<PAGE>   1
 
   AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 22, 2000
 
                                            REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                             XCYTE THERAPIES, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 

<TABLE>
<S>                                <C>                                <C>
             DELAWARE                             2834                           91-170-7622
 (STATE OR OTHER JURISDICTION OF      (PRIMARY STANDARD INDUSTRIAL             (I.R.S. EMPLOYER
  INCORPORATION OR ORGANIZATION)      CLASSIFICATION CODE NUMBER)           IDENTIFICATION NUMBER)
</TABLE>

 
                        1124 COLUMBIA STREET, SUITE 130
                           SEATTLE, WASHINGTON 98104
                                 (206) 262-6200
       (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA
               CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
                            ------------------------
 
                            RONALD J. BERENSON, M.D.
                     PRESIDENT AND CHIEF EXECUTIVE OFFICER
                             XCYTE THERAPIES, INC.
                        1124 COLUMBIA STREET, SUITE 130
                           SEATTLE, WASHINGTON 98104
                                 (206) 262-6200
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                               AGENT FOR SERVICE)
                            ------------------------
 
                                   COPIES TO:
 

<TABLE>
<S>                                                 <C>
                 SONYA F. ERICKSON                                   DANIELLE CARBONE
                 VENTURE LAW GROUP                                  SHEARMAN & STERLING
            A PROFESSIONAL CORPORATION                        1550 EL CAMINO REAL, SUITE 100
                4750 CARILLON POINT                                MENLO PARK, CA 94025
                KIRKLAND, WA 98033                                    (650) 330-2200
                  (425) 739-8700
</TABLE>

 
                            ------------------------
 
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
 
    If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
    If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.  [ ]
 
    If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.  [ ]
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE
 

<TABLE>
<S>                                         <C>                                    <C>
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
                                                      PROPOSED MAXIMUM
          TITLE OF EACH CLASS OF                     AGGREGATE OFFERING                          AMOUNT OF
       SECURITIES TO BE REGISTERED                        PRICE(1)                           REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------
Common Stock $0.001 par value.............               $86,250,000                            $22,770.00
------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------
</TABLE>

 
(1) Estimated solely for the purpose of computing the amount of the registration
    fee pursuant to Rule 457(o) under the Securities Act of 1933.
                            ------------------------
 
    THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   2
 
      THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
      MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
      THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS
      NOT AN OFFER TO SELL THESE SECURITIES, AND IT IS NOT SOLICITING AN OFFER
      TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
      PERMITTED.
 
                  SUBJECT TO COMPLETION, DATED
 
PROSPECTUS
                                                SHARES
 
                                  [XCYTE LOGO]
 
                                  COMMON STOCK
 
     This is an initial public offering of shares of common stock of Xcyte
Therapies, Inc. Xcyte Therapies expects that the initial public offering price
will be between $     and $     per share.
 
     We have applied for approval for trading and quotation of our common stock
on the Nasdaq National Market under the symbol "XCYT."
 
     OUR BUSINESS INVOLVES SIGNIFICANT RISKS.  THESE RISKS ARE DESCRIBED UNDER
THE CAPTION "RISK FACTORS" BEGINNING ON PAGE 5.
 
     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
                           -------------------------
 

<TABLE>
<CAPTION>
                                                              PER SHARE       TOTAL
<S>                                                           <C>           <C>
Public offering price.......................................  $             $
Underwriting discounts and commissions......................  $             $
Proceeds, before expenses, to Xcyte Therapies...............  $             $
</TABLE>

 
     The underwriters may also purchase up to an additional            shares of
common stock at the public offering price, less the underwriting discounts and
commissions, to cover over-allotments.
 
     The underwriters expect to deliver the shares against payment in New York,
New York on                       , 2001.
                           -------------------------
 
SG COWEN                                              U.S. BANCORP PIPER JAFFRAY
                    DAIN RAUSCHER WESSELS
                                       FIRST SECURITY VAN KASPER
 
           , 2001

<PAGE>   3
 
                               TABLE OF CONTENTS
 

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Prospectus Summary....................    1
Risk Factors..........................    5
Special Note Regarding Forward-Looking
  Statements..........................   17
Use of Proceeds.......................   18
Dividend Policy.......................   18
Capitalization........................   19
Dilution..............................   20
Selected Financial Data...............   21
Management's Discussion and Analysis
  of Financial Condition and Results
  of Operations.......................   22
</TABLE>

 

<TABLE>
<CAPTION>
                                        PAGE
                                        ----
<S>                                     <C>
Business..............................   27
Management............................   43
Certain Transactions..................   54
Principal Stockholders................   56
Description of Capital Stock..........   59
Shares Eligible for Future Sale.......   63
Underwriting..........................   65
Legal Matters.........................   67
Experts...............................   67
Where You Can Find Additional
  Information.........................   68
Index to Financial Statements.........  F-1
</TABLE>

 
                           -------------------------
 
     UNTIL                     , 2001, ALL DEALERS THAT EFFECT TRANSACTIONS IN
THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS REQUIREMENT IS IN ADDITION TO THE DEALERS'
OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
                           -------------------------
 
     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT. WE
ARE OFFERING TO SELL AND SEEKING OFFERS TO BUY SHARES OF OUR COMMON STOCK ONLY
IN JURISDICTIONS WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED
IN THIS PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS,
REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY SALE OF OUR
COMMON STOCK.
 
                           -------------------------
 
     WE HAVE FILED FOR TRADEMARK REGISTRATION OF XCYTE, XCYTE THERAPIES,
XCELLERATE AND THE XCYTE THERAPIES LOGO. THIS PROSPECTUS ALSO INCLUDES
TRADEMARKS AND TRADENAMES OF OTHER PARTIES.

<PAGE>   4
 
                               PROSPECTUS SUMMARY
 
     You should carefully read the more detailed information contained in this
prospectus, including our financial statements and related notes included in
this prospectus. Unless otherwise noted, all information in this prospectus
assumes (1) the conversion of all outstanding shares of our preferred stock into
28,059,047 shares of common stock, (2) the issuance of 1,132,287 shares of
common stock upon the exercise of warrants to purchase common stock, which
warrants will expire at the closing of this offering, (3) the issuance of
380,725 shares of common stock upon the exercise of the warrants to purchase
preferred stock, which warrants will expire at the closing of this offering, and
the subsequent conversion of the preferred stock, (4) the conversion of
preferred stock warrants into common stock warrants for the purchase of 280,029
shares of common stock and (5) no exercise by the underwriters of the
over-allotment option. We also intend to effect a   -for-  reverse stock split
that would be effected prior to consummation of this offering. This prospectus
does not reflect this reverse split.
 
                                  OUR COMPANY
 
     We are utilizing novel technologies to develop therapeutic products that
generate effective immune responses to treat cancer and infectious diseases. We
use our proprietary technology, known as Xcellerate, to activate and grow T
cells. T cells are specialized cells of the immune system that play a central
role in fighting diseases and infections. Our Xcellerate Technology rapidly and
reproducibly activates a patient's own T cells outside of the body by mimicking
normal events of the immune system. T cells activated with our technology, known
as Xcellerated T Cells, may be administered to treat patients who have either
poorly functioning or low numbers of T cells. We believe we have developed an
efficient and commercially viable process to produce Xcellerated T Cells. Our
approach, known as Xcellerate Therapy, may allow us to treat a variety of
medical conditions, including:
 
     - diseases characterized by poorly functioning immune systems, such as
       cancer and HIV;
 
     - conditions due to medical treatments, such as chemotherapy and the
       administration of drugs following transplantation, that suppress the
       immune system and cause patients to be vulnerable to infections; and
 
     - congenital disorders and advanced age that result in weakened immune
       systems.
 
     In July 2000, we initiated a Phase I clinical trial of our Xcellerate
Therapy in patients with metastatic kidney cancer. We intend to enroll a total
of 25 patients to test the safety as well as provide preliminary data on the
therapeutic effects of our Xcellerate Therapy. In this clinical trial, patients
are treated with two infusions of our Xcellerated T Cells approximately four
weeks apart. As of December 15, 2000, 17 patients have received a total of 32
infusions of our Xcellerated T Cells. To date, there have been no significant
adverse effects related to the administration of our Xcellerated T Cells and we
have observed evidence of anti-tumor activity. We expect to complete this trial
in the third quarter of 2001.
 
     Physicians have recently begun to recognize the important role that the
immune system may play in controlling cancer and improving the body's defenses
against infectious diseases. This has led to the development of a new
therapeutic approach to cancer known as immunotherapy, which uses natural
components of the immune system to fight disease. The American Cancer Society
estimates that in 2000, 1.2 million new cases of cancer will occur in the United
States. Surgery, radiation and chemotherapy are the primary approaches used to
treat cancer patients. Chemotherapy is used to treat patients with more advanced
forms of cancer, but has limited success and is associated with severe and
sometimes life-threatening side effects. Infectious diseases are caused by
viruses, bacteria and fungi and can be controlled in most people with
antibiotics or antiviral drugs. However, when a patient's immune system is
compromised, normally harmless microorganisms may cause potentially
life-threatening infections. We intend to evaluate our Xcellerate Therapy as a
potential treatment for a variety of cancers and infectious diseases.
 
                                        1

<PAGE>   5
 
Benefits of Our Xcellerate Therapy
 
     We provide a direct and reproducible method to activate T cells and we
believe our Xcellerate Therapy may be an effective treatment to fight disease.
We believe our Xcellerate Therapy has the following benefits:
 
     - Activated Immune System. We have demonstrated in the laboratory that our
       Xcellerated T Cells are highly responsive and generate potent immune
       responses because we mimic the natural process required to activate both
       helper T cells and killer T cells.
 
     - Broad Clinical Applications. Our Xcellerate Therapy targets T cells,
       which are important components of the immune system. We believe that our
       Xcellerated T Cells may be useful to treat a variety of medical
       conditions, including cancer and infectious diseases.
 
     - Minimal Toxicity. Our Xcellerated T Cells are produced from T cells
       originating from the patient. We believe that using a patient's own cells
       results in a safer product.
 
     - Easy Administration. Our Xcellerate Therapy can be administered in a
       simple outpatient procedure in less than 30 minutes. This process uses a
       standard intravenous procedure that is attractive to both physicians and
       patients.
 
     - Complementary to Other Technologies. The minimal toxicity associated with
       our Xcellerate Therapy may make it feasible to use our product with
       chemotherapy or antiviral drugs, as well as with other therapeutic
       products that are being used to activate the immune system.
 
Benefits of Our Xcellerate Technology
 
     We believe our proprietary Xcellerate Technology can be developed into a
commercially viable process. The benefits of our Xcellerate Technology are:
 
     - Rapid and Reproducible Process. Our Xcellerate Technology can be used to
       activate and grow T cells in eight days with minimal intervention. We
       believe this length of time is sufficient to generate the number of T
       cells necessary for a therapeutic effect. We use the same process and
       components for every patient, eliminating the need for patient-specific
       materials that must be obtained by surgery, such as samples of a
       patient's tumor.
 
     - Ex Vivo Process. Our Xcellerate Technology activates T cells outside of
       the body, or ex vivo. Activating and growing T cells outside of the body
       provides a more controlled environment away from tumor cells and
       infectious agents that can otherwise inhibit the activation and growth of
       T cells. In addition, therapeutic agents that are otherwise potentially
       toxic or fatal if administered directly to the patient can be used to
       improve the activity and growth of T cells.
 
     - Standard and Cost-effective Manufacturing Process. Our Xcellerate
       Technology incorporates primarily commercially available medical products
       and standard blood bank procedures, which enables us to efficiently
       manufacture our Xcellerated T Cells. We believe we are able to
       manufacture our Xcellerated T Cells in facilities that can be
       cost-effectively constructed, equipped and easily scaled.
 
     Our goal is to be a leader in the field of T cell therapy. We intend to use
our expertise in T cell activation to develop and commercialize products to
treat cancer, HIV and other serious illnesses. Key elements of our strategy
include:
 
     - commercializing our Xcellerate Therapy for cancer and HIV;
 
     - expanding the Xcellerate Therapy to treat multiple diseases;
 
     - leveraging complementary technologies and therapies;
 
     - retaining key commercialization rights;
 
     - evaluating collaboration opportunities for our products; and
 
     - expanding our intellectual property.
 
                                        2

<PAGE>   6
 
                                  THE OFFERING
 
Common stock we are offering............                    shares
 
Common stock to be outstanding after
this offering...........................                    shares
 
Underwriters' over-allotment option.....                    shares
 
Use of proceeds.........................     We intend to use the net proceeds
                                             for clinical trials, research and
                                             development activities, expansion
                                             of our manufacturing capacity and
                                             general corporate purposes and
                                             working capital
 
Proposed Nasdaq National Market
symbol..................................     XCYT
 
     The number of shares of our common stock to be outstanding immediately
after this offering is based on the number of shares outstanding on September
30, 2000. This number:
 
     - includes 5,965,234 shares of our outstanding common stock;
 
     - includes an aggregate of 28,059,047 shares of common stock issuable upon
       the automatic conversion of all outstanding shares of preferred stock
       upon the closing of this offering;
 
     - includes 1,132,287 shares of common stock issuable upon the exercise of
       warrants to purchase common stock at an exercise price of $0.30 per
       share, which warrants will expire at the closing of this offering;
 
     - includes 380,725 shares of common stock issuable upon the exercise of
       warrants to purchase preferred stock at a weighted average exercise price
       of $0.97, which warrants will expire at the closing of this offering, and
       the subsequent conversion of the preferred stock;
 
     - excludes 280,029 shares of common stock issuable upon the exercise of
       warrants to purchase 280,029 shares of preferred stock which were assumed
       to have been converted into warrants to purchase 280,029 shares of common
       stock upon the closing of this offering;
 
     - excludes 1,626,221 shares of common stock issuable upon the exercise of
       stock options outstanding under our 1996 Stock Option Plan at a weighted
       average exercise price of $0.24 per share;
 
     - excludes 785,354 shares of common stock reserved for future grant under
       our 1996 Stock Option Plan;
 
     - excludes 2,100,000 shares of common stock reserved for future issuance
       under our 2000 Stock Option Plan;
 
     - excludes 600,000 shares of common stock reserved for future issuance
       under our 2000 Employee Stock Purchase Plan;
 
     - excludes 400,000 shares of common stock reserved for future issuance
       under our 2000 Directors' Stock Option Plan;
 
     - excludes 1,056,040 shares of common stock reserved for future issuance
       under our Milestone Pool; and
 
     - excludes 180,000 shares of common stock reserved for future issuance
       under our licence agreement with ARCH Development Corporation.
 
                                     OUR HISTORY
 
     We were incorporated in Delaware as MolecuRx, Inc. in January 1996, changed
our name to CDR Therapeutics, Inc. in August 1996, and changed our name to Xcyte
Therapies, Inc. in October 1997. Our principal executive offices are located at
1124 Columbia Street, Suite 130, Seattle, Washington 98104. Our telephone number
at that location is (206) 262-6200. References in the prospectus to "we," "our,"
"us" and the "Company" refer to Xcyte Therapies. Information contained on our
Web site is not part of this prospectus.
 
                                        3

<PAGE>   7
 
                         SUMMARY FINANCIAL INFORMATION
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
     The following summary historical financial data has been derived from our
audited financial statements and unaudited interim financial statements and is
summary financial data of our business. You should read this information
together with the financial statements and the notes to those statements
appearing elsewhere in this prospectus and the information under "Selected
Financial Data" and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." See notes 1 and 10 to our financial statements for
information regarding computation of net loss per share and pro forma net loss
per share.
 

<TABLE>
<CAPTION>
                                                                                     NINE MONTHS         PERIOD FROM
                                                                                        ENDED             INCEPTION
                                                 YEARS ENDED DECEMBER 31,           SEPTEMBER 30,     (AUGUST 27, 1996)
                                           ------------------------------------   -----------------        THROUGH
                                              1997         1998         1999       1999      2000     SEPTEMBER 30, 2000
                                           ----------   ----------   ----------   -------   -------   ------------------
                                                                                     (UNAUDITED)         (UNAUDITED)
<S>                                        <C>          <C>          <C>          <C>       <C>       <C>
STATEMENT OF OPERATIONS DATA:
Total revenue............................   $   100      $    --      $    16     $    --   $    44        $    160
Operating expenses:
  Research and development...............     2,397        4,311        5,413       3,573     7,176          19,625
  General and administrative.............     1,148        1,427        1,619       1,158     1,061           5,569
  Noncash stock and compensation
    expense..............................         4            6           93           3       557             662
                                            -------      -------      -------     -------   -------        --------
Total operating expenses.................     3,549        5,744        7,125       4,734     8,794          25,856
                                            -------      -------      -------     -------   -------        --------
Loss from operations.....................    (3,449)      (5,744)      (7,109)     (4,734)   (8,750)        (25,696)
Other income, net........................       161          298          162         232       278             992
                                            -------      -------      -------     -------   -------        --------
  Net loss...............................   $(3,288)     $(5,446)     $(6,947)    $(4,502)  $(8,472)       $(24,704)
                                            =======      =======      =======     =======   =======        ========
Basic net loss per share.................   $ (0.69)     $ (0.86)     $ (1.15)    $ (0.74)  $ (1.42)       $  (4.44)
                                            =======      =======      =======     =======   =======        ========
Shares used in basic loss per share
  calculation............................     4,741        6,355        6,050       6,086     5,962           5,564
                                            =======      =======      =======     =======   =======        ========
Pro forma net loss per share.............                             $ (0.29)              $ (0.31)       $  (1.27)
                                                                      =======               =======        ========
Shares used in pro forma per share
  calculation............................                              23,999                27,159          19,514
                                                                      =======               =======        ========
</TABLE>

 
     The following table contains a summary of our balance sheet at September
30, 2000:
 
        - on an actual basis;
 
        - on a pro forma basis to reflect the automatic conversion of all
          outstanding shares of preferred stock into 28,059,047 shares of common
          stock upon the closing of this offering, the issuance of 380,725
          shares of common stock issuable upon the exercise of warrants to
          purchase preferred stock at a weighted average exercise price of $0.97
          per share, which warrants will expire at the closing of this offering,
          and the subsequent conversion of the preferred stock, the issuance of
          1,132,287 shares of common stock upon the exercise of warrants to
          purchase common stock at an exercise price of $0.30 per share, which
          warrants will expire at the closing of this offering and the
          conversion of preferred stock warrants into common stock warrants for
          the purchase of 280,029 shares of common stock; and
 
        - on a pro forma, as adjusted basis, to reflect the sale of
          shares of common stock that we are offering at an assumed initial
          public offering price per share of $          after deducting
          estimated underwriting discounts and offering expenses.
 

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30, 2000
                                                              -------------------------------------
                                                                                       PRO FORMA
                                                               ACTUAL    PRO FORMA    AS ADJUSTED
                                                              --------   ---------   --------------
<S>                                                           <C>        <C>         <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...........  $ 27,257   $ 27,967
Working capital.............................................    26,393     27,103
Total assets................................................    30,336     31,046
Long-term obligations.......................................       953        953       $    953
Redeemable convertible preferred stock......................    48,394         --             --
Redeemable convertible preferred stock warrants.............       557         --             --
Total stockholders' equity (deficit)........................   (21,228)    28,434
</TABLE>

 
                                        4

<PAGE>   8
 
                                  RISK FACTORS
 
     You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are those that
we currently believe may materially affect us. Additional risks and
uncertainties that we are unaware of or that we currently deem immaterial also
may become important factors that affect us.
 
                      RISKS RELATED TO US AND OUR BUSINESS
 
WE CANNOT ASSURE YOU THAT OUR XCELLERATE THERAPY WILL MEET REGULATORY
REQUIREMENTS FOR SAFETY AND EFFICACY. ANY FAILURE TO MEET THESE REQUIREMENTS
WOULD HARM OUR BUSINESS.
 
     Before we can commercialize any cell therapy product, we must complete
clinical trials demonstrating that our Xcellerate Therapy is safe and effective.
We have limited clinical data to date. Future clinical trials may show that our
Xcellerate Therapy is not safe and effective. We do not have data on any
possible harmful long-term effects of our Xcellerate Therapy.
 
     In June 2000, we initiated our first clinical trial of our Xcellerate
Therapy in patients with metastatic kidney cancer. We will not know the results
of our first Phase I clinical trial for metastatic kidney cancer until at least
the third quarter of 2001. Patients in this Phase I clinical trial receive low
doses of interleukin-2 with our Xcellerate Therapy. We cannot guarantee that any
beneficial data from this trial will be a result of our Xcellerate Therapy and
not attributable to interleukin-2. Therefore, we are unable to use the limited
data to support the efficacy of our Xcellerate Therapy. Following this Phase I
clinical trial, we will be required to conduct extensive additional clinical
trials to determine whether the data supports approval by the United States Food
and Drug Administration, or FDA, of our Xcellerate Therapy.
 
     We have not initiated the clinical development of our Xcellerate Therapy
for any infectious disease, nor for any other types of cancer. Much of our data
is derived from third party clinical trials, including physician-sponsored
trials, performed with one of our scientific founders in which we have not
participated. Clinical data collected under non-commercial or
physician-sponsored investigational new drug applications, or INDs, do not
fulfill the criteria necessary to be used in the support of clinical efficacy in
marketing applications for commercialization by regulatory agencies. We will
need to conduct extensive additional research and testing prior to initiating
other clinical trials. Clinical testing is very expensive, can take many years,
and the outcome is uncertain. If we fail to adequately demonstrate safety and
efficacy in our clinical trials, regulatory approval would be delayed or
precluded, which could harm our business.
 
OUR BUSINESS IS DEPENDENT ON THE SUCCESSFUL COMMERCIALIZATION OF PRODUCTS BASED
ON OUR XCELLERATE TECHNOLOGY.
 
     Our ability to successfully commercialize products based on our Xcellerate
Technology for a particular cancer type substantially depends on our ability to
activate T cells from the blood of patients with that type of cancer. In some
patients, it may not be possible to grow a sufficient number of T cells to
produce a therapeutic effect. Only a few cell-based immunotherapy products have
been commercialized. We may experience numerous unforeseen events during the
clinical development process that could delay or prevent commercialization of
our products, including the following:
 
     - the results of laboratory studies may be inconclusive, or they may not be
       indicative of results that will be obtained in clinical trials;
 
     - after reviewing test results, we may abandon projects that we might
       previously have believed to be promising;
 
     - we or regulators may suspend or terminate clinical trials if the
       participating subjects or patients are being exposed to unacceptable
       health risks; and
 
                                        5

<PAGE>   9
 
     - our potential products may not have the desired effects or may produce
       undesirable side effects or other characteristics that may preclude
       regulatory approval or limit their commercial use if approved.
 
     We do not expect to receive regulatory approval for commercial sale of our
Xcellerate Therapy for several years. We cannot assure you that we will ever
commercialize products based on our Xcellerate Technology. Any delays or
difficulties we encounter in our clinical trials may harm our business.
 
WE MAY TAKE LONGER TO COMPLETE OUR CLINICAL TRIALS THAN WE EXPECT, OR WE MAY NOT
BE ABLE TO COMPLETE THEM AT ALL.
 
     A number of factors may cause significant delays in our clinical trials,
including scheduling conflicts with participating clinicians and clinical
institutions and difficulties in identifying and enrolling patients who meet
eligibility criteria. As a result, we may not commence or complete clinical
trials involving any of our products as expected. We rely on academic
institutions or clinical research organizations to conduct, supervise or monitor
some or all aspects of clinical trials involving our products. We will have less
control over the timing and other aspects of these clinical trials than if we
conducted them entirely on our own. If we fail to commence or complete, or
experience delays in, any of our planned clinical trials, our ability to conduct
our business as currently planned would be harmed.
 
WE ARE SUBJECT TO EXTENSIVE REGULATION, WHICH CAN BE COSTLY, TIME CONSUMING AND
CAN CAUSE UNANTICIPATED DELAYS.
 
     All of our potential cell therapy products, cell processing and
manufacturing activities, are subject to comprehensive regulation by the FDA and
by comparable authorities in other countries. The process of obtaining FDA and
other required regulatory approvals, including foreign approvals, is expensive,
often takes many years and can vary substantially based upon the type,
complexity and novelty of the products involved. Our Xcellerate Therapy is
novel, and therefore, regulatory agencies may lack experience in dealing with
this type of product. This may lengthen the regulatory review process, increase
our development costs and delay or prevent commercialization of our products. To
date, the FDA has approved only a few cell therapy products. We have had only
limited experience in filing and pursuing applications necessary to gain
regulatory approvals, which may impede our ability to obtain timely FDA
approvals, if at all. We will not be able to commercialize any of our potential
products until we obtain FDA approval, and so any delay in obtaining, or
inability to obtain, FDA approval would harm our business.
 
     If we violate regulatory requirements at any stage, whether before or after
FDA approval is obtained, we may be fined, forced to remove a product from the
market or experience other adverse consequences that could harm our business.
Additionally, we may not be able to obtain the labeling claims necessary or
desirable for the promotion of our products. We may also be required to
undertake post-marketing trials. In addition, if we or others identify side
effects after any of our cell therapy products are on the market, or if
manufacturing problems occur, regulatory approval may be withdrawn and the FDA
may require reformulation of our cell therapy products, additional clinical
trials, changes in labeling or additional marketing applications.
 
WE HAVE LIMITED MANUFACTURING EXPERIENCE AND MAY NOT BE ABLE TO MANUFACTURE OUR
XCELLERATED T CELLS ON A LARGE SCALE IN A COST EFFECTIVE MANNER; UNFORESEEN
CIRCUMSTANCES MAY CAUSE DELAYS OR DISRUPTIONS IN OUR MANUFACTURING PROCESS.
 
     We have not demonstrated the ability to manufacture our Xcellerated T Cells
beyond quantities sufficient for research and development and limited clinical
activities. We have no experience manufacturing our Xcellerated T Cells at the
capacity that will be necessary to support large clinical trials or commercial
sales. Because our Xcellerate Therapy is an autologous, or patient-specific,
cell-based product, manufacturing of our Xcellerated T Cells is more
complicated. In addition, we may not be able to
 
                                        6

<PAGE>   10
 
manufacture on a large-scale or cost-effectively. Our present manufacturing
process may not meet our initial expectations as to reproducibility, yield,
purity or other measurements of performance.
 
     We are the only manufacturer of our Xcellerated T Cells. For the next
several years, we expect that we will conduct all of our manufacturing in our
own facilities. If the facilities or the equipment in our facilities are
significantly damaged or destroyed, we will not be able to quickly restore our
manufacturing capacity. We may also fail to secure any additional facilities or
hire qualified personnel that we may require to accommodate the expansion of our
operations and the manufacturing of our products.
 
WE WOULD NOT BE ABLE TO MANUFACTURE OUR PRODUCTS WITHOUT THE TECHNOLOGY WE
LICENSE FROM THIRD PARTIES.
 
     Our Xcellerate Technology uses two important monoclonal antibodies,
anti-CD3 and anti-CD28, which are licensed from third parties. Both antibodies
are necessary components of our Xcellerate Technology. We license the anti-CD3
monoclonal antibody from the Fred Hutchinson Cancer Research Center in Seattle,
Washington. We license the anti-CD28 monoclonal antibody from Diaclone S.A. in
Besancon, France. The license agreement with the Fred Hutchinson Cancer Research
Center is effective for 15 years following first sale of a product based on the
license and may be terminated in the event of a material breach. The Diaclone
agreement is effective for 15 years from the date of the first FDA approval, or
its foreign equivalent, of a product based upon the license, and may be
terminated in the event of a material breach.
 
     We are contractually obligated to purchase the anti-CD28 monoclonal
antibody from Diaclone until we begin Phase III clinical trials. Although we
believe the anti-CD3 antibody clone component is available from other sources,
few alternative suppliers of the anti-CD28 antibody clone component exist. If we
lose access to the anti-CD28 antibody clone or the anti-CD3 antibody clone, and
if we cannot find alternatives for these antibody clones, we will be unable to
continue the development of our product.
 
     We license several T cell activation patents and patent applications from
Genetics Institute. Technology disclosed in several of these patent applications
is necessary for the development of our Xcellerate Technology. Of these patent
applications, the two that relate to the basic technology necessary for our
business have been pending in the U.S. Patent and Trademark Office for over five
years. We cannot predict when or if any patents will issue from these
applications, however, we believe there is a reasonable basis for patentability.
If these patents are not issued we may not be able to exclude our competitors
from using our technology.
 
     The licenses from Genetics Institute terminate upon the expiration of the
last licensed patent and may also be terminated in the event of a material
breach. If patents issue covering our technology and we violate the terms of our
license or otherwise lose our right to license these patents and patent
applications, we would be unable to continue development of our Xcellerate
Technology.
 
WE ARE DEPENDENT ON A LIMITED NUMBER OF MANUFACTURERS AND SUPPLIERS OF SOME OF
THE KEY COMPONENTS IN OUR XCELLERATE TECHNOLOGY.
 
     We currently depend on third party suppliers for key components used to
manufacture Xcellerated T Cells. We depend on Lonza Biologics PLC to develop and
manufacture the antibodies used in our Xcellerate Technology. There are, in
general, relatively few companies with the ability to manufacture clinical and
commercial grade antibodies. Our current agreement with Lonza only provides for
the manufacture of these antibodies for use in clinical trials. We are currently
negotiating an agreement with Lonza to manufacture the antibodies for commercial
use. If we are unable to renew our current contract with Lonza or unable to
procure a suitable alternative manufacturer in a timely manner or at all, we
would be unable to continue developing our Xcellerate Technology.
 
     Our Xcellerate Technology also depends on the successful attachment of the
antibodies to magnetic beads. We currently use magnetic beads developed and
manufactured by Dynal S.A. in Oslo, Norway. Our contract with Dynal expires in
August 2009, and we are contractually obligated to obtain our beads from Dynal
as long as Dynal is able to fill our orders. If our contract with Dynal is
terminated or if Dynal
 
                                        7

<PAGE>   11
 
discontinues manufacturing beads due to economic or other considerations, we may
be unable to find a suitable alternative manufacturer in a timely manner or at
all, which would limit our ability to develop and commercialize our product.
 
     In addition, because Lonza and Dynal are located outside the United States
we are subject to foreign import laws and customs regulations, which
complicates, and could delay, shipment of components and the development and
production of our product. Any delay in the development or production of our
product would harm our business.
 
IF THIRD PARTIES FAIL TO PROVIDE SUFFICIENT AND TIMELY CAPACITY TO MANUFACTURE
OUR BEADS AND ANTIBODIES, OR DO NOT MAINTAIN HIGH STANDARDS OF MANUFACTURE, OUR
ABILITY TO DEVELOP AND COMMERCIALIZE OUR PRODUCTS COULD BE LIMITED OR DELAYED.
 
     Although our current suppliers of antibody and bead components have
produced our components with acceptable quality, quantity and cost in the past,
they may be unable or unwilling to meet our future demands. Establishing
additional or replacement suppliers for these components would take a
substantial amount of time. In addition, we may have difficulty obtaining
similar FDA-approved components from other suppliers. If we have to switch to a
replacement supplier, we may face additional regulatory delays and the
manufacture and delivery of our product could be interrupted for an extended
period. Any such delay may harm our business.
 
     We and any third party manufacturers that we may use must continually
adhere to current Good Manufacturing Practice, or GMP, regulations enforced by
the FDA through its facilities inspection program. If our facilities or the
facilities of these manufacturers cannot pass a pre-approval plant inspection,
the FDA pre-market approval of our Xcellerate Therapy will not be granted. In
complying with GMP and foreign regulatory requirements, we and any of our third
party manufacturers will be obligated to expend time, money and effort in
production, record-keeping and quality control to assure that each component of
our product meets applicable specifications and other requirements. In addition,
we may not be able to compel our third party manufacturers or suppliers to
comply with FDA standards and other regulatory requirements. If we or any of our
third party manufacturers fail to comply with these requirements, we may be
subject to regulatory action.
 
WE ARE CURRENTLY EXPANDING OUR MANUFACTURING CAPACITY AND WE MAY ENCOUNTER
DELAYS AND COST-OVERRUNS.
 
     We currently manufacture our Xcellerated T Cells in our own facility. We
plan to expand our manufacturing facilities to support future research,
development and commercialization activities. We have little experience in
developing manufacturing facilities and may not be successful. We may encounter
difficulties in designing, constructing and operating our new manufacturing
facility, including:
 
     - construction delays, including obtaining necessary governmental approvals
       and permits;
 
     - cost overruns;
 
     - delays in design, shipment and installation of equipment for our
       facility; and
 
     - other unforeseeable factors inherent in the construction process.
 
THE EX VIVO NATURE OF OUR XCELLERATE THERAPY MAY ENHANCE OUR RISK OF PRODUCT
LIABILITY AND OTHER CLAIMS AGAINST US, WHICH MAY REDUCE DEMAND FOR OUR PRODUCTS
OR RESULT IN SUBSTANTIAL DAMAGES.
 
     Our Xcellerate Therapy requires us to activate a patient's T cells ex vivo,
or outside of the body, using blood collected from patients. Blood is collected
through a process called leukapheresis, which may pose risks to the patient. If
the leukapheresis product is inadequate, we may require another leukapheresis,
or we may be unable to collect blood from the patient for our process. The
Xcellerated T Cells are later administered back to the patient intravenously in
an outpatient procedure. This procedure poses risks to the patient similar to
those occurring with transfusions of other cell products such as red blood cells
or white blood cells, including bleeding, blood clots, infection or mild to
severe allergic reactions.
 
                                        8

<PAGE>   12
 
     Blood collected in connection with our Xcellerate Therapy may contain
infectious diseases and may infect medical personnel or others who come into
contact with the blood. The ex vivo process also presents inherent risk that
human error may result in our Xcellerated T Cells being delivered to the
incorrect patient. Because patient samples are treated ex vivo after being
collected and delivered to us and then are redelivered to the patient, it is
possible that these samples could be inadvertently mixed up and delivered to the
wrong patient. If the Xcellerated T Cells are administered to the wrong patient,
the patient could suffer irreversible injury or death and sue us for liability
which would cause our reputation to suffer or may result in losses that could be
material.
 
     In addition, we store our patients' cells in freezers at our manufacturing
facilities and the loss or malfunction of these freezers may destroy those
cells. In such case, our patients' treatments will be delayed if we need to
collect additional patient cells or we may be unable to collect more cells from
our patients.
 
     We will face an even greater risk of product liability if we sell any of
our therapeutic products commercially. An individual may bring a product
liability claim against us if one of our cell therapy products causes, or merely
appears to have caused, an injury. Regardless of merit or eventual outcome,
product liability claims may result in:
 
     - decreased demand for our cell therapy products;
 
     - injury to our reputation;
 
     - withdrawal of clinical trial volunteers;
 
     - costs of related litigation; and
 
     - substantial monetary awards to plaintiffs.
 
IF A SUFFICIENT NUMBER OF PHYSICIANS AND OTHER MEDICAL PROVIDERS DO NOT ACCEPT
OUR XCELLERATE THERAPY, OUR BUSINESS WILL BE SIGNIFICANTLY HARMED.
 
     Our success will depend to a substantial extent on the willingness of
physicians and other medical providers to accept our Xcellerate Therapy. For
example, physicians and other medical providers will need to learn and adopt the
procedures necessary to properly administer our Xcellerated T Cells to patients.
In addition, we may improve our Xcellerate Therapy and the procedures necessary
to administer our Xcellerated T Cells to patients and physicians and other
medical providers may not agree with our changes. We cannot assure you that
physicians and medical providers will cooperate with us in this effort or be
willing to prescribe our Xcellerate Therapy as treatment for their patients. If
our Xcellerate Therapy does not achieve a high level of acceptance by physicians
and other medical providers, our business will be significantly harmed.
 
OUR XCELLERATE THERAPY MAY CAUSE UNKNOWN LONG TERM ADVERSE EFFECTS, WHICH MAY
LEAD TO PRODUCT LIABILITY CLAIMS.
 
     We have not yet completed clinical testing of our Xcellerate Therapy. It is
possible that our products may cause unforeseen harmful side effects. For
example, if too many T cells are activated by our Xcellerate Therapy, it is
possible that a patient could have a severe allergic reaction or could develop
an autoimmune condition. In the future we may consider using cells from a
healthy donor. If these cells from a healthy person are given to a patient with
a weakened immune system, there is a possibility that the patient may contract
graft versus host disease, a disease in which the T cells attack tissue in the
body. In addition, we have not conducted studies on the long term effects
associated with the use of the growth media solution used in our Xcellerate
Technology. Any harmful effects from our products may result in product
liability claims.
 
                                        9

<PAGE>   13
 
WE ARE EXPOSED TO POTENTIAL PRODUCT LIABILITY CLAIMS, AND INSURANCE AGAINST
THESE CLAIMS MAY NOT BE AVAILABLE TO US AT A REASONABLE RATE IN THE FUTURE.
 
     Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products. We have clinical trial insurance coverage and we intend to obtain
product liability coverage in the future. However, insurance coverage may not be
available to us at an acceptable cost, if at all. We may not be able to obtain
insurance coverage that will be adequate to satisfy any liability that may
arise. Regardless of merit or eventual outcome and whether or not we are
insured, product liability claims may result in decreased demand for a product,
injury to our reputation, withdrawal of clinical trial volunteers and loss of
revenues.
 
WE HAVE A HISTORY OF OPERATING LOSSES; WE EXPECT TO CONTINUE TO INCUR LOSSES AND
WE MAY NEVER BE PROFITABLE.
 
     We have incurred significant operating losses since we began operation in
1996. As of September 30, 2000, we had an accumulated deficit of $24.7 million.
These losses have resulted principally from costs incurred in our research and
development programs and from our general and administrative costs. We have
derived no revenues from product sales or royalties to date. We do not expect to
have any product sales or royalty revenue for a number of years, and are not
able to predict when we might do so. Our operating losses have been increasing
during the past several years and will continue to increase significantly in
subsequent years as we expand development and clinical trial activities.
 
     Our ability to achieve profitability is dependent upon obtaining regulatory
approvals for our products and successfully commercializing our products alone
or with third parties. However, our operations may not be profitable even if we
are able to commercialize any of our products currently under development.
 
WE WILL REQUIRE ADDITIONAL FUNDING, AND OUR FUTURE ACCESS TO CAPITAL IS
UNCERTAIN.
 
     It is expensive to develop products and conduct clinical trials for the
treatment of cancer and infectious diseases. We intend to conduct clinical
research and multiple clinical trials for many different therapies for cancer
and infectious diseases, which is costly.
 
     We believe that the net proceeds of this offering, together with our cash
on hand, will be sufficient to meet our projected operating and capital
requirements for at least the next 18 months. However, we may need additional
financing within this timeframe depending on a number of factors, including:
 
     - our degree of success in commercializing cell therapy products;
 
     - the rate of progress and cost of our research and development and
       clinical trial activities;
 
     - the costs of preparing, filing, prosecuting, maintaining and enforcing
       patent claims and other intellectual property rights;
 
     - the need to access competing technologies;
 
     - changes in or terminations of our licensing arrangements; and
 
     - the cost of manufacturing scale-up.
 
     We may not be able to obtain additional financing on favorable terms or at
all. If we are unable to raise additional funds when we need them, we may be
required to delay, reduce or eliminate some or all of our development programs
and some or all of our clinical trials. We also may be forced to license to
others technologies that we would prefer to develop internally. If we raise
additional funds by issuing equity securities, further dilution to stockholders
may result, and new investors could have rights superior to holders of shares
issued in this offering.
 
                                       10

<PAGE>   14
 
IF WE ARE UNABLE TO SECURE FUTURE COLLABORATORS FOR RESEARCH, DEVELOPMENT,
MANUFACTURING AND MARKETING ACTIVITIES RELATING TO OUR XCELLERATE TECHNOLOGY,
OUR PRODUCT DEVELOPMENT AND POTENTIAL FOR PROFITABILITY MAY SUFFER.
 
     We may need to enter into a commercial collaboration agreement for one or
more of the research, development, manufacturing, marketing and other
commercialization activities relating to our Xcellerate Technology in the
future. However, we may not be able to successfully negotiate any collaborative
arrangements. If established, these relationships may not be scientifically or
commercially successful. It is possible that our potential collaborators will
change their strategic focus, pursue alternative technologies or develop
alternative products, either on their own or in collaboration with others, as a
means for developing treatments for the diseases targeted by our collaborative
programs. The effectiveness of our potential collaborators in marketing our
products could also affect our potential revenues and earnings. Disputes may
arise between us and our potential collaborators, as to a variety of matters,
including financial or other obligations under our agreements. These disputes
may be both expensive and time-consuming and may result in delays in the
development and commercialization of our product.
 
IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY RIGHTS, WE MAY NOT BE ABLE TO
COMPETE EFFECTIVELY.
 
     Our success is dependent in part on obtaining, maintaining and enforcing
our patents and other proprietary rights and our ability to avoid infringing the
proprietary rights of others. The United States Patent and Trademark Office may
not issue patents from the patent applications owned by or licensed to us. Even
if issued, the patents may not give us an advantage over competitors with
similar technology.
 
     As of December 1, 2000, we owned or held exclusive rights to two issued
patents and 21 pending U.S. patent applications in the fields of or directed to
ex vivo T cell stimulation. The two issued patents relate to a method of
stimulating T cells and an antibody, which we are not currently using. We cannot
assure you that any patent will issue from our pending or licensed patent
applications concerning the technologies we do use. The issuance of a patent is
not conclusive as to its validity or enforceability. It is uncertain how much
protection, if any, will be given to our patents if we attempt to enforce them
or if their validity is challenged in court. A third party may challenge the
validity or enforceability of a patent after its issuance by the Patent Office.
It is possible that a competitor may successfully challenge our patents or that
a challenge will result in limiting the coverage of our patents. If the outcome
of litigation is adverse to us, third parties may be able to use our patented
invention without payment to us.
 
     In addition, it is possible that competitors may infringe our patents or
successfully avoid them through design innovation. The cost of litigation to
uphold the validity of our patents and to prevent infringement could be
substantial and the litigation may consume time and other resources. Some of our
competitors may be better able to sustain the costs of complex patent litigation
because they have substantially greater resources. Moreover, there is a risk
that a court would decide that our patents are not valid and that we do not have
the right to stop the other party from using our inventions. There is also the
risk that, even if the validity of our patents were upheld, a court would refuse
to stop the other party on the ground that its activities do not infringe our
patents. Policing unauthorized use of our intellectual property is difficult and
expensive, and we cannot assure you that we will be able to prevent
misappropriation of our proprietary rights.
 
     In addition to the intellectual property rights described above, we also
rely on unpatented technology, trade secrets and confidential information.
Therefore, others may independently develop substantially equivalent information
and techniques or otherwise gain access to or disclose our technology. We may
not be able to effectively protect our rights in unpatented technology, trade
secrets and confidential information. We require each of our employees,
consultants and advisors to execute a confidentiality agreement at the
commencement of an employment or consulting relationship with us. However, these
agreements may not provide effective protection of our information or, in the
event of unauthorized use or disclosure, they may not provide adequate remedies.
 
                                       11

<PAGE>   15
 
THE USE OF OUR TECHNOLOGIES COULD POTENTIALLY CONFLICT WITH THE RIGHTS OF
OTHERS.
 
     Our competitors or others may have or acquire patent rights that they could
enforce against us. If they do so, then we may be required to alter our
Xcellerate Technology, pay licensing fees or cease activities. If our Xcellerate
Technology conflicts with patent rights of others, third parties could bring
legal action against us or our licensees, suppliers, customers or potential
collaborators, claiming damages and seeking to enjoin manufacturing and
marketing of the affected products. If these legal actions are successful, in
addition to any potential liability for damages, we could be required to obtain
a license in order to continue to manufacture or market the affected products.
We may not prevail in any legal action and a required license under the patent
may not be available on acceptable terms or at all.
 
     Should third parties file patent applications, or be issued patents
claiming technology also claimed by us in pending applications, we may be
required to participate in interference proceedings in the United States Patent
and Trademark Office to determine priority of invention. We may be required to
participate in interference proceedings involving our issued patents or pending
applications. We may be required to cease using the technology or to license
rights from prevailing third parties as a result of an unfavorable outcome in an
interference proceeding. A prevailing party may not offer us a license on
commercially acceptable terms. Should third parties file oppositions in foreign
countries, we may also be required to participate in opposition proceedings in
foreign tribunals to defend the patentability of the filed patent applications.
 
COMPETITION IN OUR INDUSTRY IS INTENSE AND MANY OF OUR COMPETITORS HAVE
SUBSTANTIALLY GREATER MANAGERIAL AND FINANCIAL RESOURCES THAN WE HAVE.
 
     If our products cannot compete effectively in the marketplace, we would
fail to become profitable and our financial position would suffer. Competition
in the cancer and infectious disease fields is intense. Even if our Xcellerate
Therapy proves successful, we might not be able to remain competitive because of
the rapid pace of technological development in the biotechnology field.
 
     Several companies market immunotherapy products. We are currently aware of
a few companies in the early stages of developing ex vivo T cell activation as a
method of treating cancer and infectious diseases. Many of our potential
competitors have more financial and other resources, larger research and
development staffs, and more experienced capabilities in researching, developing
and testing products. Many of these companies also have more experience in
conducting clinical trials, obtaining FDA and other regulatory approvals, and in
manufacturing, marketing and distributing therapeutic products. Smaller
companies may successfully compete with us by establishing collaborative
relationships with larger pharmaceutical companies or academic institutions. Our
competitors may succeed in developing, obtaining patent protection for, or
commercializing their products more rapidly than us. A competing company
developing, or acquiring rights to, a more effective therapeutic product for the
same diseases targeted by us, or one that offers significantly lower costs of
treatment, could render our products noncompetitive or obsolete.
 
     Our ability to commercialize our Xcellerate Therapy and compete effectively
will depend, in large part, on:
 
     - our ability to advance our Xcellerate Therapy through clinical trials and
       to successfully manufacture our products;
 
     - the perception by physicians and other members of the health care
       community of the safety, efficacy and benefits of activated T cell
       treatments compared to those of competing products or therapies;
 
     - the willingness of physicians to adopt a new treatment;
 
     - the price of our Xcellerate Therapy relative to other products or
       competing treatments;
 
     - the effectiveness of our sales and marketing efforts and those of our
       potential marketing partners;
 
                                       12

<PAGE>   16
 
     - our ability to protect our proprietary technology; and
 
     - the impact of potential unfavorable publicity concerning
       immunotherapeutic products.
 
IF WE DO NOT EFFECTIVELY MANAGE GROWTH, OUR ABILITY TO GENERATE REVENUES COULD
BE HARMED.
 
     We are rapidly adding a significant number of new personnel and expanding
our capabilities, which may strain our existing managerial, operational,
financial and other resources. To compete effectively and manage our growth, we
must:
 
     - train, manage and motivate a growing employee base;
 
     - accurately forecast demand for our products; and
 
     - expand existing operational, financial and management information
       systems.
 
     If we fail to manage our growth effectively, our product development and
commercialization efforts could be curtailed or delayed.
 
WE MAY BE UNABLE TO ESTABLISH SALES AND MARKETING CAPABILITIES NECESSARY TO
SUCCESSFULLY COMMERCIALIZE OUR POTENTIAL PRODUCTS.
 
     We currently have no direct sales capabilities and only limited marketing
capabilities. If we decide to market our potential products through a direct
sales force, we would need to either hire a sales force with expertise in
pharmaceutical sales or contract with a third party to provide a sales force to
meet our needs. We may be unable to establish marketing, sales and distribution
capabilities necessary to commercialize and gain market acceptance for our
potential products. In addition, co-promotion or other marketing arrangements
with third parties to commercialize potential products could significantly limit
the revenues we derive from these potential products, and these third parties
may fail to commercialize our potential products successfully.
 
IF WE LOSE KEY MANAGEMENT AND SCIENTIFIC PERSONNEL OR CANNOT RECRUIT QUALIFIED
EMPLOYEES, OUR PRODUCT DEVELOPMENT PROGRAMS AND OUR RESEARCH AND DEVELOPMENT
EFFORTS WILL BE HARMED.
 
     Our success depends, to a significant extent, upon the efforts and
abilities of Ronald J. Berenson, M.D., our president and chief executive
officer, and other members of senior management. The loss of the services of one
or more of our key employees could delay our product development programs and
our research and development efforts. We maintain key person life insurance on
Dr. Berenson, but do not maintain key person life insurance on any of our other
officers, employees or consultants.
 
     Competition for qualified employees among companies in the biotechnology
and biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our products successfully, we may be required to substantially
expand our workforce, particularly in the areas of manufacturing, clinical
trials management, regulatory affairs, business development and sales and
marketing. We may require the addition of new personnel, including management,
and the development of additional expertise by existing management personnel. We
may be unsuccessful in recruiting and retaining sufficient, qualified personnel.
 
WE MAY INCUR SIGNIFICANT COSTS COMPLYING WITH ENVIRONMENTAL LAWS AND
REGULATIONS.
 
     We use hazardous, infectious and radioactive materials that could be
dangerous to human health, safety or the environment. We currently contract with
a third party to store and dispose of these materials and various wastes
resulting from their use at our facility. We are subject to a variety of
federal, state and local laws and regulations governing the use, generation,
manufacture, storage, handling and disposal of these materials and wastes
resulting from their use. We may incur significant costs complying with both
existing and future environmental laws and regulations. We are unable to predict
whether our third party contractor will properly manage, store and dispose of
the wastes as required by law and protect us from liability. In addition, we are
subject to regulation by the Occupational Safety and Health Administration,
                                       13

<PAGE>   17
 
or OSHA, and the Environmental Protection Agency, or EPA, and to regulation
under the Toxic Substances Control Act and the Resource Conservation and
Recovery Act. We are unable to predict whether any agency will adopt any
regulations, which could harm our business. Although we believe our safety
procedures for handling and disposing of these materials comply with federal,
state and local laws and regulations, we cannot entirely eliminate the risk of
accidental injury or contamination from these materials or the risk that our
third party contractor will not violate any applicable laws or regulations
governing the waste. In the event of an accident, we could be held liable for
any resulting damages, which could be substantial.
 
IF THIRD PARTY CARRIERS FAIL TO SHIP PATIENT SAMPLES AND OUR PRODUCTS IN A
CAREFUL AND TIMELY MANNER, WE MAY INCUR LIABILITY AND OUR REPUTATION WILL
SUFFER.
 
     We depend on third party carriers to deliver patient-specific cells to us
and Xcellerated T Cells back to the patient in a timely manner. We have not yet
designed or tested a tracking system for our products once they have left our
manufacturing facility. We must process the patient's blood sample within 48
hours of collection. Currently, Xcellerated T Cells must be shipped in a cold
storage shipping container and the patient must receive them within 48 hours of
the completion of the manufacturing process. If the carriers fail to deliver the
shipment of Xcellerated T Cells in a timely manner or damage the Xcellerated T
Cells during shipment because, for example, the shipping containers fail to
maintain the necessary temperature of the Xcellerated T Cells, the treatment of
patients could be delayed or prevented.
 
IF WE FAIL TO OBTAIN ADEQUATE LEVELS OF REIMBURSEMENT FOR OUR CELL THERAPY
PRODUCTS FROM THIRD PARTY PAYERS, THE COMMERCIAL POTENTIAL OF OUR CELL THERAPY
PRODUCTS WILL BE SIGNIFICANTLY LIMITED.
 
     Our profitability will depend on the extent to which government
administration authorities, private health insurance providers and other
organizations provide reimbursement for the cost of our products. Many patients
will not be capable of paying for our cell therapy products themselves. Large
private payers, managed care organizations, group purchasing organizations and
similar organizations may be unwilling to reimburse patients for newly approved
health care products such as ours. Even if they are willing to reimburse
patients, we must first obtain reimbursement codes for our products and
communicate these codes to the health care community until they are officially
published and generally available. Any delay in establishing reimbursement codes
for our products could delay acceptance of our products. Any measures that
adversely affect the pricing of cell therapy products and the amount of
reimbursement available from governmental agencies or other third party payers
could harm our business.
 
WE ARE SUBJECT TO CURRENCY FLUCTUATIONS AND WE MAY BE ADVERSELY AFFECTED BY
CHANGES IN THE VALUE OF THE BRITISH POUND RELATIVE TO THE U.S. DOLLAR.
 
     Under our agreements with Lonza we are required to make payments
denominated in British pounds. As a result, we are exposed to currency exchange
risks. Assuming milestones are completed as scheduled, remaining payments under
the agreements will be $350,000 during the fourth quarter of the year ended
December 31, 2000 and $2.7 million during the year ended December 31, 2001. We
are not engaged in currency hedging and if the British pound strengthens against
the U.S. dollar, our payments to Lonza will increase in U.S. dollar terms.
 
                        RISKS RELATING TO THIS OFFERING
 
MARKET VOLATILITY MAY AFFECT OUR STOCK PRICE AND THE VALUE OF YOUR INVESTMENT
MAY BE SUBJECT TO SUDDEN DECREASES.
 
     There is currently no public market for our common stock and an active
trading market may not develop or be sustained after this offering. The price at
which our common stock trades depends upon a number of factors, including our
historical and anticipated operating results and general market and economic
conditions, which are beyond our control. Factors such as fluctuations in our
financial and
 
                                       14

<PAGE>   18
 
operating results, the results of our research and clinical trials,
announcements of technological innovations or new commercial products by us or
our competitors, developments concerning proprietary rights and publicity
regarding actual or potential performance of products under development by us or
our competitors could also cause the market price of our common stock to
fluctuate substantially. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations. These broad market
fluctuations may lower the market price of our common stock. During periods of
stock market price volatility, share prices of many biotechnology companies have
often fluctuated in a manner not necessarily related to the companies' operating
performance. Accordingly, our common stock may be subject to greater price
volatility than the stock market as a whole.
 
NEGATIVE EVALUATIONS BY RESEARCH ANALYSTS OR INVESTORS ABOUT OUR BUSINESS MAY
CAUSE THE PRICE OF OUR STOCK TO DECLINE.
 
     The price of our stock may decline even if our business is doing well. If
our future quarterly operating results are below the expectations of research
analysts or investors, or if negative comments regarding our business and its
future prospects are publicly announced by research analysts or investors, the
price of our common stock would likely decline.
 
WE MAY ALLOCATE THE NET PROCEEDS FROM THIS OFFERING IN WAYS WHICH YOU AND OTHER
STOCKHOLDERS MAY NOT APPROVE.
 
     We expect to use the net proceeds from this offering primarily for clinical
trials, research and development activities, increasing our manufacturing
capacity and the remainder for general corporate purposes and working capital.
We have significant flexibility in applying the net proceeds of this offering
and could use these proceeds for purposes other than those contemplated at the
time of the offering. You and other stockholders will not have the opportunity
to evaluate the economic, financial or other information that we may use to
determine how we use these proceeds.
 
FUTURE SALES OF OUR COMMON STOCK MAY LOWER THE MARKET PRICE OF OUR COMMON STOCK.
 
     Sales of a substantial number of shares of our common stock in the public
market following this offering or the perception that such sales could occur
could cause the market price of our common stock to decline or limit our future
ability to raise capital through an offering of equity securities. The number of
shares of our common stock available for sale by our existing stockholders in
the public market is limited by restrictions under federal securities law and
under lock-up agreements that our stockholders entered into with the
underwriters in connection with our initial public offering. In connection with
this offering, our officers, directors and other stockholders owning
substantially all of our shares have agreed to enter into lock-up agreements
pursuant to which they agree not to offer or sell any shares of our common stock
or securities convertible into or exchangeable or exercisable for any shares of
our common stock for 180 days after the date of this prospectus without the
prior written consent of SG Cowen Securities Corporation on behalf of the
underwriters. In addition, stockholders who have not executed a lock-up
agreement are otherwise contractually restricted from selling or offering to
sell shares of our common stock for 180 days after the date of this prospectus.
Shares of our common stock, other than shares sold in this offering, will become
eligible for sale in the public market as follows:
 

<TABLE>
<S>                                                           <C>
At the effective date.......................................           0 shares
90 days after effective date................................           0 shares
181 days after effective date...............................  24,572,195 shares
More than 181 days after effective date.....................  10,110,025 shares
</TABLE>

 
IF YOU PURCHASE OUR COMMON STOCK IN THIS OFFERING, YOU WILL INCUR IMMEDIATE AND
SUBSTANTIAL DILUTION IN THE BOOK VALUE OF YOUR SHARES.
 
     You will experience an immediate and substantial dilution of $     per
share in the pro forma net tangible book value per share of our common stock
relative to the assumed public offering price of $
                                       15

<PAGE>   19
 
per share. After giving effect to this offering, our pro forma net tangible book
value as of             , 2000, would have been $     per share. In addition,
this dilution will be increased to the extent that holders of outstanding
options and warrants to purchase our common stock at prices below our net
tangible book value per share after this offering exercise those options or
warrants.
 
OUR EXECUTIVE OFFICERS, DIRECTORS AND PRINCIPAL STOCKHOLDERS WILL CONTINUE TO
HAVE SUBSTANTIAL CONTROL OVER US AFTER THE OFFERING, WHICH COULD DELAY OR
PREVENT A CHANGE IN OUR CORPORATE CONTROL FAVORED BY OUR OTHER STOCKHOLDERS.
 
     Following this offering, executive officers, directors and principal
stockholders will beneficially own      % of our outstanding common stock, or
     % if the underwriters' over-allotment option is exercised in full. If our
significant stockholders choose to act or vote together on other matters, they
will have the power to control the approval of any other action requiring the
approval of our stockholders, including any amendments to our certificate of
incorporation and mergers, acquisitions or sales of all of our assets. In
addition, without the consent of these stockholders, we could be prevented from
entering into transactions that could be beneficial to us. Also, third parties
could be discouraged from making a tender offer or bid to acquire our company at
a price per share that is above the then-prevailing market price.
 
ANTI-TAKEOVER PROVISIONS IN OUR CHARTER DOCUMENTS AND UNDER DELAWARE AND
WASHINGTON LAW COULD MAKE A CHANGE IN OUR CONTROL, WHICH MAY BE BENEFICIAL TO
OUR STOCKHOLDERS, MORE DIFFICULT.
 
     Provisions of our certificate of incorporation and bylaws will make it more
difficult for a third party to acquire us on terms not approved by our board of
directors and may have the effect of deterring hostile takeover attempts. We are
also subject to provisions of Delaware and Washington law that could have the
effect of delaying, deferring or preventing a change in control of our company.
These and other impediments to a third party acquisition or change of control
could limit the price investors are willing to pay in the future for shares of
our common stock.
 
                                       16

<PAGE>   20
 
               SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
     We have made statements under the captions "Prospectus Summary," "Risk
Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and in other sections of this
prospectus that are forward-looking statements. You can identify these
statements by forward-looking words such as "may," "will," "expect," "intend,"
"anticipate," "believe," "estimate," "plan," "could," "should" and "continue" or
similar words. These forward-looking statements may also use different phrases.
We have based these forward-looking statements on our current expectations and
projections about future events. You should also consider carefully the
statements under "Risk Factors" and other sections of this prospectus, which
address factors that could cause our results to differ from those set forth in
the forward-looking statements.
 
                                       17

<PAGE>   21
 
                                USE OF PROCEEDS
 
     We estimate that the net proceeds from the sale of the           shares of
common stock offered by us at an assumed initial public offering price of
$       per share will be approximately $       million after deducting the
estimated underwriting discounts and estimated offering expenses payable by us.
If the underwriters exercise their over-allotment option in full, we estimate
that such net proceeds will be approximately $       million.
 
     We expect to use the net proceeds from this offering primarily for clinical
trials, research and development activities, expansion of our manufacturing
capacity and the remainder for general corporate purposes and working capital.
 
     Based upon the current status of our product development and
commercialization plans, we believe that the net proceeds of this offering,
together with our cash, cash equivalents and investments, will be adequate to
satisfy our capital needs through at least the next 18 months. Pending use of
the net proceeds of this offering, we intend to invest the net proceeds in
interest bearing, investment-grade non-government and U.S. government
securities.
 
                                DIVIDEND POLICY
 
     We have never declared or paid any cash dividends on our capital stock. We
currently intend to retain all of our future earnings, if any, to finance
operations and we do not anticipate paying cash dividends in the foreseeable
future.
 
                                       18

<PAGE>   22
 
                                 CAPITALIZATION
 
     The following table sets forth our capitalization at September 30, 2000:
 
     - on an actual basis;
 
     - on a pro forma basis to reflect the automatic conversion of all
       outstanding shares of preferred stock into 28,059,047 shares of common
       stock upon the closing of this offering, the issuance of 380,725 shares
       of common stock issuable upon the exercise of warrants to purchase
       preferred stock at a weighted average exercise price of $0.97 per share,
       which warrants will expire at the closing of this offering, and the
       subsequent conversion of the preferred stock, the issuance of 1,132,287
       shares of common stock upon the exercise of warrants to purchase common
       stock at an exercise price of $0.30 per share, which warrants will expire
       at the closing of this offering, and the conversion of preferred stock
       warrants into common stock warrants for the purchase of 280,029 shares of
       common stock; and
 
     - on a pro forma, as adjusted basis, to reflect the sale of
       shares of common stock that we are offering at an assumed initial public
       offering price per share of $          after deducting estimated
       underwriting discounts and offering expenses.
 
     You should read the following table in conjunction with our financial
statements and related notes included in this prospectus.
 

<TABLE>
<CAPTION>
                                                                       SEPTEMBER 30, 2000
                                                              ------------------------------------
                                                                             PRO        PRO FORMA
                                                               ACTUAL       FORMA      AS ADJUSTED
                                                              --------    ---------    -----------
                                                                 (IN THOUSANDS EXCEPT SHARE AND
                                                                        PER SHARE DATA)
<S>                                                           <C>         <C>          <C>
Long-term obligations.......................................  $    953    $    953      $    953
Redeemable convertible preferred stock: actual -- 28,909,976
  authorized shares, 28,059,047 issued and outstanding; pro
  forma and pro forma as adjusted -- none authorized and
  none outstanding..........................................    48,394          --            --
Redeemable convertible preferred stock warrants.............       557          --            --
Stockholders' equity (deficit):
  Preferred stock, par value $0.001:
    Actual -- 28,909,976 authorized and none outstanding,
     all shares have been designated redeemable and
     convertible; pro forma -- none authorized and none
     outstanding; pro forma as adjusted -- 5,000,000
     authorized shares, none outstanding....................        --          --            --
  Common stock, par value $0.001:
    Actual -- 60,000,000 authorized shares, 5,965,234 issued
     and outstanding; pro forma -- 60,000,000 authorized
     shares, 35,537,293 issued and outstanding; pro forma as
     adjusted -- 100,000,000 authorized shares,
     issued and outstanding;................................         6          36
  Additional paid-in capital................................     5,090      54,722
  Deferred stock compensation...............................    (1,618)     (1,618)       (1,618)
  Accumulated deficit.......................................   (24,704)    (24,704)      (24,704)
  Accumulated other comprehensive loss......................        (2)         (2)           (2)
                                                              --------    --------      --------
Total stockholders' equity (deficit)........................   (21,228)     28,434
                                                              --------    --------      --------
Total capitalization........................................  $ 28,676    $ 29,387      $
                                                              ========    ========      ========
</TABLE>

 
     The information in the table above does not include:
     - 1,626,221 shares of common stock issuable upon the exercise of stock
       options outstanding under our 1996 Stock Option Plan at a weighted
       average exercise price of $0.24 per share;
 
     - 280,029 shares of common stock issuable upon the exercise of warrants to
       purchase 280,029 shares of preferred stock which were assumed to have
       been converted into warrants to purchase 280,029 shares of common stock
       upon the closing of this offering;
 
     - 785,354 shares of common stock reserved for future grant under our 1996
       Stock Option Plan;
 
     - 2,100,000 shares of common stock reserved for future issuance under our
       2000 Stock Option Plan;
 
     - 600,000 shares of common stock reserved for future issuance under our
       2000 Employee Stock Purchase Plan;
 
     - 400,000 shares of common stock reserved for future issuance under our
       2000 Directors' Stock Option Plan;
 
     - 1,056,040 shares of common stock reserved for future issuance under our
       Milestone Pool; and
 
     - 180,000 shares of common stock reserved for future issuance under our
       license with ARCH Development Corporation.
 
                                       19

<PAGE>   23
 
                                    DILUTION
 
     Our pro forma net tangible book value as of September 30, 2000, was $28.2
million or $0.79 per share of common stock after giving effect to the conversion
of all outstanding shares of preferred stock into 28,059,047 shares of common
stock in connection with this offering, issuance of 380,725 shares of common
stock upon the exercise of warrants to purchase preferred stock, which warrants
will expire at the closing of this offering, and the subsequent conversion of
the preferred stock, issuance of 1,132,287 shares of common stock upon the
exercise of warrants to purchase common stock, which warrants will expire at the
closing of this offering and the conversion of preferred stock warrants into
common stock warrants for the purchase of 280,029 shares of common stock. Our
pro forma net tangible book value per share represents the amount of total
tangible assets less total liabilities, divided by the shares of common stock
outstanding as of September 30, 2000, assuming the conversion of all outstanding
shares of preferred stock and the exercise and the subsequent conversion of the
warrants to purchase preferred stock and the exercise of the warrants to
purchase common stock.
 
     After giving effect to the sale of           shares of common stock we are
offering hereby at an assumed price of $     per share and after deducting
estimated underwriting discounts and commissions and offering expenses, our net
tangible book value as of September 30, 2000, would have been approximately
$            or $     per share. This represents an immediate increase in net
tangible book value of $     per share to existing stockholders and an immediate
dilution of $     per share to the investors purchasing shares of common stock
in this offering. The following table illustrates this per share dilution.
 

<TABLE>
<S>                                                           <C>      <C>
Assumed initial public offering price per share.............           $
  Pro forma net tangible book value per share before the
     offering...............................................  $0.79
  Increase attributable to new investors....................
                                                              -----
Pro forma net tangible book value after the offering........
                                                                       -----
Dilution per share to new investors.........................           $
                                                                       =====
</TABLE>

 
     The following table summarizes, as of September 30, 2000, on the pro forma
basis described above, the number of shares of common stock purchased in this
offering, the aggregate cash consideration paid and the average price per share
paid by existing stockholders for common stock and by new investors purchasing
shares of common stock in this offering:
 

<TABLE>
<CAPTION>
                                      SHARES PURCHASED         TOTAL CONSIDERATION
                                    ---------------------    -----------------------    AVERAGE PRICE
                                      NUMBER      PERCENT       AMOUNT       PERCENT      PER SHARE
                                    ----------    -------    ------------    -------    -------------
<S>                                 <C>           <C>        <C>             <C>        <C>
Existing Stockholders...........    35,537,293          %    $ 50,861,000          %        $1.43
New Investors...................
                                    ----------     -----     ------------     -----         -----
     Total......................                   100.0%    $                100.0%
                                    ==========     =====     ============     =====
</TABLE>

 
     This discussion and tables above assume no exercise of options outstanding
under our stock option plan. As of September 30, 2000, there were options
outstanding to purchase a total of 1,626,221 shares of common stock at a
weighted average exercise price of $0.24 per share and an aggregate of 3,885,354
shares available for future grant or issuance under our stock option plans or
stock purchase plan. The discussion and tables above also assume no exercise of
any outstanding warrants, other than those expected to be exercised due to their
termination at the time of this offering. As of September 30, 2000, there were
additional outstanding warrants to purchase 280,029 shares of our preferred
stock at a weighted average exercise price of $1.09 per share that were not
assumed to have been exercised in the discussion above. To the extent that any
of these options or warrants are exercised, there will be further dilution to
new investors.
 
                                       20

<PAGE>   24
 
                            SELECTED FINANCIAL DATA
 
     This section presents our historical financial data. You should read
carefully the financial statements included in this prospectus, including the
notes to the financial statements, and Management's Discussion and Analysis of
Financial Condition and Results of Operations. The statements of operations data
for the year ended December 31, 1999 and the balance sheet data as of December
31, 1999 have been derived from our financial statements that have been audited
by Ernst & Young LLP, independent auditors, and are included elsewhere in this
prospectus. The statement of operations data for the each of the years in the
two year period ended December 31, 1998, and the balance sheet data as of
December 31, 1998 have been derived from our financial statements that have been
audited by PricewaterhouseCoopers LLP, independent accountants, and are included
elsewhere in this prospectus. The balance sheet data as of December 31, 1997,
has been derived from our audited financial statements which are not included in
this prospectus. The statement of operations data for the nine months ended
September 30, 1999 and 2000, the period from inception (August 27, 1996) to
September 30, 2000, and the balance sheet data as of September 30, 2000 have
been derived from the unaudited financial statements included elsewhere in this
prospectus. The statement of operations data for the period from inception
(August 27, 1996) to December 31, 1996 and the balance sheet data as of December
31, 1996 have been derived from unaudited financial statements which are not
included in this prospectus. We have prepared the unaudited information on the
same basis as the audited financial statements and have included all
adjustments, consisting only of normal occurring adjustments that we consider
necessary for a fair presentation of our financial position and operating
results for these periods. Historical results are not necessarily indicative of
future results.
 

<TABLE>
<CAPTION>
                                      PERIOD FROM                                                                    PERIOD FROM
                                       INCEPTION                                                                      INCEPTION
                                      (AUGUST 27,                                             NINE MONTHS ENDED      (AUGUST 27,
                                        1996) TO           YEARS ENDED DECEMBER 31,             SEPTEMBER 30,         1996) TO
                                      DECEMBER 31,   ------------------------------------   ---------------------   SEPTEMBER 30,
                                          1996          1997         1998         1999       1999        2000           2000
                                      ------------   ----------   ----------   ----------   -------   -----------   -------------
                                      (UNAUDITED)                                                (UNAUDITED)         (UNAUDITED)
                                                            (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S>                                   <C>            <C>          <C>          <C>          <C>       <C>           <C>
STATEMENTS OF OPERATIONS DATA:
  Revenue:
    License fee.....................    $    --       $   100      $    --      $    --     $    --     $    --       $    100
    Grants..........................         --            --           --           16          --          44             60
                                        -------       -------      -------      -------     -------     -------       --------
      Total revenue.................         --           100           --           16          --          44            160
  Operating expenses:
    Research and development........        328         2,397        4,311        5,413       3,573       7,176         19,625
    General and administrative......        314         1,148        1,427        1,619       1,158       1,061          5,569
    Noncash stock compensation
      expense.......................          2             4            6           93           3         557            662
                                        -------       -------      -------      -------     -------     -------       --------
      Total operating expenses......        644         3,549        5,744        7,125       4,734       8,794         25,856
                                        -------       -------      -------      -------     -------     -------       --------
  Loss from operations..............       (644)       (3,449)      (5,744)      (7,109)     (4,734)     (8,750)       (25,696)
  Other income, net.................         93           161          298          162         232         278            992
                                        -------       -------      -------      -------     -------     -------       --------
  Net loss..........................    $  (551)      $(3,288)     $(5,446)     $(6,947)    $(4,502)    $(8,472)      $(24,704)
                                        =======       =======      =======      =======     =======     =======       ========
Basic net loss per share............    $ (0.41)      $ (0.69)     $ (0.86)     $ (1.15)    $ (0.74)    $ (1.42)      $  (4.44)
                                        =======       =======      =======      =======     =======     =======       ========
Shares used in basic loss per share
  calculation.......................      1,350         4,741        6,355        6,050       6,086       5,962          5,564
                                        =======       =======      =======      =======     =======     =======       ========
Pro forma net loss per share........                                            $ (0.29)                $ (0.31)      $  (1.27)
                                                                                =======                 =======       ========
Shares used in pro forma per share
  calculation.......................                                             23,999                  27,159         19,514
                                                                                =======                 =======       ========
</TABLE>

 

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                              --------------------------------------------------   SEPTEMBER 30,
                                                                 1996          1997         1998         1999          2000
                                                              -----------   ----------   ----------   ----------   -------------
                                                              (UNAUDITED)                                           (UNAUDITED)
<S>                                                           <C>           <C>          <C>          <C>          <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...........    $5,307       $ 6,514      $12,152      $  7,363      $ 27,257
Working capital.............................................     4,966         6,102       11,589         6,100        26,393
Total assets................................................     5,821         9,035       16,044        10,055        30,336
Long term obligations.......................................        --           937          941           854           953
Redeemable convertible preferred stock and warrants.........     6,018        11,123       23,390        23,405        48,394
Accumulated deficit.........................................      (551)       (3,839)      (9,285)      (16,232)      (24,704)
Total stockholders' deficit.................................      (546)       (3,499)      (8,939)      (15,804)      (21,228)
</TABLE>

 
                                       21

<PAGE>   25
 

          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS
 
     The following discussion should be read in conjunction with our financial
statements and related notes included in this prospectus. Please refer to
"Special Note Regarding Forward-Looking Statements" and "Risk Factors."
 
OVERVIEW
 
     We are utilizing novel technologies to develop therapeutic products that
generate effective immune system responses to treat cancer and infectious
diseases. We use our proprietary technology, known as Xcellerate, to activate
and grow T cells. Our Xcellerate Technology rapidly and reproducibly activates a
patient's own T cells outside of the body by mimicking normal events of the
immune system. Our Xcellerate Technology forms the basis for our development of
our Xcellerate Therapy to fight cancer and infectious diseases.
 
     Since our inception in 1996, our activities have been primarily associated
with the development of novel therapeutic products that target the immune system
for clinical applications in immunology, oncology, and infectious diseases. We
have incurred significant losses since our inception. As of September 30, 2000,
our accumulated deficit was $24.7 million. Our operating expenses consist of
research and development expenses and general and administrative expenses.
 
     We have recognized revenues of approximately $160,000 since inception from
sublicense fees and income from a National Institutes of Health Phase I Small
Business Innovation Research grant in chronic lymphocytic leukemia. In the
second quarter of 2001, we intend to apply for a National Institutes of Health
Phase II Small Business Innovation Research grant in the same indication. We
intend to continue to apply for other grants in the future. We currently do not
market any products and will not for several years, if at all. Therefore, we do
not expect to have any product sales or royalty revenue for a number of years.
Our net losses are a result of research and development and general and
administrative expenses incurred to support our operations. We anticipate
incurring net losses over at least the next several years as we complete our
clinical trials, apply for regulatory approvals, continue development of our
technology and expand our operations.
 
     To date, our research and development expenses have consisted primarily of
costs incurred for drug discovery and research, preclinical development,
clinical trials and regulatory activities. Research and development
activity-related costs include:
 
     - payroll and personnel-related expenses;
 
     - clinical trial and regulatory-related costs;
 
     - laboratory supplies;
 
     - contractual costs associated with developing our antibody and bead
       technology;
 
     - intellectual property related legal fees;
 
     - rent and facility expenses for our laboratory and GMP manufacturing
       areas; and
 
     - scientific consulting fees.
 
     General and administrative expenses are costs associated with supporting
our operations including payroll and personnel-related expenses and professional
fees. In addition, rent and facility expenses for our administrative office area
and other general office support activities are also included in our general and
administrative expenses.
 
     We have incurred operating losses since inception. Therefore, we have not
paid any income taxes and no provision for income taxes has been recorded for
the period from inception, beginning August 27, 1996 to September 30, 2000.
 
                                       22

<PAGE>   26
 
RESULTS OF OPERATIONS
 
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
 
Revenue
 
     Revenue was approximately $44,000 in the nine months ended September 30,
2000, and consisted of income from a National Institutes of Health Small
Business Innovation Research grant. We expect to recognize revenue from the
remainder of this grant, in the amount of $90,000, by December 31, 2000. We did
not recognize any revenue in the nine months ended September 30, 1999.
 
Operating Expenses
 
     Research and Development. Research and development expenses increased 100%,
from $3.6 million in the nine months ended September 30, 1999 to $7.2 million in
the nine months ended September 30, 2000. The $3.6 million increase was
primarily due to contractual payments relating to developing our antibody and
bead technology, laboratory supplies, rent, and salaries and payroll related
expense. We anticipate that research and development expenses will continue to
increase in the foreseeable future as we expand our research, development and
clinical trial activities.
 
     General and Administrative. General and administrative expenses did not
fluctuate significantly, from $1.2 million in the nine months ended September
30, 1999 to $1.1 million in the nine months ended September 30, 2000. We
anticipate that general and administrative expenses will increase in the
foreseeable future to support the general expansion of our operations.
 
     Other Income (Expense), net. Other income (expense), net increased from
$232,000 in the nine months ended September 30, 1999 to $278,000 in the nine
months ended September 30, 2000. Interest income increased 24%, from $375,000 in
the nine months ended September 30, 1999 to $465,000 in the nine months ended
September 30, 2000 due to increased interest income earned on the cash proceeds
from our Series D preferred stock financing. Interest expense increased 31%,
from $143,000 in the nine months ended September 30, 1999 to $187,000 in the
nine months ended September 30, 2000, due to higher debt balances related to
equipment financings and amortization of warrants issued in conjunction with
these financings. We expect to continue to enter into equipment financing
contracts to support our future clinical and commercialization activities.
 
Noncash Stock Compensation
 
     From our inception in August 1996 through September 30, 2000, we recorded
aggregate deferred stock compensation of approximately $2.3 million, of which
$662,000 was expensed in the period from inception (August 27, 1996) to
September 30, 2000. We recorded amortization of deferred stock-based
compensation of $4,000 in the year ended December 31, 1997, $6,000 in the year
ended December 31, 1998, $93,000 in the year ended December 31, 1999 and
$557,000 for the nine months ended September 30, 2000. We granted stock options
to certain of our officers, employees and consultants at prices subsequently
deemed to be below the fair value of the underlying stock on the date of grant
during the year ended December 31, 1999 and the nine months ended September 30,
2000. Additional deferred stock-based compensation of $86,000 and $526,000 were
recorded in the year ended December 31, 1999 and nine months ended September 30,
2000, respectively, based on the subsequently determined fair value of common
stock options granted during these periods. These expenses have no impact on our
cash flows. The remaining $1.6 million will be expensed in future periods over
what is generally a four-to-five year vesting period. We estimate that our
deferred stock compensation expense from options granted from our inception in
August 1996 through September 30, 2000 will be $293,000, $729,000, $340,000,
$179,000 and $74,000 for the remainder of fiscal 2000 and for the years ending
December 31, 2001, 2002, 2003 and 2004, respectively.
 
     Subsequent to September 30, 2000, we have granted options that will result
in an additional $1.0 million of deferred stock compensation. We estimate that
our deferred stock compensation expense from options granted subsequent to
September 30, 2000 will be $161,000, $466,000, $208,000,
 
                                       23

<PAGE>   27
 
$113,000 and $50,000 for the years ending December 31, 2000, 2001, 2002, 2003
and 2004, respectively, assuming no cancellations or additional stock options
grants below deemed fair value.
 
COMPARISON OF YEARS ENDED DECEMBER 31, 1999 AND 1998
 
Revenue
 
     Revenue was approximately $16,000 in the year ended December 31, 1999 and
consisted of income from a National Institutes of Health Small Business
Innovation Research grant. We recognized no revenue in the year ended December
31, 1998.
 
Operating Expenses
 
     Research and Development. Research and development expenses increased 26%,
from $4.3 million in the year ended December 31, 1998 to $5.4 million in the
year ended December 31, 1999. The $1.1 million increase was primarily due to
increased salary and personnel related expenses, consulting fees and outsourced
research and development services expenses as we expanded operations in support
of our preclinical activity. This increase was offset partially by decreases in
patent related expenses for a license that was terminated in 1999, sponsored
research studies and laboratory supplies.
 
     General and Administrative. General and administrative expenses increased
13%, from $1.4 million in the year ended December 31, 1998 to $1.6 million in
the year ended December 31, 1999. The $200,000 increase was primarily due to
increased facilities-related expenses, expenses related to moving to new
headquarters and salary and other personnel related expenses as we expanded our
operations. This increase was offset partially by a decrease in professional
fees and travel expenses.
 
     Other Income (Expense), net. Interest income was $476,000 in the year ended
December 31, 1999 and $476,000 in the year ended December 31, 1998. The amounts
were unchanged due to stable average yearly cash balances. Interest expense was
$206,000 in the year December 31, 1999 and was $178,000 in the year ended
December 31, 1998 and was relatively unchanged due to little change in debt
balances. For the year ended December 31, 1999, we recognized a loss of $108,000
on the sale of property and equipment.
 
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
 
Revenue
 
     Revenue in the year ended December 31, 1997 was $100,000 consisting of a
non-recurring fee generated from a sublicense agreement. We recognized no
revenue in the year ended December 31, 1998.
 
Operating Expenses
 
     Research and Development. Research and development expenses increased 80%,
from $2.4 million in the year ended December 31, 1997 to $4.3 million in the
year ended December 31, 1998. The $1.9 million increase was due primarily to
increases in salary and other personnel related costs, patent expenses,
laboratory supplies, depreciation, consulting fees and amortization of
intangible assets as we expanded our business and preclinical activities.
 
     General and Administrative. General and administrative expenses increased
24% from $1.1 million in the year ended December 31, 1997 to $1.4 million in the
year ended December 31, 1998. The $300,000 increase was due primarily to
increases in salary and personnel related expenses, expenses related to general
office facilities and fixtures, and other general office expenses in support of
our business and preclinical activities.
 
     Other Income (Expense), net. Interest income increased 94%, from $245,000
in the year ended December 31, 1997 to $476,000 in the year ended December 31,
1998. This was attributable to higher average balances of cash, cash equivalents
and short-term investments. Interest expense increased 112%, from $84,000 in the
year ended December 31, 1997 to $178,000 in the year ended December 31, 1998.
 
                                       24

<PAGE>   28
 
The increase was due to a higher debt balance as we entered into equipment
financing contracts to finance our expanding business and preclinical
activities.
 
INCOME TAXES
 
     We have incurred a net operating loss since inception and consequently we
have not paid any federal, state or foreign income taxes. On December 31, 1999,
we had net operating loss carryforwards of approximately $14.2 million and
research and development tax credit carryforwards of $749,000. If not utilized,
the net operating loss and tax credit carryforwards will expire at various dates
beginning in 2011. If we do not achieve profitability, net operating loss
carryforwards may be lost. In addition, utilization of net operating loss and
tax credit carryforwards may be subject to a substantial annual limitation due
to the change in the ownership provisions of the Internal Revenue Code of 1986,
as amended. We are currently not subject to these limitations. However, any
future annual limitations may result in the expiration of net operating loss and
tax credit carryforwards before utilization.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Cash, cash equivalents and short-term investments were $9.7 million on
September 30, 1999 and $27.3 million on September 30, 2000. Cash, cash
equivalents and investments were $6.8 million on December 31, 1997, $13.9
million on December 31, 1998, and $7.4 million on December 31, 1999. We have
financed our operations since inception through private placements of equity
securities, grant revenue, fees from a sublicense agreement, equipment
financings and interest income earned on cash and cash equivalents and
investments. Since January 1, 2000, we received net proceeds of $28.0 million
from private financing activities. In 1999, we did not raise any funds from
private financing activities. In 1998, we received net proceeds of $12.0 million
from private financing activities. Since inception, a total of $50.2 million net
proceeds from private financing has been received. To date, inflation has not
had a material effect on our business.
 
     Since our inception, investing activities, other than purchases and
maturities of investments, have consisted primarily of purchases of property and
equipment. On September 30, 2000, our investment in property and equipment was
$2.9 million.
 
     Net cash used in operating activities for the nine months ended September
30, 2000 was $8.1 million. During the nine months ended September 30, 1999, we
used $4.1 million of net cash in our operating activities. During the years
ended December 31, 1997, 1998 and 1999 cash used in operating activities were
$3.2 million, $4.5 million, and $5.6 million respectively. Expenditures in these
periods were generally as a result of increased research and development
expenses and general and administrative expenses in support of our operations.
 
     We have entered into agreements to develop bead and antibody technology
that require significant cash expenditures, including an agreement with Dynal
S.A. under which we have agreed to make payments totaling $3.0 million upon the
accomplishment of bead development activities. Additionally, we have two
agreements with Lonza Biologics PLC under which we have agreed to make payments
totaling $3.4 million to develop and produce Phase III GMP-grade antibodies. As
of September 30, 2000, we have paid $2.0 million to Dynal and $161,000 to Lonza.
We anticipate that the remaining payments under these agreements will be paid in
full by the end of December 2002. Under our license agreements with Genetics
Institute and ARCH Development Corporation, we are required to spend a total of
$2.0 million on research and development activities related to product
development under these agreements by June 2001.
 
     Borrowings outstanding under our equipment financing agreements totaled
$1.7 million, and we had $530,000 available under our equipment financing
agreement, at September 30, 2000.
 
     We anticipate that the net proceeds from this offering, along with our
existing cash balances will be sufficient to enable us to meet our anticipated
expenditures for at least the next 18 months. However, we may need additional
financing prior to that time to support our advancement into Phase III clinical
trials. Furthermore, we expect to require additional funding before we are able
to generate revenue, if at all, from our potential products. Additional
financing may not be available on favorable terms or at all. If we are
                                       25

<PAGE>   29
 
unable to raise additional funds when we need them, we may be required to delay,
reduce or eliminate some or all of our development programs and some or all of
our clinical trials. We also may be forced to license technologies to others
that we would prefer to develop internally.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements," (SAB
101). SAB 101 is based upon existing accounting rules and provided specific
guidance on how those accounting rules should be applied and specifically
addresses revenue recognition for non-refundable technology access fees in the
biotechnology industry. SAB 101 is effective for fiscal years beginning after
December 15, 1999. The adoption of SAB 101 did not have an impact on our
financial position or results of operations; however, as the company generates
sales of products, SAB 101 may impact recognition of revenue.
 
     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which will be
effective for the year ending 2001. SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument, including
derivative instruments imbedded in other contracts, be recorded in the balance
sheet as either an asset or liability measured at its fair value. The statement
also requires that changes in the derivative's fair value be recognized in
earnings unless specific hedge accounting criteria are met. We believe the
adoption of SFAS 133 will not have a material effect on our financial
statements, since we currently do not hold derivative instruments or engage in
hedging activities.
 
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     As of September 30, 2000, we had short-term investments of $1.5 million.
Our short-term investments will decline by an immaterial amount if market
interest rates increase, and therefore, our exposure to interest rate changes
has been immaterial. Declines of interest rates over time will, however, reduce
our interest income from our short-term investments and cash accounts. Interest
rates on capital lease obligations are fixed at the beginning of the repayment
term; therefore, exposure to changes in interest rates is limited to new
financings.
 
                                       26

<PAGE>   30
 
 
                                   BUSINESS
 
OVERVIEW
 
     We are utilizing novel technologies to develop therapeutic products that
generate effective immune system responses to treat cancer and infectious
diseases. We use our proprietary technology, known as our Xcellerate, to
activate and grow T cells. Our Xcellerate Technology rapidly and reproducibly
activates a patient's own T cells outside of the body by mimicking normal events
of the immune system. Our approach, known as Xcellerate Therapy, may allow us to
treat a variety of medical conditions, including:
 
     - diseases characterized by poorly functioning immune systems, such as
       cancer and HIV;
 
     - conditions due to medical treatments, such as chemotherapy and the
       administration of drugs following transplantations, that suppress the
       immune system and cause patients to be vulnerable to infections; and
 
     - congenital conditions and advanced age that result in weakened immune
       systems.
 
     In July 2000, we initiated a Phase I clinical trial of our Xcellerate
Therapy in patients with metastatic kidney cancer. As of December 15, 2000, 17
patients have received a total of 32 infusions of our Xcellerated T Cells. To
date, there have been no significant adverse effects related to the
administration of our Xcellerated T Cells and we have observed evidence of
anti-tumor activity. We expect to complete this trial in the third quarter of
2001.
 
BACKGROUND
 
     The human immune system is responsible for recognizing and eliminating
cancer and pathogens, such as viruses and bacteria, from the body. A normal
immune response occurs when disease-fighting white blood cells, called T cells,
are activated by two simultaneous signals. Once activated, T cells alert the
body to the presence of pathogens and cancer. The human body normally contains
billions of T cells that are categorized as either helper T cells or killer T
cells. Helper T cells are responsible for activating other cells of the immune
system. Killer T cells act directly to destroy pathogens, such as viruses, or
tumor cells. Both types of cells are required for an effective immune response.
 
Activation of T Cells
 
     T cells remain in a resting state until they become activated and generate
an immune response. The immune response begins when cells of the immune system
known as antigen-presenting cells capture antigens, which are structural
components of microorganisms and tumor cells. Antigens are broken down into tiny
fragments by antigen-presenting cells and then presented on the cell surface to
T cells. Each T cell has a unique receptor on its surface that is capable of
recognizing a different antigenic fragment. This diversity of T cells makes it
possible for our immune system to recognize and respond to a wide variety of
different pathogens and cancers.
 
                                       27

<PAGE>   31
 
                       [GRAPHIC OF ACTIVATION OF T CELLS]
   The diagram starts with an antigen-presenting cell labeled
"Antigen-presenting Cell" and shows antigens entering the cell. The antigens are
shown broken into tiny fragments and then presented on the cell surface of the
antigen-presenting cell.
 
   To the right of the antigen-presenting cell is a resting T cell labeled
"Resting T Cell." a receptor on the resting T cell is shown to bind with the
antigen fragment presented on the surface of the antigen-presenting cell,
delivering Signal 1, labeled "Signal 1." Another receptor on the surface of the
antigen-presenting cell binds to a different receptor on the Resting T Cell
delivering Signal 2, labeled "Signal 2."
 
   An arrow leads from the resting T cell to an activated T cell, labeled
"Activated T Cell." The graphic shows that the T cell is activated.
 
     When the proper T cell receptor binds to the presented antigen, it
generates a signal, known as Signal 1, which is required to activate a T cell. A
second signal, known as Signal 2, occurs when an antigen-presenting cell binds
to another receptor on the surface of a T cell. Signal 1 is generated from a
receptor that is unique to the specific antigen. In contrast, each
antigen-presenting cell contains the same receptor that binds to a receptor of
each T cell to deliver Signal 2. Both Signal 1 and Signal 2 are required for T
cells to produce an effective immune response. If only Signal 1 is generated, T
cells are weakly activated and die quickly. If only Signal 2 is generated, no
immune response occurs at all. Only the simultaneous delivery of both Signal 1
and Signal 2 generates activated T cells that can function properly in the body.
Signal 1 and Signal 2 are responsible for activating both helper T cells and
killer T cells.
 
The Dangers of a Weakened Immune System
 
     When the number of T cells decreases significantly, the human immune system
is less able to defend the body against infectious diseases and cancer.
Additionally, when T cells are not functioning properly, they may be incapable
of being activated, which also creates a greater risk of these illnesses. For
example, when T cells are damaged they may contain weakened or reduced numbers
of receptors that cannot generate Signal 1 or Signal 2. In most medical
conditions, deficits in both T cell numbers and function occur together. A
variety of illnesses as well as medical treatments for life-threatening
illnesses can cause T cell deficits. These include:
 
     - diseases that attack or evade the immune system, such as HIV and cancer
       as well as chronic illnesses, including diabetes and kidney failure;
 
     - medical treatments that damage T cells such as chemotherapy,
       immunosuppressive drugs and transplantation; and
 
     - congenital immunodeficiencies and advanced age.
 
     As a result of T cell deficits, patients are at increased risk of
developing serious and often life-threatening infections. Common and normally
benign viruses such as herpes and chicken pox can produce serious infections.
Life-threatening fungal and parasitic infections as well as some bacterial
infections, such as tuberculosis, also occur in patients with T cell deficits.
Patients with severe T cell deficits are also at high risk of developing some
types of cancer. For example, transplant patients on immunosuppressive drugs
 
                                       28

<PAGE>   32
 
have a very high rate of non-Hodgkin's lymphoma, and patients with HIV can
suffer from both non-Hodgkin's lymphoma and Kaposi's sarcoma.
 
Current Approaches to Activate the Immune System and Their Limitations
 
     Researchers have focused on developing methods to strengthen and activate a
patient's immune system to combat the problems associated with T cell deficits.
Current approaches include delivering therapeutic agents, such as cytokines,
directly into the body to stimulate T cell responses. Cytokines are chemical
messengers produced by cells of the immune system, many of which activate T
cells. Unfortunately, these cytokines often cause life-threatening or fatal side
effects when directly administered to patients. For example, when interleukin-2,
a cytokine approved by the FDA to treat some cancers, is administered at the
high doses demonstrated to be effective, it causes serious and life-threatening
toxicity that requires close medical supervision in a hospital intensive care
unit. The number of cytokines that can be used as therapeutics is limited
because only a few can be safely administered to patients. These cytokines
represent a very small portion of the many cytokines that are normally produced
during an immune response.
 
     To overcome the limitations of activating T cells inside of the body,
researchers attempted to activate and grow patients' T cells ex vivo, or outside
of the body, before administering them for therapeutic applications. Initial
attempts were made to grow T cells outside of the body using interleukin-2. The
discovery of T cell receptors generated interest in developing compounds to bind
to these receptors to activate T cells. With the development of technology to
manufacture monoclonal antibodies, it became possible to reproduce these
antibodies in large amounts for clinical applications. Researchers developed
monoclonal antibodies that bind to these receptors to deliver Signal 1 to T
cells. These antibodies were used together with interleukin-2 to activate and
grow T cells outside of the body. However, this process generated only one of
the two signals required to activate T cells, which resulted in limited growth
of T cells. Once administered to patients, these cells generally survive for
only a few days. These ex vivo methods required more than a month to generate
sufficient numbers of T cells for clinical applications. These methods also
required frequent handling and monitoring procedures during the incubation
period. Furthermore, these approaches generated primarily killer T cells and
only small numbers of helper T cells, which limits immune response. The lengthy
and laborious procedures required to generate T cells together with their
minimal therapeutic activity has led to limited use of these approaches.
 
     Scientists have recently begun to explore procedures that can be used to
deliver both Signal 1 and Signal 2 to improve the function, activation and
length of survival of T cells. One approach is to use a type of
antigen-presenting cell known as a dendritic cell. In healthy individuals,
dendritic cells are a natural and potent activator of T cells because they
deliver both Signal 1 and Signal 2. For most clinical applications, a patient's
own dendritic cells are grown outside of the body and then administered back to
the patient. Dendritic cells may prove to be effective therapeutic agents, but
they also have limitations. The ability to generate dendritic cells varies from
patient to patient. This variability may limit the ability of dendritic cells to
activate enough T cells to generate an effective immune response.
 
OUR SOLUTION
 
     We have developed a proprietary technology known as Xcellerate, which can
reproducibly activate and grow T cells outside of the body in large numbers for
therapeutic applications. Our Xcellerate Technology employs microscopic magnetic
beads that mimic the natural function of antigen-presenting cells to deliver
Signal 1 and Signal 2. Each microscopic bead is densely packed with two
monoclonal antibodies, one for Signal 1 and one for Signal 2, to create
artificial antigen-presenting cells that are able to reproducibly and
consistently activate T cells. We have developed a proprietary technique that
allows optimal binding of antibody-coated beads to T cells, making it possible
for us to generate more potent and highly activated T cells in a shorter period
of time. In addition, we use a monoclonal antibody that directly interacts with
the signaling complex of the T cell receptor to bypass the specificity that is
normally required to activate Signal 1.
 
                                       29

<PAGE>   33
 
     Our Xcellerate Technology focuses on activating T cells that are universal
to the disease-fighting process. We believe this universal approach will allow
us to treat a variety of medical conditions. Our technology also enables us to
generate sufficient numbers of activated T cells rapidly, which may allow us to
apply our Xcellerate Therapy on a commercial scale. In our Phase I clinical
trial for metastatic kidney cancer, we successfully generated Xcellerated T
Cells from all patients to date. In this clinical trial, we produced large
numbers of T cells with high purity and activity levels. To date, all infusions
of Xcellerated T Cells in our first clinical trial have been delivered to
patients with no significant adverse effects and we have observed evidence of
anti-tumor activity.
 
Benefits of Our Xcellerate Therapy
 
     By providing a consistent method to directly activate T cells, we believe
our Xcellerate Therapy may be an effective treatment for cancer and infectious
diseases. We believe the Xcellerate Therapy has the following potential
benefits:
 
     - Activated Immune System. We have demonstrated in the laboratory that our
       Xcellerated T Cells generate an effective immune response because we
       deliver both Signal 1 and Signal 2 to activate both helper T cells and
       killer T cells. Our laboratory studies have shown that Xcellerated T
       Cells function properly by expressing a broad spectrum of cytokines to
       activate other cells of the immune system. Independent clinical trials
       have shown that T cells activated using our technology survive for up to
       one year after administration into patients.
 
     - Broad Clinical Applications. Our Xcellerate Technology targets T cells
       that are required for an immune response. We believe that our Xcellerate
       Therapy can be applied to a variety of medical conditions. We have
       demonstrated in the laboratory that our Xcellerate Technology can be used
       to activate T cells from patients with a variety of cancers. In addition,
       third parties have conducted several clinical trials with one of our
       scientific founders using our T cell activation technology to treat
       patients with leukemia, lymphoma and HIV.
 
     - Minimal Toxicity. Our Xcellerated T Cells are produced from T cells
       originating from the patient. We believe that using a patient's own cells
       may result in a safer product. Minimal side effects have been observed in
       approximately 100 patients to date in clinical trials conducted by us or
       third parties working with one of our scientific founders, using our T
       cell activation technology.
 
     - Easy Administration. Our Xcellerate Therapy can be administered in a
       simple outpatient procedure in less than 30 minutes. This process uses a
       routine intravenous procedure that is convenient for both physicians and
       patients.
 
     - Complementary To Other Technologies. The minimal toxicity associated with
       our Xcellerate Therapy suggests it may be feasible to use our product
       with chemotherapy drugs. We may also use Xcellerated T Cells with other
       agents that are being used to activate the immune system, such as cancer
       vaccines.
 
Benefits of Our Xcellerate Technology
 
     We believe our proprietary Xcellerate Technology can be developed into a
commercially viable process. The benefits of our Xcellerate Technology are:
 
     - Rapid and Reproducible Process. Our Xcellerate Technology can activate
       and grow T cells in eight days with minimal laboratory effort. We believe
       this length of time is sufficient to generate the number of T cells
       necessary for a therapeutic effect. Our process optimizes the direct
       interaction between T cells and our proprietary monoclonal
       antibody-coated beads to produce consistent and strong signals that
       result in more highly activated and potent T cells.
 
     - Ex Vivo Process. Our Xcellerate Technology activates T cells ex vivo.
       Activating and growing T cells outside of the body provides a more
       controlled environment away from tumor cells and infectious agents, which
       can otherwise inhibit the activation and growth of T cells. In addition,
 
                                       30

<PAGE>   34
 
       therapeutic agents that are otherwise potentially toxic or fatal if
       administered directly to the patient can be used to improve the activity
       and growth of T cells.
 
     - Standard and Cost-effective Manufacturing Process. Our Xcellerate
       Technology incorporates primarily commercially available medical products
       and standard blood bank procedures, which enables us to efficiently
       manufacture our Xcellerated T Cells. We use the same process and
       components for every patient, eliminating the need for patient-specific
       materials that must be obtained by surgery, such as samples of the
       patient's tumor. We believe we will be able to manufacture our
       Xcellerated T Cells in facilities that can be cost-effectively
       constructed, equipped and easily scaled.
 
OUR STRATEGY
 
     Our goal is to be a leader in the field of T cell therapy and to leverage
our expertise in T cell activation to develop and commercialize products to
treat cancer and infectious diseases, such as HIV. Key elements of our strategy
include:
 
     - Commercializing Our Xcellerate Therapy. We will initially develop our
       Xcellerate Therapy to treat life-threatening forms of cancer, which
       currently have inadequate treatments. The FDA has adopted fast-track
       approval and priority trial procedures for such therapies. In addition,
       we will focus on qualifying for FDA orphan drug status for our Xcellerate
       Therapy by treating cancers that are prevalent in less than 200,000
       patients in the United States. This status may allow us to obtain a seven
       year market exclusivity in similar products targeting the same patient
       population. We believe this strategy will facilitate rapid entry into the
       market for our Xcellerate Therapy.
 
     - Expanding Our Xcellerate Therapy to Treat Multiple Diseases. We believe
       our Xcellerate Therapy has potential applications in many medical
       conditions. We intend to develop our Xcellerate Therapy to treat patients
       with infectious diseases, chronic illnesses, HIV and other immune
       deficiency conditions.
 
     - Leveraging Complementary Technologies and Therapies. We believe our
       Xcellerate Therapy can be used effectively in combination with current
       treatments for cancer and infectious diseases, such as chemotherapy. We
       intend to explore opportunities to combine complementary technologies and
       therapies, such as cancer vaccines, with our Xcellerate Therapy to
       improve and expand clinical applications.
 
     - Retaining Key Commercialization Rights. We intend to retain marketing and
       commercial rights in North America for products in concentrated markets,
       such as cancer. We believe these markets can be addressed by a small,
       targeted sales force that we can build and train internally.
 
     - Evaluating Collaboration Opportunities for Our Products. We will evaluate
       opportunities to collaborate with large pharmaceutical and biotechnology
       companies to obtain development and marketing support for territories
       outside North America, such as Europe and Japan. In addition, we may seek
       development and marketing support for indications that have more diffuse
       patient populations in North America.
 
     - Expanding Our Intellectual Property. We will continue to improve our
       Xcellerate Technology, including developing process improvements and
       improving activity and specificity of T cells. We intend to file patents
       to protect these improvements. In addition, we may supplement our
       internal efforts by acquiring or in-licensing technologies and product
       candidates that complement our existing capabilities.
 
CLINICAL APPLICATIONS
 
CANCER
 
     The American Cancer Society estimates that in 2000, 1.2 million new cases
of cancer will occur in the United States. Surgery and radiation are the primary
approaches used to treat patients with localized
 
                                       31

<PAGE>   35
 
disease. However, many cancers spread beyond the original site of disease. In
order to prevent or treat the spread of cancer, known as metastasis, many
patients are treated with chemotherapy drugs. Unfortunately, chemotherapy has
met with limited success in the treatment of most forms of cancer and is
associated with severe and sometimes life-threatening side effects. Physicians
have recently begun to recognize the important role that the immune system may
play in controlling cancer. This has led to the development of a new therapeutic
approach to cancer known as immunotherapy. Immunotherapy uses natural products
of the immune system such as monoclonal antibodies, cytokines and even whole
cells to treat cancer. This new form of therapy has been demonstrated to be
effective in some forms of cancer and has been generally associated with fewer
side effects than chemotherapy.
 
Solid Tumors
 
     The American Cancer Society estimates that in 2000 in the United States,
there will be approximately 1.0 million new patients with solid tumors, which
are cancers that originate in organs of the body. The American Cancer Society
estimates that in 2000, more than 400,000 people will die from solid tumors,
such as breast, prostate, lung, liver and colon cancers. These cancers are
typically treated with surgery or radiation. Chemotherapy is used with limited
success in treating solid tumors such as breast cancer, but is generally
ineffective in curing patients once cancer has metastasized.
 
     Kidney Cancer. The American Cancer Society estimates that in 2000,
approximately 31,200 patients will be diagnosed with kidney cancer in the United
States. Approximately half of the patients with kidney cancer will develop
metastatic disease. Once patients develop metastatic disease, they have a very
poor prognosis with an average survival of approximately one year. The five-year
survival for patients with metastatic kidney cancer is less than 5% and 11,900
deaths are expected to occur in the United States in 2000.
 
     Chemotherapy has not been effective in treating kidney cancer. The only
therapy that has been approved by the FDA for treating metastatic kidney cancer
is a regimen of high-dose interleukin-2, a drug that activates T cells. The
overall response rate to high-dose interleukin-2 is approximately 15%. However,
less than 5% of patients experience complete disappearance of all detectable
cancer and achieve five-year survival. High-dose interleukin-2 therapy is
associated with severe and potentially life-threatening side effects that can
damage kidneys, liver, lungs and brain. Due to these risks, patients receiving
high-dose interleukin-2 require monitoring in hospital intensive care units for
several days. Additionally, many patients do not receive interleukin-2 because
the risk of side effects may outweigh its potential therapeutic benefit.
Recently, attempts have been made to reduce the doses of interleukin-2
administered to patients in order to decrease the side effects. Although adverse
effects appear to decrease with low-dose regimens, there are currently
insufficient data to determine whether low-dose interleukin-2 will prove to be
an effective treatment alternative.
 
     In July 2000, we initiated a Phase I clinical trial of our Xcellerate
Therapy in patients with metastatic kidney cancer. We intend to enroll a total
of 25 patients to test the safety as well as to provide preliminary data on
therapeutic effects of our Xcellerate Therapy. In this clinical trial, patients
are treated with two infusions of our Xcellerate Therapy approximately four
weeks apart. After each infusion of our Xcellerated T Cells, patients are
treated with low doses of interleukin-2 for 10 consecutive days. As of December
15, 2000, 17 patients have received a total of 32 infusions of Xcellerated T
Cells. To date, there have been no significant adverse effects related to the
administration of our Xcellerated T Cells and we have observed evidence of
anti-tumor activity. We expect to complete this trial in the third quarter of
2001.
 
Hematological Malignancies
 
     The American Cancer Society estimates that in 2000, there will be
approximately 106,700 new cases in the United States of hematological
malignancies, which are cancers of the blood or bone marrow. The American Cancer
Society estimates that 60,400 people will die in 2000 from hematological
malignancies in the United States. Hematological malignancies include leukemia,
non-Hodgkin's lymphoma, multiple
 
                                       32

<PAGE>   36
 
myeloma and Hodgkin's disease. Hematological malignancies have usually spread
throughout the body by the time of diagnosis and therefore, require treatment
with chemotherapy drugs.
 
     Physician-sponsored clinical trials are being conducted using our T cell
activation technology in patients with both non-Hodgkin's lymphoma and leukemia.
A physician-sponsored clinical trial was conducted at the University of Chicago
in with patients with advanced non-Hodgkin's lymphoma who were treated with
high-dose chemotherapy and a bone marrow transplant. After this treatment,
patients received a single infusion of T cells activated using our T cell
activation technology. Clinical data available on 17 patients from this clinical
trial showed that the average overall survival of patients in the study was
approximately two years following the infusion. Five-year survival in similar
groups of patients with advanced non-Hodgkin's lymphoma is usually less than
10%. We will continue to evaluate this data and may explore this indication in
our own clinical trials.
 
     We also plan to evaluate the potential efficacy of Xcellerate Therapy in
patients with chronic lymphocytic leukemia, who have T cell deficits due to
treatments for their disease. We have completed a series of laboratory studies
to determine if we could generate activated T cells from the blood of these
patients, which contains very few T cells. Our laboratory studies demonstrate
that we can generate large numbers of activated T cells and overcome some of the
defects that have been documented in these patients' T cells. Based on these
results, we plan to initiate a clinical trial in the second half of 2001 to test
the safety and potential therapeutic activity of Xcellerate Therapy in patients
with chronic lymphocytic leukemia. This clinical trial will serve as the basis
for the first test of the safety and potential clinical activity of Xcellerate
Therapy in patients with severe T cell deficits.
 
INFECTIOUS DISEASES
 
     We are evaluating the use of our Xcellerate Therapy in infectious disease
indications, such as HIV, chronic viral hepatitis C and tuberculosis. Infectious
diseases are illnesses caused by microorganisms such as viruses, fungi and
bacteria and can be controlled in most people with antibiotics or antiviral
agents. However, when patients' immune systems are compromised by infections,
drugs, chronic illnesses, or age, they are often unable to fight these
infections. A normally harmless virus can cause life-threatening infections or
virally-induced cancers in patients with weakened immune systems. We plan to
evaluate the potential efficacy of Xcellerate Therapy to increase T cell levels
in patients with infectious diseases.
 
     Human Immunodeficiency Virus. There are over 400,000 individuals infected
with HIV in the United States. HIV patients are at high risk of infections and
cancer because they have low number of T cells that do not function properly.
Patients are currently treated with combinations of anti-viral drugs. Although
these drug combinations have been shown to be effective in delaying viral
relapse and the onset of acquired immunodeficiency syndrome, or AIDS, they do
not completely eliminate the virus or cure this disease. From 10% to 50% of
patients on these anti-viral drugs will relapse each year. Several third party
clinical trials have been conducted with one of our scientific founders using
our T cell activation technology to generate activated T cells to treat
HIV-positive patients. These clinical trials demonstrated that T cells could be
activated and genetically-modified and that these cells could be administered
safely and are able to target sites of HIV infection. It was observed that after
administration of genetically-modified T cells, there was an increase in T cell
counts in these patients and decrease in HIV in sites of infection. We intend to
conduct a Phase I clinical trial to assess the ability of genetically-modified
Xcellerated T Cells to delay viral relapse in HIV patients.
 
                                       33

<PAGE>   37
 
POTENTIAL FUTURE INDICATIONS
 
Cancer
 
     We are evaluating the use of our Xcellerate Therapy in the following cancer
indications:
 

<TABLE>
<CAPTION>
                TYPE OF CANCER                  INCIDENCE (NEW CASES/YEAR)(1)   DEATHS/YEAR(1)
                --------------                  -----------------------------   --------------
<S>                                             <C>                             <C>
Liver(2)......................................              15,000                  13,000
Non-Hodgkin's Lymphoma........................              55,000                  26,000
Ovarian.......................................              23,000                  14,000
Melanoma......................................              48,000                   8,000
Multiple Myeloma..............................              14,000                  11,000
Colorectal....................................             130,000                  56,000
Lung..........................................             164,000                 157,000
</TABLE>

 
-------------------------
(1) American Cancer Society estimated incidence and death rates for 2000 in the
    United States.
(2) The worldwide incidence for liver cancer is estimated at 1,000,000 (source:
    DeVita, V.T., Principles and Practice of Oncology, 1997).
 
     Clinical trials conducted by third parties have demonstrated that
therapeutic products that activate the immune system, including activated T
cells, may be used to treat these types of cancer. For example:
 
     - 150 patients were evaluated in a randomized Phase III clinical trial
       conducted by the National Cancer Center of Japan that demonstrated that
       activated T cells can reduce the risk of tumor recurrence of patients
       undergoing surgical removal of cancerous tumor tissue in the liver. In
       this clinical trial, patients who received activated T cells had a 41%
       decrease in tumor recurrence and demonstrated a statistically significant
       improvement in tumor-free survival compared to patients who did not
       receive activated T cells. This trial used T cells that were activated
       using monoclonal antibodies that target Signal 1 alone. Xcellerated T
       Cells are activated using monoclonal antibodies that deliver both Signal
       1 and Signal 2 and may be a more effective therapeutic alternative.
 
     - a physician-sponsored clinical trial was conducted at the University of
       Chicago with patients with advanced non-Hodgkin's lymphoma who were
       treated with high-dose chemotherapy and a bone marrow transplant. After
       this treatment, patients received a single infusion of T cells activated
       using our T cell activation technology. Clinical data available on 17
       patients from this clinical trial showed that the average overall
       survival of patients in the study was approximately two years following
       the infusion.
 
     - a randomized Phase III clinical trial was conducted in 148 patients with
       ovarian cancer by several academic centers in Europe. These patients
       received a cytokine, known as interferon-gamma, which improved tumor-free
       survival from 17 months to 48 months in patients who were treated with
       standard chemotherapy. We have shown in the laboratory that our
       Xcellerated T Cells produce large amounts of interferon-gamma.
 
     - interleukin-2, a drug that activates T cells, is approved by the FDA to
       treat metastatic melanoma.
 
     - we have successfully completed laboratory studies using our Xcellerate
       Technology to activate and grow T cells from patients with melanoma and
       multiple myeloma.
 
     We plan to further evaluate the use of our Xcellerate Technology to
activate T cells in patients with many of these cancers. Based on these
preclinical studies, in addition to ongoing clinical trials being conducted by
our scientific founders and their collaborators, we plan to initiate a clinical
trial in one or more of these types of cancer.
 
OUR XCELLERATE TECHNOLOGY
 
     Our Xcellerate Technology uses our novel proprietary process to activate
and grow both helper T cells and killer T cells by delivering both Signal 1 and
Signal 2. In our process, T cells are stimulated, and
 
                                       34

<PAGE>   38
 
increase in number outside of the body, using microscopic magnetic beads densely
coated with two monoclonal antibodies that deliver Signal 1 and Signal 2. Signal
1 is delivered by a monoclonal antibody that binds to and activates the CD3
complex, which is part of the T cell receptor complex, and is expressed on every
T cell. Signal 2 is delivered by another monoclonal antibody, which binds to the
CD28 receptor on T cells. Both of these antibodies are attached to the surface
of the magnetic beads. When T cells bind to the monoclonal antibodies on these
magnetic beads, they become activated and increase in number.
 
     Our Xcellerate Technology requires that a patient's white blood cells be
collected in an outpatient clinical setting using a standard procedure called
leukapheresis. These cells are then sent to our manufacturing facility, where
trained specialists process the patient's blood in a closed system without
exposing the cells to the outside environment, which reduces the risk of
microbial contamination during the process. In this process, the patient's white
blood cells are placed in sterile, disposable plastic bags containing a solution
of nutrients and a low level of interleukin-2 that sustains the growth of the T
cells. We then add our proprietary microscopic magnetic beads coated with
anti-CD3 and anti-CD28 monoclonal antibodies to activate T cells. The beads bind
to the T cells in the bag and mimic the normal process of T cell activation that
takes place inside the human body. The activated T cells in the bag are
maintained at the same temperature as the human body for approximately eight
days. During this eight day period, we monitor the T cells to ensure consistent
and adequate levels of their growth and activity. At the end of our process, the
antibody-coated magnetic beads are removed from the activated T cells using a
commercially available magnetic device. The activated T cells are then
formulated in a standard clinical infusion solution for administration to the
patient.
 
                       [GRAPHIC OF XCELLERATE TECHNOLOGY]
     The circle diagram is set up as a circle of five graphics. Beginning at the
top, the first graphic shows a female figure as the patient. From the patient,
there is an arrow to the left leading to the second graphic of a sterile bag
containing blood cells collected from the patient. A tube connects the female
patient to the sterile bag. The text above the sterile bag states "Collect
Blood."
     From the second graphic, a downward arrow leads to the third graphic of a
sterile bag containing a mixture of the patient's blood cells and a vial of our
antibody-coated beads. This graphic also contains another arrow from the vial to
the bag indicating that the vial of antibody-coating beads is being added to the
sterile bag with the patient's blood cells. In this sterile bag, beads are shown
binding to a T cell, causing activation of the T cell. To the right of the vial
of antibody-coated beads, the text states "Add Antibody-coated Beads."
     From the third graphic is an arrow to the right leading to the fourth
graphic. Below the arrow, the text states "Activate and Expand T Cells." The
fourth graphic is a sterile bag filled with an increased number of successfully
activated T cells, our Xcellerated T Cells. In addition, the graphic shows the
beads being removed and collected to the right of the sterile bag. Above the
fourth graphic is text stating "Remove Beads."
     Next, an upward arrow leads from the fourth graphic to the fifth graphic,
which is a sterile bag filled with Xcellerated T Cells. Text above this fifth
graphic states "Infuse Xcellerated T Cells." An arrow from this fifth graphic
leads back to the first graphic of the female figure, which shows the tube from
the sterile bag to the female patient, illustrating the infusion of the
activated T cells into the female patient.
 
     We have established procedures to track patients' cells during the
manufacture and shipment of Xcellerated T Cells. Each patient receives a unique
identifying number that also contains a code for the site at which they are
being treated. This unique identifying number is used to track, monitor and
record all documentation, labels and materials relating to the production of our
Xcellerated T Cells from blood collection through to re-infusion of the final
product. Before we release the shipment to the clinical site, we conduct quality
control procedures in our laboratory to assure that our Xcellerated T Cells meet
strict acceptance criteria. These quality control tests include:
 
     - Purity -- substantially free of other cell types;
 
     - Identity -- a T cell product as determined by characteristics unique to T
       cells;
 
                                       35

<PAGE>   39
 
     - Dose -- a defined number of viable T cells;
 
     - Potency -- T cells that have biological function relevant to proposed
       therapeutic effect; and
 
     - Safety and Sterility -- free from microorganisms and residual components.
 
RESEARCH AND DEVELOPMENT
 
     Our current Xcellerate Technology is based on a prototype version developed
by two of our scientific founders, Drs. Carl June and Craig Thompson, who are
leaders in the field of immunology. We have made several improvements to this
technology. We use monoclonal antibodies that are more reproducible and thus are
easier to manufacture. In addition, we manufacture large batches of sterile
antibody-coated magnetic beads and have reduced the overall process time from an
average of 14 days to an average of 8 days. We use a closed system in a sterile
environment, which reduces the chances of contamination by microorganisms. We
believe these modifications are essential to developing a product that can be
commercialized. We intend to continuously evaluate and improve our technology
and will file patents on our advancements. For example, we have recently filed a
patent application to cover a novel method that both further simplifies our
Xcellerate Technology and also generates T cells with greater activity. The
simplification of our process reduces labor and materials and lowers the costs
associated with the production of Xcellerated T Cells. We are completing
development of our improved Xcellerate Technology and plan to introduce it into
clinical trials in the first half of 2001.
 
     Our scientific founders continue to conduct physician-sponsored clinical
trials using our T cell activation technology. These studies are conducted
independently with our scientific founders' own procedures using our T cell
activation technology. We will continue to assess these data together with our
own laboratory and clinical results to determine the best clinical opportunities
for Xcellerate Therapy.
 
     We are focusing our research and development efforts on increasing the
activity of T cells in our Xcellerate Therapy. We are currently evaluating
whether other molecules of the immune system or genes could be used to improve
the therapeutic activity of the activated T cells. We are also considering the
therapeutic potential of using our Xcellerate Therapy in cancer patients to
improve the effectiveness of cancer vaccines. We are working with several groups
to evaluate the use of recently discovered antigens with our Xcellerate
Technology to activate and expand T cells with specificity toward cancer and
infectious disease targets. Previous approaches to activate and grow
antigen-specific T cells have involved complicated and laborious procedures,
which have had limited commercial feasibility. We have conducted laboratory
studies demonstrating that we can use our Xcellerate Technology to generate
large numbers of antigen-specific T cells with anti-tumor activity in several
forms of cancer including melanoma and lung cancer.
 
MANUFACTURING
 
     We have designed, built, and are operating a modern GMP pilot plant
facility in Seattle, Washington to manufacture our Xcellerated T Cells for
initial clinical trials. We have also recently leased an additional 40,500
square foot facility that we intend to develop to manufacture our Xcellerated T
Cells for our future large-scale clinical trials and initial commercialization.
We expect to complete initial modifications and begin manufacturing our
Xcellerated T Cells at this facility by the second half of 2001.
 
     We are currently improving the process by which we manufacture our
Xcellerated T Cells. For example, we plan to develop more streamlined processing
procedures that reduce labor and provide more uniform activation and process
efficiency. Except for our proprietary anti-CD3 and anti-CD28 antibody-coated
beads, all of the components including tissue culture media, nutrients,
disposable bags, tubing sets and processing equipment that are required for our
Xcellerate Technology are standard laboratory or clinical supplies that are
readily available from commercial vendors.
 
     In June 2000, we entered into two service agreements with Lonza Biologics
PLC, for the GMP manufacture of anti-CD3 and anti-CD28 monoclonal antibodies for
uses in clinical trials. We retain all
 
                                       36

<PAGE>   40
 
proprietary rights to our intellectual property that is used by Lonza under
these agreements. These agreements may be terminated at will by either party for
a material breach.
 
     In August 1999, we entered into a contract with Dynal S.A., for the GMP
manufacture of our proprietary antibody-coated magnetic beads for clinical and
commercial uses. We retain all proprietary rights to our intellectual property
that is used by Dynal under this agreement. The agreement will terminate in
August 2009 or earlier upon breach by either party. The term may be extended for
an additional five year term by either party.
 
COMPETITION
 
     The biotechnology and pharmaceutical industries are characterized by
rapidly advancing technologies, intense competition and a strong emphasis on
proprietary products. Many entities, including pharmaceutical and biotechnology
companies, academic institutions and other research organizations are actively
engaged in the discovery, research and development of products that could
compete with our products under development. They may also compete with us in
recruiting and retaining skilled scientific talent.
 
     Several companies market immunotherapy products. We are currently aware of
a few companies in the early stages of developing ex vivo T cell activation
products as a method of treating cancer and infectious diseases. However, even
if our Xcellerate Technology proves successful, we might not be able to remain
competitive in this rapidly advancing area of technology. Many of our potential
competitors have more financial and other resources, larger research and
development staffs, and more experienced capabilities in researching, developing
and testing products. Many of these companies also have more experience in
conducting clinical trials, obtaining FDA and other regulatory approvals, and in
manufacturing, marketing and distributing of medical products. Smaller companies
may successfully compete with us by establishing collaborative relationships
with larger pharmaceutical companies or academic institutions. Our competitors
may succeed in developing, obtaining patent protection for, or commercializing
their products more rapidly than us. A competing company developing, or
acquiring rights to, a more effective therapeutic product for the same diseases
targeted by us, or one that offers significantly lower costs of treatment, could
render our products noncompetitive or obsolete.
 
     Our ability to commercialize our Xcellerate Therapy and compete effectively
will depend, in large part, on:
 
     - our ability to advance our Xcellerate Therapy through clinical trials and
       to successfully manufacture our products;
 
     - the perception by physicians and other members of the health care
       community of the safety, efficacy and benefits of activated T cell
       treatments compared to those of competing products or therapies;
 
     - the willingness of physicians to adopt a new treatment;
 
     - the price of our Xcellerate Therapy relative to other products or
       competing treatments;
 
     - the effectiveness of our sales and marketing efforts and those of our
       potential marketing partners; and
 
     - our ability to protect our proprietary technology.
 
INTELLECTUAL PROPERTY
 
     We rely on a combination of patent, trademark, copyright and trade secret
laws to protect our proprietary technologies and products. We aggressively seek
U.S. and international patent protection to further our business strategy and
for major components of our Xcellerate Technology, including important antibody
clone components and methods of T cell activation. We also rely upon trade
secret protection for our confidential and proprietary information, and we enter
into licenses to technologies we view as necessary to pursue our corporate
goals.
 
                                       37

<PAGE>   41
 
     As of December 1, 2000, we owned or held exclusive rights to two issued
patents and 21 pending U.S. patent applications in the fields of or directed to
ex vivo T cell stimulation. The two issued patents relate to a method of
stimulating T cells and an antibody, which we are not currently using. We also
have 34 currently pending foreign patent applications corresponding to T cell
stimulation technology.
 
     In general, we apply for patent protection of methods and products relating
to immunotherapy for treatment of cancer and infectious diseases. With respect
to proprietary know-how that is not patentable, we have chosen to rely on trade
secret protection and confidentiality agreements to protect our interests. We
have taken security measures to protect our proprietary know-how, technologies
and confidential data and continue to explore further methods of protection.
 
     We require all employees, consultants and collaborators to enter into
confidentiality agreements, and all employees and most consultants enter into
invention assignment agreements with us. The confidentiality agreements
generally provide that all confidential information developed or made known to
the individual during the course of such relationship will be kept confidential
and not disclosed to third parties, except in specified circumstances. These
invention agreements generally provide that all inventions conceived by the
individual in the course of rendering services to us shall be our exclusive
property. There can be no assurance, however, that these agreements will provide
meaningful protection or adequate remedies for any breach, or that our trade
secrets will not otherwise become known or be independently discovered by our
competitors. Any of these events could adversely affect our competitive position
in the marketplace.
 
     In the case of a strategic partnership or other collaborative arrangement
which requires the sharing of data, our policy is to disclose to our partner
only such data as are relevant to the partnership or arrangement, under
controlled circumstances and only during the contractual term of the strategic
partnership or collaborative arrangement, subject to a duty of confidentiality
on the part of our partner or collaborator. Disputes may arise as to the
inventorship and corresponding rights in know-how and inventions resulting from
research by us and our future corporate partners, licensors, scientific
collaborators and consultants. There can be no assurance that we will be able to
maintain our proprietary position, or that third parties will not circumvent any
proprietary protection we have. Our failure to maintain exclusive or other
rights to such technologies could harm our competitive position.
 
     To continue developing and commercializing our current and future products,
we may license intellectual property from commercial or academic entities to
obtain the rights to technology that is required for our discovery, research,
development and commercialization activities.
 
     In anticipation of the commercial distribution of our products and
services, we have filed a number of trademark applications.
 
TECHNOLOGY LICENSES
 
     Where consistent with our strategy, we seek to obtain technologies that
complement and expand our existing technology base. We have licensed and will
continue to license technology from selected research and academic institutions,
as well as other organizations. Under these license agreements, we generally
seek to obtain unrestricted sublicense rights. We are generally obligated under
these agreements to pursue product development, make development milestone
payments and pay royalties on any product sales. In addition to license
agreements, we seek relationships with other entities that may benefit us and
support our business goals.
 
ARCH Development Corporation
 
     In June 1999, we entered into an exclusive license agreement with ARCH
Development Corporation, an Illinois not-for-profit corporation, for rights to a
pending patent application that lists Dr. Carl June, one of our scientific
founders, as an inventor. This agreement assisted in consolidating our patent
protection in the field of therapies based on ex vivo activation of T cells.
 
     Under the license agreement, ARCH granted us an exclusive, worldwide
license to make, sell, use and import products until expiration of any patents
that might be issued from our licensed patent
                                       38

<PAGE>   42
 
applications. In consideration for the license, we issued shares of our common
stock to ARCH and agreed to pay an annual usage royalty upon commercialization
of a product for the remainder of the license term.
 
Diaclone S.A.
 
     In October 1999, we entered into a license agreement with Diaclone S.A., a
French corporation. Under the agreement, Diaclone granted us an exclusive,
worldwide license to the anti-CD28 antibody and the cell line which produces the
antibody, for the development and commercialization of the anti-CD28 antibody
for all ex vivo uses. We are currently obligated to purchase all our anti-CD28
antibody requirements from Diaclone until we enter into Phase III clinical
trials.
 
     This agreement has a term of 15 years from the date of first approval by
FDA or its foreign equivalent, of a product based upon the licensed patent. We
currently do not have FDA approval of any products based upon the licensed
patent. At the end of the term, we will have a perpetual, irrevocable,
royalty-free exclusive license. We paid an initial license fee to Diaclone and
are required to pay royalties if our product is approved and commercialized.
 
Fred Hutchinson Cancer Research Center
 
     In October 1999, we entered into a license agreement with the Fred
Hutchinson Cancer Research Center. Under the agreement, the Fred Hutchinson
Cancer Research Center granted us a non-exclusive, worldwide license to make,
use and sell the anti-CD3 antibody for any ex vivo use involving therapeutic and
research applications.
 
     We paid upfront licensing fees to the Fred Hutchinson Cancer Research
Center and we are obligated to pay the Fred Hutchinson Cancer Research Center an
annual royalty fee when our product is commercialized. On December 1, 2000, we
amended this license agreement to broaden the field of use in exchange for an
additional upfront fee and issuance of additional shares of our common stock to
the Fred Hutchinson Cancer Research Center. Based on this license, this
agreement will remain in effect for 15 years following commercialization of our
product based on this agreement.
 
Genetics Institute, Inc.
 
     In July 1998, we entered into a license agreement with Genetics Institute,
Inc. Under the agreement, Genetics Institute granted us an exclusive license for
methods of ex vivo activation or expansion of human T cells for treatment and
prevention of infectious diseases, cancer and immunodeficiency.
 
     The term of the Genetics Institute license runs until the end of the
enforceable term of any patents issued for the methods licensed. To date, one
patent, whose term expires in 2016, has been issued for the methods licensed. In
consideration of the license, we paid Genetics Institute an upfront license fee,
issued shares of our preferred stock to Genetics Institute, and issued a warrant
under which, if one of three milestones is reached, Genetics Institute will have
the right to purchase additional shares of our preferred stock. We are also
obligated to pay royalties to Genetics Institute on sales of products covered by
the patents licensed to us under the agreement.
 
GOVERNMENTAL REGULATION
 
     Governmental authorities in the United States and other countries
extensively regulate the preclinical and clinical testing, manufacturing,
labeling, storage, record-keeping, advertising, promotion, export, marketing and
distribution, among other things, of immunotherapeutics. In the United States,
the FDA under the Federal Food, Drug, and Cosmetic Act, the Public Health
Service Act and other federal statutes and regulations subjects pharmaceutical
products to rigorous review. If we do not comply with applicable requirements,
we may be fined, our products may be recalled or seized, our production may be
totally or partially suspended, the government may refuse to approve our
marketing applications or allow us to distribute our products, and we may be
criminally prosecuted. The FDA also has the authority to revoke previously
granted marketing authorizations.
 
                                       39

<PAGE>   43
 
     In order to obtain approval of a new product from the FDA, we must, among
other requirements, submit proof of safety and efficacy as well as detailed
information on the manufacture and composition of the product, also know as an
investigational new drug applications. In most cases, this proof entails
extensive laboratory tests, and preclinical and clinical trials. This testing,
the preparation of necessary applications, the processing of those applications
by the FDA and review of the application by an advisory panel of outside experts
are expensive and typically take several years to complete. The FDA may not act
quickly or favorably in reviewing these applications, and we may encounter
significant difficulties or costs in our efforts to obtain FDA approvals that
could delay or preclude us from marketing any products we may develop. The FDA
may also require post-marketing testing and surveillance to monitor the effects
of approved products or place conditions on any approvals that could restrict
the commercial applications of these products. Regulatory authorities may
withdraw product approvals if we fail to comply with regulatory standards or if
we encounter problems following initial marketing. With respect to patented
products or technologies, delays imposed by the governmental approval process
may materially reduce the period during which we will have the exclusive right
to exploit the products or technologies.
 
     There are two types of investigational new drug applications. The first is
a commercial investigational new drug application intended to collect data on
the safety and efficacy of a new drug prior to submitting an application for
marketing approval. The second type of investigational new drug application is
the non-commercial or physician-sponsored investigational new drug application
which allows physicians to gain an initial understanding of the compound without
going through the rigors of an investigational new drug application development
program in support of commercial approval. Data from physician-sponsored trials
can be used to support the safety but not the efficacy of a product.
 
     After an investigational new drug application becomes effective, a sponsor
may commence human clinical trials. The sponsor typically conducts human
clinical trials in three sequential phases, but the phases may overlap. In Phase
I clinical trials, the product is tested in a small number of patients or
healthy volunteers, primarily for safety at one or more doses. In Phase II, in
addition to safety, the sponsor evaluates the efficacy of the product in a
patient population somewhat larger than Phase I clinical trials. Phase III
clinical trials typically involve additional testing for safety and clinical
efficacy in an expanded population at geographically dispersed test sites. The
sponsor must submit to the FDA a clinical plan, or "protocol," accompanied by
the approval of the institution participating in the trials, prior to
commencement of each clinical trial. The FDA may order the temporary or
permanent discontinuation of a clinical trial at any time.
 
     The sponsor must submit to the FDA the results of the preclinical and
clinical trials, together with, among other things, detailed information on the
manufacture and composition of the product, in the form of a new drug
application or, in the case of a biologic, a biologics license application. The
FDA is regulating our therapeutic immunotherapy products as biologics and,
therefore, we will be submitting biologics license applications to the FDA to
obtain approval of our products. A biologics license application requires data
showing the safety, purity and potency of the product. In a process which
generally takes several years, the FDA reviews this application and, when and if
it decides that adequate data is available to show that the new compound is both
safe and effective and that other applicable requirements have been met,
approves the drug or biologic for marketing. The amount of time taken for this
approval process is a function of a number of variables, including the quality
of the submission and studies presented, the potential contribution that the
compound will make in improving the treatment of the disease in question, and
the workload at the FDA. It is possible that our Xcellerate Therapy will not
successfully proceed through this approval process or that the FDA will not
approve them in any specific period of time, or at all.
 
     Congress enacted the Food and Drug Administration Modernization Act of
1997, in part, to ensure the availability of safe and effective drugs, biologics
and medical devices by expediting the FDA review process for new products. The
Modernization Act establishes a statutory program for the approval of fast track
products, including biologics. A fast track product is defined as a new drug or
biologic intended for the treatment of a serious or life-threatening condition
that demonstrates the potential to address unmet medical needs for this
condition. Under the fast track program, the sponsor of a new drug or biologic
may
                                       40

<PAGE>   44
 
request the FDA to designate the drug or biologic as a fast track product at any
time during the clinical development of the product.
 
     The Modernization Act specifies that the FDA must determine if the product
qualifies for fast track designation within 60 days of receipt of the sponsor's
request. The FDA can base approval of a marketing application for a fast track
product on an effect on a clinical endpoint or on another endpoint that is
reasonably likely to predict clinical benefit. The FDA may subject approval of
an application for a fast track product to post-approval studies to validate the
surrogate endpoint or confirm the effect on the clinical endpoint and prior
review of all promotional materials. In addition, the FDA may withdraw its
approval of a fast track product on an expedited basis on a number of grounds,
including the sponsor's failure to conduct any required post-approval study with
due diligence.
 
     If the FDA's preliminary review of clinical data suggests that a fast track
product may be effective, the agency may initiate review of sections of a
marketing application for a fast track product before the sponsor completes the
application. This rolling review is available if the applicant provides a
schedule for submission of remaining information and pays applicable user fees.
However, the time periods specified under the Prescription Drug User Fee Act
concerning timing goals to which the FDA has committed in reviewing an
application, do not begin until the sponsor submits the entire application.
 
     We may request fast track designation and orphan drug status for our
Xcellerate Therapy. Orphan drug designation may be granted to those products
developed to treat diseases or conditions that affect fewer than 200,000 persons
in the United States. We believe that some of our target cancer patient
populations meet these criteria. Under the law, the developer of an orphan drug
may be entitled to seven years of market exclusivity following the approval of
the product by the FDA, exemption from user fee payments to the FDA, and a 50%
tax credit for the amount of money spent on human clinical trials. We cannot
predict whether the FDA will grant these designations, or whether our products
will ultimately receive approval or orphan drug exclusivity nor can we predict
the ultimate impact, if any, of the fast track process on the timing or
likelihood of FDA approval of our immunotherapeutics.
 
     The FDA may, during its review of a new drug application or biologics
license application, ask for additional test data. If the FDA does ultimately
approve the product, it may require post-marketing testing, including
potentially expensive Phase IV studies, and surveillance to monitor the safety
and effectiveness of the drug. In addition, the FDA may in some circumstances
impose restrictions on the use of the drug, which may be difficult and expensive
to administer, and may require prior approval of promotional materials.
 
     Before approving a new drug application or biologics license application,
the FDA will also inspect the facilities at which the product is manufactured
and will not approve the product unless the manufacturing facilities are in
compliance with current Good Manufacturing Practices. In addition, the
manufacture, holding, and distribution of a product must be in compliance with
current Good Manufacturing Practices. Manufacturers must continue to expend
time, money and effort in the area of production and quality control and record
keeping and reporting to ensure full compliance with those requirements. The
labeling, advertising, promotion, marketing and distribution of a drug or
biologic product must be in compliance with FDA regulatory requirements. In
addition, manufacturers are required to report adverse events, and errors and
accidents in the manufacturing process. Changes to an approved product, or
changes to the manufacturing process, may require the filing of a supplemental
application for FDA review and approval. Failure to comply with applicable
requirements can lead to the FDA demanding that production and shipment cease,
and, in some cases, that the manufacturer recall products, or to FDA enforcement
actions that can include seizures, injunctions and criminal prosecution. These
failures can also lead to FDA withdrawal of approval to market the product.
 
     We are also subject to regulation by the Occupational Safety and Health
Administration and the Environmental Protection Agency and to regulation under
the Toxic Substances Control Act, the Resource Conservation and Recovery Act and
other regulatory statutes, and may in the future be subject to other federal,
state or local regulations. Either or both of OSHA or the EPA may promulgate
regulations that
 
                                       41

<PAGE>   45
 
may affect our research and development programs. We are unable to predict
whether any agency will adopt any regulation which could limit or impede on our
operations.
 
     Sales of pharmaceutical products outside the United States are subject to
foreign regulatory requirements that vary widely from country to country.
Whether or not we have obtained FDA approval, we must obtain approval of a
product by comparable regulatory authorities of foreign countries prior to the
commencement of marketing the product in those countries. The time required to
obtain this approval may be longer or shorter than that required for FDA
approval. The foreign regulatory approval process includes all the risks
associated with FDA regulation set forth above, as well as country-specific
regulations.
 
LEGAL PROCEEDINGS
 
     We are not party to any material legal proceedings.
 
EMPLOYEES
 
     As of November 30, 2000, we had 64 employees, 27 of these employees are
directly involved in research and development, and 15 employees are involved in
manufacturing operations. We consider our relations with our employees to be
good.
 
FACILITIES
 
     We currently occupy a total of 61,069 square feet of space at two
facilities, one in Seattle, Washington and one in Bothell, Washington. We have a
total of 20,659 square feet of office, laboratory space and a pilot cell
manufacturing facility in Seattle. This pilot plant facility is compliant with
FDA guidelines and proposals for the GMP manufacture of cell-based therapeutic
products for initial clinical trials. The lease on this space expires in October
1, 2006, and we have options to renew for two additional five-year terms.
 
     We have also leased 40,500 square feet of space in Bothell and we intend to
initially renovate approximately 15,000 square feet of space for manufacturing
to support large-scale clinical trials and initial commercialization of any
approved products. The initial lease term on this space expires on December 1,
2010 and we have options to renew until December 1, 2020. Under the terms of the
lease, we also have rights to negotiate for further expansion space in the
building.
 
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<PAGE>   46
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS, KEY EMPLOYEES AND DIRECTORS
 
     The following table sets forth certain information regarding our executive
officers, key employees and directors as of November 30, 2000:
 

<TABLE>
<CAPTION>
                 NAME(1)                    AGE                     POSITION
                 -------                    ---                     --------
<S>                                         <C>    <C>
Ronald J. Berenson, M.D.(4)...............  48     Chief Executive Officer, President and
                                                   Director
Stewart Craig, Ph.D.......................  39     Chief Operating Officer and Vice President
Kathi L. Cordova..........................  40     Vice President, Finance
Dawn M. McCracken.........................  33     Vice President, Regulatory and Clinical
                                                   Affairs
Mark L. Bonyhadi, Ph.D....................  46     Director of Biological Research
Robert E. Curry, Ph.D.(2)(3)(4)...........  54     Director
Jean Deleage, Ph.D.(2)....................  60     Director
Peter Langecker, M.D., Ph.D...............  49     Director
Robert T. Nelsen(2)(3)(4).................  37     Director
Michael Steinmetz, Ph.D.(2)...............  53     Director
Robert M. Williams, Ph.D..................  47     Director
</TABLE>

 
-------------------------
(1) David J. Maki resigned from our board of directors, effective December 19,
    2000.
 
(2) Member of Audit Committee
 
(3) Member of Compensation Committee
 
(4) Member of Milestone Committee
 
     RONALD J. BERENSON, M.D., our founder, has served as President and Chief
Executive Officer and a director since our inception. From April 1989 until
February 1995, Dr. Berenson held several positions at CellPro, Inc., a stem cell
therapy company that he founded, with his last positions being as Executive Vice
President and Chief Medical and Scientific Officer as well as serving on the
Board of Directors. From July 1984 to March 1989, Dr. Berenson was a faculty
member at the Fred Hutchinson Cancer Research Center, where he last held the
position of Assistant Member. He is a board-certified internist and medical
oncologist, who completed his medical oncology fellowship training at Stanford
Medical Center. Dr. Berenson received a B.S. in biology from Stanford University
and an M.D. from Yale Medical School.
 
     STEWART CRAIG, PH.D., our Chief Operating Officer and Vice President,
joined us in October 1999. Prior to joining us, he served as Vice President of
Development and Operations at Osiris Therapeutics, Inc., a stem cell therapy
company, from July 1996 to September 1999. From January 1994 to June 1996, Dr.
Craig served as Vice President of Product and Process Development at SyStemix
Inc., a stem cell and gene therapy company. From June 1987 to December 1993, Dr.
Craig held the positions of Group Leader and Senior Scientist at British
Biotech, a cancer treatment development company. Dr. Stewart received a B.Sc. in
biochemistry and a Ph.D. in physical biochemistry from the University of
Newcastle upon Tyne, U.K.
 
     KATHI L. CORDOVA, C.P.A., Vice President of Finance, joined us in March
1997. Prior to joining us, Ms. Cordova held the positions of Assistant
Controller and Controller in a joint venture between American Life Insurance
Company, an insurance company, and Italy's Confederazione Italiana Sindicati dei
Lavoratori, an insurance company, from February 1994 to February 1997. From
August 1991 to January 1994, Ms. Cordova served as Management Associate with the
Life Division of American International Group. Ms. Cordova received a B.A. in
international relations from Stanford University and an M.A. in international
relations from The Johns Hopkins University.
 
     DAWN M. MCCRACKEN, Vice President of Regulatory and Clinical Affairs,
joined us in November 1998. Prior to joining us, Ms. McCracken held the position
of Senior Manager of Regulatory and Clinical Affairs at Neopath, Inc. a medical
device company, from November 1996 to October 1998. From April 1996 to November
1996, Ms. McCracken served as Contract Consultant of Regulatory and Clinical
Affairs
 
                                       43

<PAGE>   47
 
with Bartels, Inc., an immunotherapy development company, and Sonus
Pharmaceuticals, Inc., a drug delivery product company. From January 1995 to
March 1996, Ms. McCracken served as Manager of the West Coast Region for Novum,
Inc., a contract consulting company. Ms. McCracken received a B.S. in zoology
from the University of Washington.
 
     MARK L. BONYHADI, PH.D., our Director of Biological Research, joined us in
October 1997. Prior to joining us, Dr. Bonyhadi served as Senior Scientist with
SyStemix, Inc., a stem cell and gene therapy company, from 1990 to 1997. Dr.
Bonyhadi received a B.A. in biology from Reed College and a Ph.D. in immunology
from the University of California at Berkeley.
 
     ROBERT E. CURRY, PH.D. has served as one of our directors since May 2000.
Dr. Curry has been a general partner of Sprout Group, a venture capital firm,
since May 1991 and currently serves as Vice President. He is a director of Allos
Therapeutics, Inc., a cancer therapy company and Tripath Imaging, Inc., a cancer
therapy company. Dr. Curry received a B.S. in physics from the University of
Illinois and an M.S. and Ph.D. in chemistry from Purdue University.
 
     JEAN DELEAGE, PH.D. has served as one of our directors since August 1996.
Dr. Deleage is a founder and managing director of Alta Partners, a venture
capital firm. Dr. Deleage serves as a director of ACLARA BioSciences, Inc., a
genomics company, BioMedicines, Inc., a pharmaceutical company, Neurogenetics,
Inc., a biopharmaceutical company, and Rigel Pharmaceuticals, Inc., a
pharmaceutical company, as well as several private company boards. Dr. Deleage
received an M.S. in electrical engineering from the Ecole Superieure
d'Electricite and a Ph.D. in economics from the Sorbonne.
 
     PETER LANGECKER, M.D., PH.D. has served as one of our directors since
January 2000. Dr. Langecker has served as Chief Medical Officer and Vice
President of Clinical Affairs of BioMedicines, Inc., a pharmaceutical company
since October 1999. From July 1997 to September 1999, Dr. Langecker served as
Vice President of Clinical Affairs of Sugen, Inc., a biotechnology company. From
July 1995 to July 1997, Dr. Langecker served as Vice President of Clinical
Research of Coulter Pharmaceutical, Inc., a biotechnology company. Dr. Langecker
received an M.D. and a Ph.D. in medical sciences from Ludwig Maximilians
University in Munich.
 
     ROBERT T. NELSEN has served as one of our directors since August 1996.
Since 1992, Mr. Nelsen has served as director of ARCH Venture Corporation, a
venture capital firm. Mr. Nelsen serves as a director of Adolor Corporation, an
analgesics development company, Caliper Technologies Corporation, a biochip
company, Genomica Corporation, a pharmacogenomics software company, and Illumina
Corporation, a biotechnology company. Mr. Nelsen received a B.S. in biology and
economics from the University of Puget Sound and an M.B.A. from the University
of Chicago.
 
     MICHAEL STEINMETZ, PH.D. has served as one of our directors since August
2000. Since 1997, Dr. Steinmetz has been a general partner of MPM Asset
Management LLC, a venture capital firm. From 1986 to 1997, Dr. Steinmetz headed
the Biology Department in Basel, Switzerland as well as the Biotechnology
Department and the Preclinical Research and Development Department in Nutley,
New Jersey at Hoffmann-La Roche Inc., a developer of diagnostic systems. Dr.
Steinmetz serves as a director of Caliper Technologies, a lab processing
company, Arena Pharmaceuticals, a biopharmaceutical company, and GPC Biotech, a
pharmaceutical company, as well as several private company boards. Dr. Steinmetz
received a Diploma in chemistry from the University of Hamburg and a Ph.D. in
biochemistry and molecular biology from the University of Munich.
 
     ROBERT M. WILLIAMS, PH.D. has served as one of our directors since November
1996. Since September 1980, Dr. Williams has served as a Professor of Chemistry
at Colorado State University. From 1988 to present, Dr. Williams has also
provided consulting services to several biotechnology and pharmaceutical
companies, including Cubist Pharmaceutical Company, Microcide Pharmaceuticals,
Hoffman-La Roche, G.D. Searle and EPIX Medical, Inc. Dr. Williams received a
B.A. in chemistry from Syracuse University and a Ph.D. in organic chemistry from
the Massachusetts Institute of Technology. Following graduate school, Dr.
Williams served as a postdoctoral fellow at Harvard University.
 
                                       44

<PAGE>   48
 
SCIENTIFIC ADVISORY BOARD
 
     The Scientific Advisory Board is our network of medical, scientific and
clinical advisors and collaborators who consult with our scientists. In
addition, our Scientific Advisory Board members advise us regarding our research
and development programs, the design of our clinical trials as well as other
medical and scientific matters relating to our business. One of our Scientific
Advisory Board members, E. Donnall Thomas, was awarded the 1990 Nobel Prize in
Medicine. Our Scientific Advisory Board members are:
 

<TABLE>
<CAPTION>
               NAME                            POSITION                      AFFILIATION
               ----                            --------                      -----------
<S>                                  <C>                            <C>
Joseph Bertino, M.D. ..............  Chairman of Molecular          Memorial Sloan-Kettering
                                     Pharmacology and Therapeutics  Cancer Center
                                     Program
Jeffrey Bluestone, Ph.D.,            Professor and Director of the  University of California, San
  Founder..........................  UCSF Diabetes Center           Francisco
Edward Clark, Ph.D. ...............  Professor and Program          Department of Microbiology,
                                     Director                       University of Washington
John Hansen, M.D. .................  Member and former Director of  Fred Hutchinson Cancer
                                     Clinical Research              Research Center
Carl June, M.D., Founder...........  Vice Chairman of the           University of Pennsylvania
                                     Department of Molecular and
                                     Cellular Engineering
Ronald Levy, M.D. .................  Chairman of the Division of    Stanford Medical Center
                                     Medical Oncology
Gerald Nepom, M.D., Ph.D. .........  Director                       Virginia Mason Research Center
E. Donnall Thomas, M.D. ...........  Member and former Director of  Fred Hutchinson Cancer
                                     Clinical Research              Research Center
Craig Thompson, M.D., Founder......  Scientific Director, Abramson  University of Pennsylvania
                                     Cancer Research Institute
Robert Williams, Ph.D. ............  Professor of Chemistry         Colorado State University
</TABLE>

 
BOARD COMPOSITION
 
     Our board is currently comprised of seven directors and one vacancy. Our
board of directors is divided into three classes, with each director serving a
three-year term and one class being elected at each year's annual meeting of
stockholders. Director Robert Williams will be in the class of directors whose
initial term expires at the 2001 annual meeting of stockholders. Directors Jean
Deleage, Peter Langecker and Michael Steinmetz will be in the class of directors
whose initial term expires at the 2002 annual meeting of the stockholders.
Directors Ronald J. Berenson, Robert E. Curry and Robert T. Nelsen will be in
the class of directors whose initial term expires at the 2003 annual meeting of
stockholders.
 
BOARD COMMITTEES
 
     Our board of directors has established an audit committee, a compensation
committee and a milestone committee.
 
Audit Committee
 
     The audit committee is composed of Robert Curry, Robert Nelsen and Michael
Steinmetz. It is responsible for assuring the integrity of our financial
control, audit and reporting functions. It reviews with our management and our
independent auditors the effectiveness of our financial controls, accounting and
reporting practices and procedures. In addition, the audit committee reviews the
qualifications of our independent auditors, makes recommendations to the board
of directors regarding the selection of our
 
                                       45

<PAGE>   49
 
auditors, reviews the scope, fees and results of activities related to audit and
non-audit services. Prior to December 2000, the audit committee responsibilities
were conducted by the full board of directors, which met annually with
representatives of our independent auditors, including executive sessions from
which members of management were excused.
 
Compensation Committee
 
     The compensation committee is composed of Robert E. Curry, Jean Deleage,
and Robert T. Nelsen. Its principal responsibility is to administer our stock
plans and to set the salary and incentive compensation, including stock option
grants, for the Chief Executive Officer and senior staff members.
 
Milestone Committee
 
     The milestone committee is composed of Ronald J. Berenson, Robert E. Curry
and Robert T. Nelsen. In connection with our acquisition of CellGenEx, Inc., we
initially reserved an aggregate of 1,582,340 shares of our common stock in a
Milestone Pool, for issuance to our scientific founders upon the achievement of
specific milestones determined by the milestone committee. Several of these
milestones have expired and to date, 1,056,040 shares remain available for
issuance.
 
DIRECTOR COMPENSATION
 
     Our six outside directors serve without cash compensation. In November
1996, Jean Deleage and Robert Williams were each awarded non-statutory options
for 30,000 shares of our common stock. In November 1999, Peter Langecker was
awarded a non-statutory option for 30,000 shares of our common stock. These
shares vest over a four-year period at a rate of 25% of the total number of
shares subject to the option one year after the date of grant and 1/48th of the
total number of shares subject to the option vesting each month thereafter.
Directors who are our employees are eligible to participate in our 1996 stock
option plan and, beginning in 2000, they will also be eligible to participate in
our 2000 stock option plan and 2000 employee stock purchase plan. Beginning in
2001, directors who are not our employees will be eligible to participate in our
2000 directors' stock option plan as well as our 2000 stock option plan.
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     None of our executive officers serves as a member of the board of directors
or compensation committee of any entity that has one or more of its executive
officers serving as a member of our board of directors or compensation
committee.
 
LIMITATION OF LIABILITY AND INDEMNIFICATION
 
     Our Amended and Restated Certificate of Incorporation limits the liability
of directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
 
     - breach of their duty of loyalty to the corporation or its stockholders;
 
     - acts or omissions not in good faith or that involve intentional
       misconduct or a knowing violation of law;
 
     - unlawful payments of dividends or unlawful stock repurchases or
       redemptions; and
 
     - any transaction from which the director derived an improper personal
       benefit.
 
     This limitation of liability does not apply to liabilities arising under
the federal or state securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission. Our bylaws provide
that we will indemnify our directors, officers, employees and other agents to
the fullest extent permitted by the Delaware General Corporation Law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit
                                       46

<PAGE>   50
 
us to secure insurance on behalf of any officer, director, employee or other
agent for any liability arising out of his or her actions in such capacity,
regardless of whether the bylaws would permit such indemnification.
 
     We have obtained directors and officers' insurance providing
indemnification for all of our directors, officers and employees for certain
liabilities. Prior to the closing of this offering we will enter into agreements
to indemnify our directors and executive officers in addition to the
indemnification provided for in our bylaws. These agreements, among other
things, will indemnify our directors and executive officers for expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by
any such person in any action or proceeding, out of such person's services as a
director, officer, employee, agent or fiduciary of ours, any subsidiary of ours
or any other company or enterprise to which the person provides services at our
request. We believe that these provisions and agreements are necessary to
attract and retain qualified persons as directors and executive officers. At
present, there is no litigation or proceeding involving any of our directors or
officers in which indemnification is required or permitted, and we are not aware
of any threatened litigation or proceeding that may result in a claim for
indemnification.
 
EXECUTIVE COMPENSATION
 
     The following table summarizes the compensation paid to or earned during
the year ended December 31, 1999, by our Chief Executive Officer and our other
most highly compensated executive officers whose total salary and bonus exceeded
$100,000 for services rendered to us in all capacities during 1999. The
executive officers listed in the table below are referred to as named executive
officers.
 
                           SUMMARY COMPENSATION TABLE
 

<TABLE>
<CAPTION>
                                                                         LONG-TERM
                                                                        COMPENSATION
                                                                           AWARDS
                                                                        ------------
                                                 ANNUAL COMPENSATION     SECURITIES
                                                 --------------------    UNDERLYING     ALL OTHER
          NAME AND PRINCIPAL POSITION             SALARY      BONUS      OPTIONS(#)    COMPENSATION
          ---------------------------            ---------   --------   ------------   ------------
<S>                                              <C>         <C>        <C>            <C>
Ronald J. Berenson, M.D........................  $196,352    $15,000      150,000               --
  President and Chief Executive Officer
Jeffrey Ledbetter, Ph.D.(1)....................    44,978         --           --       $121,265(2)
  Former Chief Scientific Officer
Mark Murray, Ph.D.(3)..........................   157,940         --           --               --
  Former Vice President, Business Development
Dawn M. McCracken..............................    98,028     10,000       40,000               --
  Vice President, Regulatory and Clinical
     Affairs
Alan R. Hardwick, Ph.D.(4).....................   102,000         --           --               --
  Former Director, Cell Processing Systems
</TABLE>

 
-------------------------
(1) Dr. Ledbetter resigned in March 1999.
 
(2) Constitutes severance payment.
 
(3) Dr. Murray resigned in December 1999.
 
(4) Dr. Hardwick resigned in December 2000.
 
                                       47

<PAGE>   51
 
                 OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
 
     The following table sets forth information concerning the individual grants
of stock options to each of the named executive officers during the fiscal year
ended December 31, 1999. The exercise price per share was valued by our board of
directors on the date of grant and were issued at estimated fair market value on
the date of grant based upon the assumed offering price and the purchase price
paid by investors for shares of our preferred stock, taking into account the
liquidation preferences and other rights, privileges and preferences associated
with such preferred stock.
 

<TABLE>
<CAPTION>
                                                INDIVIDUAL GRANTS                      POTENTIAL REALIZABLE
                               ----------------------------------------------------      VALUE AT ASSUMED
                               NUMBER OF      PERCENT OF                               ANNUAL RATES OF STOCK
                               SECURITIES   TOTAL OPTIONS                             PRICE APPRECIATION FOR
                               UNDERLYING     GRANTED TO     EXERCISE                     OPTION TERM(2)
                                OPTIONS      EMPLOYEES IN      PRICE     EXPIRATION   -----------------------
            NAME               GRANTED(#)   FISCAL YEAR(1)   PER SHARE      DATE          5%          10%
            ----               ----------   --------------   ---------   ----------   ----------   ----------
<S>                            <C>          <C>              <C>         <C>          <C>          <C>
Ronald J. Berenson, M.D......   150,000(3)       24.1%        $0.167      11/16/09     $15,754      $39,923
Jeffrey Ledbetter, Ph.D......        --            --             --            --          --           --
Mark Murray, Ph.D............        --            --             --            --          --           --
Dawn M. McCracken............    40,000(4)        6.4%         0.167      10/18/09       4,201       10,646
Alan R. Hardwick, Ph.D.......        --            --             --            --          --           --
</TABLE>

 
-------------------------
(1) In the last fiscal year, we granted options to employees to purchase an
    aggregate of 639,748 shares.
 
(2) Amounts represent hypothetical gains that could be achieved for the
    respective options if exercised at the end of the option term based on the
    ten-year term of the option at the time of grant. These gains are based on
    assumed rates of stock price appreciation of 5% and 10% compounded annually
    from the date the respective options were granted to their expiration date.
    These assumptions are not intended to forecast future appreciation of our
    stock price. The potential realizable value computation does not take into
    account federal or state income tax consequences of option exercises or
    sales of appreciated stock. The price to the public in this offering is
    higher than the estimated fair market value on the date of grant. Therefore,
    the potential realizable value of the option grants would be significantly
    higher than the calculations shown above.
 
(3) This option was granted under our 1996 Stock Option Plan and vests over a
    five-year period at a rate of 20% of the total number of shares subject to
    the option one year after the date of grant and 1/60th of the total number
    of shares subject to the option vesting each month thereafter.
 
(4) This option was granted under our 1996 Stock Option Plan and vests over a
    four-year period at a rate of 25% of the total number of shares subject to
    the option one year after the date of grant and 1/48th of the total number
    of shares subject to the option vesting each month thereafter.
 
                                       48

<PAGE>   52
 
                       AGGREGATE OPTION EXERCISES IN 1999
                        AND 1999 YEAR-END OPTION VALUES
 
     The following table provides summary information concerning stock options
granted under our 1996 Stock Option Plan during the year ended December 31,
1999, and exercised options subject to repurchase held as of December 31, 1999,
by each of the named executive officers. The exercise price for the options
granted in 1999 is $0.167 per share. Generally, these stock options are
immediately exercisable. We have the right to repurchase all unvested shares at
the original exercise price within three months of the date on which the
optionee's service terminates. Each of the options has a ten-year term, subject
to earlier termination if the optionee's service terminates. Our named executive
officers did not exercise any options during the fiscal year ended December 31,
1999.
 

<TABLE>
<CAPTION>
                                        SHARES                 NUMBER OF SECURITIES        VALUE OF SHARES
                                      ACQUIRED ON    VALUE     SUBJECT TO REPURCHASE    SUBJECT TO REPURCHASE
                NAME                   EXERCISE     REALIZED   DECEMBER 31, 1999(#)    DECEMBER 31, 1999($)(1)
                ----                  -----------   --------   ---------------------   -----------------------
<S>                                   <C>           <C>        <C>                     <C>
Ronald J. Berenson, M.D.............      --          --                --                       --
Jeffrey Ledbetter, Ph.D.............      --          --                --                       --
Mark Murray, Ph.D...................      --          --                --                       --
Dawn M. McCracken...................      --          --                --                       --
Alan R. Hardwick, Ph.D..............      --          --                --                       --
</TABLE>

 
-------------------------
(1) There was no public trading market for our common stock as of December 31,
    1999. Accordingly, the value of unexercised in-the-money options as of that
    date was calculated on the basis of an assumed initial public offering price
    of $     per share, less the aggregate exercise price of the options. The
    securities subject to repurchase are all unvested options purchased under
    early exercise stock purchase agreements.
 
EMPLOYEE BENEFIT PLANS
 
2000 Stock Option Plan
 
     Our 2000 stock option plan provides for the grant of incentive stock
options to employees (including employee directors) and nonstatutory stock
options to employees, directors and consultants. The purposes of the 2000 plan
are to attract and retain the best available personnel, to provide additional
incentives to our employees and consultants and to promote the success of our
business. The 2000 plan was adopted by our board of directors in December 2000
and will be submitted for approval by our stockholders prior to the completion
of this offering. A total of 2,100,000 shares of common stock has been reserved
for issuance under the 2000 plan. The number of shares reserved for issuance
under the 2000 plan will be subject to an automatic annual increase on the first
day of each of our fiscal years beginning in 2002 and ending in 2008 equal to
the lesser of 500,000 shares, 3% of our outstanding common stock on the last day
of the immediately preceding fiscal year, or such lesser number of shares as the
board of directors determines.
 
     The 2000 plan may be administered by the board of directors or a committee
of the board, each known as the administrator. The administrator determines the
terms of options and stock purchase rights granted under the 2000 plan,
including the number of shares subject to the award, the exercise or purchase
price, and the vesting and/or exercisability of the award and any other
conditions to which the award is subject. In no event, however, may an employee
receive awards for more than 1,000,000 shares under the 2000 plan in any fiscal
year. Incentive stock options granted under the 2000 plan must have an exercise
price of at least 100% of the fair market value of the common stock on the date
of grant, and not less than 110% of the fair market value in the case of
incentive stock options granted to an employee who holds more than 10% of the
total voting power of all classes of our stock or any parent or subsidiary's
stock. After the date of this offering, the exercise price of nonstatutory stock
options and the purchase price of stock purchase rights will be the price
determined by the administrator, although nonstatutory stock options and stock
purchase rights granted to our chief executive officer and our four other most
highly compensated officers will generally equal at least 10% of the grant date
fair market value if we intend that
 
                                       49

<PAGE>   53
 
the awards to those individuals will qualify as performance-based compensation
under applicable tax law. Payment of the exercise or purchase price may be made
in cash or such other consideration determined by the administrator.
 
     With respect to options granted under the 2000 plan, the administrator
determines the term of options, which may not exceed 10 years, or 5 years in the
case of an incentive stock option granted to a holder of more than 10% of the
total voting power of all classes of our stock or a parent or subsidiary's
stock. Generally, an option granted under the 2000 plan is nontransferable other
than by will or the laws of descent or distribution and may be exercised during
the lifetime of the optionee only by such optionee. However, the administrator
may, in its discretion, provide for the limited transferability of nonstatutory
stock options granted under the 2000 plan. Stock issued pursuant to stock
purchase rights granted under the 2000 plan is generally subject to a repurchase
right at the purchaser's original purchase price exercisable by us upon the
termination of the holder's employment or consulting relationship with us for
any reason, including death or disability. This repurchase right will lapse at
such rate as the administrator may determine.
 
     If we sell all or substantially all of our assets or if we are acquired by
another corporation each outstanding option and stock purchase right may be
assumed or an equivalent award substituted by the successor corporation, with
appropriate adjustments made to both the price and number of shares subject to
the option or purchase right. If the successor does assume outstanding options
and purchase rights, 25% of the shares subject to an option or initially subject
to repurchase will vest on the closing of the transaction, and if the holder is
involuntarily terminated within one year after the closing another 25% of the
shares subject to such option or initially subject to repurchase will vest on
termination. If the successor corporation does not assume options and purchase
rights or substitute equivalent options or purchase rights, then vesting of all
shares subject to options will accelerate fully and all repurchase rights will
lapse immediately prior to the closing of the transaction, and options and
purchase rights will terminate as of the closing of the transaction.
 
     The administrator has authority to amend or terminate the 2000 plan, but no
action may be taken that impairs the rights of any holder of an outstanding
option or stock purchase right without the holder's consent. In addition, we
must obtain stockholder approval of amendments to the plan as required by
applicable law. Unless terminated earlier by the board of directors, the 2000
plan will terminate in 2010.
 
1996 Stock Option Plan
 
     Our 1996 stock option plan was originally adopted by our board of directors
in September 1996 and approved by our stockholders in August 1997. As of
November 30, 2000, an aggregate of 2,500,000 shares was reserved for issuance
under the 1996 stock option plan, 1,218,686 were issuable upon exercise of
outstanding options granted under the 1996 stock option plan at a weighted
average exercise price of $0.22, 743,335 shares of common stock have been issued
upon exercise of options at purchase prices ranging between $0.10 and $0.40, and
537,979 shares of common stock remain available for future grants under the 1996
stock option plan.
 
     The terms of the options under the 1996 stock option plan are generally the
same as those that may be issued under the 2000 stock plan, except for the
following features. Only options could be granted under the 1996 stock option
plan and nonstatutory stock options granted under the 1996 stock option plan are
nontransferable in all cases. The 1996 stock option plan does not impose a
limitation on the number of shares subject to options that may be issued to any
individual employee.
 
     If we sell all or substantially all of our assets or if we are acquired by
another corporation, each outstanding option may be assumed or an equivalent
award substituted by the successor corporation, with appropriate adjustments
made to both the price and number of shares subject to the option. If the
successor does assume outstanding options, 25% of the shares subject to an
option that are unvested immediately prior to the consummation of the
transaction will vest on the closing of the transaction. If the successor
corporation does not assume options or substitute equivalent options, then
vesting of all shares
 
                                       50

<PAGE>   54
 
subject to options will accelerate fully immediately prior to the closing of the
transaction, and options will terminate as of the closing of the transaction.
 
2000 Employee Stock Purchase Plan
 
     Our 2000 employee stock purchase plan was adopted by the board of directors
in December 2000 and will be submitted for approval by our stockholders prior to
completion of this offering. A total of 600,000 shares of common stock has been
reserved for issuance under the 2000 purchase plan, none of which have been
issued as of the date of this offering. The number of shares reserved for
issuance under the 2000 purchase plan will be subject to an automatic annual
increase on the first day of each of our fiscal years beginning in 2002 and
ending in 2008 and equal to the lesser of:
 
     - 300,000 shares;
 
     - 1% of our outstanding common stock on the last day of the immediately
       preceding fiscal year;
 
     - or such lesser number of shares as the board of directors determines.
 
     The 2000 purchase plan becomes effective upon the date of this offering.
Unless terminated earlier by the board of directors, the 2000 purchase plan
shall terminate in 2010.
 
     The 2000 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, will be implemented by a series of offering periods
of approximately 6 months duration, with new offering periods, other than the
first offering period, commencing generally on February 1 and August 1 of each
year. Each offering period will consist of a single purchase period of
approximately six months duration. At the end of each purchase period an
automatic purchase will be made for participants. The initial offering period
and purchase period is expected to commence on the date of this offering and end
on July 31, 2001. Each eligible employee will be granted an option on the
effective date of this offering to purchase shares in the initial offering
period in an amount equal to the maximum number of shares that an individual can
purchase under the terms of the 2000 purchase plan.
 
     The 2000 purchase plan will be administered by the board of directors or by
a committee appointed by the board. Our employees, including officers and
employee directors, or employees of any majority-owned subsidiary designated by
the board, are eligible to participate in the 2000 purchase plan if they are
employed by us or any such subsidiary for at least 20 hours per week and more
than five months per year. The 2000 purchase plan permits eligible employees to
purchase common stock through payroll deductions, which in any event may not
exceed 15% of an employee's eligible cash compensation. The purchase price is
equal to the lower of 85% of the fair market value of the common stock at the
beginning of each offering period or at the end of each purchase period.
Employees may end their participation in the 2000 purchase plan at any time
during an offering period, and participation ends automatically on termination
of employment.
 
     An employee cannot be granted an option under the 2000 purchase plan if
immediately after the grant such employee would own stock and/or hold
outstanding options to purchase stock equaling 5% or more of the total voting
power or value of all classes of our stock or stock of our subsidiaries, or if
such option would permit an employee's rights to purchase stock under the 2000
purchase plan at a rate that exceeds $25,000 of fair market value of such stock
for each calendar year in which the option is outstanding. In addition, no
employee may purchase more than 2,500 shares of common stock under the 2000
purchase plan in any one purchase period.
 
     If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, each right to purchase stock under the 2000
purchase plan may be assumed or an equivalent right substituted by the successor
corporation. However, in the event that the successor corporation refuses to
assume each purchase right or to substitute an equivalent right, the board of
directors will shorten any ongoing offering period so that employees' rights to
purchase stock under the 2000 purchase plan are exercised prior to the
transaction. Outstanding options will be adjusted if we effect a stock split,
stock dividend or similar change in our capital structure. The board of
directors may extend future offering
 
                                       51

<PAGE>   55
 
periods to up to 27 months duration, consisting of consecutive purchase periods
of approximately six months duration, and may increase the maximum contribution
rate up to 20% of an employee's eligible cash compensation. The board of
directors has the power to amend or terminate the 2000 purchase plan as long as
the action does not adversely affect any outstanding rights to purchase stock
under the plan. However, the board of directors may amend or terminate the 2000
purchase plan or an offering period even if it would adversely affect
outstanding options in order to avoid our incurring adverse accounting charges
or if the board of directors determines that termination of the plan or offering
period is in our best interests and the best interests of our stockholders. We
must obtain stockholder approval for any amendment to the purchase plan to the
extent required by law.
 
2000 Directors' Stock Option Plan
 
     The 2000 directors' stock option plan was adopted by the board of directors
in December 2000 and will be submitted for approval by our stockholders prior to
completion of this offering. It will become effective upon the date of this
offering. A total of 400,000 shares of common stock have been reserved for
issuance under the 2000 directors' plan, all of which remain available for
future grants. The directors' plan is designed to work automatically without
administration; however, to the extent administration is necessary, it will be
performed by the board of directors. To the extend they arise, it is expected
that conflicts of interest will be addressed by abstention of any interested
director from both deliberations and voting regarding matters in which such
director has a personal interest. Unless terminated earlier by the board of
directors, the directors' plan will terminate in 2010.
 
     The directors' plan provides that each person who becomes a non-employee
director after the completion of this offering will be granted a nonstatutory
stock option to purchase 25,000 shares of common stock on the date on which such
individual first becomes a member of our board of directors. On first day of
each fiscal year, each of our nonemployee directors will be granted an option to
purchase 5,000 shares of common stock if, on such date, the director has served
on our board of directors for at least 6 months. The directors' plan provides
that each option granted to a new director shall vest at the rate of 1/3rd of
the total number of shares subject to such option twelve months after the date
of grant with the remaining shares vesting thereafter in equal monthly
installments over the next 2 years so that the option will be fully vested after
3 years, and each annual option granted to a director shall vest in full at the
end of one year.
 
     All options granted under the directors' plan will have a term of 10 years
and an exercise price equal to the fair market value on the date of grant. If a
non-employee director ceases to serve as a director for any reason other than
death or disability, he or she may, but only within 90 days after the date he or
she ceases to be a director, exercise options granted under the directors' plan.
If he or she does not exercise the option within such 90-day period, the option
shall terminate. If a directors' service terminates as a result of his or her
disability or death, or if a director dies within 3 months following
termination, the director or his or her estate will have twelve months after the
date of termination or death, as applicable, to exercise options that were
vested as of the date of termination. Options granted under the directors' plan
are generally non-transferable by the option holder other than by will or the
laws of descent or distribution, pursuant to a qualified domestic relations
order or to family members or family trusts or foundations, and each option is
exercisable, during the lifetime of the option holder, only by that option
holder or a permitted transferee.
 
     If we are acquired by another corporation, each option outstanding under
the directors' plan will be assumed or equivalent options substituted by our
acquirer, unless our acquirer does not agree to such assumption or substitution,
in which case the options will terminate upon consummation of the transaction to
the extent not previously exercised. In connection with an acquisition, each
director holding options under the directors' plan will have the right to
exercise his or her options immediately before the consummation of the merger as
to all shares underlying the options. Outstanding options will be adjusted if we
effect a stock split, stock dividend, or other similar change in our capital
structure. Our board of directors may amend or terminate the directors' plan as
long as such action does not adversely affect any
 
                                       52

<PAGE>   56
 
outstanding option and we obtain stockholder approval for any amendment to the
extend required by applicable law.
 
401(k)Plan
 
     We have established a tax-qualified employee savings and retirement plan,
or 401(k) plan, which covers all of our employees. Under the 401(k) plan,
eligible employees may defer up to 15% of their pre-tax earnings, subject to the
Internal Revenue Service's annual contribution limits, which deferral
contributions are fully vested at all times. The 401(k) plan permits
discretionary matching contributions by such percentage amount as may be
determined annually by the board of directors, and additional discretionary
contributions by us on behalf of all participants in the 401(k) plan, which
additional company contributions vest 25% per year of service with full vesting
after 4 years of service. The 401(k) plan is intended to qualify under Section
401 of the Internal Revenue Code so that contributions by us to the 401(k) plan,
if any, will be deductible by us when made. The trustee under the 401(k) plan
invests an employee's account balance under the plan in accordance with an
employee's written direction. To the extent an employee directs the investment
of his or her account balance under the plan, ERISA relieves the trustee from
liability for any loss resulting from employee direction of the investment.
 
                                       53

<PAGE>   57
 
                              CERTAIN TRANSACTIONS
 
     We have issued since our inception through November 30, 2000, in private
placement transactions shares of common and preferred stock as follows: an
aggregate of 6,334,212 shares of Series A preferred stock at $0.95 per share in
January and August 1996, an aggregate of 3,757,205 shares of Series B preferred
stock at $1.10 per share in August 1997, an aggregate of 7,185,630 shares of
Series C preferred stock at $1.67 per share in July 1998, an aggregate of
10,109,825 shares of Series D preferred stock at $2.78 per share in May and
August 2000. In addition, an aggregate of 2,999,910 shares of common stock and
526,300 shares of Series A preferred stock were issued in August 1997 in
exchange for all of the outstanding capital stock of CellGenEx, Inc. Also,
145,875 shares of Series B preferred stock and 20,000 shares of common stock
were issued in July 1998 and June 1999, respectively, in connection with license
agreements. In addition, as of November 30, 2000, an aggregate of 660,754
warrants to purchase shares of preferred stock issued between 1996 and 2000
remained outstanding and an aggregate of 1,132,287 warrants to purchase shares
of common stock issued in August 2000 remained outstanding.
 
     Each share of preferred stock is convertible, without payment of additional
consideration, into one share of common stock. All of the currently outstanding
shares of preferred stock will be converted into 28,059,047 shares of common
stock upon closing of this offering.
 
     The following table summarizes the shares of preferred stock purchased by
our greater than 5% stockholders, our directors and our executive officers in
private placement transactions:
 

<TABLE>
<CAPTION>
                                                    SERIES A    SERIES B    SERIES C    SERIES D
                                         COMMON     PREFERRED   PREFERRED   PREFERRED   PREFERRED
             INVESTOR(1)                  STOCK       STOCK       STOCK       STOCK       STOCK
             -----------                ---------   ---------   ---------   ---------   ---------
<S>                                     <C>         <C>         <C>         <C>         <C>
Directors and Executive Officers
  Ronald J. Berenson, M.D.(2).........  2,373,256      57,895          --          --          --
  Robert M. Williams, Ph.D. ..........    200,000          --          --          --          --
 
Entities Affiliated with Directors
  Alta Partners(3)....................         --   1,894,737     805,281     971,331     584,547
  ARCH Venture Corporation(4).........         --     789,469   2,045,454   1,119,265   1,321,942
  Sprout Group(5).....................         --   2,631,579     545,454   1,142,937     323,741
  MPM Asset Management LLC(6).........         --          --          --          --   4,316,547
 
5% Stockholders
  Ronald J. Berenson, M.D.(2).........  2,373,256      57,895          --          --          --
  Alta Partners(3)....................         --   1,894,737     805,281     971,331     584,547
  ARCH Venture Corporation(4).........         --     789,469   2,045,454   1,119,265   1,321,942
  Sprout Group(5).....................         --   2,631,579     545,454   1,142,937     323,741
  MPM Asset Management LLC(6).........         --          --          --          --   4,316,547
  Tredegar Investments................         --          --          --   1,976,051     286,022
</TABLE>

 
-------------------------
(1) See "Principal Stockholders" for more detail on shares held by these
    purchasers.
 
(2) Includes shares held in trust.
 
(3) Jean Deleage, Ph.D., a director, is managing director of Alta Partners.
 
(4) Robert T. Nelsen, a director, is director of ARCH Venture Corporation.
    Excludes shares held by ARCH Development Corporation, which was previously
    affiliated with ARCH Venture Corporation.
 
(5) Robert E. Curry, Ph.D., a director, is vice president of Sprout Group.
 
(6) Michael Steinmetz, Ph.D., a director, is a general partner of MPM Asset
    Management LLC.
 
     In connection with our acquisition of all the outstanding capital stock of
CellGenEx, we issued warrants to purchase 368,410 shares of Series A preferred
stock at $0.95 per share in August 1997. In addition, in connection with our
Series D preferred stock private placement, we issued warrants to purchase
1,132,287 shares of common stock at $0.30 per share in August 2000. The
following table
 
                                       54

<PAGE>   58
 
summarizes the number of shares of common stock and preferred stock issuable
pursuant to warrants granted to greater than 5% stockholders, directors,
executive officers and entities affiliated with our executive officers and
directors in private placement transactions:
 

<TABLE>
<CAPTION>
                                                           COMMON     SERIES A
                                                           WARRANT    WARRANT
                       INVESTOR(1)                         SHARES      SHARES
                       -----------                         -------    --------
<S>                                                        <C>        <C>
Alta Partners............................................   65,468         --
ARCH Venture Corporation.................................  148,056    276,307
Sprout Group.............................................   36,257         --
MPM Asset Management LLC.................................  483,453         --
Tredegar Investments.....................................   32,034         --
</TABLE>

 
-------------------------
(1) See "Principal Stockholders" for more detail on shares held by these
    purchasers.
 
     In connection with the resignation in March 1999 of Dr. Jeffrey Ledbetter,
our former Chief Scientific Officer, we entered into an agreement with Dr.
Ledbetter providing for a severance payment of $121,265. See
"Management -- Executive Compensation."
 
     In July 1999, we entered into a License Agreement with Genecraft LLC of
which Dr. Ledbetter is a principal founder. Under this agreement, we granted an
exclusive sublicense to Genecraft for the rights to several pending patent
applications in the field of in vivo activation of T cells.
 
     We have entered into a consulting agreement with Dr. James Berenson who is
the brother of Dr. Ronald J. Berenson, our President and Chief Executive
Officer. In connection with this consulting agreement, Dr. James Berenson will
serve as a consultant, will be available for consultation up to five days per
year and will be paid up to a maximum of $7,500 per year.
 
     We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against liabilities that may arise by
reason of their status or service as officers or directors (other than
liabilities arising from willful misconduct of a culpable nature) and to advance
their expenses incurred as a result of any proceeding against them as to which
they could be indemnified. See "Management -- Limitation of Liability and
Indemnification Matters."
 
     We maintain key man life insurance, under which we are the beneficiary, on
Dr. Ronald J. Berenson, our President and Chief Executive Officer, in the amount
of $2,000,000 of which we are the beneficiary.
 
     In June 1999, we entered into an exclusive license agreement with ARCH
Development Corporation to obtain rights to a pending patent application in the
field of therapies based on ex vivo activation of T cells. In consideration for
the license, we issued shares of our common stock to ARCH Development
Corporation. Dr. Carl June, one of our founders, was previously affiliated with
ARCH Development Corporation and is listed as an inventor on the patent
application licensed from ARCH Development Corporation. ARCH Development
Corporation was previously affiliated with ARCH Venture Corporation, one of our
principal stockholders.
 
     In connection with our acquisition of all of the outstanding capital stock
of CellGenEx, Inc., we reserved an aggregate of 1,582,340 shares of our common
stock in a Milestone Pool, for issuance to our scientific founders, Drs. Jeffrey
Bluestone, Carl June, Jeffrey Ledbetter and Craig Thompson, upon the achievement
of scientific milestones determined by the Milestone Committee. Several of these
milestones have expired and to date, 1,056,040 shares remain available for
issuance.
 
                                       55

<PAGE>   59
 
                             PRINCIPAL STOCKHOLDERS
 
     The following table sets forth information regarding the beneficial
ownership of our common stock as of November 30, 2000, and as adjusted to
reflect the sale of common stock offered hereby for:
 
     - each person known by us to own beneficially more than 5% of our common
       stock;
 
     - each of our directors;
 
     - our chief executive officer and our other most highly compensated
       executive officer; and
 
     - our executive officers and directors as a group.
 
     Except as otherwise noted, the address of each person listed in the table
is c/o Xcyte Therapies, Inc., 1124 Columbia Street, Suite 130, Seattle, WA
98104. The table includes all shares of common stock issuable within 60 days of
November 30, 2000, upon the exercise of options and warrants beneficially owned
by the indicated stockholders on that date based on options and warrants
outstanding as of November 30, 2000. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and includes
voting and investment power with respect to shares. To our knowledge, except
under applicable community property laws or as otherwise indicated, the persons
named in the table have sole voting and sole investment control with respect to
all shares beneficially owned. The applicable percentage of ownership for each
stockholder is based on 34,682,220 shares of common stock outstanding as of
November 30, 2000, in each case together with applicable options and warrants
for that stockholder. Shares of common stock issuable upon exercise of options
and warrants beneficially owned are deemed outstanding for the purpose of
computing the percentage of ownership of the person holding those options and
warrants, but are not deemed outstanding for computing the percentage ownership
of any other person.
 

<TABLE>
<CAPTION>
                                                                              PERCENT BENEFICIALLY
                                                                                    OWNED(1)
                                                                 SHARES       --------------------
                                                              BENEFICIALLY     BEFORE      AFTER
                      BENEFICIAL OWNER                           OWNED        OFFERING    OFFERING
                      ----------------                        ------------    --------    --------
<S>                                                           <C>             <C>         <C>
Robert T. Nelsen(2).........................................    5,700,493       16.2%
  ARCH Venture Corporation 1000 Second Avenue, Suite 3710
  Seattle, WA 98104-1053
Michael Steinmetz(3)........................................    4,800,000       13.7%
  MPM Asset Management LLC One Cambridge Center Cambridge,
  MA 02142
Robert E. Curry(4)..........................................    4,679,968       13.5%
  Sprout Group 3000 Sand Hill Road Building 1, Suite 170
  Menlo Park, CA 94025
Jean Deleage(5).............................................    4,346,676       12.4%
  Alta Partners One Embarcadero Center, Suite 4050 San
  Francisco, CA 94111
Ronald J. Berenson(6).......................................    2,581,151        7.4%
Tredegar Investments(7).....................................    2,294,107        6.6%
  6501 Columbia Center 701 Fifth Avenue Seattle, WA 98104
Jeffrey A. Ledbetter(8).....................................      631,560        1.8%
Robert M. Williams(9).......................................      225,312          *
Dawn M. McCracken(10).......................................       80,000          *
Alan R. Hardwick(11)........................................       30,000          *
Peter Langecker(12).........................................        7,000          *
Mark Murray.................................................           --          *
All directors and officers as a group (14 persons)(13)......   25,737,933       70.8%
</TABLE>

 
-------------------------
  *  less than one percent of outstanding shares
 
                                       56

<PAGE>   60
 
 (1) Assumes total conversion of preferred stock into common stock and includes
     all shares of common stock issuable (within 60 days of September 30, 2000)
     upon the exercise of outstanding options (including unvested options) held
     by the above listed stockholders and upon the exercise of outstanding
     warrants held by the above listed stockholders. Except as otherwise noted,
     the persons named in the table have sole voting and investment power with
     respect to all shares of common stock owned by them, subject to community
     property laws where applicable.
 
 (2) Includes 631,579 shares of Series A preferred stock and 363,636 shares of
     Series B preferred stock held by ARCH Venture Fund II, L.P. Includes
     157,890 shares of Series A preferred stock, 1,681,818 shares of Series B
     preferred stock, 1,119,265 shares of Series C preferred stock, 1,321,942
     shares of Series D preferred stock held by ARCH Venture Fund III, L.P. and
     includes 276,307 shares of Series A preferred stock and 148,056 shares of
     common stock issuable upon the exercise of immediately exercisable warrants
     held by ARCH Venture Fund III, L.P. Excludes shares held by ARCH
     Development Corporation, which was previously affiliated with ARCH Venture
     Corporation. Robert T. Nelsen, one of our directors, is a general partner
     of both of these partnerships, shares voting and dispositive power with
     respect to the shares held by each such entity and disclaims beneficial
     ownership of such shares in which he has no pecuniary interest.
 
 (3) Includes 66,906 shares of Series D preferred stock held by MPM Asset
     Management Investors and 7,494 shares of common stock issuable upon the
     exercise of immediately exercisable warrants held by MPM Asset Management
     Investors. Includes 1,023,022 shares of Series D preferred stock held by
     MPM Bioventures GMBH & Co. Parallel-Beteiligungs KG and 114,578 shares of
     common stock issuable upon the exercise of immediately exercisable warrants
     held by MPM Bioventures GMBH & Co. Parallel-Beteiligungs KG. Includes
     320,719 shares of Series D preferred stock held by MPM Bioventures II, L.P.
     and 35,921 shares of common stock issuable upon the exercise of immediately
     exercisable warrants held by MPM Bioventures II, L.P. Includes 2,905,900
     shares of Series D preferred stock held by MPM Bioventures II-Q, L.P. and
     325,460 shares of common stock issuable upon the exercise of immediately
     exercisable warrants held by MPM Bioventures II-Q, L.P. Michael Steinmetz,
     Ph.D., one of our directors, is a general partner of each of these
     partnerships, shares voting and dispositive power with respect to the
     shares held by each such entity and disclaims beneficial ownership of such
     shares in which he has no pecuniary interest.
 
 (4) Includes 52,632 shares of Series A preferred stock, 10,909 shares of Series
     B preferred stock, 22,859 shares of Series C preferred stock, 6,475 shares
     of shares of Series D preferred stock held by DLJ Capital Corporation and
     includes 725 shares of common stock issuable upon the exercise of
     immediately exercisable warrants held by DLJ Capital Corporation. Includes
     263,158 shares of Series A preferred stock, 54,545 shares of Series B
     preferred stock, 114,294 shares of Series C preferred stock, 32,374 shares
     of shares of Series D preferred stock held by DLJ First ESC, L.P. and
     includes 3,625 shares of common stock issuable upon the exercise of
     immediately exercisable warrants held by DLJ First ESC, L.P. Includes
     2,289,197 shares of Series A preferred stock, 474,488 shares of Series B
     preferred stock, 994,235 shares of Series C preferred stock, 281,622 shares
     of shares of Series D preferred stock held by Sprout Capital VII, L.P. and
     includes 31,541 shares of common stock issuable upon the exercise of
     immediately exercisable warrants held by Sprout Capital VII, L.P. Includes
     26,592 shares of Series A preferred stock, 5,512 shares of Series B
     preferred stock, 11,549 shares of Series C preferred stock, 3,270 shares of
     shares of Series D preferred stock held by the Sprout CEO Fund, L.P. and
     includes 366 shares of common stock issuable upon the exercise of
     immediately exercisable warrants held by the Sprout CEO Fund, L.P. Robert
     E. Curry, Ph.D., one of our directors, is a general partner of each of
     these partnerships, shares voting and dispositive power with respect to the
     shares held by each such entity and disclaims beneficial ownership of such
     shares in which he has no pecuniary interest.
 
 (5) Includes 1,840,086 shares of Series A preferred stock, 787,294 shares of
     Series B preferred stock, 949,635 shares of Series C preferred stock,
     571,491 shares of shares of Series D preferred stock held by Alta
     California Partners, L.P. and includes 64,006 shares of common stock
     issuable upon the exercise of immediately exercisable warrants held by Alta
     California Partners, L.P. Includes 54,651
                                       57

<PAGE>   61
 
     shares of Series A preferred stock, 17,987 shares of Series B preferred
     stock, 21,696 shares of Series C preferred stock, 13,056 shares of shares
     of Series D preferred stock held by Alta Embarcadero Partners, L.L.C. and
     includes 1,462 shares of common stock issuable upon the exercise of
     immediately exercisable warrants held by Alta Embarcadero Partners, L.L.C.
     Includes 24,375 shares issuable upon the exercise of immediately
     exercisable options held by Dr. Deleage within 60 days of November 30,
     2000, none of which are subject to a repurchase right. Jean Deleage, Ph.D.,
     one of our directors, is a general partner of each of these partnerships,
     shares voting and dispositive power with respect to the shares held by each
     such entity and disclaims beneficial ownership of such shares in which he
     has no pecuniary interest.
 
 (6) Includes 2,162,282 shares of common stock and 57,895 shares of Series A
     preferred stock held by Dr. Berenson. Includes 150,000 shares issuable upon
     the exercise of immediately exercisable options held by Dr. Berenson within
     60 days of November 30, 2000, 580,941 of which are subject to a repurchase
     right that lapses over the vesting of Dr. Berenson's option. Includes
     210,974 shares of common stock held by the "Irrevocable Intervivos Trust
     Agreement of Ronald J. Berenson and Cheryl L. Berenson."
 
 (7) Includes 1,796,410 shares of Series C preferred stock and 286,022 shares of
     Series D preferred stock held by TGI Fund II, L.C., 32,034 shares of common
     stock issuable upon the exercise of immediately exercisable warrants held
     by TGI Fund II, L.C. and 179,641 shares of Series C preferred stock held by
     Vengott L.C.
 
 (8) Includes 473,670 shares of common stock and 157,890 shares of Series A
     preferred stock held by Dr. Ledbetter.
 
 (9) Includes 200,000 shares of common stock held by Dr. Williams and 24,375
     shares issuable upon the exercise of immediately exercisable options held
     by Dr. Williams within 60 days of November 30, 2000, none of which are
     subject to a repurchase right.
 
(10) Includes 51,667 shares of common stock and 28,333 shares issuable upon the
     exercise of immediately exercisable options held by Ms. McCracken within 60
     days of November 30, 2000, 47,917 of which are subject to a repurchase
     right that lapses over the vesting of Ms. McCracken's option.
 
(11) Includes 30,000 shares issuable upon the exercise of immediately
     exercisable options held by Dr. Hardwick within 60 days of November 30,
     2000, 19,688 of which are subject to a repurchase right that lapses over
     the vesting of Dr. Hardwick's option.
 
(12) Includes 7,000 shares issuable upon the exercise of immediately exercisable
     options held by Dr. Langecker within 60 days of November 30, 2000, none of
     which are subject to a repurchase right.
 
(13) Includes shares referred to in footnotes (1) - (12), 75,000 shares of
     common stock and 305,000 shares issuable upon exercise of immediately
     exercisable options held by other officers within 60 days of November 30,
     2000, 243,088 of which are subject to a repurchase right that lapses over
     time.
 
                                       58

<PAGE>   62
 
                          DESCRIPTION OF CAPITAL STOCK
 
GENERAL
 
     Our Amended and Restated Certificate of Incorporation, which will become
effective upon the closing of this offering, authorizes the issuance of up to
100,000,000 shares of common stock, par value $0.001 per share, and 5,000,000
shares of preferred stock, par value $0.001 per share, the rights and
preferences of which may be established from time to time by our board of
directors. As of November 30, 2000, 6,623,173 shares of common stock were issued
and outstanding and 28,059,047 shares of preferred stock convertible into
28,059,047 shares of common stock upon the completion of this offering were
issued and outstanding. As of November 30, 2000, we had 50 common stockholders
of record and 80 preferred stockholders of record.
 
     Immediately after the closing of this offering, we will have
shares of common stock outstanding, assuming no exercise of options to acquire
1,218,686 additional shares of common stock or warrants to purchase 280,029
shares of preferred stock convertible into 280,029 shares of common stock that
are outstanding as of the date of this prospectus.
 
     The description below gives effect to the filing of the certificate of
incorporation and the adoption of the amended and restated bylaws. The following
summary is qualified in its entirety by reference to our certificate and amended
and restated bylaws, copies of which are filed as exhibits to the registration
statement of which this prospectus is a part.
 
COMMON STOCK
 
     Each holder of common stock is entitled to one vote for each share on all
matters to be voted upon by the stockholders and there are no cumulative voting
rights. Subject to preferences to which holders of preferred stock issued after
the sale of the common stock offered hereby may be entitled, holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the board of directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of us,
holders of common stock would be entitled to share in our assets remaining after
the payment of liabilities and the satisfaction of any liquidation preference
granted the holders of any outstanding shares of preferred stock. Holders of
common stock have no preemptive or conversion rights or other subscription
rights and there are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are, and the shares of
common stock offered by us in this offering, when issued and paid for will be,
fully paid and nonassessable. The rights, preferences and privileges of the
holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which we may
designate in the future.
 
PREFERRED STOCK
 
     Upon the closing of this offering, our board of directors will be
authorized, subject to any limitations prescribed by law, without stockholder
approval, to issue from time to time up to an aggregate of 5,000,000 shares of
preferred stock, in one or more series, each of such series to have such rights
and preferences, including voting rights, dividend rights, conversion rights,
redemption privileges and liquidation preferences as shall be determined by the
board of directors. The rights for the holders of common stock will be subject
to, and may be adversely affected by, the rights of holders of any preferred
stock that may be issued in the future. Issuance of preferred stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire, or of discouraging a third party from attempting to
acquire, a majority of our outstanding voting stock. We have no present plans to
issue any shares of preferred stock.
 
WARRANTS
 
     As of November 30, 2000, we have issued and outstanding warrants to
purchase an aggregate of 280,029 shares of our preferred stock convertible into
280,029 shares of common stock upon the closing of
                                       59

<PAGE>   63
 
this offering that expire between March 2003 and January 2007, warrants to
purchase an aggregate of 380,725 shares of our preferred stock that will expire
upon the closing of this offering and warrants to purchase an aggregate of
1,132,287 shares of our common stock that will expire upon the closing of this
offering.
 
REGISTRATION RIGHTS
 
     The holders of preferred stock, certain holders of warrants to purchase
preferred stock and certain holders of our common stock are parties with us to
an investor rights agreement, dated May 25, 2000, as amended August 8, 2000 and
October 18, 2000, pursuant to which those holders have customary demand and
piggyback registration rights with respect to the shares of common stock held or
to be issued upon conversion or exercise of their preferred stock and warrants,
respectively. In addition, the holders of Preferred Stock are entitled to
receive quarterly and annual financial statements, subject to certain conditions
and limitations.
 
Demand Registration
 
     According to the terms of the investor rights agreement, beginning six
months after the closing of this offering, the holders of 28,059,047 shares of
common stock shall have the right to require us to register their shares with
the Securities and Exchange Commission so that those shares may be resold to the
public. To demand such a registration, holders who hold together an aggregate of
at least 50% of the shares having registration rights must request that the
registration statement register shares for an aggregate offering price of at
least $10,000,000, net of underwriting discounts and commissions. We are not
required to effect more than two demand registrations. We may defer the filing
of a demand registration for a period of up to 90 days once in any 12-month
period.
 
Piggyback Registration
 
     If we register in a public offering any of our securities, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Rule 145 transaction, the holders of demand registration
rights will have the right to include their shares in the registration
statement.
 
Form S-3 Registration
 
     At any time after we become eligible to file a registration statement on
Form S-3, holders of shares of common stock having demand and piggyback
registration rights may require us to file a Form S-3 registration. We are
obligated to file only one Form S-3 registration statement in any 12-month
period. We are also not obligated to file a Form S-3 within 180 days after any
registered offering by us, except for a registration relating solely to employee
benefit plans or a registration relating solely to a Rule 145 transaction.
Further, the aggregate offering proceeds of the requested Form S-3 registration,
before deduction of underwriting discounts and expenses, must be at least
$500,000. We may defer one registration request in any 12-month period for 120
days.
 
     The registration rights are subject to certain conditions and limitations,
including the right of the underwriters of an offering to limit the number of
shares of common stock to be included in the registration. We are generally
required to bear the expenses of all registrations, except underwriting
discounts and commissions. However, we will not pay for any expenses of any
demand registration if the request is subsequently withdrawn by the holders
requesting the demand registration. The investors rights agreement also contains
our commitment to indemnify the holders of registration rights for losses
attributable to statements or omissions by us incurred with registrations under
the agreement. The registration rights terminate five years from the closing of
this offering.
 
DELAWARE AND WASHINGTON ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS
 
     Provisions of our amended and restated certificate of incorporation and
bylaws, which will become effective upon the closing of this offering, may have
the effect of making it more difficult for a third party
                                       60

<PAGE>   64
 
to acquire, or of discouraging a third party from attempting to acquire, control
of us. Such provisions could limit the price that investors might be willing to
pay in the future for shares of our common stock. Our Bylaws eliminate the right
of stockholders to call special meetings of stockholders or to act by written
consent without a meeting and require advance notice for stockholder proposals
and director nominations, which may preclude stockholders from bringing matters
before an annual meeting of stockholders or from making nominations for
directors at an annual meeting of stockholders. The authorization of
undesignated preferred stock makes it possible for the board of directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of us. These and other
provisions may have the effect of deferring hostile takeovers or delaying
changes in control or management of us. In addition, we are subject to Section
203 of the Delaware General Corporation which, subject to certain exceptions,
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder, unless:
 
     - prior to such date, our board of directors approved either the business
       combination or the transaction which resulted in the stockholder becoming
       an interested stockholder;
 
     - upon consummation of the transaction which resulted in the stockholder
       becoming an interested stockholder, the interested stockholder owned at
       least 85% of our voting stock outstanding at the time the transaction
       commenced, excluding for purposes of determining the number of shares
       outstanding (a) shares owned by persons who are directors and also
       officers, and (b) shares owned by employee stock plans in which employee
       participants do not have the right to determine confidentially whether
       shares held subject to the plan will be tendered in a tender or exchange
       offer; or
 
     - on or subsequent to such date, the business combination is approved by
       our board of directors and authorized at an annual or special meeting of
       stockholders, and not by written consent, by the affirmative vote of at
       least 66 2/3% of the outstanding voting stock which is not owned by the
       interested stockholder.
 
     The laws of the State of Washington, where our principal executive offices
are located, impose restrictions on certain transactions between certain foreign
corporations and significant stockholders. Chapter 23B.19 of the Washington
Business Corporation Act, or the WBCA, prohibits a target corporation, with
certain exceptions, from engaging in certain significant business transactions
with a person or group of persons who beneficially own 10% or more of the voting
securities of the target corporation, an acquiring person, for a period of five
years after such acquisition, unless the transaction or acquisition of such
shares is approved by a majority of the members of the target corporation's
board of directors prior to the time of acquisition. Such prohibited
transactions include, among other things, a merger or consolidation with,
disposition of assets to, or issuance or redemption of stock to or from, the
acquiring person, termination of 5% or more of the employees of the target
corporation as a result of the acquiring person's acquisition of 10% or more of
the shares or allowing the acquiring person to receive disproportionate benefit
as a stockholder. After the five-year period, a significant business transaction
may take place as long as it complies with certain fair price provisions of the
statute. A target corporation includes a foreign corporation if:
 
     - the corporation has a class of voting stock registered pursuant to
       Section 12 or 15 of the Exchange Act,
 
     - the corporation's principal executive office is located in Washington,
       and
 
     - any of (a) more than 10% of the corporation's stockholders of record are
       Washington residents, (b) more than 10% of its shares are owned of record
       by Washington residents, (c) 1,000 or more of its stockholders of record
       are Washington residents, (d) a majority of the corporation's employees
       are Washington residents or more than 1,000 Washington residents are
       employees of the corporation, or (e) a majority of the corporation's
       tangible assets are located in Washington or the corporation has more
       than $50.0 million of tangible assets located in Washington.
 
                                       61

<PAGE>   65
 
     A corporation may not opt out of this statute and, therefore, we anticipate
this statute will apply to us. Depending upon whether we meet the definition of
a target corporation, Chapter 23B.19 of the WBCA may have the effect of
delaying, deferring or preventing a change in control of us.
 
TRANSFER AGENT AND REGISTRAR
 
     The Transfer Agent and Registrar for our common stock is Computershare
Investor Services, 515 S. Figueroa Street, Suite 1020, Los Angeles, CA 90071,
(213) 362-4910.
 
                                       62

<PAGE>   66
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Prior to this offering, there has been no market for our common stock, and
we cannot assure you that a significant public market for the common stock will
develop or be sustained after this offering. Future sales of substantial amounts
of common stock, including shares issued upon exercise of outstanding options
and warrants, in the public market following this offering could adversely
affect market prices prevailing from time to time and could impair our ability
to raise capital through the sale of our equity securities. As described below,
no shares currently outstanding will be available for sale immediately after
this offering.
 
SALES OF RESTRICTED SECURITIES
 
     Upon completion of the offering, we will have outstanding an aggregate of
               shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or outstanding
warrants after November 30, 2000. Of these outstanding shares, the
               shares sold in the offering will be freely tradable without
restriction or further registration under the Securities Act of 1933, unless
purchased by our affiliates as that term is defined in Rule 144 under the
Securities Act of 1933. The remaining 34,682,220 shares of common stock
outstanding upon completion of the offering and held by existing stockholders
will be restricted securities as that term is defined in Rule 144 under the
Securities Act of 1933. Restricted shares may be sold in the public market only
if registered or if they qualify for an exemption from registration under Rules
144, 144(k) or 701 promulgated under the Securities Act of 1933, which rules are
summarized below, or another exemption. Sales of the restricted shares in the
public market, or the availability of such shares for sale, could adversely
affect the market price of the common stock. All officers, directors and certain
other holders of common stock have entered into contractual lock-up agreements
providing that they will not offer, sell, contract to sell or grant any option
to purchase or otherwise dispose of shares of common stock owned by them or that
could be purchased by them through the exercise of options or warrants for a
period of 180 days after the date of this prospectus without the prior written
consent of SG Cowen Securities Corporation. As a result of these contractual
restrictions, notwithstanding possible earlier eligibility for sale under the
provisions of Rules 144, 144(k) and 701, additional shares will be eligible for
sale beginning 181 days after the effective date of the offering, subject in
some cases to volume limitations.
 
         ELIGIBILITY OF RESTRICTED SHARES FOR SALE IN THE PUBLIC MARKET
 

<TABLE>
<S>                                                           <C>
At the effective date.......................................           0 shares
90 days after effective date................................           0 shares
181 days after effective date...............................  24,572,195 shares
More than 181 days after effective date.....................  10,110,025 shares
</TABLE>

 
Rule 144
 
     In general, under Rule 144 as currently in effect, beginning 91 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
persons who may be deemed to be our affiliates, would be entitled to sell within
any three-month period a number of shares that does not exceed the greater of:
 
     - 1% of the number of shares of common stock then outstanding, which will
       equal approximately shares immediately after the offering; or
 
     - the average weekly trading volume of the common stock as reported through
       the Nasdaq National Market during the four calendar weeks preceding the
       filing of a Form 144 with respect to such sale.
 
     Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the 90 days preceding a sale, and who has beneficially owned for
at least two years the restricted shares proposed to be sold, including the
holding period of any prior owner
 
                                       63

<PAGE>   67
 
except an affiliate, is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
 
Rule 701
 
     Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 permits resales of shares issued prior to the date
the issuer becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, pursuant to certain compensatory benefit plans and
contracts commencing 90 days after the issuer becomes subject to the reporting
requirements of the Securities and Exchange Act of 1933, in reliance upon Rule
144 but without compliance with certain restrictions, including the holding
period requirements. In addition, the Securities and Exchange Commission has
indicated that Rule 701 will apply to typical stock options granted by an issuer
before it becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, along with the shares acquired upon exercise of such
options, including exercises after the date the issuer becomes so subject.
Securities issued in reliance on Rule 701 are restricted securities and, subject
to the contractual restrictions described above, beginning 91 days after the
date of this prospectus, may be sold by persons other than affiliates subject
only to the manner of sale provisions of Rule 144 and by affiliates under Rule
144 without compliance with its one-year minimum holding period requirements.
 
LOCK-UP AGREEMENTS
 
     The directors and executive officers, and substantially all of our other
stockholders, have entered into lock-up agreements under which they have agreed
not to sell or otherwise dispose of any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock, or enter into
any swap or similar agreement that transfers, in whole or in part, the economic
risk of ownership of the common stock, for a period of 180 days after the date
of this prospectus. SG Cowen may, in its sole discretion, at any time without
notice, release all or any portion of the shares subject to the lock-up
agreements, which would result in more shares being available for sale in the
public market at an earlier date.
 
     We intend to file a registration statement under the Securities Act of 1933
covering the shares of common stock subject to outstanding options or reserved
for issuance under the 1996 stock option plan, the 2000 stock option plan, the
2000 directors stock option plan and the 2000 employee stock purchase plan. We
expect to file this registration statement within 90 days of effectiveness of
the registration statement covering the shares of common stock in this offering
and it will automatically become effective upon filing. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates and the expiration of a 180-day lock-up
period, be available for sale in the open market, except to the extent that such
shares are subject to our vesting restrictions or the contractual restrictions
described above.
 
                                       64

<PAGE>   68
 
                                  UNDERWRITING
 
     Pursuant to the terms of an underwriting agreement dated           , 2001,
which is filed as an exhibit to the registration statement relating to this
prospectus, the underwriters of the offering named below, for whom SG Cowen
Securities Corporation, U. S. Bancorp Piper Jaffray Inc., Dain Rauscher
Incorporated and First Security Van Kasper, Inc. are acting as representatives,
have severally agreed to purchase from us the respective number of shares of
common stock set forth opposite its name below:
 

<TABLE>
<CAPTION>
                        UNDERWRITERS                          NUMBER OF SHARES
                        ------------                          ----------------
<S>                                                           <C>
SG Cowen Securities Corporation.............................
U.S. Bancorp Piper Jaffray Inc. ............................
Dain Rauscher Incorporated..................................
First Security Van Kasper, Inc. ............................
                                                                  --------
  Total.....................................................
                                                                  ========
</TABLE>

 
     The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement, and that if any of the shares of common
stock are purchased by the underwriters under the underwriting agreement, then
all of the shares of common stock which the underwriters have agreed to purchase
under the underwriting agreement must be purchased. The conditions contained in
the underwriting agreement include the requirement that the representations and
warranties made by us to the underwriters are true, that there is no material
change in the financial markets and that we deliver to the underwriters
customary closing documents.
 
     We have granted to the underwriters an option to purchase up to an
aggregate of                     additional shares of common stock, exercisable
solely to cover over-allotments, if any, at the public offering price less the
underwriting discounts and commissions shown on the cover page of this
prospectus. The underwriters may exercise this option at any time until 30 days
after the date of the underwriting agreement. If this option is exercised, each
underwriter will be committed, so long as the conditions of the underwriting
agreement are satisfied, to purchase a number of additional shares of common
stock proportionate to the underwriter's initial commitment as indicated in the
preceding table and we will be obligated, under the over-allotment option, to
sell the shares of common stock to the underwriters.
 
     The underwriters propose to offer the common stock directly to the public
at the public offering price set forth on the cover page of this prospectus. The
underwriters may offer the common stock to securities dealers at that price less
a concession not in excess of $     per share. Securities dealers may reallow a
concession not in excess of $     per share to other dealers. After the shares
of common stock are released for sale to the public, the underwriters may vary
the offering price and other selling terms from time to time.
 
     The following table shows the per share and total underwriting discounts
and commissions to be paid to the underwriters by us. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase                     additional shares described below.
 

<TABLE>
<CAPTION>
                                                                    WITHOUT
                                                        PER SHARE    OPTION    WITH OPTION
                                                        ---------   --------   -----------
<S>                                                     <C>         <C>        <C>
Public offering price.................................
Underwriting discount.................................
Proceeds, before expenses, to Xcyte...................
</TABLE>

 
     We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $1.3 million.
 
     We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act of 1933 and liabilities arising from
breaches of the representations and warranties contained
 
                                       65

<PAGE>   69
 
in the underwriting agreement, and to contribute to payments that the
underwriters may be required to make for these liabilities.
 
     We, our executive officers and directors and substantially all of our other
stockholders, have agreed not to directly or indirectly do any of the following,
whether any transaction described in clause (1) or (2) below is to be settled by
delivery of common stock or other securities, in cash or otherwise, in each case
without the prior written consent of SG Cowen Securities Corporation on behalf
of the underwriters, for a period of 180 days after the date of this prospectus:
 
     (1) offer, sell or otherwise dispose of, or enter into any transaction or
         arrangement which is designed or could be expected to, result in the
         disposition or purchase by any person at any time in the future of, any
         shares of common stock or securities convertible into or exchangeable
         for common stock or substantially similar securities, other than any of
         the following:
 
          - the common stock sold under this prospectus
 
          - shares of common stock we issue under employee benefit plans,
            qualified stock option plans or other employee compensation plans
            existing on the date of this prospectus or under currently
            outstanding options, warrants or rights
 
     (2) sell or grant options, rights or warrants with respect to any shares of
         our common stock or securities convertible into or exchangeable for our
         common stock or substantially similar securities, other than the grant
         of options under option plans existing on the date hereof.
 
     The underwriters have informed us that they do not intend to confirm sales
to discretionary accounts that exceed five percent of the total number of shares
of common stock offered by them.
 
     We have applied for inclusion of our common stock on the Nasdaq National
Market under the symbol XCYT, subject to official notice of issuance.
 
     Prior to the offering, there has been no public market for the shares of
our common stock. The initial public offering price will be negotiated between
the representatives and us. In determining the initial public offering price of
the common stock, the representatives will consider, among other things and in
addition to prevailing market conditions, our historical performance and capital
structure, estimates of our business potential and earnings prospects, an
overall assessment of our management and the consideration of the above factors
in relation to market valuation of companies in related businesses.
 
     Until the distribution of the common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the underwriters and
selling group members to bid for and purchase shares of common stock. As an
exception to these rules, the representatives are permitted to engage in
transactions that stabilize the price of the common stock. These transactions
may consist of bids or purchases for the purpose of pegging, fixing or
maintaining the price of common stock.
 
     The representatives may engage in over-allotment, open market purchases,
stabilizing transactions and penalty bids in accordance with Regulation M under
the Securities Exchange Act of 1934. In connection with this offering, the
underwriters may make short sales by selling more shares than they are obligated
to purchase under the underwriting agreement. Covered short sales are sales made
in an amount not greater than the number of shares available for purchase by the
underwriters under the over-allotment option. The underwriters may close out a
covered short sale by exercising their over-allotment option or purchasing
shares in the open market. In determining the source of shares to close out a
covered short sale, the underwriters will consider, among other things, the
price of shares in the open market compared to the price at which they may
purchase shares under the over-allotment option. Naked short sales are sales
made in an amount in excess of the number of shares available under the
over-allotment option. The underwriters must close out any naked short sale by
purchasing shares in the open market. A naked short position is more likely to
be created if the underwriters are concerned that there may be downward pressure
on the price of the common stock in the open market after pricing that could
adversely affect investors who purchase in this offering. Stabilizing
transactions permit bids to purchase the underlying security so long as the
stabilizing bids do not exceed a specified maximum. Penalty bids permit the
                                       66

<PAGE>   70
 
representatives to reclaim a selling concession from a syndicate member when the
common stock originally sold by such syndicate member is purchased in a
syndicate covering transaction to cover syndicate short positions. Any of these
activities may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
 
     At our request, the underwriters have reserved up to      % shares of the
common stock offered by this prospectus for sale to our directors and to our
business associates at the initial public offering price set forth on the cover
page of this prospectus. These persons must commit to purchase no later than the
close of business on the day following the date of this prospectus. The number
of shares available for sale to the general public will be reduced to the extent
these persons purchase the reserved shares.
 
                                 LEGAL MATTERS
 
     The validity of the common stock offered hereby will be passed upon for us
by Venture Law Group, A Professional Corporation, Kirkland, Washington. Certain
legal matters in connection with this offering will be passed upon for the
underwriters by Shearman & Sterling, Menlo Park, California. Investment
partnerships associated with Venture Law Group and individual attorneys of
Venture Law Group beneficially own an aggregate of 16,188 shares of our Series D
Preferred Stock and warrants to purchase 1,812 shares of our common stock.
 
                                    EXPERTS
 
     Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1999, and for the year then ended and for the period
from inception (August 27, 1996) to December 31, 1999, as set forth in their
report, which as to the period from inception (August 27, 1996) to December 31,
1998 is based on the report of PricewaterhouseCoopers LLP, independent
accountants. We have included these financial statements in the prospectus and
elsewhere in the registration statement in reliance upon such reports, given on
the authority of these firms as experts in accounting and auditing.
 
     The financial statements as of December 31, 1998 and for the years ended
December 31, 1997 and 1998 included in this prospectus have been so included in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of said firm as experts in auditing and accounting.
 
                    CHANGE IN INDEPENDENT PUBLIC ACCOUNTANTS
 
     Effective January 12, 2000, Ernst & Young LLP was engaged as our
independent auditors and replaced other auditors who were dismissed as our
independent accountants on the same date. The decision to change auditors was
approved by our board of directors.
 
     Prior to January 12, 2000, our former auditors issued reports on our
financial statements for the period from inception to December 31, 1998 and for
each of the two years in the period ended December 31, 1998. These reports of
our former auditors did not contain any adverse opinion or disclaimer of opinion
nor were such reports qualified or modified as to audit scope or accounting
principle. In connection with the audits for the periods from inception to
December 31, 1998, there were no disagreements with our former auditors on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements if not resolved to the
satisfaction of our former auditors, would have caused them to make reference
thereto in their reports.
 
     Prior to January 12, 2000, we had not consulted with Ernst & Young LLP on
items that involved our accounting principles or the form of audit opinion to be
issued on our financial statements. We have requested that our former auditors
furnish us with a letter addressed to the SEC stating whether or not they agree
with the above statements. A copy of this letter is filed as an exhibit to the
registration statement of which this prospectus forms a part.
                                       67

<PAGE>   71
 
                   WHERE YOU CAN FIND ADDITIONAL INFORMATION
 
     We have filed with the SEC a registration statement on Form S-1 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the shares of common stock offered by this prospectus. This
prospectus, which constitutes part of the registration statement, does not
contain all of the information set forth in the registration statement and the
exhibits thereto. Statements contained in this prospectus as to the contents of
any contract or other document that is filed as an exhibit to the registration
statement are not necessarily complete and each such statement is qualified in
all respects by reference to the full text of such contract or document.
 
     You may read and copy all or any portion of the registration statement and
the exhibits at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at Seven
World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661. You can request
copies of these documents, upon payment of a duplication fee, by writing to the
SEC. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the SEC's public reference rooms. Also, the SEC maintains a World
Wide Web site on the Internet at http://www.sec.gov that contains reports, proxy
and information statements and other information regarding registrants that file
electronically with the SEC.
 
     As a result of this offering, we will become subject to the information and
periodic reporting requirements of the Securities Exchange Act of 1934 and, in
accordance therewith, will file periodic reports, proxy and information
statements and other information with the SEC. These periodic reports, proxy and
information statements and other information will be available for inspection
and copying at the public reference facilities, regional offices and SEC's Web
site referred to above.
 
                                       68

<PAGE>   72
 
                             XCYTE THERAPIES, INC.
 
                         INDEX TO FINANCIAL STATEMENTS
 

<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........  F-2
Report of PricewaterhouseCoopers LLP, Independent
  Accountants...............................................  F-3
Balance Sheets..............................................  F-4
Statements of Operations....................................  F-5
Statements of Changes in Stockholders' Deficit..............  F-6
Statements of Cash Flows....................................  F-7
Notes to Financial Statements...............................  F-8

</TABLE>

 
                                       F-1

<PAGE>   73
 

               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors
Xcyte Therapies, Inc.
 
     We have audited the accompanying balance sheet of Xcyte Therapies, Inc. (a
development stage enterprise) (the Company) as of December 31, 1999, and the
related statements of operations, stockholders' deficit, and cash flows for the
year then ended and for the period from inception (August 27, 1996) to December
31, 1999. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The financial statements of the Company for each
of the years in the two year period ended December 31, 1998 and for the period
from inception (August 27, 1996) to December 31, 1998 were audited by other
auditors whose report, dated September 1, 1999, expressed an unqualified opinion
on those financial statements. The financial statements for the period from
inception (August 27, 1996) to December 31, 1998 include total revenues and net
loss of $100,000 and $9,285,000, respectively. Our opinion on the statements of
operations, stockholders' deficit, and cash flows for the period from inception
(August 27, 1996) to December 31, 1999, insofar as it relates to amounts for
prior periods through December 31, 1998, is based solely on the report of other
auditors whose report indicates that the financial statements for each of the
years in the two year period ended December 31, 1998 and for the period from
inception (August 27, 1996) to December 31, 1998 have been restated.
 
     We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit and the report of other
auditors provide a reasonable basis for our opinion.
 
     In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Xcyte Therapies, Inc. (a development stage enterprise)
at December 31, 1999, and the results of its operations and its cash flows for
the year then ended, and for the period from inception (August 27, 1996) to
December 31, 1999, in conformity with accounting principles generally accepted
in the United States.
 
     As described in Note 1, the financial statements referred to in the above
paragraph have been restated.
 
                                                           Ernst & Young LLP
 
                                                           /s/ Ernst & Young LLP
 
Seattle, Washington
June 25, 2000, except for paragraph 2 of Note 5,

as to which the date is August 14, 2000,
paragraph 1 of Note 12, as to which the date is November 7, 2000
and the last paragraph of Note 1, as to which
the date is December 20, 2000.
 
                                       F-2

<PAGE>   74
 

                       REPORT OF INDEPENDENT ACCOUNTANTS
 
The Board of Directors and Stockholders of
Xcyte Therapies, Inc.
 
     In our opinion, the accompanying December 31, 1998 balance sheet and the
related statements of operations, of changes in stockholders' deficit and of
cash flows present fairly, in all material respects, the financial position of
Xcyte Therapies, Inc. (the Company) at December 31, 1998, and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1998 and
for the period from inception (August 27, 1996) to December 31, 1998 (not
presented herein), in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States of America, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
 
     As described in Note 1, the financial statements referred to in the above
paragraph have been restated.
 
PricewaterhouseCoopers LLP
 
/s/ PricewaterhouseCoopers LLP
 
September 1, 1999,

except as to the last paragraph of Note 1,
which is as of December 20, 2000
Portland, Oregon
 
                                       F-3

<PAGE>   75
 
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                                 BALANCE SHEETS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                                                             PRO FORMA
                                                                                                           STOCKHOLDERS'
                                                                    DECEMBER 31,                             EQUITY AT
                                                              ------------------------    SEPTEMBER 30,    SEPTEMBER 30,
                                                                 1998          1999           2000             2000
                                                              ----------    ----------    -------------    -------------
                                                                                           (UNAUDITED)      (UNAUDITED)
<S>                                                           <C>           <C>           <C>              <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................   $ 1,265       $    124       $ 25,761
  Receivable from lessor....................................        --            232             --
  Employee receivables......................................        --              5              5
  Short-term investments....................................    10,887          7,239          1,496
  Prepaid research and development expenses.................        --             --            527
  Prepaid expenses and other current assets.................        89            100            264
                                                               -------       --------       --------
    Total current assets....................................    12,241          7,700         28,053
Property and equipment, net.................................     1,506          1,824          1,931
Long-term investments.......................................     1,701             --             --
Intangible assets, net......................................       534            334            184
Deposits and other assets...................................        62            197            168
                                                               -------       --------       --------
    Total assets............................................   $16,044       $ 10,055       $ 30,336
                                                               =======       ========       ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable..........................................   $   233       $  1,005       $    691
  Accrued vacation..........................................        57             94            117
  Other accrued liabilities.................................        13             13             41
  Current portion of equipment financings...................       349            488            811
                                                               -------       --------       --------
    Total current liabilities...............................       652          1,600          1,660
Equipment financings, less current portion..................       941            839            896
Other liabilities...........................................        --             15             57
Commitments (Notes 8, 11, and 12)
Redeemable convertible preferred stock:
  Issued and outstanding shares -- 17,949,222 at December
    31, 1998 and 1999 and 28,059,047 at September 30, 2000
    (aggregate preference of $22,810 and $50,915 at
    September 30, 2000 and December 31, 1999, respectively)
    (none pro forma)........................................    22,866         22,866         48,394
Redeemable convertible preferred stock warrants (none pro
  forma)....................................................       524            539            557
Stockholders' equity (deficit):
  Preferred stock, par value $.001:
    Authorized and designated as redeemable and convertible
      shares -- 19,383,209 at December 31, 1998 and 1999 and
      28,909,976 at September 30, 2000 (no shares
      outstanding pro forma)................................        --             --             --          $    --
  Common stock, par value $.001:
    Authorized shares -- 40,000,000 at December 1998 and
      1999 and 60,000,000 at September 30, 2000; issued and
      outstanding shares -- 6,269,809 and 5,943,579 at
      December 31, 1998 and 1999, respectively, and
      5,965,234 at September 30, 2000 (34,024,281 shares
      outstanding pro forma)................................         6              6              6               34
  Additional paid-in capital................................       352          1,079          5,090           54,013
  Deferred stock compensation...............................       (12)          (639)        (1,618)          (1,618)
  Accumulated deficit.......................................    (9,285)       (16,232)       (24,704)         (24,704)
  Accumulated other comprehensive loss......................        --            (18)            (2)              (2)
                                                               -------       --------       --------          -------
         Total stockholders' equity (deficit)...............    (8,939)       (15,804)       (21,228)         $27,723
                                                               -------       --------       --------          =======
         Total liabilities and stockholders' equity
           (deficit)........................................   $16,044       $ 10,055       $ 30,336
                                                               =======       ========       ========
</TABLE>

 
The accompanying notes are an integral part of these financial statements.
                                       F-4

<PAGE>   76
 
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                            STATEMENTS OF OPERATIONS
                (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
 

<TABLE>
<CAPTION>
                                                                  PERIOD FROM                               PERIOD FROM
                                                                   INCEPTION                                 INCEPTION
                                                                  (AUGUST 27,       NINE MONTHS ENDED       (AUGUST 27,
                                 YEARS ENDED DECEMBER 31,           1996) TO          SEPTEMBER 30,          1996) TO
                           ------------------------------------   DECEMBER 31,   -----------------------   SEPTEMBER 30,
                              1997         1998         1999          1999          1999         2000          2000
                           ----------   ----------   ----------   ------------   ----------   ----------   -------------
                                                                                       (UNAUDITED)          (UNAUDITED)
<S>                        <C>          <C>          <C>          <C>            <C>          <C>          <C>
Revenue:
  License fee............  $      100   $       --   $       --      $  100      $       --   $       --      $  100
  Government grant.......          --           --           16          16              --           44          60
                           ----------   ----------   ----------      ------      ----------   ----------      ------
     Total revenue.......         100           --           16         116              --           44         160
Operating expense:
  Research and
     development.........       2,397        4,311        5,413      12,449           3,573        7,176      19,625
  General and
     administrative......       1,148        1,427        1,619       4,508           1,158        1,061       5,569
  Noncash stock
     compensation
     expense.............           4            6           93         105               3          557         662
                           ----------   ----------   ----------      ------      ----------   ----------      ------
Total operating
  expense................       3,549        5,744        7,125      17,062           4,734        8,794      25,856
                           ----------   ----------   ----------      ------      ----------   ----------      ------
Loss from operations.....      (3,449)      (5,744)      (7,109)    (16,946)         (4,734)      (8,750)    (25,696)
Other income (expense):
  Loss on sale of
     property and
     equipment...........          --           --         (108)       (108)             --           --        (108)
  Interest income........         245          476          476       1,290             375          465       1,755
  Interest expense.......         (84)        (178)        (206)       (468)           (143)        (187)       (655)
                           ----------   ----------   ----------      ------      ----------   ----------      ------
     Other income, net...         161          298          162         714             232          278         992
                           ----------   ----------   ----------      ------      ----------   ----------      ------
Net loss.................  $   (3,288)  $   (5,446)  $   (6,947)    ($16,232)    $   (4,502)  $   (8,472)    ($24,704)
                           ==========   ==========   ==========      ======      ==========   ==========      ======
Basic and diluted net
  loss per share.........  $    (0.69)  $    (0.86)  $    (1.15)                 $    (0.74)  $    (1.42)
                           ==========   ==========   ==========                  ==========   ==========
Shares used in
  computation of basic
  and diluted net loss
  per share..............   4,740,629    6,355,442    6,050,042                   6,085,919    5,961,946
                           ==========   ==========   ==========                  ==========   ==========
</TABLE>

 
The accompanying notes are an integral part of these financial statements.
 
                                       F-5

<PAGE>   77
 
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                 STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
                       (IN THOUSANDS, EXCEPT SHARE DATA)
 

<TABLE>
<CAPTION>
                                                                                                          ACCUMULATED
                                             COMMON STOCK      ADDITIONAL     DEFERRED                       OTHER
                                          ------------------    PAID-IN        STOCK       ACCUMULATED   COMPREHENSIVE
                                           SHARES     AMOUNT    CAPITAL     COMPENSATION     DEFICIT         LOSS         TOTAL
                                          ---------   ------   ----------   ------------   -----------   -------------   --------
<S>                                       <C>         <C>      <C>          <C>            <C>           <C>             <C>
  Common stock issued upon
    incorporation.......................  3,374,634    $ 3       $   --       $    --       $     --         $ --        $      3
  Deferred stock-based compensation.....                --            7            (7)            --           --              --
  Amortization of deferred
    compensation........................                --           --             2             --           --               2
  Common stock issued for technology
    license.............................    198,609     --           --            --             --           --              --
  Net loss..............................                --           --            --           (551)          --            (551)
                                          ---------    ---       ------       -------       --------         ----        --------
Balance at December 31, 1996............  3,573,243      3            7            (5)          (551)          --            (546)
  Common stock repurchased..............   (635,000)    (1)          --            --             --           --              (1)
  Common stock issued in acquisition....  2,999,910      3          327            --             --           --             330
  Deferred stock-based compensation.....         --     --            9            (9)            --           --              --
  Amortization of deferred
    compensation........................         --     --           --             4             --           --               4
  Common stock issued for technology
    license.............................    407,198      1           --            --             --           --               1
  Stock options exercised...............     12,750     --            1            --             --           --               1
  Net loss..............................         --     --           --            --         (3,288)          --          (3,288)
                                          ---------    ---       ------       -------       --------         ----        --------
Balance at December 31, 1997............  6,358,101      6          344           (10)        (3,839)          --          (3,499)
  Repurchase of founder's stock.........    (88,542)    --           --            --             --           --              --
  Stock options exercised...............        250     --           --            --             --           --              --
  Deferred stock-based compensation.....         --     --            8            (8)            --           --              --
  Amortization of deferred
    compensation........................         --     --           --             6             --           --               6
  Net loss..............................         --     --           --            --         (5,446)          --          (5,446)
                                          ---------    ---       ------       -------       --------         ----        --------
Balance at December 31, 1998............  6,269,809      6          352           (12)        (9,285)          --          (8,939)
  Common stock returned for technology
    license termination.................   (400,000)    --           --            --             --           --              --
  Common stock issued for technology
    license.............................     20,000     --            2            --             --           --               2
  Deferred stock-based compensation.....         --     --          720          (720)            --           --              --
  Amortization of deferred
    compensation........................         --     --           --            93             --           --              93
  Stock options exercised...............     53,770     --            5            --             --           --               5
  Change in unrealized loss on
    investments.........................         --     --           --            --             --          (18)            (18)
  Net loss..............................         --     --           --            --         (6,947)          --          (6,947)
                                                                                                                         --------
  Comprehensive loss....................                                                                                   (6,965)
                                          ---------    ---       ------       -------       --------         ----        --------
Balance at December 31, 1999............  5,943,579      6        1,079          (639)       (16,232)         (18)        (15,804)
  Issuance of common stock warrants
    (unaudited).........................         --     --        2,717            --             --           --           2,717
  Deferred stock-based compensation
    (unaudited).........................         --     --        1,536        (1,536)            --           --              --
  Amortization of deferred compensation
    (unaudited).........................         --     --           --           557             --           --             557
  Stock options exercised (unaudited)...     21,655                   3            --             --           --               3
  Accretion of redeemable convertible
    preferred stock (unaudited).........         --     --         (245)           --             --           --            (245)
  Change in unrealized loss on
    investments (unaudited).............         --     --           --            --             --           16              16
  Net loss (unaudited)..................         --     --           --            --         (8,472)          --          (8,472)
                                                                                                                         --------
  Comprehensive loss (unaudited)........                                                                                   (8,456)
                                          ---------    ---       ------       -------       --------         ----        --------
Balance at September 30, 2000
  (unaudited)...........................  5,965,234    $ 6       $5,090       $(1,618)      $(24,704)        $ (2)       $(21,228)
                                          =========    ===       ======       =======       ========         ====        ========
</TABLE>

 
The accompanying notes are an integral part of these financial statements.
 
                                       F-6

<PAGE>   78
 
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                            STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 

<TABLE>
<CAPTION>
                                                                                 PERIOD FROM                         PERIOD FROM
                                                                                  INCEPTION        NINE MONTHS        INCEPTION
                                                                                 (AUGUST 27,          ENDED          (AUGUST 27,
                                                YEARS ENDED DECEMBER 31,           1996) TO       SEPTEMBER 30,       1996) TO
                                          ------------------------------------   DECEMBER 31,   -----------------   SEPTEMBER 30,
                                             1997         1998         1999          1999        1999      2000         2000
                                          ----------   ----------   ----------   ------------   -------   -------   -------------
                                                                                                   (UNAUDITED)       (UNAUDITED)
<S>                                       <C>          <C>          <C>          <C>            <C>       <C>       <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................   $(3,288)     $(5,446)     $(6,947)      $(16,232)    $(4,502)  $(8,472)    $(24,704)
Adjustments to reconcile net loss to net
  cash used in operating activities:
  Non-cash research and development
    expense.............................        --          291            2            293          --        --          293
  Non-cash stock based compensation
    expense.............................         4            6           93            105           3       557          662
  Non-cash interest expense.............        12           16           18             18          14        18           36
  Depreciation and amortization.........       268          609          717          1,592         538       492        2,084
  Loss on sale of property and
    equipment...........................        --           --          108            108          --        --          108
  Changes in assets and liabilities:
    (Increase) decrease in receivable
      from lessor.......................        --           --         (232)          (232)         --       232           --
    Increase in employee receivables....        --           --           (5)            (5)         --        --           (5)
    Prepaid expenses and other current
      assets............................        --          (27)         (11)           (38)         --      (691)        (729)
    (Increase) decrease in deposits and
      other assets......................       (53)          (5)        (135)          (269)       (157)       29         (240)
    Increase (decrease) in accounts
      payable...........................      (234)         170          771          1,005         (27)     (314)         691
    Increase (decrease) in accrued
      liabilities.......................       110          (92)          52            122          39        93          215
                                           -------      -------      -------       --------     -------   -------     --------
Net cash used in operating activities...    (3,181)      (4,478)      (5,569)       (13,533)     (4,092)   (8,056)     (21,589)
                                           -------      -------      -------       --------     -------   -------     --------
 
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment......    (1,100)        (566)        (976)        (3,091)       (150)     (449)      (3,540)
Proceeds from sale of property and
  equipment.............................        --           --           33             33          --        --           33
Net cash acquired in acquisition........       437           --           --            437          --        --          437
Purchases of investments
  available-for-sale....................        --           --       (5,816)        (5,816)         --        --       (5,816)
Purchases of investments
  held-to-maturity......................    (1,794)     (15,939)          --        (17,732)         --        --      (17,732)
Proceeds from sales and maturities of
  investments available-for-sale........        --           --       11,147         11,147       6,929     5,760       16,907
Proceeds from sales and maturities of
  investments held-to-maturity..........        --        5,145           --          5,145          --        --        5,145
                                           -------      -------      -------       --------     -------   -------     --------
Net cash provided by (used in) investing
  activities............................    (2,457)     (11,360)       4,388         (9,877)      6,779     5,311       (4,566)
                                           -------      -------      -------       --------     -------   -------     --------
 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of preferred and
  common stock..........................     4,134       11,975            6         22,148           5    28,003       50,151
Common stock repurchased................        (1)          --           --             (1)         --        --           (1)
Proceeds from equipment financings......     1,237          362          451          2,151         421       865        3,016
Principal payments on equipment
  financings............................        --         (273)        (417)          (764)       (304)     (486)      (1,250)
                                           -------      -------      -------       --------     -------   -------     --------
Net cash provided by financing
  activities............................     5,370       12,064           40         23,534         122    28,382       51,916
                                           -------      -------      -------       --------     -------   -------     --------
Net increase (decrease) in cash.........      (268)      (3,774)      (1,141)           124       2,809    25,637       25,761
Cash at beginning of period.............     5,307        5,039        1,265             --       1,265       124           --
                                           -------      -------      -------       --------     -------   -------     --------
Cash at end of period...................   $ 5,039      $ 1,265      $   124       $    124     $ 4,074   $25,761     $ 25,761
                                           =======      =======      =======       ========     =======   =======     ========
SUPPLEMENTAL CASH FLOW AND NONCASH
  ACTIVITY INFORMATION:
    Interest paid.......................   $    72      $   193      $   207       $    472     $   143   $   189     $    661
    Issuance of common stock warrants...        --           --           --             --          --     2,717        2,717
</TABLE>

 
The accompanying notes are an integral part of these financial statements.
 
                                       F-7

<PAGE>   79
 
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                         NOTES TO FINANCIAL STATEMENTS
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
 
ORGANIZATION
 
     Xcyte Therapies, Inc., a development stage enterprise, was incorporated on
January 5, 1996 as MolecuRx, Inc. under the laws of the state of Delaware,
changed its name to CDR Therapeutics, Inc. upon commencement of operations on
August 27, 1996, and changed its name to Xcyte Therapies, Inc. (the Company) in
October 1997. The Company operates in one business segment developing products
based on T cell activation to treat cancer and infectious disease. As a
development stage company, substantially all efforts of the Company have been
devoted to conducting research and experimentation, developing and acquiring
intellectual properties, raising capital, and recruiting and training personnel.
 
     The Company has incurred operating losses and negative operating cash flows
since inception. Management expects to incur operating losses for the
foreseeable future as the Company executes its business plans. In August 2000,
the Company completed a $28.0 million private placement of preferred stock, net
of offering costs (see Note 5). Management believes that the additional cash
from the private placement, combined with existing cash, provides the Company
with the financing necessary for it to execute its business plans and to
continue operations through at least the year ended December 31, 2001.
 
UNAUDITED INTERIM FINANCIAL INFORMATION
 
     The financial information as of September 30, 2000 and for the nine months
ended September 30, 1999 and 2000, and the period from inception (August 27,
1996) to September 30, 2000 is unaudited. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. Operating results for the nine
months ended September 30, 2000 are not necessarily indicative of results that
may be expected for the entire year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to the rules and regulations of the Securities and
Exchange Commission (SEC).
 
CASH, CASH EQUIVALENTS, AND INVESTMENTS
 
     Cash equivalents include highly liquid investments with an original
maturity of three months or less. The Company's cash equivalents consist of
money market securities.
 
     Held-to-maturity securities are stated at amortized cost, adjusted for
amortization of premiums and accretion of discounts to maturity. Such
amortization is included in investment income. Interest on securities classified
as held-to-maturity is included in interest income. Securities not classified as
held-to-maturity are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses
reported in a separate component of stockholders' equity. Amortization,
accretion, interest and dividends, realized gains and losses, and declines in
value judged to be other-than-temporary on available-for-sale securities are
included in interest income. The cost of securities sold is based on the
specific identification method. Investments in securities with maturities of
less than one year or whose management's intent is to use the investments to
fund current operations are classified as short-term investments.
 
                                       F-8

<PAGE>   80
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
PROPERTY AND EQUIPMENT
 
     Property and equipment is stated at cost and is depreciated using the
straight-line method over the assets' useful lives, which range from three to
six years. Leasehold improvements are amortized over the lesser of their
estimated useful lives or the term of the lease.
 
INTANGIBLE ASSETS
 
     Intangible assets represent the excess of the purchase price of acquiring
CellGenEx, Inc. (see Note 11) over identifiable net assets acquired. Intangible
assets are being amortized using the straight-line method over four years.
Accumulated amortization at December 31, 1998, 1999 and September 30, 2000
totaled $268,000, $468,000, and $618,000, respectively.
 
IMPAIRMENT OF LONG-LIVED ASSETS
 
     The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the discounted future cash flows expected to be
generated by such assets.
 
REVENUE RECOGNITION
 
     To date, the Company has generated no revenues from sales of products.
Revenues relate to fees received for licensed technology and a Small Business
Innovation Research grant awarded to the Company by the National Institutes of
Health. Revenue from license fee income is recognized when the Company no longer
has any obligation to provide significant services to the licensee. Revenue from
government grants is recognized once the conditions of a grant have been
satisfied.
 
OTHER COMPREHENSIVE INCOME
 
     Other comprehensive income (loss) includes certain changes in equity that
are excluded from net income (loss). The Company's only component of other
comprehensive income (loss) is unrealized loss on investments. There were no
components of other comprehensive income (loss) prior to 1999.
 
RESEARCH AND DEVELOPMENT COSTS
 
     Research and development costs are charged to expense as incurred. The
Company records up-front payments related to the funding milestone payments
under development agreements as prepaid research and development expenses and
amortizes the amount into expense over the period that the development work is
performed. The Company's policy is to expense the payments for beads used in
research in the period the beads are delivered by the suppliers.
 
SEGMENTS
 
     The Company has adopted Statement of Financial Accounting Standards No.
131, "Disclosure about Segments of an Enterprise and Related Information" (SFAS
131) and related disclosures about its products, services, geographic areas and
major customers. The Company has determined that it operates in
 
                                       F-9

<PAGE>   81
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
only one segment. Accordingly, the adoption of SFAS 131 had no impact on the
Company's financial statements.
 
STOCK-BASED COMPENSATION
 
     The Company has adopted the disclosure-only provisions of Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (SFAS 123), and applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" (APB 25), and related interpretations in accounting for stock
options. Stock options granted to nonemployees are recorded using the fair value
approach in accordance with SFAS 123 and Emerging Issues Task Force Consensus
(EITF) Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services" (EITF 96-18). The options to nonemployees are subject to periodic
revaluation over their vesting terms.
 
     Deferred stock-based compensation includes amounts recorded when the
exercise price of an option is lower than the deemed fair value of the
underlying common stock on the date of grant. Deferred stock-based compensation
is amortized over the vesting period of the underlying option using the graded
vesting method.
 
NET LOSS PER SHARE
 
     Basic net loss per share is computed by dividing net loss by the weighted
average number of common shares outstanding for the period. Diluted net loss per
share reflects the dilutive effect of common stock equivalents, if any. Other
common stock equivalents, including redeemable convertible preferred stock,
stock options and warrants, are excluded from the computation as their effect is
anti-dilutive. For the periods presented, there is no difference between the
basic and diluted net loss per share.
 
FINANCIAL INSTRUMENTS
 
     Financial instruments, including cash and cash equivalents and payables,
are recorded at cost which approximates fair values based on the short-term
maturities of these instruments. The fair value of investments is determined
based on quoted market prices. Refer to Note 2 for further information on the
fair value of investments. The carrying value of equipment financing
arrangements approximates fair value because the underlying interest rates
approximate market rates at the balance sheet dates.
 
CONCENTRATIONS OF CREDIT
 
     Financial instruments that potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash equivalents,
investments, and receivables. The Company generally invests its excess cash in
money market funds, and obligations issued by or fully collateralized by the
U.S. government or federal agencies. While cash and cash equivalents held by
financial institutions at times exceed federally insured limits, management
believes that no credit or market risk exposure exists due to the high quality
of the institutions. The Company places its investments with high-credit quality
counterparties. The Company does not require collateral or other security
related to receivables.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivatives and Hedging Activities" (SFAS 133), which
establishes accounting and reporting standards
 
                                      F-10

<PAGE>   82
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
for derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as "derivatives") and for hedging
activities. SFAS 133 (as deferred by SFAS 137) is effective for fiscal years
beginning after June 15, 2000, and will be adopted by the Company during the
year beginning January 1, 2001. As the Company does not currently hold
derivatives or engage in hedging transactions, the Company anticipates that
there will be no impact on the Company's results of operations, financial
position, or cash flows upon the adoption of SFAS 133.
 
     In December 1999 the SEC issued Staff Accounting Bulletin No. 101, "Revenue
Recognition" (SAB 101), which provides guidance on the recognition, presentation
and disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met to recognize revenue and provides
guidance for disclosures related to revenue recognition policies. The Company
has recognized revenue and made disclosures in accordance with SAB 101. The
adoption of SAB 101 did not have any impact on the Company's financial position
or results of operations.
 
USE OF ESTIMATES
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
 
RECLASSIFICATIONS
 
     Certain prior year balances have been reclassified to conform to the
current year presentation.
 
RESTATEMENT
 
     In December 2000, the Company determined that it was necessary to revise
its 1997 and 1998 financial statements. The restatement was required because of
incorrect purchase accounting applied to the Company's 1997 merger with
CellGenEx, Inc. (see Note 11). The Company's initial purchase accounting
included a write-off in 1997 of all of the intangible assets acquired in the
merger amounting to $802,000. The 1997 and 1998 financial statements have been
restated to reverse the effect of the write-off of the intangible assets and to
record amortization expense relative to the intangible assets acquired over a
four year period. The Company also determined that it was necessary to revise
its 1999 financial statements for the purchase accounting issue mentioned above,
as well as to record additional stock compensation in the amount of $86,000
related to common stock options issued during the year ended December 31, 1999
which had been subsequently determined to have been issued at less than fair
value (see Note 6). The following table sets forth the effect of the restatement
on the Company's financial statements (in thousands except per share data):
 

<TABLE>
<CAPTION>
                                                                                        PERIOD
                                                                                    FROM INCEPTION
                                                      YEARS ENDED DECEMBER 31,     (AUGUST 27, 1996)
                                                     ---------------------------          TO
                                                      1997      1998      1999     DECEMBER 31, 1999
                                                     -------   -------   -------   -----------------
<S>                                                  <C>       <C>       <C>       <C>
Net loss
  As restated......................................  $(3,288)  $(5,446)  $(6,947)      $(16,232)
  As previously reported...........................   (4,023)   (5,245)   (6,661)       (16,481)
Basic and diluted net loss per share
  As restated......................................  $ (0.69)  $ (0.86)  $ (1.15)        $(2.96)
  As previously reported...........................    (0.85)    (0.83)    (1.10)         (3.01)
</TABLE>

 
                                      F-11

<PAGE>   83
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
2. INVESTMENTS
 
     A summary of investments follows (in thousands):
 

<TABLE>
<CAPTION>
                                                                 GROSS         GROSS
                                                  AMORTIZED    UNREALIZED    UNREALIZED    ESTIMATED
                                                    COST         GAINS         LOSSES      FAIR VALUE
                                                  ---------    ----------    ----------    ----------
<S>                                               <C>          <C>           <C>           <C>
December 31, 1998
  U.S. treasury securities......................   $ 9,513        $--           $(14)       $ 9,499
  Federal agency obligations....................     3,075         --             (7)         3,068
                                                   -------        ---           ----        -------
                                                   $12,588        $--           $(21)       $12,567
                                                   =======        ===           ====        =======
December 31, 1999
  U.S. treasury securities......................   $ 6,174        $--           $(18)       $ 6,156
  Federal agency obligations....................     1,083         --             --          1,083
                                                   -------        ---           ----        -------
                                                   $ 7,257        $--           $(18)       $ 7,239
                                                   =======        ===           ====        =======
September 30, 2000
  U.S. treasury securities......................   $ 1,498        $--           $ (2)       $ 1,496
                                                   =======        ===           ====        =======
</TABLE>

 
     The Company uses the services of a third party investment broker to manage
its investment portfolio. Management intends to purchase securities whose
maturities correspond to the Company's budgeted cash flow needs. Accordingly,
management classified investments as held-to-maturity since the Company's
inception. During the year ended December 31, 1998, the Company's investment
broker did not comply with management's instructions and as a result, the
Company was forced to sell a portion of its investment portfolio before
maturity. Securities with an amortized cost of $2.6 million were sold, prior to
maturity, for a net realized gain of $59,000. All remaining investment
securities held at December 31, 1998 were held through their maturity date. At
December 31, 1999 and September 30, 2000, management has classified all
investments as available-for-sale. There were no gross realized gains or losses
on sales of available-for-sale securities in the year ended December 31, 1999.
Gross realized gains and losses on sales of available-for-sale securities during
the nine months ended September 30, 2000 were $0 and $3,000, respectively.
 
                                      F-12

<PAGE>   84
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
     The available-for-sale securities as of December 31, 1999 and September 31,
2000 have contractual maturities of one year or less. Expected maturities will
differ from contractual maturities because the issuers of the securities may
have the right to repay obligations without prepayment penalties.
 
3. PROPERTY AND EQUIPMENT
 
     Property and equipment consists of the following (in thousands):
 

<TABLE>
<CAPTION>
                                                         DECEMBER 31,
                                                       ----------------    SEPTEMBER 30,
                                                        1998      1999         2000
                                                       ------    ------    -------------
<S>                                                    <C>       <C>       <C>
Equipment............................................  $1,100    $1,495       $1,829
Furniture and fixtures...............................     131       133          161
Leasehold improvements...............................     620       507          530
Computer equipment...................................     264       292          356
                                                       ------    ------       ------
                                                        2,115     2,427        2,876
Less accumulated amortization and depreciation.......    (609)     (603)        (945)
                                                       ------    ------       ------
                                                       $1,506    $1,824       $1,931
                                                       ======    ======       ======
</TABLE>

 
     Depreciation expense totaled $201,000, $408,000, and $517,000 during the
years ended December 31, 1997, 1998 and 1999, respectively, and $342,000 during
the nine months ended September 30, 2000.
 
4. SIGNIFICANT AGREEMENTS
 
TECHNOLOGY LICENSES
 
     At inception, the Company entered into a license agreement with the
Trustees of the University of Pennsylvania whereby the Company was granted use
of certain intellectual property. In exchange, the Company granted 605,807
shares of common stock at par value during the period from inception to December
31, 1997. In May 1999, the Company terminated the agreement. The terms of the
cancellation included the retirement of 400,000 shares of common stock at par
value.
 
     In July 1998, the Company entered into a license agreement with Genetics
Institute, Inc., under which the Company was granted the use of several patents
for intellectual property in exchange for the payment of a nonrefundable fee of
$53,000, 145,875 shares of Series B preferred stock, and warrants to purchase
194,500 shares of Series B preferred stock at $1.10 per share (see Note 5). The
nonrefundable fee was expensed when paid. The Company, or sublicensee, is
required to spend no less than $500,000 annually on research and development
activities related to product development until the first commercial sale of the
product.
 
     In June 1999, the Company entered into a license agreement with ARCH
Development Corporation in exchange for 200,000 shares of common stock. 20,000
of those shares were issued upon execution of the agreement and valued based on
the estimated fair market value of the common stock of $2,000. The remaining
shares are issuable upon the completion of various terms and conditions as
stated in the stock purchase agreement. The Company, or its affiliate or
sublicensee, is required to expend at least $2.0 million on the development of
licensed products during the first 24 months of the agreement.
 
     In October 1999, the Company entered into a license and supply agreement
with Diaclone S.A. In consideration for the license, the Company paid and
expensed a $75,000 nonrefundable fee. The Company also entered into a license
agreement with the Fred Hutchinson Cancer Research Center. In consideration
 
                                      F-13

<PAGE>   85
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
for the license, the Company paid and expensed a $25,000 nonrefundable fee. In
December 2000, the Company amended the agreement (see Note 12).
 
     All license agreements require the payment of royalties by the Company
based on sales and services. No royalty payments have been required or paid
through September 30, 2000.
 
MANUFACTURING AND SUPPLY CONTRACTS
 
     In August 1999, the Company entered into a development and supply agreement
with Dynal S.A. The Company has agreed to make payments upon the accomplishment
of certain development activities by Dynal S.A. totaling $3.0 million. During
the year ended December 31, 1999 and the nine months ended September 30, 2000,
the Company made payments totaling $100,000 and $1.9 million, respectively,
under the agreement. In accordance with the Company's accounting policy, the
$100,000 payment in the year ended December 31, 1999 was expensed when paid and
$1.4 million of the payments made during the nine months ended September 30,
2000 were expensed with the remaining amounts recorded as prepaid research and
development expenses. The Company's remaining payments of $1.0 million are
estimated to be payable during the year ended December 31, 2002 based on
development work plans. Remaining payments are subject to the completion of the
milestone activities and regulatory approvals as specified in the agreement.
Under the terms of the supply agreement, the Company is required to buy a
minimum $250,000 of beads in the first 12 months after the development phase
ends and $500,000 of beads annually thereafter over the remaining term of the
agreement.
 
     In June 2000, the Company entered into agreements with Lonza Biologics PLC.
Under the terms of the agreements, the Company is obligated to pay milestone
payments. Milestone payments are settled in the functional currency of Lonza
Biologics PLC (pounds) under the agreement. Exchange rate gains and losses have
been insignificant to date. The Company paid $161,000 as required under the
agreements during the nine months ended September 30, 2000. In accordance with
the Company's accounting policy, $134,000 of the payment made during the nine
months ended September 30, 2000 was expensed with the remaining amount recorded
as prepaid research and development expenses. Remaining payments under the
agreement, assuming milestones are completed as scheduled, will be $350,000
during the year ending December 31, 2000 and $2.7 million during the year ending
December 31, 2001.
 
5. REDEEMABLE CONVERTIBLE PREFERRED STOCK AND WARRANTS
 
PREFERRED STOCK
 
     A summary of redeemable convertible preferred stock follows (dollars in
thousands):
 

<TABLE>
<CAPTION>
                              DECEMBER 31, 1998 AND 1999                      SEPTEMBER 30, 2000
                       ----------------------------------------    ----------------------------------------
                                                     AGGREGATE                                   AGGREGATE
                         SHARES                     REDEMPTION       SHARES                     REDEMPTION
                       AUTHORIZED    ISSUED AND         AND        AUTHORIZED    ISSUED AND         AND
                          AND        OUTSTANDING    LIQUIDATION       AND        OUTSTANDING    LIQUIDATION
                       DESIGNATED      SHARES       PREFERENCE     DESIGNATED      SHARES       PREFERENCE
                       ----------    -----------    -----------    ----------    -----------    -----------
<S>                    <C>           <C>            <C>            <C>           <C>            <C>
Series A.............   8,000,000     6,860,512       $ 6,517       7,300,080     6,860,512       $ 6,517
Series B.............   4,097,580     3,903,080         4,293       4,097,580     3,903,080         4,293
Series C.............   7,285,629     7,185,630        12,000       7,212,316     7,185,630        12,000
Series D.............          --            --            --      10,300,000    10,109,825        28,105
                       ----------    ----------       -------      ----------    ----------       -------
                       19,383,209    17,949,222       $22,810      28,909,976    28,059,047       $50,915
                       ==========    ==========       =======      ==========    ==========       =======
</TABLE>

 
                                      F-14

<PAGE>   86
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
     The Company issued 6,334,212 shares of Series A preferred stock at $0.95
per share during the year ended December 31, 1996 for proceeds of $6.0 million,
3,757,205 shares of Series B preferred stock at $1.10 per share during the year
ended December 31, 1997 for proceeds of $4.1 million, and 7,185,630 shares of
Series C preferred stock at $1.67 per share during the year ended December 31,
1998 for proceeds of $12.0 million. There were no significant costs associated
with the Series A, B and C offerings. During 1997 the Company issued an
additional 526,300 shares of Series A preferred stock in conjunction with the
merger with CellGenEx, Inc. (see note 11). The value of the Series A preferred
stock of $579,000 was included in the determination of the purchase price of
CellGenEx, Inc. During 1998, the Company also issued 145,875 shares of Series B
preferred stock to acquire technology licenses (see note 4). These shares were
valued at $1.10 per share for an aggregate amount of $160,000. In May 2000, the
Company amended and restated its Certificate of Incorporation to change the
number of designated Series A and C preferred shares and to designate Series D
preferred shares.
 
     In August 2000, Company completed a private placement of 10,109,825 shares
at $2.78 per share of Series D redeemable preferred stock for $28.0 million, net
of offering costs of $105,000. In connection with the offering, holders of the
Series D preferred stock received 1,132,287 warrants to purchase shares of
common stock at an exercise price of $0.30 per share. The warrants were valued
at $2.7 million using the Black-Scholes method. The warrants expire in August
2005 or upon the completion of an initial public offering (IPO). Of the total
net proceeds of $28.0 million, $2.7 million has been recorded as paid in capital
and $25.3 million had been recorded as redeemable convertible preferred stock.
The Series D preferred stock includes redemption rights commencing on June 30,
2002 at $2.78 per share or $28.1 million. The difference between the recorded
value of the Series D preferred stock and the redemption value is being accreted
ratably through June 30, 2002. For the nine months ended September 30, 2000, the
Company recorded accretion of the preferred stock redemption value of $245,000
through a charge to additional paid in capital and a credit to preferred stock.
 
     Holders of Series A, B, C, and D preferred stock have preferential rights
to noncumulative dividends at a rate of $0.076, $0.088, $0.1336, and $.2224 per
share, respectively, when and if declared by the Board of Directors. The holders
are entitled to the number of votes equal to the number of shares of common
stock into which the preferred stock could be converted. In the event of
liquidation, the holders of Series A, B, C, and D have preferential right to
liquidation payments of $0.95, $1.10, $1.67, and $2.78 per share, respectively,
plus any accrued but unpaid dividends.
 
     The preferred stock can be converted, at the option of the holder,
one-for-one into common stock subject to adjustment for antidilutive events. The
conversion price for Series A, B, C, and D preferred stock is $0.95, $1.10,
$1.67, and $2.78, respectively. Each share of the preferred stock shall
automatically be converted into shares of common stock upon the closing of a
firmly underwritten IPO, provided that the price per share is not less than
$4.00 and the aggregate gross proceeds to the Company are not less than $20.0
million. In addition, the Company has granted registration rights and preemptive
rights to Series A, B, C, and D holders.
 
     The preferred stock is redeemable at the option of the holder of a majority
of the outstanding shares of preferred stock at any time after June 30, 2002.
The Series A, B, C, and D redemption price is $0.95, $1.10, $1.67, and $2.78 per
share, respectively. Since the redemption price is equal to the price originally
paid for the shares, no accretion has been recorded on Series A, B, and C
preferred stock.
 
     In addition, the Company has granted registration rights and rights of
first offer to the Series A, B, C, and D holders, and is precluded from carrying
out certain actions without the approval of the majority of the Series A, B, C,
and D holders voting as a group.
                                      F-15

<PAGE>   87
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
WARRANTS
 
     Warrants to purchase 368,410 shares of Series A preferred stock were issued
in connection with the CellGenEx, Inc. business acquisition (see Note 11) at an
exercise price of $0.95 per share during the year ended December 31, 1997. The
value of the warrants of $330,000 was included in the determination of the
purchase price of CellGenEx, Inc. In addition, warrants to purchase 71,158
shares of Series A preferred stock at $0.95 per share were issued in connection
with equipment financing for the year ended December 31, 1997. The estimated
fair value of the warrants issued of $64,000 was recorded as an additional
financing cost and is being amortized over the term of the loan as interest
expense.
 
     During the year ended December 31, 1998, the Company issued warrants to
purchase 194,500 shares of Series B preferred stock as partial consideration for
the Genetics Institute, Inc. license (see Note 4). The warrants were issued at
an exercise price of $1.10 per share. The estimated fair value of the warrants
of $131,000 was charged to research and development expense in 1998.
 
     During the year ended December 31, 1999, the Company issued warrants to
purchase 12,315 shares of Series C preferred stock at an exercise price of $1.67
per share in connection with equipment financing. The estimated fair value of
the warrants issued of $15,000 was recorded as additional financing cost and is
being amortized over the term of the loan as interest expense.
 
     In January 2000, the Company issued a warrant to purchase 14,371 shares of
Series C preferred stock at an exercise price of $1.67 per share in connection
with equipment financing. The estimated fair value of the warrants issued of
$18,000 was recorded as additional financing cost and is being amortized over
the term of the loan as interest expense.
 
     In December 2000, the Company issued an additional Series D preferred stock
warrant for 80,000 shares of Series D preferred stock, in connection with a
lease for a manufacturing facility (see Note 12).
 
     Warrants expire at various dates from March 2003 to January 2007, including
380,725 warrants outstanding at September 30, 2000 which would expire earlier
upon the completion of an IPO. All remaining preferred stock warrants which do
not expire upon the completion of an IPO, upon consent from the warrant holders,
will convert to common stock warrants upon the consummation of an IPO. The
Company has valued the warrants issued during the years ended December 31, 1997,
1998, and 1999 and the nine months ended September 30, 2000 using the
Black-Scholes method with the following assumptions: no dividend yields,
expected life of 5 years to 10 years, risk-free interest rates of 5.42% to 6.90%
and volatility of 68% to 75%.
 
6. STOCKHOLDERS' DEFICIT
 
1996 STOCK OPTION PLAN
 
     Under the Company's 1996 Stock Option Plan (1996 Plan), 2.5 million shares
of common stock have been reserved for grants to employees, directors, and
consultants, as of December 31, 1999. The term of the 1996 Plan is ten years
unless terminated earlier by the Board of Directors. Options granted under the
1996 Plan may be designated as incentive or nonqualified at the discretion of
the plan administrator. The vesting period, exercise price, and expiration
period of options are also established at the discretion of the plan
administrator. Vesting periods are typically four or five years, and incentive
stock options are exercisable at no less than the fair market value at the date
of grant, and nonqualified stock options are
 
                                      F-16

<PAGE>   88
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
exercisable at prices determined by the 1996 Plan administrator. In no event
shall the term of any incentive stock option exceed ten years.
 
     In August 2000, the Board of Directors amended the 1996 Plan to allow
options granted to certain executives to become exercisable immediately. Shares
issued upon exercise of options that are unvested are restricted and subject to
repurchase by the Company upon termination of employment and such restrictions
lapse over the original vesting schedule. At September 30, 2000, there were no
shares of restricted common stock issued and subject to repurchase.
 
     A summary of stock option activity and related information follows:
 

<TABLE>
<CAPTION>
                                                    YEARS ENDED DECEMBER 31,                          NINE MONTHS ENDED
                               ------------------------------------------------------------------       SEPTEMBER 30,
                                       1997                  1998                   1999                    2000
                               --------------------   -------------------   ---------------------   ---------------------
                                          WEIGHTED              WEIGHTED                WEIGHTED                WEIGHTED
                                           AVERAGE               AVERAGE                 AVERAGE                 AVERAGE
                                          EXERCISE              EXERCISE                EXERCISE                EXERCISE
                               OPTIONS      PRICE     OPTIONS     PRICE      OPTIONS      PRICE      OPTIONS      PRICE
                               --------   ---------   -------   ---------   ---------   ---------   ---------   ---------
<S>                            <C>        <C>         <C>       <C>         <C>         <C>         <C>         <C>
Outstanding at beginning of
  period.....................   278,000     $0.10     720,116     $0.10       955,553     $0.12     1,222,125     $0.14
    Granted at fair value....   554,866      0.10     261,500      0.16            --        --            --        --
    Granted at less than fair
      value..................        --        --          --        --       639,748      0.17       715,844      0.37
    Canceled.................  (100,000)     0.11     (25,813)     0.10      (319,406)     0.13      (290,093)     0.14
    Exercised................   (12,750)     0.10        (250)     0.10       (53,770)     0.10       (21,655)     0.13
                               --------               -------               ---------               ---------
Outstanding at end of
  period.....................   720,116     $0.10     955,553     $0.12     1,222,125     $0.14     1,626,221     $0.24
                               ========               =======               =========               =========
</TABLE>

 
The following summarizes information about stock options outstanding and
exercisable at September 30, 2000:
 

<TABLE>
<CAPTION>
                          OUTSTANDING
              ------------------------------------        EXERCISABLE
                            WEIGHTED                 ----------------------
                            AVERAGE      WEIGHTED                 WEIGHTED
  RANGE OF                 REMAINING      AVERAGE                  AVERAGE
  EXERCISE    NUMBER OF   CONTRACTUAL    EXERCISE      NUMBER     EXERCISE
   PRICE       OPTIONS    LIFE (YEARS)     PRICE     OF OPTIONS     PRICE
------------  ---------   ------------   ---------   ----------   ---------
<S>           <C>         <C>            <C>         <C>          <C>
$0.10 - 0.17    997,717       8.20         $0.15       594,992      $0.14
 0.30 - 0.40    628,504       9.87          0.39       505,233       0.40
              ---------                              ---------
              1,626,221       8.85          0.24     1,100,225       0.24
              =========                              =========
</TABLE>

 
     The number of options exercisable at December 31, 1997, 1998 and 1999 and
September 30, 2000 was 45,428, 252,485, 458,688, and 1,100,225, respectively.
The weighted-average exercise price of options vested and exercisable at
December 31, 1997, 1998 and 1999 and September 30, 2000 was $0.10, $0.10, $0.12,
and $0.24, respectively. The weighted-average fair value of options granted
during the years ended December 31, 1997, 1998 and 1999 and the nine months
ended September 30, 2000 was $0.03, $0.06, $1.29, and $2.33, respectively. The
weighted-average remaining contractual life of outstanding options at December
31, 1999 was 8.78 years.
 
     Pro forma information regarding net loss required by SFAS 123 has been
determined as if the Company had accounted for its employee stock options under
the fair value method of SFAS 123. The
                                      F-17

<PAGE>   89
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
fair value for these options was estimated at the date of grant under the
Black-Scholes method for the years ended 1997 and 1998 and the minimum value
method for the year ended December 31, 1999 and the nine months ended September
30, 2000. The following weighted-average assumptions for the years ended
December 31, 1997, 1998, and 1999 and the nine months ended September 30, 2000:
option life of 5 years, 5 years, 3.4 years, and 3.7 years, respectively;
risk-free interest rate of 5.98%, 4.89%, 6.11%, and 5.80%, respectively; and no
dividend yield. Pro forma net loss information follows:
 

<TABLE>
<CAPTION>
                                                YEARS ENDED DECEMBER 31,       NINE MONTHS ENDED
                                              -----------------------------      SEPTEMBER 30,
                                               1997       1998       1999            2000
                                              -------    -------    -------    -----------------
                                                                (IN THOUSANDS)
<S>                                           <C>        <C>        <C>        <C>
Net loss:
  As reported...............................  $(3,288)   $(5,446)   $(6,947)        $(8,472)
  Pro forma.................................   (3,290)    (5,452)    (7,035)         (9,010)
Basic and diluted net loss per share:
  As reported...............................  $ (0.69)   $ (0.86)   $ (1.15)        $ (1.42)
  Pro forma.................................    (0.69)     (0.86)     (1.16)          (1.51)
</TABLE>

 
     The Company granted 102,500 common stock options to consultants in exchange
for services performed in the year ended December 31, 1998. No options were
granted to consultants for the year ended December 31, 1999. During the nine
months ended September 30, 2000, the Company granted a total of 20,000 common
stock options to a consultant for services to be performed through August 2001.
In accordance with SFAS 123 and EITF 96-18, options granted to consultants are
periodically revalued as they vest.
 
     During the year ended December 31, 1999 and the nine months ended September
30, 2000 in connection with the grant of certain options to employees, the
Company recorded deferred stock-based compensation of $720,000 and $1.5 million,
respectively, representing the difference between the exercise price and the
subsequently determined deemed fair value of the Company's common stock on the
date such stock options were granted. The subsequently determined deemed fair
value of the Company's common stock ranged from $0.50 to $1.68 during the year
ended December 31, 1999, and $1.73 to $3.20 during the nine months ended
September 30, 2000. Deferred stock-based compensation is being amortized on a
graded vesting method. During the years ended December 31, 1997, 1998 and 1999,
and the nine months ended September 30, 2000, the Company recorded noncash
deferred stock-based compensation expense of $4,000, $6,000, $93,000 and
$557,000, respectively.
 
COMMON STOCK
 
     In August 2000, the Company amended and restated its Certificate of
Incorporation to increase the number of shares designated as common stock from
40 million to 60 million.
 
                                      F-18

<PAGE>   90
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
     Common stock reserved for future issuance follows:
 

<TABLE>
<CAPTION>
                                                     DECEMBER 31,    SEPTEMBER 30,
                                                         1999            2000
                                                     ------------    -------------
<S>                                                  <C>             <C>
Stock options......................................    2,433,230       2,411,575
Series A preferred stock...........................    8,000,000       7,300,080
Series B preferred stock...........................    4,097,580       4,097,580
Series C preferred stock...........................    7,285,629       7,212,316
Series D preferred stock...........................           --      10,300,000
Preferred stock warrants...........................      646,383         660,754
Common stock warrants..............................           --       1,132,287
License and technology agreements..................    1,236,040       1,236,040
                                                      ----------      ----------
                                                      23,698,862      34,350,632
                                                      ==========      ==========
</TABLE>

 
COMMON STOCK WARRANTS
 
     In August 2000, the Company issued 1,132,287 common stock warrants to
private investors in connection with the issuance of Series D preferred stock
(see Note 5).
 
COMMON STOCK REPURCHASES
 
     During the years ended December 31, 1997 and 1998, the Company repurchased
635,000 and 88,542 shares, respectively, of common stock from founders at par
value. The shares were subsequently canceled by the Company.
 
7. INCOME TAXES
 
     At December 31, 1999, the Company had net operating loss carryforwards of
approximately $14.2 million and research and development tax credit
carryforwards of $749,000 for federal income tax reporting purposes. The net
operating losses and tax credits will expire beginning in 2011 if not previously
utilized. In certain circumstances, as specified in the Internal Revenue Code,
due to ownership changes, the Company's ability to utilize its net operating
loss carryforwards may be limited.
 
                                      F-19

<PAGE>   91
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
     Deferred income taxes reflect the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. The significant components of
deferred taxes follows (in thousands):
 

<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                           ------------------
                                                            1998       1999
                                                           -------    -------
<S>                                                        <C>        <C>
Deferred tax assets:
  Net operating loss carryforwards.......................  $ 2,774    $ 4,812
  Research and development tax credit....................      533        749
  License agreements.....................................       99        162
  Other..................................................       37         59
                                                           -------    -------
                                                             3,443      5,782
  Less valuation allowance...............................   (3,406)    (5,745)
                                                           -------    -------
Net deferred tax assets..................................       37         37
Deferred tax liabilities:
  Fixed assets...........................................      (37)       (37)
                                                           -------    -------
Net deferred taxes.......................................  $     0    $     0
                                                           =======    =======
</TABLE>

 
     A valuation allowance has been recorded for deferred tax assets because
realization is primarily dependent on generating sufficient taxable income prior
to the expiration of net operating loss carryforwards. The valuation allowance
for deferred tax assets increased $2.1 million during the year ended December
31, 1998 and $2.3 million during the year ended December 31, 1999, principally
due to net operating losses recorded during those periods. There have been no
offsets or other deductions to the valuation allowance in any period since the
Company's inception.
 
8. LEASE COMMITMENTS AND EQUIPMENT FINANCINGS
 
     The Company has commitments for noncancelable operating leases principally
for building space and office equipment that require minimum rental payments.
The building lease requires payment of a pro rata share of property operating
expenses and includes rent escalation clauses (3% annually) and has two five-
year renewal options. Subsequent to December 31, 2000, the Company entered into
an additional lease for its manufacturing facility (see Note 12).
 
     Borrowings outstanding under equipment financing agreements totaled $1.3
million at December 31, 1998 and 1999, and $1.7 million at September 30, 2000.
The loans are secured by the related assets, and require monthly principal and
interest payments. The loans mature at various dates through the year ended
December 31, 2004. The interest rates applicable to the obligations range from
12.85% to 13.71% at December 31, 1998 and 1999 and 12.85% to 14.12% at September
30, 2000. The weighted average interest rate was 13.28% and 13.75% during the
year ended December 31, 1998 and 1999, respectively, and 13.36% for the nine
months ended September 30, 2000. At September 30, 2000, the Company has $530,000
available to it for equipment financings under its outstanding $1.0 million
equipment financing agreement. The outstanding equipment financing agreement
expires in April 2003, and requires the Company to comply with certain
non-financial covenants. The Company also issued preferred stock warrants (see
Note 5) in connection with equipment financings. At September 30, 2000, the net
book value of equipment which secures the outstanding borrowings totals $1.7
million.
 
                                      F-20

<PAGE>   92
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
     Future minimum payments under operating leases and equipment financings
arrangements at December 31, 1999 are as follows (in thousands):
 

<TABLE>
<CAPTION>
                                                         EQUIPMENT
                                                         FINANCINGS     OPERATING
                                                        ARRANGEMENTS     LEASES
                                                        ------------    ---------
<S>                                                     <C>             <C>
Year Ended December 31,
  2000................................................     $  490        $  502
  2001................................................        570           517
  2002................................................        229           532
  2003................................................         70           539
  2004................................................         --           543
  Thereafter..........................................         --           941
                                                           ------        ------
                                                            1,359        $3,574
                                                                         ======
Less unamortized discount.............................        (32)
Less current portion..................................       (488)
                                                           ------
Long-term equipment obligations.......................     $  839
                                                           ======
</TABLE>

 
     Rent expense totaled $147,000, $271,000, and $453,000 during the years
ended December 31, 1997, 1998 and 1999, respectively, and $391,000 for the nine
months ended September 30, 2000.
 
9. 401(K) PLAN
 
     The Company sponsors a 401(k) plan for the benefit of its employees. The
Company does not presently match employee contributions to the plan.
 
10. NET LOSS PER SHARE
 
     The calculation of basic and diluted loss per share and pro forma basic and
diluted loss per share follows (in thousands, except share and per share data):
 

<TABLE>
<CAPTION>
                                                                                   NINE MONTHS ENDED
                                              YEARS ENDED DECEMBER 31,               SEPTEMBER 30,
                                        -------------------------------------   ------------------------
                                           1997         1998         1999          1999         2000
                                        ----------   ----------   -----------   ----------   -----------
<S>                                     <C>          <C>          <C>           <C>          <C>
Net loss(A)...........................  $   (3,288)  $   (5,446)  $    (6,947)  $   (4,502)  $    (8,472)
                                        ==========   ==========   ===========   ==========   ===========
Weighted average outstanding
  common stock(B).....................   4,740,629    6,355,442     6,050,042    6,085,919     5,961,946
                                        ==========   ==========   ===========   ==========   ===========
Basic and diluted net loss per share
  (A/B)...............................  $    (0.69)  $    (0.86)  $     (1.15)  $    (0.74)  $     (1.42)
                                        ==========   ==========   ===========   ==========   ===========
Pro forma (unaudited):
Weighted average shares used above....                              6,050,042                  5,961,946
Pro forma adjustment to reflect
  weighted effect of assumed
  conversion of redeemable convertible
  preferred stock.....................                             17,949,222                 21,196,590
                                                                  -----------                -----------
Pro forma weighted average shares
  outstanding(C)......................                             23,999,264                 27,158,536
                                                                  ===========                ===========
Pro forma net loss per share (A/C)....                            $     (0.29)               $     (0.31)
                                                                  ===========                ===========
</TABLE>

 
                                      F-21

<PAGE>   93
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
     Pro forma loss per share (unaudited) is computed by dividing net loss by
the weighted average number of shares of common stock outstanding and the
weighted average number of shares of convertible and redeemable preferred stock
outstanding as if such shares were converted to common stock at the time of
issuance.
 
11. BUSINESS ACQUISITION
 
     On August 27, 1997, the Company acquired all of the outstanding stock of
CellGenEx, Inc. for 2,999,910 shares of common stock, 526,300 shares of
preferred Series A stock, and warrants to purchase 368,410 shares of Series A
preferred stock of the Company (see Note 5) which were collectively valued at
$1.2 million. Pursuant to an acquisition agreement between the Company and
CellGenEx, Inc., the Company reserved 1,582,340 shares of common stock
(Milestone Pool) for the Company's possible acquisition of new technology from
the scientific founders of CellGenEx, Inc. This Milestone Pool will terminate if
not used by December 31, 2003. The Company has determined that since the
acquisition, 526,300 shares reserved under this agreement will not be issued
because the related milestone requirements cannot be attained. At September 30,
2000, 1,056,040 shares of common stock remain in the Milestone Pool.
 
     CellGenEx, Inc. was a development stage company focusing on treatment of
human disease through activation of a patient's suppressed immune system. Upon
its acquisition CellGenEx, Inc. was merged into the Company. The acquisition was
accounted for using the purchase method of accounting. The purchase price was
allocated as follows (in thousands):
 

<TABLE>
<S>                                                           <C>
Cash acquired...............................................  $  437
Intangible assets...........................................     802
                                                              ------
                                                              $1,239
                                                              ======
</TABLE>

 
     Management determined that all of the excess purchase price over tangible
net assets acquired was attributable to intangible assets consisting mostly of a
scientific team of four immunologists with significant experience and reputation
in the field of immunology. The intangible assets are being amortized to expense
on a straight-line basis over the estimated useful life of four years. Related
amortization expense totaled $67,000, $201,000 and $200,000 during the years
ended December 31, 1997, 1998, and 1999, respectively, and $150,000 during the
nine months ended September 30, 2000.
 
     The results of operations of CellGenEx, Inc. are included in the results of
operations of the Company from the date of acquisition. The pro forma unaudited
results of operations for the year ended December 31, 1997, assuming the
purchase of CellGenEx, Inc. had been consummated as of January 1, 1997 follows
(in thousands, except per share data):
 

<TABLE>
<CAPTION>
                                                              (UNAUDITED)
                                                              -----------
<S>                                                           <C>
Revenues....................................................    $     0
Net loss....................................................    $(3,361)
Basic and diluted net loss per share........................    $ (0.50)
</TABLE>

 
                                      F-22

<PAGE>   94
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
12. SUBSEQUENT EVENTS (UNAUDITED)
 
INITIAL PUBLIC OFFERING
 
     In December 2000, the Company's Board of Directors authorized the Company
to file a Registration Statement with the Securities and Exchange Commission to
permit the Company to proceed with an IPO of its common stock (the Offering). If
the Company's Offering is consummated, all of the outstanding redeemable
convertible preferred stock will be automatically converted into common stock.
The unaudited pro forma stockholders' equity at September 30, 2000 has been
adjusted for the conversion of outstanding redeemable convertible preferred
stock and preferred stock warrants based on the outstanding number of shares of
redeemable convertible preferred stock and preferred stock warrants at September
30, 2000.
 
SIGNIFICANT AGREEMENTS
 
     In December 2000, the Company and the Fred Hutchinson Cancer Research
Center amended the license agreement whereby the Company agreed to pay an
additional $25,000 nonrefundable one-time license fee and to issue 150,000
shares of common stock to the Fred Hutchinson Cancer Research Center.

 
RESTATED CERTIFICATE OF INCORPORATION
 
     Upon the completion of the IPO, the Company will amend and restate its
Certificate of Incorporation to authorize the issuance of up to 100 million
shares of common stock, par value $0.001 per share, and five million shares of
preferred stock, par value $0.001 per share, the rights and preferences of which
may be established from time to time by the Board of Directors.
 
MANUFACTURING FACILITY LEASE
 
     In December 2000, the Company entered into an operating lease for its
future manufacturing facility. The initial lease term expires in December 2010.
The lease contains annual rent escalations of 4.5% and an option to renew the
lease for two additional five-year periods. In addition to base rent, the
Company is required to pay a pro rata share of the operating costs related to
the leased space. Future minimum lease payments under the lease will be as
follows (in thousands):
 

<TABLE>
<S>                                                           <C>
Year Ended December 31,
  2001......................................................  $  810
  2002......................................................     846
  2003......................................................     885
  2004......................................................     924
  2005......................................................     965
  Thereafter................................................   5,500
                                                              ------
                                                              $9,930
                                                              ======
</TABLE>

 
     The Company is required to provide additional security under the lease
agreement totaling $435,000 in the form of cash. The Company also issued a
warrant, with an expiration date of either the close of the IPO or December 7,
2005, to the lessor to purchase 80,000 shares of Series D preferred stock at an
exercise price of $2.78 in connection with this lease.
 
                                      F-23

<PAGE>   95
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
1996 STOCK OPTION PLAN
 
     Subsequent to September 30, 2000, the Company issued an additional 249,500
options at an exercise price of $0.40 per share and 29,500 options at an
exercise price of $1.00 per share. The terms of the options were consistent with
prior issuances. In November and December 2000, three executives elected to
early exercise stock options for 513,819 shares of restricted common stock.
 
2000 STOCK OPTION PLAN
 
     The 2000 Stock Option Plan (2000 Plan) provides for the grant of incentive
stock options to employees (including employee directors) and nonstatutory stock
options to employees, directors and consultants. The 2000 Plan was adopted by
the Board of Directors in December 2000 and will be submitted for approval by
the stockholders prior to the completion of the IPO. A total of 2.1 million
shares of common stock has been reserved for issuance under the 2000 Plan. The
number of shares reserved for issuance under the 2000 Plan will be subject to an
automatic annual increase on the first day of each fiscal year beginning in 2002
and ending in 2008 equal to the lesser of 500,000 shares, 3% of our outstanding
common stock on the last day of the immediately preceding fiscal year, or such
lesser number of shares as the Board of Directors determines. With respect to
options granted under the 2000 Plan, the plan administrator will determine the
term of options, which may not exceed 10 years (or 5 years in the case of an
incentive stock option granted to a holder of more than 10% of the total voting
power of all classes of stock or a parent in a subsidiary's stock). In no event,
may an employee receive awards for more than 1 million shares under the 2000
Plan in any fiscal year. Incentive stock options granted under the 2000 Plan
must have an exercise price of at least 100% of the fair market value of the
common stock on the date of grant, and not less that 110% of the fair market
value in the case of incentive stock options granted to an employee who holds
more that 10% of the total voting power of all classes of stock or any parent or
subsidiary's stock.
 
2000 DIRECTOR'S STOCK OPTION PLAN
 
     The 2000 Director's Stock Option Plan (2000 Directors' Plan) was adopted by
the Board of Directors in December 2000 and will be submitted to the
stockholders for approval prior to the closing of the IPO. A total of 400,000
shares of common stock has been reserved for issuance under the 2000 Directors'
Plan. Under the 2000 Directors' Plan, each non-employee director who first
becomes a non-employee director after the effective date of the plan will
receive an automatic initial grant of an option to purchase 25,000 shares of
common stock upon becoming a member of the Board of Directors. On the first day
of each fiscal year, nonemployee directors will be granted an option to purchase
5,000 shares of common stock if, on such a date, the director has served on the
Board of Directors for at least six months. The 2000 Directors' Plan provides
that each option granted to a new director shall vest at the rate of 1/3 of the
total number of shares subject to such option twelve months after the date of
grant with the remaining shares vesting thereafter in equal monthly installments
over the next two years so that the option will be fully vested after three
years, and each annual option granted to a director shall vest in full at the
end of one year. All options granted under the 2000 Directors' Plan will have a
term of 10 years and an exercise price equal to the fair market value on the
date of the grant.
 
2000 EMPLOYEE STOCK PURCHASE PLAN
 
     The 2000 Employee Stock Purchase Plan (2000 Employee Plan) was adopted by
the Board of Directors in December 2000 and will be submitted to the
stockholders for approval prior to the closing of
 
                                      F-24

<PAGE>   96
                             XCYTE THERAPIES, INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
 
                   NOTES TO FINANCIAL STATEMENTS (CONTINUED)
         (INFORMATION AS OF SEPTEMBER 30, 2000 AND FOR THE NINE MONTHS
                ENDED SEPTEMBER 30, 1999 AND 2000 IS UNAUDITED)
 
the IPO. A total of 600,000 shares of common stock has been reserved for
issuance under the 2000 Employee Plan, none of which have been issued. The
number of shares reserved for issuance under the 2000 Employee Plan will be
increased on the first day of each of the fiscal years in 2002 to 2008 by the
lesser of 300,000 shares; 1% of our outstanding common stock on the last day of
the immediately preceding fiscal year; or the number of shares determined by the
Board of Directors. Unless terminated earlier by the Board of Directors, the
2000 Employee Plan will terminate in December 2010.
 
                                      F-25

<PAGE>   97
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                                              SHARES
 
                                  [XCYTE LOGO]
 
                                  COMMON STOCK
 
                         ------------------------------
 
                                   PROSPECTUS
                         ------------------------------
 
                                    SG COWEN
                           U.S. BANCORP PIPER JAFFRAY
                             DAIN RAUSCHER WESSELS
                           FIRST SECURITY VAN KASPER
 
                                              , 2001
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>   98
 
                                    >PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
I
TEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
 

<TABLE>
<CAPTION>
                                                                AMOUNT
                                                              TO BE PAID
                                                              ----------
<S>                                                           <C>
SEC registration fee........................................  $   22,770
NASD filing fee.............................................       9,125
Nasdaq National Market listing fee..........................       1,000
Printing and engraving expenses.............................     175,000
Legal fees and expenses.....................................     400,000
Accounting fees and expenses................................     425,000
Blue Sky qualification fees and expenses....................       5,000
Transfer Agent and Registrar fees...........................      15,000
Miscellaneous fees and expenses.............................     247,105
                                                              ----------
  Total.....................................................  $1,300,000
                                                              ==========
</TABLE>

 
-------------------------
* To be filed by amendment
 

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act of 1933, as amended. Article nine of
our certificate of incorporation, Exhibit 3.2, and Article VI of our bylaws,
Exhibit 3.3, provide for indemnification of our directors, officers, employees
and other agents to the maximum extent permitted under the laws of Delaware.
Delaware law provides that directors of a corporation will not be personally
liable for monetary damages for breach of their fiduciary duties as directors,
except liability for:
 
     - breach of their duty of loyalty to the corporation or its stockholders;
 
     - acts or omissions not in good faith or that involve intentional
       misconduct or a knowing violation of law;
 
     - unlawful payments of dividends or unlawful stock repurchases or
       redemptions; and
 
     - any transaction from which the director derived an improper personal
       benefit.
 
In addition, we have entered into indemnification agreements, Exhibit 10.1, with
our officers and directors. The underwriting agreement, Exhibit 1.1, also
provides for cross-indemnification among us, and the underwriters with respect
to certain matters, including matters arising under the Securities Act. We
maintain directors' and officers' liability insurance.
 

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     Since December 1, 1997, we have sold and issued the following securities:
 
          1. As of November 30, 2000, we granted and issued options to purchase
     1,218,686 shares of our common stock with a weighted average price of $0.20
     to a number of our employees, directors and
 
                                      II-1

<PAGE>   99
 
     consultants pursuant to our 1996 stock incentive compensation plan. Among
     those receiving options were Ronald J. Berenson, Mark Bonyhadi, Kathi
     Cordova, Stewart Craig, Jean Deleage, Peter Langecker, Dawn McCracken and
     Robert Williams.
 
          2. As of November 30, 2000, we have issued an aggregate of 743,335
     shares of our common stock to executive officers, directors and employees
     upon the exercise of stock options granted pursuant to our 1996 stock
     incentive compensation plan with an aggregate exercise price of $230,143.
     Among those that we have issued shares to were Ronald J. Berenson, Kathi
     Cordova and Dawn McCracken.
 
          3. In July 1998, we granted and issued a warrant with an expiration
     date of July 8, 2003, to purchase 194,500 shares of Series B Preferred
     Stock at an exercise price of $1.10 per share to Genetics Institute, Inc.
     in connection with a license agreement.
 
          4. In July 1998, we issued 7,185,630 shares of Series C Preferred
     Stock to investors, including but not limited to Alta Partners, ARCH
     Venture Corporation, entities affiliated with Sprout Group and entities
     affiliated with Tredegar Investments for an aggregate cash consideration of
     $12,000,000.
 
          5. In July 1999, we granted and issued a warrant with an expiration
     date of either the closing of this offering or July 1, 2006, to purchase
     12,315 shares of Series C Preferred Stock at an exercise price of $1.67 per
     share to Phoenix Leasing Incorporated and Robert Kingsbrook, in connection
     with an equipment lease line.
 
          6. In January 2000, we granted and issued a warrant with an expiration
     date of January 10, 2007, to purchase 14,371 shares of Series C Preferred
     Stock at an exercise price of $1.67 per share to General Electric Capital
     Corporation, in connection with an equipment lease line.
 
          7. In May and August 2000, we issued 10,109,825 shares of our Series D
     Preferred Stock to investors, including but not limited to Alta Partners,
     ARCH Venture Corporation, MPM Asset Management LLC, entities affiliated
     with Sprout Group and Tredegar Investments for an aggregate cash
     consideration of $28,105,314.
 
          8. In August 2000, we granted and issued warrants with an expiration
     date of either the closing of this offering or August 8, 2005, to purchase
     an aggregate of 1,132,287 shares of common stock at an exercise price of
     $0.30 per share to our Series D investors, in connection with our Series D
     financing.
 
          9. In December 2000, we granted and issued a warrant with an
     expiration date of either the closing of this offering or December 7, 2005,
     to purchase 80,000 shares of Series D Preferred Stock at an exercise price
     of $2.78 to Hibbs/Woodinville Associates, LLC in connection with a lease.
 
          10. In December 2000, we issued 150,000 shares of our common stock to
     the Fred Hutchinson Cancer Research Center in connection with a license
     agreement.
 
     The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) or Regulation
D, or other applicable exemption of such Securities Act as transactions by an
issuer not involving any public offering. In addition, certain issuances
described in Items 1 and 2 were deemed exempt from registration under the
Securities Act in reliance upon Rule 701 promulgated under the Securities Act.
The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates and warrants issued in such transactions.
All recipients had adequate access, through their relationships with us, to
information about us.
 
                                      II-2

<PAGE>   100
 

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 
(a) EXHIBITS
 

<TABLE>
<CAPTION>

EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
 1.1*    Form of Underwriting Agreement.
 3.1     Amended and Restated Certificate of Incorporation of Xcyte
         Therapies, Inc.
 3.2     Form of Amended and Restated Certificate of Incorporation of
         Xcyte Therapies, Inc. to be filed and effective upon
         completion of this offering.
 3.3     Amended and Restated Bylaws of Xcyte Therapies, Inc.
 4.1*    Form of Xcyte Therapies, Inc. Stock Certificate.
 5.1*    Opinion of Venture Law Group, A Professional Corporation.
10.1     Form of Indemnification Agreement between Xcyte Therapies
         and each of its Officers and Directors.
10.2     Series D Preferred Stock Purchase Agreement dated May 25,
         2000.
10.3     Addendum to Series D Preferred Stock Purchase Agreement and
         Omnibus Amendment to Series D Financing Agreements dated
         August 8, 2000.
10.4     Second Addendum to Series D Preferred Stock Purchase
         Agreement dated August 14, 2000.
10.5     Amended and Restated Investor Rights Agreement dated May 25,
         2000.
10.6     Amendment to Amended and Restated Investor Rights Agreement
         dated October 18, 2000.
10.7     Form of Warrant to purchase Common Stock issued by Xcyte
         Therapies, Inc.
10.8     Form of Warrant to purchase Series C Preferred Stock issued
         by Xcyte Therapies, Inc.
10.9     Warrant to Series C Preferred Stock dated January 10, 2000
         issued by Xcyte Therapies, Inc. in favor of General Electric
         Capital Corporation.
10.10    Warrant to purchase Series D Preferred Stock dated December
         7, 2000 issued by Xcyte Therapies, Inc. in favor of
         Hibbs/Woodinville Associates, LLC.
10.11    Senior Loan and Security Agreement dated July 1, 1999
         between Xcyte Therapies, Inc. and Phoenix Leasing
         Incorporated.
10.12    Master Security Agreement dated January 15, 2000 between
         Xcyte Therapies, Inc. and General Electric Capital
         Corporation.
10.13    Facility Lease dated June 21, 1999 between Xcyte Therapies,
         Inc. and Alexandria Real Estate Equities, Inc.
10.14    Facility Lease dated December 7, 2000 between Xcyte
         Therapies, Inc. and Hibbs/Woodinville Associates, LLC.
10.15    Amended and Restated 1996 Stock Option Plan.
10.16    2000 Stock Option Plan.
10.17    2000 Employee Stock Purchase Plan.
10.18    2000 Directors' Stock Option Plan.
10.19+   License Agreement dated June 28, 1999 between Xcyte
         Therapies, Inc. and ARCH Development Corporation.
10.20+   License and Supply Agreement dated October 15, 1999 between
         Xcyte Therapies, Inc. and Diaclone S.A., as amended.
10.21+   Development and Supply Agreement dated August 1, 1999
         between Xcyte Therapies, Inc. and Dynal S.A.
10.22+   License Agreement dated July 8, 1998 between Xcyte
         Therapies, Inc., and Genetics Institute, Inc.
10.23+   Non-Exclusive License Agreement dated October 20, 1999
         between Xcyte Therapies, Inc. and the Fred Hutchinson Cancer
         Research Center, as amended.
10.24+   Services Agreement dated June 6, 2000 between Xcyte
         Therapies, Inc. and Lonza Biologics PLC.
10.25+   Services Agreement dated June 6, 2000 between Xcyte
         Therapies, Inc. and Lonza Biologics PLC.
10.26+   License Agreement dated July 30, 1999 between Xcyte
         Therapies, Inc. and Genecraft LLC.
16.1     Letter from PricewaterhouseCoopers LLP Regarding Change in
         Accountants.
</TABLE>

 
                                      II-3

<PAGE>   101
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
23.1     Consent of Ernst & Young LLP Independent Auditors.
23.2     Consent of PricewaterhouseCoopers LLP, Independent
         Accountants.
23.3*    Consent of Venture Law Group (included in Exhibit 5.1).
24.1     Power of Attorney (see page II-4).
27.1     Financial Data Schedule.
</TABLE>

 
-------------------------
* To be supplied by amendment.
 
+ Certain information in these exhibits has been omitted and filed separately
  with the Securities and Exchange Commission pursuant to a confidential
  treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.406.
 
(b) FINANCIAL STATEMENT SCHEDULES
 
     Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
 

ITEM 17. UNDERTAKINGS
 
     The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
 
     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
 
     The undersigned registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities Act
     of 1933, the information omitted from the form of prospectus filed as part
     of this registration statement in reliance upon Rule 430A and contained in
     a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     registration statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act of 1933, each post-effective amendment that contains a form of
     prospectus shall be deemed to be a new registration statement relating to
     the securities offered therein, and the offering of such securities at that
     time shall be deemed to be the initial bona fide offering thereof.
 
                                      II-4

<PAGE>   102
 

                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Seattle, State of
Washington on December 22, 2000.
 
                                          XCYTE THERAPIES, INC.
 
                                          By:    /s/ RONALD. J. BERENSON
                                            ------------------------------------
                                                  Ronald J. Berenson, M.D.
                                               President and Chief Executive
                                                           Officer
 
                                      II-5

<PAGE>   103
 
                               POWER OF ATTORNEY
 
     KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints, jointly and severally, Ronald J.
Berenson and Kathi L. Cordova, and each of them, as his attorney-in-fact, with
full power of substitution, for him in any and all capacities, to sign any and
all amendments to this Registration Statement (including post-effective
amendments), and any and all Registration Statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this Registration Statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said Registration Statement.
 
     Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
 

<TABLE>
<CAPTION>
                   SIGNATURE                                    TITLE                      DATE
                   ---------                                    -----                      ----
<S>                                               <C>                                <C>
/s/ RONALD J. BERENSON                              President and Chief Executive    December 22, 2000
------------------------------------------------    Officer (Principal Executive
Ronald J. Berenson, M.D.                                      Officer)
 
/s/ KATHI L. CORDOVA                                  Vice President of Finance      December 22, 2000
------------------------------------------------      (Principal Financial and
Kathi L. Cordova                                         Accounting Officer)
 
/s/ ROBERT E. CURRY                                           Director               December 22, 2000
------------------------------------------------
Robert E. Curry, Ph.D.
 
/s/ JEAN DELEAGE                                              Director               December 22, 2000
------------------------------------------------
Jean Deleage, Ph.D.
 
/s/ PETER LANGECKER                                           Director               December 22, 2000
------------------------------------------------
Peter Langecker, M.D., Ph.D.
 
/s/ ROBERT T. NELSEN                                          Director               December 22, 2000
------------------------------------------------
Robert T. Nelsen
 
/s/ MICHAEL STEINMETZ                                         Director               December 22, 2000
------------------------------------------------
Michael Steinmetz, Ph.D.
 
/s/ ROBERT M. WILLIAMS                                        Director               December 22, 2000
------------------------------------------------
Robert M. Williams, Ph.D.
</TABLE>

 
                                      II-6

<PAGE>   104
 

                                 EXHIBIT INDEX
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
 1.1*    Form of Underwriting Agreement.
 3.1     Amended and Restated Certificate of Incorporation of Xcyte
         Therapies, Inc.
 3.2     Form of Amended and Restated Certificate of Incorporation of
         Xcyte Therapies, Inc. to be filed and effective upon
         completion of this offering.
 3.3     Amended and Restated Bylaws of Xcyte Therapies, Inc.
 4.1*    Form of Xcyte Therapies, Inc. Stock Certificate.
 5.1*    Opinion of Venture Law Group, A Professional Corporation.
10.1     Form of Indemnification Agreement between Xcyte Therapies
         and each of its Officers and Directors.
10.2     Series D Preferred Stock Purchase Agreement dated May 25,
         2000.
10.3     Addendum to Series D Preferred Stock Purchase Agreement and
         Omnibus Amendment to Series D Financing Agreements dated
         August 8, 2000.
10.4     Second Addendum to Series D Preferred Stock Purchase
         Agreement dated August 14, 2000.
10.5     Amended and Restated Investor Rights Agreement dated May 25,
         2000.
10.6     Amendment to Amended and Restated Investor Rights Agreement
         dated October 18, 2000.
10.7     Form of Warrant to purchase Common Stock issued by Xcyte
         Therapies, Inc.
10.8     Form of Warrant to purchase Series C Preferred Stock issued
         by Xcyte Therapies, Inc.
10.9     Warrant to Series C Preferred Stock dated January 10, 2000
         issued by Xcyte Therapies, Inc. in favor of General Electric
         Capital Corporation.
10.10    Warrant to purchase Series D Preferred Stock dated December
         7, 2000 issued by Xcyte Therapies, Inc. in favor of
         Hibbs/Woodinville Associates, LLC.
10.11    Senior Loan and Security Agreement dated July 1, 1999
         between Xcyte Therapies, Inc. and Phoenix Leasing
         Incorporated.
10.12    Master Security Agreement dated January 15, 2000 between
         Xcyte Therapies, Inc. and General Electric Capital
         Corporation.
10.13    Facility Lease dated June 21, 1999 between Xcyte Therapies,
         Inc. and Alexandria Real Estate Equities, Inc.
10.14    Facility Lease dated December 7, 2000 between Xcyte
         Therapies, Inc. and Hibbs/Woodinville Associates, LLC.
10.15    Amended and Restated 1996 Stock Option Plan.
10.16    2000 Stock Option Plan.
10.17    2000 Employee Stock Purchase Plan.
10.18    2000 Directors' Stock Option Plan.
10.19+   License Agreement dated June 28, 1999 between Xcyte
         Therapies, Inc. and ARCH Development Corporation.
10.20+   License and Supply Agreement dated October 15, 1999 between
         Xcyte Therapies, Inc. and Diaclone S.A., as amended.
10.21+   Development and Supply Agreement dated August 1, 1999
         between Xcyte Therapies, Inc. and Dynal S.A.
10.22+   License Agreement dated July 8, between Xcyte Therapies,
         Inc., and Genetics Institute, Inc.
10.23+   Non-Exclusive License Agreement dated October 20, 1999
         between Xcyte Therapies, Inc. and the Fred Hutchinson Cancer
         Research Center, as amended.
10.24+   Services Agreement dated June 6, 2000 between Xcyte
         Therapies, Inc. and Lonza Biologics PLC.
10.25+   Services Agreement dated June 6, 2000 between Xcyte
         Therapies, Inc. and Lonza Biologics PLC.
10.26+   License Agreement dated July 30, 1999 between Xcyte
         Therapies, Inc. and Genecraft LLC.
16.1     Letter from PricewaterhouseCoopers LLP Regarding Change in
         Accountants.
23.1     Consent of Ernst & Young LLP, Independent Auditors.
23.2     Consent of PricewaterhouseCoopers LLP, Independent
         Accountants.
</TABLE>


<PAGE>   105
 

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                           DESCRIPTION
-------                          -----------
<S>      <C>
23.3*    Consent of Venture Law Group (included in Exhibit 5.1).
24.1     Power of Attorney (see page II-4).
27.1     Financial Data Schedule.
</TABLE>

 
-------------------------
* To be supplied by amendment.
 
+ Certain information in these exhibits has been omitted and filed separately
  with the Securities and Exchange Commission pursuant to a confidential
  treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.406..





<PAGE>   1
                                                                     EXHIBIT 3.1


                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

                            OF XCYTE THERAPIES, INC.

        Xcyte Therapies, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:

        A. The name of the corporation is Xcyte Therapies, Inc. The corporation
was originally incorporated under the name MolecuRx, Inc. and the original
Certificate of Incorporation of the corporation was filed with the Delaware
Secretary of State on January 5, 1996.

        B. Pursuant to Sections 228, 242 and 245 of the General Corporation Law
of the State of Delaware, this Amended and Restated Certificate of Incorporation
restates and amends the provisions of the Certificate of Incorporation of this
corporation.

        C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:

        ONE. The name of this corporation is Xcyte Therapies, Inc.

        TWO. The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.

        THREE. The purpose of the corporation is to engage
 in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

        FOUR. The corporation is authorized to issue two classes of stock to be
designated Common Stock and Preferred Stock. The total number of shares of
Common Stock which this corporation has authority to issue is 60,000,000 with
par value of $.001 per share. The total number of shares of Preferred Stock
which this corporation has authority to issue is 28,909,976 with par value of
$.001 per share, of which 7,300,080 shares are designated as Series A Preferred
Stock ("Series A Preferred"), 4,097,580 shares are designated as Series B
Preferred Stock ("Series B Preferred") and 7,212,316 shares are designated as
Series C Preferred Stock ("Series C Preferred") and 10,300,000 




<PAGE>   2

shares are designated as Series D Preferred Stock ("Series D Preferred" and
collectively the "Preferred Stock").

        The rights, preferences, privileges and restrictions granted to or
imposed on the respective classes of the shares of capital stock or the holders
thereof are as follows:

        1. Dividends. The holders of the Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred Stock shall be entitled to receive
dividends out of assets of the corporation legally available therefor at the
rate of $0.076, $0.088, $0.1336 and $0.2224 per share per annum, respectively,
subject to adjustment for stock dividends, combinations, splits,
recapitalizations or other adjustments payable in cash, however, such dividends
shall not be cumulative, and no right shall accrue to holders of the Common
Stock or Preferred Stock by reason of the fact that dividends on said shares are
not declared in any prior period. Dividends on the Preferred Stock, when and if
declared by the Board of Directors, shall be payable in preference and prior to
any payment of any dividend on the Common Stock of the corporation. Thereafter,
the holders of Preferred Stock and Common Stock shall be entitled, when and if
declared by the Board of Directors, to dividends out of the corporation's assets
legally available therefor; provided, however, that no such dividends may be
declared or paid on any shares of Common Stock or Preferred Stock unless at the
same time an equivalent dividend is declared and paid on all outstanding shares
of Common Stock and Preferred Stock; and provided further that the dividend on
any series of any Preferred Stock shall be payable at the same rate per share as
would be payable on the shares of Common Stock or other securities into which
such series of Preferred Stock is convertible immediately prior to the record
date for such dividend.

        2. Liquidation Preference.

                2.1 Preference. In the event of any liquidation, dissolution or
winding up of the corporation, either voluntarily or involuntarily, the holders
of Series A Preferred, Series B Preferred, Series C Preferred and Series D
Preferred shall be entitled to receive prior and in preference to any
distribution of any of the assets or surplus funds of the corporation to the
holders of Common Stock of the corporation by reason of their ownership thereof,
$0.95, $1.10, $1.67 and $2.78 per share, respectively for each share of Series A
Preferred, Series B Preferred, Series C Preferred or Series D Preferred then so
held, plus a further amount equal to any declared but unpaid dividends on such
shares (the "Preferred Preference" for each respective series). After the
distributions to the holders of Preferred Stock have been made, the remaining
assets of the corporation available for distribution to stockholders shall be
distributed pro rata among the holders of Common Stock and the Preferred Stock,
on an as converted basis, until the holders of Series A Preferred have received
an aggregate of $1.90 per share, not including the Preferred Preference, the
holders of Series B Preferred have received an aggregate of $2.20 per share, not
including the Preferred Preference, the holders of Series C Preferred have
received an aggregate of $3.34 per share, not including the Preferred Preference
and the holders of Series D Preferred have received an aggregate of $5.56 per
share, not including the Preferred Preference (each of such participation
amount, the "Participation Amount," and together with the Preferred Preference,
the "Liquidation Preference Amount"). After such 



                                      -2-


<PAGE>   3

additional distributions are made to holders of Preferred Stock, the remaining
assets of the corporation legally available for distribution shall be
distributed ratably among the holders of Common Stock.

                        2.1.1 If, upon such liquidation, dissolution or winding
up of the corporation, the assets of the corporation are insufficient to provide
for the cash payment of the full preference due hereunder, such assets as are
legally available shall be distributed ratably among the holders of Preferred
Stock in proportion to the Preferred Preference that each such holder is
otherwise entitled to receive.

                        2.1.2 Notwithstanding the foregoing, if, upon any
liquidation, dissolution or winding up of the corporation, the holders of the
outstanding shares of Preferred Stock would receive more than the Liquidation
Preference Amount in the event all of their shares were converted into shares of
Common Stock immediately prior to the record date for distributions in
connection with such liquidation, dissolution or winding up of the corporation,
then each holder of an outstanding share of Preferred Stock shall receive, upon
delivery of shares of Preferred Stock held by such holder for conversion
pursuant to Section 5 below and in lieu of the Liquidation Preference Amount,
the number of shares of Common Stock into which each such share of Preferred
Stock is then convertible in accordance with the terms hereof, before any amount
shall be paid or distributed to the holders of Common Stock or of any other
stock ranking on liquidation junior to the Preferred Stock, and thereafter shall
share ratably with the holders of Common Stock and any other stock ranking on
liquidation junior to the Preferred Stock in the assets available for
distribution. The provisions of this paragraph shall not in any way limit the
right of the holders of Preferred Stock to elect to convert their shares of
Preferred Stock into shares of Common Stock pursuant to Section 5 prior to or in
connection with any liquidation, dissolution or winding up of the corporation.

                2.2 Extraordinary Transactions.

                        2.2.1 An "Extraordinary Transaction" shall be any
merger, consolidation or sale of all or substantially all of the assets of the
corporation in which the corporation's stockholders immediately prior to such
transaction, or series of related transactions, possess less than 50% of the
voting power of the surviving, continuing or purchasing entity (or parent, if
any) immediately after the transaction or series of related transactions.

                        2.2.2 In connection with an Extraordinary Transaction,
the holder(s) of not less than a majority of the outstanding Preferred Stock
(the "Preferred Election"), may elect to redeem all (but not less than all) of
the outstanding shares of Preferred Stock held by each holder of Preferred Stock
on the effective date of such Extraordinary Transaction for an amount per share
equal to the Liquidation Preference Amount, such Liquidation Preference Amount
to be payable in cash or securities based on the valuation determined in
accordance with Section 2.2.5.

                        2.2.3 Notwithstanding the foregoing, if in connection
with any Extraordinary Transaction, the holders of the outstanding shares of
Preferred Stock would receive 




                                      -3-

<PAGE>   4

more than the Liquidation Preference Amount if their shares were converted into
shares of Common Stock immediately prior to such Extraordinary Transaction, then
each holder of an outstanding share of Preferred Stock shall receive, upon
delivery of shares of Preferred Stock held by such holder for conversion and in
lieu of the Liquidation Preference Amount, the number of shares of Common Stock
into which each such share of Preferred Stock is then convertible in accordance
with the terms hereof, before any amount shall be paid or distributed to the
holders of Common Stock or of any other stock ranking on liquidation junior to
the Preferred Stock, and thereafter shall share ratably with the holders of
Common Stock and any other stock ranking on liquidation junior to the Preferred
Stock in the proceeds of such Extraordinary Transaction.

                        2.2.4 If, in connection with an Extraordinary
Transaction, the Preferred Election is made and the shares of the Preferred
Stock are to be redeemed pursuant to subsection 2.2.2 above, the holders of not
less than a majority of the outstanding Common Stock may elect to redeem all
(but not less than all) of the outstanding shares of Common Stock held by each
holder of Common Stock on the effective date of such Extraordinary Transaction.
Upon such election and after the payment of the Preferred Preference to the
holders of the Preferred Stock pursuant to subsection 2.2.2 above, the
corporation shall redeem such shares of Common Stock and the holders of the
Common Stock shall share ratably in the proceeds of the Extraordinary
Transaction with the holders of the Preferred Stock until such holders of
Preferred Stock have received in aggregate their applicable Liquidation
Preference Amount, after which time, the remaining proceeds of the Extraordinary
Transaction shall be distributed ratably among the holders of the Common Stock.

                        2.2.5 Valuation of Consideration. In the event of a
Extraordinary Transaction, if the consideration received by the corporation is
other than cash, its value will be deemed its fair market value. Any securities
shall be valued as follows:

                                (i) If traded on a securities exchange or The
Nasdaq Stock Market, the value shall be based on a formula approved by the Board
of Directors and derived from the closing prices of the securities on such
exchange or Nasdaq over a specified time period;

                                (ii) If actively traded over-the-counter, the
value shall be based on a formula approved by the Board of Directors and derived
from the closing prices of the securities on such exchange or Nasdaq over a
specified time period; and

                                (iii) If there is no active public market, the
value shall be the fair market value thereof, as determined in good faith by the
Board of Directors.

                        2.2.6 Notice of Transaction. In the event of an
Extraordinary Transaction, the corporation shall give each holder of record of
Series A Preferred, Series B Preferred, Series C Preferred or Series D Preferred
written notice of such impending transaction not later than ten (10) days prior
to the stockholders' meeting called to approve such transaction, or twenty (20)
days prior to the closing of such transaction, whichever is earlier, and shall
also notify such holders in writing of the final approval of such transaction.
The first of such notices shall describe the material terms and conditions of
the impending transaction and the provisions of this Section 2, and the
corporation 




                                      -4-

<PAGE>   5

shall thereafter give such holders prompt notice of any material changes. The
transaction shall in no event take place sooner than twenty (20) days after the
corporation has given the first notice provided for herein or sooner than ten
(10) days after the corporation has given notice of any material changes
provided for herein; provided, however, that such periods may be shortened upon
the written consent of the holders of Preferred Stock that are entitled to such
notice rights or similar notice rights and that represent at least a majority of
the voting power of all then outstanding shares of such Preferred Stock. Each
holder of shares to be redeemed pursuant to this Section 2.2 shall surrender its
certificate or certificates representing such shares to the corporation, in the
manner and at the place designated by the corporation, and thereupon the
redemption price of such shares shall be payable to the order of the person or
entity whose name appears on such certificate or certificates as the owner
thereof and each surrendered certificate shall thereafter be canceled. In the
event less than all the shares represented by any such certificate are redeemed,
a new certificate shall be issued representing such unredeemed shares. Upon
redemption, all rights of the holders of such shares of the corporation (except
the right to receive the redemption price without interest upon surrender of
their certificate or certificates) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books of the corporation
or be deemed to be outstanding for any purpose whatsoever.

                        2.2.7 Insufficient Funds. If the funds of the
corporation legally available for redemption pursuant to this Section 2.2 are
insufficient to redeem the total number of shares entitled to be redeemed, those
funds which are legally available will be used to redeem the shares ratably
among the holders entitled to redemption pursuant to this Section 2.2. At any
time thereafter when additional funds of the corporation are legally available
for the redemption of the entitled shares, such funds will be immediately used
to redeem the balance of the shares which the corporation became obligated to
redeem pursuant to Section 2.2 but which it has not redeemed.

                        2.2.8 Effect of Noncompliance. In the event the
requirements of this Section 2.2 are not complied with, the corporation shall
forthwith either cause the closing of the transaction to be postponed until such
requirements have been complied with, or cancel such transaction, in which event
the rights, preferences and privileges of the holders of the Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred shall revert to
and be the same as such rights, preferences and privileges existing immediately
prior to the date of the first notice referred to in Section 2.2.6 hereof.

        3. Redemption Rights.

                3.1 Redemption at the Holders' Option. The Preferred Stock shall
be redeemable in whole or in part at the option of the holders of a majority of
the outstanding shares of Preferred Stock at any time and from time to time
after June 30, 2002. Such redemption right may be exercised by giving no less
than one hundred twenty (120) days notice by certified or registered mail,
postage prepaid to the corporation at its principal office, attention to the
president, prior to the date of commencement of such redemption (the "Redemption
Date"). After receipt of such notice of 




                                      -5-

<PAGE>   6

a redemption pursuant to this Section 3.1, the corporation shall, to the extent
it may lawfully do so and to the extent such redemption will not be violative of
senior lending covenants, redeem all of the outstanding shares of Preferred
Stock in eight equal installments on the last day of each calendar quarter
(commencing with the first calendar quarter ending after the one hundred twenty
(120) day notice period). The redemption price of the Series A Preferred, Series
B Preferred, Series C Preferred and Series D Preferred shall be $0.95, $1.10,
$1.67 and $2.78 per share, respectively, (as adjusted for any stock dividends,
combinations or splits) plus any declared but unpaid dividends ("Redemption
Price"). Any redemption of only a part of the outstanding Preferred Stock by the
corporation pursuant to this Section 3 shall be pro rata as among all holders of
Preferred Stock.

                3.2 Notice Regarding Redemption. At least thirty (30) but no
more than sixty (60) days prior to any Redemption Date, written notice shall be
mailed, postage prepaid, to each holder of record (determined at the close of
business on the business day next preceding the day on which notice is given) of
Preferred Stock to be redeemed, at such holder's post office address last shown
on the records of the corporation, notifying such holder of the redemption of
such shares, specifying the Redemption Date, the Redemption Price and the date
on which such holder's Conversion Rights (as hereinafter defined) as to such
shares terminate (such Conversion Rights to expire no later than the close of
business on the Redemption Date) and calling upon such holder to surrender to
the corporation, in the manner and at the place designated in the continental
United States, its certificate or certificates representing the shares to be
redeemed (such notice is hereinafter referred to as the "Redemption Notice").
Unless such holder elects to convert its shares in accordance with Section 5
prior to or on the Redemption Date, each holder of shares of Preferred Stock to
be redeemed shall surrender its certificate or certificates representing such
shares to the corporation, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person or entity whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall thereafter be canceled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing such unredeemed shares. If, prior to or on the Redemption
Date, the funds necessary for such redemption shall have been set aside by the
corporation and deposited with a bank or trust company, for the benefit of the
holders of shares of Preferred Stock whose shares are being redeemed, then from
and after the close of business on the Redemption Date, all rights of the
holders of such shares of Preferred Stock of the corporation (except the right
to receive the Redemption Price without interest upon surrender of their
certificate or certificates) shall cease with respect to such shares, and such
shares shall not thereafter be transferred on the books of the corporation or be
deemed to be outstanding for any purpose whatsoever.

                3.3 Trust Fund. On or prior to the Redemption Date, the
corporation shall deposit the Redemption Price of all shares of Preferred Stock
designated for redemption in the Redemption Notice and not yet redeemed or
converted with a bank or trust company, having an aggregate capital surplus in
excess of $100 million, as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet redeemed or
converted. Any monies deposited by the corporation pursuant to this Section 3.3
for the redemption of shares thereafter converted into shares 



                                      -6-

<PAGE>   7

of Common Stock pursuant to Section 5 hereof no later than the close of business
on the Redemption Date shall be returned to the corporation forthwith upon such
conversion. The balance of any monies deposited by the corporation pursuant to
this Section 3.3 remaining unclaimed at the expiration of one (1) year following
the Redemption Date shall thereafter be returned to the corporation upon its
request expressed in a resolution of the board of directors of the corporation,
provided that the stockholder to which such monies would be payable hereunder
shall be entitled, upon surrender of his certificates representing such shares
of Preferred Stock to the corporation, to receive such monies but without
interest from the Redemption Date.

                3.4 Insufficient Funds. If the funds of the corporation legally
available for redemption of Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the shares of Preferred Stock ratably among the holders in accordance
with the last sentence of Section 3.1. At any time thereafter when additional
funds of the corporation are legally available for the redemption of Preferred
Stock, such funds will be immediately used to redeem the balance of the shares
of Preferred Stock which the corporation became obligated to redeem on such
Redemption Date but which it has not redeemed.

        4. Voting Rights.

               4.1 Preferred Stock. Except as otherwise provided herein or
required by law, the holders of each share of Preferred Stock shall be entitled
to vote on all matters and shall be entitled to the number of votes equal to the
number of shares of Common Stock into which each share of Preferred Stock could
be converted pursuant to Section 5 hereof at the record date for the
determination of the stockholders entitled to vote on such matters or, if no
such record date is established, at the date such vote is taken. Except as
otherwise provided herein or required by law, the Preferred Stock shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula shall be rounded to the nearest
whole number (with one-half rounded upward to one).

                4.2 Election of Directors. The holders of a majority of the
Series A Preferred Stock, voting as a separate class, shall be entitled to elect
two (2) members of the corporation's board of directors. The holders of a
majority of the Series B Preferred Stock, voting as a separate class, shall be
entitled to elect one (1) member of the corporation's Board of Directors. The
holders of a majority of the Series C Preferred Stock, voting as a separate
class, shall be entitled to elect one (1) member of the corporation's Board of
Directors. The holders of a majority of the Series D Preferred Stock, voting as
a separate class, shall be entitled to elect one (1) member of the corporation's
Board of Directors. The holders of Common Stock, voting as a separate class,
shall elect two (2) members of the corporation's board of directors. The holders
of a majority of the Preferred Stock and a majority of the Common Stock shall
jointly elect one (1) member of the corporation's Board of Directors with
relevant industry experience. In the event the size of the Board of Directors is
increased, the holders of Common Stock and Preferred Stock, voting together 




                                      -7-

<PAGE>   8

as a class, shall elect the remaining directors. In the case of any vacancy in
the office of a director elected by a specific class or series of capital stock,
a successor shall be elected to hold office for the unexpired term of such
director by the affirmative vote of a majority of the shares of such class or
series given at a special meeting of such stockholders duly called or by an
action by written consent for that purpose. Any director who shall have been
elected by a specified group of stockholders may be removed during the aforesaid
term of office, either for or without cause, by, and only by, the affirmative
vote of the holders of a majority of the shares of such class or series, given
at a special meeting of such stockholders duly called or by an action by written
consent for that purpose and any such vacancy thereby created may be filled by
the vote of the holders of a majority of the shares of such series or class of
capital stock represented at such meeting or in such consent.

                4.3 Common Stock. Each holder of shares of Common Stock shall be
entitled to one vote for each share thereof held.

                4.4 Election by Ballot. The election of directors need not be by
written ballot unless the Bylaws of the corporation shall so provide.

        5. Conversion. The holders of Preferred Stock shall have conversion
rights as follows (the "Conversion Rights"):

                5.1 Right to Convert. Each share of Preferred Stock shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the corporation or any transfer agent
for the Preferred Stock. Each share of Preferred Stock shall be convertible into
the number of shares of Common Stock which results from dividing the "Conversion
Price" per share in effect for such series of Preferred Stock at the time of
conversion into the "Conversion Value" per share of such series of Preferred
Stock. The number of shares of Common Stock into which each series of Preferred
Stock is convertible is hereinafter referred to as the "Conversion Rate" for
such series of Preferred Stock. The Conversion Price per share of Series A
Preferred shall be $0.95, the Conversion Price per share of the Series B
Preferred shall be $1.10, the Conversion Price per share of the Series C
Preferred shall be $1.67 and the Conversion Price per share of the Series D
Preferred shall be $2.78. The Conversion Value per share of Series A Preferred
shall be $0.95, the Conversion Value per share of Series B Preferred shall be
$1.10, the Conversion Value per share of the Series C Preferred shall be $1.67
and the Conversion Value per share of the Series D Preferred shall be $2.78. The
Conversion Price of each series of Preferred Stock shall be subject to
adjustment as hereinafter provided.

                5.2 Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate immediately upon the closing of a firmly underwritten public
offering pursuant to an effective registration statement under the Securities
Act of 1933, as amended, covering any of the corporation's securities (as that
term is defined under the Securities Act of 1933, as then in effect) with a per
share public offering price (as adjusted for combinations, stock dividends,
subdivisions or split-ups) of at least $4.00 (before deduction of underwriting
commissions, discounts and expenses) and with aggregate gross proceeds 




                                      -8-

<PAGE>   9

to the corporation, at the public offering price, of at least $20,000,000. Upon
any conversion (automatic or otherwise) any declared but unpaid dividends shall
be paid in accordance with Section 5.3 herein.

                5.3 Mechanics of Conversion. Before any holder of Preferred
Stock shall be entitled to convert such shares into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the corporation or of any transfer agent for such Preferred
Stock and shall give written notice to the corporation at such office that it
elects to convert the same. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock a
certificate or certificates for the number of shares of Common Stock to which it
shall be entitled as aforesaid and any declared but unpaid dividends on the
Preferred Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock on
such date.

                5.4 Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of the Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash equal to such fraction multiplied by the applicable
Conversion Price.

                5.5 Adjustment of Conversion Price. The Conversion Price of each
series of Preferred Stock shall be subject to adjustment from time to time as
follows:

                        5.5.1 If the corporation shall issue any Common Stock or
convertible securities other than "Excluded Stock" (as defined below) for a
consideration per share less than the Conversion Price of any series of
Preferred Stock in effect immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations which are covered by Sections 5.5.3, 5.5.4, 5.5.5 and 5.5.6),
the Conversion Price for such series of Preferred Stock in effect after each
such issuance shall thereafter (except as provided in this Section 5.5) be
adjusted to a price equal to the quotient obtained by dividing:

                        (1) an amount equal to the sum of

                                (x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock, or deemed to have been issued pursuant to subdivision (iii)
of this clause 5.5.1 and to clause 5.5.2 below) immediately prior to such
issuance multiplied by the Conversion Price in effect immediately prior to such
issuance, plus

                                (y) the consideration received by the
corporation upon such issuance, by




                                      -9-

<PAGE>   10

                        (2) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock or deemed to have been issued pursuant to subdivision (iii)
of this clause 5.5.1 and to clause 5.5.2 below) immediately prior to such
issuance plus the additional shares of Common Stock issued in such issuance (but
not including any additional shares of Common Stock deemed to be issued as a
result of any adjustment in the Conversion Price of any series of Preferred
Stock resulting from such issuance).

                            For purposes of any adjustment of the Conversion 
Price of any series of Preferred Stock pursuant to this clause 5.5.1, the
following provisions shall be applicable:

                                (i) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any discounts or commissions paid or incurred by the
corporation in connection with the issuance and sale thereof.

                                (ii) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined by
the board of directors of the corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
determination, the corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.

                                (iii) In the case of the issuance of: (i)
options to purchase or rights to subscribe for Common Stock (other than Excluded
Stock), (ii) securities by their terms convertible into or exchangeable for
Common Stock (other than Excluded Stock), or (iii) options to purchase or rights
to subscribe for such convertible or exchangeable securities:

                                        (A) the aggregate maximum number of
shares of Common Stock deliverable upon exercise of such options to purchase or
rights to subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subdivisions (1) and (2)
above), if any, received by the corporation upon the issuance of such options or
rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;

                                        (B) the aggregate maximum number of
shares of Common Stock deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such options or rights were




                                      -10-

<PAGE>   11

issued and for a consideration equal to the consideration received by the
corporation for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends), plus the
minimum additional consideration, if any, to be received by the corporation upon
the conversion or exchange of such securities or the exercise of any related
options or rights (the consideration in each case to be determined in the manner
provided in subdivisions (1) and (2) above);

                                        (C) on any change in the number of
shares of Common Stock deliverable upon exercise of any such options or rights
or conversion of or exchange for such convertible or exchangeable securities, or
on any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution provisions of
such options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the adjustment
made upon (x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change or (y) the options or rights related to such securities
not converted or exchanged prior to such change, as the case may be, been made
upon the basis of such change; and

                                        (D) on the expiration of any such
options or rights, the termination of any such rights to convert or exchange or
the expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be readjusted to
such Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.

                        5.5.2 "Excluded Stock" shall mean:

                                (a) all shares of Common Stock and Preferred
Stock issued and outstanding on the date hereof;

                                (b) all shares of Common Stock into which the
shares of Preferred Stock are convertible;

                                (c) all shares of Common Stock or other
securities, or options or warrants to purchase Common Stock or any such other
securities, issuable to employees, officers, consultants or directors of, or
licensors of technology to, the corporation, under any agreement, arrangement or
plan, including any incentive stock plan, approved by the Board of Directors of
the corporation;




                                      -11-

<PAGE>   12

                                (d) all shares of Common Stock issuable pursuant
to the exercise of options, warrants or convertible securities outstanding as of
the date this Certificate of Incorporation is filed with the Secretary of State
of the State of Delaware;

                                (e) all shares of Common Stock or other
securities, or options or warrants to purchase Common Stock or any such other
securities, issued in connection with the corporation's Series D Preferred Stock
financing or issuable pursuant to such securities; and

                                (f) all shares of Common Stock or other
securities, or options or warrants to purchase Common Stock or any such other
securities, issuable to landlords, financial institutions or lessors in
connection with office leases, commercial credit arrangements, equipment
financings or similar transactions.

                                All outstanding shares of Excluded Stock
(including any shares issuable upon conversion of the Preferred Stock but
excluding shares reserved for issuance for option plans for which options have
not yet been granted) shall be deemed to be outstanding for all purposes of the
computations of Section 5.5.1 above.

                        5.5.3 If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price for each series of Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of any shares of the Preferred Stock shall be increased in proportion
to such increase of outstanding shares.

                        5.5.4 If the number of shares of Common Stock
outstanding at any time after the date hereof is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price for each series of Preferred Stock shall be
appropriately increased so that the number of shares of Common Stock issuable on
conversion of shares of the Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares.

                        5.5.5 In case the corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the corporation convertible
into or exchangeable for Common Stock), then, in each such case, immediately
following the record date fixed for the determination of the holders of Common
Stock entitled to receive such dividend or distribution, the Conversion Price
for each series of Preferred Stock in effect thereafter shall be determined by
multiplying the Conversion Price for such series of Preferred Stock in effect
immediately prior to such record date by a fraction of which the numerator shall
be an amount equal to the remainder of (x) the Current Market Price of 



                                      -12-

<PAGE>   13

one share of Common Stock less (y) the amount of such cash dividend in respect
of one share of Common Stock or the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive) of the stock,
securities, evidences or indebtedness, assets, options or rights so distributed
in respect of one share of Common Stock, as the case may be, and of which the
denominator shall be the Current Market Price of one share of Common Stock. Such
adjustment shall be made on the date such dividend or distribution is made, and
shall become effective at the opening of business on the business day next
following the record date for the determination of stockholders entitled to such
dividend or distribution.

                        5.5.6 In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the corporation
(other than a change in par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or merger
of the corporation with or into another person (other than a consolidation or
merger in which the corporation is the continuing entity and which does not
result in any change in the Common Stock), or of the sale or other disposition
of all or substantially all the properties and assets of the corporation as an
entirety to any other person, the shares of Preferred Stock shall, after such
reorganization, reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the corporation or of the entity resulting from such
consolidation or surviving such merger or to which such properties and assets
shall have been sold or otherwise disposed to which such holder would have been
entitled if immediately prior to such reorganization, reclassification,
consolidation, merger, sale or other disposition he had converted his shares of
Preferred Stock into Common Stock. The provisions of this Section 5.5.4 shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.

                        5.5.7 All calculations under this Section 5 shall be
made to the nearest cent or to the nearest one hundredth (1/100) of a share, as
the case may be.

                        5.5.8 For the purpose of any computation pursuant to
this Section 5.5, the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this Section 5.5 are available for the
period required hereunder, Current Market Price shall be determined in good
faith by the Board of Directors of the corporation.

                5.6 Minimal Adjustments. No adjustment in a Conversion Price
need be made if such adjustment would result in a change in such Conversion
Price of less than $0.01. Any adjustment of less than $0.01 which is not made
shall be carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in a Conversion Price.




                                      -13-

<PAGE>   14

                5.7 No Impairment. The corporation will not, through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 5 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against impairment. This
provision shall not restrict the corporation from amending its Certificate of
Incorporation in accordance with the General Corporation Law of the State of
Delaware.

                5.8 Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 5,
the corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate at the time in effect, and (iii) the number of shares
of Common Stock and the amount, if any, of other property which at the time
would be received upon the conversion of the Preferred Stock held by such
holder.

                5.9 Notices of Record Date. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, the corporation
shall mail to each holder of Preferred Stock at least twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend or distribution.

                5.10 Reservation of Stock Issuable Upon Conversion. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Preferred Stock such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of Preferred Stock, the
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.

                5.11 Notices. Any notice required by the provisions of this
Section 5 to be given to the holder of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the corporation.

        6. Protective Provisions.




                                      -14-

<PAGE>   15

                6.1 Series A Protective Provisions. For so long as shares of
Series A Preferred shall be outstanding, the corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of more than two-thirds of the outstanding shares of Series A
Preferred:

                        6.1.1 No Adverse Change. Adversely alter or change the
powers, preferences or special rights of the Series A Preferred; or

                        6.1.2 Create Any New Class or Series. Create any new
class or series of shares having any powers, preferences, or special rights
superior to or on a parity with the Series A Preferred.

                6.2 Series B Protective Provisions. For so long as shares of
Series B Preferred shall be outstanding, the corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of more than two-thirds of the outstanding shares of Series B
Preferred:

                        6.2.1 No Adverse Change. Adversely alter or change the
powers, preferences or special rights of the Series B Preferred; or

                        6.2.2 Create Any New Class or Series. Create any new
class or series of shares having any powers, preferences, or special rights
superior to or on a parity with the Series B Preferred.

                6.3 Series C Protective Provisions. For so long as shares of
Series C Preferred shall be outstanding, the corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of more than two-thirds of the outstanding shares of Series C
Preferred:

                        6.3.1 No Adverse Change. Adversely alter or change the
powers, preferences or special rights of the Series C Preferred; or

                        6.3.2 Create Any New Class or Series. Create any new
class or series of shares having any powers, preferences, or special rights
superior to or on a parity with the Series C Preferred.

                6.4 Series D Protective Provisions. For so long as shares of
Series D Preferred shall be outstanding, the corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of more than two-thirds of the outstanding shares of Series D
Preferred:




                                      -15-

<PAGE>   16

                        6.4.1 No Adverse Change. Adversely alter or change the
powers, preferences or special rights of the Series D Preferred; or

                        6.4.2 Create Any New Class or Series. Create any new
class or series of shares having any powers, preferences, or special rights
superior to or on a parity with the Series D Preferred.

                6.5 Preferred Stock Protective Provisions. For so long as shares
of the Preferred Stock shall be outstanding, the corporation shall not, without
first obtaining the approval (by vote or written consent, as provided by law) of
the holders of a majority of the outstanding shares of Preferred Stock:

                        6.5.1 Sale of Assets. Sell, lease, exchange, convey, or
otherwise dispose of, all or substantially all of the property of the
corporation;

                        6.5.2 Merger or Consolidation. Complete a merger,
consolidation or sale of all or substantially all of the assets of the
corporation in which the corporation's stockholders immediately prior to such
transaction, or series of related transactions, possess less than 50% of the
voting securities of the surviving, continuing or purchasing entity (or parent,
if any) immediately after the transaction or series of related transactions in
which an excess of 50% of the corporation's voting power is transferred;

                        6.5.3 Dividends/Redemption. Redeem or repurchase or
otherwise make any distributions with respect to outstanding securities, other
than (i) the repurchase of shares of Common Stock issued to or held by
employees, directors or consultants of or to the corporation or any of its
subsidiaries upon termination of their employment or services pursuant to
agreements providing for the right of such repurchase between the corporation
and such persons and (ii) the repurchase of shares of Common Stock in connection
with the exercise of the right of first refusal pursuant to agreements providing
for the right of first refusal between the corporation and any of its
stockholder;

                        6.5.4 Authorized Number. Increase or decrease the
authorized number of shares of Preferred Stock;

                        6.5.5 Restatement of Certificate/Bylaws. Amend, restate,
alter or repeal any provision of the corporation's Certificate of Incorporation
or the Bylaws of the corporation; or

                        6.5.6 Section 305. Do any act or thing which would
result in the taxation of the holders of the Preferred Stock under Section 305
of the Internal Revenue Code of 1986, as amended (or any successor provision).

                6.6 Preferred Stock Protective Provisions - Super Majority. For
so long as shares of the Preferred Stock shall be outstanding, the corporation
shall not, without first obtaining the 



                                      -16-

<PAGE>   17

approval (by vote or written consent, as provided by law) of the holders of a
two-thirds of the outstanding shares of Preferred Stock:

                        6.6.1 Board Size. Increase the size of the Board of
Directors to a number greater than that set forth in the Bylaws of the
corporation.

        FIVE. The corporation is to have perpetual existence.

        SIX. Subject to Article FOUR, Section 6 herein, in furtherance and not
in limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, alter, amend or repeal the Bylaws of the
corporation.

        SEVEN. The number of directors which constitute the whole Board of
Directors of the corporation shall be as specified in the Bylaws of the
corporation.

        EIGHT. Meetings of stockholders may be held within or without the State
of Delaware, as the Bylaws may provide. The books of the corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the corporation.

        NINE. To the fullest extent permitted by the Delaware General
Corporation Law, a director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Neither any amendment nor repeal of this Article NINE, nor
the adoption of any provision of this Certificate of Incorporation inconsistent
with this Article NINE, shall eliminate or reduce the effect of this Article
NINE in respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article NINE, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.

        TEN. Advance notice of new business and stockholder nominations for the
election of directors shall be given in the manner and to the extent provided in
the Bylaws of the corporation.

        ELEVEN. Subject to Article FOUR, Section 6 herein, the corporation
reserves the right to amend, alter, change or repeal any provisions contained in
this Certificate, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation.



                                      -17-

<PAGE>   18

        IN WITNESS WHEREOF, the corporation has caused this Certificate to be
signed by Ronald J. Berenson, its President, this __ day of August, 2000.



                                       XCYTE THERAPIES, INC.


                                       By:
                                          --------------------------------------
                                          Ronald J. Berenson, President





<PAGE>   1
                                                                     EXHIBIT 3.2


                          _______ AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                                       OF
                                 [COMPANY NAME]


         The undersigned, _____________ and _______________, hereby certify
that:

         1. They are the duly elected and acting President and Secretary,
respectively, of [COMPANY NAME], a Delaware corporation.

         2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on _____________ under the name of
______________.

         3. The Certificate of Incorporation of this corporation shall be
amended and restated to read in full as follows:

                                   "ARTICLE I

         The name of this corporation is [COMPANY NAME] (the "Corporation").

                                   ARTICLE II

         The address of the Corporation's registered office in the State of
Delaware is [1209 ORANGE STREET, WILMINGTON, COUNTY OF NEW CASTLE]. The name of
its registered agent at such address is [THE CORPORATION TRUST COMPANY].

                                   ARTICLE III

         The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.

                                   ARTICLE IV

         [UPON THE EFFECTIVE DATE OF THE FILING OF THIS ______ AMENDED AND
RESTATED CERTIFICATE OF INCORPORATION, EACH SHARE OF THE CORPORATION'S
OUTSTANDING CAPITAL STOCK SHALL BE CONVERTED AND RECONSTITUTED INTO ____ SHARES
OF COMMON STOCK OF THE CORPORATION
 (THE "STOCK SPLIT"). NO FURTHER ADJUSTMENT OF
ANY PREFERENCE OR PRICE SET FORTH IN THIS ARTICLE IV SHALL BE MADE AS A RESULT
OF THE STOCK SPLIT, AS ALL SHARE AMOUNTS PER SHARE AND PER SHARE NUMBERS SET
FORTH IN THIS ______ AMENDED AND RESTATED CERTIFICATE OF INCORPORATION HAVE BEEN
APPROPRIATELY ADJUSTED TO REFLECT THE STOCK SPLIT.]

         (A) The Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is __________
(__________) shares, each with a par value of $________ per share. _____________
(__________) shares shall be Common Stock and _____________ (___________) shares
shall be Preferred Stock.



<PAGE>   2

         (B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a certificate
pursuant to the applicable law of the state of Delaware and within the
limitations and restrictions stated in this Certificate of Incorporation, to
determine or alter the rights, preferences, privileges and restrictions granted
to or imposed upon any wholly unissued series of Preferred Stock and the number
of shares constituting any such series and the designation thereof, or any of
them; and to increase or decrease the number of shares of any series subsequent
to the issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series shall
be so decreased, the shares constituting such decrease shall resume the status
which they had prior to the adoption of the resolution originally fixing the
number of shares of such series.

                                    ARTICLE V

         The number of directors of the Corporation shall be fixed from time to
time by a bylaw or amendment thereof duly adopted by the Board of Directors.

                                   ARTICLE VI

         [INSERT THE FOLLOWING ARTICLE TO ADD A CLASSIFIED BOARD]

         [THIS ARTICLE VI SHALL BECOME EFFECTIVE ONLY WHEN THE CORPORATION
QUALIFIES FOR AN EXEMPTION FROM SECTION 2115 OF THE CALIFORNIA CORPORATIONS CODE
(THE "EFFECTIVE TIME").]

         On or prior to the date on which the Corporation first provides notice
of an annual meeting of the stockholders [FOLLOWING THE EFFECTIVE TIME], the
Board of Directors of the Corporation shall divide the directors into three
classes, as nearly equal in number as reasonably possible, designated Class I,
Class II and Class III, respectively. Directors shall be assigned to each class
in accordance with a resolution or resolutions adopted by the Board of
Directors. At the first annual meeting of stockholders or any special meeting in
lieu thereof [FOLLOWING THE EFFECTIVE TIME], the terms of the Class I directors
shall expire and Class I directors shall be elected for a full term of three
years. At the second annual meeting of stockholders or any special meeting in
lieu thereof [FOLLOWING THE EFFECTIVE TIME], the terms of the Class II directors
shall expire and Class II directors shall be elected for a full term of three
years. At the third annual meeting of stockholders or any special meeting in
lieu thereof [FOLLOWING THE EFFECTIVE TIME], the terms of the Class III
directors shall expire and Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of stockholders or special
meeting in lieu thereof, directors elected to succeed the directors of the class
whose terms expire at such meeting shall be elected for a full term of three
years.

         [PRIOR TO THE EFFECTIVE TIME, THE PROVISIONS OF THE PRECEDING PARAGRAPH
SHALL NOT APPLY, AND ALL DIRECTORS SHALL BE ELECTED AT EACH ANNUAL MEETING OF
STOCKHOLDERS OR ANY SPECIAL MEETING IN LIEU THEREOF TO HOLD OFFICE UNTIL THE
NEXT ANNUAL MEETING OR SPECIAL MEETING IN LIEU THEREOF.]


                                      -2-

<PAGE>   3

         Notwithstanding the foregoing provisions of this Article VI, each
director shall serve until his or her successor is duly elected and qualified or
until his or her death, resignation, or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.

         Any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal, or other causes shall be filled by
either (i) the affirmative vote of the holders of a majority of the voting power
of the then-outstanding shares of voting stock of the Corporation entitled to
vote generally in the election of directors (the "Voting Stock") voting together
as a single class; or (ii) by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Subject to the rights of any series of Preferred Stock then
outstanding, newly created directorships resulting from any increase in the
number of directors shall, unless the Board of Directors determines by
resolution that any such newly created directorship shall be filled by the
stockholders, be filled only by the affirmative vote of the directors then in
office, even though less than a quorum of the Board of Directors, or by a sole
remaining director. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.

         In addition to the requirements of law and any other provisions hereof
(and notwithstanding the fact that approval by a lesser vote may be permitted by
law or any other provision thereof), the affirmative vote of the holders of at
least 66 2/3% of the voting power of the then-outstanding stock shall be
required to amend, alter, repeal or adopt any provision inconsistent with this
Article VI.

                                   ARTICLE VII

         In the election of directors, each holder of shares of any class or
series of capital stock of the Corporation shall be entitled to one vote for
each share held. No stockholder will be permitted to cumulate votes at any
election of directors.

                                  ARTICLE VIII

         If at any time this Corporation shall have a class of stock registered
pursuant to the provisions of the Securities Exchange Act of 1934, as amended,
for so long as such class is so registered, any action by the stockholders of
such class must be taken at an annual or special meeting of stockholders, upon
due notice and in accordance with the provisions of the Bylaws of this
Corporation, and may not be taken by written consent.

                                   ARTICLE IX

         The Corporation reserves the right to amend, alter, change or repeal
any provision contained in this Certificate of Incorporation, in the manner now
or hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.


                                      -3-

<PAGE>   4

                                    ARTICLE X

         (A) Except as otherwise provided in the Bylaws, the Bylaws may be
altered or amended or new Bylaws adopted by the affirmative vote of at least 66
2/3% of the voting power of all of the then-outstanding shares of the voting
stock of the Corporation entitled to vote. The Board of Directors of the
Corporation is expressly authorized to adopt, amend or repeal Bylaws.

         (B) The directors of the Corporation need not be elected by written
ballot unless the Bylaws so provide.

         (C) Advance notice of stockholder nominations for the election of
directors or of business to be brought by the stockholders before any meeting of
the stockholders of the Corporation shall be given in the manner provided in the
Bylaws.

                                   ARTICLE XI

         Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the bylaws of the Corporation.

                                   ARTICLE XII

         The Corporation shall have perpetual existence.

                                  ARTICLE XIII

         (A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. If
the General Corporation Law of Delaware is hereafter amended to authorize, with
the approval of a corporation's stockholders, further reductions in the
liability of a corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.

         (B) Any repeal or modification of the foregoing provisions of this
Article XIII shall not adversely affect any right or protection of a director of
the Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.

                                   ARTICLE XIV

         (A) To the fullest extent permitted by applicable law, the Corporation
is also authorized to provide indemnification of (and advancement of expenses
to) such agents (and any other persons to which Delaware law permits the
Corporation to provide indemnification) through Bylaw provisions, agreements
with such agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and advancement
otherwise 


                                      -4-

<PAGE>   5

permitted by Section 145 of the General Corporation Law of Delaware, subject
only to limits created by applicable Delaware law (statutory or non-statutory),
with respect to actions for breach of duty to a corporation, its stockholders,
and others.

         (B) Any repeal or modification of any of the foregoing provisions of
this Article XIV shall not adversely affect any right or protection of a
director, officer, agent or other person existing at the time of, or increase
the liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification."
                                      * * *
















                                      -5-

<PAGE>   6

         The foregoing Amended and Restated Certificate of Incorporation has
been duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.

         Executed at ___________________, on the ____ day of ___________, _____.



                                           _____________________________________

                                           __________________, President


                                           _____________________________________

                                           __________________, Secretary













                                      -6-



<PAGE>   1

                                                                     Exhibit 3.3

                                     BYLAWS

                                       OF

                                 [COMPANY NAME]



            [(AS AMENDED AND RESTATED EFFECTIVE __________ __, ____)]




<PAGE>   2

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                           Page
                                                                                           ----
<S>                                                                                        <C>
ARTICLE I - CORPORATE OFFICES................................................................1

        1.1  Registered Office...............................................................1
        1.2  Other Offices...................................................................1

ARTICLE II - MEETINGS OF STOCKHOLDERS........................................................1

        2.1  Place of Meetings...............................................................1
        2.2  Annual Meeting..................................................................1
        2.3  Special Meeting.................................................................2
        2.4  Notice of Stockholder's Meetings; Affidavit of Notice...........................2
        2.5  Advance Notice of Stockholder Nominees and Other Stockholder Proposals..........3
        2.6  Quorum..........................................................................4
        2.7  Adjourned Meeting; Notice.......................................................4
        2.8  Conduct of Business.............................................................5
        2.9  Voting..........................................................................5
        2.10 Waiver of Notice................................................................6
        2.11 Record Date for Stockholder Notice; Voting......................................6
        2.12 Proxies.........................................................................6

ARTICLE III - DIRECTORS......................................................................7

        3.1  Powers..........................................................................7
        3.2  Number of Directors.............................................................7
        3.3  Election, Qualification and Term of Office of Directors.........................7
        3.4  Resignation and Vacancies.......................................................8
        3.5  Place of Meetings; Meetings by Telephone........................................9
        3.6  Regular Meetings................................................................9
        3.7  Special Meetings; Notice........................................................9
        3.8  Quorum..........................................................................9
        3.9  Waiver of Notice...............................................................10
        3.10 Board Action by Written Consent Without a Meeting..............................10
        3.11 Fees and Compensation of Directors.............................................10
        3.12 Approval of Loans to Officers..................................................10
        3.13 Removal of Directors...........................................................11
        3.14 Chairman of the Board of Directors.............................................11

ARTICLE IV - COMMITTEES.....................................................................11

        4.1  Committees of Directors........................................................11
        4.2  Committee Minutes..............................................................12
        4.3  Meetings and Action of Committees..............................................12

ARTICLE V - OFFICERS........................................................................12


        5.1  Officers.......................................................................12
</TABLE>



                                      -i-


<PAGE>   3


<TABLE>
<CAPTION>
<S>                                                                                        <C>
        5.2  Appointment of Officers........................................................12
        5.3  Subordinate Officers...........................................................12
        5.4  Removal and Resignation of Officers............................................13
        5.5  Vacancies in Offices...........................................................13
        5.6  Chief Executive Officer........................................................13
        5.7  President......................................................................13
        5.8  Vice Presidents................................................................14
        5.9  Secretary......................................................................14
        5.10 Chief Financial Officer........................................................14
        5.11 Representation of Shares of Other Corporations.................................15
        5.12 Authority and Duties of Officers...............................................15

ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS............15

        6.1  Indemnification of Directors and Officers......................................15
        6.2  Indemnification of Others......................................................15
        6.3  Payment of Expenses in Advance.................................................16
        6.4  Indemnity Not Exclusive........................................................16
        6.5  Insurance......................................................................16
        6.6  Conflicts......................................................................17

ARTICLE VII - RECORDS AND REPORTS...........................................................17

        7.1  Maintenance and Inspection of Records..........................................17
        7.2  Inspection by Directors........................................................18

ARTICLE VIII - GENERAL MATTERS..............................................................18

        8.1  Checks.........................................................................18
        8.2  Execution of Corporate Contracts And Instruments...............................18
        8.3  Stock Certificates; Partly Paid Shares.........................................18
        8.4  Special Designation on Certificates............................................19
        8.5  Lost Certificates..............................................................19
        8.6  Construction; Definitions......................................................20
        8.7  Dividends......................................................................20
        8.8  Fiscal Year....................................................................20
        8.9  Seal...........................................................................20
        8.10 Transfer of Stock..............................................................20
        8.11 Stock Transfer Agreements......................................................20
        8.12 Registered Stockholders........................................................21
        8.13 Facsimile Signatures...........................................................21

ARTICLE IX..................................................................................21
</TABLE>



                                      -ii-



<PAGE>   4

                              AMENDED AND RESTARTED

                                     BYLAWS

                                       OF

                                 [COMPANY NAME]

                                    ARTICLE I

                                CORPORATE OFFICES

        1.1    REGISTERED OFFICE.

               The address of the Corporation's registered office in the State
of Delaware is [1209 ORANGE STREET, WILMINGTON, COUNTY OF NEW CASTLE]. The name
of its registered agent at such address is [THE CORPORATION TRUST COMPANY].

        1.2    OTHER OFFICES.

               The Board of Directors may at any time establish other offices at
any place or places where the Corporation is qualified to do business.

                                   ARTICLE II

                            MEETINGS OF STOCKHOLDERS

        2.1    PLACE OF MEETINGS.

               Meetings of stockholders shall be held at any place, within or
outside the State of Delaware, designated by the Board of Directors. In the
absence of any such designation, stockholders' meetings shall be held at the
registered office of the Corporation.

        2.2    ANNUAL MEETING.

               (a) The annual meeting of stockholders shall be held each year on
a date and at a time designated by resolution of the Board of Directors. At the
meeting, directors shall be elected and any other proper business may be
transacted.

               (b) Nominations of persons for election to the Board of Directors
of the Corporation and the proposal of business to be transacted by the
stockholders may be made at an annual meeting of stockholders (i) pursuant to
the Corporation's notice with respect to such meeting, (ii) by or at the
direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of the notice
provided for in this Section 2.2, who is entitled to vote at the meeting and who
has complied with the notice procedures set forth in this Section 2.2.



<PAGE>   5

               (c) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of paragraph
(b) of this Section 2.2, the stockholder must have given timely notice thereof
in writing to the secretary of the Corporation, as provided in Section 2.5, and
such business must be a proper matter for stockholder action under the General
Corporation Law of Delaware.

               (d) Only such business shall be conducted at an annual meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in these Bylaws. The chairman of the meeting shall
determine whether a nomination or any business proposed to be transacted by the
stockholders has been properly brought before the meeting and, if any proposed
nomination or business has not been properly brought before the meeting, the
chairman shall declare that such proposed business or nomination shall not be
presented for stockholder action at the meeting.

               (e) Nothing in this Section 2.2 shall be deemed to affect any
rights of stockholders to request inclusion of proposals in the Corporation's
proxy statement pursuant to Rule 14a-8 under the Exchange Act.

        2.3    SPECIAL MEETING.

               (a) A special meeting of the stockholders may be called at any
time by the Board of Directors, the chairman of the board, the president or by
one or more stockholders holding shares in the aggregate entitled to cast not
less than [%] of the votes at that meeting.

               (b) Only such business shall be conducted at a special meeting of
the stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting.

               (c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders, if such election is set forth
in the notice of such special meeting. Such nominations may be made either by or
at the direction of the Board of Directors, or by any stockholder of record
entitled to vote at such special meeting, provided the stockholder follows the
notice procedures set forth in Section 2.5.

               (d) Notwithstanding the foregoing provisions of this Section 2.3,
a stockholder shall also comply with all applicable requirements of the
Securities Exchange Act of 1934 and the rules and regulations thereunder with
respect to matters set forth in this Section 2.3.

        2.4    NOTICE OF STOCKHOLDER'S MEETINGS; AFFIDAVIT OF NOTICE.

               (a) All notices of meetings of stockholders shall be in writing
and shall be sent or otherwise given in accordance with this Section 2.4 of
these Bylaws not less than 10 nor more than 60 days before the date of the
meeting to each stockholder entitled to vote at such meeting (or such longer or
shorter time as is required by Section 2.5 of these Bylaws, if applicable). The
notice shall specify the place (if any), date, and hour of the meeting, and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called. Written 


                                      -2-



<PAGE>   6

notice of any meeting of stockholders, if mailed, is given when deposited in the
United States mail, postage prepaid, directed to the stockholder at his address
as it appears on the records of the Corporation. Without limiting the manner by
which notice otherwise may be given effectively to stockholders, any notice to
stockholders may be given by electronic mail or other electronic transmission,
in the manner provided in Section 232 of the Delaware General Corporation Law.
An affidavit of the secretary or an assistant secretary or of the transfer agent
of the Corporation that the notice has been given shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.

               (b) If a special meeting is called by stockholders representing
the percentage of the total votes outstanding designated in Section 2.3(a), the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally, or sent by registered mail or by facsimile transmission to the
chairman of the board, the president, any vice president, or the secretary of
the corporation. No business may be transacted at such special meeting otherwise
than specified in such request. The officer receiving the request shall cause
notice to be promptly given to the stockholders entitled to vote, in accordance
with the provisions of this Section 2.4, that a meeting will be held at the time
requested by the person or persons calling the meeting, not less than 35 nor
more than 60 days after the receipt of the request. If the notice is not given
within 20 days after the receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in this Section
2.4(b) shall be construed as limiting, fixing, or affecting the time when a
meeting of stockholders called by action of the Board of Directors may be held.

        2.5    ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND OTHER STOCKHOLDER 
               PROPOSALS.

               Only persons who are nominated in accordance with the procedures
set forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the Board of Directors of the Corporation
may be made at a meeting of stockholders by or at the direction of the Board of
Directors or by any stockholder of the Corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice in
writing to the secretary of the Corporation. Stockholders may bring other
business before the annual meeting, provided that timely notice is provided to
the secretary of the Corporation in accordance with this section, and provided
further that such business is a proper matter for stockholder action under the
General Corporation Law of Delaware. To be timely, a stockholder's notice shall
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than 90 days nor more than 120 days prior to the
anniversary date of the prior year's meeting; provided, however, that in the
event that (i) the date of the annual meeting is more than 30 days prior to or
more than 60 days after such anniversary date, and (ii) less than 60 days notice
or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Such stockholder's notice shall set forth (a) as to each person whom the
stockholder proposes to nominate for election or re-election as a directors, (i)
the name, age, business address and 



                                      -3-


<PAGE>   7

residence address of such person, (ii) the principal occupation or employment of
such person, (iii) the class and number of shares of the Corporation which are
beneficially owned by such person and (iv) any other information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934 (including, without
limitation, such person's written consent to being name in the proxy statement
as a nominee and to serving as a director if elected); (b) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of such business, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (c) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the proposal is made (i) the name and address of the stockholder, as they
appear on the Corporation's books, and of such beneficial owner and (ii) the
class and number of shares of the Corporation which are owned of record by such
stockholder and beneficially by such beneficial owner. At the request of the
Board of Directors any person nominated by the Board of Directors for election
as a director shall furnish to the secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee. No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 2.5. The chairman of the meeting shall, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
procedures prescribed by the Bylaws, and if he or she should so determine, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded.

               Notwithstanding the foregoing provisions of this Section 2.5, a
stockholder shall also comply with all applicable requirements of the Securities
Exchange Act of 1934 and the rules and regulations thereunder with respect to
matters set forth in this Section 2.5.

        2.6    QUORUM.

               The holders of a majority of the shares of stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum is not present or
represented at any meeting of the stockholders, then either (a) the chairman of
the meeting or (b) holders of a majority of the shares of stock entitled to vote
who are present, in person or by proxy, shall have power to adjourn the meeting
to another place (if any), date or time.

        2.7    ADJOURNED MEETING; NOTICE.

               When a meeting is adjourned to another place (if any), date or
time, unless these Bylaws otherwise require, notice need not be given of the
adjourned meeting if the time and place (if any), thereof and the means of
remote communications, if any, by which stockholders and proxyholders may be
deemed to be present and vote at such adjourned meeting, are announced at the
meeting at which the adjournment is taken. At the adjourned meeting the
Corporation may transact any business that might have been transacted at the
original meeting. 


                                      -4-



<PAGE>   8

If the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, notice of the place (if any),
date and time of the adjourned meeting and the means of remote communications,
if any, by which stockholders and proxyholders may be deemed to be present and
vote at such adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.

        2.8    CONDUCT OF BUSINESS.

               (a) Such person as the Board of Directors may have designated or,
in the absence of such a person, the President of the Corporation or, in his or
her absence, such person as may be chosen by the holders of a majority of the
shares entitled to vote who are present, in person or by proxy, shall call to
order any meeting of the stockholders and act as Chairman of the meeting. In the
absence of the Secretary of the Corporation, the Secretary of the meeting shall
be such person as the Chairman of the meeting appoints.

               (b) The Chairman of any meeting of stockholders shall determine
the order of business and the procedure at the meeting, including the manner of
voting and the conduct of business. The date and time of opening and closing of
the polls for each matter upon which the stockholders will vote at the meeting
shall be announced at the meeting.

        2.9    VOTING.

               (a) The stockholders entitled to vote at any meeting of
stockholders shall be determined in accordance with the provisions of Section
2.11 of these Bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).

               (b) Except as may be otherwise provided in the Certificate of
Incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.

               (c) The Corporation may, and to the extent required by law,
shall, in advance of any meeting of stockholders, appoint one or more inspectors
to act at the meeting and make a written report thereof. The Corporation may
designate one or more alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall take and sign an
oath faithfully to execute the duties of inspector with strict impartiality and
according to the best of his or her ability. Every vote taken by ballots shall
be counted by an inspector or inspectors appointed by the chairman of the
meeting.

               (d) All elections shall be determined by a plurality of the votes
cast, and except as otherwise required by law, all other matters shall be
determined by a majority of the votes cast affirmatively or negatively.


                                      -5-


<PAGE>   9

        2.10   WAIVER OF NOTICE.

               Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the Certificate of Incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, or waiver by electronic mail or other electronic transmission by such
person, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the stockholders need be specified in any written
waiver of notice, or any waiver of notice by electronic transmission, unless so
required by the Certificate of Incorporation or these Bylaws.

        2.11   RECORD DATE FOR STOCKHOLDER NOTICE; VOTING.

               In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than 60 nor less than 10 days before the date of such
meeting, nor more than 60 days prior to any other action. If the Board of
Directors does not so fix a record date:

               (a) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.

               (b) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.

               A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting, if such adjournment is for thirty (30) days or less; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.

        2.12   PROXIES.

               Each stockholder entitled to vote at a meeting of stockholders
may authorize another person or persons to act for such stockholder by an
instrument in writing or by an electronic transmission permitted by law filed
with the secretary of the Corporation, but no such proxy shall be voted or acted
upon after three years from its date, unless the proxy provides for a longer
period. A proxy shall be deemed signed if the stockholder's name is placed on
the proxy (whether by manual signature, typewriting, electronic or telegraphic
transmission or otherwise) 


                                      -6-




<PAGE>   10

by the stockholder or the stockholder's attorney-in-fact. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.

                                   ARTICLE III

                                    DIRECTORS

        3.1    POWERS.

        Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the Certificate of Incorporation or these Bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the Corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the Board of Directors.

        3.2    NUMBER OF DIRECTORS.

               The number of directors constituting the entire Board of
Directors shall be [No of Directors].

               Thereafter, this number may be changed by a resolution of the
Board of Directors or of the stockholders, subject to Section 3.4 of these
Bylaws. No reduction of the authorized number of directors shall have the effect
of removing any director before such director's term of office expires.

        3.3    ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS.

               Except as provided in Section 3.4 of these Bylaws, and unless
otherwise provided in the Certificate of Incorporation, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
Certificate of Incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.

               Unless otherwise specified in the Certificate of Incorporation,
elections of directors need not be by written ballot.

        3.4    RESIGNATION AND VACANCIES.

               Any director may resign at any time upon written notice to the
attention of the secretary of the Corporation. When one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in 


                                      -7-




<PAGE>   11

the Certificate of Incorporation, and subject to the rights of the holders of
any series of Preferred Stock that may then be outstanding, a vacancy created by
the removal of a director by the vote of the stockholders or by court order may
be filled only by the affirmative vote of a majority of the shares represented
and voting at a duly held meeting at which a quorum is present (which shares
voting affirmatively also constitute a majority of the quorum. Each director so
elected shall hold office until the next annual meeting of the stockholders and
until a successor has been elected and qualified.

               Unless otherwise provided in the Certificate of Incorporation or
these Bylaws:

               (a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.

               (b) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.

               If at any time, by reason of death or resignation or other cause,
the Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.

               If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole Board of Directors (as constituted immediately prior to any such
increase), then the Court of Chancery may, upon application of any stockholder
or stockholders holding at least 10% of the total number of the shares at the
time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.

        3.5    PLACE OF MEETINGS; MEETINGS BY TELEPHONE.

               The Board of Directors of the Corporation may hold meetings, both
regular and special, either within or outside the State of Delaware. Unless
otherwise restricted by the Certificate of Incorporation or these Bylaws,
members of the Board of Directors, or any committee designated by the Board of
Directors, may participate in a meeting of the Board of Directors, or any
committee, by means of conference telephone or other communications 


                                      -8-




<PAGE>   12

equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.

        3.6    REGULAR MEETINGS.

               Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board of Directors.

        3.7    SPECIAL MEETINGS; NOTICE.

               Special meetings of the board of directors for any purpose or
purposes may be called at any time by the chairman of the board, the president,
any vice president, the secretary or any two (2) directors.

               Notice of the time and place of special meetings shall be
delivered personally or by telephone to each director or sent by first-class
mail or telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the Corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally, by facsimile or by electronic transmission or by telephone,
telecopy, telegram, telex or other similar means of communication, it shall be
delivered at least twenty-four (24) hours before the time of the holding of the
meeting, or on such shorter notice as the person or persons calling such meeting
may deem necessary and appropriate in the circumstances. Any oral notice given
personally, by facsimile or by electronic transmission or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose of the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.

        3.8    QUORUM.

               At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.

               A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.

        3.9    WAIVER OF NOTICE.



                                      -9-



<PAGE>   13

               Whenever notice is required to be given under any provision of
the General Corporation Law of Delaware or of the Certificate of Incorporation
or these Bylaws, a written waiver thereof, signed by the person entitled to
notice, or waiver by electronic mail or other electronic transmission by such
person, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the directors, or members of a committee of
directors, need be specified in any written waiver of notice unless so required
by the Certificate of Incorporation or these Bylaws.

        3.10   BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.

               Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, any action required or permitted to be taken at any meeting of
the Board of Directors, or of any committee thereof, may be taken without a
meeting if all members of the Board of Directors or committee, as the case may
be, consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee. Written consents
representing actions taken by the board or committee may be executed by telex,
telecopy or other facsimile transmission, or by electronic mail or other
electronic transmission, and such facsimile or electronic transmission shall be
valid and binding to the same extent as if it were an original. If the minutes
of the board or committee are maintained in paper form, consents obtained by
electronic transmission shall be reduced to written form and filed with such
minutes.

        3.11   FEES AND COMPENSATION OF DIRECTORS.

               Unless otherwise restricted by the Certificate of Incorporation
or these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.

        3.12   APPROVAL OF LOANS TO OFFICERS.

               The Corporation may lend money to, or guarantee any obligation
of, or otherwise assist any officer or other employee of the Corporation or of
its subsidiary, including any officer or employee who is a director of the
Corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
Corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the Corporation. Nothing in this Section 3.2 contained shall be deemed
to deny, limit or restrict the powers of guaranty or warranty of the Corporation
at common law or under any statute.

        3.13   REMOVAL OF DIRECTORS.


                                      -10-


<PAGE>   14

               [NOTE: THIS PROVISION MUST BE AMENDED IF THE COMPANY ADOPTS A 
STAGGERED BOARD.]

               Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the Corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.

               No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.

        3.14   CHAIRMAN OF THE BOARD OF DIRECTORS.

               The Corporation may also have, at the discretion of the Board of
Directors, a Chairman of the Board of Directors who shall not be considered an
officer of the Corporation.

                                   ARTICLE IV

                                   COMMITTEES

        4.1    COMMITTEES OF DIRECTORS.

               The Board of Directors may designate one or more committees, each
committee to consist of one or more of the directors of the corporation. The
Board may designate 1 or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members present at any meeting and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member. Any such committee, to the
extent provided in the resolution of the Board of Directors, or in these Bylaws,
shall have and may exercise all the powers and authority of the Board of
Directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to the following matters: (i) approving or adopting, or recommending to the
stockholders, any action or matter expressly required by the General Corporate
Law of Delaware to be submitted to stockholders for approval or (ii) adopting,
amending or repealing any Bylaw of the corporation.

        4.2    COMMITTEE MINUTES.

               Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.



                                      -11-


<PAGE>   15

        4.3    MEETINGS AND ACTION OF COMMITTEES.

               Meetings and actions of committees shall be governed by, and held
and taken in accordance with, the provisions of Section 3.5 (place of meetings
and meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with such changes in
the context of such provisions as are necessary to substitute the committee and
its members for the Board of Directors and its members; provided, however, that
the time of regular meetings of committees may be determined either by
resolution of the Board of Directors or by resolution of the committee, that
special meetings of committees may also be called by resolution of the Board of
Directors and that notice of special meetings of committees shall also be given
to all alternate members, who shall have the right to attend all meetings of the
committee. The Board of Directors may adopt rules for the government of any
committee not inconsistent with the provisions of these Bylaws.

                                    ARTICLE V

                                    OFFICERS

        5.1    OFFICERS.

               The officers of the Corporation shall be [A CHIEF EXECUTIVE
OFFICER], a president, a secretary, and a chief financial officer. The
Corporation may also have, at the discretion of the Board of Directors, one or
more vice presidents, one or more assistant secretaries, one or more assistant
treasurers, and any such other officers as may be appointed in accordance with
the provisions of Section 5.3 of these Bylaws. Any number of offices may be held
by the same person.

        5.2    APPOINTMENT OF OFFICERS.

               The officers of the Corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.

        5.3    SUBORDINATE OFFICERS.

               The Board of Directors may appoint, or empower the chief
executive officer or the president to appoint, such other officers and agents as
the business of the Corporation may require, each of whom shall hold office for
such period, have such authority, and perform such duties as are provided in
these Bylaws or as the Board of Directors may from time to time determine.

        5.4    REMOVAL AND RESIGNATION OF OFFICERS.

               Subject to the rights, if any, of an officer under any contract
of employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of 


                                      -12-



<PAGE>   16

the Board of Directors at any regular or special meeting of the Board of
Directors or, except in the case of an officer chosen by the Board of Directors,
by any officer upon whom such power of removal may be conferred by the Board of
Directors.

               Any officer may resign at any time by giving written notice to
the attention of the secretary of the Corporation. Any resignation shall take
effect at the date of the receipt of that notice or at any later time specified
in that notice; and, unless otherwise specified in that notice, the acceptance
of the resignation shall not be necessary to make it effective. Any resignation
is without prejudice to the rights, if any, of the Corporation under any
contract to which the officer is a party.

        5.5    VACANCIES IN OFFICES.

               Any vacancy occurring in any office of the Corporation shall be
filled by the Board of Directors.

        [5.6   CHIEF EXECUTIVE OFFICER.

               SUBJECT TO SUCH SUPERVISORY POWERS, IF ANY, AS MAY BE GIVEN BY
THE BOARD OF DIRECTORS TO THE CHAIRMAN OF THE BOARD, IF ANY, THE CHIEF EXECUTIVE
OFFICER OF THE CORPORATION SHALL, SUBJECT TO THE CONTROL OF THE BOARD OF
DIRECTORS, HAVE GENERAL SUPERVISION, DIRECTION, AND CONTROL OF THE BUSINESS AND
THE OFFICERS OF THE CORPORATION. HE OR SHE SHALL PRESIDE AT ALL MEETINGS OF THE
STOCKHOLDERS AND, IN THE ABSENCE OR NONEXISTENCE OF A CHAIRMAN OF THE BOARD, AT
ALL MEETINGS OF THE BOARD OF DIRECTORS AND SHALL HAVE THE GENERAL POWERS AND
DUTIES OF MANAGEMENT USUALLY VESTED IN THE OFFICE OF CHIEF EXECUTIVE OFFICER OF
A CORPORATION AND SHALL HAVE SUCH OTHER POWERS AND DUTIES AS MAY BE PRESCRIBED
BY THE BOARD OF DIRECTORS OR THESE BYLAWS.]

        5.7    PRESIDENT.

               Subject to such supervisory powers, if any, as may be given by
the Board of Directors to the chairman of the board (if any) [OR THE CHIEF
EXECUTIVE OFFICER], the president shall have general supervision, direction, and
control of the business and other officers of the Corporation. He or she shall
have the general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.

        5.8    VICE PRESIDENTS.

               In the absence or disability of the [CHIEF EXECUTIVE OFFICER AND]
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.


                                      -13-




<PAGE>   17

        5.9    SECRETARY.

               The secretary shall keep or cause to be kept, at the principal
executive office of the Corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall show the
time and place of each meeting, the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.

               The secretary shall keep, or cause to be kept, at the principal
executive office of the Corporation or at the office of the Corporation's
transfer agent or registrar, as determined by resolution of the Board Of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.

               The secretary shall give, or cause to be given, notice of all
meetings of the stockholders and of the Board of Directors required to be given
by law or by these Bylaws. He or she shall keep the seal of the Corporation, if
one be adopted, in safe custody and shall have such other powers and perform
such other duties as may be prescribed by the Board of Directors or by these
Bylaws.

        5.10   CHIEF FINANCIAL OFFICER.

               The chief financial officer shall keep and maintain, or cause to
be kept and maintained, adequate and correct books and records of accounts of
the properties and business transactions of the Corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.

               The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the Corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the Corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the Corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the Bylaws.

        5.11   REPRESENTATION OF SHARES OF OTHER CORPORATIONS.

               The chairman of the board, the chief executive officer, the
president, any vice president, the chief financial officer, the secretary or
assistant secretary of this Corporation, or any other person authorized by the
Board of Directors or the chief executive officer or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
Corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this Corporation. The authority granted
herein may be exercised either 



                                      -14-



<PAGE>   18

by such person directly or by any other person authorized to do so by proxy or
power of attorney duly executed by the person having such authority.

        5.12   AUTHORITY AND DUTIES OF OFFICERS.

               In addition to the foregoing authority and duties, all officers
of the Corporation shall respectively have such authority and perform such
duties in the management of the business of the Corporation as may be designated
from time to time by the Board of Directors or the stockholders.

                                   ARTICLE VI

               INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
                                AND OTHER AGENTS

        6.1    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

               The Corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the Corporation. For purposes of this Section 6.1, a
"director" or "officer" of the Corporation includes any person (a) who is or was
a director or officer of the Corporation, (b) who is or was serving at the
request of the Corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a Corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.

        6.2    INDEMNIFICATION OF OTHERS.

               The Corporation shall have the power, to the maximum extent and
in the manner permitted by the General Corporation Law of Delaware, to indemnify
each of its employees and agents (other than directors and officers) against
expenses (including attorneys' fees), judgments, fines, settlements and other
amounts actually and reasonably incurred in connection with any proceeding,
arising by reason of the fact that such person is or was an agent of the
Corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
Corporation (other than a director or officer) includes any person (a) who is or
was an employee or agent of the Corporation, (b) who is or was serving at the
request of the Corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was an
employee or agent of a corporation which was a predecessor corporation of the
Corporation or of another enterprise at the request of such predecessor
corporation.

        6.3    PAYMENT OF EXPENSES IN ADVANCE.

               Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted 


                                      -15-


<PAGE>   19

pursuant to Section 6.2 following authorization thereof by the Board of
Directors shall be paid by the Corporation in advance of the final disposition
of such action or proceeding upon receipt of an undertaking by or on behalf of
the indemnified party to repay such amount if it shall ultimately be determined,
by final judicial decision from which there is no further right to appeal, that
the indemnified party is not entitled to be indemnified as authorized in this
Article VI.

        6.4    INDEMNITY NOT EXCLUSIVE.

               The indemnification provided by this Article VI shall not be
deemed exclusive of any other rights to which those seeking indemnification may
been titled under any Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the Certificate of
Incorporation.

        6.5    INSURANCE.

               The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him or
her and incurred by him or her in any such capacity, or arising out of his or
her status as such, whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of the General
Corporation Law of Delaware.

        6.6    CONFLICTS.

               No indemnification or advance shall be made under this Article
VI, except where such indemnification or advance is mandated by law or the
order, judgment or decree of any court of competent jurisdiction, in any
circumstance where it appears:

               (a) That it would be inconsistent with a provision of the
Certificate of Incorporation, these Bylaws, a resolution of the stockholders or
an agreement in effect at the time of the accrual of the alleged cause of the
action asserted in the proceeding in which the expenses were incurred or other
amounts were paid, which prohibits or otherwise limits indemnification; or

               (b) That it would be inconsistent with any condition expressly
imposed by a court in approving a settlement.

                                   ARTICLE VII

                               RECORDS AND REPORTS

        7.1    MAINTENANCE AND INSPECTION OF RECORDS.

               The Corporation shall, either at its principal executive offices
or at such place or places as designated by the Board of Directors, keep a
record of its stockholders listing their 


                                      -16-




<PAGE>   20

names and addresses and the number and class of shares held by each stockholder,
a copy of these Bylaws as amended to date, accounting books, and other records.

               Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the Corporation's stock ledger, a list of its stockholders, and its other books
and records and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent is the person who seeks the
right to inspection, the demand under oath shall be accompanied by a power of
attorney or such other writing that authorizes the attorney or other agent to so
act on behalf of the stockholder. The demand under oath shall be directed to the
Corporation at its registered office in Delaware or at its principal place of
business.

               A complete list of stockholders entitled to vote at any meeting
of stockholders, arranged in alphabetical order for each class of stock and
showing the address of each such stockholder and the number of shares registered
in each such stockholder's name, shall be open to the examination of any such
stockholder for a period of at least ten (10) days prior to the meeting in the
manner provided by law. The stock list shall also be open to the examination of
any stockholder during the whole time of the meeting as provided by law. This
list shall presumptively determine the identity of the stockholders entitled to
vote at the meeting and the number of shares held by each of them.

        7.2    INSPECTION BY DIRECTORS.

               Any director shall have the right to examine the Corporation's
stockledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order the
Corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.

                                  ARTICLE VIII

                                 GENERAL MATTERS

        8.1    CHECKS.

               From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the Corporation, and only the persons so
authorized shall sign or endorse those instruments.

        8.2    EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.



                                      -17-


<PAGE>   21

               The Board of Directors, except as otherwise provided in these
Bylaws, may authorize any officer or officers, or agent or agents, to enter into
any contract or execute any instrument in the name of and on behalf of the
Corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the Corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.

        8.3    STOCK CERTIFICATES; PARTLY PAID SHARES.

               The shares of the Corporation shall be represented by
certificates, provided that the Board of Directors of the Corporation may
provide by resolution or resolutions that some or all of any or all classes or
series of its stock shall be uncertificated shares. Any such resolution shall
not apply to shares represented by a certificate until such certificate is
surrendered to the Corporation. Notwithstanding the adoption of such a
resolution by the Board of Directors, every holder of stock represented by
certificates and upon request every holder of uncertificated shares shall be
entitled to have a certificate signed by, or in the name of the Corporation by
the chairman or vice-chairman of the Board of Directors, or the chief executive
officer or the president or vice-president, and by the chief financial officer
or an assistant treasurer, or the secretary or an assistant secretary of the
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the date of issue.

               The Corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
Corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
Corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.

        8.4    SPECIAL DESIGNATION ON CERTIFICATES.

               If the Corporation is authorized to issue more than one class of
stock or more than one series of any class, then the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate that the
Corporation shall issue to represent 


                                      -18-




<PAGE>   22

such class or series of stock; provided, however, that, except as otherwise
provided in Section 202 of the General Corporation Law of Delaware, in lieu of
the foregoing requirements there may be set forth on the face or back of the
certificate that the Corporation shall issue to represent such class or series
of stock a statement that the Corporation will furnish without charge to each
stockholder who so requests the powers, the designations, the preferences, and
the relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.

        8.5    LOST CERTIFICATES.

               Except as provided in this Section 8.5, no new certificates for
shares shall be issued to replace a previously issued certificate unless the
latter is surrendered to the Corporation and canceled at the same time. The
Corporation may issue a new certificate of stock or uncertificated shares in the
place of any certificate previously issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or the owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.

        8.6    CONSTRUCTION; DEFINITIONS.

               Unless the context requires otherwise, the general provisions,
rules of construction, and definitions in the Delaware General Corporation Law
shall govern the construction of these Bylaws. Without limiting the generality
of this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.

        8.7    DIVIDENDS.

               The directors of the Corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the Certificate
of Incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock.

               The directors of the Corporation may set apart out of any of the
funds of the Corporation available for dividends a reserve or reserves for any
proper purpose and may abolish any such reserve. Such purposes shall include but
not be limited to equalizing dividends, repairing or maintaining any property of
the Corporation, and meeting contingencies.

        8.8    FISCAL YEAR.

               The fiscal year of the Corporation shall be fixed by resolution
of the Board of Directors and may be changed by the Board of Directors.

        8.9    SEAL.



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<PAGE>   23

               The Corporation may adopt a corporate seal, which may be altered
at pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.

        8.10   TRANSFER OF STOCK.

               Upon surrender to the Corporation or the transfer agent of the
Corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.

        8.11   STOCK TRANSFER AGREEMENTS.

               The Corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the Corporation to restrict the transfer of shares of stock of the Corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.

        8.12   REGISTERED STOCKHOLDERS.

               The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends and to vote as such owner, shall be entitled to hold liable for calls
and assessments the person registered on its books as the owner of shares, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.

        8.13   FACSIMILE SIGNATURES.

               In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these Bylaws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.

                                   ARTICLE IX

                                   AMENDMENTS

               The Bylaws of the Corporation may be adopted, amended or repealed
by the stockholders entitled to vote; provided, however, that the Corporation
may, in its Certificate of Incorporation, confer the power to adopt, amend or
repeal Bylaws upon the directors. The fact that such power has been so conferred
upon the directors shall not divest the stockholders of the power, nor limit
their power to adopt, amend or repeal Bylaws.



                                      -20-


<PAGE>   24

                           CERTIFICATE OF ADOPTION OF
                           AMENDED AND RESTATED BYLAWS

                                       OF

                                 [COMPANY NAME]


               The undersigned hereby certifies that the undersigned is the duly
elected, qualified, and acting Secretary of [Company Name] (the "Corporation"),
and that the foregoing Amended and Restated Bylaws, comprising [No of Pages]
pages, were adopted the Bylaws of the corporation on [Date Adopted], by the
Board of Directors of the corporation.

               Executed this _____ day of _________________, ___.



                                                   ----------------------------
                                                   [Secretary Name], Secretary




<PAGE>   1
                                                                    EXHIBIT 10.1

                            INDEMNIFICATION AGREEMENT

        This Indemnification Agreement (the "Agreement") is made as of December
__, 2000, by and between Xcyte Therapies, Inc., a Delaware corporation (the
"Company"), and ___________ (the "Indemnitee").

                                    RECITALS

        The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Company and Indemnitee further recognize
the substantial increase in corporate litigation in general, subjecting
directors, officers and key employees to expensive litigation risks at the same
time as the availability and coverage of liability insurance has been severely
limited. Indemnitee does not regard the current protection available as adequate
under the present circumstances, and Indemnitee and agents of the Company may
not be willing to continue to serve as agents of the Company without additional
protection. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, and to indemnify its directors,
officers and key employees so as to provide them
 with the maximum protection
permitted by law.

                                    AGREEMENT

        In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Company and Indemnitee hereby agree as follows:

        1. INDEMNIFICATION.

                (a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee 




<PAGE>   2

reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, that Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful.

                (b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably withheld), in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company and its stockholders, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of Indemnitee's duty to
the Company and its stockholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.

                (c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.

        2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is intended
to create in Indemnitee any right to continued employment.

        3. EXPENSES; INDEMNIFICATION PROCEDURE.

                (a) ADVANCEMENT OF EXPENSES. The Company shall advance all
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referred to in Section l(a) or Section 1(b) hereof (including amounts actually
paid in settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby.

                (b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in 



                                      -2-

<PAGE>   3

writing as soon as practicable of any claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company and
shall be given in accordance with the provisions of Section 12(d) below. In
addition, Indemnitee shall give the Company such information and cooperation as
it may reasonably require and as shall be within Indemnitee's power.

                (c) PROCEDURE. Any indemnification and advances provided for in
Section 1 and this Section 3 shall be made no later than thirty (30) days after
receipt of the written request of Indemnitee. If a claim under this Agreement,
under any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within thirty (30) days after a written request for payment thereof
has first been received by the Company, Indemnitee may, but need not, at any
time thereafter bring an action against the Company to recover the unpaid amount
of the claim and, subject to Section 11 of this Agreement, Indemnitee shall also
be entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee for the amount claimed, but the burden of
proving such defense shall be on the Company and Indemnitee shall be entitled to
receive interim payments of expenses pursuant to Section 3(a) unless and until
such defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the parties' intention that if the Company
contests Indemnitee's right to indemnification, the question of Indemnitee's
right to indemnification shall be for the court to decide, and neither the
failure of the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) to have made a determination that indemnification of Indemnitee is
proper in the circumstances because Indemnitee has met the applicable standard
of conduct required by applicable law, nor an actual determination by the
Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its stockholders) that
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that Indemnitee has or has not met the applicable standard of
conduct.

                (d) NOTICE TO INSURERS. If, at the time of the receipt of a
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.

                (e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel 



                                      -3-

<PAGE>   4

by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ counsel in any such proceeding at Indemnitee's expense; and (ii)
if (A) the employment of counsel by Indemnitee has been previously authorized by
the Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.

        4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.

                (a) SCOPE. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Certificate of Incorporation, the Company's Bylaws or by statute. In the event
of any change, after the date of this Agreement, in any applicable law, statute,
or rule which expands the right of a Delaware corporation to indemnify a member
of its board of directors or an officer, such changes shall be deemed to be
within the purview of Indemnitee's rights and the Company's obligations under
this Agreement. In the event of any change in any applicable law, statute or
rule which narrows the right of a Delaware corporation to indemnify a member of
its board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.

                (b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its Bylaws, any
agreement, any vote of stockholders or disinterested members of the Company's
Board of Directors, the General Corporation Law of the State of Delaware, or
otherwise, both as to action in Indemnitee's official capacity and as to action
in another capacity while holding such office. The indemnification provided
under this Agreement shall continue as to Indemnitee for any action taken or not
taken while serving in an indemnified capacity even though he or she may have
ceased to serve in any such capacity at the time of any action, suit or other
covered proceeding.

        5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.

        6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or public policy may override applicable
state law and prohibit the Company from indemnifying its directors and officers
under this Agreement or otherwise. 



                                      -4-

<PAGE>   5

For example, the Company and Indemnitee acknowledge that the Securities and
Exchange Commission (the "SEC") has taken the position that indemnification is
not permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain ERISA violations.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the SEC to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.

        7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.

        8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.

        9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:

                (a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law, but such indemnification or




                                      -5-

<PAGE>   6

advancement of expenses may be provided by the Company in specific cases if the
Board of Directors finds it to be appropriate;

                (b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;

                (c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the
extent such expenses or liabilities have been paid directly to Indemnitee by an
insurance carrier under a policy of officers' and directors' liability insurance
maintained by the Company; or

                (d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.

        10. CONSTRUCTION OF CERTAIN PHRASES.

                (a) For purposes of this Agreement, references to the "Company"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.

                (b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.

        11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee 



                                      -6-

<PAGE>   7

with respect to such action, unless as a part of such action, the court of
competent jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the Company
under this Agreement or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including attorneys' fees, incurred by Indemnitee in defense of such action
(including with respect to Indemnitee's counterclaims and cross-claims made in
such action), unless as a part of such action the court determines that each of
Indemnitee's material defenses to such action were made in bad faith or were
frivolous.

        12. MISCELLANEOUS.

                (a) GOVERNING LAW. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflict of law.

                (b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.

                (c) CONSTRUCTION. This Agreement is the result of negotiations
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.

                (d) NOTICES. Any notice, demand or request required or permitted
to be given under this Agreement shall be in writing and shall be deemed
sufficient when delivered personally or sent by telegram or fax, or forty-eight
(48) hours after being deposited in the U.S. mail, as certified or registered
mail, with postage prepaid, and addressed to the party to be notified at such
party's address as set forth below or as subsequently modified by written
notice.

                (e) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

                (f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns, and inure to the benefit of
Indemnitee and Indemnitee's heirs, legal representatives and assigns.

                (g) SUBROGATION. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of 



                                      -7-

<PAGE>   8

Indemnitee, who shall execute all documents required and shall do all acts that
may be necessary to secure such rights and to enable the Company to effectively
bring suit to enforce such rights.

                            [Signature Page Follows]



                                      -8-

<PAGE>   9


        The parties hereto have executed this Agreement as of the day and year
set forth on the first page of this Agreement.

                                       XCYTE THERAPIES, INC.

                                       By:
                                          --------------------------------------
                                       Title:
                                             -----------------------------------

                                       Address: 1124 Columbia Street, Suite 130
                                                Seattle, WA  98104


AGREED TO AND ACCEPTED:


<<IndemniteeName>>


---------------------------------------
(Signature)

Address:



                                      -9-



<PAGE>   1
                                                                    EXHIBIT 10.2

                            ------------------------

                            ------------------------


                              XCYTE THERAPIES, INC.

                            SERIES D PREFERRED STOCK

                               PURCHASE AGREEMENT

                                  MAY 25, 2000


                            ------------------------

                            ------------------------

<PAGE>   2


                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                          PAGE
                                                                                          ----
<S>                                                                                       <C>
1.   PURCHASE AND SALE OF STOCK                                                              3

   1.1    AUTHORIZATION, SALE AND ISSUANCE OF SHARES.........................................3
   1.2    CLOSING............................................................................3
   1.3    DELIVERY...........................................................................3
   1.4    ADDITIONAL CLOSINGS................................................................4

2.   REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................4

   2.1    ORGANIZATION, GOOD STANDING AND QUALIFICATION......................................4
   2.2    AUTHORIZATION......................................................................4
   2.3    CAPITALIZATION.....................................................................5
   2.4    SUBSIDIARIES.......................................................................6
   2.5    GOVERNMENTAL CONSENTS..............................................................6
   2.6    PROPRIETARY INFORMATION AGREEMENT..................................................6
   2.7    PATENTS AND TRADEMARKS.............................................................6
   2.8    FINANCIAL STATEMENTS...............................................................7
   2.9    CHANGES............................................................................7
   2.10   LIABILITIES........................................................................8
   2.11   LITIGATION.........................................................................8
   2.12   COMPLIANCE WITH OTHER INSTRUMENTS..................................................8
   2.13   OFFERING...........................................................................9
   2.14   AGREEMENTS; ACTION.................................................................9
   2.15   LABOR AGREEMENTS AND ACTIONS......................................................10
   2.16   TAX RETURNS, PAYMENTS AND ELECTIONS...............................................10
   2.17   TITLE TO PROPERTY AND ASSETS......................................................10
   2.18   REGISTRATION RIGHTS...............................................................10
   2.19   EMPLOYEE BENEFIT PLANS............................................................10
   2.20   OBLIGATIONS OF MANAGEMENT.........................................................11
   2.21   ENVIRONMENTAL AND SAFETY LAWS.....................................................11
   2.22   DISCLOSURE........................................................................11
   2.23   SECTION 83(B) ELECTIONS...........................................................11
   2.24   REAL PROPERTY HOLDING CORPORATION.................................................11
   2.25   INSURANCE.........................................................................11
   2.26   INVESTMENT COMPANY ACT............................................................11

3.   REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.........................................11

   3.1    AUTHORIZATION.....................................................................11
   3.2    PURCHASE ENTIRELY FOR OWN ACCOUNT.................................................12
   3.3    DISCLOSURE OF INFORMATION.........................................................12
   3.4    INVESTMENT
 EXPERIENCE.............................................................12
   3.5    REGULATION D......................................................................12
   3.6    RESTRICTED SECURITIES.............................................................12
   3.7    LEGENDS...........................................................................13
</TABLE>


<PAGE>   3


<TABLE>
<S>                                                                                       <C>
4.   CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING........................................13

   4.1    REPRESENTATIONS AND WARRANTIES....................................................13
   4.2    PERFORMANCE.......................................................................13
   4.3    CERTIFICATE.......................................................................13
   4.4    COMPLIANCE CERTIFICATE............................................................13
   4.5    PROCEEDINGS AND DOCUMENTS.........................................................13
   4.6    BOARD OF DIRECTORS................................................................14
   4.7    RIGHTS AGREEMENT..................................................................14
   4.8    CO-SALE AGREEMENT.................................................................14
   4.9    OPINION OF COMPANY COUNSEL........................................................14
   4.10   MINIMUM INVESTMENT................................................................14

5.   CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.....................................14

   5.1    REPRESENTATIONS AND WARRANTIES....................................................14
   5.2    LEGAL MATTERS.....................................................................14

6.   MISCELLANEOUS..........................................................................14

   6.1    SURVIVAL OF WARRANTIES............................................................15
   6.2    SUCCESSORS AND ASSIGNS............................................................15
   6.3    GOVERNING LAW.....................................................................15
   6.4    COUNTERPARTS......................................................................15
   6.5    TITLES AND SUBTITLES..............................................................15
   6.6    NOTICES...........................................................................15
   6.7    FINDER'S FEE......................................................................15
   6.8    AMENDMENTS AND WAIVERS............................................................16
   6.9    SEVERABILITY......................................................................16
   6.10   EXCULPATION AMONG INVESTORS.......................................................16
   6.11   EXPENSES..........................................................................16
</TABLE>



EXHIBITS

A      Schedule of Investors
B      Form of Amended and Restated Certificate of Incorporation
C      Schedule of Exceptions
D      Form of Proprietary Information Agreement
E      Form of Amended and Restated Investor Rights Agreement
F      Form of Amended and Restated Right of First Refusal and CoSale Agreement
G      Form of Opinion of Counsel to the Company


                                      -2-

<PAGE>   4

                              XCYTE THERAPIES, INC.

                            STOCK PURCHASE AGREEMENT

        THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
made as of the 25th day of May 2000, by and between Xcyte Therapies, Inc., a
Delaware corporation, located at 1124 Columbia Street, Suite 130, Seattle, WA
98104 (the "Company"), and the investors listed on Exhibit A hereto, each of
which is herein referred to as an "Investor."

        WHEREAS, the Company desires to issue and sell up to 7,194,245 shares of
        Series D Preferred Stock to the Investors; and

        WHEREAS, the Investors desire to purchase such shares from the Company
        on the terms and subject to the conditions of this Agreement.

        NOW THEREFORE, the parties hereby agree as follows:

        1. Purchase and Sale of Stock.

                1.1 Authorization, Sale and Issuance of Shares

                        (a) The Company has authorized the sale and issuance of
up to 7,194,245 shares of Series D Preferred Stock (the "Shares"), with the
Shares having the rights, preferences, privileges and restrictions as set forth
in the Company's Restated Certificate of Incorporation in the form satisfactory
to the Investors, a copy of which is attached hereto as Exhibit B (the
"Certificate"). The Common Stock issuable upon conversion of the Shares is
referred to hereinafter as the "Conversion Shares."

                        (b) Subject to the terms and conditions of this
Agreement, the Company shall sell and issue to each Investor, and each Investor
agrees, severally and not jointly, to purchase from the Company, that number of
Shares set forth opposite each Investor's name on Exhibit A attached hereto for
the purchase price of $2.78 per share as set forth thereon.

                1.2 Closing. The purchase and sale of the Shares shall take
place at the offices of Venture Law Group, 4750 Carillon Point, Kirkland,
Washington, at 10:00 a.m., on May 25, 2000, or at such other time and place as
the Company and Investors may agree (which time and place are designated as the
"Closing"). The date of such Closing is hereinafter referred to as the "Closing
Date."

                1.3 Delivery. At the Closing, the Company shall deliver to each
Investor a certificate representing the Shares which such Investor is purchasing
against delivery to the 

<PAGE>   5

Company by such Investor of a check, wire transfer of immediately available
funds payable to the Company's order or cancellation of indebtedness (or any
combination thereof) in the aggregate amount of the purchase price therefor.

                1.4 Additional Closings. If the full number of Series D
Preferred Stock of the Company is not sold at the Closing, the Company shall
have the right, at any time prior to August 8, 2000 (the "Subsequent Closing
Date"), to sell the remaining authorized but unissued shares of Series D
Preferred Stock to one or more additional purchasers as determined by the
Company, or to any Purchaser hereunder who wishes to acquire additional shares
of Series D Preferred Stock at the price and on the terms set forth herein,
provided that any such additional purchaser shall be required to execute an
Addendum Agreement substantially in the form attached hereto as Exhibit H. Any
additional purchaser so acquiring shares of Series D Preferred Stock shall be
considered a "Purchaser" for purposes of this Agreement and an "Investor" for
the purposes of the Agreements (as defined below), and any Series D Preferred
Stock so acquired by such additional purchaser shall be considered "Shares" for
purposes of this Agreement and all other agreements contemplated hereby.

        2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on the
Schedule of Exceptions attached hereto as Exhibit C, which exceptions shall be
deemed to be representations and warranties as if made hereunder:

                2.1 Organization, Good Standing and Qualification. The Company
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties. As of the Closing, the
Certificate shall be in the form attached hereto as Exhibit B and the Bylaws of
the Company shall be in the form provided to counsel for the Investors prior to
the Closing.

                2.2 Authorization.

                        (a) The Company has all requisite corporate power and
authority to execute and deliver, and to consummate the transactions
contemplated by this Agreement, the Amended and Restated Investor Rights
Agreement attached as Exhibit E ("Rights Agreement") and the Amended and
Restated Right of First Refusal and Co-Sale Agreement attached as Exhibit F (the
"Co-Sale Agreement" with the Agreement and Rights Agreement, the "Financing
Documents"). All corporate action on the part of the Company, its officers,
directors and stockholders necessary for the execution and delivery of, and the
consummation of the transactions contemplated by the Financing Documents, the
performance of all obligations of the 

                                      -4-

<PAGE>   6

Company under the Financing Documents and the authorization, sale, issuance (or
reservation for issuance) and delivery of the Shares being sold hereunder and
the Conversion Shares has been taken or will be taken prior to the Closing. The
Financing Documents, upon execution and delivery by the Company and assuming the
due and proper execution and delivery by the other parties, constitute valid and
binding obligations of the Company enforceable in accordance with their
respective terms, except as such enforcement may be limited by bankruptcy,
insolvency, moratorium and other laws of general application affecting the
enforcement of creditors' rights.

                        (b) The Shares, when issued in compliance with the
provisions of this Agreement, will be validly issued, fully paid and
nonassessable and will be free of any liens or encumbrances known to, or caused
or created by, the Company; provided, however, that the Shares may be subject to
restrictions on transfer under state and/or federal securities laws as set forth
herein, as may be required by changes in such laws and as contemplated by the
Financing Documents. Upon conversion of the Shares into the Conversion Shares in
conformity with the Certificate, such Conversion Shares will be duly authorized,
validly issued, fully paid and nonassessable, and will be free of any liens or
encumbrances caused or created by the Company; provided, however, that the
Conversion Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein, as may be required by changes in
such law and as contemplated by the Financing Documents.

                        (c) Except as set forth herein or in the Financing
Documents, no entity has any right of first refusal or any preemptive rights in
connection with the issuance of the Shares, the Conversion Shares or any future
issuances of securities by the Company.

                2.3 Capitalization.

                        (a) Immediately prior to the Closing, the authorized
capital of the Company shall consist of: (i) 40,000,000 shares of Common Stock,
and (ii), 25,909,976 shares of Preferred Stock (the "Preferred Stock"), of which
7,300,080 have been designated Series A Preferred Stock, 4,097,580 have been
designated Series B Preferred Stock, 7,212,316 have been designated Series C
Preferred Stock and 7,300,000 have been designated Series D Preferred Stock.
Immediately prior to the Closing, 5,964,247 shares of Common Stock, 6,860,512
shares of Series A Preferred Stock, warrants to purchase 439,568 shares of
Series A Preferred Stock, 3,903,080 shares of Series B Preferred Stock, warrants
to purchase 194,500 shares of Series B Preferred Stock, 7,185,630 shares of
Series C Preferred Stock, and warrants to purchase 26,686 shares of Series C
Preferred Stock and no shares of Series D Preferred Stock will be outstanding.

                        (b) Except as set forth in this Agreement and the
exhibits thereto, there are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock except that the Company has
reserved (i) the Shares for issuance at each Closing, (ii) the Common Stock
issuable upon conversion of the Preferred Stock, (iii) 2,500,000 shares of

                                      -5-

<PAGE>   7

Common Stock reserved for issuance pursuant to a stock option plan adopted by
the Company 992,441 options have been granted and remain outstanding, with
1,420,121 shares remaining for grant, (iv) 898,150 shares of Common Stock
reserved for issuance to scientific founders upon the achievement of certain
milestones, and (v) 157,890 shares reserved for issuance to Carl June or his
assignees upon the Company's acquisition of certain future technology.

                2.4 Subsidiaries. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity.

                2.5 Governmental Consents.

                        (a) No consent, approval, order or authorization of, or
registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
the Financing Documents.

                        (b) No consent, approval, waiver or other action by any
person under any contract, agreement, indenture, lease, instrument or other
document to which the Company is a party or bound is required or necessary for
the execution, delivery and performance of, or the consummation of the
transactions contemplated by, any of the Financing Documents by the Company.

                2.6 Proprietary Information Agreement. Each former and present
employee, consultant and officer of the Company has executed and each future
employee, consultant and officer will execute, a Proprietary Information
Agreement in the form attached hereto as Exhibit D and no exceptions have been
taken by any such employee, consultant or officer to the terms of such
agreement. The Company, after reasonable investigation, is not aware that any of
its employees, officers or consultants are in violation thereof, and the Company
will use its best efforts to prevent any such violation.

               2.7 Patents and Trademarks. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted without any conflict
with or infringement of the rights of others. There are no outstanding options,
licenses, or agreements of any kind relating to the foregoing, nor is the
Company bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. The Company has not received any communications alleging
that the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including 

                                      -6-

<PAGE>   8

licenses, covenants or commitments of any nature) or other agreement, or subject
to any judgment, decree or order of any court or administrative agency, that
would interfere with the use of his or her best efforts to promote the interests
of the Company or that would conflict with the Company's business as proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the best of the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to
their employment by the Company.

                2.8 Financial Statements. The Company has delivered to each
Investor (i) its unaudited balance sheet as of March 31, 2000 and unaudited
statement of income for the period from January 1, 2000 to March 31, 2000 and
unaudited financial statements as of December 31, 1999 (collectively the
"Financial Statements"). The Financial Statements, together with the notes
thereto, are complete and correct in all material respects and have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods indicated, except as disclosed
therein, and present fairly the financial condition and position of the Company
as of March 31, 2000; provided, however, that the unaudited financial statements
are subject to normal recurring year-end audit adjustments (which are not
expected to be material), and do not contain all footnotes required under
generally accepted accounting principles.

                2.9 Changes. Since March 31, 2000, there has not been:

                        (a) Any change in the assets, liabilities, financial
condition or operations of the Company from that reflected in the Financial
Statements, other than changes in the ordinary course of business, or any other
event or condition of any character, any of which individually or in the
aggregate has had or is expected to have a material adverse effect on such
assets, liabilities, financial condition or operations of the Company;

                        (b) Any resignation or termination of any key officers
of the Company; and the Company, to the best of its knowledge, does not know of
the impending resignation or termination of employment of any such officer;

                        (c) Any material change, except in the ordinary course
of business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;

                                      -7-

<PAGE>   9

                        (d) Any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the properties,
business or prospects or financial condition of the Company;

                        (e) Any direct or indirect loans made by the Company to,
or any material change in, any compensation arrangement or agreement with, any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;

                        (f) Any declaration or payment of any dividend or other
distribution of the assets of the Company;

                        (g) Any debt, obligation or liability incurred, assumed
or guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business; or any waiver
by the Company of a valuable right or of a material debt owed to it;

                        (h) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets; and

                        (i) To the Company's knowledge, any change in any
material agreement to which the Company is a party or by which it is bound which
materially and adversely affects the business, assets, liabilities, financial
condition, operations or prospects of the Company, including compensation
agreements with the Company's employees.

                2.10 Liabilities. The Company has no material liabilities and
knows of no material contingent liabilities not disclosed in the Financial
Statements, except current liabilities incurred in the ordinary course of
business subsequent to March 31, 2000, which have not been, either in any
individual case or in the aggregate, materially adverse.

                2.11 Litigation. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company that questions
the validity of this Agreement or the right of the Company to enter into it, or
to consummate the transactions contemplated hereby, or which might result,
either individually or in the aggregate, in any material adverse changes in the
assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company, nor is
the Company aware that there is any basis for the foregoing. The foregoing
includes, without limitation, actions pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's employees, their use in connection with the Company's business of any
information or techniques allegedly proprietary to any of their former
employers, or their obligations under any agreements with prior employers. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or

                                      -8-

<PAGE>   10

instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.

                2.12 Compliance with Other Instruments. The Company is not in
violation or default of any provision of its Certificate or Bylaws or any
provision of any mortgage, indenture, contract, agreement, instrument, judgment,
order, writ, or decree to which it is a party or by which it is bound or, to its
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company which would materially and adversely affect the
business, assets, liabilities, financial condition, operations or prospects of
the Company. The execution, delivery and performance of this Agreement, the
Rights Agreement and the Co-Sale Agreement and the consummation of the
transactions contemplated hereby and thereby will not result in any such
material violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such provision,
instrument, judgment, order, writ, decree or contract or an event which results
in the creation of any lien, charge or encumbrance upon any assets of the
Company.

                2.13 Offering. Subject in part to the accuracy of the Investors'
representations set forth in Section 3 hereof, the offer, sale and issuance of
the Shares as contemplated by this Agreement and the issuance of the Conversion
Shares upon the conversion of such Shares are exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
and the registration, qualification or compliance requirements of any applicable
blue sky or other state securities laws, and neither the Company nor any
authorized agent acting on its behalf will take any action that would cause the
loss of any such exemption.

                2.14 Agreements; Action.

                        (a) There are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, affiliates,
or any affiliate thereof.

                        (b) There are no agreements, understandings,
instruments, contracts or proposed transactions to which the Company is a party
or by which it is bound which involve (i) obligations of, or payments to the
Company in excess of $25,000, or (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company (other than
licenses arising from the purchase of "off-the-shelf" products) or (iii)
obligations of, or payments by, the Company to any officer, director, employee
or family member of any such individual.

                        (c) The Company has not (i) declared or paid any
dividends, or authorized or made any distribution upon or with respect to any
class or series of its capital stock, (ii) incurred any indebtedness for money
borrowed or incurred any other liabilities individually in excess of $25,000 or
in excess of $75,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.

                                      -9-

<PAGE>   11

                        (d) The Company is not a party to and is not bound by
any contract, agreement or instrument, or subject to any restriction under its
Certificate or Bylaws, which materially adversely affects its business as now
conducted and as proposed to be conducted.

                        (e) The Company has not engaged in the past twelve (12)
months in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or into
any such corporation or corporations, (ii) with any corporation, partnership,
association or other business entity or any individual regarding the sale,
conveyance or disposition of all or substantially all of the assets of the
Company, or (iii) regarding any other form of liquidation, dissolution or
winding up of the Company.

                2.15 Labor Agreements and Actions. The Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge of
the Company, has sought to represent any of the employees, representatives or
agents of the Company. There is no strike or other labor dispute involving the
Company pending, or to the knowledge of the Company threatened, which could have
a material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. To the best of its
knowledge, the Company is not aware that any officer or key employee, or that
any group of key employees, intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. The employment of each officer and employee
of the Company is terminable at the will of the Company.

                2.16 Tax Returns, Payments and Elections. The Company has filed
all tax returns and reports as required by law. These returns and reports are
true and correct in all material respects. The Company has paid all taxes and
other assessments due, except those contested by it in good faith which are
listed in the Schedule of Exceptions, attached hereto as Exhibit C. The
provision for taxes of the Company as shown in the Balance Sheet is adequate for
taxes due or accrued as of the date thereof. The Company has not elected
pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), to be
treated as a Subchapter S corporation or a collapsible corporation pursuant to
Section 1362(a) or Section 341(f) of the Code, respectively, nor has it made any
other elections pursuant to the Code (other than elections which relate solely
to methods of accounting, depreciation or amortization) which would have a
material effect on the Company, its financial condition, its business as
presently conducted or proposed to be conducted or any of its properties or
material assets.

                2.17 Title to Property and Assets. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's 

                                      -10-

<PAGE>   12

ownership or use of such property or assets. With respect to the property and
assets it leases, the Company is in compliance with such leases and, to the best
of its knowledge, holds a valid leasehold interest free of any liens, claims or
encumbrances.

                2.18 Registration Rights. Except as provided in the Rights
Agreement, a form of which is attached hereto as Exhibit E, the Company has not
granted or agreed to grant any registration rights, including piggyback rights,
to any person or entity.

                2.19 Employee Benefit Plans. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security Act
of 1974, as amended.

                2.20 Obligations of Management. Each officer of the Company is
currently devoting his or her full-time to the conduct of the business of the
Company. The Company is not aware of any officer or key employee or the Company
planning to work less than full-time at the Company in the future.

                2.21 Environmental and Safety Laws. To the best of its
knowledge, the Company is not in violation of any applicable statute, law or
regulation relating to the environment or occupational health and safety, and to
its knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.

                2.22 Disclosure. The Company has fully provided each Investor
with all the information which such Investor has requested for deciding whether
to purchase the Shares and all information which the Company believes is
reasonably necessary to enable such Investor to make such decision. To the best
of the Company's knowledge, neither this Agreement, the Rights Agreement, the
Co-Sale Agreement nor any other statements or certificates made or delivered in
connection herewith, when taken as a whole, contains any untrue statement of a
material fact or omits to state a material fact necessary to make the statements
herein or therein not misleading.

                2.23 Section 83(b) Elections. To the Company's knowledge, all
elections and notices permitted by Section 83(b) of the Internal Revenue Code
and analogous provisions of applicable state tax laws have been timely filed by
all employees who have purchased shares of the Company's common stock under
agreements that provide for the vesting of such shares.

                2.24 Real Property Holding Corporation. The Company is not a
real property holding corporation within the meaning of Internal Revenue Code
Section 897(c)(2) and any regulations promulgated thereunder.

                2.25 Insurance. The Company has fire and casualty insurance
policies with coverage customary for companies similarly situated to the
Company.

                                      -11-

<PAGE>   13

                2.26 Investment Company Act. The Company is not an "investment
company", or a company "controlled" by an "investment", within the meaning of
the Investment Company Act of 1940, as amended.

        3. Representations and Warranties of the Investor. Each Investor hereby
severally and not jointly represents and warrants that:

                3.1 Authorization. This Agreement when executed and delivered by
such Investor shall constitute a valid and legally binding obligation,
enforceable in accordance with its terms, subject to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal or
state laws affecting the rights of creditors and the effect of rules of law
governing specific performance, injunctive relief or other equitable remedies.

                3.2 Purchase Entirely for Own Account. This Agreement is made
with each Investor in reliance upon such Investor's representations and
warranties to the Company, which by such Investor's execution of this Agreement
such Investor hereby confirms, that the Shares to be received by such Investor
and the Conversion Shares (collectively, the "Securities") will be acquired for
investment for such Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that such
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, each Investor
further represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person or entity to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Securities. Each Investor represents that it has full power and authority to
enter into this Agreement.

                3.3 Disclosure of Information. Each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Shares. Each Investor further represents that it has had
an opportunity to ask questions, if any, and receive answers from the Company
regarding the terms and conditions of the offering of the Shares. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 2 of this Agreement or the right of the Investors to rely
thereon.

                3.4 Investment Experience. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, and bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Shares. If
other than an individual, Investor also represents it has not been organized for
the purpose of acquiring the Shares.

                3.5 Regulation D. Each Investor is an "Accredited Investor" as
that term is defined in Regulation D promulgated under the Securities Act.

                                      -12-

<PAGE>   14

                3.6 Restricted Securities. Each Investor understands that the
Shares it is purchasing (and the Conversion Shares) are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, each Investor represents that it is familiar
with Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.

                3.7 Legends. It is understood that the certificates evidencing
the Series D Preferred Stock (or the Conversion Shares) may bear one or all of
the following legends:

                        (a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT. THESE SECURITIES ARE SUBJECT TO A CERTAIN
VOTING PROVISION ENTERED INTO BY AND AMONG THE INVESTORS."

                        (b) Any other legends required by the laws of the State
of Delaware or any other applicable blue sky or state securities laws.

        4. Conditions of Investor's Obligations at Closing. The obligations of
each Investor under this Agreement are subject to the fulfillment on or before
the Closing of each of the following conditions, any of which may be waived in
whole or in part by such Investor with respect to himself, herself or itself
unless required by state or federal law:

                4.1 Representations and Warranties. The representations and
warranties of the Company contained in Section 2 shall be true on and as of the
Closing Date with the same effect as though such representations and warranties
had been made on and as of the date of the Closing.

                4.2 Performance. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.

                4.3 Certificate. The Certificate shall have been filed with the
Secretary of State of the State of Delaware.

                                      -13-

<PAGE>   15

               4.4 Compliance Certificate. The President of the Company shall
deliver to counsel for the Investors at the Closing a certificate certifying
that the conditions specified in Sections 4.1, 4.2 and 4.3 have been fulfilled
and stating that there shall have been no adverse change in the business,
affairs, prospects, operations, properties, assets, liabilities or condition of
the Company since the date of this Agreement.

                4.5 Proceedings and Documents. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to each Investor and counsel to any of the Investors, and they shall
have received all such counterpart original and certified or other copies of
such documents as they may reasonably request.

                4.6 Board of Directors. As of the Closing, the Board of
Directors will be comprised of seven members: Ronald J. Berenson, Robert Curry,
Jean Deleage, Steve Johnson, Peter Langecker, Robert Nelsen and Robert Williams.

                4.7 Rights Agreement. The Company and the Investors shall have
entered into the Rights Agreement in the form attached hereto as Exhibit E.

                4.8 Co-Sale Agreement. The Company, Ronald Berenson, Carl June,
Jeffrey Bluestone, Jeffrey Ledbetter and Craig Thompson and certain of the
Investors shall have entered into the Co-Sale Agreement in the form attached
hereto as Exhibit F.

                4.9 Opinion of Company Counsel. The Investors shall have
received from Venture Law Group, counsel to the Company, an opinion addressed to
them, dated the Closing Date, in the form attached hereto as Exhibit G.

                4.10 Minimum Investment. As of the Closing Date, the sale and
issuance of the Shares by the Company shall amount to a minimum investment by
the Investors of at least eleven million (11,000,000) dollars.

        5. Conditions of the Company's Obligations at Closing. The obligations
of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions any of
which may be waived in whole or in part by the Company unless required by state
or federal law:

                5.1 Representations and Warranties. The representations and
warranties of each Investor contained in Section 3 hereof shall be true and
correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of that date; and each
Investor shall have performed all obligations and conditions required to be
performed or observed by he, she or it on or prior to the Closing Date.

                                      -14-

<PAGE>   16

                5.2 Legal Matters. All material matters of a legal nature which
pertain to this agreement and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.

        6. Miscellaneous.

                6.1 Survival of Warranties. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.

                6.2 Successors and Assigns. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.

                6.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of Washington.

                6.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

                6.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

                6.6 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal deliver to the party to be notified, the refusal
of delivery by such person, or five (5) days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party in
Exhibit A attached hereto or in the case of the Company on the first page of
this Agreement, or at such other address as such party may designate by ten (10)
days' advance written notice to the other parties.

                6.7 Finder's Fee. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or 

                                      -15-

<PAGE>   17

representatives is responsible. The Company agrees to indemnify and hold
harmless each Investor from any liability for any commission or compensation in
the nature of a finders' fee (and the costs and expenses of defending against
such liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.

                6.8 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Shares. Any amendment or waiver effected in accordance with
this Section 6.8 shall be binding upon each holder of any securities purchased
under this Agreement at the time outstanding (including securities into which
such securities are convertible), each future holder of all such securities, and
the Company; provided, however, that no condition set forth in Section 4 hereof
may be waived with respect to any Investor who does not consent thereto.

                6.9 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.

                6.10 Exculpation Among Investors. Each Investor acknowledges
that it is not relying upon any person, firm or corporation, other than the
Company and its officers and directors, in making its investment decision to
invest in the Company. Each Investor agrees that no other Investor nor the
respective controlling persons, officers, directors, partners, agents or
employees of any such other Investor shall be liable for any action heretofore
or hereafter taken or omitted to be taken by any of them in connection with each
Investor's purchase of the Shares and Conversion Shares.

                6.11 Expenses. Upon the Closing of the purchase and sale of
securities as contemplated by this Agreement and the exhibits thereto, the
Company shall pay the fees and reasonable expenses of counsel for the Investors,
which fees shall not exceed $15,000.00.

                            (signature page follows)

                                      -16-

<PAGE>   18

        IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.


                                       XCYTE THERAPIES, INC.


                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------
                                                          (print)
                                       Title:
                                             -----------------------------------

                                       PURCHASERS:


                                       -----------------------------------------
                                       (Print name of Purchaser)

                                       By:
                                          --------------------------------------

                                       Name:
                                            ------------------------------------
                                                          (print)
                                       Title:
                                             -----------------------------------

     [SIGNATURE PAGE TO XCYTE THERAPIES, INC. SERIES D PURCHASE AGREEMENT]

<PAGE>   19

                                    EXHIBIT A

                              SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>
                                                NUMBER OF SERIES D
INVESTOR NAME AND ADDRESS                        PREFERRED SHARES          AMOUNT OF INVESTMENT
<S>                                             <C>                        <C>
DLJ CAPITAL CORP.                                      6,475                         $18,000.50
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Philippe Chambon, M.D. Ph.D.

DLJ FIRST ESC L.P.                                    32,374                         $89,999.72
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Philippe Chambon, M.D. Ph.D.

SPROUT CAPITAL VII, L.P.                              281,622                       $782,909.16
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Philippe Chambon, M.D. Ph.D.

THE SPROUT CEO FUND, L.P.                              3,270                          $9,090.60
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Philippe Chambon, M.D. Ph.D.

ARCH VENTURE FUND III, L.P.                           962,230                     $2,674,999.40
1000 Second Avenue, Suite 3700
Seattle, WA  98104-1053
Attn:  Bob Nelsen

ALTA CALIFORNIA PARTNERS, L.P.                        571,491                     $1,588,744.98
One Embarcadero Center, Suite 4050
San Francisco, CA  94111
Attn: Jean Deleage

ALTA EMBARCADERO PARTNERS, LLC                        13,056                         $36,295.68
One Embarcadero Center, Suite 4050
San Francisco, CA  94111
</TABLE>


<PAGE>   20


<TABLE>
<CAPTION>
                                                NUMBER OF SERIES D
INVESTOR NAME AND ADDRESS                        PREFERRED SHARES          AMOUNT OF INVESTMENT
<S>                                             <C>                        <C>
Attn: Jean Deleage

TGI FUND II, LC                                       286,022                       $795,141.16
6501 Columbia Center 
701 - 5th Avenue Seattle, WA 98104
Attn:  Michael Beblo and Steven Johnson

FALCON TECHNOLOGY PARTNERS, L.P.                      95,341                        $265,047.98
600 Dorset Road
Devon, PA  19333
Attn: Jim Rathman

VULCAN VENTURES INC.                                  719,424                     $1,999,998.72
110 110th Avenue, NE, Suite 550
Bellevue, WA  98004
Attn:  Ruth B. Kunath

FLUKE CAPITAL MANAGEMENT, L.P.                        89,928                        $249,999.84
11400 SE 6th Street, Suite 230
Bellevue, WA  98004
Attn:  Dennis Weston

TOM ALBERG                                            719,424                     $1,999,998.72
c/o Madrona Investment Group
1000 2nd Avenue
Seattle, WA  98104

MGN OPPORTUNITY GROUP LLC                             359,712                       $999,999.36
Matthew G. Norton Company
The Norton Building
801 Second Avenue, Suite 1300
Seattle, WA  98104
Attn:  Stephen Humphreys
</TABLE>


                                      -2-

<PAGE>   21


<TABLE>
<CAPTION>
                                                NUMBER OF SERIES D
INVESTOR NAME AND ADDRESS                        PREFERRED SHARES          AMOUNT OF INVESTMENT
<S>                                             <C>                        <C>
ARNOLD L. HOLM, JR.                                   36,000                        $100,080.00
Holm Construction Services
310 3rd Avenue NE, Suite 103
Issaquah, WA  98027

HENRY JAMES                                           89,928                        $249,999.84
22420 North Dogwood Lane
Woodway, WA  98020

OKI ENTERPRISES, LLC                                  359,712                       $999,999.36
c/o Scott Oki
10838 Main Street
Bellevue, WA  98004

VLG INVESTMENTS LLC                                   12,619                         $35,080.82
c/o Elias J. Blawie
2800 Sand Hill Road
Menlo Park, CA 94025

VLG ASSOCIATES 2000                                    1,770                          $4,920.60
c/o Elias J. Blawie
2800 Sand Hill Road
Menlo Park, CA 94025

SONYA F. ERICKSON                                      1,799                           $5001.22
4750 Carillon Point
Kirkland, WA 98033

TOTAL                                                4,642,197                   $12,905,307.66
</TABLE>


                                      -3-

<PAGE>   22

                                    EXHIBIT B

                          FORM OF AMENDED AND RESTATED

                          CERTIFICATE OF INCORPORATION
                                 (SEE TAB NO. 4)


<PAGE>   23


                                    EXHIBIT C

                             SCHEDULE OF EXCEPTIONS


<PAGE>   24

                                    EXHIBIT D

                    FORM OF PROPRIETARY INFORMATION AGREEMENT


<PAGE>   25

                                    EXHIBIT E

                          FORM OF AMENDED AND RESTATED
                            INVESTOR RIGHTS AGREEMENT
                                 (SEE TAB NO. 2)


<PAGE>   26

                                    EXHIBIT F

                          FORM OF AMENDED AND RESTATED
                  RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
                                 (SEE TAB NO. 3)


<PAGE>   27

                                    EXHIBIT G

                    FORM OF OPINION OF COUNSEL TO THE COMPANY
                                (SEE TAB NO. 11)



<PAGE>   1
                                                                    EXHIBIT 10.3

                              XCYTE THERAPIES, INC.

           ADDENDUM TO SERIES D PREFERRED STOCK PURCHASE AGREEMENT AND
               OMNIBUS AMENDMENT TO SERIES D FINANCING AGREEMENTS

        This Addendum to Series D Preferred Stock Purchase Agreement and Omnibus
Amendment to Series D Financing Agreements (the "Addendum") is made as of the
8th day of August, 2000 by and among Xcyte Therapies, Inc., a Delaware
corporation (the "Company"), the investors listed on Exhibit A attached hereto
(each an "Additional Purchaser" and together the "Additional Purchasers"), the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock listed on Exhibit B hereto (each a "Series A Investor," "Series
B Investor" and "Series C Investor" and together the "Series A Investors,"
"Series B Investors" and "Series C Investors"), the existing holders of Series D
Preferred Stock listed on Exhibit C hereto (each an "Initial Series D Investor,"
together the "Initial Series D Investors" and together with the Series A
Investors, Series B Investors and Series C Investors, the "Investors") and
Ronald J. Berenson, Jeffrey Bluestone, Carl June, Jeffrey Ledbetter and Craig
Thompson, each of whom is herein referred to as a "Founder." All capitalized
terms not defined herein shall have
 the meaning set forth in the Purchase
Agreement (defined herein).

                                    RECITALS

        WHEREAS, on May 25, 2000, the Company entered into a Series D Preferred
Stock Purchase Agreement attached hereto as Exhibit F (the "Purchase Agreement")
with the Initial Series D Investors. The Purchase Agreement provides in Section
1.4 thereof that additional investors may, under conditions set forth therein,
become parties to the Purchase Agreement at any time on or before August 8,
2000;

        WHEREAS, the parties hereto desire, through this Addendum, to amend the
Purchase Agreement, the Amended and Restated Investor Rights Agreement dated as
of May 25, 2000 by and among the Company, the Founders and the Investors
attached hereto as Exhibit G (the "Investor Rights Agreement") and the Amended
and Restated Right of First Refusal and Co-Sale Agreement attached hereto as
Exhibit H (the "Co-Sale Agreement" and together with the Purchase Agreement and
the Investor Rights Agreement, the "Agreements");

        WHEREAS, pursuant to the terms of Section 8.1 of the Investor Rights
Agreement, the Investors' Rights Agreement may be amended only with the written
consent of the Company and the holders of a two-thirds of the Registrable
Securities (as defined therein) then outstanding, (as defined therein);

        WHEREAS, pursuant to the terms of Section 7.4 of the Co-Sale Agreement,
the Co-Sale Agreement may be amended only with the written consent of the
Company, each Stockholder (as defined therein) and the holders of a majority of
the Investor Stock (as defined therein) then outstanding, (as defined therein);

        WHEREAS, pursuant to the terms of Section 6.8 of the Purchase Agreement,
the Purchase Agreement may be amended only with the written consent of the
Company and Initial


                                      -1-

<PAGE>   2

Series D Investors holding at least a majority of the Stock (or the Common Stock
issuable upon conversion thereof);

        WHEREAS, the Company, the Additional Purchasers, the undersigned
Investors and the undersigned Founders, constituting the holders of sufficient
shares of capital stock of the Company to amend each of the Agreements, desire
to amend certain terms and conditions of the Agreements;

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:



                                    AGREEMENT

        In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:

        1. AUTHORIZATION AND SALE OF PREFERRED STOCK AND WARRANTS.

                1.1 AUTHORIZATION OF PREFERRED STOCK. The Company has authorized
the issuance pursuant to this Addendum of up to 9,390,400 shares of its Series D
Preferred Stock (the "Additional Shares") and the issuance of Warrants to
purchase 1,051,712 shares of Common Stock (the "Warrants") to the Initial Series
D Investors and the Additional Purchasers. The rights, preferences, privileges
and restrictions of the Series D Preferred Stock are as set forth in the
Company's Amended and Restated Certificate of Incorporation attached as Exhibit
J to the Purchase Agreement (the "Restated Certificate").

                1.2 SALE OF PREFERRED STOCK AND WARRANTS. Subject to the terms
and conditions hereof, at the Closing (as defined in Section 2.1 hereof) the
Company will issue and sell to each Additional Purchaser, and each Additional
Purchaser severally agrees to purchase from the Company, that number of
Additional Shares at a cash purchase price of $2.78 per share of Series D
Preferred Stock and Warrants at a cash purchase price of $0.001 per share of
Common Stock specified opposite such Additional Purchaser's name on Exhibit A
hereto. Each of the Additional Purchasers, by their signatures hereto, shall
hereby (i) become parties to the Purchase Agreement, as amended by this Addendum
(ii) be considered a "Purchaser" for all purposes under the Purchase Agreement,
(iii) have all the rights and obligations of a Purchaser thereunder, (iv) become
parties to the Investors' Rights Agreement, as amended, and Voting Agreement, as
amended, (v) be considered a "Series D Investor" for all purposes under the
Investor Rights Agreement, as amended, and (vi) have all the rights and
obligations of an Investor thereunder. In addition, at the Closing, the Company
will issue and sell to each Initial Series D Investor the Warrants specified
opposite such Initial Series D Investor's name on Exhibit A hereto at a cash
purchase price of $0.001 per share. The Additional Shares, the Warrants and the
Common Stock issuable upon exercise of the Warrants (the "Warrant Shares")
acquired by the Additional Purchasers and the Initial Series D Investors
hereunder shall be considered "Shares" for all purposes under the Purchase
Agreement, as amended.


                                      -2-

<PAGE>   3

        2. CLOSING; DELIVERY.

                2.1 CLOSING. The closing of the purchase and sale of the
Additional Shares and Warrants hereunder (the "Closing") shall be held at the
offices of Venture Law Group, Kirkland, Washington, at 10:00 a.m., on August 8,
2000, or at such other time and place as the Company and the Additional
Purchasers may agree.

                2.2 DELIVERY. At the Closing, the Company will deliver to each
Additional Purchaser a certificate representing the number of Additional Shares
and Warrants set forth opposite such Additional Purchaser's name on Exhibit A,
against payment of the purchase price therefor by each Additional Purchaser by
check or wire transfer to the Company. In addition, the Company will deliver to
each Initial Series D Investor the Warrants specified opposite such Initial
Series D Investor's name on Exhibit A, against payment of the purchase price
therefor by each Initial Series D Investor by check or wire transfer to the
Company.

        3. DISCLOSURE; CAPITALIZATION.

                3.1 DISCLOSURE. Each Additional Purchaser hereby acknowledges
receipt of the Purchase Agreement and the exhibits thereto. The Company affirms
to each Additional Purchaser that:

                        (i) The representations and warranties of the Company
set forth in Section 2 of the Purchase Agreement were true and accurate when
made;

                        (ii) Those representations and warranties, which are
incorporated herein by this reference and made a part hereof, remain true and
accurate in all material respects as of the date hereof, except (A) for changes
resulting from the transactions contemplated in the Purchase Agreement and (B)
as set forth in the Schedule of Exceptions to Representations and Warranties
attached hereto as Exhibit D.

                        (iii) The conditions to closing set forth in Section 4
of the Purchase Agreement and in Section 5 hereof have been satisfied, provided
that the conditions set forth in Section 4.1 of the Purchase Agreement shall
include references to changes in the Company's representations and warranties
and the Company's status, respectively, as set forth herein and in the Exhibits
attached hereto, and resulting from the consummation of the transactions
contemplated by the Purchase Agreement.

                3.2 CAPITALIZATION. Immediately prior to the Closing, the
authorized capital of the Company shall consist of:

                        (i) Immediately prior to the Closing, the authorized
capital of the Company shall consist of: (a) 40,000,000 shares of Common Stock,
and (b) 28,109,976 shares of Preferred Stock (the "Preferred Stock"), of which
7,300,080 have been designated Series A Preferred Stock, 4,097,580 have been
designated Series B Preferred Stock, 7,212,316 have been designated Series C
Preferred Stock and 9,500,000 have been designated Series D Preferred Stock.
Immediately prior to the Closing, 5,965,234 shares of Common Stock, 6,860,512
shares 


                                      -3-

<PAGE>   4

of Series A Preferred Stock, warrants to purchase 439,568 shares of Series A
Preferred Stock, 3,903,080 shares of Series B Preferred Stock, and warrants to
purchase 194,500 shares of Series B Preferred Stock, 7,185,630 shares of Series
C Preferred Stock, warrants to purchase 26,686 shares of Series C Preferred
Stock and 4,642,197 shares of Series D Preferred Stock will be outstanding.

                        (ii) Except as set forth in this Agreement and the
exhibits thereto, there are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock except that the Company has
reserved (a) the Shares for issuance at Closing, (b) the Common Stock issuable
upon conversion of the Preferred Stock, (c) 2,500,000 shares of Common Stock
reserved for issuance pursuant to a stock option plan adopted by the Company of
which options to purchase 988,453 shares have been granted and remain
outstanding, with 1,423,122 shares remaining for grant (d) 898,150 shares of
Common Stock reserved for issuance to scientific founders upon the achievement
of certain milestones, and (e) 157,890 shares of Common Stock reserved for
issuance to Carl June or his assignees upon the Company's acquisition of certain
future technology.

                        (iii) Based in part upon the representations of each
Purchaser in this Addendum and subject to the provisions of Section 2.5 of the
Purchase Agreement, the Stock (and the Common Stock issuable upon conversion
thereof) has been issued or will be issued in compliance with all applicable
federal and state securities laws.

        4. REPRESENTATIONS AND WARRANTIES OF ADDITIONAL PURCHASERS AND INITIAL
SERIES D INVESTORS. Each Additional Purchaser and Initial Series D Investor,
severally and not jointly, acknowledges that such Additional Purchaser has
reviewed the representations and warranties set forth in Section 3 of the
Purchase Agreement and agrees with the Company that such representations and
warranties, which are incorporated herein by this reference and made a part
hereof, are true and correct as of the date hereof as they relate to such
Additional Purchaser's purchase of the Additional Shares and Warrants, or
Initial Series D Investor's purchase of Warrants, as the case may be, hereunder.

        5. CONDITIONS TO ADDITIONAL PURCHASERS' OBLIGATIONS AT CLOSING. The
obligation of each Additional Purchaser to purchase the Additional Shares at the
Closing is subject to the fulfillment to such Additional Purchaser's
satisfaction at or prior to the Closing of the following conditions:

                5.1 REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct when made, and shall be true and correct on the
date of the Closing with the same force and effect as if they had been made on
and as of said date, subject to changes contemplated by this Addendum; and the
Company shall have performed all obligations and conditions herein required to
be performed or observed by it at or prior to the Closing.


                                      -4-

<PAGE>   5

                5.2 CONSENTS AND WAIVERS. The Company shall have obtained any
and all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Addendum.

                5.3 LEGAL OPINION. Upon request, each of the Additional
Purchasers will be entitled to receive from Venture Law Group, legal counsel for
the Company, a legal opinion addressed to the Additional Purchasers
substantially in the form attached hereto as Exhibit I.

        6. CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company under Sections 1.1 and 1.2 of this Addendum are subject to the
fulfillment at or before the Closing of each of the following conditions:

                6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Additional Purchaser and Initial Series D Investor contained
in Section 4 hereof shall be true at the Closing.

                6.2 CONSENTS AND WAIVERS. The Company shall have obtained any
and all consents and waivers necessary or appropriate for the Purchasers to
become parties to the Investor Rights Agreement for the consummation of the
transactions contemplated by this Addendum.

        7. AMENDMENTS TO AGREEMENTS.

                7.1 STOCK PURCHASE AGREEMENT. The Purchase Agreement is amended
to provide for the sale by the Company of Series D Preferred Stock and Warrants,
substantially in the form attached hereto as Exhibit E, to purchase that number
of shares of Common Stock indicated on Exhibit A; and all references to "Shares"
in the Purchase Agreement shall be amended to include the Warrant Shares, as
appropriate.

                7.2 INVESTOR RIGHTS AGREEMENT.

                        (i) Section 1.1(g) of the Investor Rights Agreement is
hereby amended to read in its entirety as follows:

                        "(a) The term "Registrable Securities" means (1) the
        Common Stock issued or issuable upon conversion of the Series A
        Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
        Series D Preferred Stock or any Common Stock issued upon conversion of
        the Series A Preferred Stock, Series B Preferred Stock, Series C
        Preferred Stock or Series D Preferred Stock issuable upon the exercise
        of outstanding warrants to purchase such shares of Preferred Stock, (2)
        up to 1,051,712 shares of Common Stock of the Company issued or issuable
        upon exercise of warrants issued to the holders of Series D Preferred
        Stock, (3) up to 6,158 shares of Common Stock of the Company issued or
        issuable upon conversion of the Series C Preferred Stock issued or
        issuable upon exercise of that certain warrant issued to Phoenix Leasing
        Incorporated, (4) up to 


                                      -5-

<PAGE>   6

        6,157 shares of Common Stock of the Company issued or issuable upon
        conversion of the Series C Preferred Stock issued or issuable upon
        exercise of that certain warrant issued to Robert Kingsbook and (5) any
        Common Stock of the Company issued as (or issuable upon the conversion
        or exercise of any warrant, right or other security which is issued as)
        a dividend or other distribution with respect to, or in exchange for or
        in replacement of, such Preferred Stock or Common Stock, excluding in
        all cases, however, (i) any Registrable Securities sold by a person in a
        transaction in which such person's rights under this Section 1 are not
        assigned, or (ii) any Registrable Securities sold to or through a broker
        or dealer or underwriter in a public distribution or a public securities
        transaction; and"


                        (ii) Section 1.11(a)(ii) of the Investor Rights
Agreement is hereby amended to read in its entirety as follows:

                        "(i) as soon as practicable, effect such registration
        and all such qualifications and compliances as may be so requested and
        as would permit or facilitate the sale and distribution of all or such
        portion of such Holder's or Holders' Registrable Securities as are
        specified in such request, together with all or such portion of the
        Registrable Securities of any other Holder or Holders joining in such
        request as are specified in a written request given within 15 days after
        receipt of such written notice from the Company; provided, however, that
        the Company shall not be obligated to effect any such registration,
        qualification or compliance, pursuant to this Section 1.11: (1) if Form
        S-3 is not available for such offering by the Holders; (2) if the
        Holders, together with the holders of any other securities of the
        Company entitled to inclusion in such registration, propose to sell
        Registrable Securities and such other securities (if any) at an
        aggregate price to the public (net of any underwriters' discounts or
        commissions) of less than $1,000,000; (3) if the Company shall furnish
        to the Holders a certificate signed by the President of the Company
        stating that in the good faith judgment of the Board of Directors of the
        Company, it would be seriously detrimental to the Company and its
        stockholders for such Form S-3 Registration to be effected at such time,
        in which event the Company shall have the right to defer the filing of
        the Form S-3 registration statement for a period of not more than 120
        days after receipt of the request of the Holder or Holders under this
        Section 1.11; provided, however, that the Company shall not utilize this
        right more than once in any twelve (12) month period; (4) if the Company
        has already effected one registration on Form S-3 within the past six
        (6) months for the Holders pursuant to this Section 1.11; (5) in any
        particular jurisdiction in which the Company would be required to
        qualify to do business or to execute a general consent to service of
        process in effecting such registration, 


                                      -6-

<PAGE>   7

        qualification or compliance; (6) if the Company, within ten (10) days of
        the receipt of the request of the initiating Holders, gives notice of
        its bona fide intention to effect the filing of a registration statement
        with the Commission within ninety (90) days of receipt of such request
        (other than with respect to a registration statement relating to a Rule
        145 transaction, or an offering solely to employees); or (7) during the
        period starting with the date ninety (90) days prior to the Company's
        estimated date of filing of, and ending on the date six (6) months
        immediately following, the effective date of any registration statement
        pertaining to securities of the Company (other than a registration of
        securities in a Rule 145 transaction or with respect to an employee
        benefit plan), provided that the Company is actively employing in good
        faith all reasonable efforts to cause such registration statement to
        become effective."

                        (iii) Section 3 of the Investor Rights Agreement is
hereby amended to read in its entirety as follows:

                        "3. Voting Provisions. The undersigned hereby agree that
        in all elections of directors of the Company the Investors will vote
        their shares such that one nominee designated by Alta Venture Partners,
        one nominee designated by the Sprout Group, one nominee designated by
        ARCH Venture Fund III, L.P., one nominee designated by TGI Fund II and
        one nominee designated by MPM Capital will be elected to the Company's
        Board of Directors. This Section 3 shall automatically terminate upon
        the earlier to occur of: (i) a Qualified Public Offering or (ii) when
        the Company first becomes subject to the periodic reporting requirements
        of Sections 12(g) or 15(d) of the Securities Exchange Act of 1934, as
        amended."

                        (iv) Waiver of Preemptive Rights. To the extent that an
Investor under the Investor Rights Agreement or Additional Purchaser is not
purchasing its pro rata share of Series D Preferred Stock pursuant to the
Purchase Agreement or Addendum, all rights under the Preemptive Rights set forth
in Section 2 of the Investor Rights Agreement to purchase such securities and to
receive notice is hereby waived. This waiver is effective upon the execution of
this Addendum.

                7.3 CO-SALE AGREEMENT.

                        (i) Section 1.1 of the Co-Sale Agreement is hereby
amended to read in its entirety as follows:

                        "1.1 "Common Stock Equivalents" means and includes all
        shares of the Company's Common Stock issued and outstanding at the
        relevant time plus (i) all shares of Common Stock issuable upon exercise
        of any options, warrants and other rights of any kind that are then


                                      -7-

<PAGE>   8

        exercisable, and (ii) all shares of Common Stock issuable upon
        conversion or exchange of (A) any convertible securities, including,
        without limitation, Preferred Stock and debt securities then
        outstanding, which are by their terms then convertible into or
        exchangeable for Common Stock, or (B) any such convertible securities
        issuable upon exercise of options, warrants or other rights that are
        then exercisable."


                        (ii) Section 1.4 of the Co-Sale Agreement is hereby
amended to read in its entirety as follows:

                        "1.4 "Investor Stock" means (i) as to the Investors, the
        Common Stock Equivalents currently owned or hereafter acquired by the
        Investors, or (ii) as to the Transferee, the Series A Preferred Stock,
        Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
        Stock, shares exercisable into Common Stock issued in connection with
        the Series D Preferred Stock or the Common Stock transferred to the
        Transferee by Investor and still held by Transferee (expressed in Common
        Stock Equivalents) plus all Common Stock Equivalents acquired by
        Transferee pursuant to Section 2.3 of this Agreement."

                        (iii) Section 1.6 of the Co-Sale Agreement is hereby
amended to read in its entirety as follows:

                        "1.6 "Transferee" means (i) any transferee of at least
        twenty percent (20%) of the Investors' originally-purchased Series A
        Preferred Stock, Series B Preferred Stock, Series C Preferred Stock or
        Series D Preferred Stock, the Common Stock issued upon conversion
        thereof or the Common Stock issued upon exercise of Warrants held by
        Investors or (ii) any transferee who is an affiliate of the Investor
        effecting the transfer, including, with respect to a party which is a
        partnership or limited liability company, its partners, members or an
        affiliated entity managed by the same manager or managing partner or
        management company, or managed or owned by an entity controlling,
        controlled by or under common control with, such manager or managing
        partner or management company."


                        (iv) Section 7.4 of the Co-Sale Agreement is hereby
amended to read in its entirety as follows:

                        "7.4 Amendment. Any amendment, modification or waiver of
        this Agreement shall be effective only with the written consent of the
        Investors holding more than fifty percent (50%) of the then outstanding
        Investor Stock, a majority of the Stockholders and the Company;
        provided, 


                                      -8-

<PAGE>   9

        however, that any person may waive, reduce or release (in whole or in
        part) any of its rights hereunder without the consent of any other
        parties hereto. Any waiver by a party of its rights hereunder shall be
        effective only if evidenced by a written instrument executed by a duly
        authorized representative of such party. Any amendment or waiver
        effected in accordance with this Section 7.4 shall be binding upon the
        Company, the Investors and the Stockholders, and each of their
        respective successors and assigns. Notwithstanding the foregoing, the
        Company may, without obtaining any further consent of the Investors and
        Stockholders, amend this Agreement to the extent necessary to grant
        rights and obligations on a pari passu basis with the rights and
        obligations of the Series D Preferred Stock Investors hereunder to
        investors in any subsequent round of financing prior to the Subsequent
        Closing Date (as such term is defined in the Series D Preferred Stock
        Purchase Agreement), and such investors shall become parties to this
        Agreement by executing a counterpart hereof."


        8. MISCELLANEOUS.

                8.1 INCORPORATION BY REFERENCE. The provisions set forth in
Section 6 of the Purchase Agreement (other than Section 6.6) are incorporated
herein by this reference and made a part hereof. Except as otherwise set forth
herein, the terms and conditions of the Purchase Agreement shall remain in full
force and effect notwithstanding the execution of this Agreement and are
incorporated in their entirety herein and made a part of this Addendum as if
fully set forth herein.

                8.2 NOTICES. Any notice required or permitted by this Addendum
and/or the Agreements shall be in writing and shall be deemed sufficient upon
delivery, when delivered personally or sent by overnight courier telegram or
fax, or forty-eight (48) hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address or fax number (as set forth below or in
the Purchase Agreement or on Exhibit A hereto or thereto, or as subsequently
modified by written notice) and (a) if to the Company, with a copy to Sonya F.
Erickson, Venture Law Group, 4750 Carillon Point, Kirkland, Washington 98033,
fax number (425) 739-8750 or (b) if to the Purchasers, with a copy to Laura
Hodges-Taylor, Goodwin, Proctor & Hoar LLP, Exchange Place, Boston, MA 02109,
fax number (617) 570-8150.

                8.3 COUNTERPARTS. This Addendum may be executed in any number of
counterparts, each of which may be executed by less than all of the Additional
Purchasers, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.


                                      -9-

<PAGE>   10

                8.4 FEES AND EXPENSES. The Company shall pay the reasonable fees
and expenses of Goodwin, Proctor & Hoar LLP, the counsel for the Purchasers,
incurred with respect to this Agreement, the documents referred to herein and
the transactions contemplated hereby and thereby, provided such fees and
expenses do not exceed $20,000.





                            [Signature page follows]














                                      -10-

<PAGE>   11


        The parties hereto have executed this Addendum as of the date first set
forth above.

                                XCYTE THERAPIES, INC.


                                By:
                                   ---------------------------------------------
                                   Ron J. Berenson, Chief Executive Officer

                                Address: 1124 Columbia Street, Suite 130
                                         Seattle, WA  98104
                                Fax:     (206) 262-6200














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<PAGE>   12



                                ADDITIONAL PURCHASERS:

                                MPM BIOVENTURES II, L.P.

                                By: MPM Asset Management II, L.P., its General 
                                    Partner
                                By: MPM Asset Management II LLC,  its General 
                                    Partner

                                By:
                                   ---------------------------------------------
                                Name:
                                Title:

                                MPM BIOVENTURES II-QP, L.P.

                                By: MPM Asset Management II, L.P., its General 
                                    Partner
                                By: MPM Asset Management II LLC,  its General 
                                    Partner

                                By:
                                   ---------------------------------------------
                                Name:
                                Title:

                                MPM BIOVENTURES GMBH & CO. 
                                PARALLEL-BETEILIGUNGS KG

                                By: MPM Asset Management II, L.P., its General 
                                    Partner
                                By: MPM Asset Management II LLC,  its General 
                                    Partner

                                By: 
                                   ---------------------------------------------
                                Name:
                                Title:

                                MPM ASSET MANAGEMENT INVESTORS 2000 B LLC

                                By:
                                   ---------------------------------------------
                                Name:
                                Title:


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<PAGE>   13


                                ADDITIONAL PURCHASERS:

                                ----------------------------------
                                JOHN E. PARKEY

                                Address: Tredegar Investments
                                         6501 Columbia Center
                                         701 Fifth Avenue
                                         Seattle, WA  98104










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<PAGE>   14



                                ADDITIONAL PURCHASERS:

                                ----------------------------------
                                NEIL RUZIC

                                Address: c/o Little Stirrup Cay Research Limited
                                             345 East Lake Front Drive
                                             Beverly Shores, IN  46301










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<PAGE>   15




                                ADDITIONAL PURCHASERS:

                                ----------------------------------
                                ARCH VENTURE FUND III, L.P.

                                By:
                                   ---------------------------------------------

                                Name:
                                     -------------------------------------------
                                                      (print)
                                Title:
                                      ------------------------------------------

                                  Address: 1000 Second Avenue, Suite 3700
                                           Seattle, WA  98104-1053
                                           Attn:  Bob Nelsen








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<PAGE>   16


                                ADDITIONAL PURCHASERS:

                                ----------------------------------
                                JIM ROBERTS

                                Address: 2540 Shoreland Drive South
                                         Seattle, WA  98144










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<PAGE>   17



                                ADDITIONAL PURCHASERS:

                                ----------------------------------
                                MARK GROUDINE

                                Address: 1142 20th Avenue East
                                         Seattle, WA  98112










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<PAGE>   18

FOUNDERS:

------------------------------------
RONALD J. BERENSON



------------------------------------
JEFFREY BLUESTONE



------------------------------------
CARL JUNE



------------------------------------
JEFFREY LEDBETTER



------------------------------------
CRAIG THOMPSON




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<PAGE>   19


INITIAL SERIES D INVESTORS:

DLJ CAPITAL CORP.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: 3000 Sand Hill Road, Bldg. 3, Suite 170
         Menlo Park, CA  94025

DLJ FIRST ESC, L.P.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: 3000 Sand Hill Road, Bldg. 3, Suite 170
         Menlo Park, CA  94025

SPROUT CAPITAL VII, L.P.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: 3000 Sand Hill Road, Bldg. 3, Suite 170
         Menlo Park, CA  94025

THE SPROUT CEO FUND, L.P.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: 3000 Sand Hill Road, Bldg. 3, Suite 170
         Menlo Park, CA  94025

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<PAGE>   20

INITIAL SERIES D INVESTORS:

ARCH VENTURE FUND III, L.P.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: 1000 Second Avenue, Suite 3700
         Seattle, WA  98104-1053
         Attn:  Bob Nelsen


SERIES A AND B INVESTOR:

ARCH VENTURE FUND II, L.P.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: 1000 Second Avenue, Suite 3700
         Seattle, WA  98104-1053
         Attn:  Bob Nelsen







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<PAGE>   21

INITIAL SERIES D INVESTORS:

ALTA CALIFORNIA PARTNERS, L.P.

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: One Embarcadero Center, Suite 4050
         San Francisco, CA  94111
         Attn:  Jean Deleage


ALTA EMBARCADERO PARTNERS, LLC

By:
   ---------------------------------------
Name:
     -------------------------------------
                     (print)
Title:
      ------------------------------------

Address: One Embarcadero Center, Suite 4050
         San Francisco, CA  94111
         Attn: Jean Deleage








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<PAGE>   22



INITIAL SERIES D INVESTORS:


------------------------------------
TGI FUND II, LC

Address: 6501 Columbia Center
         701 5th Avenue
         Seattle, WA 98104
         Attn:  Michael Beblo & Dave Maki














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<PAGE>   23

INITIAL SERIES D INVESTORS:


------------------------------------
FALCON TECHNOLOGY PARTNERS, L.P.

Address: 600 Dorset Road
         Devon, PA 19333
         Attn:  Jim Rathman















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<PAGE>   24



INITIAL SERIES D INVESTORS:


------------------------------------
VULCAN VENTURES, INC.

Address: 110 110th Avenue NE, Suite 550
         Bellevue, WA  98004
         Attn: Ruth B. Kunath















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<PAGE>   25

INITIAL SERIES D INVESTORS:


------------------------------------
FLUKE CAPITAL MANAGEMENT, L.P.

Address: 11400 SE 6th Street, Suite 230
         Bellevue, WA  98004
         Attn: Dennis Weston














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<PAGE>   26

INITIAL SERIES D INVESTORS:


------------------------------------
TOM ALBERG

Address: c/o Madrona Investment Group
         1000 2nd Avenue
         Seattle, WA 98104
















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<PAGE>   27

INITIAL SERIES D INVESTORS:


------------------------------------
MGN OPPORTUNITY GROUP LLC

Address: The Norton Building
         801 Second Avenue, Suite 1300
         Seattle, WA 98104
         Attn: Stephen Humphreys















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<PAGE>   28

INITIAL SERIES D INVESTORS:


------------------------------------
ARNOLD L. HOLM, JR.

Address: Holm Construction Services
         310 3rd Avenue NE, Suite 103
         Issaquah, WA  98027














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<PAGE>   29

INITIAL SERIES D INVESTORS:


------------------------------------
HENRY JAMES

Address: 22420 North Dogwood Lane
         Woodway, WA 98020














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<PAGE>   30

INITIAL SERIES D INVESTORS:


------------------------------------
OKI ENTERPRISES, LLC

Address: c/o Scott Oki
         10838 Main Street
         Bellevue, WA  98004
















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<PAGE>   31

INITIAL SERIES D INVESTORS:


------------------------------------
VLG INVESTMENTS LLC

Address: c/o Elias J. Blawie
         2800 Sand Hill Road
         Menlo Park, CA  94025


------------------------------------
VLG ASSOCIATES 2000

Address: c/o Elias J. Blawie
         2800 Sand Hill Road
         Menlo Park, CA  94025












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<PAGE>   32



INITIAL SERIES D INVESTORS:


------------------------------------
SONYA F. ERICKSON

Address: 4750 Carillon Point
         Kirkland, WA  98033


SERIES C WARRANT HOLDER:

------------------------------------
PHOENIX GROWTH CAPITAL CORP.

Address: 2401 Kerner Boulevard
         San Rafael, CA  94901-5529
         Attn:  Bob Borges

SERIES C WARRANT HOLDER:

------------------------------------
ROBERT KINGSBOOK

Address: c/o Capital Finance Group
         6777 Moore Drive
         Oakland, CA  94611









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<PAGE>   33

SERIES A, B, OR C INVESTOR:

By:
   ------------------------------------

Its:
   ------------------------------------

   ------------------------------------
               Print Name
















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<PAGE>   34

                                    EXHIBIT A

                        SCHEDULE OF ADDITIONAL PURCHASERS

<TABLE>
<CAPTION>
                                                                                NUMBER OF
                                                AMOUNT          NUMBER OF        WARRANT     PURCHASE PRICE
         NAME/ADDRESS                          INVESTED          SHARES          SHARES       OF WARRANTS
         ------------                          --------          ------          ------       -----------
<S>                                         <C>                 <C>            <C>            <C>
MPM BIOVENTURES II, LP
One Cambridge Center                        $   891,598.82        320,719         35,921      $     35.92
Cambridge, MA 02142

MPM BIOVENTURES II-QP, LP
One Cambridge Center                        $ 8,078,402.00      2,905,900        325,460      $    325.46
Cambridge, MA 02142

MPM BIOVENTURES GMBH & CO. 
PARALLEL-BETEILIGUNGS KG                    $ 2,844,001.16      1,023,022        114,578      $    114.58
One Cambridge Center
Cambridge, MA 02142

MPM ASSET MANAGEMENT
INVESTORS 2000 B LLC                        $   185,998.68         66,906          7,494      $      7.49
One Cambridge Center
Cambridge, MA 02142

JOHN E. PARKEY
Tredegar Investments                        $    50,001.08         17,986          2,014      $      2.01
6501 Columbia Center
701 Fifth Avenue
Seattle, WA 98104

NEIL RUZIC
Little Stirrup Cay Research Ltd.            $    50,001.08         17,986          2,014      $      2.01
345 Each Lake Front Drive
Beverly Shores, IN 46301

ARCH VENTURE FUND III, L.P. 
1000 Second Avenue, Suite 3700              $   999,999.36        359,712         40,287      $     40.29
Seattle, WA 98104-1053
Attn: Bob Nelsen

JIM ROBERTS
2540 Shoreland Drive South                  $    50,001.08         17,986          2,014      $      2.01
Seattle, WA 98144
</TABLE>




<PAGE>   35


<TABLE>
<CAPTION>
                                                                                NUMBER OF
                                                AMOUNT          NUMBER OF        WARRANT     PURCHASE PRICE
         NAME/ADDRESS                          INVESTED          SHARES          SHARES       OF WARRANTS
         ------------                          --------          ------          ------       -----------
<S>                                         <C>                 <C>            <C>            <C>
MARK GROUDINE
1142 20th Avenue East                       $    50,001.08         17,986          2,014      $      2.01
Seattle, WA 98112

DLJ CAPITAL CORP 
3000 Sand Hill Road                                                                  725      $      0.73
Building Three, Suite 170
Menlo Park, CA 94025
Attn: Bob Curry

DLJ FIRST ESC L.P. 
3000 Sand Hill Road                                                                3,625      $      3.63
Building Three, Suite 170
Menlo Park, CA 94025
Attn: Bob Curry

SPROUT CAPITAL VII, L.P. 
3000 Sand Hill Road                                                               31,541      $     31.54
Building Three, Suite 170
Menlo Park, CA 94025
Attn: Bob Curry

THE SPROUT CEO FUND, L.P. 
3000 Sand Hill Road                                                                  366      $      0.37
Building Three, Suite 170
Menlo Park, CA 94025
Attn: Bob Curry

ARCH VENTURE FUND III, L.P. 
1000 Second Avenue, Suite 3700                                                   107,769      $    107.77
Seattle, WA 98104-1053
Attn: Bob Nelsen

ALTA CALIFORNIA PARTNERS, L.P. 
One Embarcadero Center, Suite 4050                                                64,006      $     64.01
San Francisco, CA 94111
Attn: Jean Deleage
</TABLE>




<PAGE>   36


<TABLE>
<CAPTION>
                                                                                NUMBER OF
                                                AMOUNT          NUMBER OF        WARRANT     PURCHASE PRICE
         NAME/ADDRESS                          INVESTED          SHARES          SHARES       OF WARRANTS
         ------------                          --------          ------          ------       -----------
<S>                                         <C>                 <C>            <C>            <C>
ALTA EMBARCADERO PARTNERS, LLC
One Embarcadero Center, Suite 4050                                                 1,462      $      1.46
San Francisco, CA 94111
Attn: Jean Deleage

TGI FUND II, LC
6501 Columbia Center                                                              32,034      $     32.03
701 -- 5th Avenue
Seattle, WA 98104
Attn: Michael Beblo and Dave Maki

FALCON TECHNOLOGY PARTNERS, L.P. 
600 Dorset Road                                                                   10,678      $     10.68
Devon, PA 19333
Attn: Jim Rathman

VULCAN VENTURES INC. 
110 110th Avenue, NE, Suite 550                                                   80,575      $     80.58
Bellevue, WA 98004
Attn: Ruth B. Kunath

FLUKE CAPITAL MANAGEMENT, L.P. 
11400 SE 6th Street, Suite 230                                                    10,071      $     10.07
Bellevue, WA 98004
Attn: Dennis Weston and Kevin Gabelein

TOM ALBERG
c/o Madrona Investment Group                                                      80,575      $     80.58
1000 2nd Avenue
Seattle, WA 98104

MGN OPPORTUNITY GROUP LLC
Matthew G. Norton Company                                                         40,287      $     40.29
The Norton Building
801 Second Avenue, Suite 1300
Seattle, WA 98104
Attn: Stephen Humphreys
</TABLE>




<PAGE>   37


<TABLE>
<CAPTION>
                                                                                NUMBER OF
                                                AMOUNT          NUMBER OF        WARRANT     PURCHASE PRICE
         NAME/ADDRESS                          INVESTED          SHARES          SHARES       OF WARRANTS
         ------------                          --------          ------          ------       -----------
<S>                                         <C>                 <C>            <C>            <C>
ARNOLD L. HOLM, JR.
Holm Construction Services                                                         4,032      $      4.03
310 3rd Avenue NE, Suite 103
Issaquah, WA 98027

HENRY JAMES
22420 North Dogwood Lane                                                          10,071      $     10.07
Woodway, WA 98020

OKI ENTERPRISES, LLC
c/o Scott Oki                                                                     40,287      $     40.29
10838 Main Street
Bellevue, WA 98004

VLG INVESTMENTS LLC
c/o Elias J. Blawie                                                                1,413             1.41
2800 Sand Hill Road
Menlo Park, CA 94025

VLG ASSOCIATES 2000
c/o Elias J. Blawie                                                                  198              .20
2800 Sand Hill Road
Menlo Park, CA 94025

SONYA F. ERICKSON
4750 Carillon Point                                                                  201      $       .20
Kirkland, WA 98033

TOTAL                                       $13,200,000.34      4,748,203      1,051,712      $   1051.71
</TABLE>





<PAGE>   38

                                    EXHIBIT B

                    SERIES A, SERIES B AND SERIES C INVESTORS


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                                               NUMBER OF SHARES
-------------------------                                               ----------------
<S>                                                                     <C>
Alta California Partners, L.P.                                          Series A: 1,840,086
One Embarcadero Center                                                  Series B:   787,294
Suite 4050                                                              Series C:   949,635
San Francisco, CA  94111
Attn: Elaine Walker and Jean Deleage
Tel:  (415) 362-4022
Fax:  (415) 362-6178

Alta Embarcadero Partners, LLC                                          Series A:    54,651
One Embarcadero Center                                                  Series B:    17,987
Suite 4050                                                              Series C:    21,696
San Francisco, CA  94111
Attn: Elaine Walker and Jean Deleage
Tel:  (415) 362-4022
Fax:  (415) 362-6178

ARCH Venture Fund II, L.P.                                              Series A:   631,579
8735 West Higgins Road                                                  Series B:   363,636
Suite 235
Chicago, IL  60631
Attn:  Melanie Davis
Tel: (773) 380-6600
Fax: (773) 380-6606

1000 Second Avenue, Suite 3700
Seattle, WA  98104
Attn:  Bob Nelsen

CV Sofinnova Venture Partners III                                       Series A:   947,368
140 Geary Street, 10th Floor                                            Series B:   338,289
San Francisco, CA 94108                                                 Series C:    59,880
Attn.:  Michael Powell
Tel:  (415) 228-3387
Fax:  (415) 228-3390
</TABLE>




<PAGE>   39


<TABLE>
INVESTOR NAME AND ADDRESS                                               NUMBER OF SHARES
-------------------------                                               ----------------
<S>                                                                     <C>
DLJ Capital Corp.                                                       Series A:    52,632
3000 Sand Hill Road                                                     Series B:    10,909
Bldg. 3, Ste. 170                                                       Series C:    22,859
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

DLJ First ESC L.P.                                                      Series A:   263,158
3000 Sand Hill Road                                                     Series B:    54,545
Bldg. 3, Ste. 170                                                       Series C:   114,294
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

Sprout Capital VII, L.P.                                                Series A: 2,289,197
3000 Sand Hill Road                                                     Series B:   474,488
Bldg. 3, Ste. 170                                                       Series C:   994,235
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

The Sprout CEO Fund, L.P.                                               Series A:    26,592
3000 Sand Hill Road                                                     Series B:     5,512
Bldg. 3, Ste. 170                                                       Series C:    11,549
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

Ron Berenson, M.D.                                                      Series A:    57,895
PO Box 1598
Mercer Island, WA  98040
Tel:  (206) 232-1433
Fax:  (206) 236-1876

GC&H Investments                                                        Series A:    26,316
1 Maritime Plaza, 20th Fl.
San Francisco, CA 94111
Attn:  John L. Cordoza
Tel: (415) 693-2600
</TABLE>




<PAGE>   40


<TABLE>
INVESTOR NAME AND ADDRESS                                               NUMBER OF SHARES
-------------------------                                               ----------------
<S>                                                                     <C>
WS Investment Company                                                   Series A: 26,316
650 Page Mill Road
Palo Alto, CA  94304
Tel:  (650) 443-9300
Fax:  (650) 845-5000
Attn:  J. Casey McGlynn

Paul Etsekson                                                           Series A: 26,316
Fleet Pride
P.O. Box 80986
Seattle, WA 98108
Tel: (206) 654-8089
Fax:  (206) 343-1499

Gary P. Farber IRA Rollover                                             Series A: 26,316
Summit Partners
16102 S.E. Cougar Mountain Way
Bellevue, WA 98006
Tel: (206) 447-9020

Mrs. Thomas Georges, Jr.                                                Series A: 26,316
1814 S.W. Jackson Street
Portland, OR 97201
Tel: (503) 227-3898

Thomas Georges, Jr.                                                     Series A: 10,526
1814 S.W. Jackson Street
Portland, OR 97201
Tel: (503) 227-3898

Michael S. Rabson                                                       Series A:  2,632
c/o  Maxygen, Inc. 
515 Galveston Drive
Redwood City, CA 94063

Benjamin Stern                                                          Series A: 26,316
528 Laidlaw Blvd
Winnipeg, Canada
R3POK9
</TABLE>




<PAGE>   41


<TABLE>
INVESTOR NAME AND ADDRESS                                               NUMBER OF SHARES
-------------------------                                               ----------------
<S>                                                                     <C>
SMS                                                                     Series B:    22,727
Bader Martin Ross & Smith, P.S. 
1000 Second Avenue, 34th Floor
Seattle, WA  98104
Tel: (206) 621-1900
Fax: (206) 682-1874
Attn:  Walter R. Smith, CPA


ARCH Development Corporation
Walker 213                                                              Series A:   157,890
1101 East 58th Street
Chicago, IL  60637
Attn:  Terry Willey

ARCH Venture Fund III, L.P.                                             Series A:   157,890
8735 West Higgins Road                                                  Series B: 1,681,818
Suite 235                                                               Series C: 1,119,265
Chicago, IL  60631
Attn:  Melanie Davis
Tel: (773) 380-6600
Fax: (773) 380-6606

1000 Second Avenue, Suite 3700
Seattle, WA  98104-1053
Attn:  Bob Nelsen

Jeffrey Ledbetter                                                       Series A:   157,890
18798 Ridgefield Road N.W.
Shoreline, WA  98177

Marylin Parsons                                                         Series A:    52,630
306 NW 113th Place
Seattle, WA  98177

TGI Fund II, LC                                                         Series C: 1,796,410
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104
Attn:  Michael Beblo and Dave Maki
</TABLE>




<PAGE>   42


<TABLE>
INVESTOR NAME AND ADDRESS                                               NUMBER OF SHARES
-------------------------                                               ----------------
<S>                                                                     <C>
Vengott LC                                                              Series C: 179,641
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104
Attn:  Michael Beblo and Steven Johnson

Steven M. Johnson                                                       Series C:  32,934
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

John E. Parkey                                                          Series C:  29,940
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

Charles A. Blanchard                                                    Series C:  14,970
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

Anthony P. Russo, Trustee                                               Series C:  14,970
Anthony P. Russo Separate Property Trust U/A 9/11/90
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

David J. Maki                                                           Series C:  14,970
Tredegar Investments
6300 Columbia Center
701 Fifth Avenue
Seattle, WA  98104-7092

R. Ray Cummings                                                         Series C:  11,976
Cummings Consulting
8695 NE Grizdale Lane
Bainbridge Island, WA  98110

Falcon Technology Partners, L.P.                                        Series C: 598,802
600 Dorset Road
Devon, PA  19333
Attn:  Jim Rathman
</TABLE>




<PAGE>   43


<TABLE>
INVESTOR NAME AND ADDRESS                                               NUMBER OF SHARES
-------------------------                                               ----------------
<S>                                                                     <C>
Vulcan Ventures Inc.                                                    Series C: 598,802
110 110th Avenue NE, Suite 550
Bellevue, WA  98004
Attn:  Ruth B. Kunath

Fluke Capital Management, L.P.                                          Series C: 598,802
11400 SE  6th Street, Suite 230
Bellevue, WA  98004
Attn:  Dennis P. Weston & Kevin C. Gabelein
</TABLE>



<PAGE>   44









                                    EXHIBIT C

                           INITIAL SERIES D INVESTORS



<TABLE>
<CAPTION>
                                                      NUMBER OF SERIES D
INVESTOR NAME AND ADDRESS                              PREFERRED SHARES
-------------------------                             ------------------
<S>                                                   <C>
DLJ CAPITAL CORP                                             6,475
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

DLJ FIRST ESC L.P.                                          32,374
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

SPROUT CAPITAL VII, L.P.                                   281,622
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

THE SPROUT CEO FUND, L.P.                                    3,270
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

ARCH VENTURE FUND III, L.P.                                962,230
1000 Second Avenue, Suite 3700
Seattle, WA  98104-1053
Attn:  Bob Nelsen

ALTA CALIFORNIA PARTNERS, L.P.                             571,491
One Embarcadero Center, Suite 4050
San Francisco, CA  94111
Attn: Jean Deleage

ALTA EMBARCADERO PARTNERS, LLC                              13,056
One Embarcadero Center, Suite 4050
San Francisco, CA  94111
Attn: Jean Deleage
</TABLE>




<PAGE>   45


<TABLE>
<CAPTION>
                                                      NUMBER OF SERIES D
INVESTOR NAME AND ADDRESS                              PREFERRED SHARES
-------------------------                             ------------------
<S>                                                   <C>
TGI FUND II, LC                                            286,022
6501 Columbia Center
701 - 5th Avenue
Seattle, WA 98104
Attn: Michael Beblo and Dave Maki

FALCON TECHNOLOGY PARTNERS, L.P.                            95,341
600 Dorset Road
Devon, PA  19333
Attn: Jim Rathman

VULCAN VENTURES INC                                        719,424
110 110th Avenue, NE, Suite 550
Bellevue, WA  98004
Attn:  Ruth B. Kunath

FLUKE CAPITAL MANAGEMENT, L.P.                              89,928
11400 SE 6th Street, Suite 230
Bellevue, WA  98004
Attn:  Dennis Weston and Kevin Gabelein

TOM ALBERG                                                 719,424
c/o Madrona Investment Group
1000 2nd Avenue
Seattle, WA  98104

MGN OPPORTUNITY GROUP LLC                                  359,712
Matthew G. Norton Company
The Norton Building
801 Second Avenue, Suite 1300
Seattle, WA  98104
Attn:  Stephen Humphreys

ARNOLD L. HOLM, JR.                                         36,000
Holm Construction Services
310 3rd Avenue NE, Suite 103
Issaquah, WA  98027

HENRY JAMES                                                 89,928
22420 North Dogwood Lane
Woodway, WA  98020
</TABLE>




<PAGE>   46


<TABLE>
<CAPTION>
                                                      NUMBER OF SERIES D
INVESTOR NAME AND ADDRESS                              PREFERRED SHARES
-------------------------                             ------------------
<S>                                                   <C>
OKI ENTERPRISES, LLC                                       359,712
c/o Scott Oki
10838 Main Street
Bellevue, WA  98004

VLG INVESTMENTS LLC                                         12,619
c/o Elias J. Blawie
2800 Sand Hill Road
Menlo Park, CA 94025


VLG ASSOCIATES 2000                                          1,770
c/o Elias J. Blawie
2800 Sand Hill Road
Menlo Park, CA 94025

SONYA F. ERICKSON                                            1,799
4750 Carillon Point
Kirkland, WA 98033
</TABLE>




<PAGE>   47



                                    EXHIBIT D

                             SCHEDULE OF EXCEPTIONS





<PAGE>   48



                                    EXHIBIT E

                                FORM OF WARRANTS




<PAGE>   49



                                    EXHIBIT F

                   SERIES D PREFERRED STOCK PURCHASE AGREEMENT



                                 (SEE TAB NO. 1)





<PAGE>   50



                                    EXHIBIT G

                AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT



                                 (SEE TAB NO. 2)





<PAGE>   51



                                    EXHIBIT H

                          AMENDED AND RESTATED RIGHT OF
                       FIRST REFUSAL AND CO-SALE AGREEMENT


                                 (SEE TAB NO. 3)




<PAGE>   52



                                    EXHIBIT I

                       LEGAL OPINION OF VENTURE LAW GROUP



                                (SEE TAB NO. 24)





<PAGE>   53




                                    EXHIBIT J


                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION



                                (SEE TAB NO. 17)



<PAGE>   1
                                                                   EXHIBIT 10.4

                              XCYTE THERAPIES, INC.

                      SECOND ADDENDUM TO SERIES D PREFERRED
                            STOCK PURCHASE AGREEMENT

        This Second Addendum to Series D Preferred Stock Purchase Agreement (the
"Second Addendum") is made as of the 14th day of August, 2000 by and among Xcyte
Therapies, Inc., a Delaware corporation (the "Company"), the investors listed on
Exhibit A attached hereto (each an "Additional Purchaser" and together the
"Additional Purchasers"), and the existing holders of Series D Preferred Stock
listed on Exhibit B hereto (each an "Initial Series D Investor," together the
"Initial Series D Investors"). All capitalized terms not defined herein shall
have the meaning set forth in the Purchase Agreement (defined herein).

                                    RECITALS

        WHEREAS, on May 25, 2000, the Company entered into a Series D Preferred
Stock Purchase Agreement, as amended by the Addendum to Series D Preferred Stock
Purchase Agreement and Omnibus Amendment to Series B Financing Agreements dated
as of August 8, 2000 (the "Purchase Agreement") with the Initial Series D
Investors. The Purchase Agreement provides in Section 1.4 thereof that
additional investors may, under conditions set forth therein, become parties to
the Purchase Agreement at any time on or before August
 8, 2000;

        WHEREAS, pursuant to the terms of Section 6.8 of the Purchase Agreement,
the Purchase Agreement may be amended only with the written consent of the
Company and Initial Series D Investors holding at least a majority of the Stock
(or the Common Stock issuable upon conversion thereof);

        WHEREAS, the Company, the Additional Purchasers, the undersigned Initial
Series D Investors, constituting the holders of sufficient shares of capital
stock of the Company to amend the Purchase Agreement, desire to amend certain
terms and conditions of the Purchase Agreement;

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

                                    AGREEMENT

        In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:

        1.     AUTHORIZATION AND SALE OF PREFERRED STOCK AND WARRANTS.

               1.1 AUTHORIZATION OF PREFERRED STOCK. The Company has authorized
the issuance pursuant to this Second Addendum of up to 719,425 shares of its
Series D Preferred Stock (the "Additional Shares") and the issuance of Warrants
to purchase 80,575 shares of Common Stock (the "Warrants") to the Additional
Purchasers. The rights, preferences, privileges and restrictions of the Series D
Preferred Stock are as set forth in the Company's


                                      -1-



<PAGE>   2

Amended and Restated Certificate of Incorporation attached as Exhibit C to the
Purchase Agreement (the "Restated Certificate").

               1.2 SALE OF PREFERRED STOCK AND WARRANTS. Subject to the terms
and conditions hereof, at the Closing (as defined in Section 2.1 hereof) the
Company will issue and sell to each Additional Purchaser, and each Additional
Purchaser severally agrees to purchase from the Company, that number of
Additional Shares at a cash purchase price of $2.78 per share of Series D
Preferred Stock and Warrants at a cash purchase price of $0.001 per share of
Common Stock specified opposite such Additional Purchaser's name on Exhibit A
hereto. Each of the Additional Purchasers, by their signatures hereto, shall
hereby (i) become parties to the Purchase Agreement, as amended by this Second
Addendum (ii) be considered a "Purchaser" for all purposes under the Purchase
Agreement, (iii) have all the rights and obligations of a Purchaser thereunder,
(iv) become parties to the Investors' Rights Agreement, as amended, and Voting
Agreement, as amended, (v) be considered a "Series D Investor" for all purposes
under the Investor Rights Agreement, as amended, and (vi) have all the rights
and obligations of an Investor thereunder. The Additional Shares, the Warrants
and the Common Stock issuable upon exercise of the Warrants (the "Warrant
Shares") acquired by the Additional Purchasers hereunder shall be considered
"Shares" for all purposes under the Purchase Agreement, as amended.

        2.     CLOSING; DELIVERY.

               2.1 CLOSING. The closing of the purchase and sale of the
Additional Shares and Warrants hereunder (the "Closing") shall be held at the
offices of Venture Law Group, Kirkland, Washington, at 10:00 a.m., on August 14,
2000, or at such other time and place as the Company and the Additional
Purchasers may agree.

               2.2 DELIVERY. At the Closing, the Company will deliver to each
Additional Purchaser a certificate representing the number of Additional Shares
and Warrants set forth opposite such Additional Purchaser's name on Exhibit A,
against payment of the purchase price therefor by each Additional Purchaser by
check or wire transfer to the Company.

        3.     DISCLOSURE; CAPITALIZATION.
               -------------------------- 

               3.1 DISCLOSURE. Each Additional Purchaser hereby acknowledges
receipt of the Purchase Agreement and the exhibits thereto. The Company affirms
to each Additional Purchaser that:

                      (i) The representations and warranties of the Company set
forth in Section 2 of the Purchase Agreement were true and accurate when made;

                      (ii) Those representations and warranties, which are
incorporated herein by this reference and made a part hereof, remain true and
accurate in all material respects as of the date hereof, except (A) for changes
resulting from the transactions contemplated in the Purchase Agreement and (B)
as set forth in the Schedule of Exceptions to Representations and Warranties
attached hereto as Exhibit D.


                                      -2-


<PAGE>   3

                      (iii) The conditions to closing set forth in Section 4 of
the Purchase Agreement and in Section 5 hereof have been satisfied, provided
that the conditions set forth in Section 4.1 of the Purchase Agreement shall
include references to changes in the Company's representations and warranties
and the Company's status, respectively, as set forth herein and in the Exhibits
attached hereto, and resulting from the consummation of the transactions
contemplated by the Purchase Agreement.

               3.2    CAPITALIZATION.  Immediately prior to the Closing, the 
authorized capital of the Company shall consist of:

                      (i) Immediately prior to the Closing, the authorized
capital of the Company shall consist of: (a) 60,000,000 shares of Common Stock,
and (b) 28,909,976 shares of Preferred Stock (the "Preferred Stock"), of which
7,300,080 have been designated Series A Preferred Stock, 4,097,580 have been
designated Series B Preferred Stock, 7,212,316 have been designated Series C
Preferred Stock and 10,300,000 have been designated Series D Preferred Stock.
Immediately prior to the Closing, 5,965,234 shares of Common Stock, 6,860,512
shares of Series A Preferred Stock, warrants to purchase 439,568 shares of
Series A Preferred Stock, 3,903,080 shares of Series B Preferred Stock, and
warrants to purchase 194,500 shares of Series B Preferred Stock, 7,185,630
shares of Series C Preferred Stock, warrants to purchase 26,686 shares of Series
C Preferred Stock and 9,390,400 shares of Series D Preferred Stock will be
outstanding.

                      (ii) Except as set forth in this Agreement and the
exhibits thereto, there are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or acquisition
from the Company of any shares of its capital stock except that the Company has
reserved (a) the Shares for issuance at Closing, (b) the Common Stock issuable
upon conversion of the Preferred Stock, (c) 2,500,000 shares of Common Stock
reserved for issuance pursuant to a stock option plan adopted by the Company of
which options to purchase 1,037,453 shares have been granted and remain
outstanding, with 1,374,122 shares remaining for grant (d) 898,150 shares of
Common Stock reserved for issuance to scientific founders upon the achievement
of certain milestones, (e) 157,890 shares of Common Stock reserved for issuance
to Carl June or his assignees upon the Company's acquisition of certain future
technology and (f) the Warrants to purchase 1,051,712 shares of Common Stock
issued pursuant to the Purchase Agreement, as amended.

                      (iii) Based in part upon the representations of each
Purchaser in this Second Addendum and subject to the provisions of Section 2.5
of the Purchase Agreement, the Stock (and the Common Stock issuable upon
conversion thereof) has been issued or will be issued in compliance with all
applicable federal and state securities laws.

        4. REPRESENTATIONS AND WARRANTIES OF ADDITIONAL PURCHASERS AND INITIAL
SERIES D INVESTORS. Each Additional Purchaser and Initial Series D Investor,
severally and not jointly, acknowledges that such Additional Purchaser has
reviewed the representations and warranties set forth in Section 3 of the
Purchase Agreement and agrees with the Company that such representations and
warranties, which are incorporated herein by this reference and made a part


                                      -3-


<PAGE>   4

hereof, are true and correct as of the date hereof as they relate to such
Additional Purchaser's purchase of the Additional Shares and Warrants hereunder.

        5. CONDITIONS TO ADDITIONAL PURCHASERS' OBLIGATIONS AT CLOSING. The
obligation of each Additional Purchaser to purchase the Additional Shares at the
Closing is subject to the fulfillment to such Additional Purchaser's
satisfaction at or prior to the Closing of the following conditions:

               5.1 REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in Section 3
hereof shall be true and correct when made, and shall be true and correct on the
date of the Closing with the same force and effect as if they had been made on
and as of said date, subject to changes contemplated by this Second Addendum;
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it at or prior to the Closing.

               5.2 CONSENTS AND WAIVERS. The Company shall have obtained any and
all consents and waivers necessary or appropriate for consummation of the
transactions contemplated by this Second Addendum.

               5.3 LEGAL OPINION. Upon request, each of the Additional
Purchasers will be entitled to receive from Venture Law Group, legal counsel for
the Company, a legal opinion addressed to the Additional Purchasers
substantially in the form attached hereto as Exhibit E.

        6. CONDITIONS TO COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company under Sections 1.1 and 1.2 of this Second Addendum are subject to
the fulfillment at or before the Closing of each of the following conditions:

               6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Additional Purchaser and Initial Series D Investor contained
in Section 4 hereof shall be true at the Closing.

               6.2 CONSENTS AND WAIVERS. The Company shall have obtained any and
all consents and waivers necessary or appropriate for the Purchasers to become
parties to the Investor Rights Agreement for the consummation of the
transactions contemplated by this Second Addendum.

        7. AMENDMENT TO STOCK PURCHASE AGREEMENT. Section 1.4 of the Purchase
Agreement is hereby amended to read in its entirety as follows:

               "1.4 Additional Closings. If the full number of Series D
        Preferred Stock of the Company is not sold at the Closing, the Company
        shall have the right, at any time prior to August 18, 2000 (the
        "Subsequent Closing Date"), to sell the remaining authorized but
        unissued shares of Series D Preferred Stock to one or more additional
        purchasers as determined by the Company, or to any Purchaser hereunder
        who wishes to acquire additional shares of Series D Preferred Stock at
        the price and on the terms set forth herein, provided that any


                                      -4-



<PAGE>   5

        such additional purchaser shall be required to execute an Second
        Addendum Agreement substantially in the form attached hereto as Exhibit
        F. Any additional purchaser so acquiring shares of Series D Preferred
        Stock shall be considered a "Purchaser" for purposes of this Agreement
        and an "Investor" for the purposes of the Agreements (as defined below),
        and any Series D Preferred Stock so acquired by such additional
        purchaser shall be considered "Shares" for purposes of this Agreement
        and all other agreements contemplated hereby."

        8.     MISCELLANEOUS.

               8.1 INCORPORATION BY REFERENCE. The provisions set forth in
Section 6 of the Purchase Agreement (other than Section 6.6) are incorporated
herein by this reference and made a part hereof. Except as otherwise set forth
herein, the terms and conditions of the Purchase Agreement shall remain in full
force and effect notwithstanding the execution of this Agreement and are
incorporated in their entirety herein and made a part of this Second Addendum as
if fully set forth herein.

               8.2 NOTICES. Any notice required or permitted by this Second
Addendum and/or the Agreements shall be in writing and shall be deemed
sufficient upon delivery, when delivered personally or sent by overnight courier
telegram or fax, or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address or fax number (as set forth
below or in the Purchase Agreement or on Exhibit A hereto or thereto, or as
subsequently modified by written notice) and (a) if to the Company, with a copy
to Sonya F. Erickson, Venture Law Group, 4750 Carillon Point, Kirkland,
Washington 98033, fax number (425) 739-8750 or (b) if to the Purchasers, with a
copy to Richard Porter, Kirkland & Ellis, Aon Center, 200 East Randolph Drive
Chicago, Illinois 60601, fax number (312) 861-2200.

               8.3 COUNTERPARTS. This Second Addendum may be executed in any
number of counterparts, each of which may be executed by less than all of the
Additional Purchasers, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument.




                            [Signature page follows]




                                      -5-


<PAGE>   6

        The parties hereto have executed this Second Addendum as of the date
first set forth above.

                                  XCYTE THERAPIES, INC.


                                  By:
                                       ----------------------------------------
                                       Ron J. Berenson, Chief Executive Officer

                                  Address:  1124 Columbia Street, Suite 130
                                            Seattle, WA  98104
                                  Fax:      (206) 262-6200





                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   7

                                     ADDITIONAL PURCHASERS:


                                     VECTOR FUND MANAGEMENT, L.P.

                                     By:
                                           -------------------------------------
                                     Name:
                                           -------------------------------------
                                                          (print)
                                     Title:
                                           -------------------------------------

                                     Address:  1751 Lake Cook Road, Suite 350
                                               Deerfield, IL  60015
                                               Attn:  Doug Reed, M.D.








                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   8

                                       INITIAL SERIES D INVESTORS:

                                       MPM BIOVENTURES II, L.P.

                                       By:  MPM Asset Management II, L.P., its 
                                            General Partner
                                       By:  MPM Asset Management II LLC, its 
                                            General Partner

                                       By:  
                                            ------------------------------------
                                       Name:
                                       Title:

                                       MPM BIOVENTURES II-QP, L.P.

                                       By:  MPM Asset Management II, L.P., its 
                                            General Partner
                                       By:  MPM Asset Management II LLC, its 
                                            General Partner

                                       By:  
                                            ------------------------------------
                                       Name:
                                       Title:

                                       MPM BIOVENTURES GMBH & CO. 
                                       PARALLEL-BETEILIGUNGS KG

                                       By:  MPM Asset Management II, L.P., its
                                            General Partner
                                       By:  MPM Asset Management II LLC, its 
                                            General Partner

                                       By:  
                                            ------------------------------------
                                       Name:
                                       Title:

                                       MPM ASSET MANAGEMENT INVESTORS 2000 B LLC

                                       By:
                                            ------------------------------------

                                       Name:
                                       Title:




                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT



<PAGE>   9


                                       INITIAL SERIES D INVESTORS:

                                       ---------------------------------
                                       JOHN E. PARKEY

                                       Address:  Tredegar Investments
                                                 6501 Columbia Center
                                                 701 Fifth Avenue
                                                 Seattle, WA  98104











                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT



<PAGE>   10


                                       INITIAL SERIES D INVESTORS:

                                       ---------------------------------
                                       NEIL RUZIC

                                       Address:  c/o Little Stirrup Cay 
                                                 Research Limited
                                                 345 East Lake Front Drive
                                                 Beverly Shores, IN  46301
















                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT



<PAGE>   11


                                       INITIAL SERIES D INVESTORS:

                                       ARCH VENTURE FUND III, L.P.

                                       By:
                                              ----------------------------------
                                       Name:
                                              ----------------------------------
                                                           (print)
                                       Title:
                                              ----------------------------------

                                       Address:  1000 Second Avenue, Suite 3700
                                                 Seattle, WA  98104-1053
                                                 Attn:  Bob Nelsen










                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT




<PAGE>   12

                                       INITIAL SERIES D INVESTORS:

                                       ---------------------------------
                                       JIM ROBERTS

                                       Address:  2540 Shoreland Drive South
                                                 Seattle, WA  98144




















                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT



<PAGE>   13


                                       INITIAL SERIES D INVESTORS:

                                       ---------------------------------
                                       MARK GROUDINE

                                       Address:  1142 20th Avenue East
                                                 Seattle, WA  98112












                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT




<PAGE>   14

INITIAL SERIES D INVESTORS:

DLJ CAPITAL CORP.

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  3000 Sand Hill Road, Bldg. 3, Suite 170
          Menlo Park, CA  94025

DLJ FIRST ESC, L.P.

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  3000 Sand Hill Road, Bldg. 3, Suite 170
          Menlo Park, CA  94025

SPROUT CAPITAL VII, L.P.

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  3000 Sand Hill Road, Bldg. 3, Suite 170
          Menlo Park, CA  94025

THE SPROUT CEO FUND, L.P.

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  3000 Sand Hill Road, Bldg. 3, Suite 170
          Menlo Park, CA  94025




                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT



<PAGE>   15

INITIAL SERIES D INVESTORS:

ARCH VENTURE FUND III, L.P.

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  1000 Second Avenue, Suite 3700
          Seattle, WA  98104-1053
          Attn:  Bob Nelsen












                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   16

INITIAL SERIES D INVESTORS:

ALTA CALIFORNIA PARTNERS, L.P.

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  One Embarcadero Center, Suite 4050
          San Francisco, CA  94111
          Attn:  Jean Deleage


ALTA EMBARCADERO PARTNERS, LLC

By:
       -------------------------------------------
Name:
       -------------------------------------------
                      (print)
Title:
       -------------------------------------------

Address:  One Embarcadero Center, Suite 4050
          San Francisco, CA  94111
          Attn: Jean Deleage












                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   17

INITIAL SERIES D INVESTORS:


------------------------------------
TGI FUND II, LC

Address:     6501 Columbia Center
             701 5th Avenue
             Seattle, WA 98104
             Attn:  Michael Beblo & Dave Maki










                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   18

INITIAL SERIES D INVESTORS:


------------------------------------
FALCON TECHNOLOGY PARTNERS, L.P.

Address:     600 Dorset Road
             Devon, PA 19333
             Attn:  Jim Rathman



















                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   19

INITIAL SERIES D INVESTORS:


------------------------------------
VULCAN VENTURES, INC.

Address:     110 110th Avenue NE, Suite 550
             Bellevue, WA  98004
             Attn:  Ruth B. Kunath




















                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   20

INITIAL SERIES D INVESTORS:


------------------------------------
FLUKE CAPITAL MANAGEMENT, L.P.

Address:     11400 SE 6th Street, Suite 230
             Bellevue, WA  98004
             Attn:  Dennis Weston


















                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT




<PAGE>   21

INITIAL SERIES D INVESTORS:


------------------------------------
TOM ALBERG

Address:     c/o Madrona Investment Group
             1000 2nd Avenue
             Seattle, WA 98104
























                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT





<PAGE>   22

INITIAL SERIES D INVESTORS:


------------------------------------
MGN OPPORTUNITY GROUP LLC

Address:     The Norton Building
             801 Second Avenue, Suite 1300
             Seattle, WA 98104
             Attn:  Stephen Humphreys





























                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   23

INITIAL SERIES D INVESTORS:


------------------------------------
ARNOLD L. HOLM, JR.

Address:     Holm Construction Services
             310 3rd Avenue NE, Suite 103
             Issaquah, WA  98027






























                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   24

INITIAL SERIES D INVESTORS:


------------------------------------
HENRY JAMES

Address:     22420 North Dogwood Lane
             Woodway, WA 98020






























                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   25

INITIAL SERIES D INVESTORS:


------------------------------------
OKI ENTERPRISES, LLC

Address:     c/o Scott Oki
             10838 Main Street
             Bellevue, WA  98004































                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   26

INITIAL SERIES D INVESTORS:


------------------------------------
VLG INVESTMENTS LLC

Address:     c/o Elias J. Blawie
             2800 Sand Hill Road
             Menlo Park, CA  94025


------------------------------------
VLG ASSOCIATES 2000

Address:     c/o Elias J. Blawie
             2800 Sand Hill Road
             Menlo Park, CA  94025































                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   27

INITIAL SERIES D INVESTORS:


------------------------------------
SONYA F. ERICKSON

Address:     4750 Carillon Point
             Kirkland, WA  98033






























                    SIGNATURE PAGE TO XCYTE THERAPIES, INC.
              SECOND ADDENDUM TO SERIES D STOCK PURCHASE AGREEMENT


<PAGE>   28





                                    EXHIBIT A

                        SCHEDULE OF ADDITIONAL PURCHASERS



<TABLE>
<CAPTION>
             NAME/ADDRESS               AMOUNT INVESTED   NUMBER OF SHARES       NUMBER OF       PURCHASE PRICE
                                                                              WARRANT SHARES      OF WARRANTS

<S>                                     <C>               <C>                 <C>                <C>   
 VECTOR LATER-STAGE EQUITY FUND II,       $500,000.38          179,856            20,144             $20.14
 L.P.
 1751 Lake Cook Road, Suite 350
 Deerfield, IL  60015
 Attn:  Doug Reed, M.D.

 VECTOR LATER-STAGE EQUITY FUND II       $1,500,001.12         539,569            60,431             $60.44
 (QP), L.P.
 1751 Lake Cook Road, Suite 350
 Deerfield, IL  60015
 Attn:  Doug Reed, M.D.

                       TOTAL             $2,000,001.50         719,425            80,575             $80.58

</TABLE>




<PAGE>   29

                                    EXHIBIT B

                           INITIAL SERIES D INVESTORS




<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS               NUMBER OF SERIES D          NUMBER OF WARRANT
                                        PREFERRED SHARES                  SHARES
<S>                                     <C>                         <C>
DLJ CAPITAL CORP.                             6,475                          725
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

DLJ FIRST ESC L.P.                           32,374                        3,625
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

SPROUT CAPITAL VII, L.P.                    281,622                       31,541
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

THE SPROUT CEO FUND, L.P.                     3,270                          366
3000 Sand Hill Road
Building Three, Suite 170
Menlo Park, CA  94025
Attn:  Bob Curry

ARCH VENTURE FUND III, L.P.                1,321,942                     148,056
1000 Second Avenue, Suite 3700
Seattle, WA  98104-1053
Attn:  Bob Nelsen

ALTA CALIFORNIA PARTNERS, L.P.               571,491                      64,006
One Embarcadero Center
Suite 4050
San Francisco, CA  94111
Attn: Jean Deleage
</TABLE>





<PAGE>   30


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS               NUMBER OF SERIES D          NUMBER OF WARRANT
                                        PREFERRED SHARES                  SHARES
<S>                                     <C>                         <C>
ALTA EMBARCADERO
PARTNERS, LLC                                13,056                        1,462
One Embarcadero Center
Suite 4050
San Francisco, CA  94111
Attn: Jean Deleage

TGI FUND II, LC                             286,022                       32,034
6501 Columbia Center
701 - 5th Avenue
Seattle, WA  98104
Attn:  Michael Beblo and
       Dave Maki

FALCON TECHNOLOGY PARTNERS, L.P.             95,341                       10,678
600 Dorset Road
Devon, PA  19333
Attn: Jim Rathman

VULCAN VENTURES INC.                        719,424                       80,575
110 110th Avenue, NE, Suite 550
Bellevue, WA  98004
Attn:  Ruth B. Kunath

FLUKE CAPITAL MANAGEMENT, L.P.               89,928                       10,071
11400 SE 6th Street, Suite 230
Bellevue, WA  98004
Attn:  Dennis Weston and
       Kevin Gabelein

TOM ALBERG                                  719,424                       80,575
c/o Madrona Investment Group
1000 2nd Avenue
Seattle, WA  98104

</TABLE>




<PAGE>   31


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS               NUMBER OF SERIES D          NUMBER OF WARRANT
                                        PREFERRED SHARES                  SHARES
<S>                                     <C>                         <C>
MGN OPPORTUNITY GROUP LLC
Matthew G. Norton Company
The Norton Building
801 Second Avenue, Suite 1300               359,712                       40,287
Seattle, WA  98104
Attn:  Stephen Humphreys

ARNOLD L. HOLM, JR.                          36,000                        4,032
Holm Construction Services
310 3rd Avenue NE, Suite 103
Issaquah, WA  98027

HENRY JAMES                                  89,928                       10,071
22420 North Dogwood Lane
Woodway, WA  98020

OKI ENTERPRISES, LLC                        359,712                       40,287
c/o Scott Oki
10838 Main Street
Bellevue, WA  98004

VLG INVESTMENTS LLC                          12,619                        1,413
c/o Elias J. Blawie
2800 Sand Hill Road
Menlo Park, CA 94025

VLG ASSOCIATES 2000                           1,770                          198
c/o Elias J. Blawie
2800 Sand Hill Road
Menlo Park, CA 94025

SONYA F. ERICKSON                             1,799                          201
4750 Carillon Point
Kirkland, WA 98033

MPM BIOVENTURES II, LP                      320,719                       35,921
One Cambridge Center
Cambridge, MA 02142

</TABLE>




<PAGE>   32



<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS               NUMBER OF SERIES D          NUMBER OF WARRANT
                                        PREFERRED SHARES                  SHARES
<S>                                     <C>                         <C>
MPM BIOVENTURES II-QP, LP                 2,905,900                      325,460
One Cambridge Center
Cambridge, MA 02142

MPM BIOVENTURES GMBH & CO.                1,023,022                      114,578
PARALLEL-BETEILIGUNGS KG
One Cambridge Center
Cambridge, MA 02142

MPM ASSET MANAGEMENT INVESTORS 2000          66,906                        7,494
B LLC
One Cambridge Center
Cambridge, MA 02142

JOHN E. PARKEY                               17,986                        2,014
Tredegar Investments
6501 Columbia Center
701 Fifth Avenue
Seattle, WA  98104

NEIL RUZIC                                   17,986                        2,014
Little Stirrup Cay Research Ltd.
345 Each Lake Front Drive
Beverly Shores, IN  46301

JIM ROBERTS                                  17,986                        2,014
2540 Shoreland Drive South
Seattle, WA  98144

MARK GROUDINE                                17,986                        2,014
1142 20th Avenue East
Seattle, WA  98112

TOTAL                                     9,390,400                    1,051,712
</TABLE>






<PAGE>   33


                                    EXHIBIT C


                AMENDED AND RESTATED CERTIFICATE OF INCORPORATION


                                (SEE TAB NO. 31)









<PAGE>   34



                                    EXHIBIT D

                             SCHEDULE OF EXCEPTIONS







<PAGE>   35


                                    EXHIBIT E

                              FORM OF LEGAL OPINION


                                (See Tab No. 11





<PAGE>   1
                                                                   EXHIBIT 10.5

                              XCYTE THERAPIES, INC.

                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT


        This Amended and Restated Investor Rights Agreement (the "Agreement") is
effective as of May 25, 2000, by and among Xcyte Therapies, Inc., a Delaware
corporation (the "Company"), the investors listed on Schedule A attached hereto
(the "Investors"), Phoenix Leasing Incorporated and Robert Kingsbook.

                                    RECITALS

        A. The Company sold and issued to certain Investors (the "Series A
Holders") 6,334,212 shares of the Series A Preferred Stock of the Company on
August 28, 1996.

        B. In connection with the Company's merger with CellGenEx, Inc., dated
August 27, 1997, the Company issued 526,300 shares of Series A Preferred Stock
to holders of CellGenEx Preferred Stock.

        C. The Company sold and issued to certain Investors (the "Series B
Holders") 3,903,080 shares of the Series B Preferred Stock of the Company.

        D. The Company sold and issued to certain Investors (the "Series C
Holders") 7,185,630 shares of the Series C Preferred Stock of the Company.

        E. Pursuant to that certain Restated Investor Rights Agreement, dated as
of July 21, 1998, (the "Prior Rights Agreement") the Company granted to such
Series A Holders, Series B Holders and Series C Holders certain rights and the
Series
 A Holders, Series B Holders and Series C Holders entered into certain
covenants between themselves.

        F. Pursuant to that certain Series D Preferred Stock Purchase Agreement
of even date herewith (the "Series D Agreement"), the Company has agreed to sell
to certain Investors (the "Series D Holders") a total of up to 7,194,245 shares
of the Series D Preferred Stock of the Company and, as an inducement for the
Series D Holders to purchase such shares, the Company, the Series A Holders, the
Series B Holders and the Series C Holders have agreed to enter into this
Agreement to supersede, amend and restate the rights granted to and covenants
agreed by the Series A Holders, Series B Holders and Series C Holders in the
Prior Rights Agreement. All shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock are
referred to herein as the "Preferred Shares."

        All terms not otherwise defined herein shall have the same meaning as
set forth in the Series D Agreement.

        NOW THEREFORE, the parties hereby agree as follows:




<PAGE>   2

        1. Registration Rights.

               1.1 Definitions. For purposes of this Section 1:

                        (a) The term "Act" shall mean the Securities Act of
1933, as amended.

                        (b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission (the "SEC") which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC;

                        (c) The term "Holder" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof;

                        (d) The term "Qualified Public Offering" shall mean an
underwritten public offering of shares of the Company's Common Stock at a public
offering price per share of not less than $4.00 (as adjusted for stock splits,
combinations or consolidations) with gross proceeds to the Company of not less
than $20,000,000 at the public offering price;

                        (e) The term "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;

                        (f) The term "registration expenses" shall mean all
expenses, except as otherwise stated below, incurred by the Company in complying
with Sections 1.2, 1.3 and 1.11 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, fees and disbursement of one
counsel to the Holders, blue sky fees and expenses, the expense of any special
audits incident to or required by any such registration (but excluding the
compensation of regular employees of the Company which shall be paid in any
event by the Company).

                        (g) The term "Registrable Securities" means (1) the
Common Stock issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock or any
Common Stock issued upon conversion of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock issuable
upon the exercise of outstanding warrants to purchase such shares of Preferred
Stock, (2) up to 6,158 shares of Common Stock of the Company issued or issuable
upon conversion of the Series C Preferred Stock issued or issuable upon exercise
of that certain warrant issued to Phoenix Leasing Incorporated, (3) up to 6,157
shares of Common Stock of the Company issued or issuable upon conversion of the
Series C Preferred Stock issued or issuable upon exercise of that certain
warrant issued to Robert Kingsbook and (4) any Common Stock of the Company
issued as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with respect
to, or in exchange 


                                      -2-




<PAGE>   3

for or in replacement of, such Preferred Stock or Common Stock, excluding in all
cases, however, (i) any Registrable Securities sold by a person in a transaction
in which such person's rights under this Section 1 are not assigned, or (ii) any
Registrable Securities sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction; and

                        (h) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.

               1.2 Request for Registration.

                        (a) If the Company shall receive at any time after the
earlier of (i) August 15, 2002 or (ii) six (6) months after the effective date
of a Qualified Public Offering (other than a registration statement relating
either to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a written
request from the Holders of at least fifty percent (50%) of the Registrable
Securities then outstanding (including securities convertible into Registrable
Securities) that the Company file a registration statement under the Act
covering the registration of at least fifty percent (50%) of Registrable
Securities, or any lesser number of shares if the anticipated aggregate offering
price, net of underwriting discounts and commissions, would exceed $10,000,000,
then the Company shall, within ten (10) days of the receipt thereof, give
written notice of such request to all Holders and shall, subject to the
limitations of Section 1.2(b), effect as soon as practicable, and in any event
within ninety (90) days of the receipt of such request, the registration under
the Act of all Registrable Securities which the Holders request to be registered
within twenty (20) days of the mailing of such written notice by the Company;
provided, however, that the Company shall not be obligated to take any action to
effect any such registration, qualification or compliance pursuant to this
Section 1.2(a):

                                (i) During the period starting with the date
thirty (30) days prior to the Company's estimated date of filing of, and ending
on the date one hundred twenty (120) days immediately following the effective
date of, any registration statement pertaining to securities of the Company
(other than a registration of securities in a Rule 145 transaction or with
respect to an employee benefit plan), provided that the Company is actively
employing in good faith all reasonable efforts to cause such registration
statement to become effective;

                                (ii) After the Company has effected two such
registrations pursuant to this Section 1.2(a), and such registrations have been
declared or ordered effective; or

                                (iii) If the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors it would be seriously detrimental
to the Company or its stockholders for a registration statement to be filed at
such time, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.2(a) shall be deferred for a period not
to exceed ninety (90) days from the date of receipt of 



                                      -3-



<PAGE>   4
written request from the Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.

                        (b) If the Holders initiating the registration request
hereunder (the "Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 1.2
and the Company shall include such information in the written notice referred to
in Section 1.2(a). In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder at the time of filing of such Registration
Statement. To facilitate the allocation of shares in accordance with the above
provisions, the Company or the underwriters may round the number of shares
allocated to any Holder to the nearest one hundred (100) shares.

               If any Holder of Registrable Securities disapproves of the terms
of the underwriting, such Holder may elect to withdraw therefrom by written
notice to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration, and such Registrable Securities shall not be
transferred in a public distribution prior to one hundred eighty (180) days
after the effective date of such registration, or such other shorter period of
time as the underwriters may require.
.

               1.3 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for stockholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, give each Holder written notice of such registration thirty (30) days
prior to such registration. Upon the written request of each Holder given within
twenty (20) days after mailing of written notice by the Company, the Company
shall, subject to 



                                      -4-


<PAGE>   5

the provisions of Section 1.8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.

               1.4 Obligations of the Company. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:

                        (a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective, and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, keep such registration statement effective for up to ninety (90)
days.

                        (b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.

                        (c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.

                        (d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

                        (e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement provided that such underwriting agreement
shall not provide for indemnification or contribution obligations on the part of
the holders greater than the obligations set forth in Section 1.9.

                        (f) Notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.

                        (g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the date
that such Registrable Securities are delivered to the underwriters for sale in
connection with a registration pursuant to this Section 1, if such securities
are being sold through underwriters, or, if such securities are not being sold
through underwriters, on the 



                                      -5-




<PAGE>   6

date that the registration statement with respect to such securities becomes
effective, (i) an opinion, dated such date, of the counsel representing the
Company for the purposes of such registration, in form and substance as is
customarily given to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) if such offering is being underwritten, a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters.

               1.5 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.

               1.6 Expenses of Demand Registration. All expenses other than
underwriting discounts and commissions incurred in connection with the
registration, filing or qualification pursuant to Section 1.2, including all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company; provided, however, that the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2 if the
registration request is subsequently withdrawn at the request of the Holders of
a majority of the Registrable Securities to be registered (in which case all
participating Holders shall bear such expenses), unless the Holders of a
majority of the Registrable Securities agree to forfeit their right to a demand
registration pursuant to Section 1.2; provided further, however, that if at the
time of such withdrawal, the Holders have learned of a material adverse change
in the condition, business, or prospects of the Company from that known to the
Holders at the time of their request, of which the Company had or should have
had knowledge at the time of the request, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to Section
1.2.

               1.7 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), including all registration, filing, and qualification fees,
printers and accounting fees relating or apportionable thereto and the fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding underwriting discounts and commissions relating to Registrable
Securities.

               1.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company; provided that such
underwriting agreement shall not provide for indemnification or 


                                      -6-





<PAGE>   7

contribution obligations on the part of the Holders greater than the obligations
set forth in Section 1.9. If the total amount of securities, including
Registrable Securities requested by stockholders to be included in such
offering, exceeds the amount of securities sold (other than by the Company) that
the underwriters reasonably believe compatible with the success of the offering,
then the Company shall be required to include in the offering only that number
of such securities, including Registrable Securities, which the underwriters
believe will not jeopardize the success of the offering (the securities so
included to be apportioned pro rata among the selling stockholders according to
the total amount of securities entitled to be included therein owned by each
selling stockholder or in such other proportions as shall mutually be agreed to
by such selling stockholders), but in no event shall any shares being sold by a
stockholder exercising a demand registration right similar to that granted in
Section 1.2 be excluded from such offering. For purposes of apportionment, any
selling stockholder which is a Holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and stockholders of
such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence. In no
event, shall the amount of securities of the selling Holders included in the
registration be reduced below thirty percent (30%) of the total amount of the
securities included in such registration unless such registration is the
Company's initial public offering and such registration does not include the
shares of any other selling stockholders, in which event any or all of the
Registrable Securities may be excluded if the underwriter makes the
determination described above. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of shares
allocated to any Holder to the nearest one hundred (100) shares.

        If any Holder or holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any Registrable Securities
and/or securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration, and shall not be transferred in a public
distribution prior to one hundred eighty (180) days after the effective date of
the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.

               1.9 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:

                        (a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Act or the Securities Exchange Act of 1934, amended
(the "1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, insofar as such losses, claims, damages, or liabilities
(or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a "Violation"): (i)
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary prospectus or final
prospectus contained therein or any amendments or supplements 


                                      -7-




<PAGE>   8

thereto, (ii) the omission or alleged omission to state therein a material fact
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the
Act, the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities law; and the
Company will pay to each such Holder, underwriter or controlling person, as
incurred, any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
Section 1.9(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such loss, claim, damage,
liability, or action to the extent that it arises out of or is based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration by
any such Holder, underwriter or controlling person.

                        (b) To the extent permitted by law, each selling Holder
will indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder expressly for
use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this Section 1.9(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this Section 1.9(b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder, which consent shall not be unreasonably withheld; provided, that, in no
event shall any indemnity under this Section 1.9(b) exceed the gross proceeds
from the offering received by such Holder, unless such liability resulted from
the willful misconduct of such Holder.

                        (c) Promptly after receipt by an indemnified party under
this Section 1.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a 


                                      -8-




<PAGE>   9

reasonable time of the commencement of any such action, if prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 1.9(c), but the omission
to so deliver written notice to the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 1.9.

                        (d) If the indemnification provided for in this Section
1.9 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge and access to information.

                        (e) The obligations of the Company and Holders under
this Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.

               1.10 Reports Under Securities Exchange Act of 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time permit
a Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:

                        (a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after ninety (90)
days after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;

                        (b) take such action, including the voluntary
registration of its Common Stock under Section 12 of the 1934 Act, as is
necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable after the
end of the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;

                        (c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and

                        (d) furnish to any Holder, so long as the Holder owns
any Registrable Securities, forthwith upon request (i) a written statement by
the Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after ninety (90) days after the effective date of the 


                                      -9-




<PAGE>   10

first registration statement filed by the Company), the Act and the 1934 Act (at
any time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.

               1.11 Form S-3 Registration.

                        (a) In case the Company shall receive from any Holder or
Holders a written request or requests that the Company effect a registration on
Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:

                                (i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and

                                (ii) as soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Registrable Securities as are specified in
such request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice from
the Company; provided, however, that the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.11: (1) if Form S-3 is not available for such offering by the Holders;
(2) if the Holders, together with the holders of any other securities of the
Company entitled to inclusion in such registration, propose to sell Registrable
Securities and such other securities (if any) at an aggregate price to the
public (net of any underwriters' discounts or commissions) of less than
$500,000; (3) if the Company shall furnish to the Holders a certificate signed
by the President of the Company stating that in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such Form S-3 Registration to be effected at
such time, in which event the Company shall have the right to defer the filing
of the Form S-3 registration statement for a period of not more than 120 days
after receipt of the request of the Holder or Holders under this Section 1.11;
provided, however, that the Company shall not utilize this right more than once
in any twelve (12) month period; (4) if the Company has already effected one
registration on Form S-3 within the past twelve (12) months for the Holders
pursuant to this Section 1.11; (5) in any particular jurisdiction in which the
Company would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration, qualification or
compliance; (6) if the Company, within ten (10) days of the receipt of the
request of the initiating Holders, gives notice of its bona fide intention to
effect the filing of a registration statement with the Commission within ninety
(90) days of receipt of such request (other than with respect to a registration
statement relating to a Rule 145 transaction, or an offering solely to
employees); or (7) during the period starting with the date ninety (90) days
prior to the Company's estimated date of filing of, and ending on 



                                      -10-




<PAGE>   11

the date six (6) months immediately following, the effective date of any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective.

                        (b) If the Initiating Holders requesting such
registration hereunder intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as part of their request made pursuant to this Section 1.11 and the Company
shall include such information in the written notice referred to in Section
1.11(a)(i). In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of this Section 1.11, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder. To facilitate the allocation of shares in
accordance with the above provisions, the Company may round the number of shares
allocated to any Holder to the nearest one hundred (100) shares.

        If any Holder or holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Company and the managing underwriter. Any Registrable Securities
and/or securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration, and shall not be transferred in a public
distribution prior to one hundred eighty (180) days after the effective date of
the registration statement relating thereto, or such other shorter period of
time as the underwriters may require.

                        (c) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders. All expenses incurred in connection with a
registration requested pursuant to Section 1.11, including all registration,
filing, qualification, printer's and accounting fees and the reasonable fees and
disbursements of one counsel for the selling Holders selected by them, but
excluding any underwriters' discounts or commissions associated with Registrable
Securities, shall be borne by the Company. Registrations effected pursuant to
this Section 1.11 shall not be counted as demands for registration or
registrations effected pursuant to Section 1.2 or 1.3, respectively.

               1.12 Assignment of Registration Rights. The rights to cause the
Company to 


                                      -11-




<PAGE>   12

register Registrable Securities pursuant to this Section 1 may be assigned by a
Holder to a transferee or assignee who acquires at least the lesser of all of
the shares owned by such Holder or 500,000 shares of Registrable Securities,
provided the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. Notwithstanding the
above, such rights may be assigned by a Holder to an Affiliate (as defined
below) of such Holder (the "Transferee"), regardless of the number of shares
acquired by such Transferee. For purposes of this Agreement, "Affiliate"
includes, with respect to a party which is a partnership or limited liability
company, its partners, members or an affiliated entity managed by the same
manager or managing partner or management company, or managed or owned by an
entity controlling, controlled by, or under common control with, such manager or
managing partner or management company.

               1.13 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least two-thirds (66-2/3%) of the
outstanding Registrable Securities, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to include such securities in any registration
filed under Section 1.3 hereof, unless (i) under the terms of such agreement,
such holder or prospective holder may include such securities in any such
registration only to the extent that the inclusion of its securities will not
reduce the amount of the Registrable Securities of the Holders which is included
or (ii) the Board of Directors approves the grant of registration right to such
holder or prospective holder.

               1.14 "Market Stand-Off" Agreement. Each holder of securities
which are or at one time were Registrable Securities (or which are or were
convertible into Registrable Securities) hereby agrees that, during a period not
to exceed one hundred eighty (180) days, following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, sell or otherwise transfer
or dispose of (other than to a donee who agrees to be similarly bound), make a
short sale, loan, or grant any option for the purchase of any Common Stock or
other securities of the Company held by it at any time during such period except
Common Stock included in such registration; provided, however, that:

                        (a) such agreement shall be applicable only to the first
such registration statement of the Company which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and

                        (b) all officers and directors of the Company enter into
similar agreements.

        In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period and, furthermore, each
holder of 

                                      -12-




<PAGE>   13

securities agrees to execute all documents effectuating the above as may be
requested by the underwriter at the time of the initial public offering.

               1.15 Termination of Registration Rights. No stockholder shall be
entitled to exercise any right provided for in this Section 1 after five (5)
years following the Company's first Qualified Public Offering.

        2. Preemptive Rights.

               2.1 Grant of Right. Subject to the terms and conditions specified
in this Section 2, the Company hereby grants to each Investor who, together with
its Affiliates, holds more than 500,000 shares of Preferred Stock a preemptive
right with respect to future sales by the Company of its Future Shares (as
hereinafter defined).

               2.2 Future Shares. "Future Shares" shall mean shares of any
capital stock of the Company, whether now authorized or not, and any rights,
options or warrants to purchase such capital stock, and securities of any type
that are, or may become, convertible into such capital stock; provided however,
that "Future Shares" do not include (i) the Shares purchased under the Series D
Stock Purchase Agreement (ii) the shares of Common Stock issued or issuable upon
the conversion of the Preferred Stock, (iii) securities offered pursuant to a
registration statement filed under the Act, (iv) securities issued pursuant to
the acquisition of another corporation by the Company by merger or, purchase of
substantially all of the assets or other reorganization, (v) securities issued
in connection with or as consideration for a collaborative partnership
arrangement, as approved by a majority of the Board of Directors of the Company,
or the acquisition, leasing or licensing of technology or other significant
assets to be used in the Company's business, as approved by a majority of the
Board of Directors of the Company and (vi) securities issued or issuable to
officers, directors, employees or consultants of the Company pursuant to any
employee or consultant stock offering, plan or arrangement approved by a
majority of the Board of Directors of the Company.

               2.3 Notice. In the event the Company proposes to offer any of its
Future Shares, the Company shall first make an offering of such Future Shares to
each Investor in accordance with the following provisions:

                        (a) The Company shall deliver a notice by certified mail
(the "Notice") to the Investors stating (i) its bona fide intention to offer
such Future Shares, (ii) the number of such Future Shares to be offered, (iii)
the price, if any, for which it proposes to offer such Future Shares, and (iv) a
statement as to the number of days from receipt of such Notice within which the
Investor must respond to such Notice.

                        (b) Within twenty (20) calendar days after receipt of
the Notice, the Investor may elect to purchase or obtain, at the price and on
the terms specified in the Notice, up to that portion of such Future Shares
which equals the proportion that the number of shares of Common Stock issued and
held, or issuable upon conversion of the Shares then held, by such Investor
bears to the total 


                                      -13-




<PAGE>   14

number of shares of Common Stock issued and outstanding, including shares
issuable upon conversion of convertible securities issued and outstanding. If an
Investor elects not to purchase such shares up to its pro rata allocation, any
affiliate of such Investor which is also an Investor may increase its allocation
to add the pro rata shares not purchased by its affiliate. The Company shall
promptly, in writing, inform each Investor which purchases all of the Future
Shares available to it (the "Fully-Exercising Investor") of any other Investor's
failure to do likewise. During the ten (10) day period commencing after receipt
of such information, each Fully-Exercising Investor shall be entitled to obtain
that portion of the Future Shares offered to the Investors which was not
subscribed for, which is equal to the proportion that the number of shares of
Common Stock issued and held, or issuable upon conversion of the Shares then
held, by such Fully-Exercising Investor bears to the total number of shares of
Common Stock issued and outstanding, including shares issuable upon conversion
of convertible securities issued and outstanding then held, by all
Fully-Exercising Investors who wish to purchase some of the unsubscribed shares.

               2.4 Sale after Notice. If all such Future Shares referred to in
the Notice are not elected to be obtained as provided in Section 2.3 hereof, the
Company may, during the 90-day period following the expiration of the period
provided in Section 2.3 hereof, offer the remaining unsubscribed Future Shares
to any person or persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If the Company does
not enter into an agreement for the sale of the Future Shares within such
period, or if such agreement is not consummated within 90 days of the execution
thereof, the right provided hereunder shall be deemed to be revived and such
Future Shares shall not be offered unless first reoffered to the Investors in
accordance herewith.

               2.5 Assignment. The right of first offer granted under this
Section 2 is assignable by the Investors to any transferee who acquires at least
the lesser of all of the shares owned by such Investor or a minimum of 500,000
shares of Common Stock (including any shares of Common Stock into which shares
of Preferred Stock are convertible).

               2.6 Termination of Rights. No stockholder shall be entitled to
exercise any right provided for in this Section 2 (i) upon the consummation of
the sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the initial firm commitment underwritten
offering of its securities to the general public or (ii) when the Company first
becomes subject to the periodic reporting requirements of Section 12(g) or 15(d)
of the Securities Exchange Act of 1934, whichever event shall first occur.

        3. Voting Provisions. The undersigned hereby agree that in all elections
of directors of the Company the Investors will vote their shares such that one
nominee designated by Alta Venture Partners, one nominee designated by the
Sprout Group, one nominee designated by ARCH Venture Fund III, L.P., and one
nominee designated by TGI Fund II will be elected to the Company's Board of
Directors. This Section 3 shall automatically terminate upon the earlier to
occur of: (i) a Qualified Public Offering or (ii) when the Company first becomes
subject to the periodic reporting requirements of Sections 12(g) or 15(d) of the
Securities Exchange Act of 1934, as amended.




                                      -14-




<PAGE>   15

        4. Prior Rights Agreements. Effective upon the execution of this
Agreement by the Company and at least the holders of two-thirds (66 2/3%) of the
Registrable Securities under the Prior Rights Agreement, the Prior Rights
Agreement is null and void and superseded in its entirety by this Agreement.

        5. Waiver of Preemptive Rights. To the extent that an Investor under the
Prior Rights Agreement is not purchasing its pro rata share of Series D
Preferred Stock pursuant to the Series D Agreement, all rights under the
Preemptive Rights set forth in Section 2 of the Prior Rights Agreement to
purchase such securities and to receive notice is hereby waived. This waiver is
effective upon the execution of this Agreement by the holders of a majority of
the Registrable Securities under the Prior Rights Agreement.

        6. Transferability.

               6.1 Restrictions on Transferability. The Shares and the
Registrable Securities shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Section 6, which conditions are
intended to ensure compliance with the provisions of the Securities Act. The
Investors will cause any proposed purchaser, assignee, transferee, or pledgee of
the Shares or the Registrable Securities held by the Investors to agree to take
and hold such securities subject to the provisions and upon the conditions
specified in this Section 6.

               6.2 Restrictive Legend. Each certificate representing (i) the
Shares, (ii) the Registrable Securities and (iii) any other securities issued in
respect of the Shares or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted by the provisions of Section 6.3 below) be stamped
or otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):

               "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
               ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY NOT BE SOLD,
               OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A
               REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
               UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
               COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS SOLD
               PURSUANT TO RULE 144 OF SUCH ACT. THESE SECURITIES ARE SUBJECT TO
               A CERTAIN VOTING PROVISION ENTERED INTO BY AND AMONG THE
               INVESTORS."

               The Investors and Holders consent to the Company making a
notation on its records and giving instructions to any transfer agent of the
Shares or the Registrable Securities in order to implement the restrictions on
transfer established in this Section 6.


                                      -15-




<PAGE>   16

               6.3 Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 6.3. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted Securities (other than (i) a
transfer not involving a change in beneficial ownership, or (ii) in transactions
involving the distribution without consideration of Restricted Securities by the
Investors to any of its partners, or retired partners, or to the estate of any
of its partners or retired partners, (iii) a transfer to an affiliated fund,
partnership or company, which is not a competitor of the Company, or a transfer
to an Affiliate of the holder, subject to compliance with applicable securities
laws, or (iv) transfers in compliance with Rule 144, so long as the Company is
furnished with satisfactory evidence of compliance with such Rule), unless there
is in effect a registration statement under the Securities Act covering the
proposed transfer, the holder thereof shall give written notice to the Company
of such holder's intention to effect such transfer, sale, assignment or pledge.
Each such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and shall be
accompanied, at such holder's expense by either (a) a written opinion of legal
counsel who shall, and whose legal opinion shall, be reasonably satisfactory to
the Company addressed to the Company, to the effect that the proposed transfer
of the Restricted Securities may be effected without registration under the
Securities Act, or (b) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such
transfer is made pursuant to Rule 144, the appropriate restrictive legend set
forth in Section 6.2 above, except that such certificate shall not bear such
restrictive legend if in the opinion of counsel for such holder and in the
reasonable opinion of the Company such legend is not required in order to
establish compliance with any provision of the Securities Act.

               6.4 Removal of Restrictions on Transfer of Securities. Any legend
referred to in Section 6.2 hereof stamped on a certificate evidencing (i) the
Shares, (ii) the Registrable Securities or (iii) any other securities issued in
respect of the Shares or the Registrable Securities upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event and the stock
transfer instructions and record notations with respect to such security shall
be removed and the Company shall issue a certificate without such legend to the
holder of such security if such security is registered under the Securities Act,
or if such holder provides the Company with an opinion of counsel (which may be
counsel for the Company) reasonably acceptable to the Company to the effect that
a public sale or transfer of such security may be made without registration
under the Securities Act or such holder provides the Company with reasonable
assurances, which may, at the option of the Company, include an opinion of
counsel satisfactory to the Company, that such security can be sold pursuant to
Section (k) of Rule 144 under the Securities Act.

        7. Covenants of the Company.

               7.1 Delivery of Financial Statements. The Company shall deliver
to each Investor who holds, together with its Affiliates, an aggregate of
500,000 shares of Series C Preferred Stock or 


                                      -16-




<PAGE>   17

Series D Preferred Stock (or Conversion Shares) (a "Major Investor") and upon
such Major Investors timely request for each such report:

                        (a) as soon as practicable, but in any event within one
hundred eighty (180) days after the end of each fiscal year of the Company,
statements of operations and cash flow for such fiscal year, a balance sheet of
the Company as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;

                        (b) as soon as practicable, but in any event prior to
the end of each fiscal year of the Company, an annual budget and plan of
operations for the upcoming fiscal year approved by the Board of Directors;

                        (c) within twenty (20) days of the end of each month,
and until a public offering of Common Stock of the Company, an unaudited
statement of operations and balance sheet for and as of the end of such month,
in reasonable detail and prepared in accordance with GAAP, subject to year end
audit adjustments and the absence of footnotes;

                        (d) with respect to the financial statements called for
in subsection (c) of this Section 7.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with GAAP consistently applied with prior
practice for earlier periods and fairly present the financial condition of the
Company and its results of operation for the period specified, subject to
year-end audit adjustments and the absence of footnotes;

                        (e) all accounting letters or reports from independent
auditors and such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Major Investor or
any assignee of the Major Investor may from time to time request, provided,
however, that the Company shall not be obligated to provide information which
the Board of Directors deems in good faith to be proprietary; and

               7.2 Confidential Information. Each Major Investor agrees that it
will keep confidential and will not disclose any confidential, proprietary or
secret information which such Major Investor may obtain from the Company, and
which the Company has prominently marked "confidential", "proprietary" or
"secret" or has otherwise identified as being such, orally or in writing,
pursuant to financial statements, reports and other materials submitted by the
Company as required hereunder, unless such information is or becomes known to
the Major Investor from a source other than the Company without violation of any
rights of the Company, or is or becomes publicly known, or unless the Company
gives its written consent to the Major Investor's release of such information,
except that no such written consent shall be required (and the Major Investor
shall be free to release such information to such recipient) if such information
is to be provided to a Major Investor's counsel, in response to a subpoena or
regulatory inquiry, or to an officer, director or partner of a Major Investor,
provided that the Major 


                                      -17-




<PAGE>   18

Investor shall inform the recipient of the confidential nature of such
information, and such recipient must agree in advance of disclosure to treat the
information as confidential.

               7.3 Inspection. The Company shall permit each Major Investor, at
such Major Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Major Investor; provided, however, that the Company shall not
be obligated pursuant to this Section 7.3 to provide access to any information
which the Board of Directors reasonably considers to be a trade secret or
similar confidential information.

               7.4 Board Visitation Rights. Each Major Investor or its
designated representative, unless already represented on the Company's Board of
Directors (the "Observer"), shall have the right to attend the Company's Board
of Directors meetings and to receive, at the same time such information as is
provided to its directors and notice and copies of all information furnished to
directors in connection with all meetings of the Board of Directors; provided,
however, that the Company shall not be obligated pursuant to this Section 7.4 to
provide access to any information which the Company's Board of Directors
reasonably considers to be a trade secret or similar confidential information
unless the Observer executes a form of nondisclosure agreement acceptable to the
Company, which acceptance shall not be unreasonably withheld. The rights of the
Major Investor under this Section 7.4 shall not be transferable.

               7.5 Termination of Covenants. The covenants set forth in Sections
7.1, and 7.2 shall terminate as to Investors and be of no further force or
effect upon the earlier to occur of: (i) a Qualified Public Offering or (ii)
when the Company first becomes subject to the periodic reporting requirements of
Sections 12(g) or 15(d) of the Securities Exchange Act of 1934, as amended.

        8. Miscellaneous Provisions.

               8.1 Waivers and Amendments. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
at least a majority of the shares of Registrable Securities except that any such
amendment of Sections 1.13, 3 or 8.1 shall require the written consent of the
Company and the holders of at least two-thirds (66 2/3%) of the shares of
Registrable Securities. Any amendment or waiver effected in accordance with this
Section 8.1 shall be binding upon each person or entity which are granted
certain rights under this Agreement and the Company. Notwithstanding the
foregoing, the Company may, without obtaining any further consent of the holders
of Registrable Securities, amend this Agreement to the extent necessary to grant
rights and obligations on a pari passu basis with the rights and obligations of
the Series D Investors hereunder to investors in any subsequent round of
financing prior to the Subsequent Closing Date (as such term is defined in the
Series D Stock Purchase Agreement), and such investors shall become parties to
this Agreement by executing a counterpart hereof.



                                      -18-


<PAGE>   19

               8.2 Notices. All notices and other communications required or
permitted hereunder shall be in writing and, except as otherwise noted herein,
shall be deemed effectively given upon personal delivery, refusal of delivery,
delivery by nationally recognized courier or five business days after deposit
with the United States Post Office (by first class mail, postage prepaid),
addressed: (a) if to the Company, at 1124 Columbia Street, Suite 130, Seattle,
WA 98104 (or at such other address as the Company shall have furnished to the
Investors in writing) attention of President and (b) if to an Investor, at the
latest address of such person shown on the Company's records.

               8.3 Descriptive Headings. The descriptive headings herein have
been inserted for convenience only and shall not be deemed to limit or otherwise
affect the construction of any provisions hereof.

               8.4 Governing Law. This Agreement shall be governed by and
interpreted under the laws of the State of Washington as applied to agreements
among Washington residents, made and to be performed entirely within the State
of Washington.

               8.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument, but only one of which
need be produced.

               8.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.

               8.7 Successors and Assigns. Except as otherwise expressly
provided in this Agreement, this Agreement shall benefit and bind the
successors, assigns, heirs, executors and administrators of the parties to this
Agreement.

               8.8 Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the specific subject matter
hereof.

               8.9 Separability; Severability. Unless expressly provided in this
Agreement, the rights of each Investor under this Agreement are several rights,
not rights jointly held with any other Investors. Any invalidity, illegality or
limitation on the enforceability of this Agreement with respect to any Investor
shall not affect the validity, legality or enforceability of this Agreement with
respect to the other Investors. If any provision of this Agreement is judicially
determined to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not be affected or impaired.

               8.10 Stock Splits. All references to numbers of shares in this
Agreement shall be appropriately adjusted to reflect any stock dividend, split,
combination or other recapitalization of shares by the Company occurring after
the date of this Agreement.




                                      -19-


<PAGE>   20

        IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first set forth above.

COMPANY:                                        INVESTORS:

XCYTE THERAPIES, INC.                           --------------------------------
                                                (Investor)

                                                By:
                                                    ----------------------------
By:                                             Name:
     ----------------------------                     --------------------------
                                                               (print)
Title:                                          Title:
      ---------------------------                      -------------------------


FOUNDERS:

---------------------------------
Ronald J. Berenson


---------------------------------
Jeffrey Bluestone


---------------------------------
Carl June


---------------------------------
Jeffrey Ledbetter


---------------------------------
Craig Thompson



                    [SIGNATURE PAGE FOR XCYTE THERAPIES, INC.
                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]



<PAGE>   21

                                   SCHEDULE A

                              SCHEDULE OF INVESTORS


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
Alta California Partners, L.P.               1,840,086      787,294       949,635       571,491
One Embarcadero Center
Suite 4050
San Francisco, CA  94111
Attn: Elaine Walker and Jean Deleage
Tel:  (415) 362-4022
Fax:  (415) 362-6178

Alta Embarcadero Partners, LLC                 54,651        17,987        21,696        13,056
One Embarcadero Center
Suite 4050
San Francisco, CA  94111
Attn: Elaine Walker and Jean Deleage
Tel:  (415) 362-4022
Fax:  (415) 362-6178

ARCH Venture Fund II, L.P.                    631,579       363,636          0             0
8735 West Higgins Road
Suite 235
Chicago, IL  60631
Attn:  Melanie Davis
Tel: (773) 380-6600
Fax: (773) 380-6606
1000 Second Avenue, Suite 3700
Seattle, WA  98104-1053
Attn:  Bob Nelsen

Ron Berenson, M.D.                             57,895          0             0             0
PO Box 1598
Mercer Island, WA  98040
Tel:  (206) 232-1433
Fax:  (206) 236-1876
</TABLE>




<PAGE>   22


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
                                               26,316          0             0             0
GC&H Investments
1 Maritime Plaza, 20th Fl.
San Francisco, CA 94111
Attn:  John L. Cordoza
Tel: (415) 693-2600

CV Sofinnova Venture Partners III
140 Geary Street, 10th Floor                  947,368       338,289        59,880          0
San Francisco, CA 94108
Attn.: Michael F. Powell
Tel:  (415) 228-3387
Fax:  (415) 228-3390

DLJ Capital Corp.                              52,632        10,909        22,859        6,475
3000 Sand Hill Road
Bldg. 3, Ste. 170
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

DLJ First ESC L.P.                            263,158        54,545       114,294        32,374
3000 Sand Hill Road
Bldg. 3, Ste. 170
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

Sprout Capital VII, L.P.                     2,289,197      474,488       994,235       281,622
3000 Sand Hill Road
Bldg. 3, Ste. 170
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry

The Sprout CEO Fund, L.P.                      26,592        5,512         11,549        3,270
3000 Sand Hill Road
Bldg. 3, Ste. 170
Menlo Park, CA  94025
Tel:  (650) 234-2700
Fax:  (650) 234-2779
Attn:  Bob Curry
</TABLE>




<PAGE>   23



<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
WS Investment Company                          26,316          0             0             0
650 Page Mill Road
Palo Alto, CA  94304
Tel:  (650) 443-9300
Fax:  (650) 845-5000
Attn:  J. Casey McGlynn

Paul Etsekson                                  26,316          0             0             0
Fleet Pride
P.O. Box 80986
Seattle, WA 98108
Tel: (206) 654-8089
Fax:  (206) 343-1499

Gary P. Farber IRA Rollover                    26,316          0             0             0
Summit Partners
16102 S.E. Cougar Mountain Way
Bellevue, WA 98006
Tel: (206) 447-9020

Mrs. Thomas Georges, Jr.                       26,316          0             0             0
1814 S.W. Jackson Street
Portland, OR 97201
Tel: (503) 227-3898

Thomas Georges, Jr.                            10,526          0             0             0
1814 S.W. Jackson Street
Portland, OR 97201
Tel: (503) 227-3898

Michael S. Rabson                              2,632           0             0             0
c/o  Maxygen, Inc.
515 Galveston Drive
Redwood City, CA 94063

SMS                                              0           22,727          0             0
Bader Martin Ross & Smith, P.S.
1000 Second Avenue, 34th Floor
Seattle, WA  98104
Tel: (206) 667-0310
Fax: (206) 682-1874
Attn:  Walter R. Smith, CPA
</TABLE>




<PAGE>   24


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
Benjamin Stern
528 Laidlaw Blvd
Winnipeg, Canada                               26,316          0             0             0
R3POK9

ARCH Development Corporation                  157,890          0             0             0
Walker 213
1101 East 58th Street
Chicago, IL  60637
Attn:  Terry Willey

ARCH Venture Fund III, L.P.                   157,890      1,681,818     1,119,265      962,230
8735 West Higgins Road
Suite 235
Chicago, IL  60631
Attn:  Melanie Davis
Tel: (773) 380-6600
Fax: (773) 380-6606
1000 Second Avenue, Suite 3700
Seattle, WA  98104-1053
Attn: Bob Nelsen

Jeffrey Ledbetter                             157,890          0             0             0
18798 Ridgefield Road NW
Shoreline, WA  98177

TGI Fund II, LC                                  0             0         1,796,410      286,022
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104
Attn:  Michael Beblo and Dave Maki

Vengott LC                                       0             0          179,641          0
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104
Attn:  Michael Beblo and Dave Maki

Steven M. Johnson                                0             0           32,934          0
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104
</TABLE>




<PAGE>   25


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
John E. Parkey                                   0             0           29,940          0
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

Charles A. Blanchard                             0             0           14,970          0
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

Anthony P. Russo, Trustee                        0             0           14,970          0
Anthony P. Russo Separate Property Trust
U/A 9/11/90
6501 Columbia Center
701-5th Avenue
Seattle, WA  98104

David J. Maki                                    0             0           14,970          0
Tredegar Investments
6300 Columbia Center
701 Fifth Avenue
Seattle, WA  98104-7092

R. Ray Cummings                                  0             0           11,976          0
Cummings Consulting
8695 NE Grizdale Lane
Bainbridge Island, WA  98110

Falcon Technology Partners, L.P.                 0             0          598,802        95,341
600 Dorset Road
Devon, PA  19333
Attn:  Jim Rathman

Vulcan Ventures Inc.                             0             0          598,802       719,424
110 110th Avenue NE, Suite 550
Bellevue, WA  98004
Attn:  Ruth B. Kunath

Fluke Capital Management, L.P.                   0             0          598,802        89,928
11400 SE  6th Street, Suite 230
Bellevue, WA  98004
Attn:  Dennis P. Weston & Kevin C.
Gabelein
</TABLE>




<PAGE>   26


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
Tom Alberg                                       0             0             0          719,424
Madrona Investment Group
1000 Second Avenue
Seattle, WA  98104

MGN Opportunity Group LLC                        0             0             0          359,712
Matthew G. Norton Company
The Norton Building
801 Second Avenue, Suite 1300
Seattle, WA  98104
Attn:  Stephen Humphreys

Arnold L. Holm, Jr.                              0             0             0           36,000
Holm Construction Services
310 Third Avenue NE, Suite 103
Issaquah, WA  98027

Henry James                                      0             0             0           89,928
22420 North Dogwood Lane
Woodway, WA  98020

Scott Oki                                        0             0             0          359,712
Oki Enterprises, LLC
10838 Main Street
Bellevue, WA  98004

VLG Investments LLC                              0             0             0           12,619
2800 Sand Hill Road
Menlo Park, CA  94025
Attn:  Elias J. Blawie

VLG Associates 2000                              0             0             0           1,770
2800 Sand Hill Road
Menlo Park, CA  94025
Attn:  Elias J. Blawie

Sonya F. Erickson                                0             0             0           1,799
4750 Carillon Point
Kirkland, WA  98033

Marilyn Parsons                                52,630          0             0             0
306 NW 113th Place
Seattle, WA  98177
</TABLE>




<PAGE>   27


<TABLE>
<CAPTION>
INVESTOR NAME AND ADDRESS                    SERIES A      SERIES B      SERIES C      SERIES D
<S>                                          <C>           <C>           <C>           <C>    
Genetics Institute                               0          145,875          0             0
c/o American Home Products Corp.
S Giralda Farms
Madison, NJ  07940
Attn:  Senior V.P. & General Counsel
</TABLE>






<PAGE>   1
                                                                    EXHIBIT 10.6

                                  AMENDMENT TO
                 AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
                            OF XCYTE THERAPIES, INC.

        This Amendment to the Amended and Restated Investor Rights Agreement
dated as of May 25, 2000 of Xcyte Therapies, Inc. (the "Amendment") is entered
into as of October 18, 2000 by and between Xcyte Therapies, Inc., a Delaware
corporation (the "Company"), the holders of the Company's capital stock listed
on Schedule A attached to the Amended and Restated Investor Rights Agreement
(collectively, the "Investors"), Phoenix Leasing Incorporated and Robert
Kingsbook (each of whom is referred to as a "Warrantholder").

                                     RECITAL

        The Company, the Investors and the Warrantholders are parties to an
Amended and Restated Investor Rights Agreement dated as of May 25, 2000 and
amended by the Addendum to the Series D Preferred Stock Purchase Agreement and
Omnibus Amendment to Series D Financing Documents dated as of August 8, 2000
(the "Rights Agreement"). Capitalized terms used herein without definition shall
have the meaning ascribed to them in the Rights Agreement. The Company and
Landlord are entering into a Lease Agreement dated September 20, 2000 (the
"Lease Agreement") pursuant to which the Company will issue Landlord a warrant

to purchase shares of the Company's Series D Preferred Stock (the "Warrant").

                                    AGREEMENT


        1. Amendment to Section 2.2. Section 2.2 is hereby amended and restated
to read in its entirety as follows:

                2.2 Future Shares. "Future Shares" shall mean shares of any
capital stock of the Company, whether now authorized or not, and any rights,
options or warrants to purchase such capital stock, and securities of any type
that are, or may become, convertible into such capital stock; provided however,
that "Future Shares" do not include (i) the Shares purchased under the Series D
Stock Purchase Agreement (ii) the shares of Common Stock issued or issuable upon
the conversion of the Preferred Stock, (iii) securities offered pursuant to a
registration statement filed under the Act, (iv) securities issued pursuant to
the acquisition of another corporation by the Company by merger or, purchase of
substantially all of the assets or other reorganization, (v) securities issued
in connection with or as consideration for a collaborative partnership
arrangement, as approved by a majority of the Board of Directors of the Company,
or the acquisition, leasing or licensing of technology or other significant
assets to be used in the Company's business, as approved by a majority of the
Board of Directors of the Company, (vi) securities issued or issuable to
officers, directors, employees or consultants of the Company pursuant to any
employee or consultant stock offering, plan or arrangement approved by a
majority of the Board of Directors of the Company and (vii) all shares of Common
Stock or other securities, or options or warrants to purchase Common Stock or
any such other securities, issuable to landlords, financial institutions or
lessors in connection with office leases, commercial credit arrangements,
equipment financings or similar transactions."


<PAGE>   2

        2. No Other Amendments. Except as expressly amended as set forth above,
the Rights Agreement shall remain in full force and effect in accordance with
its terms.

        3. Counterparts. This Amendment may be executed in counterparts, each of
which shall be deemed an original and all of which together shall constitute one
document.



                            (signature page follows)

                                      -2-

<PAGE>   3
        The parties have executed this Amendment to Amended and Restated
Investor Rights Agreement of Xcyte Therapies, Inc. as of the date first written
above.

                                              COMPANY:

                                              XCYTE THERAPIES, INC.

                                              ---------------------------------

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------


                                              WARRANTHOLDERS:

                                              PHOENIX LEASING INCORPORATED

                                              ---------------------------------

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              ---------------------------------
                                              Robert Kingsbook



                                              INVESTORS:

                                              ---------------------------------

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]


<PAGE>   4

                                              INVESTORS:

                                              ALTA CALIFORNIA PARTNERS, L.P.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: One Embarcadero Center
                                                       Suite 4050
                                                       San Francisco, CA  94111


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]



<PAGE>   5



                                              INVESTORS:

                                              ARCH DEVELOPMENT CORPORATION

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 1000 Second Avenue
                                                       Suite 3700
                                                       Seattle, WA  98104-1053

                                              ARCH VENTURE FUND III, L.P.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 1000 Second Avenue
                                                       Suite 3700
                                                       Seattle, WA  98104-1053

                                              ARCH VENTURE PARTNERS II, L.P.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------
                                              Address: 1000 Second Avenue
                                                       Suite 3700
                                                       Seattle, WA  98104-1053

               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]


<PAGE>   6



                                              INVESTORS:

                                              RONALD J. BERENSON, M.D.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------


                                              Address: 8836 S.E. 74th Place
                                                       Mercer Island, WA  98040


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]


<PAGE>   7



                                              INVESTORS:

                                              DLJ CAPITAL CORP.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 3000 Sand Hill Road
                                                       Building 3, Suite 170
                                                       Menlo Park, CA  94025

                                              DLJ FIRST ESC L.L.C.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 3000 Sand Hill Road
                                                       Building 3, Suite 170
                                                       Menlo Park, CA  94025

                                              DLJ FIRST ESC. L.P.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 3000 Sand Hill Road
                                                       Building 3, Suite 170
                                                       Menlo Park, CA  94025


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]


<PAGE>   8

                                              INVESTORS:

                                              MPM ASSET MANAGEMENT INVESTORS

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: One Cambridge Center
                                                       Cambridge, MA  02142

                                              MPM BIOVENTURES GMBH & CO.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: One Cambridge Center
                                                       Cambridge, MA  02142

                                              MPM BIOVENTURES II, LP

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: One Cambridge Center
                                                       Cambridge, MA  02142

                                              MPM BIOVENTURES QP, LP

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: One Cambridge Center
                                                       Cambridge, MA  02142


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]


<PAGE>   9



                                              INVESTORS:

                                              SPROUT CAPITAL VII, L.P.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 3000 Sand Hill Road
                                                       Building 3, Suite 170
                                                       Menlo Park, CA  94025

                                              SPROUT CEO FUND, L.P.

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 3000 Sand Hill Road
                                                       Building 3, Suite 170
                                                       Menlo Park, CA  94025


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]


<PAGE>   10



                                              INVESTORS:

                                              TGI FUND II, LC

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 6501 Columbia Center
                                                       701 Fifth Ave.
                                                       Seattle, WA  98104


                                              VENGOTT LC
                                              C/O TREDEGAR INVESTMENTS

                                              By:
                                                   ----------------------------

                                              Name:
                                                    ---------------------------

                                              Its:
                                                   ----------------------------

                                              Address: 6501 Columbia Center
                                                       701 Fifth Ave.
                                                       Seattle, WA  98104


               [SIGNATURE PAGE TO XCYTE THERAPIES, INC. AMENDMENT
               TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT]
 



<PAGE>   1
                                                                   EXHIBIT 10.7

         THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
-------------------------------------------------------------------------------

Warrant No. <<WarrantNo>>                         Number of Shares: <<NoShares>>
ate of Issuance: <<Date>>                                (subject to adjustment)

                              XCYTE THERAPIES, INC.

                          COMMON STOCK PURCHASE WARRANT



        Xcyte Therapies, Inc., a Delaware corporation (the "Company"), for value
received, hereby certifies that <<Holder>>, or its registered assigns (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to <<NoShares>> shares
of Common Stock of the Company, at a purchase price of $0.30 per share. The
shares purchasable upon exercise of this Warrant and the purchase price per
share, as adjusted from time to time pursuant to the provisions of this Warrant,
are
 hereinafter referred to as the "Warrant Stock" and the "Purchase Price,"
respectively.

        This Warrant is issued pursuant to, and is subject to the terms and
conditions of, an Addendum to Series D Preferred Stock Purchase Agreement and
Omnibus Amendment to Series D Financing Agreements dated August 14, 2000 among
the Company and certain Investors (the "Purchase Agreement").

        1.     EXERCISE.

               (a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon such
exercise. The Purchase Price may be paid by cash, check, wire transfer or by the
surrender of promissory notes or other instruments representing indebtedness of
the Company to the Registered Holder.

               (b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such


<PAGE>   2

time, the person or persons in whose name or names any certificates for Warrant
Stock shall be issuable upon such exercise as provided in Section 1(d) below
shall be deemed to have become the holder or holders of record of the Warrant
Stock represented by such certificates.

               (c)    NET ISSUE EXERCISE.

                      (i) In lieu of exercising this Warrant in the manner
provided above in Section 1(a), the Registered Holder may elect to receive
shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election on the purchase/exercise form appended
hereto as Exhibit A duly executed by such Registered Holder or such Registered
Holder's duly authorized attorney, in which event the Company shall issue to
such Holder a number of shares of Warrant Stock computed using the following
formula:

                             X =    Y (A - B)
                                    ---------
                                       A
Where          X = The number of shares of Warrant Stock to be issued to the
                      Registered Holder.

               Y = The number of shares of Warrant Stock purchasable under
                      this Warrant (at the date of such calculation).

               A = The fair market value of one share of Warrant Stock (at
                      the date of such calculation).

               B = The Purchase Price (as adjusted to the date of such
                      calculation).

                      (ii) For purposes of this Section 1(c), the fair market
value of Warrant Stock on the date of calculation shall mean with respect to
each share of Warrant Stock:

                             (A) if the exercise is in connection with an
initial public offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been declared
effective by the Securities and Exchange Commission, then the fair market value
per share shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number of shares
of Common Stock into which each share of Warrant Stock is convertible at the
date of calculation;

                             (B) if (A) is not applicable, the fair market value
of Warrant Stock shall be at the highest price per share which the Company could
obtain on the date of calculation from a willing buyer (not a current employee
or director) for shares of Warrant Stock sold by the Company, from authorized
but unissued shares, as determined in good faith by the Board of Directors,
unless the Company is at such time subject to an acquisition as described in
Section 5(b) below, in which case the fair market value of Warrant Stock shall
be deemed to be the value received by the holders of such stock pursuant to such
acquisition.

               (d) DELIVERY TO HOLDER. As soon as practicable after the exercise
of this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its


                                      -2-

<PAGE>   3

expense will cause to be issued in the name of, and delivered to, the Registered
Holder, or as such Holder (upon payment by such Holder of any applicable
transfer taxes) may direct:

                      (i)  a certificate or certificates for the number of
shares of Warrant Stock to which such Registered Holder shall be entitled, and

                      (ii) in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant minus the number of such shares purchased
by the Registered Holder upon such exercise as provided in Section 1(a) or 1(c)
above.

        2.     ADJUSTMENTS.

               (a) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Common Stock shall be subdivided into a greater number of shares or a
dividend in Common Stock shall be paid in respect of Common Stock, the Purchase
Price in effect immediately prior to such subdivision or at the record date of
such dividend shall simultaneously with the effectiveness of such subdivision or
immediately after the record date of such dividend be proportionately reduced.
If outstanding shares of Common Stock shall be combined into a smaller number of
shares, the Purchase Price in effect immediately prior to such combination
shall, simultaneously with the effectiveness of such combination, be
proportionately increased. When any adjustment is required to be made in the
Purchase Price, the number of shares of Warrant Stock purchasable upon the
exercise of this Warrant shall be changed to the number determined by dividing
(i) an amount equal to the number of shares issuable upon the exercise of this
Warrant immediately prior to such adjustment, multiplied by the Purchase Price
in effect immediately prior to such adjustment, by (ii) the Purchase Price in
effect immediately after such adjustment.

               (b) RECLASSIFICATION, ETC. In case there occurs any
reclassification or change of the outstanding securities of the Company or of
any reorganization of the Company (or any other corporation the stock or
securities of which are at the time receivable upon the exercise of this
Warrant) or any similar corporate reorganization on or after the date hereof,
then and in each such case the Registered Holder, upon the exercise hereof at
any time after the consummation of such reclassification, change, or
reorganization shall be entitled to receive, in lieu of the stock or other
securities and property receivable upon the exercise hereof prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment
pursuant to the provisions of this Section 2.

               (c) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.


                                      -3-

<PAGE>   4

               (d) ACKNOWLEDGEMENT. In order to avoid doubt, it is acknowledged
that the holder of this Warrant shall be entitled to the benefit of all
adjustments in the number of shares of Common Stock of the Company.

        3. TRANSFERS.

               (a) UNREGISTERED SECURITY. Each holder of this Warrant
acknowledges that this Warrant, the Warrant Stock and the Common Stock of the
Company have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), and agrees not to sell, pledge, distribute, offer for
sale, transfer or otherwise dispose of this Warrant, any Warrant Stock issued
upon its exercise in the absence of (i) an effective registration statement
under the Act as to this Warrant or such Warrant Stock and registration or
qualification of this Warrant or such Warrant Stock under any applicable U.S.
federal or state securities law then in effect, or (ii) an opinion of counsel,
satisfactory to the Company, that such registration and qualification are not
required. Each certificate or other instrument for Warrant Stock issued upon the
exercise of this Warrant shall bear a legend substantially to the foregoing
effect.

               (b) TRANSFERABILITY. Subject to the provisions of Section 3(a)
hereof and of Section 1.12 of the Investors' Rights Agreement dated May 25, 2000
among the Company and certain holders of the Company's securities, this Warrant
and all rights hereunder are transferable, in whole or in part, upon surrender
of the Warrant with a properly executed assignment (in the form of Exhibit B
hereto) at the principal office of the Company.

               (c) WARRANT REGISTER. The Company will maintain a register
containing the names and addresses of the Registered Holders of this Warrant.
Until any transfer of this Warrant is made in the warrant register, the Company
may treat the Registered Holder of this Warrant as the absolute owner hereof for
all purposes; provided, however, that if this Warrant is properly assigned in
blank, the Company may (but shall not be required to) treat the bearer hereof as
the absolute owner hereof for all purposes, notwithstanding any notice to the
contrary. Any Registered Holder may change such Registered Holder's address as
shown on the warrant register by written notice to the Company requesting such
change.

        4. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will (subject to Section 13 below) at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the holder of this Warrant against impairment.

        5. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) August 8, 2005, (b) the sale, conveyance or
disposal of all or substantially all of the Company's property or business or
the Company's merger into or consolidation with any other corporation (other
than a wholly-owned subsidiary of the Company) or any other transaction or
series of related transactions in which more than fifty percent (50%) of the
voting power of the Company is disposed of, provided that this Section 5(b)
shall not apply to a merger effected


                                      -4-

<PAGE>   5

exclusively for the purpose of changing the domicile of the Company, or (c) the
closing of a firm commitment underwritten public offering pursuant to a
registration statement on Form S-1 under the Securities Act, the public offering
price of which is not less than $4.00 per share (appropriately adjusted for any
stock split, dividend, combination or other recapitalization)] and which results
in aggregate cash proceeds to the Company of $20,000,000 (net of underwriting
discounts and commissions).

        6. NOTICES OF CERTAIN TRANSACTIONS.  In case:

               (a) the Company shall take a record of the holders of its Common
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right, or

               (b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or

               (c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,

then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up or redemption is to take place, and the time, if any is to be fixed,
as of which the holders of record of Common Stock (or such other stock or
securities at the time deliverable upon such reorganization, reclassification,
consolidation, merger, transfer, dissolution, liquidation, winding-up or
redemption) are to be determined. Such notice shall be mailed at least ten (10)
days prior to the record date or effective date for the event specified in such
notice.

        7. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.

        8. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered


                                      -5-

<PAGE>   6

Holder or as such Registered Holder (upon payment by such Registered Holder of
any applicable transfer taxes) may direct, calling in the aggregate on the face
or faces thereof for the number of shares of Common Stock called for on the face
or faces of the Warrant or Warrants so surrendered.

        9.  REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.

        10. MAILING OF NOTICES. Any notice required or permitted pursuant to
this Warrant shall be in writing and shall be deemed sufficient upon receipt,
when delivered personally or sent by courier, overnight delivery service or
confirmed facsimile, or forty-eight (48) hours after being deposited in the
regular mail, as certified or registered mail (airmail if sent internationally),
with postage prepaid, addressed (a) if to the Registered Holder, to the address
of the Registered Holder most recently furnished in writing to the Company and
(b) if to the Company, to the address set forth below or subsequently modified
by written notice to the Registered Holder.

        11. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.

        12. NO FRACTIONAL SHARES. No fractional shares of Common Stock will be
issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.

        13. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived upon written consent of the Company and the holders of at least a
majority of the Common Stock issuable upon exercise of outstanding warrants
purchased pursuant to the Purchase Agreement. By acceptance hereof, the
Registered Holder acknowledges that in the event the required consent is
obtained, any term of this Warrant may be amended or waived with or without the
consent of the Registered Holder; provided, however, that any amendment hereof
that would materially adversely affect the Registered Holder in a manner
different from the holders of the remaining warrants issued pursuant to the
Purchase Agreement shall also require the consent of Registered Holder.

        14. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.

        15. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.


                                      -6-

<PAGE>   7

                                       XCYTE THERAPIES, INC.


                                       By
                                         ------------------------------------
                                         Address:      1124 Columbia Street
                                                       Suite 130
                                                       Seattle, Washington 98104

                                         Fax Number:   (206) 262-0900


                                      -7-

<PAGE>   8

                                    EXHIBIT A

                             PURCHASE/EXERCISE FORM


To:     XCYTE THERAPIES, INC.                                    Dated:

        The undersigned, pursuant to the provisions set forth in the attached
Warrant No. <<WarrantNo>>, hereby irrevocably elects to (a) purchase _____
shares of the Common Stock covered by such Warrant and herewith makes payment of
$ _________, representing the full purchase price for such shares at the price
per share provided for in such Warrant, or (b) exercise such Warrant for _______
shares purchasable under the Warrant pursuant to the Net Issue Exercise
provisions of Section 1(c) of such Warrant.

        The undersigned acknowledges that it has reviewed the representations
and warranties contained in Section 3 of the Purchase Agreement (as defined in
the Warrant) and by its signature below hereby makes such representations and
warranties to the Company. Defined terms contained in such representations and
warranties shall have the meanings assigned to them in the Purchase Agreement,
provided that the term "Purchaser" shall refer to the undersigned and the term
"Securities" shall refer to the Warrant Stock.

        The undersigned further acknowledges that it has reviewed the market
standoff provisions set forth in Section 1.14 of the Investors' Rights Agreement
dated May 25, 2000, as amended, among the Company and certain holders of the
Company's securities and agrees to be bound by such provisions.


                              Signature:
                                        -------------------------------------

                              Name (print):
                                           ----------------------------------- 

                              Title (if applic.)
                                                ------------------------------ 

                              Company (if applic.):
                                                   --------------------------- 


<PAGE>   9

                                    EXHIBIT B

                                 ASSIGNMENT FORM

        FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the number of shares of Common Stock covered
thereby set forth below, unto:

 NAME OF ASSIGNEE            ADDRESS/FAX NUMBER              NO. OF SHARES






Dated:                       Signature:
      ------------------               -----------------------------------
                                  
                                       -----------------------------------


                              Witness:
                                       -----------------------------------





<PAGE>   1

                                                                    EXHIBIT 10.8

        THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION OF
        SUCH SECURITIES MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION
        STATEMENT RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR HOLDER,
        REASONABLY SATISFACTORY TO COMPANY, THAT SUCH REGISTRATION IS NOT
        REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
        EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF
        ARTICLE III OF THIS WARRANT.

                                     WARRANT

                 TO PURCHASE SHARES OF SERIES C PREFERRED STOCK

                              Dated August 25, 2000



This certifies that for value received, ________________________________, or
registered assigns, is entitled as of August 25, 2000 (the "Closing Date"),
subject to the terms set forth herein, to purchase from XCYTE THERAPIES, INC., a
Delaware corporation (the "Company"), up to ________________________________
fully paid and non-assessable shares of Company's Series C Preferred Stock, at
the price of One Dollar and Sixty-Seven Cents ($1.67) per share. The initial
exercise price of One Dollar and Sixty-Seven Cents ($1.67) per share, and the
number of shares purchasable hereunder, are subject to adjustment in certain
events, all as more fully set forth under Article IV herein. This Warrant is the
result
 of the partial assignment of a Warrant dated July 1, 1999.

                                    ARTICLE I

                                   DEFINITIONS

        "Certificate of Incorporation" means the Restated Certificate of
Incorporation of Company, as filed with the Delaware Secretary of State on July
21, 1998.

        "Commission" means the Securities and Exchange Commission, or any other
federal agency then administering the Exchange Act or the Securities Act, as
defined herein.

        "Common Stock" means Company's Common Stock, any stock into which such
stock shall have been changed or any stock resulting from any reclassification
of such stock, and any other capital stock of Company of any class or series now
or hereafter authorized having the right to share in distributions either of
earnings or assets of Company without limit as to amount or percentage.

        "Company" means XCYTE THERAPIES, INC., a Delaware corporation, and any
successor corporation.

        "Conversion Price" means the Conversion Price for Series C Preferred
Stock, as determined in accordance with the Certificate of Incorporation.

        "Convertible Securities" means evidences of indebtedness, shares of
stock or other securities which are convertible into or exchangeable for, with
or without payment of additional consideration,




<PAGE>   2

shares of Common Stock, either immediately or upon the arrival of a specified
date or the happening of a specified event or both.

        "Exchange Act" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.

        "Exercise Period" means the period commencing on the Closing Date and
terminating at the earlier to occur of: (i) 5:00 p.m., Pacific Time on the
seventh (7th) anniversary of the Closing Date, or (ii) the closing of Company's
initial sale and issuance of shares of Common Stock in an underwritten public
offering, pursuant to a registration statement on Form S-i under the Securities
Act, the public offering price of which is not less than $4.00 per share
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and which results in aggregate cash proceeds to the Company of
$20,000,000 (net of underwriting documents and commissions).

        "Exercise Price" means the price per share of Series C Preferred Stock
set forth in the Preamble to this Warrant, as such price may be adjusted
pursuant to Article IV hereof.

        "Fair Market Value" means

               (i) If shares of Series C Preferred Stock or Common Stock, as the
case may be, are being sold pursuant to a Registration and Fair Market Value is
being determined as of the closing of the public offering, the "price to public"
specified for such shares in the final prospectus for such public offering;

               (ii) If shares of Series C Preferred Stock or Common Stock, as
the case may be, are then listed or admitted to trading on any national
securities exchange or traded on any national market system and Fair Market
Value is not being determined as of the date described in clause (i) of this
definition, the average of the daily closing prices for the thirty (30) trading
days before such date, excluding any trades which are not bona fide, arm's
length transactions. The closing price for each day shall be the last sale price
on such date or, if no such sale takes place on such date, the average of the
closing bid and asked prices on such date, in each case as officially reported
on the principal national securities exchange or national market system on which
such shares are then listed, admitted to trading or traded;

               (iii) If no shares of Series C Preferred Stock or Common Stock,
as the case may be, are then listed or admitted to trading on any national
securities exchange or traded on any national market system or being offered to
the public pursuant to a Registration, the average of the reported closing bid
and asked prices thereof on such date in the over-the-counter market as shown by
the National Association of Securities Dealers automated quotation system or, if
such shares are not then quoted in such system, as published by the National
Quotation Bureau, Incorporated or any similar successor organization, and in
either case as reported by any member firm of the New York Stock Exchange
selected by Holder;

               (iv) If no shares of Series C Preferred Stock or Common Stock, as
the case may be, are then listed or admitted to trading on any national exchange
or traded on any national market system, if no closing bid and asked prices
thereof are then so quoted or published in the over-the-counter market and if no
such shares are being offered to the public pursuant to a Registration, the Fair
Market Value of a



                                      -2-

<PAGE>   3

share of Series C Preferred Stock or Common Stock, as the case may be, shall be
as determined in good faith by Company's Board of Directors.

        "Fiscal Year" means the fiscal year of Company.

        "Holder" means the person in whose name this Warrant is registered on
the books of Company maintained for such purpose.

        "Option" means any right, warrant or option to subscribe for or purchase
shares of Common Stock or Convertible Securities.

        "Person" means and includes natural persons, corporations, limited
partnerships, general partnerships, joint stock companies, joint ventures,
associations, companies, trusts, banks, trust companies, land trusts, business
trusts, government entities and authorities and other organizations, whether or
not legal entities.

        "Preferred Stock" means the Preferred Stock of Company, as defined in
the Certificate of Incorporation.

        "Principal Executive Office" means Company's office at 1124 Columbia
Street, Suite 130, Seattle, Washington 98104, or such other office as designated
in writing to Holder by Company.

        "Register," "Registered" and "Registration" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such
registration statement.

        "Rights Agreement" means the Amended and Restated Registration Rights
Agreement, dated as of July 21, 1998, by and among Company and the shareholders
of Company named therein, attached hereto as Exhibit "D".

        "Rule 144" means Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor rule that the Commission may promulgate.

        "Securities Act" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect from time to time.

        "Series C Preferred Stock" means the Series C Preferred Stock of
Company, as defined in the Certificate of Incorporation.

        "Shareholder" means a holder of one or more Warrant Shares or shares of
Common Stock acquired upon conversion of Warrant Shares.

        "Warrant" means the warrant dated as of Closing Date issued to Holder
and all warrants issued upon the partial exercise, transfer or division of or in
substitution for any Warrant.

        "Warrant Shares" means the shares of Series C Preferred Stock issuable
upon the exercise of this Warrant provided that if under the terms hereof there
shall be a change such that the securities purchasable hereunder shall be issued
by an entity other than Company or there shall be a change in the



                                      -3-

<PAGE>   4

type or class of securities purchasable hereunder, then the term shall mean the
securities issuable upon the exercise of the rights granted hereunder.

                                   ARTICLE II

                                    EXERCISE

        2.1. Exercise Right; Manner of Exercise. Holder may exercise this
Warrant, in whole or in part, at any time and from time to time during the
Exercise Period upon (i) surrender of this Warrant, together with an executed
Notice of Exercise, substantially in the form of Exhibit "A" attached hereto, at
the Principal Executive Office, and (ii) payment to Company of the aggregate
Exercise Price for the number of Warrant Shares specified in the Notice of
Exercise (such aggregate Exercise Price the "Total Exercise Price"). The Total
Exercise Price shall be paid by check. Certificates for the Warrant Shares so
purchased shall be delivered to Holder within a reasonable time, not exceeding
fifteen (15) days after this Warrant is exercised. The issuance of Warrant
Shares upon exercise of this Warrant shall be made without charge to Holder for
any issuance tax with respect thereto or any other cost incurred by Company in
connection with the exercise of this Warrant and the related issuance of Warrant
Shares.

        2.2. Conversion Right. In lieu of exercising this Warrant as specified
in Section 2.1, Holder may from time to time convert this Warrant, in whole or
in part, into that number of shares of Series C Preferred Stock equal to the
product of: (a) the quotient obtained by dividing (i) the Fair Market Value of
one share of Series C Preferred Stock at the time of such net exercise election
less the Exercise Price of one such share by (ii) the Fair Market Value of such
share; and (b) the aggregate number of shares of Series C Preferred Stock to be
purchased pursuant to this Section 2.2. If, as of the last day of the Exercise
Period, this Warrant has not been fully exercised, then as of such date this
Warrant shall be automatically converted, in full, in accordance with this
Section 2.2, without any action or notice by Holder.

        2.3. Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant, Company shall deliver to Holder certificates
for the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so
acquired.

        2.4. Fractional Shares. Company shall not issue fractional shares of
Series C Preferred Stock or Common Stock or scrip representing fractional shares
of Series C Preferred Stock or Common Stock upon any exercise or conversion of
this Warrant. As to any fractional share of Series C Preferred Stock or Common
Stock which Holder would otherwise be entitled to purchase from Company upon
such exercise or conversion, Company shall purchase from Holder such fractional
share at a price equal to an amount calculated by multiplying such fractional
share (calculated to the nearest 1/100th of a share) by the fair market value of
a share of Series C Preferred Stock or Common Stock, as applicable, on the date
of the Notice of Exercise or the Conversion Date, as applicable, as determined
in good faith by Company's Board of Directors. Payment of such amount shall be
made in cash or by check payable to the order of Holder at the time of delivery
of any certificate or certificates arising upon such exercise or conversion.

                                   ARTICLE III

                REGISTRATION, TRANSFER, EXCHANGE AND REPLACEMENT

        3.1. Maintenance of Registration Books. Company shall keep at the
Principal Executive Office a register in which, subject to such reasonable
regulations as it may prescribe, it shall provide for



                                      -4-

<PAGE>   5

the registration, transfer and exchange of this Warrant. Company and any Company
agent may treat the Person in whose name this Warrant is registered as the owner
of this Warrant for all purposes whatsoever and neither Company nor any Company
agent shall be affected by any notice to the contrary.

        3.2 Restrictions on Transfers.

               (a) Compliance with Securities Act. Holder, by acceptance hereof,
agrees that this Warrant, the Series C Preferred Stock to be issued upon
exercise hereof and the shares of Common Stock to be issued upon conversion of
such shares of Series C Preferred Stock are being acquired for investment,
solely for Holder's own account and not as a nominee for any other Person, and
that Holder will not offer, sell or otherwise dispose of this Warrant, any such
shares of Series C Preferred Stock or any such shares of Common Stock except
under circumstances which will not result in a violation of the Securities Act.
Upon exercise of this Warrant, Holder shall confirm in writing, by executing the
form attached as Exhibit "B" hereto, that the shares of Series C Preferred Stock
or Common Stock purchased thereby are being acquired for investment, solely for
Holder's own account and not as a nominee for any other Person, and not with a
view toward distribution or resale.

               (b) Certificate Legends. This Warrant, all shares of Series C
Preferred Stock issued upon exercise of this Warrant (unless Registered under
the Securities Act), and all shares of Common Stock issued upon conversion of
such shares of Series C Preferred Stock (unless Registered under the Securities
Act) shall be stamped or imprinted with a legend in substantially the following
form (in addition to any legends required by applicable state securities laws):

        THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR DISPOSITION OF
        SUCH SECURITIES MAY BE EFFECTED WITHOUT (1) AN EFFECTIVE REGISTRATION
        STATEMENT RELATING THERETO, (ii) AN OPINION OF COUNSEL FOR HOLDER,
        REASONABLY SATISFACTORY TO COMPANY, THAT SUCH REGISTRATION IS NOT
        REQUIRED, (iii) RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES AND
        EXCHANGE COMMISSION, OR (iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF
        ARTICLE III OF THE WARRANT UNDER WHICH THIS SECURITY WAS ISSUED.

               (c) Disposition of Warrant or Shares. With respect to any offer,
sale or other disposition of this Warrant, any shares of Series C Preferred
Stock issued upon exercise of this Warrant or shares of Common Stock acquired
pursuant to conversion of such shares of Series C Preferred Stock prior to
Registration of such shares, Holder or the Shareholder, as the case may be,
agrees to give written notice to Company prior thereto, describing briefly the
manner thereof, together with a written opinion of Holder's or Shareholder's
counsel, if reasonably requested by Company, to the effect that such offer, sale
or other disposition may be effected without Registration under the Securities
Act or qualification under any applicable state securities laws of this Warrant
or such shares, as the case may be, and indicating whether or not under the
Securities Act certificates for this Warrant or such shares, as the case may be,
to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act. Promptly upon receiving such written notice and reasonably
satisfactory opinion, if so requested, Company, as promptly as practicable,
shall notify Holder or the Shareholder, as the case may be, that it may sell or
otherwise dispose of this Warrant or such shares, as the case may be, all in
accordance with the terms of the notice delivered to Company. If a determination
has been made pursuant to this subsection (c) that the opinion of counsel for
Holder or the Shareholder, as the case may be, is not reasonably satisfactory to
Company, Company shall



                                      -5-

<PAGE>   6

so notify Holder or the Shareholder, as the case may be, promptly after such
determination has been made and shall specify the legal analysis supporting any
such conclusion. Notwithstanding the foregoing, this Warrant or such shares, as
the case may be, may be offered, sold or otherwise disposed of in accordance
with Rule 144, provided that Company shall have been furnished with such
information as Company may reasonably request to provide reasonable assurance
that the provisions of Rule 144 have been satisfied. Each certificate
representing this Warrant or the shares thus transferred (except a transfer
pursuant to Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act, unless in
the aforesaid reasonably satisfactory opinion of counsel for Holder or the
Shareholder, as the case may be, such legend is not necessary in order to insure
compliance with the Securities Act. Company may issue stop transfer instructions
to its transfer agent in connection with such restrictions.

               (d) Warrant Transfer Procedure. Transfer of this Warrant to a
third party, following compliance with the preceding subsections of this Section
3.2, shall be effected by execution of the Assignment Form attached hereto as
Exhibit "C", and surrender for registration of transfer of this Warrant at the
Principal Executive Office, together with funds sufficient to pay any applicable
transfer tax. Upon receipt of the duly executed Assignment Form and the
necessary transfer tax funds, if any, Company, at its expense, shall execute and
deliver, in the name of the designated transferee or transferees, one or more
new Warrants representing the right to purchase a like aggregate number of
shares of Series C Preferred Stock.

               (e) Termination of Restrictions. The restrictions imposed under
this Section 3.2 upon the transferability of the Warrant, the shares of Series C
Preferred Stock acquired upon the exercise of this Warrant and the shares of
Common Stock issuable upon conversion of such shares of Series C Preferred Stock
shall cease when (i) a registration statement covering all shares of Common
Stock issued or issuable upon conversion of the Series C Preferred Stock becomes
effective under the Securities Act, (ii) Company is presented with an opinion of
counsel reasonably satisfactory to Company that such restrictions are no longer
required in order to insure compliance with the Securities Act or with a
Commission "no-action" letter stating that future transfers of such securities
by the transferor or the contemplated transferee would be exempt from
registration under the Securities Act, or (iii) such securities may be
transferred in accordance with Rule 144(k). When such restrictions terminate,
Company shall, or shall instruct its transfer agent to, promptly, and without
expense to Holder or the Shareholder, as the case may be, issue new securities
in the name of Holder and/or the Shareholder, as the case may be, not bearing
the legends required under subsection (b) of this Section 3.2. In addition, new
securities shall be issued without such legends if such legends may be properly
removed under the terms of Rule 144(k).

        3.3. Exchange. At Holder's option, this Warrant may be exchanged for
other Warrants representing the right to purchase a like aggregate number of
shares of Series C Preferred Stock upon surrender of this Warrant at the
Principal Executive Office. Whenever this Warrant is so surrendered to Company
at the Principal Executive Office for exchange, Company shall execute and
deliver the Warrants which Holder is entitled to receive. All Warrants issued
upon any registration of transfer or exchange of Warrants shall be the valid
obligations of Company, evidencing the same rights, and entitled to the same
benefits, as the Warrants surrendered upon such registration of transfer or
exchange. No service charge shall be made for any exchange of this Warrant.

        3.4. Replacement. Upon receipt of evidence reasonably satisfactory to
Company of the loss, theft, destruction or mutilation of this Warrant and (i) in
the case of any such loss theft or destruction, upon delivery of indemnity
reasonably satisfactory to Company in form and amount, or (ii) in the case of



                                      -6-

<PAGE>   7

any such mutilation, upon surrender of such Warrant for cancellation at the
Principal Executive Office, Company, at its expense, shall execute and deliver,
in lieu thereof, a new Warrant.

                                   ARTICLE IV

                             ANTIDILUTION PROVISIONS

        4.1. Conversion of Series C Preferred Stock. If all of the Series C
Preferred Stock is converted into shares of Common Stock in connection with a
Registration, then this Warrant shall automatically become exercisable for that
number of shares of Common Stock equal to the number of shares of Common Stock
that would have been received if this Warrant had been exercised in full and the
shares of Series C Preferred Stock received thereupon had been simultaneously
converted into shares of Common Stock immediately prior to such event, and the
Exercise Price shall be automatically adjusted to equal the amount obtained by
dividing (i) the aggregate Exercise Price of the shares of Series C Preferred
Stock for which this Warrant was exercisable immediately prior to such
conversion, by (ii) the number of shares of Common Stock for which this Warrant
is exercisable immediately after such conversion.

        4.2. Reorganization, Reclassification or Recapitalization of Company. In
case of (1) a capital reorganization, reclassification or recapitalization of
Company's capital stock (other than in the cases referred to in of Section 4.4
hereof), (2) Company's consolidation or merger with or into another corporation
in which Company is not the surviving entity, or a reverse triangular merger in
which Company is the surviving entity but the shares of Company's capital stock
outstanding immediately prior to the merger are converted, by virtue of the
merger, into other property, whether in the form of securities, cash or
otherwise, or (3) the sale or transfer of Company's property as an entirety or
substantially as an entirety, then, as part of such reorganization,
reclassification, recapitalization, merger, consolidation, sale or transfer,
lawful provision shall be made so that there shall thereafter be deliverable
upon the exercise of this Warrant or any portion thereof (in lieu of or in
addition to the number of shares of Series C Preferred Stock theretofore
deliverable, as appropriate), and without payment of any additional
consideration, the number of shares of stock or other securities or property to
which the holder of the number of shares of Series C Preferred Stock which would
otherwise have been deliverable upon the exercise of this Warrant or any portion
thereof at the time of such reorganization, reclassification, recapitalization,
consolidation, merger, sale or transfer would have been entitled to receive in
such reorganization, reclassification, recapitalization, consolidation, merger,
sale or transfer.

        This Section 4.2 shall apply to successive reorganizations,
reclassifications, recapitalizations, consolidations, mergers, sales and
transfers and to the stock or securities of any other corporation that are at
the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to Holder for shares of Series C Preferred Stock in
connection with any transaction described in this Section 4.2 is in a form other
than cash or marketable securities, then the value of such consideration shall
be determined in good faith by Company's Board of Directors.

        4.3. Splits and Combinations. If Company at any time subdivides any of
its outstanding shares of Series C Preferred Stock into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced, and, conversely if the outstanding shares of Series
C Preferred Stock are combined into a smaller number of shares, the Exercise
Price in effect immediately prior to such combination shall be proportionately
increased. Upon any adjustment of the Exercise Price under this Section 4.3, the
number of shares of Series C Preferred Stock issuable upon exercise of this
Warrant shall equal the number of shares determined by dividing (i) the
aggregate Exercise Price payable for the purchase of all shares issuable upon
exercise of this Warrant immediately



                                      -7-

<PAGE>   8

prior to such adjustment by (ii) the Exercise Price per share in effect
immediately after such adjustment.

        4.4. Reclassifications. If Company changes any, of the securities as to
which purchase rights under this Warrant exist into the same or a different
number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted. No adjustment shall be made
pursuant to this Section 4.4 upon any conversion described in Section 4.1
hereof.

        4.5. Dividends and Distributions. If Company declares a dividend or
other distribution on the Series C Preferred Stock or if a dividend or other
distribution on the Series C Preferred Stock occurs pursuant to the Certificate
of Incorporation (other than a cash dividend or distribution), then, as part of
such dividend or distribution, lawful provision shall be made so that there
shall thereafter be deliverable upon the exercise of this Warrant or any portion
thereof, in addition to the number of shares of Series C Preferred Stock
receivable thereupon and without payment of any additional consideration, the
amount of the dividend or other distribution to which the holder of the number
of shares of Series C Preferred Stock obtained upon exercise hereof would have
been entitled to receive had the exercise occurred as of the record date for
such dividend or distribution.

        4.6. Liquidation Dissolution. If Company shall dissolve, liquidate or
wind up its affairs, Holder shall have the right, but not the obligation, to
exercise this Warrant effective as of the date of such dissolution, liquidation
or winding up. If any such dissolution, liquidation or winding up results in any
cash distribution to Holder in excess of the aggregate Exercise Price for the
shares of Series C Preferred Stock for which this Warrant is exercised, then
Holder may, at its option, exercise this Warrant without making payment of such
aggregate Exercise Price and, in such case, Company shall, upon distribution to
Holder, consider such aggregate Exercise Price to have been paid in full, and in
making such settlement to Holder, shall deduct an amount equal to such aggregate
Exercise Price from the amount payable to Holder.

        4.7. Other Dilutive Events. If any event occurs as to which the other
provisions of this Article IV are not strictly applicable but the failure to
make any adjustment would not fairly protect the purchase rights represented by
this Warrant in accordance with the essential intent and principles hereof,
then, in each such case, Company shall appoint a firm of independent public
accountants of recognized national standing (which may be Company's regular
auditors) which shall give their opinion upon the adjustment, if any, on a
basis, consistent with the essential intent and principles established in this
Article IV, necessary to preserve, without dilution, the purchase rights
represented by this Warrant. Upon receipt of such opinion, Company shall
promptly mail a copy thereof to Holder and shall make the adjustments described
therein.

        4.8. Certificates and Notices.

               (a) Adjustment Certificates. Upon any adjustment of the Exercise
Price and/or the number of shares of Series C Preferred Stock purchasable upon
exercise of this Warrant, a certificate, signed by (i) Company's President and
Chief Financial Officer, or (ii) any independent firm of certified public
accountants of recognized national standing Company selects at its own expense,
setting forth in reasonable detail the events requiring the adjustment and the
method by which such adjustment was calculated, shall be mailed to Holder and
shall specify the adjusted Exercise Price and the number of



                                      -8-

<PAGE>   9

shares of Series C Preferred Stock purchasable upon exercise of the Warrant
after giving effect to the adjustment.

               (b) Extraordinary Corporate Events. If Company, after the date
hereof, proposes to effect (i) any transaction described in Sections 4.2 or 4.4
hereof, (ii) a liquidation, dissolution or winding up of Company described in
Section 4.6 hereof, or (iii) any payment of a dividend or distribution with
respect to Series C Preferred Stock or Common Stock, then, in each such case,
Company shall mail to Holder a notice describing such proposed action and
specifying the date on which Company's books shall close, or a record shall be
taken, for determining the holders of Series C Preferred Stock or Common Stock,
as appropriate, entitled to participate in such action, or the date on which
such reorganization, reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution or winding up shall take place or commence, as the case
may be, and the date as of which it is expected that holders of Series C
Preferred Stock and Common Stock of record shall be entitled to receive
securities and/or other property deliverable upon such action, if any such date
is to be fixed. Such notice shall be mailed to Holder at least thirty (30) days
prior to the record date for such action in the case of any action described in
clause (i) or clause (iii) above, and in the case of any action described in
clause (ii) above, at least thirty (30) days prior to the date on which the
action described is to take place and at least thirty (30) days prior to the
record date for determining holders of Series C Preferred Stock or Common Stock,
as appropriate, entitled to receive securities and/or other property in
connection with such action.

        4.9. No Impairment. Company shall not, by amendment of the Certificate
of Incorporation or through any reorganization, recapitalization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed hereunder by Company, but shall at
all times in good faith assist in the carrying out of all the provisions of this
Article IV and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of Holder against impairment.

        4.10. Application. Except as otherwise provided herein, all sections of
this Article IV are intended to operate independently of one another. If an
event occurs that requires the application of more than one section, all
applicable sections shall be given independent effect.

                                    ARTICLE V

                               REGISTRATION RIGHTS

        At the earlier to occur of: (i) Company's next equity financing, (ii)
sixty (60) days prior to the filing of any registration, as defined in the
Rights Agreement, or (iii) sixty (60) days prior to the sale conveyance,
disposal, or encumbrance of all or substantially all of the Company's property
or business or the Company's merger into or consolidation with any other
corporation (other than a wholly-owned subsidiary corporation) or any other
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, provided that this
section (iii) shall not apply to a merger effected exclusively for the purpose
of changing the domicile of the Company, Company shall cause Holder to become a
party to the Rights Agreement and Holder shall be deemed a "Holder", as defined
in the Rights Agreement, for purposes of the Rights Agreement and shall be
entitled to all the rights, and be subject to all the obligations, of a Holder
under the Rights Agreement, the Warrant Shares shall be deemed "Series C
Preferred Stock", as defined in the Rights Agreement, and the Common Stock
issuable upon conversion of the Warrant Shares shall be deemed "Registrable
Securities", as defined in the Rights Agreement, for purposes of the Rights
Agreement (collectively, the "Rights"). Such actions shall be effected by
Company executing and delivering to Holder a fully-



                                      -9-

<PAGE>   10

executed at the time Company Amendment to Rights Agreement substantially in the
form of Exhibit "E" hereto. Failure by Company to cause Holder to become a party
to an Investor Rights Agreement as provided herein shall, in addition to being a
default under this Warrant, be deemed an Event of Default under that certain
Senior Loan and Security Agreement No. 6261 dated as of July 1, 1999.

                                   ARTICLE VI

                                    COVENANTS

        6.1. Financial Information. Company shall deliver to Holder, concurrent
with delivery to any of the Investors, as defined in the Rights Agreement, all
information delivered to any of the Investors pursuant to Section 7.1 of the
Rights Agreement and all other information delivered to any of the Investors
from time to time pursuant to the Rights Agreement as in effect from time to
time during the term hereof. If the Rights Agreement is terminated for any
reason, and for so long as Company is not subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the Exchange Act, Company shall
deliver to Holder all information that was required to be delivered to any of
the Investors, as defined in the Rights Agreement, pursuant to the Section 7.1
of the Rights Agreement, as in effect on the date hereof.

        6.2 Non-Financial Covenants. Company covenants that:

               (a) Authorized Shares. Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the rights
evidenced by this Warrant, a sufficient number of shares of Series C Preferred
Stock to provide for the exercise of the rights represented by this Warrant (for
purposes of determining compliance with this covenant, the shares of Series C
Preferred Stock issuable upon exercise of all other options and warrants shall
be deemed issued and outstanding), and a sufficient number of shares of Common
Stock to provide for the conversion into Common Stock of all the shares of
Series C Preferred Stock issued and issuable upon the exercise of this Warrant
but theretofore unconverted (for purposes of determining compliance with this
covenant, the shares of Common Stock issuable upon exercise of all options and
warrants to acquire Common Stock and upon conversion of all instruments
convertible into Common Stock shall be deemed issued and outstanding);

               (b) Proper Issuance. Company, at its expense, will take all such
action as may be necessary to assure that the Series C Preferred Stock issuable
upon the exercise of this Warrant, and the Common Stock issuable upon the
conversion of such Series C Preferred Stock, may be so issued without violation
of any applicable law or regulation, or of any requirements of any domestic
securities exchange upon which any capital stock of Company may be listed. Such
action may include, but not be limited to, causing such shares to be duly
registered or approved or listed on relevant domestic securities exchanges; and

               (c) Fully Paid Shares. Company will take all actions necessary or
appropriate to validly and legally issue (i) fully paid and non-assessable
shares of Series C Preferred Stock upon exercise of this Warrant and (ii) fully
paid and non-assessable shares of Common Stock upon conversion of such shares of
Series C Preferred Stock. All such shares will be free from all taxes, liens and
charges with respect to the issuance thereof, other than any stock transfer
taxes in respect to any transfer occurring contemporaneously with such issuance.

                                   ARTICLE VII



                                      -10-

<PAGE>   11

                                  MISCELLANEOUS

        7.1. Certain Expenses. Company shall pay all expenses in connection
with, and all taxes (other than stock transfer taxes) and other governmental
charges that may be imposed in respect of, the issuance, sale and delivery of
the Warrant, the Warrant Shares and the shares of Common Stock issuable upon
conversion of the Warrant Shares.

        7.2. Remedies. Company stipulates that the remedies at law of Holder in
the event of any default or threatened default by Company in the performance of
or compliance with any of the terms of this Warrant are not and will not be
adequate to the fullest extent permitted by law, and that such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise.

        7.3. Enforcement Costs. If any party to, or beneficiary of, this Warrant
seeks to enforce its rights hereunder by legal proceedings or otherwise, then
the non-prevailing party shall pay all reasonable costs and expenses incurred by
the prevailing party, including, without limitation, all reasonable attorneys'
fees (including the allocable costs of in-house counsel).

        7.4. Notices. Any notice, demand or delivery to be made pursuant to this
Warrant will be sufficiently given or made if sent by first class mail, postage
prepaid, addressed to (a) Holder and the Shareholders at their last known
addresses appearing on the books of Company maintained for such purpose or (b)
Company at its Principal Executive Office. Holder, the Shareholders and Company
may each designate a different address by notice to the other pursuant to this
section. A notice shall be deemed effective upon the earlier of (i) receipt or
(ii) the third day after mailing in accordance with the terms of this Section
7.4.

        7.5. Successors and Assigns. This Warrant shall be binding upon Company
and any Person succeeding Company by merger, consolidation or acquisition of all
or substantially all of Company's assets, and all of the obligations of Company
with respect to the shares of Series C Preferred Stock issuable upon exercise of
this Warrant and the shares of Common Stock issuable upon the conversion of such
shares of Series C Preferred Stock, shall survive the exercise, expiration or
termination of this Warrant and all of the covenants and agreements of Company
shall inure to the benefit of Holder, each Shareholder and their respective
successors and assigns.

        7.6. Modification: Severability. If, in any action before any court or
agency legally empowered to enforce any term, any term is found to be
unenforceable, then such term shall be deemed modified to the extent necessary
to make it enforceable by such court or agency. If any term is not curable as
set forth in this section, the unenforceability of such term shall not affect
the other provisions of this Warrant but this Warrant shall be construed as if
such unenforceable term had never been contained herein.

        7.7. Amendment. This Warrant may not be modified or amended except by
written agreement of Company and Holder.

        7.8. Headings. The headings of the Articles and Sections of this Warrant
are for the convenience of reference only and shall not, for any purpose, be
deemed a part of this Warrant.

        7.9. Governing Law. This Warrant shall be governed by, and construed in
accordance with, the California law, without giving effect to conflicts of law
principles.



                                      -11-

<PAGE>   12

        IN WITNESS WHEREOF, Company has caused this Warrant to be executed by
its duly authorized officer as of _____________________, 19__.



                                       XCYTE THERAPIES, INC.



                                       By:     /s/ Ron Berenson
                                          --------------------------------------

                                       Name:   Ron Berenson
                                            ------------------------------------

                                       Title:  President & CEO
                                             -----------------------------------



                                      -12-

<PAGE>   13

                              SCHEDULE OF EXHIBITS

EXHIBIT "A"   -      Notice of Exercise (Section 2.1)

EXHIBIT "B"   -      Investment Representation Certificate (Section 3.2(a))

EXHIBIT "C"   -      Assignment Form (Section 3.2(d))

EXHIBIT "D" -        Rights Agreement (Article I) a.

EXHIBIT "E"   -      Amendment to Rights Agreement (Article V)



                                      -13-

<PAGE>   14

                                   EXHIBIT "A"

                             NOTICE OF EXERCISE FORM

                    (To be executed only upon partial or full

                         exercise of the within Warrant)

        The undersigned registered Holder of the within Warrant hereby
irrevocably exercises the within Warrant for and purchases shares of Series C
Preferred Stock of * [COMPANY] and herewith makes payment therefor in the amount
of $______, all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or ______ certificates in
denominations of shares) for the shares of Series C Preferred Stock of
*[COMPANY] hereby purchased be issued in the name of and delivered to (choose
one) (a) the undersigned, or (b) *[NAME], whose address is _______________and,
if such shares of Series C Preferred Stock shall not include all the shares of
Series C Preferred Stock issuable as provided in the within Warrant, that a new
Warrant of like tenor for the number of shares of Series C Preferred Stock of
*[COMPANY] not being purchased hereunder be issued in the name of and delivered
to (choose one) (a) the undersigned, or (b) *[NAME], whose address is
________________.

Dated:  _____________________, 199__

Signature Guaranteed                     _______________________________________

                                         _______________________________________

                                         By:____________________________________
                                              (Signature of Registered Holder)

                                         Title:_________________________________

NOTICE:        The signature to this Notice of Exercise must correspond with the
               name as written upon the face of the within Warrant in every
               particular, without alteration or enlargement or any change
               whatever.

               The signature to this Notice of Exercise must be guaranteed by a
               commercial bank or trust company in the United States or a member
               firm of the New York Stock Exchange.



                                      -14-

<PAGE>   15

                              SCHEDULE OF EXHIBITS



EXHIBIT "A"   -      Notice of Exercise (Section 2.1)

EXHIBIT "B"   -      Investment Representation Certificate (Section 3.2(a))

EXHIBIT "C"   -      Assignment Form (Section 3.2(d))

EXHIBIT "D" -        Rights Agreement (Article I) a.

EXHIBIT "E"   -      Amendment to Rights Agreement (Article V)



                                      -15-

<PAGE>   16

                                   EXHIBIT "A"

                             NOTICE OF EXERCISE FORM

                    (To be executed only upon partial or full

                         exercise of the within Warrant)

        The undersigned registered Holder of the within Warrant hereby
irrevocably exercises the within Warrant for and purchases shares of Series C
Preferred Stock of * [COMPANY] and herewith makes payment therefor in the amount
of $______, all at the price and on the terms and conditions specified in the
within Warrant and requests that a certificate (or ______ certificates in
denominations of shares) for the shares of Series C Preferred Stock of
*[COMPANY] hereby purchased be issued in the name of and delivered to (choose
one) (a) the undersigned, or (b) *[NAME], whose address is _______________and,
if such shares of Series C Preferred Stock shall not include all the shares of
Series C Preferred Stock issuable as provided in the within Warrant, that a new
Warrant of like tenor for the number of shares of Series C Preferred Stock of
*E[COMPANY] not being purchased hereunder be issued in the name of and delivered
to (choose one) (a) the undersigned, or (b) *[NAME], whose address is
________________.

Dated:  _____________________, 199__

Signature Guaranteed                     _______________________________________

                                         _______________________________________

                                         By:____________________________________
                                              (Signature of Registered Holder)

                                         Title:_________________________________

NOTICE:        The signature to this Notice of Exercise must correspond with the
               name as written upon the face of the within Warrant in every
               particular, without alteration or enlargement or any change
               whatever.

               The signature to this Notice of Exercise must be guaranteed by a
               commercial bank or trust company in the United States or a member
               firm of the New York Stock Exchange.



                                      -16-

<PAGE>   17

                                   EXHIBIT "B"

                      INVESTMENT REPRESENTATION CERTIFICATE

Purchaser:

Company:       XCYTE THERAPIES, INC.

Security:      Series C Preferred Stock

Amount:

Date:

In connection with the purchase of the above-listed securities (the
"Securities"), the undersigned (the "Purchaser") represents to Company as
follows:

The Purchaser is aware of Company's business affairs and financial condition,
and has acquired sufficient information about Company to reach an informed and
knowledgeable decision to acquire the Securities. The Purchaser is purchasing
the Securities for its own account for investment purposes only and not with a
view to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act")

The Purchaser understands that the Securities have not been registered under the
Securities Act in reliance upon a specific exemption therefor, which exemption
depends upon, among other things, the bona fide nature of the Purchaser's
investment intent as expressed herein. In this connection, the Purchaser
understands that, in the view of the Securities and Exchange Commission ("SEC"),
the statutory basis for such exemption may be unavailable if the Purchaser's
representation was predicated solely upon a present intention to hold these
Securities for the minimum capital gains period specified under tax statutes,
for a deferred sale, for or until an increase or decrease in the market price of
the Securities, or for a period of one year or any other fixed period in the
future;

The Purchaser further understands that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that Company is under no obligation to register the Securities. In addition, the
Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased;

The Purchaser is aware of the provisions of Rule 144, promulgated under the
Securities Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: (i) the availability of certain public information about Company; (ii)
the resale occurring not less than one (1) year after the party has purchased
and paid for the securities to be sold; (iii) the sale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934) and the amount of securities being sold during any three-month period not
exceeding the specified limitations stated therein;

The Purchaser further understands that at the time it wishes to sell the
Securities there may be no public market upon which to make such a sale, and
that, even if such a public market upon which to make such



                                      -17-

<PAGE>   18

a sale then exists, Company may not be satisfying the current public information
requirements of Rule 144, and that, in such event, the Purchaser may be
precluded from selling the Securities under Rule 144 even if the one (1) year
minimum holding period had been satisfied; and

The Purchaser further understands that in the event all of the requirements of
Rule 144 are not satisfied, registration under the Securities Act, compliance
with Regulation A, or some other registration exemption will be required; and
that, notwithstanding the fact that Rule 144 is not exclusive, the staff of the
SEC has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.

Date:   _____________________, 199___



                                         PURCHASER:



                                         _______________________________________



                                      -18-

<PAGE>   19

                                   EXHIBIT "C"

                                 ASSIGNMENT FORM

                   (To be executed only upon the assignment of
                               the within Warrant)

        FOR VALUE RECEIVED, the undersigned registered Holder of the within
Warrant hereby sells, assigns and transfers unto
_____________________________________________, whose address is
_________________________________________________ all of the rights of the
undersigned under the within Warrant, with respect to shares of Series C
Preferred Stock of XCYTE THERAPIES, INC. and, if such shares of Series C
Preferred Stock shall not include all the shares of Series C Preferred Stock
issuable as provided in the within Warrant, that a new Warrant of like tenor for
the number of shares of Series C Preferred Stock of XCYTE THERAPIES, INC. not
being transferred hereunder be issued in the name of and delivered to the
undersigned, and does hereby irrevocably constitute and appoint
______________________________________ attorney to register such transfer on the
books of XCYTE THERAPIES, INC. maintained for the purpose, with full power of
substitution in the premises.

Dated: ____________   , 199___



Signature Guaranteed                     _______________________________________

                                         _______________________________________

                                         By:____________________________________
                                              (Signature of Registered Holder)

                                         Title:_________________________________

NOTICE:        The signature to this Assignment must correspond with the name 
               upon the face of the within Warrant in every particular, without
               alteration or enlargement or any change whatever.

               The signature to this Notice of Assignment must be guaranteed by
               a commercial bank or trust company in the United States or a
               member firm of the New York Stock Exchange.



                                      -19-

<PAGE>   20

                                   EXHIBIT "D"

                                RIGHTS AGREEMENT

                                   (Article I)



                                      -20-

<PAGE>   21

                                   EXHIBIT "E"

                          AMENDMENT TO RIGHTS AGREEMENT

                                   (Article V)



                                      -21-

<PAGE>   22
                     Series C Preferred Stock Warrantholder
                     --------------------------------------


<TABLE>
<CAPTION>
Holder                                              Number of Shares
------                                              ----------------
<S>                                                 <C>
Phoenix Leasing Incorporated                              1,530
Robert Kingsbrook                                         6,157
Gus and Mary Jane Constantin Living Trust                 3,934
CIT Venture Leasing Fund, LLC                               694
</TABLE>




<PAGE>   1
                                                                    EXHIBIT 10.9

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. NO SALE OR
DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER SAID ACT OR
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS
NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND EXCHANGE COMMISSION.

             WARRANT TO PURCHASE SHARES OF SERIES C PREFERRED STOCK

                                                   ________________________ 2000



THIS CERTIFIES THAT, for value received, GENERAL ELECTRIC CAPITAL CORPORATION,
("Holder") is entitled to subscribe for and purchase shares of the fully paid
and nonassessable Series C Preferred Stock (the "Shares" or the "Preferred
Stock") of Xcyte Therapies, Inc., a Delaware corporation (the "Company"), at the
Warrant Price (as hereinafter defined), subject to the provisions and upon the
terms and conditions hereinafter set forth. As used herein, the term "Series C
Preferred Stock" shall mean the Company's presently authorized Series C
Preferred Stock and any stock into which such Series C Preferred Stock may
hereafter be converted or exchanged.


1.  Warrant Price. The Warrant Price shall initially be One and 67/100 dollars
($1.67) per share, subject to adjustment as provided in Section 7 below. The
number of shares for which this Warrant shall be exercisable shall be the
greater of Fourteen Thousand Three Hundred Seventy One (14,371) Shares or the
number of shares calculated by multiplying the amount of the credit facility
utilized during the funding period, and any extension thereof, by 4% and then
dividing by the Warrant Price.

2.  Conditions to Exercise. The purchase right represented by this Warrant may
be exercised at any time, or from time to time, in whole or in part during the
term commencing on the date hereof and ending on the earlier of:

    (a) 5:00 P.M. Pacific time on the seventh anniversary of the date of this
Warrant, or

    (b) the effective date of the merger of the Company with or into, the
consolidation of the Company with, or the sale by the Company of all or
substantially all of its assets or all or substantially all of its shares to
another corporation or other entity (other than such a transaction wherein the
shareholders of the Company retain or obtain a majority of the voting capital
stock of the surviving, resulting, or purchasing corporation); provided that the
Company shall notify the registered Holder of this Warrant of the proposed
effective date of the merger, consolidation, or sale at least 20 days prior to
the effectiveness thereof, and the Holder shall be entitled to give notice of
exercise of this Warrant contingent upon the closing of such transaction.


<PAGE>   2

    In the event that, although the Company shall have given notice of a
transaction pursuant to subparagraph (b) of this Section 2, the transaction does
not close within 90 days of the day specified by the Company, unless otherwise
elected by the Holder any exercise of the Warrant subsequent to the giving of
such notice shall be rescinded and the Warrant shall again be exercisable until
terminated in accordance with this Paragraph 2.

3.  Method of Exercise: Payment; Issuance of Shares; Issuance of New Warrant.

    (a) Cash Exercise. Subject to Section 2 hereof, the purchase right
represented by this Warrant may be exercised by the Holder hereof, in whole or
in part, by the surrender of this Warrant (with a duly executed Notice of
Exercise in the form attached hereto) at the principal office of the Company (as
set forth in Section 18 below) and by payment to the Company, by check, of an
amount equal to the then applicable Warrant Price per share multiplied by the
number of shares then being purchased. In the event of any exercise of the
rights represented by this Warrant, certificates for the shares of stock so
purchased shall be in the name of, and delivered to, the Holder hereof, or as
such Holder may direct (subject to the terms of transfer contained herein and
upon payment by such Holder hereof of any applicable transfer taxes). Such
delivery shall be made within 30 days after exercise of the Warrant and at the
Company's expense and, unless this Warrant has been fully exercised or expired,
a new Warrant having terms and conditions substantially identical to this
Warrant and representing the portion of the Shares, if any, with respect to
which this Warrant shall not have been exercised, shall also be issued to the
Holder hereof within 30 days after exercise of the Warrant.

    (b) Net Issue Exercise. In lieu of exercising this Warrant pursuant to
Section 3(a), Holder may elect to receive shares equal to the value of this
Warrant (or of any portion thereof remaining unexercised) by surrender of this
Warrant at the principal office of the Company together with notice of such
election, in which event the Company shall issue to Holder the number of shares
of the Company's Preferred Stock computed using the following formula:

               X=Y(A-B)
                 ------
                   A

               Where X = the number of shares of Preferred Stock to be issued to
                         Holder.

               Y = the number of shares of Preferred Stock purchasable under
                   this Warrant (at the date of such calculation).

               A = the Fair Market Value of one share of the Company's
                   Preferred Stock (at the date of such calculation).

               B = Warrant Price (as adjusted to the date of such calculation).

    (c) Fair Market Value. For purposes of this Section 3, Fair Market Value of
one share of the Company's Preferred Stock shall mean:


                                      -2-

<PAGE>   3

               (i) In the event of an exercise in connection with an Initial
               Public Offering, the per share Fair Market Value for the
               Preferred Stock shall be the Offering Price at which the
               underwriters initially sell Common Stock to the public multiplied
               by the number of shares of Common Stock into which each share of
               Preferred Stock is then convertible; or

               (ii) The average of the closing bid and asked prices of Common
               Stock quoted in the Over-The-Counter Market Summary, the last
               reported sale price quoted on the Nasdaq National Market ("NNM")
               or on any exchange on which the Common Stock is listed, whichever
               is applicable, as published in the Western Edition of the Wall
               Street Journal for the twenty (20) trading days prior to the date
               of determination of Fair Market Value, multiplied by the number
               of shares of Common Stock into which each share of Preferred
               Stock is then convertible; or

               (iii) In the event of an exercise in connection with a merger,
               acquisition or other consolidation in which the Company is not
               the surviving entity, the per share Fair Market Value for the
               Preferred Stock shall be the value to be received per share of
               Preferred Stock by all holders of the Preferred Stock in such
               transaction as determined by the Board of Directors; or

               (iv) In any other instance, the per share Fair Market Value for
               the Preferred Stock shall be as determined in good faith by the
               Company's Board of Directors.

               In the event of 3(c)(iii) or 3(c)(iv), above, the Company's Board
               of Directors shall prepare a certificate, to be signed by an
               authorized officer of the Company, setting forth in reasonable
               detail the basis for and method of determination of the per share
               Fair Market Value of the Preferred Stock. The Board will also
               certify to the Holder that this per share Fair Market Value will
               be applicable to all holders of the Company's Preferred Stock.
               Such certification must be made to Holder at least thirty (30)
               business days prior to the proposed effective date of the merger,
               consolidation, sale, or other triggering event as defined in
               3(c)(iii) or 3(c)(iv).

    (d) Automatic Exercise. To the extent this Warrant is not previously
exercised, it shall be automatically exercised in accordance with Sections 3(b)
and 3(c) hereof (even if not surrendered) immediately before: (i) its expiration
or (ii) the consummation of any consolidation or merger of the Company, or any
sale or transfer of a majority of the Company's assets or shares pursuant to
Section 2(b).

4.   Representations and Warranties of Holder and Restrictions on Transfer
Imposed by the Securities Act of 1933.

    (a) Representations and Warranties by Holder. The Holder represents and
warrants to the Company with respect to this purchase as follows:

               (i) The Holder has substantial experience in evaluating and
               investing in private placement transactions of securities of
               companies similar to the Company


                                      -3-

<PAGE>   4

               so that the Holder is capable of evaluating the merits and risks
               of its investment in the Company and has the capacity to protect
               its interests.

               (ii) The Holder is acquiring the Warrant and the Shares of
               Preferred Stock issuable upon exercise of the Warrant
               (collectively the "Securities") for investment for its own
               account and not with a view to, or for resale in connection with,
               any distribution thereof. The Holder understands that the
               Securities have not been registered under the Securities Act of
               1933, as amended (the "Act") by reason of a specific exemption
               from the registration provisions of the Act which depends upon,
               among other things, the bona fide nature of the investment intent
               as expressed herein. In this connection, the Holder understands
               that, in the view of the Securities and Exchange Commission (the
               "SEC"), the statutory basis for such exemption may be unavailable
               if this representation was predicated solely upon a present
               intention to hold the Securities for the minimum capital gains
               period specified under tax statutes, for a deferred sale, for or
               until an increase or decrease in the market price of the
               Securities or for a period of one year or any other fixed period
               in the future.

               (iii) The Holder acknowledges that the Securities must be held
               indefinitely unless subsequently registered under the Act or an
               exemption from such registration is available. The Holder is
               aware of the provisions of Rule 144 promulgated under the Act
               ("Rule 144") which permits limited resale of securities purchased
               in a private placement subject to the satisfaction of certain
               conditions, including, in case the securities have been held for
               more than one but less than two years, the existence of a public
               market for the shares, the availability of certain public
               information about the Company, the resale occurring not less than
               one year after a party has purchased and paid for the security to
               be sold, the sale being through a "broker's transaction" or in a
               transaction directly with a "market maker" (as provided by Rule
               144(f)) and the number of shares or other securities being sold
               during any three-month period not exceeding specified
               limitations.

               (iv) The Holder further understands that at the time the Holder
               wishes to sell the Securities there may be no public market upon
               which such a sale may be effected, and that even if such a public
               market exists, the Company may not be satisfying the current
               public information requirements of Rule 144, and that in such
               event, the Holder may be precluded from selling the Securities
               under Rule 144 unless (a) a one-year minimum holding period has
               been satisfied and (b) the Holder was not at the time of the sale
               nor at any time during the three-month period prior to such sale
               an affiliate of the Company.

               (v) The Holder has had an opportunity to discuss the Company's
               business, management and financial affairs with its management
               and an opportunity to review the Company's facilities. The Holder
               understands that such discussions, as well as the written
               information issued by the Company, were intended to describe


                                      -4-

<PAGE>   5

               the aspects of the Company's business and prospects which it
               believes to be material but were not necessarily a thorough or
               exhaustive description.

        (b)    Legends. Each certificate representing the Securities shall be
endorsed with the following legend:

               THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
               ACT OF 1933 AND MAY NOT BE TRANSFERRED UNLESS COVERED BY AN
               EFFECTIVE REGISTRATION STATEMENT UNDER SAID ACT, A "NO ACTION"
               LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION WITH RESPECT
               TO SUCH TRANSFER, A TRANSFER MEETING THE REQUIREMENTS OF RULE 144
               OF THE SECURITIES AND EXCHANGE COMMISSION, OR (IF REASONABLY
               REQUIRED BY THE COMPANY) AN OPINION OF COUNSEL SATISFACTORY TO
               THE ISSUER TO THE EFFECT THAT ANY SUCH TRANSFER IS EXEMPT FROM
               SUCH REGISTRATION.

The Company need not enter into its stock records a transfer of Securities
unless the conditions specified in the foregoing legend are satisfied. The
Company may also instruct its transfer agent not to allow the transfer of any of
the Shares unless the conditions specified in the foregoing legend are
satisfied.

        (c)    Removal of Legend and Transfer Restrictions. The legend relating
to the Act endorsed on a certificate pursuant to paragraph 4(b) of this Warrant
shall be removed and the Company shall issue a certificate without such legend
to the Holder of the Securities if (i) the Securities are registered under the
Act and a prospectus meeting the requirements of Section 10 of the Act is
available or (ii) the Holder provides to the Company an opinion of counsel for
the Holder reasonably satisfactory to the Company, a no-action letter or
interpretive opinion of the staff of the SEC reasonably satisfactory to the
Company, or other evidence reasonably satisfactory to the Company, to the effect
that public sale, transfer or assignment of the Securities may be made without
registration and without compliance with any restriction such as Rule 144.

5.  Condition of Transfer or Exercise of Warrant. It shall be a condition to any
transfer or exercise of this Warrant that at the time of such transfer or
exercise, the Holder shall provide the Company with a representation in writing
that the Holder or transferee is acquiring this Warrant and the shares of
Preferred Stock to be issued upon exercise for investment purposes only and not
with a view to any sale or distribution, or will provide the Company with a
statement of pertinent facts covering any proposed distribution. As a further
condition to any transfer of this Warrant or any or all of the shares of
Preferred Stock issuable upon exercise of this Warrant, other than a transfer
registered under the Act, the Company may request a legal opinion, in form and
substance satisfactory to the Company and its counsel, reciting the pertinent
circumstances surrounding the proposed transfer and stating that such transfer
is exempt from the registration and prospectus delivery requirements of the Act.
Each certificate evidencing the shares issued upon exercise of the Warrant or
upon any transfer of the shares (other than a transfer registered under the Act
or any subsequent transfer of shares so registered) shall, at the Company's
option,


                                      -5-

<PAGE>   6

if the Shares are not freely saleable under Rule 144(k) under the Act, contain a
legend in form and substance satisfactory to the Company and its counsel,
restricting the transfer of the shares to sales or other dispositions exempt
from the requirements of the Act.

    As further condition to each transfer, at the request of the Company, the
Holder shall surrender this Warrant to the Company and the transferee shall
receive and accept a Warrant, of like tenor and date, executed by the Company.

6.  Stock Fully Paid; Reservation of Shares. All Shares which may be issued upon
the exercise of the rights represented by this Warrant will, upon issuance, be
fully paid and nonassessable, and free from all taxes, liens, and charges with
respect to the issue thereof. During the period within which the rights
represented by this Warrant may be exercised, the Company will at all times have
authorized, and reserved for issuance upon exercise of the purchase rights
evidenced by this Warrant, a sufficient number of shares of its Preferred Stock
to provide for the exercise of the rights represented by this Warrant.

7.  Adjustment for Certain Events. The number and kind of securities purchasable
upon the exercise of this Warrant and the Warrant Price shall be subject to
adjustment from time to time upon the occurrence of certain events, as follows:

    (a) Reclassification or Merger. In case of any reclassification or change of
securities of the class issuable upon exercise of this Warrant (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination), or in case of any
merger of the Company with or into another corporation (other than a merger with
another corporation in which the Company is the acquiring and the surviving
corporation and which does not result in any reclassification or change of
outstanding securities issuable upon exercise of this Warrant), or in case of
any sale of all or substantially all of the assets of the Company, then, unless
this Warrant shall have expired pursuant to Section 2(b), the Company, or such
successor or purchasing corporation, as the case may be, shall duly execute and
deliver to the Holder a new Warrant (in form and substance satisfactory to the
Holder of this Warrant), or the Company shall make appropriate provision without
the issuance of a new Warrant, so that the Holder shall have the right to
receive, at a total purchase price not to exceed that payable upon the exercise
of the unexercised portion of this Warrant, and in lieu of the shares of
Preferred Stock theretofore issuable upon exercise of this Warrant, the kind and
amount of shares of stock, other securities, money and property receivable upon
such reclassification, change, merger or sale by a Holder of the number of
shares of Preferred Stock then purchasable under this Warrant, or in the case of
such a merger or sale in which the consideration paid consists all or in part of
assets other than securities of the successor or purchasing corporation, at the
option of the Holder, the securities of the successor or purchasing corporation
having a value at the time of the transaction equivalent to the value of the
Preferred Stock purchasable upon exercise of this Warrant at the time of the
transaction. Any new Warrant shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4. The provisions of this subparagraph (a) shall similarly apply to
successive reclassifications, changes, mergers and transfers.


                                      -6-

<PAGE>   7

     (b) Subdivision or Combination of Shares. If the Company at any time while
this Warrant remains outstanding and unexpired shall subdivide or combine its
outstanding shares of Preferred Stock, the Warrant Price shall be
proportionately decreased and the number of Shares issuable hereunder shall be
proportionately increased in the case of a subdivision and the Warrant Price
shall be proportionately increased and the number of Shares issuable hereunder
shall be proportionately decreased in the case of a combination.

     (c) Stock Dividends and Other Distributions. If the Company at any time
while this Warrant is outstanding and unexpired shall (i) pay a dividend with
respect to Preferred Stock payable in Preferred Stock, then the Warrant Price
shall be adjusted, from and after the date of determination of shareholders
entitled to receive such dividend or distribution, to that price determined by
multiplying the Warrant Price in effect immediately prior to such date of
determination by a fraction (A) the numerator of which shall be the total number
of shares of Preferred Stock outstanding immediately prior to such dividend or
distribution, and (B) the denominator of which shall be the total number of
shares of Preferred Stock outstanding immediately after such dividend or
distribution; or (ii) make any other distribution with respect to Preferred
Stock (except any distribution specifically provided for in Sections 6(a) and
6(b)), then, in each such case, provision shall be made by the Company such that
the Holder of this Warrant shall receive upon exercise of this Warrant a
proportionate share of any such dividend or distribution as though it were the
Holder of the Preferred Stock (or Common Stock issuable upon conversion thereof)
as of the record date fixed for the determination of the shareholders of the
Company entitled to receive such dividend or distribution.

     (d) Adjustment of Number of Shares. Upon each adjustment in the Warrant
Price, the number of Shares purchasable hereunder shall be adjusted, to the
nearest whole share, to the product obtained by multiplying the number of Shares
purchasable immediately prior to such adjustment in the Warrant Price by a
fraction, the numerator of which shall be the Warrant Price immediately prior to
such adjustment and the denominator of which shall be the Warrant Price
immediately thereafter.

8.  Notice of Adjustments. Whenever any Warrant Price or the kind or number of
securities issuable under this Warrant shall be adjusted pursuant to Section 7
hereof, the Company shall prepare a certificate signed by an officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment,
the amount of the adjustment, the method by which such adjustment was
calculated, and the Warrant Price and number or kind of shares issuable upon
exercise of the Warrant after giving effect to such adjustment, and shall cause
copies of such certificate to be mailed (by certified or registered mail, return
receipt required, postage prepaid) within thirty (30) days of such adjustment to
the Holder of this Warrant as set forth in Section 18 hereof.

9.  Transferability of Warrant. This Warrant is transferable on the books of the
Company at its principal office by the registered Holder hereof upon surrender
of this Warrant properly endorsed, subject to compliance with Section 5 and
applicable federal and state securities laws. The Company shall issue and
deliver to the transferee a new Warrant representing the Warrant so transferred.
Upon any partial transfer, the Company will issue and deliver to Holder a new


                                      -7-

<PAGE>   8

Warrant with respect to the Warrant not so transferred. Holder shall not have
any right to transfer any portion of this Warrant to any direct competitor of
the Company.

10. No Fractional Shares. No fractional share of Preferred Stock will be issued
in connection with any exercise hereunder, but in lieu of such fractional share
the Company shall make a cash payment therefor upon the basis of the Warrant
Price then in effect.

11. Charges, Taxes and Expenses. Issuance of certificates for shares of
Preferred Stock upon the exercise of this Warrant shall be made without charge
to the Holder for any United States or state of the United States documentary
stamp tax or other incidental expense with respect to the issuance of such
certificate, all of which taxes and expenses shall be paid by the Company, and
such certificates shall be issued in the name of the Holder.

12. No Shareholder Rights Until Exercise. This Warrant does not entitle the
Holder hereof to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof.

13. Registry of Warrant. The Company shall maintain a registry showing the name
and address of the registered Holder of this Warrant. This Warrant may be
surrendered for exchange or exercise, in accordance with its terms, at such
office or agency of the Company, and the Company and Holder shall be entitled to
rely in all respects, prior to written notice to the contrary, upon such
registry.

14. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in the case of loss, theft, or
destruction, of indemnity reasonably satisfactory to it, and, if mutilated, upon
surrender and cancellation of this Warrant, the Company will execute and deliver
a new Warrant, having terms and conditions substantially identical to this
Warrant, in lieu hereof.

15. Miscellaneous.

    (a) Issue Date. The provisions of this Warrant shall be construed and shall
be given effect in all respect as if it had been issued and delivered by the
Company on the date hereof.

    (b) Successors. This Warrant shall be binding upon any successors or assigns
of the Company.

    (c) Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California.

    (d) Headings. The headings used in this Warrant are used for convenience
only and are not to be considered in construing or interpreting this Warrant.

    (e) Saturdays, Sundays, Holidays. If the last or appointed day for the
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or


                                      -8-

<PAGE>   9

shall be a legal holiday in the State of California, then such action may be
taken or such right may be exercised on the next succeeding day not a legal
holiday.

16. No Impairment. The Company will not, by amendment of its Certificate of
Incorporation or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder hereof against impairment.

17. Addresses. Any notice required or permitted hereunder shall be in writing
and shall be mailed by overnight courier, registered or certified mail, return
receipt required, and postage prepaid, or otherwise delivered by hand or by
messenger, addressed as set forth below, or at such other address as the Company
or the Holder hereof shall have furnished to the other party.

18. "Market Stand-Off" Agreement. Holder hereby agrees that for a period of up
to 180 days following the effective date of the first registration statement of
the Company covering common stock (or other securities) to be sold on behalf of
the Company in an underwritten public offering, it will not, to the extent
requested by the Company and any underwriter, sell or otherwise transfer or
dispose of (other than to donees or transferees who agree to be similarly bound)
any of the Shares at any time during such period except common stock included in
such registration; provided, however, that all officers and directors of the
Company who hold securities of the Company or options to acquire securities of
the Company and all other persons with registration rights enter into similar
agreements.

               If to the Company:   Xcyte Therapies, Inc.
                                    1124 Columbia Street
                                    Suite 130
                                    Seattle, WA 98104
                                    Attn:   Director of Finance

               If to the Holder:    General Electric Capital Corporation
                                    5150 El Camino Real
                                    Suite B-21
                                    Los Altos, CA 94022
                                    Attn:   Barbara B. Kaiser, EVP/GM


IN WITNESS WHEREOF, XCYTE THERAPIES, INC. has caused this Warrant to be executed
by its officers thereunto duly authorized.

Dated as of 1/10, 2000.

                                                   By: /s/ Ronald Jay Berenson
                                                      -------------------------
                                                   
                                                   Name: Ronald Jay Berenson
                                                         ----------------------
                                      -9-


<PAGE>   10

                                                   Title: President & CEO
                                                         ----------------------


                                      -10-

<PAGE>   11

                               NOTICE OF EXERCISE

TO:


1.      The undersigned Warrantholder ("Holder") elects to acquire shares of the
        Series C Preferred Stock (the "Preferred Stock") of
        _________________________________, (the "Company"), pursuant to the
        terms of the Stock Purchase Warrant dated _____________ ____ 1999, (the
        "Warrant").

2.      The Holder exercises its rights under the Warrant as set forth below:

            (      ) The Holder elects to purchase _______________ shares of
                     Preferred Stock as provided in Section 3(a) and tenders
                     herewith a check in the amount of $_____ as payment of the
                     purchase price.

            (      ) The Holder elects to convert the purchase rights
                     into shares of Preferred Stock as provided in
                     Section 3(b)'of the Warrant.

3.      The Holder surrenders the Warrant with this Notice of Exercise.

4.      The Holder represents that it is acquiring the aforesaid shares of
        Preferred Stock for investment and not with a view to or for resale in
        connection with distribution and that the Holder has no present
        intention of distributing or reselling the shares.

5.      Please issue a certificate representing the shares of the Preferred
        Stock in the name of the Holder or in such other name as is specified
        below:

               Name:

               Address:

               Taxpayer I.D.:

                                  ----------------------------------------
                                  (Holder)

                                   By:
                                      ------------------------------------

                                   Title:
                                         ---------------------------------
                                   Date:
                                         ---------------------------------

                                      -11-



<PAGE>   1
                                                                   EXHIBIT 10.10

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
-------------------------------------------------------------------------------

Warrant No. PD-1                              Date of Issuance: December 7, 2000
80,000 shares

                              XCYTE THERAPIES, INC.

                    SERIES D PREFERRED STOCK PURCHASE WARRANT

        Xcyte Therapies, Inc. (the "Company"), for value received, hereby
certifies that Hibbs/Woodinville Associates LLC, or its registered assigns (the
"Registered Holder"), is entitled, subject to the terms set forth below, to
purchase from the Company, at any time after the date hereof and on or before
the Expiration Date (as defined in Section 5 below), up to 80,000 shares of
Series D Preferred Stock of the Company ("Preferred Stock"), at a purchase price
of $2.78 per share. The shares purchasable upon exercise of this Warrant and the
purchase price per share, as adjusted from time to time pursuant to the
provisions of this Warrant,
 are hereinafter referred to as the "Warrant Stock"
and the "Purchase Price," respectively.



        1.     EXERCISE.

               (a) MANNER OF EXERCISE. This Warrant may be exercised by the
Registered Holder, in whole or in part, by surrendering this Warrant, with the
purchase/exercise form appended hereto as Exhibit A duly executed by such
Registered Holder or by such Registered Holder's duly authorized attorney, at
the principal office of the Company, or at such other office or agency as the
Company may designate, accompanied by payment in full of the Purchase Price
payable in respect of the number of shares of Warrant Stock purchased upon such
exercise. The Purchase Price may be paid by cash, check, wire transfer or by the
surrender of promissory notes or other instruments representing indebtedness of
the Company to the Registered Holder.

               (b) EFFECTIVE TIME OF EXERCISE. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the day on which this Warrant shall have been surrendered to the Company as
provided in Section 1(a) above. At such time, the person or persons in whose
name or names any certificates for Warrant Stock shall be issuable upon such
exercise as provided in Section 1(d) below shall be deemed to have become the
holder or holders of record of the Warrant Stock represented by such
certificates.

               (c)    NET ISSUE EXERCISE.


<PAGE>   2

                      (i) In lieu of exercising this Warrant in the manner
provided above in Section 1(a), the Registered Holder may elect to receive
shares equal to the value of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with notice of such election on the purchase/exercise form appended
hereto as Exhibit A duly executed by such Registered Holder or such Registered
Holder's duly authorized attorney, in which event the Company shall issue to
such Holder a number of shares of Warrant Stock computed using the following
formula:

                             X =    Y (A - B)
                                    ---------
                                       A
Where          X = The number of shares of Warrant Stock to be issued to the
                     Registered  Holder.

               Y = The number of shares of Warrant Stock purchasable under
                     this Warrant (at the date of such calculation).

               A = The fair market value of one share of Warrant Stock (at
                      the date of such calculation).

               B = The Purchase Price (as adjusted to the date of such
                     calculation).

                      (ii) For purposes of this Section 1(c), the fair market
value of Warrant Stock on the date of calculation shall mean with respect to
each share of Warrant Stock:

                             (A) if the exercise is in connection with an
initial public offering of the Company's Common Stock, and if the Company's
Registration Statement relating to such public offering has been declared
effective by the Securities and Exchange Commission, then the fair market value
per share shall be the product of (x) the initial "Price to Public" specified in
the final prospectus with respect to the offering and (y) the number of shares
of Common Stock into which each share of Warrant Stock is convertible at the
date of calculation;

                             (B) if (A) is not applicable, the fair market value
of Warrant Stock shall be at the highest price per share which the Company could
obtain on the date of calculation from a willing buyer (not a current employee
or director) for shares of Warrant Stock sold by the Company, from authorized
but unissued shares, as determined in good faith by the Board of Directors,
unless the Company is at such time subject to an acquisition as described in
Section 6(b) below, in which case the fair market value of Warrant Stock shall
be deemed to be the value received by the holders of such stock pursuant to such
acquisition.

               (d) DELIVERY TO HOLDER. As soon as practicable after the exercise
of this Warrant in whole or in part, and in any event within ten (10) days
thereafter, the Company at its expense will cause to be issued in the name of,
and delivered to, the Registered Holder, or as such Holder (upon payment by such
Holder of any applicable transfer taxes) may direct:

                      (i) a certificate or certificates for the number of shares
of Warrant Stock to which such Registered Holder shall be entitled, and


                                      -2-

<PAGE>   3

                      (ii) in case such exercise is in part only, a new warrant
or warrants (dated the date hereof) of like tenor, calling in the aggregate on
the face or faces thereof for the number of shares of Warrant Stock equal
(without giving effect to any adjustment therein) to the number of such shares
called for on the face of this Warrant minus the number of such shares purchased
by the Registered Holder upon such exercise as provided in Section 1(a) or 1(c)
above.

        2. ADJUSTMENTS.

           (a) REDEMPTION OR CONVERSION OF PREFERRED STOCK. If all of the
Preferred Stock is redeemed or converted into shares of Common Stock, then this
Warrant shall automatically become exercisable for that number of shares of
Common Stock equal to the number of shares of Common Stock that would have been
received if this Warrant had been exercised in full and the shares of Preferred
Stock received thereupon had been simultaneously converted into shares of Common
Stock immediately prior to such event, and the Exercise Price shall be
automatically adjusted to equal the number obtained by dividing (i) the
aggregate Purchase Price of the shares of Preferred Stock for which this Warrant
was exercisable immediately prior to such redemption or conversion, by (ii) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after such redemption or conversion.

           (b) STOCK SPLITS AND DIVIDENDS. If outstanding shares of the
Company's Preferred Stock shall be subdivided into a greater number of shares or
a dividend in Preferred Stock shall be paid in respect of Preferred Stock, the
Purchase Price in effect immediately prior to such subdivision or at the record
date of such dividend shall simultaneously with the effectiveness of such
subdivision or immediately after the record date of such dividend be
proportionately reduced. If outstanding shares of Preferred Stock shall be
combined into a smaller number of shares, the Purchase Price in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased. When any
adjustment is required to be made in the Purchase Price, the number of shares of
Warrant Stock purchasable upon the exercise of this Warrant shall be changed to
the number determined by dividing (i) an amount equal to the number of shares
issuable upon the exercise of this Warrant immediately prior to such adjustment,
multiplied by the Purchase Price in effect immediately prior to such adjustment,
by (ii) the Purchase Price in effect immediately after such adjustment.

           (c) RECLASSIFICATION, ETC. In case there occurs any reclassification
or change of the outstanding securities of the Company or of any reorganization
of the Company (or any other corporation the stock or securities of which are at
the time receivable upon the exercise of this Warrant) or any similar corporate
reorganization on or after the date hereof, then and in each such case the
Registered Holder, upon the exercise hereof at any time after the consummation
of such reclassification, change, or reorganization shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise hereof prior to such consummation, the stock or other securities or
property to which such Holder would have been entitled upon such consummation if
such Holder had exercised this Warrant immediately prior thereto, all subject to
further adjustment pursuant to the provisions of this Section 2.


                                      -3-

<PAGE>   4

           (d) ADJUSTMENT CERTIFICATE. When any adjustment is required to be
made in the Warrant Stock or the Purchase Price pursuant to this Section 2, the
Company shall promptly mail to the Registered Holder a certificate setting forth
(i) a brief statement of the facts requiring such adjustment, (ii) the Purchase
Price after such adjustment and (iii) the kind and amount of stock or other
securities or property into which this Warrant shall be exercisable after such
adjustment.

           (e) ACKNOWLEDGEMENT. In order to avoid doubt, it is acknowledged that
the holder of this Warrant shall be entitled to the benefit of all adjustments
in the number of shares of Common Stock of the Company issuable upon conversion
of the Preferred Stock of the Company which occur prior to the exercise of this
Warrant, including without limitation, any increase in the number of shares of
Common Stock issuable upon conversion as a result of a dilutive issuance of
capital stock.

        3. TRANSFERS.

           (a) UNREGISTERED SECURITY. Each holder of this Warrant acknowledges
that this Warrant, the Warrant Stock and the Common Stock of the Company have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and agrees not to sell, pledge, distribute, offer for sale,
transfer or otherwise dispose of this Warrant, any Warrant Stock issued upon its
exercise or any Common Stock issued upon conversion of the Warrant Stock in the
absence of (i) an effective registration statement under the Act as to this
Warrant, such Warrant Stock or such Common Stock and registration or
qualification of this Warrant, such Warrant Stock or such Common Stock under any
applicable U.S. federal or state securities law then in effect, or (ii) an
opinion of counsel, satisfactory to the Company, that such registration and
qualification are not required. Each certificate or other instrument for Warrant
Stock issued upon the exercise of this Warrant shall bear a legend substantially
to the foregoing effect.

           (b) TRANSFERABILITY. Subject to the provisions of Section 3(a)
hereof, this Warrant and all rights hereunder are transferable to any individual
or entity with the consent of the Company, which consent shall not be
unreasonably withheld; provided that any assignee shall be bound by the terms
hereof. Notwithstanding the foregoing, this Warrant may not be transferred to
any individual or entity engaged in any business that competes with any business
of the Company, and any purported transfer to a such an individual or entity
shall be void. A permitted transfer of this Warrant shall be effected by
surrendering the Warrant with a properly executed assignment (in the form of
Exhibit B hereto) at the principal office of the Company. This Warrant may not
be transferred in part unless the transferee acquires the right to purchase all
of the shares of Warrant Stock hereunder.

           (c) WARRANT REGISTER. The Company will maintain a register containing
the names and addresses of the Registered Holders of this Warrant. Until any
transfer of this Warrant is made in the warrant register, the Company may treat
the Registered Holder of this Warrant as the absolute owner hereof for all
purposes; provided, however, that if this Warrant is properly assigned in blank,
the Company may (but shall not be required to) treat the bearer


                                      -4-

<PAGE>   5

hereof as the absolute owner hereof for all purposes, notwithstanding any notice
to the contrary. Any Registered Holder may change such Registered Holder's
address as shown on the warrant register by written notice to the Company
requesting such change.

        4. REPRESENTATIONS AND WARRANTIES OF HOLDER.  The Registered Holder
hereby represents and warrants to the Company as follows:

           (a) PURCHASE ENTIRELY FOR OWN ACCOUNT. The Registered Holder
acknowledges that this Warrant is given to the Registered Holder in reliance
upon the Registered Holder's representation to the Company, which by its
acceptance of this Warrant the Registered Holder hereby confirms, that the
Warrant, the Warrant Shares, and the Common Stock issuable upon conversion of
the Warrant Shares (collectively, the "Securities") being acquired by the
Registered Holder are being acquired for investment for the Registered Holder's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Registered Holder has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By executing this Agreement, the Registered Holder further represents
that the Registered Holder does not presently have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of the
Securities. The Registered Holder represents that it has full power and
authority to enter into this Agreement. The Registered Holder has not been
formed for the specific purpose of acquiring any of the Securities.

           (b) DISCLOSURE OF INFORMATION. The Registered Holder has had an
opportunity to discuss the Company's business, management, financial affairs and
the terms and conditions of the offering of the Securities with the Company's
management and has had an opportunity to review the Company's facilities. The
Registered Holder understands that such discussions, as well as the written
information issued by the Company, were intended to describe the aspects of the
Company's business which it believes to be material.

           (c) RESTRICTED SECURITIES. The Registered Holder understands that the
Securities have not been, and will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Registered Holder's
representations as expressed herein. The Registered Holder understands that the
Securities are "restricted securities" under applicable U.S. federal and state
securities laws and that, pursuant to these laws, the Registered Holder must
hold the Securities indefinitely unless they are registered with the Securities
and Exchange Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available. The Registered
Holder further acknowledges that if an exemption from registration or
qualification is available, it may be conditioned on various requirements
including, but not limited to, the time and manner of sale, the holding period
for the Securities, and on requirements relating to the Company which are
outside of the Registered Holder's control, and which the Company is under no
obligation and may not be able to satisfy.


                                      -5-

<PAGE>   6

           (d) NO PUBLIC MARKET. The Registered Holder understands that no
public market now exists for any of the securities issued by the Company, that
the Company has made no assurances that a public market will ever exist for the
Securities.

           (e) LEGENDS. The Registered Holder understands that the Securities,
and any securities issued in respect of or exchange for the Securities, may bear
one or all of the following legends:

               (i) "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933."

               (ii) Any legend required by the Blue Sky laws of any state to the
extent such laws are applicable to the shares represented by the certificate so
legended.

           (f) ACCREDITED INVESTOR. The Registered Holder is an accredited
investor as defined in Rule 501(a) of Regulation D promulgated under the Act.

        5. NO IMPAIRMENT. The Company will not, by amendment of its charter or
through reorganization, consolidation, merger, dissolution, sale of assets or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against impairment.

        6. TERMINATION. This Warrant (and the right to purchase securities upon
exercise hereof) shall terminate upon the earliest to occur of the following
(the "Expiration Date"): (a) January 20, 2006, (b) within 20 business days of
the sale, conveyance or disposal of all or substantially all of the Company's
property or business or the Company's merger into or consolidation with any
other corporation (other than a wholly-owned subsidiary of the Company) or
within 20 business days of any other transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of the
Company is disposed of, provided that this Section 6(b) shall not apply to a
merger effected exclusively for the purpose of changing the domicile of the
Company, or (c) the closing of a firm commitment underwritten public offering
pursuant to a registration statement on FORM S-1 under the Securities Act, the
public offering price of which is not less than $4.00 per share (appropriately
adjusted for any stock split, dividend, combination or other recapitalization)
and which results in aggregate cash proceeds to the Company of $20,000,000 (net
of underwriting discounts and commissions).


                                      -6-

<PAGE>   7

        7. NOTICES OF CERTAIN TRANSACTIONS. In case:

           (a) the Company shall take a record of the holders of its Preferred
Stock (or other stock or securities at the time deliverable upon the exercise of
this Warrant) for the purpose of entitling or enabling them to receive any
dividend or other distribution, or to receive any right to subscribe for or
purchase any shares of stock of any class or any other securities, or to receive
any other right, to subscribe for or purchase any shares of stock of any class
or any other securities, or to receive any other right, or

           (b) of any capital reorganization of the Company, any
reclassification of the capital stock of the Company, any consolidation or
merger of the Company, any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the Company
is the surviving entity), or any transfer of all or substantially all of the
assets of the Company, or

           (c) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company,

           (d) of any redemption of the Preferred Stock or mandatory conversion
of the Preferred Stock into Common Stock of the Company, or

           (e) of a public offering described in Section 6(c).

then, and in each such case, the Company will mail or cause to be mailed to the
Registered Holder of this Warrant a notice specifying, as the case may be, (i)
the date on which a record is to be taken for the purpose of such dividend,
distribution or right, and stating the amount and character of such dividend,
distribution or right, (ii) the effective date on which such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion is to take place, and the time, if any is
to be fixed, as of which the holders of record of Preferred Stock (or such other
stock or securities at the time deliverable upon such reorganization,
reclassification, consolidation, merger, transfer, dissolution, liquidation,
winding-up, redemption or conversion) are to be determined, or (iii) the
expected date on which the closing of a firm commitment underwritten public
offering described in Section 6(c) shall occur. Such notice shall be mailed at
least ten (10) days prior to the record date or effective date for the event
specified in such notice.

        8. RESERVATION OF STOCK. The Company will at all times reserve and keep
available, solely for the issuance and delivery upon the exercise of this
Warrant, such shares of Warrant Stock and other stock, securities and property,
as from time to time shall be issuable upon the exercise of this Warrant.

        9. EXCHANGE OF WARRANTS. Upon the surrender by the Registered Holder of
any Warrant or Warrants, properly endorsed, to the Company at the principal
office of the Company, the Company will, subject to the provisions of Section 3
hereof, issue and deliver to or upon the order of such Holder, at the Company's
expense, a new Warrant or Warrants of like tenor, in the name of such Registered
Holder or as such Registered Holder (upon payment by such Registered


                                      -7-

<PAGE>   8

Holder of any applicable transfer taxes) may direct, calling in the aggregate on
the face or faces thereof for the number of shares of Preferred Stock called for
on the face or faces of the Warrant or Warrants so surrendered.

        10. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and (in the case of loss, theft or destruction) upon delivery of an
indemnity agreement (with surety if reasonably required) in an amount reasonably
satisfactory to the Company, or (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will issue, in lieu thereof, a new
Warrant of like tenor.

        11. MAILING OF NOTICES. Any notice required or permitted pursuant to
this Warrant shall be in writing and shall be deemed sufficient upon receipt,
when delivered personally or sent by courier, overnight delivery service or
confirmed facsimile, or forty-eight (48) hours after being deposited in the
regular mail, as certified or registered mail (airmail if sent internationally),
with postage prepaid, addressed (a) if to the Registered Holder, to the address
of the Registered Holder most recently furnished in writing to the Company and
(b) if to the Company, to the address set forth below or subsequently modified
by written notice to the Registered Holder.

        12. NO RIGHTS AS STOCKHOLDER. Until the exercise of this Warrant, the
Registered Holder of this Warrant shall not have or exercise any rights by
virtue hereof as a stockholder of the Company.

        13. NO FRACTIONAL SHARES. No fractional shares of Preferred Stock will
be issued in connection with any exercise hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal to
the product of such fraction multiplied by the fair market value of one share of
Preferred Stock on the date of exercise, as determined in good faith by the
Company's Board of Directors.

        14. AMENDMENT OR WAIVER. Any term of this Warrant may be amended or
waived only by an instrument in writing signed by the party against which
enforcement of the amendment or waiver is sought.

        15. HEADINGS. The headings in this Warrant are for purposes of reference
only and shall not limit or otherwise affect the meaning of any provision of
this Warrant.

        16. GOVERNING LAW. This Warrant shall be governed, construed and
interpreted in accordance with the laws of the State of Washington, without
giving effect to principles of conflicts of law.

        17. INVESTOR RIGHTS AGREEMENT. The Warrant Stock and any Common Stock
issued upon conversion of the Warrant Stock shall be deemed "Registrable
Securities" under the Amended and Restated Investor Rights Agreement dated as of
May 25, 2000, as amended, between the Company, the Investors identified therein
to the fullest extent possible, and the Registered Holder shall be deemed, and
become to the fullest extent possible by virtue of the issuance of this Warrant,
a "Holder" under said Agreement, entitled to all of the registration and


                                      -8-

<PAGE>   9

other rights, benefits and privileges accorded "Holders" thereunder to the
fullest extent possible, and subject to all obligations, duties and conditions
imposed on "Holders" thereunder to the fullest extent possible. The Registered
Holder, the Warrant, the Warrant Stock and any common stock issued upon
conversion of the Warrant Stock shall be subject to the "market standoff"
obligations pursuant to Section 1.14 of said Agreement. The Company's Board of
Directors acting pursuant to Section 1.13(ii) of said Agreement shall grant to
Registered Holder to the fullest extent possible all registration rights
accorded Holders thereunder.


                                      -9-

<PAGE>   10

                                      XCYTE THERAPIES, INC.


                                      By
                                        ------------------------------------

                                      Address:    1124 Columbia Street
                                                  Suite 130
                                                  Seattle, WA  98104

                                      Fax Number: (206) 262-0900



                        SIGNATURE PAGE TO XCYTE THERAPIES
                          WARRANT TO PURCHASE SERIES D
                       TO HIBBS/WOODINVILLE ASSOCIATES LLC


<PAGE>   11

                                    EXHIBIT A

                             PURCHASE/EXERCISE FORM


To:     XCYTE THERAPIES, INC.                                    Dated:

        The undersigned, pursuant to the provisions set forth in the attached
Warrant No. PD-1, hereby irrevocably elects to (a) purchase _____ shares of the
Preferred Stock covered by such Warrant and herewith makes payment of $________,
representing the full purchase price for such shares at the price per share
provided for in such Warrant, or (b) exercise such Warrant for _______ shares
purchasable under the Warrant pursuant to the Net Issue Exercise provisions of
Section 1(c) of such Warrant.

        The undersigned further acknowledges that it has reviewed the
representations and warranties of the Registered Holder contained in Section 4
of the Warrant and the covenants of the Registered Holder contained in Section
17 of the Warrant, and by its signature below the undersigned hereby makes such
representations, warranties and covenants to the Company as of the date hereof.


                              Signature:
                                        -----------------------------

                              Name (print):
                                           --------------------------

                              Title (if applic.)
                                                ---------------------

                              Company (if applic.):
                                                   ------------------


<PAGE>   12
                                    EXHIBIT B

                                 ASSIGNMENT FORM

        FOR VALUE RECEIVED, _________________________________________ hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant with respect to the number of shares of Series D Preferred
Stock covered thereby set forth below, unto:

NAME OF ASSIGNEE            ADDRESS/FAX NUMBER              NO. OF SHARES






Dated:                         Signature:
      ------------------                 ------------------------------

                                         ------------------------------

                                Witness:
                                         ------------------------------





<PAGE>   1
                                                                   EXHIBIT 10.11

                   SENIOR LOAN AND SECURITY AGREEMENT NO. 6261



        THIS SENIOR LOAN AND SECURITY AGREEMENT NO. 6261 (this "Security
Agreement") is dated as of July 1, 1999 between XCYTE THERAPIES, NC., a Delaware
corporation ("Borrower") and PHOENIX LEASING INCORPORATED, a California
corporation ("Lender").

                                    RECITALS

        A. Borrower desires to borrow from Lender in one or more borrowings the
Commitment amount as defined in Section 3(a)(ii) below, and Lender desires to
loan, subject to the terms and conditions herein set forth, such amount to
Borrower (each, a "Loan" and collectively, the "Loans"). Such borrowings shall
be evidenced by one or more Senior Secured Promissory Notes (each, a "Note" and
collectively, the "Notes"), in the form attached hereto.

        B. As security for Borrower's obligations to Lender under this Security
Agreement, the Notes and any other agreement between Borrower and Lender,
Borrower will grant to Lender hereunder a first priority security interest in
certain of its equipment, machinery, fixtures, other items and intangibles, and
also certain custom use equipment, installation and delivery costs, purchase
tax, toolings, software and other items generally considered fungible or
expendable ("Soft Costs") whether now owned
 by Borrower or hereafter acquired,
and all substitutions and replacements of and additions, improvements,
accessions and accumulations to said equipment, machinery and fixtures and other
items, together with all rents, issues, income, profits and proceeds therefrom
which is described on the Note attached hereto or any subsequently-executed Note
entered into by Lender and Borrower and which incorporates this Security
Agreement by reference (collectively, the "Collateral").

        NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

        SECTION 1. TERM OF AGREEMENT. The term of this Security Agreement begins
on the date set forth above and shall continue thereafter and be in effect so
long as and at any time any Note entered into pursuant to this Security
Agreement is in effect. The Term and monthly payment amount payable with respect
to each item of Collateral shall be as set forth in and as stated in the
respective Note(s). The terms of each Note hereto are subject to all conditions
and provisions of this Security Agreement as it may at any time be amended. Each
Note shall constitute a separate and independent Loan and contractual obligation
of Borrower and shall incorporate the terms and conditions of this Security
Agreement and any additional provisions contained in such Note. In the event of
a conflict between the terms and conditions of this Security Agreement and any
provisions of such Note, the provisions of such Note shall prevail with respect
to such Note only.




<PAGE>   2

        SECTION 2. NON-CANCELABLE LOAN. This Security Agreement and each Note
cannot be canceled or terminated except as expressly provided herein. Borrower
agrees that its obligations to pay all monthly payment amounts and other sums
payable hereunder (and under any Note) and the rights of Lender and any assignee
in and to such monthly payment amounts and other sums, are absolute and
unconditional and are not subject to any abatement, reduction, setoff, defense,
counterclaim or recoupment due or alleged to be due to, or by reason of, any
past, present or future claims which Borrower may have against Lender, any
assignee, the manufacturer or seller of the Collateral, or against any person
for any reason whatsoever.

        SECTION 3. LENDER COMMITMENT. (a) General Terms. Subject to the terms
and conditions of this Security Agreement, Lender hereby agrees to make one or
more senior secured Loans to Borrower, subject to the following conditions: (i)
each Loan shall be evidenced by a Note; (ii) the total principal amount of the
Loans shall not exceed $1,000,000 in the aggregate (the "Commitment") provided
that no more than 20% of the amount of the utilized Commitment may be used to
finance Soft Costs; (iii) the amount of each Loan shall be at least $25,000
except for a final Loan which may be less than $25,000; (iv) Lender shall not be
obligated to make any Loan after August 31, 2000; (v) at the time of each Loan,
no Event of Default or event which with the giving of notice or passage of time,
or both, could become an Event of Default shall have occurred, as reasonably
determined by Lender, and certified by Borrower; (vi) at the time of each Loan,
Borrower has reimbursed Lender for all UCC filing and search costs, inspection
and labeling costs, and appraisal fees, if any; (vii) for each Loan, Borrower
shall present to Lender a list of proposed Collateral for approval by Lender in
its sole discretion; (viii) for each Loan, Borrower shall have provided Lender
with each of the closing documents described in Exhibit A hereto (which
documents shall be in form and substance reasonably acceptable to Lender); (ix)
Borrower is performing substantially in accordance with its business plan
referred to as "Xcyte Therapies Cash Position" labeled Budget 99 to 00 Revised
.xls and "Xctye Therapies Cash Flow Statement" labeled Revised for 3.16.99 Board
Meeting" (the "Business Plan") (all quarterly figures will be prorated to
monthly), as may be amended from time to time in form and substance acceptable
to Lender; (x) there shall be no material adverse change in Borrower's
condition, financial or otherwise, that would materially impair the ability of
Borrower to meet its payment and other obligations under this Loan (a "Material
Adverse Effect") as reasonably determined by Lender, and Borrower so certifies,
from (yy) the date of the most recent financial statements delivered by Borrower
to Lender to (zz) the date of the proposed Loan; (xi) prior to payment in full
of all Notes, Borrower shall not offer any loan secured by any equipment,
furniture or fixtures to any other person or entity other than Lender, unless
Lender declines to finance such transaction or Borrower and Lender are unable to
agree on the terms of such financing; (xii) Borrower shall use the proceeds of
all Loans hereunder to purchase or reimburse the purchase of Collateral; (xiii)
all Collateral has been marked and labeled by Lender or Lender's agent; and
(xiv) Lender has received in form and substance acceptable to Lender: (a)
Borrower's interim financial statements signed by a financial officer of
Borrower; and (b) complete copies of the Borrower's audit reports for its most
recent fiscal year when completed, which shall include at least Borrower's
balance sheet as of the close of such year, and Borrower's statement of income
and retained earnings and of changes in financial position for such year,
prepared on a consolidated basis and certified by independent public
accountants. Such certificate shall not be qualified or limited because of
restricted or limited


                                      -2-

<PAGE>   3

examination by such accountant of any material portion of the company's records.
Such reports shall be prepared in accordance with generally accepted accounting
principles and practices consistently applied.

        (b) The Notes. Each Loan shall be evidenced by a Note which may not be
prepaid in whole or in part. Each Note shall bear interest and be payable at the
times and in the manner provided therein. Following payment of the Indebtedness
related to each Note, Lender shall promptly return such Note, marked "canceled,"
to Borrower.

        SECTION 4. SECURITY INTERESTS. (a) Borrower hereby grants to Lender a
first security interest in all Collateral; (b) This Security Agreement secures
(i) the payment of the principal of and interest on the Notes and all other sums
due thereunder and under this Security Agreement (the "Indebtedness") and (ii)
the performance by Borrower of all of its other covenants now or hereafter
existing under the Notes, this Security Agreement and any other obligation owed
by Borrower to Lender (the "Obligations").

        SECTION 5. BORROWER'S REPRESENTATIONS AND WARRANTIES. Borrower
represents and warrants that (a) it is in good standing under the laws of the
state of its formation, duly qualified to do business and will remain duly
qualified during the term of each Loan in each state where necessary to carry on
its present business and operations, including the jurisdiction(s) where the
Collateral will be located as specified on each Exhibit A to each Note, except
where failure to be so qualified would not have a Material Adverse Effect; (b)
it has full authority to execute and deliver this Security Agreement and the
Notes and perform the terms hereof and thereof, and this Security Agreement and
the Notes have been duly authorized, executed and delivered and constitute valid
and binding obligations of Borrower enforceable in accordance with their terms;
(c) the execution and delivery of this Security Agreement and the Notes will not
contravene any law, regulation or judgment affecting Borrower or result in any
breach of any material agreement or other instrument binding on Borrower; (d) no
consent of Borrower's shareholders or holder of any indebtedness, or filing
with, or approval of, any governmental agency or commission, which has not
already been obtained or performed, as appropriate, is a condition to the
performance of the terms of this Security Agreement or the Notes; (e) there is
no action or proceeding pending or threatened against Borrower before any court
or administrative agency which might have a Material Adverse Effect on the
business, financial condition or operations of Borrower; (f) at the time any
Loan is made hereunder, Borrower owns and will keep all of the Collateral free
and clear of all liens, claims and encumbrances, and, except for this Security
Agreement, there is no deed of trust, mortgage, security agreement or other
third party interest against any of the Collateral other than Permitted Liens
(as defined below); (g) at the time any Loan is made hereunder, Borrower has
good and marketable title to the Collateral; (h) at the time any Loan is made
hereunder, all Collateral has been received, installed and is ready for use and
is satisfactory in all respects for the purposes of this Security Agreement; (i)
the Collateral is, and will remain at all times under applicable law, removable
personal property, which is free and clear of any lien or encumbrance except in
favor of Lender other than Permitted Liens (as defined below), notwithstanding
the manner in which the Collateral may be attached to any real property; (j) all
credit and financial information submitted to Lender herewith or at any other
time is and will at the time given be true and correct


                                      -3-

<PAGE>   4

in all material respects; and (k) the security interest granted to Lender
hereunder is a first priority security interest, and (I) on or before January 1,
2000, Borrower's computer system shall be Year 2000 performance compliant and
will thus be able to accurately process date data from, into and between the
twentieth and twenty-first centuries including leap year calculations.
"Permitted Liens" shall mean and include: (i) liens for taxes or other
governmental charges not at the time delinquent or thereafter payable without
penalty or being contested in good faith; and (ii) liens of carriers,
warehousemen, mechanics, materialmen, vendors, landlords and other liens arising
by operation of law incurred in the ordinary course of business.

        SECTION 6. METHOD AND PLACE OF PAYMENT. Borrower shall pay to Lender, at
such address as Lender specifies in writing, all amounts payable to it under
this Security Agreement and the Notes.

        SECTION 7. LOCATION; INSPECTION; LABELS. All of the Collateral shall be
located at the address (the "Collateral Location") shown on Exhibit A to each
Note and shall not be moved unless Borrower has provided Lender with written
notice of the change in location and Lender has acknowledged receipt of the
notice. All of the records regarding the Collateral shall be located at 2203
Airport Way South, Suite 300, Seattle, WA 98134, or such other location of which
Borrower has given notice to Lender in accordance with this Security Agreement.
Lender shall have the right to inspect Collateral, including records relating
thereto, and Borrower's books and records at any time (upon reasonable
notification) during regular business hours, such books and records to be
maintained in accordance with generally accepted accounting principles. Borrower
shall be responsible for all labor, material and freight charges incurred in
connection with any removal or relocation of Collateral which is requested by
Borrower and consented to by Lender, as well as for any charges due to the
installation or moving of the Collateral. Payments under the Notes and under
this Security Agreement shall continue during any period in which the Collateral
is in transit during a relocation. During Borrower's regular business hours and
upon at least two days' notice to Borrower, Lender or its agent shall mark and
label Collateral, which labels (to be provided by Lender) shall state that such
Collateral is subject to a security interest of Lender, and Borrower shall keep
such labels on the Collateral as so labeled.

        SECTION 8. COLLATERAL MAINTENANCE. (a) General. Upon reasonable notice,
Borrower will permit Lender to inspect each item of Collateral and its
maintenance records during Borrower's regular business hours. Borrower will at
its sole expense comply with all applicable laws, rules, regulations,
requirements and orders with respect to the use, maintenance, repair, condition,
storage and operation of each item of Collateral. Any addition or improvement
that is so required or cannot be so removed will immediately become Collateral
of Lender. (b) Service and Repair. Borrower will at its sole expense maintain
and service and repair any damage to each item of Collateral in a manner
consistent with prudent industry practice and Borrower's own practice so that
such item of Collateral is at all times (i) in the same condition as when
delivered to Borrower, except for ordinary wear and tear, and (ii) in good
operating order for the function intended by its manufacturer's warranties and
recommendations.

        SECTION 9. LOSS OR DAMAGE. Borrower assumes the entire risk of loss to
the Collateral through use, operation or otherwise. Borrower hereby indemnifies
and holds harmless


                                      -4-

<PAGE>   5

Lender from and against all claims, loss of Loan payments, costs, damages, and
expenses relating to or resulting from any loss, damage or destruction of the
Collateral, any such occurrence being hereinafter called a "Casualty
Occurrence." Notwithstanding any Casualty Occurrence, the Loan to which such
casualtied item of Collateral is subject shall continue in full force and effect
without any abatement in the monthly payment due. Borrower shall, at its
election, (a) no later than thirty (30) days after such Casualty Occurrence
repair the Collateral returning it to good operating condition, (b) no later
than thirty (30) days after such Casualty Occurrence replace the Collateral with
Collateral acceptable to Lender in its reasonable discretion, in good condition
and repair taking all steps required by Lender to perfect Lender's first
priority security interest therein, which replacement Collateral shall be
subject to the terms of this Security Agreement, or (c) on the next regular
monthly payment date which falls after such thirty (30) days, or if there is no
such payment date, thirty (30) days after such Casualty Occurrence pay to Lender
an amount equal to the Balance Due (as defined below) for each lost or damaged
item of Collateral. The Balance Due for each such item is the sum of: (i) all
amounts for each item which may be then due or accrued to the payment date, plus
(ii) as of such payment date, an amount equal to the product of the fraction
specified below times the sum of all remaining payments under the respective
Note, including the amount of any mandatory or optional payment required or
permitted to be paid by Borrower to Lender at the maturity of the Note
discounting to present value the amounts in (ii) at a rate of 6% per annum
compounded monthly on the basis of a 360 day year ("Discount Rate"). The
numerator of the fraction shall be the collateral value (as set forth on the
applicable Note) of the item and the denominator shall be the aggregate
collateral value of all items under the Note. Upon the making of such payments,
Lender shall release such item of Collateral from its lien hereunder.

        SECTION 10. INSURANCE. Borrower at its expense shall keep the Collateral
insured against all risks of physical loss for at least the replacement value of
the Collateral and in no event for less than the amount payable following a
Casualty Occurrence (as provided in Section 9). Such insurance shall provide for
a loss payable endorsement to Lender and/or any assignee of Lender. If there is
no event of default by Borrower, any insurance proceeds received by Lender shall
be released by Lender for application to the costs incurred by Borrower to
repair the Collateral. Borrower shall maintain commercial general liability
insurance, including products liability and completed operations coverage, with
respect to loss or damage for personal injury, death or property damage in an
amount not less than $2,000,000 in the aggregate, naming Lender and/or Lender's
assignee as additional insured. Such insurance shall contain insurer's agreement
to give thirty (30) days' advance written notice to Lender before cancellation
or material change of any policy of insurance. Borrower will provide Lender and
any assignee of Lender with a certificate of insurance from the insurer
evidencing Lender's or such assignee's interest in the policy of insurance. Such
insurance shall cover any Casualty Occurrence to any unit of Collateral.
Notwithstanding anything in Section 9 or this Section 10 to the contrary, this
Security Agreement and Borrower's obligations hereunder shall remain in full
force and effect with respect to any unit of Collateral which is not subject to
a Casualty Occurrence. If Borrower fails to provide or maintain insurance as
required herein, Lender shall have the right, but shall not be obligated, to
obtain such insurance. In that event, Borrower shall pay to Lender the cost
thereof.


                                      -5-

<PAGE>   6

        SECTION 11. MISCELLANEOUS AFFIRMATIVE COVENANTS. So long as any portion
of the Indebtedness is unpaid and as long as any of the Obligations are
outstanding Borrower will: (a) duly pay all governmental taxes and assessments
at the time they become due and payable; provided, however, Borrower may contest
the same in good faith so long as no payment default by Borrower has occurred
and is continuing; (b) comply with all applicable material governmental laws,
rules and regulations relating to its business and the Collateral where a
failure to comply would have a Material Adverse Effect; (c) take no action to
adversely affect Lender's security interest in the Collateral as a first and
prior perfected security interest; (d) furnish Lender with its annual audited
financial statements within ninety (90) days following the end of Borrower's
fiscal year, unaudited quarterly financial statements within forty-five (45)
days after the end of each fiscal quarter, and within thirty (30) days of the
end of each month a financial statement for that month prepared by Borrower, and
including an income statement and balance sheet, all of which shall be certified
by an officer of Borrower as true and correct and shall be prepared in
accordance with generally accepted accounting principles consistently applied,
and such other information as Lender may reasonably request; and (e) promptly
(but in no event more than five (5) days after the occurrence of such event)
notify Lender of any change in Borrower's condition during the commitment period
which constitutes a Material Adverse Effect, and of the occurrence of any Event
of Default.

        SECTION 12. INDEMNITIES. Borrower will protect, indemnify and save
harmless Lender and any assignees from and against all liabilities, obligations,
claims, damages, penalties, causes of action, costs and expenses (including
reasonable attorneys' fees and expenses), imposed upon or incurred by or
asserted against Lender or any assignee of Lender by Borrower or any third party
by reason of the occurrence or existence (or alleged occurrence or existence) of
any act or event relating to or caused by any portion of the Collateral, or its
purchase, acceptance, possession, use, maintenance or transportation, including
without limitation, consequential or special damages of any kind, any failure on
the part of Borrower to perform or comply with any of the terms of this Security
Agreement or any Note, claims for latent or other defects, claims for patent,
trademark or copyright infringement and claims for personal injury, death or
property damage, including those based on Lender's negligence or strict
liability in tort and excluding only those based on Lender's gross negligence or
willful misconduct. In the event that any action, suit or proceeding is brought
against Lender by reason of any such occurrence, Borrower, upon Lender's
request, will, at Borrower's expense, resist and defend such action, suit or
proceeding or cause the same to be resisted and defended by counsel designated
and approved by Lender. Borrower's obligations under this Section 12 shall
survive the payment in full of all the Indebtedness and the performance of all
Obligations with respect to acts or events occurring or alleged to have occurred
prior to the payment in full of all the Indebtedness and the performance of all
Obligations.

        SECTION 13. TAXES. Borrower does not indemnify Lender for any loss of
Lender's anticipated tax benefits unless the loss arises from an act or omission
by the Borrower or from any misrepresentation under the Security Agreement by
the Borrower. Borrower agrees to reimburse Lender (or pay directly if instructed
by Lender) and any assignee of Lender for, and to indemnify and hold Lender and
any assignee harmless from, all fees (including, but not limited to, license,
documentation, recording and registration fees), and all sales, use, gross
receipts,


                                      -6-

<PAGE>   7

personal property, occupational, value added or other taxes, levies, imposts,
duties, assessments, charges, or withholdings of any nature whatsoever, together
with any penalties, fines, additions to tax, or interest thereon (the foregoing
collectively "Impositions"), except same as may be attributable to Lender's
income, arising at any time prior to or during the term of any Notes or of this
Security Agreement, or upon termination or early termination of this Security
Agreement and levied or imposed upon Lender directly or otherwise by any
Federal, state or local government in the United States or by any foreign
country or foreign or international taxing authority upon or with respect to (a)
the Collateral, (b) the exportation, importation, registration, purchase,
ownership, delivery, leasing, financing, possession, use, operation, storage,
maintenance, repair, return, sale, transfer of title, or other disposition
thereof, (c) the rentals, receipts, or earnings arising from the Collateral, or
any disposition of the rights to such rentals, receipts, or earnings, (d) any
payment pursuant to this Security Agreement or the Notes, or (e) this Security
Agreement, the Notes or any transaction or any part hereof or thereof.

        SECTION 14. RELEASE OF LIENS. Upon payment of all of the Indebtedness
and performance of all of the Obligations, Lender shall execute UCC termination
statements and such other documents as Borrower shall reasonably request to
evidence the release of Lender's lien relating to the Collateral.

        SECTION 15. ASSIGNMENT. WITHOUT LENDER'S PRIOR WRITTEN CONSENT WHICH
CONSENT WILL NOT BE UNREASONABLY WITHHELD OR DELAYED, BORROWER SHALL NOT (a)
ASSIGN, TRANSFER, PLEDGE, HYPOTHECATE OR OTHERWISE DISPOSE OF THIS SECURITY
AGREEMENT, ANY NOTE, ANY COLLATERAL, OR ANY INTEREST THEREIN, (I,) LEASE OR LEND
COLLATERAL OR PERMIT IT TO BE USED BY ANYONE OTHER THAN BORROWER OR BORROWER'S
EMPLOYEES, CONTRACTORS AND AGENTS OR (c) MERGE INTO, CONSOLIDATE WITH OR CONVEY
OR TRANSFER ITS PROPERTIES SUBSTANTIALLY AS AN ENTIRETY TO ANY OTHER PERSON OR
ENTITY. LENDER MAY ASSIGN ANY OF THE NOTES, THIS SECURITY AGREEMENT OR ITS
SECURITY INTEREST IN ANY OR ALL COLLATERAL, OR ANY OR ALL OF THE ABOVE, IN WHOLE
OR IN PART TO ONE OR MORE ASSIGNEES OR SECURED PARTIES WITHOUT NOTICE TO
BORROWER. If Borrower is given notice of such assignment it agrees to
acknowledge receipt thereof in writing and Borrower shall execute such
additional documentation as Lender's assignee and/or secured party shall
reasonably require at Lender's expense. Each such assignee and/or secured party
shall have all of the rights, but (except as provided in this Section 15) none
of the obligations, of Lender under this Security Agreement, unless such
assignee or secured party expressly agrees to assume such obligations in
writing. Borrower shall not assert against any assignee and/or secured party any
defense, counterclaim or offset that Borrower may have against Lender.
Notwithstanding any such assignment, and providing no Event of Default has
occurred and is continuing, Lender, or its assignees, secured parties, or their
agents or assigns, shall not interfere with Borrower's right to quietly enjoy
use of Collateral subject to the terms and conditions of this Security
Agreement. Subject to the foregoing, the Notes and this Security Agreement shall
inure to the benefit of, and are binding upon, the successors and assignees of
the parties hereto. Borrower acknowledges that any such


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assignment by Lender will not change Borrower's duties or obligations under this
Security Agreement and the Notes or increase any burden or risk on Borrower.

        SECTION 16. DEFAULT. (a) Events of Default. Any of the following events
or conditions shall constitute an "Event of Default" hereunder: (i) Borrower's
failure to pay any monies due to Lender hereunder or under any Note beyond the
tenth (10th) day after the same is due; (ii) Borrower's failure to comply with
its obligations under Section 10 or Section 15; (iii) any representation or
warranty of Borrower made in this Security Agreement or the Notes or in any
other agreement, statement or certificate furnished to Lender in connection with
this Security Agreement or the Notes shall prove to have been incorrect in any
material respect when made or given; (iv) Borrower's failure to comply with or
perform any material term, covenant or condition of this Security Agreement or
any Note or under any lease or mortgage of real property covering the location
of the Collateral if such failure to comply or perform is not cured by Borrower
within thirty (30) days after Borrower knows of the noncompliance or
nonperformance or notice from Lender or such longer period that Borrower is
diligently attempting to effect such cure; (v) seizure of any of the Collateral
under legal process; (vi) the filing by or against Borrower or any guarantor
under any guaranty executed in connection with this Security Agreement
("Guarantor") of a petition for reorganization or liquidation under the
Bankruptcy Code or any amendment thereto or under any other insolvency law
providing for the relief of debtors; (vii) the voluntary or involuntary making
of an assignment of a substantial portion of its assets by Borrower or by any
Guarantor for the benefit of its creditors, the appointment of a receiver or
trustee for Borrower or any Guarantor or for any of Borrower's or Guarantor's
assets, the institution by or against Borrower or any Guarantor of any formal or
informal proceeding for dissolution, liquidation, settlement of claims against
or winding up of the affairs of Borrower or any Guarantor provided that in the
case of all such involuntary proceedings, same are not dismissed within sixty
(60) days after commencement; (viii) the making by Borrower or by any Guarantor
of a transfer of all or a material portion of Borrower's or Guarantor's assets
or inventory not in the ordinary course of business; or (ix) any default or
breach by any Guarantor of any of the terms of its guaranty to Lender in
connection with this Security Agreement.

        (b) Remedies. If any Event of Default has occurred, Lender may in its
sole discretion exercise one or more of the following remedies with respect to
any or all of the Collateral: (i) declare due any or all of the aggregate sum of
all remaining payments under the Notes, including the amount of any mandatory or
optional payment required or permitted to be paid by Borrower to Lender at the
maturity of the Notes ("Remaining Payments"); (ii) proceed by appropriate court
action or actions either at law or in equity to enforce Borrower's performance
of the applicable covenants of the Notes and this Security Agreement or to
recover all reasonable damages and expenses incurred by Lender by reason of an
Event of Default; (iii) except as provided by law, without court order or prior
demand, enter upon the premises where the Collateral is located and take
immediate possession of and remove it without liability of Lender to Borrower or
any other person or entity; (iv) terminate this Security Agreement and sell the
Collateral at public or private sale, or otherwise dispose of, hold, use or
lease any or all of the Collateral in a commercially reasonable manner; or (v)
exercise any other right or remedy available to it under applicable law. If
Lender has declared due any or all of the Remaining Payments, Borrower will pay
immediately to Lender, without duplication, (A) the Remaining Payments
discounted to


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<PAGE>   9

present value at the Discount Rate, (B) all amounts which may be then due or
accrued, and (C) all other amounts due under this Security Agreement and under
the Notes (Lender's Return, as referred to below, means the amounts described in
clauses (A), (B) and (C) above). The net proceeds of any sale or lease of such
Collateral will be credited against Lender's Return. The net proceeds of a sale
of the Collateral pursuant to this Section 16(b) is defined as the sales price
of the Collateral less selling expenses, including, without limitation, costs of
remarketing the Collateral and all refurbishing costs and commissions paid with
respect to such remarketing. The net proceeds of a lease of the Collateral
pursuant to this Section 16(b) is defined as the amount equal to the monthly
payments due under such lease (discounted to present value at the Discount Rate)
plus the residual value of the Collateral at the end of the basic term of such
lease, as reasonably determined by Lender, and discounted at the Discount Rate.

        At Lender's request, Borrower shall assemble the Collateral and make it
available to Lender at such time and location as Lender may reasonably
designate. Borrower waives any right it may have to redeem the Collateral.

        Declaration that any or all amounts under this Security Agreement and/or
the Notes are immediately due and payable and Lender's taking possession of any
or all Equipment shall not terminate this Security Agreement or any of the Notes
unless Lender so notifies Borrower in writing. None of the above remedies is
intended to be exclusive but each is cumulative and may be enforced separately
or concurrently.

        (c) Application of Proceeds. The proceeds of any sale of all or any part
of the Collateral and the proceeds of any remedy afforded to Lender by this
Security Agreement shall be paid to and applied as follows:

        First, to the payment of reasonable costs and expenses of suit or
foreclosure, if any, and of the sale, if any, including, without limitation,
refurbishing costs, costs of remarketing and commissions related to remarketing,
all Remedy Expenses, all expenses, liabilities and advances incurred or made
pursuant to this Security Agreement or any Note by Lender in connection with
foreclosure, suit, sale or enforcement of this Security Agreement or the Notes,
and taxes, assessments or liens superior to Lender's security interest granted
by this Security Agreement;

        Second, to the payment of all other amounts not described in item Third
below due under this Security Agreement and all Notes;

        Third, to pay Lender an amount equal to Lender's Return, to the extent
not previously paid by Borrower; and

        Fourth, to the payment of any surplus to Borrower or to whomever may
lawfully be entitled to receive it.

        (d) Effect of Delay: Waiver: Foreclosure on Collateral. No delay or
omission of Lender, in exercising any right or power arising from any Event of
Default shall prevent Lender from exercising that right or power if the Event of
Default continues. No waiver of an Event of Default, whether full or partial, by
Lender or such holder shall be taken to extend to any


                                      -9-

<PAGE>   10

subsequent Event of Default, or to impair the rights of Lender in respect of any
damages suffered as a result of the Event of Default. The giving, taking or
enforcement of any other or additional security, collateral or guaranty for the
payment or discharge of the Indebtedness and performance of the Obligations
shall in no way operate to prejudice, waive or affect the security interest
created by this Security Agreement or any rights, powers or remedies exercised
hereunder or thereunder. Lender shall not be required first to foreclose on the
Collateral prior to bringing an action against Borrower for sums owed to Lender
under this Security Agreement or under any Note.

        SECTION 17. LATE PAYMENTS. Borrower shall pay Lender a late charge of
10% of any payment owed Lender by Bo