pension and retirement programs, stock option and other incentive compensation programs, and other fringe benefit programs made available to senior executive employees of the Company from time to time, and Executive shall be entitled to receive such other fringe benefits as may be granted to him from time to time by the Company's Board of Directors. (b) Executive shall be allowed four (4) weeks of vacation with pay and leaves of absence with pay on the same basis as other senior executive employees of the Company. (c) The Company shall reimburse Executive for reasonable business expenses incurred in performing Executive's duties and promoting the business of the Company, including, but not limited to, reasonable entertainment expenses, travel and lodging expenses, following presentation of documentation in accordance with the Company's business expense reimbursement policies. 11 (d) Executive shall be added as an additional named insured under all liability insurance policies now in force or hereafter obtained covering any officer or director of the Company in his or her capacity as an officer or director. Company shall indemnify Executive in his capacity as an officer or director and hold him harmless from any cost, expense or liability arising out of or relating to any acts or decisions made by him on behalf of or in the course of performing services for the Company (to the maximum extent provided by the Company's Bylaws and applicable law). 5. Term; Termination of Employment. As used herein, the phrase "Term of Employment" shall mean the period commencing on the Effective Date and ending on the same date two (2) years later; provided, however, that as of the expiration date of each of (i) the initial Term of Employment and (ii) if applicable, any Renewal Period (as defined below), the Term of Employment shall automatically be extended for a two (2) year period (each a "Renewal Period") unless either the Company or Executive provides Two (2) months' notice to the contrary. Notwithstanding the foregoing, the Term of Employment shall expire on the first to occur of the following: (a) Termination by the Company. Notwithstanding anything to the contrary in this Agreement, whether express or implied, the Company may, at any time, terminate Executive's employment for any reason other than Cause, Death or Disability by giving Executive at least 60 days' prior written notice of the effective date of termination. Company may terminate Employee's employment for Cause, Death or Disability without prior notice, except that Executive may not be terminated for substantial and willful failure to perform specific and lawful directives of the Board, as reasonably determined by the Board unless and until the Board has given him reasonable written notice of its intended actions and specifically describing the alleged events, activities or omissions giving rise thereto and with respect to those events, activities or omissions for which a cure is possible, a reasonable opportunity to cure such breach; and provided further, however, that for purposes of determining whether Cause is present, no act or failure to act by Executive shall be considered "willful" if done or omitted to be done by Executive in good faith and in the reasonable belief that such act or omission was in the best interest of the Company and/or required by applicable law. The terms "Cause" and "Disability" shall have the meaning given them under the Separation and Severance Agreement. (b) Termination by Executive. In the event that Executive's employment with the Company is voluntarily terminated by Executive, the Company shall have no further obligation hereunder from and after the effective date of termination except as may be provided in the Separation and Severance Agreement and the Company shall have all other rights and remedies available under this Agreement or any other agreement and at law or in equity. Executive shall give the Company at least 30 days' advance written notice of his intention to terminate his employment hereunder. (c) Salary and Benefits Upon Termination. In the event of termination of employment, Executive shall receive all regular Base Salary due up to the date of termination, and if it has not previously been paid to Executive, Executive shall be paid any Bonus to which Executive had become entitled under the Bonus Plan prior to the effective date of such termination and the Company shall have no further obligation hereunder from and after the effective date of termination except as may be provided in the Separation and Severance Agreement and the Company shall have all other rights and remedies available under this Agreement or any other agreement and at law or in equity. Executive's stock options with respect to the Company's stock shall be subject to the terms of the Trimeris, Inc. Amended and Restated Stock Incentive 12 Plan or any successor plan, which is a separate agreement. In the event of termination, Executive's rights to benefits other than severance shall be governed by the terms of the Company's retirement, insurance and other benefit plans and programs then in effect in accordance with the terms of such plans. Executive's right to severance benefits, if any, shall be governed by the terms of the Separation and Severance Agreement attached hereto as Exhibit B (the "Severance Agreement"); provided, however, the Executive, as the Chief Executive, shall be entitled to de novo review of any material violation of this Severance Agreement, or denial of any claim, or eligibility for any claim thereunder exclusively as provided in the Resolution of Dispute provisions of section 12 of this Employment Agreement. The Severance Agreement is incorporated in this Agreement by reference and is hereby made a part of this Agreement as if fully set forth herein. 6. Confidential Information, Non-Solicitation and Non-Competition. (a) During the Term of Employment and at all times thereafter, Executive shall not, except as may be required to perform his duties hereunder or as required by applicable law, disclose to others or use, whether directly or indirectly, any Confidential Information regarding the Company. "Confidential Information" shall mean information about the Company, its subsidiaries and affiliates, and their respective clients and customers that is not available to the general public and that was learned by Executive in the course of his employment by the Company, including (without limitation) (i) any proprietary knowledge, trade secrets, ideas, processes, formulas, cell lines, sequences, developments, designs, assays and techniques, data, formulae, and client and customer lists and all papers, resumes, records (including computer records), (ii) information regarding plans for research, development, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers (iii) information regarding the skills and compensation of other employees of Company and (iv) the documents containing such Confidential Information. Executive acknowledges that such Confidential Information is specialized, unique in nature and of great value to the Company, and that such information gives the Company a competitive advantage. Upon the termination of his employment for any reason whatsoever, Executive shall promptly deliver to the Company all documents, slides, computer tapes and disks (and all copies thereof) containing any Confidential Information. (b) During the Term of Employment and for two (2) years thereafter, Executive shall not, directly or indirectly in any manner or capacity (e.g., as an advisor, principal, agent, partner, officer, director, shareholder, employee, member of any association or otherwise) engage in, work for, consult, provide advice or assistance or otherwise participate in any activity which is competitive with the business of the Company which is worldwide ("Competing Business" or "Competitor"). Executive further agrees that during such period he will not assist or encourage any other person in carrying out any activity that would be prohibited by the foregoing provisions of this Section 6 if such activity were carried out by Executive and, in particular, Executive agrees that he will not induce any employee of the Company to carry out any such activity; provided, however, that the "beneficial ownership" by Executive, either individually or as a member of a "group," as such terms are used in Rule 13d of the General Rules and Regulations under the Exchange Act, of not more than five percent (5%) of the voting stock of any publicly held corporation shall not be a violation of this Agreement. It is further expressly agreed that the Company will or would suffer irreparable injury if Executive were to compete with the Company or any subsidiary or affiliate of the Company in violation of this 13 Agreement and that the Company would by reason of such competition be entitled to injunctive relief in a court of appropriate jurisdiction. "Competing Business" is defined as the business of the discovery, development, testing, manufacturing, and/or marketing therapeutic components for the treatment of human viral diseases based on a viral fusion protein target and any other business in which the Company may engage or propose to engage during the term of this Agreement. (c) During the Term of Employment and for two (2) years thereafter, Executive shall not, directly or indirectly, influence or attempt to influence customers or suppliers of the Company or any of its subsidiaries or affiliates, to divert their business to any Competitor of the Company. (d) Executive recognizes that he will possess confidential information about other employees of the Company relating to their education, experience, skills, abilities, compensation and benefits, and interpersonal relationships with customers of the Company. Executive recognizes that the information he will possess about these other employees is not generally known, is of substantial value to the Company in developing its business and in securing and retaining customers, and will be acquired by him because of his business position with the Company. Executive agrees that, during the Term of Employment, and for a period of two (2) years thereafter, he will not, directly or indirectly, solicit or recruit any employee of the Company for the purpose of being employed by him or by any Competitor of the Company on whose behalf he is acting as an agent, representative or employee and that he will not at any time convey any such confidential information or trade secrets about other employees of the Company to any other person. (e) Executive agrees and understands that Company has received, and in the future will receive, from third parties confidential or proprietary information ("Third Party Information") subject to a duty on Company's part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the term of Executive's employment and thereafter, Executive will hold Third Party Information in the strictest of confidence and will not disclose (to anyone other than Company personnel who need to know such information in connection with their work for Company), or use, except in connection with any work for Company, Third Party Information unless expressly and specifically authorized to do so prior to any proposed disclosure by an officer of Company. (f) Inventions (i) Assignment. Executive hereby assigns to Company all his right, title and interest in and to any and all Inventions (and all patent rights, copyright, trade secret rights and all other rights throughout the world in connection therewith, whether or not patentable or registerable under copyright, trademark or similar statutes), together with all goodwill associated therewith, (all of the foregoing being hereinafter referred to collectively as "Proprietary Rights"), made, conceived, reduced to practice or learned by Executive, either alone or jointly with others, during his period of employment with Company. Inventions assigned under this Section 3 are hereinafter referred to as "Company Inventions". Executive agrees to assist Company in every necessary way to obtain or enforce any patents, copyrights or any proprietary rights relating to Company Inventions and to execute all documents and applications necessary to vest in Company's full legal title to such Company Inventions, and Executive agrees to continue this assistance after the termination of his employment with Company. Furthermore, Executive hereby designates and appoints Company and its officers and agents as his agents and attorneys-in-fact to execute and file any certificates, applications or documents and to do all 14 other lawful acts reasonably necessary in the opinion of Company to protect Company's rights in Company Inventions. Executive expressly acknowledges that the foregoing power of attorney is coupled with an interest and is therefore irrevocable and will survive Executive's termination of employment, death or incompetency. (ii) Government. Executive also will assign to or as directed by Company all his right, title and interest in and to any and all Inventions, full title to which may required to be in the United States by a contract between Company and the United States or any of its agencies. (iii) Independent Inventions. Notwithstanding anything in this Agreement to the contrary, Executive's obligation to assign or offer to assign Executive's rights in an Invention to Company will not extend or apply to an Invention that Executive has developed entirely on Executive's own time without using Company's equipment, supplies, facilities or trade secret information unless such Invention: (a) relates to Company's business or actual demonstrably anticipated research or development or (b) results from any work performed by Executive for Company. Executive will bear the burden of proof in establishing that the Invention qualifies for exclusion under this Subsection 6f(iii). (iv) Assignment of Company Inventions: Executive will assist Company in every proper way to obtain and from time to time enforce United States and foreign Proprietary Rights related to Company Inventions in any and all countries. Executive's obligation to assist Company with respect to Proprietary Rights relating to such Company Inventions will continue beyond the termination of Executive's employment, but Company will compensate Executive at a reasonable rate after Executive's termination for the time actually spent by executive at Company's request on such assistance. Executive hereby waives and quitclaims to Company all claims, of any nature whatsoever, which Executive may or may hereafter have for infringement, including past infringements, of any Proprietary Rights assigned hereunder to Company. (v) Obligation to Keep Company Informed: During the period of Executive's employment, Executive will promptly disclose to Company fully and in writing, and will hold in trust for the sole right and benefit of Company, any and all Inventions. In addition, after termination of Executive's employment, Executive will disclose all patent applications filed by Executive within a year after termination of such employment. (vi) Prior Inventions: Inventions, if any, patented or unpatented, which Executive made prior to Executive's commencement of employment with Company are excluded from the scope of this Agreement. To preclude any possible uncertainty, Executive has set forth on the attached Exhibit A, a complete list of all Inventions that Executive has, alone or jointly with others, conceived, developed or reduced to practice or caused to be conceived, developed or reduced to practice prior to the commencement of Executive's employment with Company, that Executive considers to be Executive's property or the property of the third parties, and Executive wishes to have excluded from the scope of this Agreement. If disclosure of any such Invention on Exhibit A would cause Executive to violate any prior confidentiality agreement with another party, Executive understands that he is not to list such Inventions in Exhibit A but that I am to inform Company in writing that all such Inventions have not been listed for that reason. (g) If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 6 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified 15 or amended by the court to render it enforceable to the maximum extent permitted by the law of that state. 7. Return of Company Documents: In the event Executive leaves the employment of Company for whatever reason, Executive agrees to deliver to Company any and all laboratory notebooks, drawings, notes, memoranda, specifications, devices, software, databases, formulas, molecules, cells and documents, together with all copies thereof, and any other material containing or disclosing any Company Inventions, Third Party Information or Confidential Information of Company. Executive further agrees that any property situated on Company's premises and owned by Company including disks and other storage media, filing cabinets or other work areas, is subject to inspection by Company personnel at any time, with or without notice, for the purpose of protecting Company's rights and interests in its intellectual property. 8. Taxes. All payments to be made to Executive under this Agreement will be subject to any applicable withholding of federal, state and local income and employment taxes. 9. Miscellaneous. This Agreement shall also be subject to the following miscellaneous considerations: (a) Executive and the Company each represent and warrant to the other that he or it has the authorization, power and right to deliver, execute, and fully perform his or its obligations under this Agreement in accordance with its terms. (b) This Agreement (including attached Exhibits A and B) contains a complete statement of all the arrangements between the parties with respect to Executive's employment by the Company, this Agreement supersedes all prior and existing negotiations and agreements between the parties concerning Executive's employment, and this Agreement can only be changed or modified pursuant to a written instrument duly executed by each of the parties hereto. (c) If any provision of this Agreement or any portion thereof is declared invalid, illegal, or incapable of being enforced by any court of competent jurisdiction, the remainder of such provisions and all of the remaining provisions of this Agreement shall continue in full force and effect. (d) This Agreement shall be governed by and construed in accordance with the internal, domestic laws of the State of North Carolina. (e) The Company may assign this Agreement to any direct or indirect subsidiary or parent of the Company or joint venture in which the Company has an interest, or any successor (whether by merger, consolidation, purchase or otherwise) to all or substantially all of the stock, assets or business of the Company and this Agreement shall be binding upon and inure to the benefit of such successors and assigns. Except as expressly provided herein, Executive may not sell, transfer, assign, or pledge any of his rights or interests pursuant to this Agreement. (f) Any rights of Executive hereunder shall be in addition to any rights Executive may otherwise have under benefit plans, agreements, or arrangements of the Company to which he is a party or in which he is a participant, including, but not limited to, any Company-sponsored employee benefit plans. Provisions of this Agreement shall not in any way abrogate Executive's rights under such other plans, agreements, or arrangements. 16 (g) For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the named Executive at the address set forth below under his signature; provided that all notices to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. (h) Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of this Agreement for any other purpose. (i) Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof shall not be deemed a waiver of such term, covenant, or condition, nor shall any waiver or relinquishment of, or failure to insist upon strict compliance with, any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. (j) This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Legal and Equitable Remedies: Because the Executive's services are personal and unique, and because the Executive will have access to and become acquainted with Proprietary and Confidential Information of Company, Company will have the right to enforce this Agreement and any of its provisions by injunction, specific performance or other equitable relief in any court of competent jurisdiction, without prejudice to any other rights and remedies that Company may have for a breach of this Agreement. 11. Survival of Provisions: The executory provisions of this Agreement will survive the termination of this Agreement or the assignment of this Agreement by Company to any successor in interest or other assignee. 12. Resolution of Disputes. Except as otherwise specifically provided in section 10 of the Chief Executive Separation and Severance Agreement attached hereto, any dispute or controversy arising under or in connection with this Agreement and Severance Agreement shall be settled exclusively by arbitration administered by the American Arbitration Association and conducted before a panel of three arbitrators in Raleigh, Wake County, North Carolina, all in accordance with its Commercial Arbitration rules then in effect. The Company and Executive hereby agree that the arbitrator will not have the authority to award punitive damages, damages for emotional distress or any other damages that are not contractual in nature. Judgment shall be final and binding upon the parties and judgement may be entered on the arbitrator's award in any court having jurisdiction; provided, however, that (a) the Company shall be entitled to seek a restraining order or injunction in any court of competent jurisdiction to prevent any violation or the continuation thereof, of the provisions of Section 6 of this Agreement, and Executive consents that such restraining order or injunction may be granted without the necessity of the Company's posting any bond except to the extent otherwise required by applicable law; and (b) notwithstanding anything in the Severance Agreement to the contrary, the Executive, as Chief Executive, shall be entitled by arbitration to seek de novo review of any material violation of the 17 Severance Agreement in accordance with paragraph 10 of such Severance Agreement or any denial of a claim or obligation to pay a claim thereunder. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. EXECUTIVE COMPANY TRIMERIS, INC. BY: /s/ Dani Bolognesi BY: /s/ Jesse I. Treu ------------------------- ---------------------------- TITLE: CHIEF EXECUTIVE OFFICER NAME: Jesse I. Treu -------------------------- TITLE: Chairman of the Board -------------------------- ADDRESS:_____________________ ADDRESS:_______________________ _____________________ _______________________ _____________________ _______________________ 18 EXHIBIT A TO EMPLOYMENT AGREEMENT 1. The following is a complete list of all inventions or improvements relevant to the subject matter of my employment by Company, Inc. that have been made or conceived or first reduced to practice by me alone or jointly with others prior to my employment by Company, Inc. and therefore should be excluded from the coverage of this Agreement: ____ Additional sheets attached. ____ No pertinent inventions or improvements. ____ Due to confidentiality agreements with one or more prior employers, I cannot disclose certain inventions that would otherwise be included on the above-described list. 2. I propose to bring to my employment the following devices, materials and documents of a former employer or other person to whom I have an obligation of confidentiality and that are not generally available to the public. These materials and documents may be used in my employment pursuant to the express written authorization of my former employer or such other person (a copy of which is attached hereto). If no such authorization is in place, I will consult with Trimeris, Inc. management to determine what steps should be taken to protect the interests of all parties concerned.: ____ Additional sheets attached. ____ No material. Date: EXECUTIVE: ______________________________ __________________ 19 EXHIBIT B TO CHIEF EXECUTIVE EMPLOYMENT AGREEMENT CHIEF EXECUTIVE SEPARATION AND SEVERANCE AGREEMENT THIS SEPARATION AND SEVERANCE AGREEMENT (the "Severance Agreement") is made a part of that Employment Agreement (the "Employment Agreement"), entered into and effective as of the _______ day of ________________, 1999, by and between DANI P. BOLOGNESI, an individual resident of the State of North Carolina ("Executive"), and TRIMERIS, INC., a Delaware corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Company desires to employ Executive and to provide for severance benefits under the terms and conditions set forth herein; and WHEREAS, this Severance Agreement constitutes part of the Employment Agreement and is incorporated therein by reference and fully set forth therein. COVENANTS NOW, THEREFORE, in consideration of the premises, mutual promises contained herein, and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: 1. Certain Definitions. The following terms shall have the meanings set forth herein. (a) "Administrator" shall mean the Company. The Company shall also be the "named fiduciary" hereunder. The Company shall have the authority to designate one or more of its officers, employees or directors to act on its behalf in administering this Severance Agreement. (b) "Base Salary" shall mean Executive's regular pay at the time of termination. Base Salary shall not include bonus or incentive plans, overtime pay, relocation allowances or the value of any other benefits for which Executive may be eligible. (c) "Good Reason" shall mean, without the express written consent of Executive, the occurrence of any of the following events unless such events are fully corrected within 30 days following written notification by Executive to the Company that he intends to terminate his employment hereunder for one of the reasons set forth below: 20 (i) a material breach by the Company of any provision of this Agreement, including, but not limited to, the assignment to Executive of any duties inconsistent with Executive's position in the Company or a material adverse alteration in the nature or status of Executive's responsibilities; (ii) the Company's requiring the Executive to be based anywhere other than the metropolitan area where he currently works and resides; and (iii) the occurrence of a "Change in Control" as defined below. For purposes of this Agreement a "Change in Control" shall mean an event as a result of which: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the voting stock of the Company; (ii) the Company consolidates with, or merges with or into another corporation or sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to any person, or any corporation consolidates with, or merges with or into, the Company, in any such event pursuant to a transaction in which the outstanding voting stock of the Company is changed into or exchanged for cash, securities or other property, other than any such transaction where (A) the outstanding voting stock of the Company is changed into or exchanged for (i) voting stock of the surviving or transferee corporation or (ii) cash, securities (whether or not including voting stock) or other property, and (B) the holders of the voting stock of the Company immediately prior to such transaction own, directly or indirectly, not less than 50% of the voting power of the voting stock of the surviving corporation immediately after such transaction; or (iii) during any period of two consecutive years, individuals who at the beginning of such period constituted the Board of the Company (together with any new directors whose election by such Board or whose nomination for election by the stockholders of the Company was approved by a vote of 66-2/3% of the directors then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of the Company then in office; or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation, provided, however, that a Change in Control shall not include any going private or leveraged buy-out transaction which is sponsored by Executive or in which Executive acquires an equity interest materially in excess of his equity interest in the Company immediately prior to such transaction (each of the events described in (i), (ii), (iii) or (iv) above, except as provided otherwise by the preceding clause being referred to herein as a "Change in Control"). In the event of a sale of the assets or stock of the Company, the Executive shall have the option of electing to terminate his employment due to a Change in Control and receive such severance benefits or electing to remain employed under the terms of this Agreement, but not both. Executive's right to terminate his employment for Good Cause due to any "Change in Control" must be exercised within sixty (60) days after receiving written notice or his receiving actual knowledge of such Good Cause. (d) Cause shall mean: (i) fraud, misappropriation, embezzlement, or other act of material misconduct against the Company or any of its affiliates; (ii) substantial and willful failure to perform specific and lawful directives of the Board; 21 (iii) willful and knowing violation of any rules or regulations of any governmental or regulatory body, which is materially injurious to the financial condition of the Company; or (iv) conviction of or plea of guilty or nolo contendere to a felony; (v) a material breach of the terms and conditions of this Agreement: provided, however, that with regard to subparagraphs (ii) and (v) above, Executive may not be terminated for Cause unless and until the Board has given him reasonable written notice of its intended actions and specifically describing the alleged events, activities or omissions giving rise thereto and with respect to those events, activities or omissions for which a cure is possible, a reasonable opportunity to cure such breach; and provided further, however, that for purposes of determining whether any such Cause is present, no act or failure to act by Executive shall be considered "willful" if done or omitted to be done by Executive in good faith and in the reasonable belief that such act or omission was in the best interest of the Company and/or required by applicable law. (e) Disability shall mean that as a result of Executive's incapacity due to physical or mental illness (as determined in good faith by a physician acceptable to the Company and Executive), Executive shall have been absent from the full-time performance of his duties with the Company for 120 consecutive days during any twelve (12) month period or if a physician acceptable to the Company and Executive advises the Company that it is likely that Executive will be unable to return to the full-time performance of his duties for 120 consecutive days during the succeeding twelve (12) month period. 2. Responsibility for Benefits. The Company will pay the entire cost of all benefits provided under this Severance Agreement, solely from its general assets. The benefits made available by this Severance Agreement are "unfunded," and Executive is not required or permitted to make any contribution with respect to this Severance Agreement. 3. Payment of Benefits. In the event Executive's employment is terminated (a) by the Company other than for Cause, Disability or Death or (b) by Executive for Good Reason (as defined herein), Executive shall receive the following severance benefits upon his satisfaction of the condition in paragraph 4 hereof: (i) his Base Salary during the period commencing on the effective date of such termination and ending two (2) years later (the "Salary Continuation Period"), as if Executive were still employed during the Salary Continuation Period; and (ii) during the Salary Continuation Period, Executive and his spouse and dependents shall be entitled to continue to be covered by the Company's group medical, health and accident insurance plan to the extent such coverage was in effect as of the date of such termination, at the same coverage level and on the same terms and conditions which applied immediately prior to the date of Executive's termination of employment; provided, however, that if, as the result of the termination of Executive's employment, Executive and/or his otherwise eligible dependents or beneficiaries shall become ineligible for benefits under such plans, Executive and his spouse and dependents shall be entitled to continuation coverage pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, Sections 601-608 of the Employee Retirement Income Security Act of 1974, as amended, and under any other applicable law, to the extent required by such laws, and the Company shall reimburse Executive for the cost of such continuation coverage to the extent such coverage would have been provided at no cost to Executive prior to his termination, for a period of up to two (2) years following his termination or, if sooner, until the expiration of Executive's continuation coverage rights. 22 4. Conditions to Receipt of Benefits. Upon the occurrence of an event described in Section 3 above, Executive will be eligible for severance benefits hereunder only if Executive executes and delivers to the Company a Settlement Agreement and Release in the form of Exhibit 1 attached hereto and made a part hereof. 5. Termination Events Not Covered. Notwithstanding anything to the contrary contained herein, the Company shall not pay Executive severance benefits under this Severance Agreement if: (a) Executive dies during the term of his employment; (b) Executive's employment is terminated for Cause or Disability, as defined herein; (c) Executive terminates his employment with Company for a reason other than Good Reason as defined herein; or (d) Executive revokes his agreement to release the Company from any and all claims related to his employment pursuant to the Settlement Agreement and Release executed in satisfaction of Section 4 hereof. 6. How Severance Benefits Are Paid. The Company will pay severance benefits in installments through the Company's regular payroll procedure according to Executive's pay schedule at the time of termination of employment; provided however, the Administrator shall have the discretion to cause the Company to pay all severance benefits in a lump sum payment, or to cause the Company to postpone commencement of benefits until the eighth (8th) day following Executive's execution of the Settlement Agreement and Release. Executive's severance benefits shall be subject to mandatory withholding, including federal, state and local income taxes, as well as FICA and withholding for applicable insurance premiums. 7. Administration. The Administrator shall have all powers necessary or helpful to administering this Severance Agreement in all its details, and shall have full discretionary authority in exercising such powers. This authority includes, but is not limited to, the power: (a) To make rules and regulations for the administration of this Severance Agreement; (b) To make any finding of fact necessary or appropriate for any purpose under this Severance Agreement, including, but not limited to, the determination of eligibility for and the amount of any benefit payable under this Severance Agreement; and (c) To interpret the terms and provisions of this Severance Agreement and to determine any and all questions arising out of this Severance Agreement or in connection with its administration. This authority shall include, but is not limited to, the right to remedy or resolve possible ambiguities, inconsistencies or omissions, by general rule or particular decision. 23 (d) The Administrator shall exercise the powers conferred by this Severance Agreement in its sole and absolute discretion, and all its acts and determinations will be final and binding upon all interested parties subject to the de novo review by arbitration as provided in this Severance Agreement and Employment Agreement. 8. Benefit Claims and Appeal Procedures. Executive has the right to make a written claim for benefits under this Severance Agreement. If all or part of Executive's claim for benefits is denied, or if there is a dispute regarding Executive's rights under this Severance Agreement, the Administrator will notify Executive in writing of the reasons for the denial of Executive's claim. The notice will refer to the appropriate provision of this Severance Agreement on which the denial or decision is based. The notice will also describe how claims are reviewed and outline the steps for an appeal. Usually, the Administrator will give Executive written notice of its decision within ninety (90) days of receipt of the claim. However, the Administrator may in some cases require additional time to complete its review, due to special circumstances. The Administrator will notify Executive if additional time is required for review of the claim. If Executive disagrees with the Administrator's decision, Executive may appeal and request a review of the case by the Administrator. Executive must request a review of the claim in writing within sixty (60) days after the Administrator notifies Executive of its decision. Executive's request must state why Executive disagrees with the decision, and Executive must include any information, questions or comments to support his appeal. Executive or his legal representative may review any documents related to the claim. The Administrator will review the appeal and notify Executive of its decision within sixty (60) days after receipt of the appeal; however, the Administrator may in some cases require additional time to complete its review, due to special circumstances. The Administrator will notify Executive if additional time is required for review of the appeal. The Administrator will notify Executive of its final decision and the reasons for the decision. 9. Additional Information Regarding this Severance Agreement. (a) This Severance Agreement shall not be amended except by a written agreement executed by Executive and by an authorized officer of the Company(other than Executive). (b) The Employment Agreement and this Severance Agreement provides the sole and exclusive agreement concerning severance benefits for Executive in the event of a termination and replaces any and all prior plans, policies and practices relating to severance pay that may exist now or may have existed in the past. (c) To the extent not preempted by ERISA, the Employment Agreement and this Severance Agreement shall be governed by and construed according to the laws of the state of North Carolina. (d) If a provision of this Severance Agreement shall be held illegal or invalid, the legality or invalidity shall not affect the remaining provisions of this Severance Agreement, and this Severance Agreement shall be construed and enforced as if the illegal or invalid provision had not been included. 24 (e) Executive acknowledges that no representation, promise or inducement has been made other than as set forth in the Employment Agreement and this Severance Agreement, and that he does not enter into this Employment Agreement and Severance Agreement in reliance upon any representation, promise or inducement not set forth herein and the Employment Agreement. The Employment Agreement and this Severance Agreement supersedes all prior negotiations and understandings of any kind with respect to the subject matter and contains all of the terms and provisions of the agreement between Executive and the Company with respect to the subject matter hereof. Any representation, promise or condition, whether written or oral, not specifically incorporated herein, shall be of no binding effect. 10. Executive's Rights Under ERISA. As a participant under this Severance Agreement, Executive is entitled to certain rights and protections under ERISA. Executive may examine all documents relating to the Severance Agreement without charge. These may include annual financial reports, plan descriptions and all other official documents filed with the United States Department of Labor (if any). Executive may obtain copies of documents relating to this Severance Agreement and certain other information by writing to the Administrator. The Administrator may impose a reasonable charge for the copies. In addition to creating rights for the Executive as a participant under this Severance Agreement, ERISA imposes certain duties on the people who are responsible for operating this Severance Agreement. These people are called "fiduciaries." The fiduciaries have a duty to operate the Severance Agreement prudently and in the interest of the Executive. The Company may not terminate Executive's employment or otherwise discriminate against Executive in any way to prevent him from obtaining a severance benefit or exercising rights under ERISA. Under ERISA, Executive may take the following steps to enforce his rights: (a) if Executive requests certain materials from the administrator regarding this Severance Agreement and does not receive them within 30 days, Executive may file suit in a federal court; in such a case, the court may require the Administrator to provide the materials and pay Executive up to $100 a day until Executive receives the materials, unless the materials were not sent due to reasons beyond the control of the Administrator; (b) if Executive's claim for benefits is denied or ignored in whole or in part, Executive may file suit in federal court; (c) if Executive is discriminated against for pursuing a benefit or exercising ERISA rights, Executive may seek help from the United States Department of Labor or file suit in a federal court. If Executive files a suit, the court will decide who should pay court costs and legal fees. If Executive has any questions about this statement or about ERISA rights, Executive should contact the Administrator. Executive may also contact the nearest area office of the Pension and Welfare Benefit Administration, United States Department of Labor. 11. Miscellaneous Information About this Severance Agreement. This section provides general information about this Severance Agreement required by the Employee Retirement Income Security Act of 1974 ("ERISA"). Participation in this Severance Agreement is subject to the execution by the Executive of a Settlement Agreement and Release with the Company. This Agreement shall not be construed in any manner to give any Company employee other than the Executive the right to severance benefits upon termination of employment. Plan Sponsor: Trimeris, Inc. Tax ID Number: 56-6017737 25 Plan Name: Trimeris, Inc. 1999 Chief Executive Employment Agreement and Separation and Severance Plan Plan Number: _______ Plan Year: Calendar year Plan Type: Welfare benefit plan Effective Date: March 12, 1999 Agent For Service of Legal Process: Trimeris, Inc. Attention: Secretary IN WITNESS WHEREOF, the parties hereto have executed this Severance Agreement under seal as of the date first set forth above (the individual party adopting the word "SEAL" as his seal). COMPANY: TRIMERIS, INC. By:_______________________________ Name: Title: EXECUTIVE: ____________________________(SEAL) Name: Address: 26 EXHIBIT 1 SETTLEMENT AGREEMENT AND RELEASE THIS SETTLEMENT AGREEMENT AND RELEASE ("Settlement Agreement") sets out the complete agreement and understanding between Trimeris, Inc. (the "Company") and Dani P. Bolognesi ("Executive") regarding the termination of Executive's employment with the Company. I. RELEASE AND WAIVER: For and in consideration of the severance payments described in that certain Separation and Severance Agreement dated as of ____________________________ between the Company and Executive (the "Severance Agreement"), to be paid beginning no sooner than the eighth day following execution of this document, Executive hereby releases, waives and forever discharges the Company, its parent, affiliates and subsidiaries, and all of its benefit plans, plan administrators, trustees, agents, subsidiaries, affiliates, employees, officers, shareholders, successors and assigns (hereafter "the Releasees") from any and all liability, actions, charges, causes of action, demands, damages, attorneys fees or claims for relief or remuneration of any kind whatsoever, whether known or unknown at this time, arising out of or in any way connected with Executive's employment, or the termination of employment, with the Company. These include, but are not limited to, any claim (including related attorneys' fees and costs) under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Worker's Adjustment and Retraining Notification Act, the Equal Pay Act, the Post Civil War Civil Rights Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the North Carolina Wage and Hour Act, the North Carolina Hazardous Chemicals Right to Know Act, the North Carolina Retaliatory Employment Discrimination Act, all as amended, or any other federal, state or local law or ordinance, and any claim for benefits or other claims under the Employee Retirement Income Security Act of 1974, as amended (except as expressly provided below). This waiver, release and discharge also includes without limitation, any wrongful or unlawful discharge claims, discipline or retaliation claims, any claims relating to any contract of employment, whether express or implied, any claims related to promotions or demotions, any claims for or relating to relocation, compensation including commissions, short term or long term incentives, the Company's Executive benefit plans and the management thereof (except as expressly provided below), any claims for defamation, slander, libel, invasion of privacy, misrepresentation, fraud, infliction of emotional distress, any claims based on stress to the extent permitted by law, any claims for breach of any covenant of good faith and fair dealing, and any other claims relating to the Executive's employment with the Company and termination thereof. This Settlement Agreement does not apply to any claims or rights that may arise under the Age Discrimination in Employment Act after the date that this Settlement Agreement is signed. Executive expressly waives all claims, including those which he/she does not know or suspect to exist in his/her favor as of the date of this Settlement Agreement. As used in this Settlement Agreement, the parties understand the word "claims" to include all actions, claims and grievances, whether actual or potential, known or unknown, and specifically but not exclusively including all claims against the Releasees arising from Executive's employment with the Company, the termination thereof or any other conduct by the Releasees occurring on or 27 prior to the date Executive signs this Settlement Agreement. All such claims are forever barred by this Settlement Agreement whether they arise in contract or tort or under a statute or any other law. Executive also understands and agrees that this release extinguishes all claims, whether known or unknown, foreseen or unforeseen, and expressly waives any rights or benefits under any law or judicial decision providing that, in substance, a general release does not extend to claims which a creditor does not know or suspect to exist in his/her favor at the time of executing the release, which if known by him must have materially affected his/her settlement with a debtor. It is expressly understood and agreed by the parties that this Settlement Agreement is in full accord, satisfaction and discharge of any and all doubtful and/or disputed claims by Executive against the Releasees, and that this Settlement Agreement has been signed with the express intent of extinguishing all claims, obligations, actions or causes of action as herein described. The Executive's waiver of claims relating to or arising under the Employee Retirement Income Security Act of 1974, as amended, or the Company's 401(K) PLAN, shall not be construed as a waiver of the Executive's right to receive his/her vested benefits under such plan, if any, in accordance with the terms and provisions of such plan, or as a waiver of the Executive's right to reimbursement for covered expenses under and in accordance with the terms and provisions of the Company's health or dental insurance plans, to the extent such covered expenses were incurred during a period in which the Executive was eligible to participate and in fact was participating in such plans. II. VOLUNTARY AGREEMENT AND OTHER ACKNOWLEDGMENTS: Executive acknowledges that: I have read this Settlement Agreement, and I understand its legal and binding effect. I am knowingly and voluntarily executing this Settlement Agreement of my own free will. The severance benefits under the Severance Agreement are in addition to and in excess of benefits to which I am otherwise entitled. I have had the opportunity to seek, and the Company has expressly advised me to seek, legal counsel prior to signing this Settlement Agreement. I have been given at least 45 days from the date I received this form to consider the severance benefits being offered to me and the terms of this Settlement Agreement. At the beginning of that 45 day period, I also received a description of: (1) the class, unit, or group of individuals covered by the severance and separation plan (if any), the eligibility factors for this program, and any time limits applicable to the program; and (2) the job titles and ages of all individuals being asked to execute this Settlement Agreement in exchange for payment of severance benefits (if any) and the job titles and ages of all individuals in the same job classification or organizational unit who are not being asked to execute this Settlement Agreement. I understand that in signing this Settlement Agreement, I am releasing the Releasees from any and all claims I may have against them (except as expressly provided herein), including but not limited to claims under the Age Discrimination in Employment Act. 28 III. REVOCATION OF SETTLEMENT AGREEMENT: I understand that I can change my mind and revoke my signature on this Settlement Agreement within seven days after signing it by hand delivering notice of such revocation to the Chairman of the Compensation Committee of the Company. I understand that if I revoke this Settlement Agreement, I will not be entitled to any severance benefits under the Severance Agreement. I understand that, unless properly revoked by me during this seven-day period, the release and waiver in the first section above will become effective seven days after I sign the Settlement Agreement. VII. COMPLETE AGREEMENT: I acknowledge that no representation, promise or inducement has been made other than as set forth in this Settlement Agreement, and that I do not enter into this Settlement Agreement in reliance upon any representation, promise or inducement not set forth herein. This Settlement Agreement supersedes all prior negotiations and understandings of any kind with respect to the subject matter and contains all of the terms and provisions of agreement between the Executive and the Company with respect to the subject matter hereof. Any representation, promise or condition, whether written or oral, not specifically incorporated herein, shall be of no binding effect. VIII. GOVERNING LAW: This Settlement Agreement shall be governed by the Employee Retirement Income Security Act and, where applicable, the law of the State of North Carolina. IX. SEVERABILITY: In the event any provision of this Settlement Agreement shall be held to be void, voidable, unlawful or, for any reason, unenforceable, the remaining portions shall remain in full force and effect. The unenforceability or invalidity of a provision of this Settlement Agreement in one jurisdiction shall not invalidate or render that provision unenforceable in any other jurisdiction. If Executive's release and waiver pursuant to Section I of this Settlement Agreement is found to be unenforceable, however, Executive agrees that he/she will either sign a valid release and waiver of claims in favor of the Company and the Releasees or promptly return the severance benefits received by Executive. X. BINDING EFFECT: This Settlement Agreement is binding upon, and shall inure to the benefit of, the parties and their respective heirs, executors, administrators, successors and assigns. XI. NO ADMISSIONS: This Settlement Agreement is not intended as, and shall not be construed, as an admission that the Company and Releasees or any of them have violated any federal, state or local law, ordinance or regulation, breached any contract, or committed any wrong whatsoever against Executive. AGREED AND UNDERSTOOD: EXECUTIVE: - ------------------------- ----------------------- Name: Dani P. Bolognesi Date EX-11 4 EXHIBIT 11.1 Exhibit 11.1 Computations of Basic Loss Per Share. TRIMERIS, INC. STATEMENTS RE: COMPUTATIONS OF BASIC LOSS PER SHARE (in thousands, except per share data) Three Months Ended March 31, 1998 1999 ---- ---- Common shares outstanding (weighted average) (1) 10,520 10,677 Common Stock equivalents (using the treasury stock method): Stock Options and Awards (weighted average) Pursuant to Staff Accounting Bulletin No. 83 (2) 100 100 -------- --------- Total weighted average shares 10,620 10,777 ======== ========= Net loss $ (2,967) $ (5,367) ======== ========= Basic net loss per share $ (0.28) $ (0.50) ========== ========== (1) Assumes the retroactive conversion of the Preferred Stock into shares of Common Stock which occurred upon the completion of the Company's Initial Public Offering in October, 1997, for all periods presented. (2) Includes all options and awards issued during the twelve-month period prior to the initial filing of the registration statement relating to the Company's Initial Public Offering, in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 83. EX-27 5 EXHIBIT 27.1
5 3-MOS DEC-31-1999 MAR-30-1999 9,831 4,151 46 0 0 14,361 4,678 2,957 16,798 3,168 0 0 0 11 12,874 16,798 0 81 0 0 5,637 0 42 (5,367) 0 (5,367) 0 0 0 (5,367) (0.50) (0.50)
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