FORM OF INDEMNITY ESCROW AGREEMENT

 

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                                                                   Exhibit 2.2.4

 

                       FORM OF INDEMNITY ESCROW AGREEMENT

 

            ESCROW AGREEMENT, dated as of August 16, 2005 (this "Agreement"),

among EPIMMUNE INC., a Delaware corporation (the "Issuer"), HELENE PLOIX (the

"Shareholder Representative"), as designated representative of certain

shareholders (the "IDM Shareholders") of IDM S.A., a societe anonyme organized

under the laws of France (the "Company") identified on Schedule A hereto, and

U.S. BANK NATIONAL ASSOCIATION, a national banking association, as escrow agent

(the "Escrow Agent").

 

                               W I T N E S E T H:

 

            WHEREAS, the Issuer and certain shareholders of the Company have

entered into a Share Exchange Agreement, dated March 15, 2005, as amended, a

copy of which is attached hereto (but not made a part hereof) as Exhibit A (the

"Exchange Agreement"; capitalized terms not defined herein have the meanings

ascribed to them in the Exchange Agreement);

 

            WHEREAS, the Boards of Directors of the Issuer and the Company have

each determined that it is in the best interests of their respective

shareholders for the Issuer to acquire the Company upon the terms and subject to

the conditions set forth in the Exchange Agreement;

 

            WHEREAS, pursuant to the Exchange Agreement, the Issuer has agreed

to exchange shares of common stock, par value $0.01 per share, of the Issuer

("Issuer Common Stock") for issued and outstanding class A ordinary shares,

nominal value (euro)0.01 per share, of the Company ("Company A Shares") and

class B ordinary shares, nominal value (euro)0.01 per share, of the Company

("Company B Shares" and, together with the Company A Shares, the "Company

Shares"), upon the terms and subject to the conditions set forth in the Exchange

Agreement;

 

            WHEREAS, it is contemplated under the Exchange Agreement that the

Issuer will deposit or cause to be deposited into escrow at the Closing

certificates representing in the aggregate 1,061,571 shares of Issuer Common

Stock (the "Escrow Shares") issued in the name of the IDM Shareholders as

provided in Section 1.02 hereof to secure the indemnification obligations of the

IDM Shareholders as set forth in Article IX of the Exchange Agreement and to be

held and disbursed by the Escrow Agent in accordance with Section 1.07 of this

Agreement;

 

            WHEREAS, pursuant to Section 9.04 of the Exchange Agreement, Helene

Ploix has been appointed to act as the representative of the IDM Shareholders,

and is authorized to act on behalf of the IDM Shareholders with respect to any

claims by the Issuer for indemnification or to be held harmless pursuant to

Article IX of the Exchange Agreement and with respect to any actions to be taken

by the Shareholder Representative pursuant to the terms of this Agreement;

 

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            WHEREAS, the Escrow Agent is willing to act as the Escrow Agent

hereunder.

 

            NOW, THEREFORE, in consideration of the foregoing and the mutual

covenants and agreements herein contained, and intending to be legally bound

hereby, the parties hereby agree as follows:

 

                                   ARTICLE I

 

                                     ESCROW

 

            SECTION 1.01 Appointment and Agreement of Escrow Agent The Issuer

and the Shareholder Representative hereby appoint the Escrow Agent to serve as,

and the Escrow Agent hereby agrees to act as, escrow agent upon the terms and

conditions of this Agreement.

 

            SECTION 1.02 Establishment of the Escrow Fund. (a) Pursuant to

Section 1.06 of the Exchange Agreement, the Issuer and the Shareholder

Representative shall deliver to the Escrow Agent on the date hereof

certificates, which in the aggregate represent the Escrow Shares of the IDM

Shareholders. The Escrow Agent shall hold the Escrow Shares and/or any cash (the

"Escrow Fund") in escrow pursuant to this Agreement. Each certificate

representing a portion of the Escrow Shares shall be registered in the name of

an IDM Shareholder and shall represent the number of shares of Issuer Common

Stock otherwise issuable to such IDM Shareholder in the Share Exchange, but not

delivered to such IDM Shareholder at the Closing pursuant to Section

1.05(a)(i)(B) of the Share Exchange Agreement. With the delivery of Escrow

Shares, the Issuer shall deliver to the Escrow Agent a certificate specifying

the date of the Closing.

 

            (b) Each of the Issuer and the Shareholder Representative confirms

to the Escrow Agent and to each other that the Escrow Shares are free and clear

of all Liens except as may be created by this Agreement and the Exchange

Agreement.

 

            (c) No later than September 15, 2005, the Shareholder Representative

shall deliver to the Escrow Agent one stock transfer power for each certificate

delivered pursuant to Section 1.02(a) above and duly executed by the respective

IDM Shareholder.

 

            SECTION 1.03 Purpose of the Escrow Fund. The Escrow Shares will be

deposited with the Escrow Agent and held by the Escrow Agent to secure the

indemnification obligations of the IDM Shareholders contained in Article IX of

the Exchange Agreement.

 

            SECTION 1.04 Company Shareholder Percentage Interest in Escrow Fund.

Attached hereto as Schedule A is a schedule listing the name, address and, if

applicable and when known, the taxpayer identification number of each IDM

Shareholder and such IDM Shareholder's initial percentage interest in the Escrow

Fund (expressed as a percentage, based on the number of shares of Issuer Common

Stock delivered to the Escrow Agent at Closing on behalf of such IDM

Shareholder). If any fact stated in Schedule A changes, the Shareholder

Representative shall furnish a revised version of Schedule A to the Escrow

Agent. Unless and until the Escrow Agent receives such a revised version, the

Escrow Agent may assume without inquiry that each fact set forth in the most

recent Schedule A it has received is correct.

 

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            SECTION 1.05 IDM Shareholder Rights. (a) While any Escrow Shares are

held in escrow in the Escrow Fund, and pending the distribution thereof to the

Issuer or the IDM Shareholders, as the case may be, in connection with any

distributions from the Escrow Fund in accordance with Section 1.07 hereof, each

IDM Shareholder will have all rights with respect to the Escrow Shares

attributable to such IDM Shareholder's name (including, without limitation, the

right to vote such shares), except (i) the right of possession thereof or (ii)

the right to sell, assign, pledge, hypothecate or otherwise dispose of such

shares or any interest therein. IDM Shareholders shall have the right to receive

any cash dividends or other cash distributions in respect thereof, which shall

be paid by the Issuer directly to the IDM Shareholders.

 

            (b) The Issuer and the Shareholder Representative (on behalf of each

of the IDM Shareholders) agree between themselves, for the benefit of the Issuer

and the Escrow Agent, that, except as otherwise provided in the last sentence of

Section 1.05(a), any shares of Issuer Common Stock or other property distributed

or issued (whether by way of dividend, stock split or otherwise) in respect of

or in exchange for any Escrow Shares (including pursuant to or as a part of a

merger, consolidation, acquisition of property or stock, reorganization or

liquidation involving the Issuer) shall not be distributed or issued to the IDM

Shareholders, but rather shall be distributed or issued to and held by the

Escrow Agent in the Escrow Fund and shall constitute a part of the Escrow

Shares.

 

            (c) Each IDM Shareholder shall be responsible for and shall pay and

discharge all taxes, assessments and governmental charges imposed on or with

respect to the Escrow Shares attributable to such IDM Shareholder.

 

            SECTION 1.06 Share Value. The parties hereto agree and acknowledge

that, for all purposes under this Agreement, the value of each Escrow Share

shall be equal to the Average Closing Price (as defined below) as of the date of

distribution or setting aside of such Escrow Share pursuant to Section 1.07 (the

"Share Value"). "Average Closing Price" means, for any specified date, the

average of the per share closing (at 4:00 p.m., Eastern Time) prices on the

Nasdaq National Market of shares of Issuer Common Stock during the five

consecutive trading days ending on, and including, the trading day immediately

preceding such specified date.

 

            SECTION 1.07 Payments from the Escrow Fund. (a) If, at any time on

or prior to 11:59 p.m. California Time on the date six months following the

Closing (the "Expiration Date"), (i) any Issuer Indemnified Party actually

suffered or incurred a quantified Loss for which it is entitled to be

indemnified under Article IX of the Exchange Agreement or (ii) (A) there has

been a breach of any statement regarding the Company contained in Article II of

the Exchange Agreement, a breach of any representation or warranty made by each

IDM Shareholder in Article III of the Exchange Agreement or a breach of any

covenant or agreement regarding the Company or by the IDM Shareholders contained

in Article V or Article VI of the Exchange Agreement and (B) the Issuer

Indemnified Party reasonably and in good faith believes that such breach will

result in such Issuer Indemnified Party actually suffering or incurring a

quantifiable Loss prior to the Estimated Loss Expiration Date (as defined below)

for which it is entitled to be indemnified under Article IX of the Exchange

Agreement, which Loss is not quantifiable as of the date of the Claim

Certificate (as defined below) (an "Estimated Loss"), then such Issuer

Indemnified Party shall deliver to the Escrow Agent and the Shareholder

Representative a certificate (a "Claim Certificate"), which Claim Certificate

shall:

 

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            (i) state that the Issuer Indemnified Party has paid or incurred a

      Loss or reasonably and in good faith believes it will incur an Estimated

      Loss for which, in each case, it is entitled to indemnification pursuant

      to Article IX of the Exchange Agreement (an "Indemnification Item");

 

            (ii) state the aggregate amount of the Loss or a good faith,

      non-binding estimate of such Estimated Loss made in the Claim Certificate,

      in each case, in U.S. dollars, and the estimated number of shares of

      Issuer Common Stock necessary to satisfy the Loss or Estimated Loss

      specified in the Indemnification Item based on the Average Closing Price

      as of the date of the Claim Certificate; and

 

            (iii) specify in reasonable detail the nature and amount of each

      individual Indemnification Item, including whether such Indemnification

      Item results from a breach of representation or warranty contained in

      Article III of the Exchange Agreement or covenant of an IDM Shareholder or

      a breach of any representation or warranty regarding the Company contained

      in Article II of the Exchange Agreement.

 

            In no event may a Claim Certificate be submitted after the

Expiration Date and any Indemnification Item related to an Estimated Loss and

claimed in a Claim Certificate validly submitted prior to the Expiration Date

shall be withdrawn if the Estimated Loss does not result in the Issuer

Indemnified Party actually suffering or incurring a quantifiable Loss within

nine months after the Expiration Date (the "Estimated Loss Expiration Date")

 

            (b) If the Shareholder Representative shall object to any amount

claimed or estimated in any Claim Certificate delivered in connection with any

Indemnification Item specified in any Claim Certificate, the Shareholder

Representative shall, within 15 business days after delivery by the Issuer

Indemnified Party to the Shareholder Representative and the Escrow Agent of such

Claim Certificate, deliver to such Issuer Indemnified Party and the Escrow Agent

a certificate, executed by the Shareholder Representative (a "Company

Shareholder Certificate"), (i) specifying each such amount to which the

Shareholder Representative objects and (ii) specifying in reasonable detail the

nature and basis for each such objection. Notwithstanding anything to the

contrary contained herein, the Shareholder Representative shall be deemed to

object to any Estimated Loss claimed in any Claim Certificate delivered to the

Shareholder Representative in accordance with Section 1.07(a).

 

            (c) If the Escrow Agent shall not have received a Company

Shareholder Certificate objecting to the amount claimed with respect to an

Indemnification Item within 15 business days after delivery to the Shareholder

Representative and the Escrow Agent of a Claim Certificate specifying such

Indemnification Item, the IDM Shareholders shall be deemed to have acknowledged

the correctness of the U.S. dollar amount claimed on such Claim Certificate with

respect to such Indemnification Item, and the Escrow Agent shall thereafter

forward to the transfer agent for the Issuer Common Stock (the "Transfer Agent")

as soon as administratively practicable for further transfer to the Issuer, out

of the Escrow Fund (such transfer to be applied pro rata in accordance with each

IDM Shareholder's percentage interest in the Escrow Fund, except as otherwise

provided in Section 1.07(h)) such number of shares of Issuer Common Stock equal

to the lesser of (A) the number of shares equal to the U.S. dollar amount

claimed in the Claim Certificate with respect to such Indemnification Item

divided by the Share Value and (B)

 

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the number of Escrow Shares then remaining in the Escrow Fund. Notwithstanding

anything to the contrary contained herein, the Shareholder Representative shall

be deemed to object to any estimated amount claimed with respect to an

Indemnification Item and such amount shall constitute an Objected Amount (as

defined below) for purposes of this Agreement.

 

            (d) If the Escrow Agent receives, within 15 business days after

delivery to the Shareholder Representative and the Escrow Agent of a Claim

Certificate, a Company Shareholder Certificate objecting to any amount or

amounts claimed with respect to any Indemnification Item specified in such Claim

Certificate or, with respect to any Estimated Loss, the amount of any Estimated

Loss deemed objected to pursuant to Section 1.07(b), the amount or amounts so or

so deemed objected to valued pursuant to Section 1.06 as of the date of the

applicable Claim Certificate (the "Objected Amount") shall be held by the Escrow

Agent and shall not be released from the Escrow Fund, except in accordance with

either (i) written instructions executed by each of an authorized officer of the

Issuer and the Shareholder Representative or (ii) written instructions from the

Issuer Indemnified Party and the final nonappealable decision of a panel of

arbitrators selected pursuant to Section 3.09 hereof or Section 10.07 of the

Exchange Agreement relating to the claim by the Issuer Indemnified Party for

indemnification from the IDM Shareholders, after which time the Escrow Agent

shall forward to the Transfer Agent as soon as administratively practicable for

further transfer to the Issuer Indemnified Party, out of the Escrow Fund (such

transfer to be applied pro rata in accordance with each IDM Shareholder's

percentage interest in the Escrow Fund, except as otherwise provided in Section

1.07(h)) such number of shares of Issuer Common Stock, as specified in the

decision, or if not so specified, as determined by the Issuer Indemnified Party

in accordance with such decision and communicated to the Escrow Agent in writing

and equal to the lesser of (A) the amount set forth in the written instructions

or in such decision, as the case may be, divided by the Share Value valued in

accordance with Section 1.06 as of the date of distribution and (B) the number

of shares of Issuer Common Stock then remaining in the Escrow Fund. Except as

otherwise provided in the last sentence of Section 1.07(c), any amount or

amounts claimed with respect to any Indemnification Item specified in such Claim

Certificate other than any Objected Amount shall be treated as if no objection

was made with respect thereto pursuant to Section 1.07(b) and shall be promptly

released to the Issuer from the Escrow Fund in accordance with Section 1.07(c).

 

            (e) The Shareholder Representative and the Issuer Indemnified Party

shall attempt in good faith to resolve any dispute related to the Objected

Amount. If the Issuer Indemnified Party and the Shareholder Representative

resolve such dispute, such resolution shall be binding on all of the IDM

Shareholders and a settlement agreement shall be entered into by such Issuer

Indemnified Party and the Shareholder Representative and sent to the Escrow

Agent, which shall, upon receipt thereof, if applicable, release Escrow Shares

(or other property held in the Escrow Fund) from the Escrow Fund in accordance

with such agreement and Section 1.07(d). If the Shareholder Representative and

the Issuer Indemnified Party are unable to resolve any dispute related to any

Objected Amount within 45 days after the delivery of the Claim Certificate, then

the claim described in the Claim Certificate and related to the Objected Amount

shall be settled by binding arbitration in accordance with Section 3.09 hereof,

provided that with respect to an Estimated Loss, the related Objected Amount

shall be settled by binding arbitration in accordance with Section 3.09 hereof

if the Shareholder Representative and the Issuer Indemnified Party are unable to

resolve any dispute with respect to such Objected Amount

 

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within 45 days after delivery of a certificate (a "Loss Certificate") by the

Issuer Indemnified Party to the Shareholder Representative stating that the

Estimated Loss has been paid or incurred, the aggregate amount of the Loss in

U.S. dollars and the estimated number of shares of Issuer Common Stock necessary

to satisfy the Loss based on the Average Closing Price as of the date of the

Loss Certificate.

 

            (f) Notwithstanding the limitations set forth in Section 1.07(a) of

this Agreement, following the Expiration Date, any Issuer Indemnified Party

shall be entitled to assert claims against the Escrow Fund under this Section

1.07 in respect of all Losses that were included in determining the Reserved

Amount (as defined below).

 

            (g) If, on the Expiration Date, the Reserved Amount is less than the

product of the number of Escrow Shares then remaining in the Escrow Fund and the

Average Closing Price on the Expiration Date then, the Escrow Agent shall

promptly liquidate all investments (other than shares of Issuer Common Stock) of

the Escrow Fund and (i) first, shall forward to the Transfer Agent as soon as

administratively practicable for further transfer to the Shareholder

Representative, out of the Escrow Fund (such transfer to be applied pro rata in

accordance with each IDM Shareholder's percentage interest in the Escrow Fund,

except as otherwise provided in Section 1.07(h)) such number of shares of Issuer

Common Stock equal to the aggregate amount of the Shareholder Representative

Claims (as defined below) claimed and unpaid in all Shareholder Representative

Certificates (as defined below) delivered by the Shareholder Representative

prior to the Expiration Date in accordance with Section 1.11 divided by the

Share Value; provided that in the event that the number of Escrow Shares

remaining in the Escrow Fund after the transfer of shares of Issuer Common Stock

to the Shareholder Representative pursuant to this Section 1.07(g) would be less

than the number of shares of Issuer Common Stock (the "Reserved Shares") equal

to the Reserve Amount divided by the Average Closing Price on the Expiration

Date, the number of shares of Issuer Common Stock transferable to the

Shareholder Representative pursuant to this Section 1.07(g) shall be reduced

such that the Reserved Shares would remain in the Escrow Fund; and (ii) second,

shall transfer to each IDM Shareholder (A) by wire transfer in immediately

available funds in accordance with the written wire transfer instructions

provided by the Shareholder Representative, the amount in cash, if any, then

remaining in the Escrow Fund and attributable to the Escrow Shares attributable

to such IDM Shareholder and (B) the number of shares of Issuer Common Stock

attributable to such IDM Shareholder then remaining in the Escrow Fund after the

transfer of Escrow Shares to the Shareholder Representative pursuant to Section

1.07(g)(i) less such IDM Shareholder's percentage interest of the Reserved

Shares. For purposes of this Agreement, the "Reserved Amount" shall be equal to

the aggregate of the U.S. dollar amounts claimed and unpaid in all Claim

Certificates delivered to the Shareholder Representative prior to the Expiration

Date (which claims shall not have been resolved on or prior to the Expiration

Date).

 

            (h) With respect to indemnifiable Losses resulting from a breach by

a particular IDM Shareholder of a representation or warranty contained in

Article III of the Exchange Agreement or a covenant of a particular IDM

Shareholder and not from a breach of any statement regarding the Company

contained in Article II of the Exchange Agreement or the failure of a particular

IDM Shareholder to deliver such IDM Shareholder's Pro Rata Amount to the Expense

Escrow Agent, any Escrow Shares transferred out of the Escrow Fund pursuant to

Sections 1.07(c), 1.07(d), 1.07(g) or 1.07(i) shall be transferred out of such

IDM Shareholder's

 

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percentage interest in the Escrow Fund and shall not be accounted against the

interest of other IDM Shareholders in the Escrow Fund. Following such transfer,

pursuant to Section 1.04, the Shareholder Representative shall furnish a

corrected version of Schedule A to the Escrow Agent.

 

             (i) Upon the termination of this Agreement in accordance with

Section 3.01, the Escrow Agent shall promptly liquidate all investments (other

than shares of Issuer Common Stock) of the Escrow Fund and (i) first, shall

forward to the Transfer Agent as soon as administratively practicable for

further transfer to the Shareholder Representative, out of the Escrow Fund (such

transfer to be applied pro rata in accordance with each IDM Shareholder's

percentage interest in the Escrow Fund, except as otherwise provided in Section

1.07(h)) such number of shares of Issuer Common Stock equal to the aggregate

amount of the Shareholder Representative Claims claimed and unpaid in all

Shareholder Representative Certificates delivered by the Shareholder

Representative prior to the termination of this Agreement in accordance with

Section 1.11 divided by the Share Value and (ii) second, shall transfer to each

IDM Shareholder (A) the shares of Issuer Common Stock attributable to such IDM

Shareholder then remaining in the Escrow Fund and (B) by wire transfer in

immediately available funds, the amount in cash, if any, then remaining in the

Escrow Fund and attributable to such IDM Shareholder in accordance with the

written wire transfer instructions provided by the Shareholder Representative,

which shall be deemed to be standing instructions unless revised instructions

are subsequently received by the Escrow Agent.

 

            SECTION 1.08 Allocation of Escrow Shares. (a) With respect to any

Escrow Shares distributed to the IDM Shareholders pursuant to Section 1.07 of

this Agreement, the Escrow Agent, the Shareholder Representative and the Issuer

will take such action as may be necessary: (i) to cause appropriate certificates

to be issued and delivered to the IDM Shareholders and (ii) to the extent

necessary if not all shares of Issuer Common Stock have been distributed from

the Escrow Fund, to cause appropriate certificates to be issued to in the name

of each IDM Shareholder representing the Escrow Shares to remain in the Escrow

Fund and attributable to such IDM Shareholder and to deliver to the Escrow Agent

such certificates representing, in the aggregate, the number of shares of Issuer

Common Stock remaining in the Escrow Fund after such distribution to the IDM

Shareholders, each endorsed in blank or accompanied by stock transfer powers

duly executed by the respective IDM Shareholder.

 

            (b) In the event Escrow Shares are distributed by the Escrow Agent

to the Issuer pursuant to Section 1.07 of this Agreement and, after such

distribution, shares of Issuer Common Stock remain in the Escrow Fund, the

Issuer, the Shareholder Representative and the Escrow Agent will take such

action as may be necessary to cause appro