Exhibit 1
EXECUTION VERSION
NORTHWEST BIOTHERAPEUTICS
RECAPITALIZATION AGREEMENT
This RECAPITALIZATION AGREEMENT (this "AGREEMENT") is made by and
between NORTHWEST BIOTHERAPEUTICS, INC., and its affiliates, if any
(collectively, the "COMPANY"), a Delaware corporation with offices at 00000 00xx
Xxx XX, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx, 00000, and TOUCAN CAPITAL FUND II, L.P.,
and its designees (collectively, the "INVESTOR"), a Delaware limited partnership
with offices at 0000 Xxxxxxxxx Xxxxxx, Xxxxxxxx, XX 00000, effective as of April
26, 2004 (the "EFFECTIVE DATE").
WHEREAS, the Company is in the business of developing cancer
therapeutics, the Company's products are still in clinical and pre-clinical
development, the Company does not yet have any revenue-generating products, and
the Company needs substantial amounts of additional funding to [ * * * ];
WHEREAS, the Company has sought to raise equity financing for nearly
two years, with assistance from two investment banks, but to date has not
succeeded in obtaining any binding commitment for, or closing on, any such
funding;
WHEREAS, the Company has taken all reasonable steps to reduce its
expenditures during this period, including terminating clinical trials, reducing
staff, ceasing GMP manufacturing, exiting from its GMP facility, moving the
Company to smaller and less expensive offices and lab space, and other such
steps;
[ * * *]
WHEREAS, the Company has also taken all reasonable actions during this
period to try to raise funds through any means other than equity financing,
including selling off certain future royalty rights, selling certain
non-essential equipment, obtaining bridge funding from management, and other
such steps;
WHEREAS, the Company also needs substantial funds in order to fulfill
regulatory requirements for FDA approval to re-start its prostate cancer
clinical trial, to persuade trial sites and other necessary parties to
participate in a re-start of the prostate trial, and to resume any clinical
and/or pre-clinical development of other products beyond the prostate cancer
vaccine;
WHEREAS, in January 2004, the Company was within one week of having to
cease operations and commence liquidation, the Company had no investors ready to
close on any funding, and no investors who had made material progress into due
diligence. Although the Company was still vigorously pursuing all other funding
possibilities, there were no alternative sources of funding available to the
Company, either, at that time or soon enough for the Company to avoid ceasing
operations and commencing liquidation;
* Confidential Treatment Requested
EXECUTION VERSION
WHEREAS, Investor was interested in commencing due diligence on the
Company, to determine whether an investment in the Company would be viable.
However, as of that time, the necessary due diligence materials had not been
pulled together into organized, comprehensive binders or investor packages that
could be readily reviewed by prospective investors. It was necessary for
Investor to work jointly with the Company to assemble these necessary materials,
and develop the necessary analyses, to enable a due diligence assessment to be
made;
WHEREAS, since the Company did not have any operating funds to enable
it to continue operating during a due diligence process, such a process was only
feasible if Investor provided operating funds for the Company for this period;
WHEREAS, Investor provided such operating funds to the Company in two
bridge notes of $50,000 each, covering the period from late January through the
date of this Agreement. Such bridge (debt) financing was extremely high risk;
WHEREAS, the Company's situation and prospects were highly complex, and
a large volume of information was required to be gathered and analyzed to make a
due diligence assessment. For Investor, it took a team of two partners, four
associates, and numerous outside advisors (e.g., legal, regulatory, IP) a period
of two months to pull together and evaluate most of the necessary information;
[ * * * ]
WHEREAS, a further (third) bridge period is necessary in order to try
to accomplish as many as possible of the key steps that must occur before a
recapitalization and restart may be viable, and this bridge period may take up
to ninety (90) days and the Company believes that an additional bridge and
recapitalization will create more value for its stockholders and creditors than
could be achieved through a liquidation of the Company at this time;
WHEREAS, at this time there can be no assurance as to whether the key
steps required to make recapitalization and restart of the Company viable can be
achieved, nor what amount of time and expense will be required to achieve them
if they are achievable, nor whether prospective co-investors will then be
willing to close on sufficient funding to enable the Company to continue in
business;
WHEREAS, the Company does not have adequate funds for operations, nor
for additional expenses related to corporate governance, regulatory filings, or
preparations for recapitalization and restart of the Company, during this
further bridge period, and the Company has requested that Investor provide such
bridge funding;
WHEREAS, the amount of funds the Company will need in order to continue
operations during the additional bridge period of up to ninety (90) days will be
much larger than the Company has needed for the two bridge periods to date, and
will be as much as $500,000 for the first thirty (30) days alone;
* Confidential Treatment Requested
2.
EXECUTION VERSION
WHEREAS, Investor has already undertaken extensive risk and work during
the first two bridge periods, Investor will undertake substantially greater risk
with substantially more capital and perform further work during the further
(third) bridge period contemplated under this Agreement, and Investor is willing
to provide the necessary funds for operations and certain other expenses of the
Company during a further bridge period, but only as part of a comprehensive
recapitalization agreement, with binding agreement between the parties, prior to
such further bridge funding, as to all material terms of the comprehensive
recapitalization, as set forth herein, all parts of which constitute essential
terms and conditions; and
WHEREAS, Investor, the Company and its Board of Directors have
undertaken extensive discussions and negotiations over a number of weeks about
the terms, conditions and structure of an overall recapitalization of the
Company, and have explored numerous approaches to fit the circumstances and meet
the needs of both the Company and Investor.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
SECTION 1: RECAPITALIZATION PLAN
1.1 Recapitalization Plan: The Company is being recapitalized in two
stages (the "RECAPITALIZATION PLAN"), consisting of (i) a bridge period (the
"BRIDGE PERIOD") which began on February 1, 2004 and shall end ninety (90) days
after the Effective Date of this Agreement, unless earlier terminated or further
extended as provided in Section 2.6 of this Agreement, and (ii) an anticipated
equity financing of the Company, through the issuance of Convertible Preferred
Stock (as defined in the Convertible Preferred Stock Term Sheet attached hereto
as Exhibit B) in accordance with this Agreement (the "ANTICIPATED EQUITY
FINANCING"). Investor shall serve as the lead in the Bridge Funding and Bridge
Period Activities, as defined herein. At Investor's election, in its sole
discretion, on or before the end of the Bridge Period, Investor shall also serve
as the lead investor in the Anticipated Equity Financing as provided herein.
1.2 Recapitalization Documents and Agreements: The terms and conditions
of the Recapitalization Plan are set forth in this Agreement, and shall be
further set forth in the following other documents and agreements (the "RELATED
RECAPITALIZATION DOCUMENTS"): (a) each Loan Agreement, Security Agreement and
Note (each "NOTE") in the form attached hereto as Exhibit A and executed
pursuant to this Agreement during the Bridge Period, (b) the binding Convertible
Preferred Stock Term Sheet, attached hereto as Exhibit B, (c) a Bridge Warrant
in the form attached hereto as Exhibit C, (d) a Preferred Stock Warrant in the
form attached hereto as Exhibit D, (e) a Convertible Stock Purchase Agreement,
Investor Rights Agreement, Certificate of Designation (or Amended and Restated
Certificate of Incorporation, as appropriate), and Voting Agreement, all of
which shall be drafted, executed and filed, as necessary, in accordance with
this Agreement and the binding Convertible Stock Term Sheet attached hereto as
Exhibit B, as promptly as practicable after execution of this Agreement, and (f)
such other documents and agreements as may be necessary or desirable, in
Investor's sole discretion, to effectuate the transactions contemplated in this
Agreement and designated by Investor as a "Related Recapitalization Document."
All such Related Recapitalization Documents are and shall be incorporated into
this Agreement by reference.
3.
EXECUTION VERSION
1.3 Integrated Plan; All Terms and Conditions Essential: The
Recapitalization Plan comprises a single integrated plan. All terms and
conditions set forth in this Agreement and the Related Recapitalization
Documents are an essential part of the transaction. The Company acknowledges and
agrees that Investor is only willing to undertake the Recapitalization Plan and
this Agreement, and the consideration to Investor for undertaking the
Recapitalization Plan and this Agreement is only adequate, if the entire
Recapitalization Plan and this Agreement are implemented on an integrated basis,
including all terms and conditions thereof. The Company also acknowledges and
agrees that, in view of the resources needed to restart its business and to
maintain and build that business on a sustainable basis, it is in the best
interests of the Company for the entire Recapitalization Plan to be implemented
on an integrated basis. Notwithstanding anything in this Section 1.3 or anything
in the remainder of this Agreement or any Related Recapitalization Document to
the contrary, any Note, Warrant, or other equity or debt security issued
hereunder or under the terms of any Related Recapitalization Document shall
continue to be outstanding regardless of whether the Recapitalization Plan is
ever fully implemented and the failure of the Company to fully implement the
Recapitalization Plan shall not in any way limit any rights of the Investor
under the terms of this Agreement, any Related Capitalization Document or any
such security.
1.4 Notwithstanding anything in Section 1.3 or the remainder of this
Agreement or any Related Recapitalization Document to the contrary, and for the
purposes of clarity, other than the Initial Bridge Funding (as defined below),
Investor shall not be obligated to provide any financing to the Company on the
terms described herein or therein, or on any other terms, and each decision, if
any, by Investor to provide any such additional financing shall be at Investor's
sole discretion and shall not be deemed to create any obligation on the part of
Investor to provide any future financing to the Company.
SECTION 2: BRIDGE PERIOD AND FUNDING
2.1 Activities During Bridge Period: During the Bridge Period, the
parties shall cooperate and use best efforts to complete certain material
actions (collectively, the "BRIDGE PERIOD ACTIVITIES") necessary or desirable
for the recapitalization of the Company, restart of the Company's development
programs, and the Anticipated Equity Financing. Investor shall, at its election,
lead these Bridge Period Activities, after consultation with the Company. Such
Bridge Period Activities shall include, without limitation:
(a) Negotiation and execution of contract manufacturing
arrangements for GMP sourcing and handling of dendritic cells.
(b) Analysis of the intellectual property of the Company [ * * *].
(c) [ * * *]
(d) [ * * *]
(e) Identification and pursuit of additional antigens to establish
a product pipeline for the Company, through negotiation and execution of binding
letter(s) of intent or agreement(s) for one or more licensing and/or M&A
transactions.
* Confidential Treatment Requested
4.
EXECUTION VERSION
(f) Clarification and analysis of licensing terms and costs for
license of IL-4, in case it is not feasible or not desirable (e.g., because
regulatory requirements are too lengthy and/or costly) to change the dendritic
cell production method to use the Tangential Flow Filtration ("TFF") devices in
the prostate cancer clinical trial re-start.
(g) Preparation of an updated business plan, budgets, regulatory
plan (including plans for pre-IND animal and in vitro studies for FDA
re-approval of the prostate cancer clinical trial), Xxxxx charts, manufacturing
plans, intellectual property analyses, and the like.
(h) Preparation of an investor package and due diligence binders,
to facilitate review and due diligence by prospective equity investors.
(i) Evaluation of potential structures for the Anticipated Equity
Financing and preparations for implementation of the transaction selected,
including, without limitation, Investor consent and regulatory filings.
(j) Analysis and determination, satisfactory to Investor, of what
reverse stock split should be undertaken by the Company (including terms,
conditions and timing), and preparations for implementation of the transaction
decided upon, including, without limitation, Investor consent and regulatory
filings.
(k) Assembly of financing syndicate for the Anticipated Equity
Financing, and determination of the amounts and timing of such financing.
2.2 Form, Seniority and Security of Bridge Funding:
(a) Funding provided by Investor for the Bridge Period shall be
provided in the form of senior secured convertible debt (the "BRIDGE FUNDING")
in one or more tranches, in Investor's sole discretion. All such Bridge Funding
shall be evidenced by execution of one or more Notes in the form attached hereto
as Exhibit A.
(b) As more fully provided in the form of Note to evidence such
Bridge Funding, and except as otherwise expressly provided in the Note or
herein, the Bridge Funding: (i) shall be senior in all respects to all other
indebtedness or obligations of the Company of any kind, direct or indirect,
contingent or otherwise, other than obligations of the Company owed directly to
the state or federal government, obligations to those creditors listed on
Schedule 2.2 hereto (and only to the amounts set forth on such schedule), and
other than any other obligations of the Company to Investor; and (ii) shall not
be made subordinate or subject in right of payment to the prior payment of any
other indebtedness or obligation of any kind, direct or indirect, contingent or
otherwise, other than obligations of the Company owed directly to the state or
federal government, obligations to those creditors listed on Schedule 2.2 hereto
(and only to the amounts set forth on such schedule), and other than any other
obligations of the Company to Investor.
(c) As more fully provided in the form of Note to evidence the
Bridge Funding and except as otherwise expressly set forth in the Note or
herein, the Company's
5.
EXECUTION VERSION
obligations under each such Note shall be secured by a first priority senior
security interest in all of the Company's right, title and interest in, to and
under all of the Company's tangible and intangible property, whether now owned,
licensed or held or hereafter acquired, licensed, developed, held or arising,
(the "Collateral"). The rights and remedies of Investor with respect to the
senior security interest are in addition to all other rights, powers and
remedies that may be available to as a matter of law or equity, and shall be
cumulative and concurrent. The exercise by Investor of any one or more of the
rights, powers and/or remedies provided for in the Note, or now or hereafter
existing at law or in equity, shall not preclude the simultaneous or later
exercise by any person, including a grantee, of any or all rights, powers and/or
remedies.
(d) Notwithstanding anything to the contrary in this Agreement or
any other agreement or document, in the event that the Company is unable to pay
and discharge any Note in full on the applicable Maturity Date, subject to
compliance with any applicable requirements of the Delaware Uniform Commercial
Code, nothing herein or in any Related Recapitalization Document shall be deemed
to preclude, limit or restrict Investor from requiring the delivery of some or
all of the Collateral in full or partial satisfaction of the Company's
obligations under the Notes. Alternatively, Investor may, in its sole
discretion, elect to cause some or all of the Collateral to be sold, and the
sale proceeds to be used to pay and discharge the Note in full.
2.3 Amount and Timing of Bridge Funding:
(a) The initial amounts of Bridge Funding provided by Investor
include $100,000 already provided by Investor, for which the applicable notes
are to be cancelled and re-issued in the same form as attached hereto as Exhibit
A, and $500,000 to be provided by Investor upon execution of this Agreement (the
$600,000, in aggregate, the "INITIAL BRIDGE FUNDING"). The Initial Bridge
Funding has covered and will cover general operating expenses and certain other
expenses of the Company agreed in advance by Investor from the commencement of
the Bridge Period through the thirty (30) days after execution of this
Agreement, as more fully provided herein and in the Note evidencing the $500,000
of Bridge Funding. Concurrent with the reissuance of a new Note evidencing the
$100,000 already provided by Investor to the Company prior to the Effective
Date, Investor will cancel and return to the Company the two currently
outstanding promissory notes in aggregate principal amount of $100,000.
(b) Investor may, in its sole discretion, provide up to an
additional $500,000 of Bridge Funding (the "ADDITIONAL BRIDGE FUNDING"), in one
or more tranches, to cover general operating expenses and certain other expenses
of the Company agreed in advance by Investor during the sixty (60) days
following the period covered by the Initial Bridge Funding. (The Additional
Bridge Funding shall thus cover the period running from thirty days to ninety
days after execution of this Agreement.) The Additional Bridge Funding, if any,
shall be provided on the same terms and conditions as set forth herein.
(c) The amounts and timing of any further Bridge Funding after the
Additional Bridge Funding, if any, shall be determined by mutual agreement
between the Company and Investor. Investor's agreement to any such further
Bridge Funding shall be in its sole discretion.
2.4 Conditions to Bridge Funding and Recapitalization Plan:
Notwithstanding anything to the contrary, and, in each case, unless expressly
waived in writing in advance by
6.
EXECUTION VERSION
Investor (any such waiver by Investor shall be applicable only as to such
closing and shall not be deemed a waiver of such condition as to future
closings, if any), and only to the extent expressly waived, at the first closing
of Bridge Funding following execution of this Agreement and, independently, at
any subsequent closing of Bridge Funding, Investor's provision of Bridge Funding
and/or any other element of the Recapitalization Plan shall be conditional upon
and subject to the satisfaction or waiver of each of the following conditions
precedent, with each such satisfaction or waiver to be determined by Investor in
its sole discretion (including, without limitation, the acceptability to
Investor of any exception set forth in a disclosure schedule), on or before the
applicable closing date. Investor shall make all such determinations in its sole
discretion. The conditions precedent to all closings of Bridge Funding and/or
any other element of the Recapitalization Plan shall include the following,
unless waived by Investor in its sole discretion:
(a) the Company to execute this Agreement and all Related
Recapitalization Documents, and all such documents and agreements to be in form
and in substance satisfactory to Investor;
(b) the Company to be in compliance with all terms and conditions
of this Agreement and all Related Recapitalization Documents that are being or
have been executed as of such closing (whether originally executed in connection
with such closing or a prior closing), including, without limitation, the
confidentiality and exclusivity requirements set forth in Sections 4.1 and 4.12
hereof;
(c) the Company to re-issue the two prior bridge notes evidencing
the $100,000 provided by Investor to date, to conform to the form of the Note
attached hereto as Exhibit A;
(d) all conditions set forth in the Notes to continue, including
without limitation, the covenants;
(e) the Company to have permitted, and to continue to permit,
Investor to serve as the lead in regard to the Bridge Funding and Bridge Period
Activities, and in regard to the Anticipated Equity Financing, if Investor
elects to do so;
(f) the Company's board of directors to have resolved that a
reverse split of its outstanding stock is needed, and that the terms, conditions
and timing shall be determined during the Bridge Period as part of the Bridge
Period Activities, and shall be reasonably satisfactory to Investor;
(g) the Company to obtain all necessary creditor and stockholder
consents, and any additional consents requested by Investor, and the Company to
make all necessary regulatory filings related to this Agreement and the Related
Recapitalization Documents and the transactions contemplated thereby, in each
case as rapidly as reasonably possible during the Bridge Period;
(h) all secured creditors of the Company to have executed a
subordination agreement, in the form attached hereto as Exhibit E, except for
the equipment lessors and holders of statutory liens or landlord liens set forth
on Schedule 2.2 hereto;
7.
EXECUTION VERSION
(i) each holder of a secured convertible promissory notes issued on
November 13, 2003 (each a "MANAGEMENT NOTE" and, collectively the "MANAGEMENT
NOTES") shall have executed the notice, consent and waiver in the form attached
hereto as Exhibit F;
(j) each holder of a Management Note shall have executed and
delivered the First Amendment to Convertible Secured Promissory Note in the form
attached hereto as Exhibit G;
(k) each holder of a warrant to purchase common shares issued in
connection with the Management Notes shall have executed the First Amendment to
Warrants to Purchase Common Shares in the form attached hereto as Exhibit H;
(l) all fees, costs and expenses incurred and/or undertaken by
Investor to be satisfied by the Company as provided in Section 4.11 hereof;
(m) progress toward and/or in the Bridge Period Activities to be
satisfactory to Investor;
(n) the Company to have satisfied all applicable general conditions
to closing, as set forth in Section 4.9;
(o) the Company to deliver to Investor at each closing of Bridge
Funding and each closing of any other element of the Recapitalization Plan an
officer's certificate, executed by an authorized and responsible officer of the
Company, and certifying that the foregoing conditions have been fulfilled;
(p) the Company to be in compliance with all conditions, covenants
and other provisions contained in the Notes.
2.5 Covenants Related to Bridge Funding and Equity Financing Period: As
more fully set forth in the form of Note to evidence Bridge Funding, during the
Bridge Period and for so long as any Bridge Funding remains outstanding, the
Company shall comply with certain affirmative and negative covenants including,
without limitation, covenants relating to financial matters, handling of
intellectual property, issuance of any equity or debt securities, handling of
TFF devices, confidentiality and exclusivity, and other material matters.
Without limiting the foregoing, during the Bridge Period and the Equity
Financing Period, the Company shall:
(a) coordinate with Investor on the preparation and filing with the
SEC of any Exchange Act filings and confidential treatment requests covering any
commercially sensitive terms (as determined jointly by the Company and Investor)
of this Agreement and any Related Recapitalization Document required to be filed
with the SEC under applicable SEC regulations, and the Company shall use its
best efforts to obtain confidential treatment of such information from the SEC;
(b) take all steps reasonably necessary to implement the structure
provided in Section 3.3 hereof;
(c) not hire, or agree to hire, any employee or engage, or agree to
engage, any consultant, independent contractor or any other non-employee
personnel, except in accordance
8.
EXECUTION VERSION
with the Company's budget that has been approved by the Company's board of
directors and the Investor;
(d) not enter into, increase, expand, extend, or renew any
severance, retention, separation, change of control or similar agreement with
any employee, consultant, independent contractor or any other non-employee
personnel, or agree, promise or commit to do so, without the prior written
approval of Investor;
(e) not purchase, lease, hire, rent or otherwise acquire directly
or indirectly any rights in or to any asset or facility outside of the ordinary
course of business in an amount in excess of $10,000, in aggregate, or agree,
promise or commit to do so, except in accordance with the Company's budget that
has been approved by the Company's board of directors and the Investor; and
(f) take all steps reasonably necessary to procure the execution
and delivery by Xxx Xxxxx of the First Amendment to Warrants to Purchase Common
Shares during the thirty (30) day Funded Bridge Period of the Initial Bridge
Note.
2.6 Modification of Bridge Period:
(a) Early Termination of Bridge Period: The Bridge Period shall
continue until ninety (90) days after execution of this Agreement. The Bridge
Period may only terminate prior to ninety (90) days after execution of this
Agreement upon the occurrence of one of the following events:
(i) In the event that Investor makes a written election to
cease providing Bridge Funding, the Bridge Period shall end upon the later of
expiration of the portion of the Bridge Period covered by the funding already
provided by Investor, as specified in the Note evidencing such funding (the
"FUNDED BRIDGE PERIOD"), or ten (10) business days after Investor's written
election;
(ii) In the event Investor does not make a written election to
cease providing Bridge Funding, but Investor fails to offer or provide
Additional Bridge Funding, on the terms and conditions set forth in this
Agreement, during the ten (10) business days after completion of the Funded
Bridge Period, and
(A) the Company reasonably needs such Additional Bridge
Funding at that time in order to avoid termination of its operations,
(B) the Company has used and spent the Bridge Funding to
date in accordance with the provisions of this Agreement and the applicable
Note, including, without limitation, the pacing and period of time to be covered
by the Bridge Funding to date, and the authorized uses of funds; and
(C) on or after completion of the Funded Bridge Period,
the Company has made a written request to Investor for such Additional Bridge
Funding. In such case, the Bridge Period shall end on the later of twenty (20)
business days after completion of the Funded Bridge Period, or ten (10) business
days after the Company's written request for Additional Bridge Funding, unless
Investor offers or provides Additional Bridge Funding on or
9.
EXECUTION VERSION
before expiration of that twenty (20) business day period or that later ten (10)
business day period, as applicable.
(b) Extension of Bridge Period: The Bridge Period may be extended
beyond the period of ninety (90) days after execution of this Agreement upon the
occurrence of one of the following events:
(i) mutual agreement of the parties; or
(ii) Investor reasonably determines, in its discretion, that
further time is needed to complete the Bridge Period Activities, and Investor is
willing to provide reasonable additional Bridge Funding for the period of such
extension.
2.7 Conversion of Bridge Funding:
(a) Automatic Conversion: The Bridge Funding shall automatically
convert into Convertible Preferred Stock, upon the terms and conditions set
forth herein and in the Note, only in the event, and upon the closing of, the
purchase in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments), on the
terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by
Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a
minimum of $15 million of Convertible Preferred Stock.
(b) Discretionary Conversion: Until, and/or in the absence of, the
closing of purchases for cash of a minimum of $15 million of Convertible
Preferred Stock, by Other Investors, on the terms and conditions set forth
herein, the determination as to whether to convert any or all of the Bridge
Funding into equity shall be made by Investor in its sole discretion. Investor
may make such determinations from time to time and at any time before any Note
evidencing such Bridge Funding has been discharged in full, and, as applicable,
at any time on or before the expiration of the thirty (30) day notice period
required under each Note in the event the Company wishes to prepay such Note.
Investor may, in its sole discretion, elect to convert any or all of the
principal and/or interest due under the Note into any Equity Security and/or
Debt Security (each as defined below) and/or any combination thereof, in each
case that Investor shall designate in Investor's sole discretion (the securities
so elected being the "INVESTOR DESIGNATED SECURITIES"). For purposes hereof, (i)
the term "EQUITY SECURITY" means any class or series of equity security, or any
combination of classes and/or series of equity securities, of the Company that
have been authorized under the Company's certificate of incorporation, as
amended and/or restated, including by any certificate of designation (the
"CHARTER"), or any new class or series of equity security, or any combination of
new and/or existing classes and/or series of equity securities, of the Company
for which the Company has undertaken any agreement, obligation, promise,
commitment or letter of intent to obtain such authorization and (ii) the term
"DEBT SECURITY" means any evidence of indebtedness of the Company that the
Company has authorized, created or incurred, or that the Company has undertaken
any agreement, obligation, promise, commitment or letter of intent to authorize,
create or incur.
(c) Information for Investor's Election. The Company shall provide
to Investor, within two (2) business days after notice of each request by
Investor, all information reasonably requested by Investor in connection with
any Equity Securities and/or Debt Securities, to enable Investor to make
decisions regarding one or more conversions. In the event
10.
EXECUTION VERSION
that the Company seeks to prepay a Note evidencing Bridge Funding, the Company
shall deliver to Investor, simultaneously and together with the notice required
under such Note of the Company's interest in prepaying the Note, a summary of
all material information, terms and conditions relating to all Equity Securities
and Debt Securities (including any "side" letters or agreements or separate
agreements).
(d) Conversion. The conversion price for any conversion pursuant to
Section 2.7(a) shall be the lowest nominal or effective price per share paid by
the Other Investors who purchase such Convertible Preferred Stock (with the
exception of shares issuable upon exercise of the Bridge Warrants). The
conversion price for any conversion into any Equity or Debt Security pursuant to
Section 2.7(b) shall be the lowest of (i) the lowest nominal or effective price
per share paid by any investor at any time on or after the date one year prior
to the execution of this Agreement (with the exception of (x) purchases of up to
35,000 shares of the Company's Common Stock, $0.001 par value ("COMMON STOCK")
pursuant to certain options to purchase, at a purchase price of $0.0001, that
were outstanding on the Effective Date of this Agreement and held by members of
the Board of Directors, as set forth in Schedule 2.7(d), and (y) shares issuable
upon the exercise of the Bridge Warrants, each of which shall be excluded from
consideration under this section), (ii) the lowest nominal or effective price at
which any investor is entitled to acquire shares (including, without limitation,
through purchase, exchange, conversion or exercise) pursuant to any other
security, instrument, or promise, undertaking, commitment, agreement or letter
of intent of the Company outstanding on or after the Effective Date of this
Agreement or granted, issued, extended or otherwise made available by the
Company at any time on or after the date one year prior to the Effective Date of
this Agreement (regardless of whether currently exercisable or convertible)
(with the exception of (x) certain options to purchase up to 35,000 shares of
Common Stock at a purchase price of $0.0001 that were outstanding on the
Effective Date of this Agreement and held by members of the Board of Directors
as set forth in Schedule 2.7(d), and (y) the Bridge Warrants, each of which
shall be excluded from consideration under this section); and (iii) the lesser
of $0.10 per share or 35% discount to the average closing price per share of the
Common Stock during any twenty consecutive trading days (beginning with the
twenty consecutive trading days prior to the date of execution of this
Agreement); provided, however, that in no event shall the price per share
calculated pursuant to this clause (iii) be less than $.04 per share. The
calculation required by clause (ii) hereof shall initially be based upon
Schedule 2.7(d) hereto. All other rights, preferences, privileges, terms and
conditions received by Investor in connection with any conversion and/or any
securities issued by the Company to Investor upon conversion, shall be no less
favorable to Investor than the rights, preferences, privileges, terms and
conditions any other investor in the Company has received or is entitled to
receive with respect to the security into which Investor is converting pursuant
to any other security, instrument, promise, undertaking, commitment, agreement
or letter of intent of the Company, whether or not such rights, preferences,
privileges, terms and conditions for any other investor are incorporated into
the agreements or documents relating to any conversion or any issuance of the
security or other instrument to that investor or are provided separately, at any
time on or after one year prior to the execution of this Agreement. In regard to
each conversion hereunder, the Company hereby agrees to take and/or arrange for
all necessary corporate and related action to enable the execution of each such
conversion elected by Investor. Except as set forth on Schedule 2.7(d) hereto,
no subscription, warrant, option, convertible security, or other right (direct
or indirect, contingent or otherwise) to purchase or otherwise acquire any
equity securities of the Company
11.
EXECUTION VERSION
are outstanding or authorized. At each closing of the Bridge Funding and the
Anticipated Equity Financing, if any, the Company shall provide Investor with an
updated Schedule 2.7(d).
(e) No Impairment. The Company shall not, by amendment of its
Charter or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission, or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with any Note evidencing Bridge Funding, but shall at all times in
good faith use best efforts to assist in carrying out of all the provisions of
and/or relating to such Note and in taking all such action as may be necessary
or appropriate to protect Investor's rights, preferences and privileges under
and/or in connection with the Note against impairment. The Investor's rights,
preferences and privileges granted under and/or in connection with any Note
and/or Investor Designated Securities may not be amended, modified or waived
without the Investor's prior written consent, and the documentation providing
for such rights, preferences and privileges will specifically provide as such.
2.8 Bridge Warrants:
(a) Issuance of Bridge Warrants. At each closing of Bridge Funding
following execution of this Agreement, Investor shall receive warrants with
coverage equal to three hundred percent (300%) of the principal amount due under
each Note evidencing Bridge Funding, including, without limitation, the Initial
Bridge Funding and the Additional Bridge Funding (collectively, the "BRIDGE
WARRANTS"). The Company shall, therefore, issue $1,800,000 in warrant coverage
on the $600,000 of Initial Bridge Funding, and, if Investor elects, in its sole
discretion, to provide $500,000 of Additional Bridge Funding, the Company shall
issue $1,500,000 in warrant coverage on that $500,000 in Additional Bridge
Funding. The number of shares subject to such Bridge Warrants to be so issued
shall be determined on the same basis for all Bridge Funding, and shall be on
the basis of $0.05 per share (subject to adjustment for stock splits, stock
dividends and the like). The number of shares for which Investor shall be able
to exercise the Bridge Warrants Investor receives for the Initial Bridge Funding
shall therefore be 36,000,000 shares, and the number of shares for which
Investor shall be able to exercise the Bridge Warrants Investor receives for the
Additional Bridge Funding shall therefore be 30,000,000, if the amount of
Additional Bridge Funding is $500,000.
(b) Exercise of Bridge Warrants: The Bridge Warrants shall (a)
become exercisable upon the earliest of such times as (i) the Company has raised
at least $2 million through the issuance of any class or series of Equity
Security, Debt Security and/or combinations thereof (including, without
limitation, any conversion of any Notes and/or other convertible or exercisable
securities and/or instruments other than the Bridge Warrants), (ii) the Company
breaches any provision of this Agreement or any Related Recapitalization
Document; (iii) the Company decides to accept an Unsolicited Proposal; or (iv)
sixty one (61) days after notice from Investor; and (b) continue to be
exercisable for a period of seven (7) years after their respective issuance
dates. The exercise price of the Bridge Warrants shall be $0.01 per share
(subject to adjustment for stock dividends, stock splits, certain dilutive
issuances and similar transactions, as provided more fully in the Bridge
Warrants). In the event the Convertible Preferred Stock is approved and
authorized and as provided herein, and Other Investors have closed on the
purchase in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments) of a
minimum of $15 million of such
12.
EXECUTION VERSION
Convertible Preferred Stock, on the terms and conditions set forth herein, then
the Bridge Warrants shall be exercisable for such Convertible Preferred Stock.
However, if, for any reason, such Convertible Preferred Stock is not approved or
authorized, and/or if Other Investors have not closed on the purchase in cash
(and not by conversion of debt, exercise of warrants or options, or conversion
or exercise of other securities or instruments) of a minimum of $15 million of
such Convertible Preferred Stock, on the terms and conditions set forth herein,
the Bridge Warrants shall be exercisable for any Equity Security and/or Debt
Security (each as defined in Section 2.7 hereof) and/or any combination thereof,
in each case that Investor shall designate in Investor's sole discretion (the
securities so elected being the "INVESTOR DESIGNATED SECURITIES").
(c) No Impairment. The Company shall not, by amendment of its
Charter or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission, or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with any Bridge Warrants, but shall at all times in good faith use
best efforts to assist in carrying out of all the provisions of and/or relating
to such Bridge Warrants and in taking all such action as may be necessary or
appropriate to protect Investor's rights, preferences and privileges under
and/or in connection with the Bridge Warrants against impairment. The Investor's
rights, preferences and privileges granted under and/or in connection with any
Bridge Warrants may not be amended, modified or waived without the Investor's
prior written consent, and the documentation providing for such rights,
preferences and privileges will specifically provide as such.
(d) Tax Treatment of Bridge Warrants and Notes. The Company and
Investor, as a result of arm's length bargaining, agree that the aggregate fair
market value of the Notes, if issued apart from the Bridge Warrants, is $570,000
and $475,000 for the Notes issued in the Initial Bridge Funding and the
Additional Bridge Funding, respectively, and the aggregate fair market value of
the Bridge Warrants, if issued apart from the Notes, is $30,000 and $25,000 for
the Bridge Warrants issued in the Initial Bridge Funding and the Additional
Bridge Funding, respectively. The Company and Investor further agree that all
tax filings and records relating to or including this Agreement, the Notes
and/or the Bridge Warrants shall be prepared on the basis of, and consistently
reflect, the agreed fair market values set forth in this Section 2.8(d), and the
Company shall instruct its accountants and other tax-preparation professionals
to prepare all tax filings and returns on the basis of the foregoing.
SECTION 3: ANTICIPATED EQUITY FINANCING
3.1 Essential Part of Recapitalization Plan: As provided in Section
1.1, hereof, the Company is being recapitalized in two stages under the
Recapitalization Plan: first, through Bridge Funding, and thereafter through an
Anticipated Equity Financing. The Recapitalization Plan comprises a single
integrated plan, and all terms and conditions set forth in this Agreement and
the Related Recapitalization Documents - including, without limitation, the
Anticipated Equity Financing - are an essential part of the transaction. This
integrated structure, with binding agreement between the parties in regard to
the Anticipated Equity Financing as well as the Bridge Funding, is necessary to
provide adequate consideration to Investor, and is also both necessary and
desirable for the Company, in order to provide the resources needed to restart
the Company's business, and enable the Company to maintain and build that
business on a
13.
EXECUTION VERSION
sustainable basis. The Company shall fully disclose and present the
Recapitalization Plan as a single integrated plan in all regulatory filings and
all documents relating to shareholder notice and consent in connection with the
Recapitalization Plan.
3.2 Fiduciary Exception: Notwithstanding the binding agreement set
forth herein in regard to the Anticipated Equity Financing, that agreement, and
the Company's obligations thereunder, shall be subject to a limited fiduciary
exception, pursuant to which the Company may respond to or accept a proposal for
equity financing or merger, consolidation, business combination or sale of all
or substantially all of the Company's assets from another party or parties (each
of the foregoing constituting an "ALTERNATIVE EQUITY FINANCING PROPOSAL"), but
(a) only as and to the extent required by applicable law; (b) only in regard to
an Alternative Equity Financing Proposal that has not been directly or
indirectly solicited by the Company or any of its officers, directors or
employees, Soma Partners LLC ("SOMA"), or any advisors, agents or consultants of
the Company during the Standstill Period provided in Section 4.1 hereof or
during the standstill period provisions described in Section 13 of each of the
10% Convertible, Secured Promissory Notes issued by the Company to the Investor,
dated as of February 2, 2004 and March 1, 2004, respectively (an "UNSOLICITED
PROPOSAL"), and (c) only if the Board of Directors of the Company provides
written certification to Investor that the Alternative Equity Financing Proposal
is an Unsolicited Proposal. The Company shall notify Investor of its receipt of
any Unsolicited Proposal immediately upon receipt thereof, and shall provide to
Investor a copy of such Unsolicited Proposal or a description of all material
terms thereof, including the party or parties involved. If the Company's board
of directors determines that acceptance of any Unsolicited Proposal is required
in order to fulfill its fiduciary obligations, prior to accepting such
Unsolicited Proposal, the Company shall notify Investor of its intent to accept
such Unsolicited Proposal. Investor shall have twenty-one (21) days from the
date it receives such notice from the Company to present a revised proposal of
its own to the Company (although Investor shall under no circumstances be
obligated to do so), which the Company's board of directors shall fully consider
in good faith. In the event that, following the consideration of any revised
proposal from Investor or, in the absence of any such revised proposal,
following the expiration of twenty-one (21) days, the Company's board of
directors determines that acceptance of the Unsolicited Proposal is required in
order to fulfill its fiduciary obligations pursuant to this Section 3.2 and the
Company has complied with all aspects of this Section 3.2, then the Company
shall be under no obligation to proceed with the Anticipated Equity Financing;
provided, however, that all other terms and conditions of this Agreement and the
Related Recapitalization Documents, including, without limitation, the terms and
conditions of any Notes and Warrants issued pursuant to this Agreement, shall
remain in full force and effect (with the exception of Sections 2.1, 2.5(b),
2.5(c), 4.6(b), 4.6(d), 4.6(e) and 4.6(h) of this Agreement which shall
terminate and be of no further effect). Upon the later of (i) the termination,
if applicable, of the Company's obligation to proceed with the Anticipated
Equity Financing as described in this Section 3.2, and (ii) the date that no
Notes are outstanding, the covenants contained in Section 4.6(f) of this
Agreement shall terminate and be of no further effect.
3.3 Structure: It is the preference of the Company to raise the
Anticipated Equity Financing in the form of a private investment in public
entity ("PIPE") transaction, with the Company remaining a publicly traded
entity. However, the Company acknowledges and agrees that there can be no
assurance that it will be reasonably feasible to do so. The Company, with
assistance from two investment banks, has tried for two years without success to
raise financing through a secondary equity offering or PIPE while remaining a
publicly traded entity. In order to
14.
EXECUTION VERSION
raise the necessary follow-on financing to the Bridge Funding, it may be
necessary for the Company to do so in connection with, or following, the
deregistration of the Common Stock under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"). In order to accommodate the Company's preference
for a PIPE transaction, while also providing for the possibility of effecting
the follow-on financing in connection with or following deregistration of the
Common Stock under the Exchange Act if the latter transaction is either
necessary or desirable, the parties agree to the plan set forth below. The
parties further agree that the securities to be sold for the Anticipated Equity
Financing will be the same Convertible Preferred Stock, on the same terms and
conditions as set forth herein, regardless of whether the structure of the
Anticipated Equity Financing is (i) a PIPE transaction, (ii) in connection with,
or following, the deregistration of the Common Stock under the Exchange Act, or
(iii) a combination thereof.
(a) Initial PIPE: The Company will first seek to sell at least $8
million of the Convertible Preferred Stock through a PIPE transaction. In the
event such sale is achieved, it will be sufficient to transfer control of the
Company to the purchasers thereof. At such time as the Company has raised at
least $2 million through the issuance of any class or series of Equity Security,
Debt Security and/or combinations thereof (including, without limitation, any
conversion of any Notes and/or other convertible or exercisable securities
and/or instruments other than the Bridge Warrants), a new Board of Directors
will be constituted. In the event such sale through a PIPE transaction is not
achieved, and if it reasonably appears that such sale can be achieved in
connection with or following the deregistration of the Company's Common Stock
under the Exchange Act, the Company will then review the Anticipated Equity
Financing with a view to proceeding with such financing in connection with or
following the deregistration of the Company's Common Stock under the Exchange
Act.
(b) Regulatory Approval and Shareholder Consent: The Company will
fully disclose, in all applicable regulatory filings and all documents relating
to shareholder notice and consent, the full Recapitalization Plan.
3.4 Terms and Conditions: The terms and conditions of the Anticipated
Equity Financing shall be as set forth herein and in the Convertible Preferred
Stock Term Sheet, which is attached hereto as Exhibit B and incorporated herein
by reference. Such terms and conditions include, without limitation, the
following:
(a) Securities To Be Issued: The Anticipated Equity Financing shall
consist of the issuance and sale of up to $40 million of Convertible Preferred
Stock (including any shares issuable upon conversion of Bridge Funding, but not
including any shares issuable upon exercise of warrants, options, and similar
instruments or obligations) (the "MAXIMUM ISSUANCE"), in one or more closings
over a period of 12 months commencing at the first closing of Convertible
Preferred Stock (the "EQUITY FINANCING PERIOD"), so long as the aggregate amount
issued and sold does not exceed the Maximum Issuance. The price per share for
such issuance and sale shall be the lesser of $0.10 per share (as adjusted for
stock splits, stock dividends and the like) or a 35% discount to the average
closing price during the twenty trading days prior to closing; provided,
however, that in no event shall the price per share be less than $0.04 per share
(as adjusted for stock splits, stock dividends and the like).
(b) Preferred Warrants: The Company shall issue $8 million in
warrant coverage on the first $8 million of Convertible Preferred Stock
purchased for cash (the
15.
EXECUTION VERSION
"Preferred Stock Warrants"). Preferred Stock Warrants shall not be issued upon
conversion of notes, exercise of warrants, or other conversion or exercise. The
number of shares issuable upon exercise of warrants to be so issued shall be
determined on the basis of $0.10 per share (subject to adjustment for stock
splits, stock dividends and the like), and the aggregate number of shares for
which the holders of Preferred Stock Warrants shall be able to exercise such
Warrants shall therefore be 80 million shares. The exercise price of such
Preferred Stock Warrants shall be the lesser of $0.10 per share (subject to
adjustment for stock splits, stock dividends and the like) and 35% discount to
the average closing price during the twenty trading days prior to the first
closing of the sale of Convertible Preferred Stock; provided, however that in no
event will the exercise price be less than $.04 per share (subject to adjustment
for stock splits, stock dividends and the like). The exercise period shall
commence upon issuance of the Preferred Stock Warrants, and shall continue for a
period of seven (7) years after their respective issuance dates.
(c) Investor Election to Lead: At Investor's election, in its sole
discretion, on or before the end of the Bridge Period, Investor shall serve as
the lead to identify and organize Other Investors during the Bridge Period and
the Equity Financing Period, and prepare for one or more closings of the
Anticipated Equity Financing during the Equity Financing Period.
(d) Right of First Refusal: Investor shall have a right of first
refusal to purchase up to $15 million of the Convertible Preferred Stock. This
right of first refusal shall apply at each closing during the Equity Financing
Period, until the $15 million amount is reached. Such purchases shall be
determined in addition to, and shall not be deemed to include, any purchases of
Convertible Preferred Stock by Investor (including its designees) through
conversion of Bridge Funding, or exercise of any warrants or similar
instruments. Such right of first refusal shall apply regardless of whether or
not Investor leads the financing during any part of the Equity Financing Period.
3.5 Termination of Obligation to Effect Anticipated Equity Financing:
The Company's obligation to effect the Anticipated Equity Financing in
accordance with this Section 3 and the attached Convertible Preferred Stock Term
Sheet shall terminate in the event that the Company has not raised at least $2
million through the issuance of any class or series of Equity Security, Debt
Security and/or combinations thereof (including, without limitation, any
conversion of any Notes and/or other convertible or exercisable securities
and/or instruments of any kind) within 180 days of the Effective Date of this
Agreement in accordance with the terms of this Agreement and the Related
Recapitalization Documents. In the event that the Company's obligation to effect
the Anticipated Equity Financing is terminated in accordance with this Section
3.5, the Standstill Period described in Section 4.1 below shall immediately end
and the Company shall be free to solicit investments from parties other than the
Investor; provided, however, that all provisions in this Agreement and the
Related Recapitalization Documents, other than those concerning the Standstill
Period and the Anticipated Equity Financing (including, without limitation, all
Notes and Bridge Warrants issued pursuant to this Agreement), shall remain in
full force and effect (with the exception of Sections 2.1, 2.5(b), 2.5(c),
4.6(b), 4.6(d), 4.6(e) and 4.6(h) of this Agreement which shall terminate and be
of no further effect). Upon the later of (i) the termination, if applicable, of
the Company's obligation to proceed with the Anticipated Equity Financing as
described in this Section 3.5, and (ii) the date that no Notes are outstanding,
the covenants contained in Section 4.6(f) of this Agreement shall terminate and
be of no further effect.
16.
EXECUTION VERSION
SECTION 4: GENERAL PROVISIONS
4.1 Standstill and Exclusivity: During the Bridge Period and the Equity
Financing Period, as defined herein and in the Convertible Preferred Stock Term
Sheet, but excluding the periods from February 18, 2004 through February 29,
2004 and March 16, 2004 through the Effective Date of this Agreement
(collectively the "STANDSTILL PERIOD"), the parties shall have worked together,
and shall continue to work together, in good faith with best efforts to
implement the terms of this Agreement. Except as provided in the fiduciary
exception set forth in Section 3.2 hereof, during the Standstill Period the
Company and its officers, directors, employees, agents, advisers, consultants,
partners and collaborators shall work only with Investor and its agents,
advisers and consultants, and shall have had, and shall continue to have, no
discussions, negotiations and/or communications of any kind with any other
parties, regardless of which party initiates or attempts to initiate any such
contact or communication, in regard to any potential equity or debt financing of
the Company, and/or any joint venture, license, co-development or other business
arrangement, or merger, consolidation, business combination or sale of all or
substantially all of the Company's assets, by or with parties other than
Investor.
4.2 Cross-Default: The Company acknowledges that the financing
contemplated by this Agreement is part of an integrated Recapitalization Plan,
as set forth in this Agreement and the Related Recapitalization Documents. The
Company further acknowledges and agrees that this Agreement is subject to all
terms and conditions set forth in the Related Recapitalization Documents, and
that the Related Recapitalization Documents are subject to all of the terms and
conditions of this Agreement. The Company agrees that any default by the Company
under any provision of this Agreement or any of the Related Recapitalization
Documents will constitute a default under each other Related Recapitalization
Document and this Agreement.
4.3 Termination of Soma Partners: Prior to any closing hereunder,
including without limitation the closing of the Initial Bridge Funding
hereunder, the Company shall terminate all existing agreements, understandings,
commitments and obligations with Soma (other than an existing obligation of
$3,000 and obligations under the tail period following termination of the letter
agreement between the Company and Soma dated October 15, 2003). Following such
termination, the Company shall be permitted (but not required) to negotiate and
enter into a new agreement with Soma, provided that the terms and conditions of
any such agreement are in accordance with prevailing market terms, and provided
further that the Company obtains the prior written approval of Investor for any
such new agreement.
4.4 Indemnification: The Company will indemnify, defend and hold
Investor and each person controlling Investor harmless, to the fullest extent
allowed under applicable law, from and against all liabilities, losses, and
damages, together with all reasonable costs and expenses related thereto
(including, without limitation, reasonable legal and accounting fees and
expenses), other than consequential losses or damages, which would not have been
incurred if (a) all of the representations and warranties of the Company herein
had been true, correct and complete as of each closing, and (b) all of the
covenants and agreements of the Company herein had been fully and timely
complied with and performed. The Company will pay as incurred to Investor and to
each person controlling Investor, all legal and other expenses reasonably
incurred in connection with investigating, defending against, and/or settling
any such liability, loss or damage.
17.
EXECUTION VERSION
4.5 Injunctive Relief: The Company agrees that its breach of this
Agreement will cause irreparable harm to the Investor and that monetary damages
would not be a sufficient remedy in the event of a breach of the Agreement by
the Company. The Company agrees that Investor shall be entitled to seek and
obtain injunctive relief and/or specific performance under this Agreement in the
event of any such breach. Such remedies shall not be deemed to be exclusive
remedies for a breach of this Agreement but shall be in addition to all other
remedies available to Investor at law or in equity.
4.6 Additional Covenants:
(a) The Company will make, in a timely manner, all filings required
by applicable regulatory agencies (whether state or federal), exchanges, markets
or other bodies, at the Company's expense, in connection with the transactions
contemplated by this Agreement and the Related Recapitalization Documents.
(b) As soon as practicable after execution of this Agreement, the
Company will use its best efforts to obtain all necessary consents and, if
applicable, shareholder votes from its shareholders to implement the
transactions contemplated by this Agreement and the Related Recapitalization
Documents.
(c) The Company shall not hire, or agree to hire, any employee or
engage, or agree to engage, any consultant, independent contractor or any other
non-employee personnel, except in accordance with the Company's budget that has
been approved by the Company's board of directors and the Investor;
(d) The Company shall not enter into, increase, expand, extend, or
renew any severance, retention, separation, change of control or similar
agreement with any employee, consultant, independent contractor or any other
non-employee personnel, or agree, promise or commit to do so, without the prior
written approval of Investor;
(e) The Company shall not purchase, lease, hire, rent or otherwise
acquire directly or indirectly any rights in or to any asset or facility outside
of the ordinary course of business in an amount in excess of $10,000, in
aggregate, or agree, promise or commit to do so, except in accordance with the
Company's budget that has been approved by the Company's board of directors and
the Investor.
(f) The Company shall comply in all respects with all covenants
listed in Section 10 of the Notes. The covenants listed in Section 10 of the
Notes are hereby incorporated by reference into this Section 4.6 of this
Agreement.
(g) The Company shall comply in all respects with all covenants
listed in Section 3 of the Bridge Warrant. The covenants listed in Section 3 of
the Bridge Warrant are incorporated by reference into this Section 4.6 of this
Agreement.
(h) The Company shall use its best efforts to obtain, within 30
days of the Effective Date of this Agreement, the written agreement, in a form
acceptable to Investor, of each of those stockholders of the Company listed on
Schedule 4.6 hereto (the "KEY STOCKHOLDERS") to vote in favor of the approval of
this Agreement, the Related Recapitalization Documents and all transactions
contemplated hereunder and thereunder, including, without
18.
EXECUTION VERSION
limitation, the approval of an amendment to the Company's Charter in order to
authorize sufficient capital stock to permit the Anticipated Equity Financing.
Such written agreement of the Key Stockholders shall, without limitation,
include a provision whereby each Key Stockholder agrees that it will not take
any action in opposition to the transactions contemplated hereby or attempt to
frustrate the purposes hereof.
4.7 Representations and Warranties: Except as expressly set forth (with
reference to a section in this Agreement) in the Schedule of Exceptions (as
updated as of each closing contemplated by this Agreement and the Related
Recapitalization Documents) attached hereto as Exhibit I (the "SCHEDULE OF
EXCEPTIONS"), and only to the extent such exceptions are acceptable to Investor,
in its sole discretion, as of the Effective Date, and independently as of the
date upon which each Note is issued to Investor, and as of the date of each
closing, if any, of the Anticipated Equity Financing, the Company represents and
warrants to the following:
4.7.1 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. 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, properties,
operations, prospects or condition (financial or otherwise).
4.7.2 Authorization of Agreement, Etc. The execution, delivery and
performance by the Company of this Agreement, including the Related
Recapitalization Documents, has been duly authorized by all requisite corporate
action by the Company in accordance with Delaware law. This Agreement and the
Related Recapitalization Documents that are being or have been executed as of
such closing are valid and binding obligations of the Company, enforceable
against the Company in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, or other laws of
general application effecting enforcements of creditors' rights or general
principles of equity.
4.7.3 No Conflicts. The execution, delivery, performance, issuance,
sale and delivery of this Agreement and the Related Recapitalization Documents,
and compliance with the provisions hereof by the Company, will not (a) to the
knowledge of the Company, violate any provision of any law, statute, rule or
regulation applicable to the Company or any ruling, writ, injunction, order,
judgment or decree of any court, arbitrator, administrative agency or other
governmental body applicable to the Company or any of its properties or assets
or (b) conflict with or result in any material breach of any of the terms,
conditions or provisions of, or constitute (with notice or lapse of time or
both) a material default (or give rise to any right of termination, cancellation
or acceleration) under, or result in the creation of, any encumbrance upon any
of the material assets of the Company under, the Charter or Bylaws of the
Company (as they may be amended to date) or any agreement or instrument to which
the Company is a party. As used herein, "encumbrance" shall mean any liens,
charges, encumbrances, equities, claims, options, proxies, pledges, security
interests, licenses or other similar rights of any nature.
4.7.4 Compliance with Other Instruments. The Company is not in
violation of any term of the Company's Charter, as amended, including any
certificate of designation filed therewith, and/or the Company's Bylaws. The
Company is not, in any material respect, in violation of any term of any
mortgage, indenture, contract, agreement, instrument, judgment,
19.
EXECUTION VERSION
decree, order, statute, rule or regulation to which the Company or any of such
Collateral is subject. To the best of the Company's knowledge, no event has
occurred which, with the passage of time or the giving of notice, or both, would
constitute a breach or violation, in any material respect, under any applicable
judgments, orders, writs, decrees, federal, state and/or local laws, rules or
regulations which would have a material adverse affect on the condition,
financial or otherwise, or operations of the Company (as it is currently
conducted and as it is proposed to be conducted) or on any material assets or
any Intellectual Property owned, controlled, licensed, possessed, and/or used by
the Company. To the best of its knowledge, the Company has avoided every
condition, and has not performed any act, the occurrence of which would result
in the Company's loss of any right granted under any license, distribution
agreement or other agreement or Intellectual Property.
4.7.5 Approvals. The Company has obtained all necessary permits,
authorizations, waivers, consents and approvals of or by, and made all necessary
notifications of and/or filings with, all applicable persons (governmental and
private), in connection with the execution, delivery, performance, issuance,
sale and/or delivery of this Agreement and the Related Recapitalization
Documents, and consummation by the Company of the transactions contemplated
hereby and thereby, except as listed in Schedule 4.7.5.
4.7.6 Capitalization. The authorized capital stock of the Company
consists of 125,000,000 shares of Common Stock, par value $0.001 per share and
15,000,000 shares of Preferred Stock, par value of $0.001 per share. As of the
date hereof, 19,028,779 shares of Common Stock and no shares of preferred stock
of any kind are issued and outstanding. No other shares of any class or series
of the Company's capital stock are authorized and/or issued and outstanding. All
issued and outstanding shares of capital stock of the Company have been duly
authorized and validly issued, and are fully paid and non-assessable, and have
been offered, sold and delivered by the Company in compliance with all
applicable federal and state securities laws. Except as set forth in Schedule
4.7.6, no subscription, warrant, option, convertible security, or other right
(direct or indirect, contingent or otherwise) to purchase or otherwise acquire
any equity securities of the Company is authorized or outstanding, and there is
no agreement, promise, commitment, undertaking or letter of intent of any kind
(direct or indirect, contingent or otherwise) by the Company to issue any
shares, subscriptions, warrants, options, convertible securities, or other such
rights, or to distribute to holders of any of its equity securities any evidence
of indebtedness or asset. Except as set forth in Schedule 4.7.6, the Company has
no obligation of any kind (direct or indirect, contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
respect thereof. Schedule 4.7.6 includes a true, accurate and complete statement
describing the total number of shares of the Company outstanding as of the date
of this Agreement (on a fully diluted basis, including, without limitation, all
warrants and options outstanding (whether or not currently exercisable), all
convertible instruments of any kind (whether or not currently convertible),
shares of all classes of stock, and any agreements, promises, commitments,
undertakings or letters of intent to issue any of the foregoing.
4.7.7 Authorization of the Shares. The Company has, or before the
first closing of the Anticipated Equity Financing hereunder will have,
authorized the issuance and sale of a sufficient number of shares of Convertible
Preferred Stock, par value $0.001 per share, and Common Stock of the Maker to
fully implement the Recapitalization Plan, while maintaining
20.
EXECUTION VERSION
such additional authorized but unissued shares as reasonably determined by
Holder to be appropriate. Of such authorized shares, a sufficient number of
shares shall be reserved for issuance upon any exercise of the Bridge Warrants
and/or Preferred Stock Warrants. If at any time the number of authorized but
unissued shares of Convertible Preferred Stock and/or of Common Stock is not
sufficient to effect the conversion of all then outstanding convertible Notes
and other instruments, and the exercise of all then outstanding warrants,
options and similar instruments, then, in addition to such other remedies as may
be available to Investor, the Company shall take such corporate action as may be
necessary to increase its authorized but unissued shares of Convertible
Preferred Stock and/or Common Stock to such number of shares as will be
sufficient for such purposes. Such corporate action shall include, without
limitation, obtaining all requisite regulatory approvals and any requisite
shareholder approval of any necessary amendment to the Company's Charter.
4.7.8 Litigation. There is no action, suit, proceeding or
investigation pending or, to the knowledge of the Company, currently threatened
against the Company, or its officers, directors, advisors, agents, properties,
assets or business, in each case relating to the Company. 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 instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
4.7.9 No Liens. Except for liens for the benefit of Investor,
created by this Agreement and/or any of the Related Recapitalization Documents,
and except as set forth in Schedule 4.7.9 of the Disclosure Schedule, none of
the material assets of the Company, including the Collateral, are subject to any
existing lien, pledge, security interest or other encumbrance of any kind,
direct or indirect, contingent or otherwise.
4.7.10 Full Disclosure. Notwithstanding any other provision of this
Agreement or any Related Recapitalization Document, neither this Agreement, any
of the Related Recapitalization Documents nor any exhibit hereto or thereto, nor
any written report, certificate, instrument or other information furnished to
Investor in connection with the transactions contemplated under and/or in
connection with this Agreement and the Related Recapitalization Documents
contain any material misstatement (including, without limitation, any material
omission), or is misleading in any material respect.
4.7.11 No Other Security Interests or Other Encumbrances. Except as
set forth in Schedule 4.7.11 (and only to the amounts set forth on such
schedule), there are no existing security interests, pledges, liens or other
encumbrances of any kind, direct or indirect, contingent or otherwise (including
without limitation any licensing or partnering arrangements or agreements), in
or relating to any assets of the Company, including, without limitation, any
Intellectual Property (as defined in the Note) or other Collateral. All existing
security interests, pledges, liens or other encumbrances of any kind, other than
those set forth in Schedule 4.7.11 hereto (and only to the amounts set forth on
such schedule), are subordinate to the security interest established pursuant to
the Notes, in accordance with Section 11 thereof, all necessary consents,
subordination agreements and waivers, if any, have been obtained, and all
amended filings and/or re-filings shall be made immediately upon execution of
this Agreement.
21.
EXECUTION VERSION
4.7.12 "Small Business".
(a) Small Business Status. The Company together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of Code of
Federal Regulations (the "FEDERAL REGULATIONS")) is a "small business concern"
within the meaning of the Small Business Investment Act of 1958, as amended (the
"SMALL BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder,
including Section 121.301(c) of Title 13, Code of Federal Regulations.
(b) Information for SBA Reports. The Company has delivered and/or
will deliver to Investor certain information, set forth by and regarding the
Company and its affiliates in connection with this Agreement, on SBA Forms 480,
652 and Part A and B of Form 1031. This information delivered was true,
accurate, complete and correct, and any information yet to be delivered will be
true, accurate, complete and correct, and in form and substance acceptable to
Investor.
(c) Eligibility. The Company is eligible for financing by any SBIC
Investor pursuant to Section 107.720 of Title 13 of the Federal Regulations.
4.7.13 Intellectual Property.
(a) Definitions. "INTELLECTUAL PROPERTY" means all foreign and
domestic intangible property and rights, owned, licensed, sub-licensed or
otherwise obtained by the Company, including, without limitation, (i)
inventions, discoveries and ideas, whether patentable or not, and all patents,
registrations and applications therefor, including divisions, continuations,
continuations-in-part, requests for continued examination, and renewal
applications, and including renewals, extensions and reissues, including without
limitation those items referenced on Appendix 2 to Exhibit A of the Note
(collectively, "PATENTS"); (ii) confidential and proprietary information, trade
secrets and know-how, including without limitation processes, schematics,
formulae, drawings, prototypes, models, designs and customer lists
(collectively, "TRADE SECRETS"); (iii) all data, slides, observations, and
laboratory results, produced by, for or on behalf of the Company, or which the
Company has rights to obtain (collectively, "DATA"); (iv) all FDA applications,
registrations, filings and other rights (collectively, "FDA RIGHTS") and all
data and documentation supporting or relating thereto; (iv) published and
unpublished works of authorship, whether copyrightable or not (including,
without limitation, databases and other compilations of information), copyrights
therein and thereto, and registrations and applications therefor, and all
renewals, extensions, restorations and reversions thereof (collectively,
"COPYRIGHTS"); (v) trademarks, service marks, brand names, certification marks,
collective marks, d/b/a's, Internet domain names, logos, symbols, data, trade
dress, assumed names, fictitious names, trade names, and other indicia of
origin, all applications and registrations for the foregoing, and all goodwill
associated therewith and symbolized thereby, including all extensions,
modifications and renewals of same, including without limitation those items
referenced on Appendix 1 to Exhibit A of the Note (collectively, "TRADEMARKS");
(vi) all other intellectual property or proprietary rights, including, without
limitation, all claims or causes of action arising out of or related to any
infringement, misappropriation or other violation of any of the foregoing,
including rights to recover for past, present and future violations thereof
(collectively, "OTHER PROPRIETARY RIGHTS").
22.
EXECUTION VERSION
"INTELLECTUAL PROPERTY CONTRACTS" means all agreements involving,
relating to or affecting the Intellectual Property, including, without
limitation, agreements granting rights to use the Licensed or Sub-Licensed
Intellectual Property, agreements granting rights to use Owned Intellectual
Property, confidentiality agreements, Trademark coexistence agreements,
Trademark consent agreements and non-assertion agreements.
"LICENSED OR SUB-LICENSED INTELLECTUAL PROPERTY" means the Intellectual
Property that the Company is licensed, sub-licensed or otherwise permitted by
other persons or entities to use.
"OWNED INTELLECTUAL PROPERTY" means the Intellectual Property owned by
the Company.
"REGISTERED" means issued, registered, renewed or the subject of a
pending application.
(b) Schedule 4.7.13 ("INTELLECTUAL PROPERTY") sets forth a true and
complete list and summary description of (A) all Registered or material Owned
Intellectual Property (each identified as a Patent, Trademark, Trade Secret,
Copyright or Other Proprietary Right, as the case may be); (B) all Licensed or
Sub-Licensed Intellectual Property and (C) all Intellectual Property Contracts.
(c) All Intellectual Property is valid, subsisting and enforceable.
No Owned Intellectual Property has been canceled, suspended, adjudicated
invalid, not maintained, expired or lapsed, or is subject to any outstanding
order, judgment or decree restricting its use or adversely affecting or
reflecting the Company's rights thereto. No Licensed or Sub-Licensed
Intellectual Property has been canceled, suspended, not renewed or extended,
adjudicated invalid, not maintained, expired or lapsed, or is subject to any
outstanding order, judgment or decree restricting its use or adversely affecting
or reflecting the Company's rights thereto.
(d) The Owned Intellectual Property is owned exclusively by the
Company and has been used with all patent, trademark, copyright, confidential,
proprietary and other Intellectual Property notices and legends prescribed by
law or otherwise permitted.
(e) No suit, action, reissue, reexamination, public protest,
interference, opposition, cancellation or other proceeding (collectively,
"SUIT") is pending or threatened concerning any claim or position:
(i) that the Company, or another person or entity, has violated
any Intellectual Property rights. To the Company's best knowledge, the Company
is not violating and has not violated any intellectual property rights of any
other party.
(ii) that the Company, or another person or entity, has
breached any Intellectual Property Contract. There exists no event, condition or
occurrence which, with the giving of notice or lapse of time, or both, would
constitute a breach or default by the Company, or a breach or default by another
person or entity, under any Intellectual Property Contract. No party to any
Intellectual Property Contract has given the Company notice of its intention to
cancel, terminate or fail to renew any Intellectual Property Contract.
23.
EXECUTION VERSION
(iii) that the Intellectual Property has been violated or is
invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned or
not owned exclusively by the Company. No such claim has been threatened or
asserted. To the Company's best knowledge, no valid basis for any such Suits or
claims exists.
(f) To the Company's best knowledge, no other person or entity is
violating, infringing upon or claiming rights incompatible with the Company's
rights to any Intellectual Property. The Company has provided to Investor and
all Other Investors copies of all information reasonably available to it
relevant to intellectual property rights claimed by third parties and possible
infringement thereof including, without limitation, any freedom to practice or
freedom to operate opinions.
(g) The Company owns or otherwise holds valid rights to use all
Intellectual Property used in its business.
(h) The Company has timely made all filings and payments with the
appropriate foreign and domestic agencies and other parties required to maintain
in full force and effect all Intellectual Property. Except as set forth on
Schedule 4.7.13, no due dates for filings or payments concerning the
Intellectual Property (including, without limitation, office action responses,
affidavits of use, affidavits of continuing use, renewals, requests for
extension of time, maintenance fees, application fees and foreign convention
priority filings) fall due within ninety (90) days prior to or after the
closing, whether or not such due dates are extendable. The Company is in
compliance with all applicable rules and regulations of such agencies and other
parties with respect to the Intellectual Property. All documentation necessary
to confirm and effect the Intellectual Property, if acquired from other persons
or entities, has been recorded in the United States Patent and Trademark Office,
the United States Copyright Office and other official offices.
(i) The Company has undertaken and consistently implemented best
efforts to protect the secrecy, confidentiality and value of all non-public
Intellectual Property used in its business (including, without limitation,
entering into appropriate confidentiality agreements with all officers,
directors, employees and other persons or entities with access to such
non-public Intellectual Property). Company management has not disclosed any such
non-public Intellectual Property to any persons or entities other than (i)
Company employees or Company contractors who had a need to know and use such
non-public Intellectual Property in the ordinary course of employment or
contract performance, or (ii) prospective customers, and in each case who
executed appropriate confidentiality agreements.
(j) The Company has taken all reasonable measures to confirm that
no current or former Company employee is or was a party to any confidentiality
agreement or agreement not to compete that restricts or forbids, or restricted
or forbade at any time during such employee's employment by the Company, such
employee's performance of the Company's business, or any other activity that
such employee was hired to perform or otherwise performed on behalf of or in
connection with such employee's employment by the Company.
4.7.14 SEC Filings; Financial Statements.
(a) The Company has delivered or made available to Investor
accurate and complete copies of all registration statements, proxy statements
and other statements, reports,
24.
EXECUTION VERSION
schedules, forms and other documents filed by the Company with the SEC since
January 1, 2003, and all amendments thereto (the "COMPANY SEC DOCUMENTS").
Except as set forth on Schedule 4.7.14, all statements, reports, schedules,
forms and other documents required to have been filed by the Company with the
SEC have been so filed on a timely basis. As of the time it was filed with the
SEC (or, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing): (i) each of the Company SEC
Documents complied in all material respects with the applicable requirements of
the Securities Act or the Exchange Act (as the case may be); and (ii) none of
the Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) The financial statements (including any related notes)
contained in the Company SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments that will not, individually or in the aggregate,
be material in amount), and (iii) fairly present the consolidated financial
position of the Company and its consolidated subsidiaries as of the respective
dates thereof and the consolidated results of operations and cash flows of the
Company and its consolidated subsidiaries for the periods covered thereby.
4.7.15 Liabilities. The Company has no accrued, contingent or other
liabilities of any nature, either matured or unmatured, except for: (a)
liabilities identified as such in the Company's audited balance sheet as of
December 31, 2003, or the notes thereto; (b) liabilities that have been incurred
by the Company since December 31, 2003 in the ordinary course of business and
consistent with past practices, and that do not exceed a maximum potential
amount of $330,000; and (c) expenses that have been incurred by the Company (but
not including any expenses of Investor that the Company is obligated to
reimburse pursuant to Section 4.11 hereof) in the preparation and review of this
Agreement and the Related Recapitalization Documents, and that do not exceed
$72,000.
4.7.16 Compliance with All Standstill Provisions. The Company has
complied in all respects with all standstill, exclusivity and confidentiality
provisions of (a) this Agreement and the Related Recapitalization Documents, (b)
Section 13 of that certain 10% Convertible, Secured Promissory Note by and
between the Company and Investor dated as of February 2, 2004 and (c) Section 13
of that certain 10% Convertible, Secured Promissory Note by and between the
Company and Investor dated as of March 1, 2004.
4.8 Representations and Warranties of Investor: Investor hereby
represents and warrants to the Company, that subject to, and based in part on,
the Company's representation and warranty in Section 4.7.10 hereof,
(a) Investor has conducted its own due diligence review of the
Company and received copies or originals of all documents it has requested from
the Company; Notwithstanding the foregoing, this representation shall not in any
way be deemed to prohibit,
25.
EXECUTION VERSION
limit, restrict or otherwise impact Investor's rights to indemnification, and/or
to any other rights or remedies available at law or equity, from the Company and
its affiliates in the event of a breach by the Company of any representation,
warranty, covenant or other term hereof or of any Related Recapitalization
Document; and
(b) Investor is aware of the Company's financial prospects and
acknowledges that the sources of repayment of the Notes and the payment of
Investor's fees, costs and expenses pursuant to Section 4.11 are limited to
additional capital raised in bridge or other debt financing, the Anticipated
Equity Financing or other future financing transaction or foreclosure of the
Collateral.
4.9 Conditions to Closing: Notwithstanding anything to the contrary,
and, in each case, unless expressly waived in writing in advance by Investor
(any such waiver by Investor shall be applicable only as to such closing and
shall not be deemed a waiver of such condition as to future closings, if any),
and only to the extent expressly waived, all closings contemplated under this
Agreement and the Related Recapitalization Documents shall be conditional upon
and subject to the satisfaction or waiver of each of the following conditions
precedent, with each such satisfaction or waiver to be determined by Investor in
its sole discretion (including, without limitation, the acceptability to
Investor of any exception set forth in a disclosure schedule), on or before the
applicable closing date. Investor shall make all such determinations in its sole
discretion. These conditions are in addition to the conditions set forth in
Section 2.4. The conditions precedent to each closing under this Agreement and
the Related Recapitalization Documents shall include the following, unless
waived by Investor in its sole discretion:
(a) Performance of Obligations. The Company has in all material
respects performed all obligations and agreements and complied with all
covenants and other items contained in the Agreement and the Related
Recapitalization Documents required to be performed or fulfilled on or before
the applicable closing date.
(b) Representations True and Complete. All of the representations
and warranties made by the Company in the Agreement and the Related
Recapitalization Documents true, correct and complete, with no material
inaccuracies or omissions, as of the applicable closing date.
(c) No Material Adverse Change. There has been no change that has
had or could reasonably be expected to have a material adverse effect on the
business, affairs, prospects, operations, properties, assets, liabilities,
structure or condition, financial or otherwise, of the Company (as such business
is presently conducted and/or as it is proposed to be conducted) (a "MATERIAL
ADVERSE EFFECT") since December 31, 2003.
(d) Proceedings. All corporate and other proceedings, and all
documents applicable to the transactions involved in the purchase and sale of
any securities issued or to be issued under this Agreement or the Related
Recapitalization Documents, are satisfactory in substance and form to Investor
and, if applicable Other Investors), and Investor and its counsel and Other
Investors (as applicable) and their respective counsel have received all such
counterpart originals or certified or other copies of such documents as they may
have requested including, without limitation, the following:
26.
EXECUTION VERSION
(i) The Company's Charter (including and amendments,
restatements and certificates of designation thereto) filed with and certified
by the Delaware Secretary of State;
(ii) A certificate, as of the most recent practicable date
prior to or on the applicable closing date, as to the corporate good standing of
the Company, issued by the Delaware Secretary of State and any other applicable
state tax department;
(iii) The Bylaws of the Company, certified by the Secretary of
the Company as of the applicable closing date;
(iv) The resolutions of the Board of Directors of the Company
authorizing and approving all matters in connection with this Agreement and the
Related Recapitalization Documents and the transactions contemplated hereby and
thereby, certified by the Secretary of the Company as of the applicable closing
date.
(v) As applicable, the resolutions of the Company's
stockholders or stockholder vote, certified by the Secretary of the Company, of
the stockholders approving any matter in connection with this Agreement and/or
the Related Recapitalization Documents upon which the stockholders are required
to vote under applicable law as of any applicable closing date whereby such
stockholder approval would be necessary to issue securities due at such closing
date or otherwise effectuate such closing.
(e) Executed Agreements. The Company will have executed, delivered
and maintained in force this Agreement and the Related Recapitalization
Documents.
(f) Due Diligence. The Company will have provided prior to the
applicable closing date all due diligence information requested by Investor or
any Other Investor, and/or necessary to enable such investor to complete a
thorough due diligence review and obtain a complete and accurate understanding
of the business, operations, prospects, assets, liabilities, structure, legal
aspects and condition, financial or otherwise, of the Company.
(g) No Severance Agreements. The Company will not have entered
into, increased, expanded, extended, or renewed any severance, separation,
retention, change of control or similar agreement with any employee, or agreed,
promised or committed to do so, within the six month period prior to any closing
hereunder, without the prior written approval of Investor.
(h) Termination of Soma Partners. The Company shall deliver to
Investor written evidence satisfactory to Investor that all existing agreements
with Soma have been terminated, and that the Company has notified Soma that
Investor was not introduced to the Company by Soma and that in accordance with
Section 7 of the letter agreement by and between Soma and the Company, dated as
of October 15, 2003, Soma is not entitled to any compensation (cash or
securities) from the Company by virtue of any investment by Investor in the
Company (other than an existing obligation of $3,000).
(i) Board Certification of Shares Outstanding. The Board of
Directors of the Company shall deliver to the Investor a certified statement
detailing, to the best of the board's knowledge, the total number of shares of
the Company outstanding as of the date of each closing
27.
EXECUTION VERSION
(on a fully-diluted basis, including, without limitation, all shares of stock of
all series and classes, all options, warrants, convertible instruments of any
kind (whether or not exercised or converted as the case may be), and any
promises, commitments, agreements, undertakings or letters of intent to issue
any of the foregoing).
(j) Bridge Funding Conditions. The Company has complied with all of
the Closing Conditions of Bridge Funding as listed in Section 2.4 hereof.
(k) Officer's Certificate. The Chief Executive Officer of the
Company, or other officer of the Company acceptable to Investor in Investor's
sole discretion, will deliver to Investor at each closing a certificate
certifying that the conditions specified in this Section 4.9 (other than actions
to be taken by parties other than the Company or existing shareholders) have
been fulfilled. For each subsequent closing, there shall have been no material
inaccuracy or omission in any certificate delivered to Investor pursuant to this
Section 4.9(k) on the Effective Date or at any closing occurring after the
Effective Date.
(l) The Board of Directors of the Company shall have amended the
Stockholder Rights Agreement (the "RIGHTS AGREEMENT") dated as of February 26,
2002 between the Company and Mellon Investor Services LLC, as Rights Agent such
that (i) Investor, Other Investors, and their respective affiliates shall be
excluded from the definition of the "ACQUIRING PERSON" thereunder (and any
additional, conforming changes that are deemed necessary to prevent the
transactions contemplated hereby from triggering the occurrence of a
"DISTRIBUTION DATE" thereunder) and (ii) the Rights Agreement may not be further
amended without the consent of Investor except in the event that the Company's
obligation to effect the Anticipated Equity Financing is terminated pursuant to
Section 3.2 or 3.5 hereof.
(m) The Company shall have obtained the written agreement, in a
form acceptable to Investor, of each Key Stockholder (as listed in Schedule 4.6
hereto) to vote in favor of the approval of this Agreement, the Related
Recapitalization Documents and all transactions contemplated hereunder and
thereunder, including, without limitation, the approval of an amendment to the
Company's Charter in order to authorize sufficient capital stock to permit the
Anticipated Equity Financing. Such written agreement of the Key Stockholders
shall, without limitation, include a provision whereby each Key Stockholder
agrees that it will not take any action in opposition to the transactions
contemplated hereby or attempt to frustrate the purposes hereof.
4.10 SBA Matters. The Company acknowledges that Investor has informed
the Company that it is a Federal licensee or sub-licensee under the Small
Business Investment Act ("SBIA") and a participant in the Small Business
Investment Company ("SBIC") program of the United States Small Business
Administration ("SBA") and, as such, in its business and investment activities
is required to comply with the SBIA and all regulations, advice, direction and
guidance applicable to SBIC's. In addition, such laws and regulations also
require certain practices on the part of the companies in which Investor makes
investments, including but not limited to those requirements specifically
enumerated in this Agreement. So long as Investor holds any securities of the
Company:
(A) The Company will not change the nature of its business activity
in a manner that would cause a violation of Sections 107.720 and/or 107.760(b)
of Title 13 of the
28.
EXECUTION VERSION
Code of Federal Regulations (including, without limitation, by undertaking real
estate, film production or oil and gas exploration activities). In the event
that the Company changes the nature of its business activity such that such
change would render the Company ineligible for financing pursuant to applicable
SBA rules and regulations, the Company agrees to use its best efforts to
facilitate a transfer or redemption of any securities then held by Investor.
(B) The Company will at all times comply with the non-
discrimination requirements of Parts 112, 113 and 117 of Title 13 of the Code of
Federal Regulations.
(C) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), and at such other times as Investor may
reasonably request, the Company will deliver to Investor a written assessment,
in form and substance satisfactory to Investor, of the economic impact of
Investor's financing hereunder, specifying the full-time equivalent jobs created
or retained in connection with such investment, and the impact of the financing
on the Company's business in terms of revenues and profits and on taxes paid by
the Company and its employees.
(D) The Company will provide to Investor and any Other Investor
that is a participant in the SBIC (an "SBIC INVESTOR") all financial information
required by such SBIC Investor, on a timely basis, including without limitation,
its quarterly and annual balance sheets and income statement. Such financial
information will be certified by a member of management of the Company at least
annually. Financial information required will also include such information as
is necessary for such SBIC Investor to file Form 468 with the SBA. The Company
will also provide on a timely basis any other information reasonably requested
or required by any governmental agency asserting jurisdiction over Investor. The
Company agrees to allow SBA examiners access to the Company's books and records,
as reasonably required by such examiners, in connection with their annual audits
of Investor or for any other legitimate purposes reasonably related to the
investment of the SBA in Investor. The Company will also provide, in good faith
and in a timely manner, all other assistance and cooperation reasonably required
to enable any SBIC or SBIC Investor to make all necessary filings and comply
with all applicable SBA and SBIC-related requirements.
(E) The proceeds from the sale of securities (including, without
limitation, the Notes, Bridge Warrants, Preferred Stock Warrants and/or shares
Convertible Preferred Stock) to any SBIC Investor (the "PROCEEDS"), shall be
used by the Company for its growth, modernization and/or expansion and/or for
general corporate purposes as permitted by applicable SBA rules and regulations.
4.11 Fees; Expenses The Company shall pay, reimburse or otherwise
satisfy, upon demand of Investor, all fees, costs and expenses incurred and/or
undertaken, and to be incurred and/or undertaken, by Investor relating to the
preparation for, development of and implementation of the Recapitalization Plan
set forth in this Agreement, including, without limitation, all due diligence
expenses and all expenses relating to the Bridge Funding, the Anticipated Equity
Financing and the transactions contemplated hereby and the documentation of all
of the foregoing (including, without limitation all legal fees and expenses and
costs incurred and to be incurred in connection with any SBA filings), which
shall be satisfied by the Company upon Investor's demand, including but without
limitation upon each closing of the Bridge Funding or Anticipated Equity
Financing. This obligation shall apply regardless of
29.
EXECUTION VERSION
whether or not all of the transactions contemplated in this Agreement close. At
each closing of Bridge Funding or Anticipated Equity Financing, at Investor's
sole discretion, and with respect to any or all of such fees, costs and expenses
accrued through such closing, the Company shall (a) pay Investor in cash
concurrently with such closing (or at Investor's sole discretion, Investor may
withhold such amount from the wire of investment proceeds), (b) issue a Note in
the form of Exhibit A in principal amount equal to such fees, costs and expenses
(which at Investor's option may instead be evidenced as an increase in the
principal amount of any Note issued in connection with such closing); or (c)
treat such fees, costs and expenses as an unsecured payable. At any time
following such closing, Investor may require any amounts that it elected to have
the Company treat as unsecured amounts payable to be paid in cash or satisfied
by issuance of a Note in the principal amount of some or all of such unsecured
obligation.
4.12 Confidentiality. Notwithstanding the fiduciary exception set forth
in Section 3.2 hereof, during the Standstill Period the Company and its
officers, directors, employees, agents, advisers, consultants, partners and
collaborators shall maintain confidentiality, and shall not provide copies,
excerpts, summaries or descriptions, or communicate in any way with any third
parties, either directly or indirectly, as to any aspects of the
recapitalization of the Company and/or any financing by Investor, including,
without limitation, the identity of the parties involved, any terms of the
Recapitalization Agreement and/or the Related Recapitalization Documents, the
Convertible Preferred Stock or any other matter relating to the recapitalization
of the Company or the progress or status of any activities or processes relating
to the recapitalization of the Company; provided, however, nothing herein shall
prohibit the Company from filing this Agreement and any Related Recapitalization
Document with the Securities and Exchange Commission (the "SEC"), if required by
the regulations of the SEC (subject to the covenant in Section 2.5(a) hereof).
4.13 Miscellaneous:
(a) Counterparts. This Agreement may be executed in counterparts,
each of which when so executed and delivered will constitute a complete and
original instrument but all of which together will constitute one and the same
agreement, and it will not be necessary when making proof of this Agreement or
any counterpart thereof to account for any counterpart other than the
counterpart of the party against whom enforcement is sought.
(b) Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to principles of conflicts of law. Each party to this Agreement hereby
irrevocably and unconditionally agrees that any legal action, suit or proceeding
arising out of or relating to this Agreement or any agreements or transactions
contemplated hereby will be brought in any federal or state court located in
Delaware, and hereby irrevocably and unconditionally expressly submits to the
personal jurisdiction and venue of such courts for the purposes thereof and
hereby irrevocably and unconditionally waives any claim (by way of motion, as a
defense or otherwise) of improper venue, that it is not subject personally to
the jurisdiction of such court, that such courts are an inconvenient forum or
that this Agreement or the subject matter may not be enforced in or by such
courts. Each party hereby irrevocably and unconditionally consents to the
service of process of any of the aforementioned courts in any such action, suit
or proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, to the address set forth or provided for in Section 4.13(c) of
this Agreement, such service to become effective upon
30.
EXECUTION VERSION
delivery, in accordance with Section 4.13(c) below. Nothing herein contained
will be deemed to affect the right of any party to serve process in any manner
permitted by law or commence legal proceedings or otherwise proceed against any
other party in any other jurisdiction to enforce judgments obtained in any
action, suit or proceeding brought pursuant to this Section.
(c) Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement must be in writing and will be deemed to be effective upon delivery
when delivered (a) personally; (b) by facsimile, provided a copy is mailed on
the same day by overnight delivery with a nationally recognized overnight
delivery service; (c) by overnight delivery with a nationally recognized
overnight delivery service, in each case properly addressed to the party to
receive the same. The addresses and facsimile numbers for such communications
will be, in the case of Investor;
Xxxxx X. Xxxxxx
Managing Director
Toucan Capital Corp.
0000 Xxxxxxxxx Xxx, 0xx xxxxx
Xxxxxxxx, XX 00000
Tel: 000-000-0000
Fax: 000-000-0000
xxxxxxx@xxxxxxxxxxxxx.xxx
And in the case of the Company:
Northwest Biotherapeutics, Inc.
Attention: Xxxxx Xxxxxxx
00000 00xx Xxxxxx, XX, Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Fax: 000-000-0000
or at such other address and facsimile number as the receiving party will have
furnished to the sending party in writing. Each party will provide five (5)
business days' prior written notice to the other parties of any change in
address or facsimile number.
(d) Survivability. The representations, warranties, covenants and
agreements made herein will survive any investigation made by or on behalf of
the Investor or the Company, and will survive for two years after the applicable
closing date.
(e) Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof will inure to the benefit of, and be binding upon,
the respective successors, assigns, heirs, executors and administrators of the
parties hereto. Notwithstanding anything to the contrary in this Agreement or
the Related Recapitalization Documents, Investor may transfer or assign all or
any portion of its rights under this Agreement and the other Related
Recapitalization Documents to any person or entity, or designate another party
to exercise all or any portion of Investor's rights under this Agreement and the
other Related Recapitalization Documents, so long as such transfer or assignment
is permissible under applicable federal and state securities laws. Without
limiting the generality of the foregoing, all representations, warranties,
covenants and agreements benefiting Investor will inure to the benefit of any
and all subsequent holders from time to time of the Notes, the Bridge Warrants,
Preferred Stock
31.
EXECUTION VERSION
Warrants, the shares of Convertible Preferred Stock contemplated by this
Agreement, and any shares of Common Stock issued or issuable upon conversion of
any of the foregoing.
(f) Entire Agreement; Amendments. This Agreement (including the
Schedules and Exhibits hereto, which are an integral part of this Agreement) and
the Related Recapitalization Documents constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof. Except as otherwise expressly provided herein, neither this
Agreement, the Related Recapitalization Documents nor any term hereof or thereof
may be amended, waived, discharged or terminated, except by a written instrument
signed by the Company and Investor. Notwithstanding anything to the contrary, no
provision that applies to any person or entity specifically designated by name
will be amended, waived, discharged or terminated without the express written
consent of such named person or entity. Also notwithstanding anything to the
contrary, this Agreement and/or the other Related Recapitalization Documents
will be amended as and to the extent necessary to comply with the Small Business
Investment Act and all regulations, advice, direction and guidance applicable to
SBICs.
(g) Interpretation. All pronouns and any variations thereof will
be deemed to refer to the masculine, feminine, neuter, singular or plural, as
the identity of the person or persons or entity or entities may require. All
references to "$" or dollars herein will be construed to refer to United States
dollars. The titles of the Sections and subsections of this Agreement are for
convenience or reference only and are not to be considered in construing this
Agreement.
(h) Rights, Separability. In case any provision of this Agreement
or the Related Recapitalization Documents will be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions will not in any way be affected or impaired thereby.
[SIGNATURE PAGE FOLLOWS]
32.
EXECUTION VERSION
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
NORTHWEST BIOTHERAPEUTICS, INC.
By: /s/ Xxxxx Xxxxxxx
--------------------------------------------------
Name: Xxxxx Xxxxxxx
Title: President
TOUCAN CAPITAL FUND II, LP
By:/s/ Xxxxx Xxxxxx
--------------------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Managing Director
EXECUTION VERSION
EXHIBIT A
FORM OF NORTHWEST BIOTHERAPEUTICS, INC.
LOAN AGREEMENT, SECURITY AGREEMENT AND
10% CONVERTIBLE, SECURED PROMISSORY NOTE
$____________ APRIL 26, 2004
SECTION 1. GENERAL.
For value received, NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the
"Maker" or the "Company"), hereby promises to pay to the order of Toucan Capital
Fund II, L.P. or its assigns (collectively, the "Holder"), the principal amount
of ____________ Dollars ($____) upon written demand by Holder made at any time
on or after the first anniversary of execution of this Loan Agreement, Security
Agreement and 10% Convertible, Secured Promissory Note (this "Note" or this
"Agreement"), or such earlier date as may be applicable under Sections 3 and 4
hereof (the "Maturity Date"). Maker shall pay interest on the unpaid principal
amount of this Note, accruing from and after ___________ at the rate of ten
percent (10%) per annum, compounding annually (computed on the basis of a
365-day year and the actual number of days elapsed) (the "Interest Rate").
Accrued interest shall be payable upon the payment of the principal of this
Note. The principal of, and interest on, this Note shall be payable in lawful
currency of the United States of America by wire transfer in immediately
available funds to the account of Holder, as provided in writing to Maker by
Holder. All payments shall be applied first to fees, costs and charges relating
to this Note (including, without limitation, any costs of collection), then to
accrued and unpaid interest, and thereafter to principal. This loan is made by
Holder to Maker in anticipation of an equity financing. Capitalized terms used
but not defined herein shall have the meanings ascribed to them in the
Recapitalization Agreement.
SECTION 2. PRE-PAYMENT.
This Note may be pre-paid in whole or in part prior to the Maturity Date;
provided Maker provides Holder with 30 days prior written notice thereof, and
provided further that Holder shall have the option to convert this note in
accordance with Section 12 hereof by notifying Maker of Holder's election on or
before the expiration of such thirty (30) day notice period. In the event of
prepayment, Maker shall pay a penalty in the amount of 1% of the principal and
accrued interest then outstanding under this Note, unless a greater or lesser
penalty is established or approved by the U.S. Small Business Administration
("SBA"). Conversion of this Note shall not be deemed a prepayment.
SECTION 3. DEFAULT INTEREST.
Upon the occurrence of an Event of Default (as hereinafter defined), the unpaid
principal amount and accrued and unpaid interest shall bear interest payable on
demand at the lesser of (i) fourteen percent (14%) per annum, (ii) the maximum
rate permitted under applicable rules and regulations of the SBA, or (iii) the
maximum rate allowed by law (the "Default Interest"). Such interest
1
EXECUTION VERSION
shall accrue, commencing upon the occurrence of an Event of Default and
continuing until such Event of Default is cured or waived.
SECTION 4. DEFAULTS.
4.1 Definitions. Each occurrence of any of the following events shall
constitute an "Event of Default":
(a) if a default occurs in the payment of any principal of,
interest on, or other obligation with respect to, this Note, whether at the due
date thereof or upon acceleration thereof, and such default remains uncured for
five (5) business days after written notice thereof from Holder;
(b) if any representation or warranty of Maker made herein shall
have been false or misleading in any material respect, or shall have contained
any material omission, as of the date hereof;
(c) if a default occurs in the due observance or performance of any
covenant or agreement on the part of Maker to be observed or performed pursuant
to the terms of this Note and such default remains uncured for five (5) business
days after written notice thereof from Holder;
(d) if a default occurs in Maker's performance of any of the terms
and conditions of that certain Recapitalization Agreement, dated as of April 26,
2004 (the "Recapitalization Agreement") or any Related Recapitalization
Document;
(e) if Maker shall (i) discontinue its business, (ii) apply for or
consent to the appointment of a receiver, trustee, custodian or liquidator of
Maker or any of its property, (iii) make a general assignment for the benefit of
creditors, or (iv) file a voluntary petition in bankruptcy, or a petition or an
answer seeking reorganization or an arrangement with creditors, or take
advantage of any bankruptcy, reorganization, insolvency, readjustment of debt,
dissolution or liquidation laws or statutes, or file an answer admitting the
material allegations of a petition filed against it in any proceeding under any
such law, provided, however, that insolvency of Maker shall not constitute a
default, or the basis for a default, during the Bridge Period;
(f) if there shall be filed against Maker an involuntary petition
seeking reorganization of Maker or the appointment of a receiver, trustee,
custodian or liquidator of Maker or a substantial part of its assets, or an
involuntary petition under any bankruptcy, reorganization or insolvency law of
any jurisdiction, whether now or hereafter in effect (any of the foregoing
petitions being hereinafter referred to as an "Involuntary Petition") and such
Involuntary Petition shall not have been dismissed within ninety (90) days after
it was filed, provided, however, that insolvency of Maker shall not constitute a
default, or the basis for a default, during the Bridge Period;
(g) if final judgment(s) for the payment of money in excess of an
aggregate of $25,000 (excluding any portion thereof that an insurance company of
nationally recognized
2
EXECUTION VERSION
standing and creditworthiness has agreed to pay) shall be rendered against Maker
and the same shall remain undischarged for a period of thirty (30) days; or
(h) if there occurs any event that may have a material adverse
effect on the business, affairs, prospects, operations, properties, assets,
liabilities, structure or condition, financial or otherwise, of the Company (as
such business is presently currently conducted and/or as it is proposed to be
conducted), or on any material assets or any Intellectual Property or other
Collateral developed, owned, controlled, licensed, possessed, or used by Maker,
or to which Maker has any right, option, entitlement or claim, provided,
however, that ongoing weakening of Maker's financial condition due to ongoing
expenditures and Maker's failure to obtain equity financing shall not constitute
a default, or the basis for a default, during the Bridge Period.
4.2 Cross-Default: Maker acknowledges that the financing contemplated
by this Note is part of an integrated Recapitalization Plan, as set forth in the
Recapitalization Agreement and the Related Recapitalization Documents. Maker
further acknowledges and agrees that this Note is subject to all terms and
conditions set forth in the Recapitalization Agreement and the Related
Recapitalization Documents, and that the Recapitalization Agreement and the
Related Recapitalization Documents are subject to all of the terms and
conditions of this Note. Maker agrees that any default by Maker under any
provision of this Note, the Recapitalization Agreement or any of the Related
Recapitalization Documents will constitute a default under each other Related
Recapitalization Document and the Recapitalization Agreement.
4.3 Remedies on Default.
(a) Upon each and every such Event of Default and at any time
thereafter during the continuance of such Event of Default: (i) any and all
indebtedness of Maker to Holder under this Note or otherwise shall immediately
become due and payable, both as to principal and interest (including any
deferred interest and any accrued and unpaid interest and any Default Interest);
and (ii) Holder may exercise all the rights of a creditor under applicable state
and/or federal law.
(b) In case any one or more Events of Default shall occur and be
continuing, and acceleration of this Note or any other indebtedness of Maker to
Holder shall have occurred, Holder may, inter alia, proceed to protect and
enforce its rights by an action at law, suit in equity and/or other appropriate
proceeding, whether for the specific performance of any agreement contained in
this Note, or for an injunction against a violation of any of the terms hereof
or thereof or in furtherance of the exercise of any power granted hereby or
thereby or by law. No right conferred upon Holder by this Note shall be
exclusive of any other right referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise.
SECTION 5. DEFENSES.
5.1 No Offsets. The obligations of Maker under this Note shall not be
subject to reduction, limitation, impairment, termination, defense, set-off,
counterclaim or recoupment for any reason.
5.2 Usury Limitations. It is the intention of the parties hereto to
comply with all applicable usury laws; accordingly, it is agreed that
notwithstanding any provisions to the
3
EXECUTION VERSION
contrary in this Note or any other agreements or instruments between them, in no
event shall such agreements or instruments require the payment or permit the
collection of interest (which term, for purposes hereof, shall include any
amount which, under applicable law, is deemed to be interest, whether or not
such amount is characterized by the parties as interest) in excess of the
maximum amount permitted by such laws. If any excess of interest is
unintentionally contracted for, charged or received under the Note or under the
terms of any other agreement or instrument between the parties, the effective
rate of interest shall be automatically reduced to the maximum lawful rate of
interest allowed under the applicable usury laws as now or hereafter construed
by the courts having jurisdiction thereof.
SECTION 6. REPLACEMENT OF NOTE.
Upon receipt by Maker of reasonable evidence of the loss, theft,
destruction, or mutilation of this Note, Maker will deliver a new Note
containing the same terms and conditions in lieu of this Note. Any Note
delivered in accordance with the provisions of this Section 6 shall be dated as
of the date of this Note.
SECTION 7. EXTENSION OF MATURITY.
Should the principal of or interest on this Note become due and payable
on other than a business day, the due date thereof shall be extended to the next
succeeding business day, and, in the case of principal, interest shall be
payable thereon at the rate per annum herein specified during such extension.
For the purposes of the preceding sentence, a business day shall be any day that
is not a Saturday, Sunday, or legal holiday in the State of Delaware.
SECTION 8. ATTORNEYS' FEES AND COLLECTION FEES.
Should the indebtedness evidenced by this Note or any part hereof be
collected at law or in equity or in bankruptcy, receivership or other court
proceedings, arbitration or mediation, or any settlement of any of the
foregoing, Maker agrees to pay, in addition to principal and interest due and
payable hereon, all costs of collection, including, without limitation,
reasonable attorneys' fees and expenses, incurred by Holder in collecting or
enforcing this Note.
SECTION 9. WAIVERS; CONSENT TO JURISDICTION.
9.1 Waivers by Maker. Maker hereby waives presentment, demand for
payment, notice of dishonor, notice of protest and all other notices or demands
in connection with the delivery, acceptance, performance or default of this
Note.
9.2 Actions of Holder not a Waiver. No delay by Holder in exercising
any power or right hereunder shall operate as a waiver of any power or right,
nor shall any single or partial exercise of any power or right preclude other or
further exercise thereof, or the exercise of any other power or right hereunder
or otherwise; and no waiver or modification of the terms hereof shall be valid
unless set forth in writing by Holder and then only to the extent set forth
therein.
9.3 Consent to Jurisdiction. Maker hereby irrevocably submits to the
jurisdiction of any state or federal court sitting in the State of Delaware over
any suit, action, or proceeding arising out of or relating to this Note or any
other agreements or instruments with respect to
4
EXECUTION VERSION
Holder. Maker hereby irrevocably waives, to the fullest extent permitted by law,
any objection that Maker may now or hereafter have to the laying of venue of any
such suit, action, or proceeding brought in any such court and any claim that
any such suit, action, or proceeding brought in any such court has been brought
in an inconvenient forum. Final judgment in any such suit, action, or proceeding
brought in any such court shall be conclusive and binding upon Maker and may be
enforced in any court in which Maker is subject to jurisdiction by a suit upon
such judgment, provided that service of process is effected upon Maker as
provided in this Note or as otherwise permitted by applicable law.
9.4 Waiver of Jury Trial. MAKER WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY DEALINGS BETWEEN
MAKER AND HOLDER RELATING TO THE SUBJECT MATTER OF THIS NOTE. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS NOTE,
INCLUDING, WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY
NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT OR TO ANY
OTHER DOCUMENT OR AGREEMENT RELATING TO THE LOAN.
9.5 Service of Process. Maker hereby consents to process being served
in any suit, action, or proceeding instituted in connection with this Note by
delivery of a copy thereof by certified mail, postage prepaid, return receipt
requested, to Maker, and/or by delivery of a copy thereof to a registered agent
of Maker. Refusal to accept delivery, and/or avoidance of delivery, shall be
deemed to constitute delivery. Maker irrevocably agrees that service in
accordance with this Section 9.5 shall be deemed in every respect effective
service of process upon Maker in any such suit, action or proceeding, and shall,
to the fullest extent permitted by law, be taken and held to be valid personal
service upon Maker. Nothing in this Section 9.5 shall affect the right of Holder
to serve process in any manner otherwise permitted by law or limit the right of
Holder otherwise to bring proceedings against Maker in the courts of any
jurisdiction or jurisdictions.
SECTION 10. COVENANTS.
10.1 Affirmative Covenants. So long as this Note shall remain
outstanding:
(a) Office. Maker shall maintain its principal office, and the
majority of its employees, assets and operations, in the United States.
(b) Use of Proceeds. Maker will use the proceeds from this Note
only for the following purposes:
(i) General operating expenses, expenses for the development
and protection of its intellectual property, and other usual and customary
commercial and business expenses incurred in pursuing its business plan and
strategy, on and after the effective date hereof;
5
EXECUTION VERSION
(ii) Audit expenses and regular and special SEC filing
expenses, for audits and filings occurring on or after the effective date
hereof, including, without limitation, SEC filings relating to solicitation of
any shareholder consents to the recapitalization of Maker; and
(iii) Expenses of accountants, attorneys, consultants and
other professionals (including, without limitation, the expenses of Investor
described in Section 4.11 of the Recapitalization Agreement) relating to the
recapitalization of Maker.
Maker will not use the proceeds from this Note for any other purpose. Without
limiting the generality of the foregoing, none of the proceeds will be used,
without prior written agreement by the Holder, (i) to purchase or carry (or
refinance any borrowing, the proceeds of which were used to purchase or carry)
any "security" within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"), (ii) to repay any indebtedness or discharge any obligation to
an person or entity, other than trade payables incurred in the ordinary course
of business on or after the effective date hereof, and consistent with Maker's
operating plans and budgets fully disclosed to the Holder prior to the Closing,
or (iii) to engage in business activities which would cause a violation of 13
CFR 107.720. This latter limitation prohibits, without limitation, the use of
proceeds: (i) directly or indirectly, for providing funds to others; (ii) for
the purchase or discounting of debt obligations; (iii) for factoring or
long-term leasing of equipment with no provision for maintenance or repair; (iv)
for engaging in real estate transactions such that Maker could reasonably be
classified under Major Group 65 (Real Estate) of the SIC Manual; (v) for
business activities wherein the assets of the business of Maker (the "Business")
will be reduced or consumed, generally without replacement, as the life of the
Business progresses, and the nature of the Business does not require that a
stream of cash payments be made to the financing sources of the Business, on a
basis associated with the continuing sale of assets (examples of such businesses
would include real estate development projects, the financing and production of
motion pictures, and oil and gas well exploration, development and production);
(vi) for a foreign operation; (vii) to provide capital to a corporation licensed
or sub-licensed under the Small Business Investment Act, (viii) to acquire farm
land, (ix) to fund production of a single item or defined limited number of
items generally over a defined production period, such production to constitute
the majority, of the activities of Maker (examples include electric generating
plants), or (x) for any purpose contrary to the public interest (including, but
not limited to, activities which are in violation of law) or inconsistent with
free competitive enterprise, in each case, within the meaning of Section 107.720
of Title 13 of the Code of Federal Regulations.
(c) Seniority. Except as otherwise expressly provided, and except
for security interests and liens described in items 2, 3 and 4 of Schedule 14.11
of the Disclosure Schedule attached hereto as Exhibit B (the "Disclosure
Schedule"), the indebtedness evidenced by this Note: (i) shall be senior in all
respects to all other indebtedness or obligations of Maker of any kind, direct
or indirect, contingent or otherwise, other than obligations of Maker owed
directly to the state or federal government, and other than any other
indebtedness or obligations of Maker to Holder; (ii) shall not be made
subordinate or subject in right of payment to the prior payment of any other
indebtedness or obligation of any kind, direct or indirect, contingent or
otherwise, other than obligations of Maker owed directly to the state or federal
government, and other than any other indebtedness or obligations of Maker to
Holder.
6
EXECUTION VERSION
(d) No Conflicting Agreements. Maker shall not enter into any
agreement that would materially impair, interfere or conflict with Maker's
obligations hereunder. Without Holder's prior written consent, Maker shall not
permit the inclusion in any material contract to which it becomes a party of any
provisions that could or might in any way result in the creation of a security
interest in any assets of Maker, including without limitation any Collateral (as
defined in Exhibit A hereto).
(e) Disclosure of Material Adverse Events. Within three (3)
business days of Maker obtaining knowledge thereof, Maker will notify Holder in
writing of any event that may have a material adverse effect on the business,
affairs, prospects, operations, properties, assets, liabilities, structure or
condition, financial or otherwise, of the Company (as such business is presently
conducted and/or as it is proposed to be conducted), or on any material assets
or any Intellectual Property or other Collateral developed, owned, controlled,
licensed, possessed, or used by Maker, or to which Maker has any right, option,
entitlement or claim. Operating expenditures in the ordinary course of business
and in accordance with operating budgets approved by Maker's Board of Directors
and fully disclosed to Holder prior to the effective date hereof shall not be
deemed to be material adverse events solely because they weaken Maker's
financial condition in the absence of new equity financing of Maker.
(f) Financial Information. So long as any principal and/or
interest under this Note shall remain outstanding:
(i) Promptly after the end of each fiscal year (but in any
event prior to February 28 of each year) and at such other times as Holder may
reasonably request, Maker shall deliver to Holder a written assessment, in form
and substance satisfactory to Holder, of the economic impact of such Holder's
financing hereunder, specifying the full-time equivalent jobs created or
retained in connection with such investment, and the impact of the financing on
Maker's business in terms of revenues and profits and on taxes paid by Maker and
its employees.
(ii) Maker shall provide on a timely basis to Holder all
financial information requested from time to time by Holder, including without
limitation its quarterly and annual balance sheet and income statement. Such
financial information shall be certified by a member of Maker's senior
management. Financial information required shall also include such information
as is necessary for Holder to file form 468 with the SBA.
(iii) In addition to the information specified in Section
10.1(f)(i) and (ii) above, upon request, Maker agrees promptly to provide Holder
with sufficient additional information to permit Holder to comply with (i) its
obligations under the Small Business Investment Act of 1958, as amended, and the
regulations promulgated thereunder and related thereto and (ii) provide any
other information reasonably requested or required by any governmental agency
asserting jurisdiction over Holder.
(g) Access. So long as any principal and/or interest under this
Note shall remain outstanding, Maker shall permit Holder and its agents or
representatives to visit and inspect Maker's properties, to examine its books of
account and records and to discuss Maker's affairs, finances and accounts with
its officers, all at such times during normal business hours as reasonably may
be requested by Holder. Maker shall allow SBA Examiners access to its books
7
EXECUTION VERSION
and records, as reasonably required by such Examiners in connection with their
annual audits of Holder or for any other legitimate purposes.
(h) SBA Compliance. Maker acknowledges that Holder is a licensed
Small Business Investment Corporation and thereby a participant in the SBIC
program of the U. S. Small Business Administration ("SBA"), and as such is
subject to the rules, regulations, guidance and direction of the SBA on matters
affecting its business and investment practices, and that such rules and
regulations affect the business activities and practices of the companies in
which Holder makes investments. Maker shall promptly and fully cooperate with
Holder to facilitate both Maker's and Holder's compliance with all such SBA
rules, regulations, guidance and direction.
(i) Business Activity. As long as this Note shall remain
outstanding, Maker shall make no change in its business activity that would make
it or any of its business activities non-compliant with SBA regulations and
guidelines.
10.2 Negative Covenants. So long as this Note shall remain outstanding:
(a) Indebtedness. Maker shall not incur additional indebtedness,
beyond the indebtedness already existing as of the date hereof, for borrowed
money in excess of $10,000, in aggregate.
(b) Liens. Maker shall not grant to any person or entity a
security interest, lien, license, or other encumbrance of any kind, direct or
indirect, contingent or otherwise, in, to or upon any assets of Maker,
including, without limitation, any intellectual property of any kind, as defined
in Exhibit A hereto (respectively, the "Intellectual Property" and the
"Collateral").
(c) Sale or License of Assets. Maker shall not sell, lease,
transfer, assign or otherwise dispose of or encumber (including, without
limitation through licensing or partnering arrangements) or abandon, conceal,
injure or destroy any material assets (whether tangible or intangible) of Maker
(including, without limitation, any Collateral (as defined in Section 11), other
than with the prior written approval of Holder and in the ordinary course of
business.
(d) Issuance of Capital Stock. Except for (a) any transaction
pursuant to an Unsolicited Proposal that Maker accepts in accordance with the
fiduciary exception provided in Section 3.2 of the Recapitalization Agreement or
(b) shares of capital stock issuable upon exercise or conversion of warrants or
convertible securities outstanding prior to February 1, 2004, Maker shall not
without Holder's prior written approval: (i) issue any shares of capital stock
or other securities, or any instruments exercisable for or convertible into
capital stock or other securities, or (ii) make any promises, commitments,
undertakings, agreements or letters of intent for any of the issuances described
in (i) hereof.
(e) Distributions and Redemptions. Maker shall not declare or pay
any dividends or make any distributions of cash, property or securities of Maker
with respect to any shares of its common stock, preferred stock or any other
class or series of its stock, or, directly or indirectly (except for repurchases
of common stock by Maker in accordance with the terms of employee benefit plans
or written agreement between Maker and any of its employees approved
8
EXECUTION VERSION
by the Board of Directors of Maker prior to February 1, 2004), redeem, purchase,
or otherwise acquire for any consideration any shares of its common stock or any
other class of its stock.
(f) Hiring. Maker shall not hire, or agree to hire, any employee
or engage, or agree to engage, any consultant, independent contractor or any
other non-employee personnel, except in accordance with Maker's budget that has
been approved by Maker's board of directors and the Investor;
(g) Severance. Maker shall not enter into, increase, expand,
extend, or renew any severance, separation, retention, change of control or
similar agreement with any employee, consultant, independent contractor or any
other non-employee personnel, or agree, promise or commit to do so, without the
prior written approval of Investor;
(h) Facilities. Maker shall not purchase, lease, hire, rent or
otherwise acquire directly or indirectly any rights in or to any asset or
facility outside of the ordinary course of business in an amount in excess of
$10,000, in aggregate, or agree, promise or commit to do so, except in
accordance with the Maker's budget that has been approved by the Maker's board
of directors and the Investor.
(i) Other Limitations.
(i) Maker shall not change the nature of its business activity
in a manner that would cause a violation of 13 C.F.R. Section 107.720 and/or
Section 107.760(b) (including, without limitation, by undertaking real estate,
film production or oil and gas exploration activities). In the event that Maker
changes the nature of its business activity such that such change would render
Maker ineligible for financing pursuant to applicable SBA rules and regulations,
Maker agrees to use its best efforts to facilitate a transfer or redemption of
any securities then held by Holder.
(ii) Maker will at all times comply with the non-
discrimination requirements of 13 C.F.R. Parts 112, 113 and 117.
(iii) For a period of at least one year after the date of this
Note,Maker will locate no more than 49 percent of the employees or tangible
assets of Maker outside the United States.
10.3 Additional Covenant. Immediately after the effective date of this
Note, Maker shall recall all units of Maker's Tangential Flow Filtration ("TFF")
devices, and all specifications, diagrams, description or other information
relating to such TFF devices, or any similar device, from all third parties who
may currently have any of the foregoing. Maker will take all necessary steps to
ensure that such recall is effective as quickly as possible, and in no event
later than fifteen (15) days after the effective date hereof. Until the later of
the expiration of the Standstill Period (as defined in Section 13 below) or the
date on which this Note has been discharged in full, Maker shall not sell,
license, loan or otherwise in any way transfer or distribute Maker's Tangential
Flow Filtration ("TFF") devices or any similar device, or any specifications,
diagrams, description or other information about the TFF devices, to any third
party, or commit or promise or enter into any understanding of any kind, direct
or indirect,
9
EXECUTION VERSION
contingent or otherwise, to do any of the foregoing in regard to Maker's TFF
devices or any similar device, without the prior written consent of Holder in
each case.
SECTION 11. SECURITY INTEREST.
11.1 First Priority in All Collateral. To secure its obligations under
this Note whether at stated maturity, by acceleration or otherwise, Maker hereby
grants and pledges to Holder a first priority senior security interest in all of
Maker's right, title and interest in, to and under all of Maker's tangible and
intangible property, whether now owned, licensed or held or hereafter acquired,
licensed, developed, held or arising, as described in Exhibit A hereto (the
"Collateral"), and all proceeds of any kind from any disposition of any such
Collateral. Such security interest shall be senior to any security interest in
the Collateral granted the holders of the Management Notes pursuant to any
subordination agreement between Holder, the holders of the Management Notes and
Maker, and shall be senior to any other security interest of any kind, direct or
indirect, contingent or otherwise, in the Collateral except for the security
interests and liens described in items 2, 3 and 4 of Schedule 14.11 of the
Disclosure Schedule (only to the amounts set forth on such schedule) and any
other indebtedness or obligations of Maker to Holder. If certificates of title
are now, or hereafter become, issued or outstanding with respect to any of the
Collateral, Maker promptly shall cause the senior security interest of Holder to
be properly noted thereon. Maker agrees that the security interest herein
granted has attached and shall continue until Maker's obligations under this
Note have been paid, performed and indefeasibly discharged in full.
11.2 Rights Cumulative. The rights and remedies of Holder with respect
to the senior security interest granted hereby are in addition to those which
are now or may hereafter be available to Holder as a matter of law or equity.
Each right, power and remedy of Holder provided for herein, or now or hereafter
existing at law or in equity, shall be cumulative and concurrent and shall be in
addition to every right, power and remedy provided for herein, and the exercise
by Holder of any one or more of the rights, powers and/or remedies provided for
in this Note, or now or hereafter existing at law or in equity, shall not
preclude the simultaneous or later exercise by any person, including a grantee,
of any or all other rights, powers and/or remedies.
11.3 Documentation of Security Interest. Maker shall execute, deliver,
file, amend, and re-file any financing statements, instruments (including
without limitation stock certificates), continuation statements, assignments, or
other security agreements that Holder may require from time to time to confirm
the liens arising out of this Note with respect to the Collateral. Maker agrees
to pay all reasonable costs associated with filing and/or re-filing of any
financing statements, continuation statements or other security agreements
required to perfect and to continue perfection of Holder's security interest in
the Collateral and all reasonable costs required to evidence the first priority
of the security interest, including, without limitation, reasonable attorneys'
fees. Maker authorizes Holder to file financing statements under the UCC with
respect to the security interest granted hereby and agrees, upon request of
Holder, to promptly and duly execute and deliver any and all such further
instruments and documents, and to take such further action, as Holder may
reasonably deem necessary or desirable to obtain the full benefits of this grant
of security interest.
10
EXECUTION VERSION
11.4 No Conflicting Agreements. Maker shall not enter into any
agreement on or after the effective date of this Note that would materially
impair or conflict with Maker's obligations hereunder without Holder's prior
written consent. Without Holder's prior written consent, Maker shall not permit
the inclusion in any material contract to which it becomes a party on or after
the effective date of this Note, of any provisions that could or might in any
way prevent the creation, perfection and maintenance of a first priority
security interest in Maker's rights and interest in any property included within
the definition of the Collateral acquired under such contracts. Maker represents
and warrants that, as of the effective date of this Note, there are no existing
agreements or undertakings that would materially impair or conflict with Maker's
obligations hereunder or that could or might in any way prevent the creation,
perfection and maintenance of a first priority security interest in Maker's
rights and interest in any property included within the definition of the
Collateral acquired under such contracts; except for existing equipment leases
described in item 2 of Schedule 14.11 and the statutory liens described in items
3 and 4 of the Disclosure Schedule.
11.5 Notification Requirements. Within two (2) business days of any
officer, director or employee of Maker obtaining knowledge thereof, Maker will
promptly notify Holder in writing of any event that materially adversely affects
the value of any material Collateral, the ability of Maker to dispose of any
material Collateral, or the rights and remedies of Holder in relation thereto,
including the levy of any legal process against any of the Collateral.
11.6 Foreclosure Remedy. Notwithstanding anything to the contrary
herein or in the Recapitalization Agreement or any other agreement or document,
in the event that Maker is unable to pay and discharge this Note in full on the
Maturity Date, subject to the compliance with the requirements of the Delaware
Uniform Commercial Code, nothing herein or in the Recapitalization Agreement or
any other agreement or document shall be deemed to preclude, limit or restrict
Holder from requiring the delivery of some or all of the Collateral in full or
partial satisfaction of Maker's obligation under the Note. Alternatively, Holder
may, in its sole discretion, elect to cause some or all of the Collateral to be
sold, and the sale proceeds to be used to pay and discharge the Note in full.
SECTION 12. CONVERSION.
12.1 Holder's Election. Notwithstanding any other provision of this
Note or any applicable agreement or document, until, and/or in the absence of,
purchases for cash of a minimum of $15 million of Convertible Preferred Stock,
by Other Investors (as defined in the Recapitalization Agreement), on the terms
and conditions set forth herein and in the Recapitalization Agreement, Holder
may, in its sole discretion, elect to convert any or all of the principal and/or
interest due under the Note into any Equity Security and/or Debt Security (each
as defined below) and/or any combination thereof, in each case that Holder shall
designate in Holder's sole discretion (the securities so elected being the
"Holder Designated Securities"). Holder may make such determinations from time
to time and at any time before this Note has been discharged in full, and, as
applicable, at any time on or before the expiration of the thirty (30) day
notice period required under this Note in the event the Maker wishes to prepay
this Note. For purposes hereof, (i) the term "Equity Security" means any class
or series of equity security, or any combination of classes and/or series of
equity securities, of the Maker that have been authorized under the Maker's
certificate of incorporation, as amended and/or restated,
11
EXECUTION VERSION
including by any certificate of designation (the "Charter"), or any new class or
series of equity security, or any combination of new and/or existing classes
and/or series of equity securities, of the Maker for which the Maker has
undertaken any agreement, obligation, promise, commitment or letter of intent to
obtain such authorization and (ii) the term "Debt Security" means any evidence
of indebtedness of the Maker that the Maker has authorized, created or incurred,
or that the Maker has undertaken any agreement, obligation, promise, commitment
or letter of intent to authorize, create or incur.
12.2 Automatic Conversion. The principal amount of, and accrued and
unpaid interest on, this Note shall automatically convert into Convertible
Preferred Stock, upon the terms and conditions set forth herein and in the
Recapitalization Agreement, only in the event, and upon the closing of, the
purchase in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments), on the
terms and conditions set forth in the Convertible Preferred Stock Term Sheet, by
Other Investors, as defined in the Convertible Preferred Stock Term Sheet, of a
minimum of $15 million of Convertible Preferred Stock.
12.3 Information for Holder's Election. Maker shall provide to Holder,
within two (2) business days after notice of each request by Holder, all
information reasonably requested by Holder in connection with any Equity
Securities and/or Debt Securities, to enable Holder to make decisions regarding
one or more conversions. In the event that Maker seeks to prepay this Note,
Maker shall deliver to Holder, simultaneously and together with the notice
required under Section 2 of this Note of Maker's interest in prepaying the Note,
a summary of all material information, terms and conditions relating to all
Equity Securities and Debt Securities (including any "side" letters or
agreements or separate agreements).
12.4 Conversion Price. The conversion price for any conversion pursuant
to Section 12.2 shall be the lowest nominal or effective price per share paid by
the Other Investors who purchase such Convertible Preferred Stock (with the
exception of shares issuable upon exercise of the Bridge Warrants). The
conversion price for any conversion into any equity or debt security pursuant to
Section 12.1 shall be the lowest of (i) the lowest nominal or effective price
per share paid by any investor at any time on or after the date one year prior
to the Effective Date of the Recapitalization Agreement (with the exception of
(x) purchases of up to 35,000 shares of Common Stock pursuant to certain options
to purchase, at a purchase price of $0.0001, that were outstanding on the
Effective Date of the Recapitalization Agreement and held by members of the
Board of Directors, as set forth in Schedule 2.7(d) to the Recapitalization
Agreement, and (y) shares issuable upon the exercise of the Bridge Warrants,
each of which shall be excluded from consideration under this section), (ii) the
lowest nominal or effective price at which any investor is entitled to acquire
shares (including, without limitation, through purchase, exchange, conversion or
exercise) pursuant to any other security, instrument, or promise, undertaking,
commitment, agreement or letter of intent of the Maker outstanding on or after
the Effective Date of the Recapitalization Agreement or granted, issued,
extended or otherwise made available by the Maker at any time on or after the
date one year prior to the Effective Date of the Recapitalization Agreement
(regardless of whether currently exercisable or convertible) (with the exception
of (x) certain options to purchase up to 35,000 shares of Common Stock at a
purchase price of $0.0001 that were outstanding on the Effective Date of the
Recapitalization Agreement and held by members of the Board of Directors as set
forth in Schedule 2.7(d) to the Recapitalization Agreement, and (y) the Bridge
Warrants, each of which shall be excluded from
12
EXECUTION VERSION
consideration under this section); and (iii) the lesser of $0.10 per share or
35% discount to the average closing price per share of the Common Stock during
any twenty consecutive trading days (beginning with the twenty consecutive
trading days prior to the Effective Date of the Recapitalization Agreement);
provided, however, that in no event shall the price per share calculated
pursuant to this clause (iii) be less than $.04 per share. The calculation
required by clause (ii) hereof shall initially be based upon Schedule 2.7(d) to
the Recapitalization Agreement. All other rights, preferences, privileges, terms
and conditions received by Holder in connection with any conversion and/or any
securities issued by the Maker to Holder upon conversion, shall be no less
favorable to Holder than the rights, preferences, privileges, terms and
conditions any other investor in the Maker has received or is entitled to
receive with respect to the security into which Holder is converting pursuant to
any other security, instrument, promise, undertaking, commitment, agreement or
letter of intent of the Maker, whether or not such rights, preferences,
privileges, terms and conditions for any other investor are incorporated into
the agreements or documents relating to any conversion or any issuance of the
security or other instrument to that investor or are provided separately, at any
time on or after one year prior to the Effective Date of the Recapitalization
Agreement. In regard to each conversion hereunder, the Maker hereby agrees to
take and/or arrange for all necessary corporate and related action to enable the
execution of each such conversion elected by Holder.
12.5 No Impairment. Maker shall not, by amendment of its Charter or
through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by Maker under and/or in connection
with this Note, but shall at all times in good faith use best efforts to assist
in carrying out of all the provisions of and/or relating to this Note and in
taking all such action as may be necessary or appropriate to protect Holder's
rights, preferences and privileges under and/or in connection with the Note
against impairment. Holder's rights, preferences and privileges granted under
and/or in connection with any Holder Designated Securities may not be amended,
modified or waived without the Holder's prior written consent, and the
documentation providing for such rights, preferences and privileges will
specifically provide as such.
SECTION 13. STANDSTILL, EXCLUSIVITY AND CONFIDENTIALITY.
During the Bridge Period and the Equity Financing Period, as defined in the
Recapitalization Agreement and in the Convertible Preferred Stock Term Sheet,
but excluding the periods from February 18, 2004 through February 29, 2004 and
from March 16, 2004 through the Effective Date of the Recapitalization
Agreement, (collectively the "STANDSTILL PERIOD") the parties shall have worked
together, and shall continue to work together, in good faith with best efforts
to implement the terms of the Recapitalization Agreement, upon which the parties
shall have reached binding agreement and which the parties shall have executed
as a condition precedent to the execution and funding of this Note. Except as
provided in the fiduciary exception set forth in Section 3.2 of the
Recapitalization Agreement, during the Standstill Period, the Maker and its
officers, directors, employees, agents, advisers, consultants, partners and
collaborators shall work only with Holder and its agents, advisers and
consultants, and shall have had, and shall continue to have, no discussions,
negotiations and/or communications of any kind with any other parties,
regardless of which party initiates or attempts to initiate any such contact or
communication, in regard to any potential equity or debt financing of the Maker
by parties other than Holder, and/or
13
EXECUTION VERSION
any joint venture, license, co-development or other business arrangement by or
with parties other than Holder. Notwithstanding the fiduciary exception set
forth in Section 3.2 of the Recapitalization Agreement, during the Standstill
Period, the Maker and its officers, directors, employees, agents, advisers,
consultants, partners and collaborators shall maintain confidentiality, and
shall not have, and shall continue not to provide copies, excerpts, summaries,
descriptions, or communicate in any way with any third parties, either directly
or indirectly, as to any aspects of the recapitalization of Maker and/or any
financing by Holder, including, without limitation, the identity of the parties
involved, any terms of the Recapitalization Agreement, this Note, the Related
Recapitalization Documents, the Convertible Preferred Stock or any other matter
relating to the recapitalization of Maker, or the progress or status of any
activities or processes relating to the recapitalization of Maker; provided,
however, nothing herein shall prohibit the Maker from filing this Note, the
Recapitalization Agreement and any Related Recapitalization Document with the
Securities and Exchange Commission (the "SEC"), if required by the regulations
of the SEC (subject to the covenant in Section 2.5(a) of the Recapitalization
Agreement). During the Standstill Period, the Maker shall not make any sales of
equipment or other assets of any kind, including, without limitation, any
non-essential laboratory equipment, and the Maker shall comply with Section 10.3
in regard to the TFF devices.
SECTION 14. REPRESENTATIONS AND WARRANTIES.
Except as expressly set forth (with reference to a section in this Note) in the
Disclosure Schedule attached hereto as Exhibit B, and only to the extent such
exceptions are acceptable to Holder in its sole discretion as of the date of
this Note, and independently as of the date upon which each additional Note is
issued to Holder, and as of the date of each closing, if any, of the Anticipated
Equity Financing, Maker represents and warrants to the following:
14.1 Organization, Good Standing and Qualification. Maker 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. Maker 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, properties, operations, prospects or
condition (financial or otherwise).
14.2 Authorization of Note, Etc. The execution, delivery and
performance by Maker of this Note has been duly authorized by all requisite
corporate action by Maker in accordance with Delaware law. This Note is a valid
and binding obligation of Maker, enforceable against Maker in accordance with
its terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws of general application effecting
enforcements of creditors' rights or general principles of equity.
14.3 No Conflicts. The execution, delivery, performance, issuance, sale
and delivery of this Note and the Related Recapitalization Documents, and
compliance with the provisions hereof by Maker, will not (a) to the knowledge of
Maker, violate any provision of any law, statute, rule or regulation applicable
to Maker or any ruling, writ, injunction, order, judgment or decree of any
court, arbitrator, administrative agency or other governmental body applicable
to Maker or any of its properties or assets or (b) conflict with or result in
any material breach of any
14
EXECUTION VERSION
of the terms, conditions or provisions of, or constitute (with notice or lapse
of time or both) a material default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of, any
encumbrance upon any of the material assets of Maker under, the Charter or
Bylaws of Maker (as they may be amended to date) or any agreement or instrument
to which Maker is a party. As used herein, "encumbrance" shall mean any liens,
charges, encumbrances, equities, claims, options, proxies, pledges, security
interests, licenses or other similar rights of any nature.
14.4 Compliance with Other Instruments. Maker is not in violation of
any term of Maker's Charter, as amended, including any certificate of
designation filed therewith, and/or Maker's Bylaws. Maker is not, in any
material respect, in violation of any term of any mortgage, indenture, contract,
agreement, instrument, judgment, decree, order, statute, rule or regulation to
which Maker or any of such Collateral is subject. To the best of Maker's
knowledge, no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a breach or violation, in any material
respect, under any applicable judgments, orders, writs, decrees, federal, state
and/or local laws, rules or regulations which would have a material adverse
affect on the condition, financial or otherwise, or operations of Maker (as it
is currently conducted and as it is proposed to be conducted) or on any material
assets or any Intellectual Property or other Collateral owned, controlled,
licensed, possessed, and/or used by Maker. To the best of its knowledge, Maker
has avoided every condition, and has not performed any act, the occurrence of
which would result in Maker's loss of any right granted under any license,
distribution agreement or other agreement or Maker's loss of any rights in or to
any Collateral.
14.5 Approvals. Maker has obtained all necessary permits,
authorizations, waivers, consents and approvals of or by, and made all necessary
notifications of and/or filings with, all applicable persons (governmental and
private), in connection with the execution, delivery, performance, issuance,
sale and/or delivery of this Note, the Recapitalization Agreement and the
Related Recapitalization Documents, and consummation by Maker of the
transactions contemplated hereby and thereby, except as listed in Schedule 14.5
14.6 Capitalization. The authorized capital stock of Maker consists of
125,000,000 shares of Common Stock, par value $0.001 per share and 15,000,000
shares of Preferred Stock, par value of $0.001 per share. As of the date hereof,
19,028,779 shares of Common Stock are issued and outstanding and no shares of
preferred stock of any kind are issued and outstanding. No other shares of any
class or series of Maker's capital stock are authorized and/or issued and
outstanding. All issued and outstanding shares of capital stock of Maker have
been duly authorized and validly issued, and are fully paid and non-assessable,
and have been offered, sold and delivered by Maker in compliance with all
applicable federal and state securities laws. Except as set forth in Schedule
14.6, no subscription, warrant, option, convertible security, or other right
(direct or indirect, contingent or otherwise) to purchase or otherwise acquire
any equity securities of Maker is authorized or outstanding, and there is no
agreement, promise, commitment, undertaking or letter of intent of any kind
(direct or indirect, contingent or otherwise) by Maker to issue any shares,
subscriptions, warrants, options, convertible securities, or other such rights,
or to distribute to holders of any of its equity securities any evidence of
indebtedness or asset. Except as set forth in Schedule 14.6, Maker has no
obligation of any kind (direct or indirect, contingent or otherwise) to
purchase, redeem or otherwise acquire any of its equity securities or any
interest therein or to pay any dividend or make any other distribution in
15
EXECUTION VERSION
respect thereof. Schedule 14.6 includes a true, accurate and complete statement
describing the total number of shares of Maker outstanding as of the date of
this Note (on a fully diluted basis, including, without limitation, all warrants
and options outstanding (whether or not currently exercisable), all convertible
instruments of any kind (whether or not currently convertible), shares of all
classes of stock, and any agreements, promises, commitments, undertakings or
letters of intent to issue any of the foregoing.
14.7 Authorization of the Shares. Maker has, or before the first
closing of the Anticipated Equity Financing hereunder will have, authorized the
issuance and sale of a sufficient number of shares of Convertible Preferred
Stock, par value $0.001 per share, and Common Stock of the Maker to fully
implement the Recapitalization Plan, while maintaining such additional
authorized but unissued shares as reasonably determined by Holder to be
appropriate. Of such authorized shares, a sufficient number of shares shall be
reserved for issuance upon any exercise of the Bridge Warrants and/or Preferred
Stock Warrants. If at any time the number of authorized but unissued shares of
Convertible Preferred Stock and/or of Common Stock is not sufficient to effect
the conversion of all then outstanding convertible Notes and other instruments,
and the exercise of all then outstanding warrants, options and similar
instruments, then, in addition to such other remedies as may be available to
Holder, Maker shall take such corporate action as may be necessary to increase
its authorized but unissued shares of Convertible Preferred Stock and/or Common
Stock to such number of shares as will be sufficient for such purposes. Such
corporate action shall include, without limitation, obtaining all requisite
regulatory approvals and any requisite shareholder approval of any necessary
amendment to Maker's Charter.
14.8 Litigation. There is no action, suit, proceeding or investigation
pending or, to the knowledge of Maker, currently threatened against Maker,
and/or its directors, officers, advisers, agents, properties, assets or
business, in each case relating to Maker and/or its business, assets, operations
or properties. Maker is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by Maker
currently pending or which Maker intends to initiate.
14.9 No Liens. Except for liens for the benefit of Holder, created by
this Note, the Recapitalization Agreement and/or any of the Related
Recapitalization Documents, and except as set forth in Schedule 14.9 of the
Disclosure Schedule, none of the material assets of Maker, including the
Collateral, are subject to any existing lien, pledge, security interest or other
encumbrance of any kind, direct or indirect, contingent or otherwise.
14.10 Full Disclosure. Notwithstanding any other provision of this
Note, neither this Note, nor any exhibit hereto, nor any written report,
certificate, instrument or other information furnished to Holder in connection
with the transactions contemplated under and/or in connection with Note contain
any material misstatement (including, without limitation, any material
omission), or is misleading in any material respect.
14.11 No Other Security Interests or Other Encumbrances. Except as set
forth in Schedule 14.11 (and only to the amounts set forth on such schedule),
there are no existing security interests, pledges, liens or other encumbrances
of any kind, direct or indirect, contingent
16
EXECUTION VERSION
or otherwise (including without limitation any licensing or partnering
arrangements or agreements), in or relating to any assets of Maker, including,
without limitation, any Intellectual Property (as defined herein) or other
Collateral. All existing security interests, pledges, liens or other
encumbrances of any kind, other than those set forth in Schedule 14.11 hereto
(and only to the amounts set forth on such schedule), are subordinate to the
security interest established pursuant to Section 11 hereof, all necessary
consents, subordination agreements and waivers, if any, have been obtained, and
all amended filings and/or re-filings shall be made immediately upon execution
of this Note.
14.12 "Small Business".
(a) Small Business Status. Maker together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of Code of
Federal Regulations (the "FEDERAL REGULATIONS")) is a "small business concern"
within the meaning of the Small Business Investment Act of 1958, as amended (the
"SMALL BUSINESS ACT" or "SBIA"), and the regulations promulgated thereunder,
including Section 121.301(c) of Title 13, Code of Federal Regulations.
(b) Information for SBA Reports. Maker has delivered and/or
will deliver to Holder certain information, set forth by and regarding the Maker
and its affiliates in connection with this Note, on SBA Forms 480, 652 and Part
A and B of Form 1031. This information delivered was true, accurate, complete
and correct, and any information yet to be delivered will be true, accurate,
complete and correct, and in form and substance acceptable to Holder.
(c) Eligibility. Maker is eligible for financing by any Holder
pursuant to Section 107.720 of Title 13 of the Federal Regulations and any other
SBA regulations.
14.13 Intellectual Property.
(d) Definitions. "Intellectual Property" means all foreign and
domestic intangible property and rights, owned, licensed, sub-licensed or
otherwise obtained by Maker, including, without limitation, (i) inventions,
discoveries and ideas, whether patentable or not, and all patents, registrations
and applications therefor, including divisions, continuations,
continuations-in-part, requests for continued examination, and renewal
applications, and including renewals, extensions and reissues (collectively,
"Patents"); (ii) confidential and proprietary information, trade secrets and
know-how, including without limitation processes, schematics, formulae,
drawings, prototypes, models, designs and customer lists (collectively, "Trade
Secrets"); (iii) all data, slides, observations, and laboratory results,
produced by, for or on behalf of Maker, or which Maker has rights to obtain
(collectively, "Data"); (iv) all FDA applications, registrations, filings and
other rights (collectively, "FDA Rights") and all data and documentation
supporting or relating thereto; (iv) published and unpublished works of
authorship, whether copyrightable or not (including, without limitation,
databases and other compilations of information), copyrights therein and
thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, "Copyrights");
(v) trademarks, service marks, brand names, certification marks, collective
marks, d/b/a's, Internet domain names, logos, symbols, data, trade dress,
assumed names, fictitious names, trade names, and other indicia of origin, all
applications and registrations for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all
17
EXECUTION VERSION
extensions, modifications and renewals of same (collectively, "Trademarks");
(vi) all other intellectual property or proprietary rights, including, without
limitation, all claims or causes of action arising out of or related to any
infringement, misappropriation or other violation of any of the foregoing,
including rights to recover for past, present and future violations thereof
(collectively, "Other Proprietary Rights").
"Intellectual Property Contracts" means all agreements involving,
relating to or affecting the Intellectual Property, including, without
limitation, agreements granting rights to use the Licensed or Sub-Licensed
Intellectual Property, agreements granting rights to use Owned Intellectual
Property, confidentiality agreements, Trademark coexistence agreements,
Trademark consent agreements and non-assertion agreements.
"Licensed or Sub-Licensed Intellectual Property" means the Intellectual
Property that Maker is licensed, sub-licensed or otherwise permitted by other
persons or entities to use.
"Owned Intellectual Property" means the Intellectual Property owned by
Maker.
"Registered" means issued, registered, renewed or the subject of a
pending application.
(e) Schedule 14.13 ("Intellectual Property") sets forth a true
and complete list and summary description of (A) all Registered or material
Owned Intellectual Property (each identified as a Patent, Trademark, Trade
Secret, Copyright or Other Proprietary Right, as the case may be); (B) all
Licensed or Sub Licensed Intellectual Property and (C) all Intellectual Property
Contracts.
(f) All Intellectual Property is valid, subsisting and
enforceable. No Owned Intellectual Property has been canceled, suspended,
adjudicated invalid, not maintained, expired or lapsed, or is subject to any
outstanding order, judgment or decree restricting its use or adversely affecting
or reflecting Maker's rights thereto. No Licensed or Sub-Licensed Intellectual
Property has been canceled, suspended, not renewed or extended, adjudicated
invalid, not maintained, expired or lapsed, or is subject to any outstanding
order, judgment or decree restricting its use or adversely affecting or
reflecting Maker's rights thereto.
(g) The Owned Intellectual Property is owned exclusively by
Maker and has been used with all patent, trademark, copyright, confidential,
proprietary and other Intellectual Property notices and legends prescribed by
law or otherwise permitted.
(h) No suit, action, reissue, reexamination, public protest,
interference, opposition, cancellation or other proceeding (collectively,
"Suit") is pending or threatened concerning any claim or position:
(i) that Maker, or another person or entity, has violated
any Intellectual Property rights. To Maker's best knowledge, Maker is not
violating and has not violated any intellectual property rights of any other
party.
(ii) that Maker, or another person or entity, has breached
any Intellectual Property Contract. There exists no event, condition or
occurrence which, with the giving of notice or lapse of time, or both, would
constitute a breach or default by Maker, or a
18
EXECUTION VERSION
breach or default by another person or entity, under any Intellectual Property
Contract. No party to any Intellectual Property Contract has given Maker notice
of its intention to cancel, terminate or fail to renew any Intellectual Property
Contract.
(iii) that the Intellectual Property has been violated or
is invalid, unenforceable, unpatentable, unregisterable, cancelable, not owned
or not owned exclusively by Maker. No such claim has been threatened or
asserted. To Maker's best knowledge, no valid basis for any such Suits or claims
exists.
(i) To Maker's best knowledge, no other person or entity is
violating, infringing upon or claiming rights incompatible with Maker's rights
to any Intellectual Property. Maker has provided to Holder copies of all
information reasonably available to it relevant to intellectual property rights
claimed by third parties and possible infringement thereof including, without
limitation, any freedom to practice or freedom to operate opinions.
(j) Except as set forth on Schedule 14.13(j), Maker owns or
otherwise holds valid rights to use all Intellectual Property used in its
business.
(k) Maker has timely made all filings and payments with the
appropriate foreign and domestic agencies and other parties required to maintain
in full force and effect all Intellectual Property. Except as set forth on
Schedule 14.13, no due dates for filings or payments concerning the Intellectual
Property (including, without limitation, office action responses, affidavits of
use, affidavits of continuing use, renewals, requests for extension of time,
maintenance fees, application fees and foreign convention priority filings) fall
due within ninety (90) days prior to or after the closing, whether or not such
due dates are extendable. Maker is in compliance with all applicable rules and
regulations of such agencies and other parties with respect to the Intellectual
Property. All documentation necessary to confirm and effect the Intellectual
Property, if acquired from other persons or entities, has been recorded in the
United States Patent and Trademark Office, the United States Copyright Office
and other official offices.
(l) Maker has undertaken and consistently implemented best
efforts to protect the secrecy, confidentiality and value of all non-public
Intellectual Property used in its business (including, without limitation,
entering into appropriate confidentiality agreements with all officers,
directors, employees and other persons or entities with access to such
non-public Intellectual Property). Maker management has not disclosed any such
non-public Intellectual Property to any persons or entities other than (i) Maker
employees or Maker contractors who had a need to know and use such non-public
Intellectual Property in the ordinary course of employment or contract
performance, or (ii) prospective customers, and in each case who executed
appropriate confidentiality agreements.
(m) Maker has taken all reasonable measures to confirm that no
current or former Maker employee is or was a party to any confidentiality
agreement or agreement not to compete that restricts or forbids, or restricted
or forbade at any time during such employee's employment by Maker, such
employee's performance of Maker's business, or any other activity that such
employee was hired to perform or otherwise performed on behalf of or in
connection with such employee's employment by Maker.
19
EXECUTION VERSION
14.14 SEC Filings; Financial Statements.
(a) Maker has delivered or made available to Holder accurate
and complete copies of all registration statements, proxy statements and other
statements, reports, schedules, forms and other documents filed by the Maker
with the SEC since January 1, 2003, and all amendments thereto (the "Maker SEC
Documents"). Except as set forth on Schedule 14.14(a), all statements, reports,
schedules, forms and other documents required to have been filed by Maker with
the SEC have been so filed on a timely basis. As of the time it was filed with
the SEC (or, if amended or superseded by a filing prior to the date of this
Note, then on the date of such filing): (i) each of the Maker SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act or the Exchange Act (as the case may be); and (ii) none of the
Maker SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
(b) The financial statements (including any related notes)
contained in the Maker SEC Documents: (i) complied as to form in all material
respects with the published rules and regulations of the SEC applicable thereto;
(ii) were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered (except as may be
indicated in the notes to such financial statements or, in the case of unaudited
statements, as permitted by Form 10-Q of the SEC, and except that the unaudited
financial statements may not contain footnotes and are subject to normal and
recurring year-end adjustments that will not, individually or in the aggregate,
be material in amount), and (iii) fairly present the consolidated financial
position of Maker and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations and cash flows of Maker and
its consolidated subsidiaries for the periods covered thereby.
14.15 Liabilities. Maker has no accrued, contingent or other
liabilities of any nature, either matured or unmatured, except for: (a)
liabilities identified as such in Maker's audited balance sheet as of December
31, 2003, or the notes thereto; (b) liabilities that have been incurred by Maker
since December 31, 2003 in the ordinary course of business and consistent with
past practices, and that do not exceed a maximum potential amount of $330,000;
and (c) expenses that have been incurred by the Maker (but not including any
expenses of Holder that Maker is obligated to reimburse in connection therewith)
in the preparation and review of the Recapitalization Agreement and the Related
Recapitalization Documents, and that do not exceed $72,000.
14.16 Compliance with All Standstill Provisions. Maker has complied in
all respects with all standstill, exclusivity and confidentiality provisions of
(a) this Note, the Recapitalization Agreement and the Related Recapitalization
Documents, (b) Section 13 of that certain 10% Convertible, Secured Promissory
Note by and between Maker and Holder dated as of February 2, 2004 and (c)
Section 13 of that certain 10% Convertible, Secured Promissory Note by and
between Maker and Holder dated as of March 1, 2004.
20
EXECUTION VERSION
SECTION 15. INDEMNIFICATION
15.1 Indemnification Agreement.
(a) In addition to all rights and remedies available to Holder at law
or in equity, Maker shall indemnify Holder and each subsequent holder of this
Note, and their respective affiliates, stockholders, limited partners, general
partners, officers, directors, managers, employees, agents, representatives,
successors and assigns (collectively, the "Indemnified Persons") and save and
hold each of them harmless against and pay on behalf of or reimburse such party
as and when incurred for any loss, liability, demand, claim, action, cause of
action, cost, damage, deficiency, tax, penalty, fine or expense (other than any
demand, claim, action or cause of action instituted by Maker), including
interest, penalties, reasonable attorneys' fees and expenses, and all amounts
paid in investigation, defense or settlement of any of the foregoing
(collectively, "Losses) which any such party may suffer, sustain or become
subject to, as a result of, in connection with, relating or incidental to or by
virtue of:
(i) any material misrepresentation in, or material omission from,
or breach of any of the representations, warranties, statements, schedules
and/or exhibits hereto, certificates or other instruments or documents furnished
to Holder by Maker in connection with this Note; or
(ii) any material nonfulfillment or material breach of any
covenant or agreement on the part of Maker under this Note.
(b) Notwithstanding the foregoing, Maker shall not be liable for any
portion of Losses resulting from the gross negligence or willful misconduct of
Holder or a subsequent holder of this Note.
(c) Within twenty (20) days after receipt of notice of commencement of
any action or the assertion of any claim by a third party, Holder shall give
Maker written notice thereof together with a copy of such claim, process or
other legal pleading of such claim. Maker shall have the right to assist in the
defense thereof by representation of its own choosing.
15.2 Survival. All indemnification rights hereunder shall survive the
execution and delivery of this Note and the consummation of the transactions
contemplated hereby (i) for a period of two years with respect to
representations and warranties made by Maker, and (ii) until fully performed
with respect to covenants and agreements made by Maker, regardless of any
investigation, inquiry or examination made for or on behalf of, or any knowledge
of Holder and/or any of the Indemnified Persons, or the acceptance by Holder of
any certificate or opinion.
15.3 Payment. Any indemnification of Holder or any other Indemnified Person
by Maker pursuant to this Section 15 shall be effected by wire transfer of
immediately available funds from Maker to an account designated by Holder or
such other Indemnified Person within fifteen (15) days after the determination
thereof.
21
EXECUTION VERSION
SECTION 16. INTEGRATION WITH RECAPITALIZATION PLAN
Maker acknowledges and agrees that the funding provided by Holder pursuant to
this Note is only being provided as part of an integrated Recapitalization Plan,
as set forth in the Recapitalization Agreement. Maker further acknowledges and
agrees that this Note is subject to all terms and conditions set forth in the
Recapitalization Agreement.
SECTION 17. MISCELLANEOUS.
17.1 Notices. All notices, demands and requests of any kind to be
delivered to any party in connection with this Note shall be in writing and
shall be deemed to be effective upon delivery if (i) personally delivered, (ii)
sent by confirmed facsimile with a copy sent by nationally recognized overnight
courier, (iii) sent by nationally recognized overnight courier, or (iv) sent by
registered or certified mail, return receipt requested and postage prepaid,
addressed as follows:
if to Maker: Northwest Biotherapeutics, Inc.
00000 00xx Xxx XX, Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000 0000
Attn: Xxxxx Xxxxxxx
if to Holder: Toucan Capital Fund II, LP
0000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx X. Xxxxxx
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance with the
provisions of this Section.
17.2 Parties In Interest. This Note shall bind and inure to the benefit of
Holder, Maker and their respective successors and permitted assigns. Maker shall
not transfer or assign this Note without the prior written consent of Holder.
Holder may transfer and assign this note without the prior consent of Maker.
17.3 Entire Agreement. This Note together with the Disclosure Schedule and
the Recapitalization Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes all prior agreements
and understandings among the parties with respect thereto.
17.4 Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of Delaware (without giving effect to
principles of conflicts of laws of the State of Delaware or any other state).
22
EXECUTION VERSION
17.5 Headings. The section and paragraph headings contained in this Note
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Note.
17.6 Amendments. No provision of this Note may be amended or waived without
the express written consent of both Maker and Holder, provided, however, that
Holder may waive any provision hereof that inures to the benefit of Holder
without the prior written consent of Maker. Also notwithstanding anything to the
contrary, this Note shall be amended as and to the extent necessary to comply
with the Small Business Investment Act and all regulations, advice, direction
and guidance applicable to SBIC's.
17.7 Nature of Obligation. This Note is being made for business and
investment purposes, and not for household or other purposes.
17.8 Expenses. Maker shall pay, reimburse or otherwise satisfy, upon demand
of Holder, all fees, costs and expenses incurred and/or undertaken, and to be
incurred and/or undertaken, by Holder relating to the preparation for,
development of and implementation of the Recapitalization Plan set forth in the
Recapitalization Agreement, including, without limitation, all due diligence
expenses and all expenses relating to the Bridge Funding, the Anticipated Equity
Financing and the transactions contemplated thereby and the documentation of the
foregoing (including, without limitation all legal fees and expenses and costs
incurred and to be incurred in connection with any SBA filings), which shall be
satisfied by Maker upon Holder's demand, including but without limitation upon
each closing of the Bridge Funding or Anticipated Equity Financing. This
obligation shall apply regardless of whether or not all of the transactions
contemplated in the Recapitalization Agreement close. At each closing of Bridge
Funding or Anticipated Equity Financing, at Holder's sole discretion, and with
respect to any or all of such fees, costs and expenses accrued through such
closing, Maker shall (a) pay Holder in cash concurrently with such closing (or
at Holder's sole discretion, Investor may withhold such amount from the wire of
investment proceeds), (b) issue a Note in the form hereof in principal amount
equal to such fees, costs and expenses (which at Holder's option may instead be
evidenced as an increase in the principal amount of any Note issued in
connection with such closing); or (c) treat such fees, costs and expenses as an
unsecured payable. At any time following such closing, Holder may require any
amounts that it elected to have Maker treat as unsecured amounts payable to be
paid in cash or satisfied by issuance of a Note in the principal amount of some
or all of such unsecured obligation.
23
EXECUTION VERSION
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed by
its duly authorized person(s) as of the date first written above.
NORTHWEST BIOTHERAPEUTICS, INC.
By ___________________________________
Name: ________________________________
Title: _______________________________
CONSENT AND AGREEMENT
Toucan Capital Fund II, L.P. consents to the loan and security interest granted
by Maker in the foregoing Note.
TOUCAN CAPITAL FUND II, L.P.
By ___________________________________
Name: ________________________________
Title: _______________________________
24
EXECUTION VERSION
EXHIBIT A
DESCRIPTION OF COLLATERAL
The "Collateral" consists of all of Maker's right, title and interest
(in each case, whether now owned or hereafter acquired) in and to the following:
(a) All intellectual property of any kind, whether owned, licensed or
otherwise permitted to be used, and whether now held or hereafter acquired or
developed (the "Intellectual Property"). Such Intellectual Property shall
include, without limitation, all foreign and domestic intangible property and
rights, owned, licensed or otherwise obtained by Maker, including, without
limitation, (i) trademarks, service marks, brand names, certification marks,
collective marks, d/b/a's, Internet domain names, logos, symbols, trade dress,
assumed names, fictitious names, trade names, and other indicia of origin, all
applications and registration for the foregoing, and all goodwill associated
therewith and symbolized thereby, including all extensions, modifications and
renewals of same, including without limitation those items reference on Appendix
1 hereto (collectively, "Trademarks"); (ii) inventions, discoveries and ideas,
whether patentable or not, and all patents, registrations and applications
therefor, including divisions, continuations, continuations-in-part, requests
for continued examination, and renewal applications, and including renewals,
extensions and reissues, including without limitation those items reference on
Appendix 2 hereto (collectively, "Patents"); (iii) confidential and proprietary
information, trade secrets and know-how, including, without limitation,
processes, schematics, formulae, drawings, prototypes, models, designs and
customer lists (collectively, "Trade Secrets"); (iv) published and unpublished
works of authorship, whether copyrightable or not (including, without
limitation, databases and other compilations of information), copyrights therein
and thereto, and registrations and applications therefor, and all renewals,
extensions, restorations and reversions thereof (collectively, "Copyrights");
(v) all FDA applications, registrations, filings and other rights (collectively,
"FDA Rights and Materials"); (vi) all results, information and data arising
from, or obtained in connection with, research, development, pre-clinical work
and/or clinical trials (collectively, "Data"); and (vii) all other intellectual
property or proprietary rights and claims or causes of action arising out of or
related to any infringement, misappropriation or other violation of any of the
foregoing, including rights to recover for past, present and future violations
thereof (collectively, "Other Proprietary Rights").
(b) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located.
(c) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Maker's custody or possession or in transit
and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing an any documents of title representing any of the above.
25
EXECUTION VERSION
(d) All contract rights, general intangibles and intellectual property,
now owned or hereafter acquired, including, without limitation, goodwill,
trademarks, service marks, trade styles, trade names, patents, patent
applications, leases, license agreements, franchise agreements, blueprints,
drawings, purchase orders, customer lists, route lists, infringements, claims,
computer programs, computer discs, computer tapes, computer code, copyrights,
literature, reports, catalogs, design rights, income tax refunds, payments of
insurance and rights to payment of any kind.
(e) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Maker
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Maker, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefore, as well as
all merchandise returned to or reclaimed by Maker.
(f) All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Maker's books relating to the foregoing.
(g) Each item of equipment, or personal property whether now owned or
hereafter acquired, together with all substitutions, renewals or replacements of
and additions, improvements, and accessions to any and all of the foregoing, and
all proceeds from sales, renewals, releases or other dispositions thereof.
(h) All Maker's books relating to the foregoing and any and all claims,
rights and interests in any of the above, whether now owned or hereafter
acquired, and all substitutions for, additions and accessions to and proceeds
thereof.
Notwithstanding the foregoing, to the extent any of Maker's licensed
Intellectual Property prohibits the transfer or encumbrance of such licensed
Intellectual Property (the "Restricted Intellectual Property") without prior
consent of the owner or licensor thereof, such Restricted Intellectual Property
is hereby conditionally included within the definition of Collateral, subject to
receipt, by or on behalf of Maker, of any required consents. If requested by
Holder, Maker shall use its best efforts to obtain the required consents under
any Restricted Intellectual Property within thirty (30) days of such request.
26
EXECUTION VERSION
APPENDIX 1
TRADEMARKS
27
EXECUTION VERSION
APPENDIX 2
PATENTS
28
EXECUTION VERSION
EXHIBIT B
DISCLOSURE SCHEDULE
29
EXECUTION VERSION
EXHIBIT B
FORM OF
BINDING TERM SHEET
CONVERTIBLE PREFERRED STOCK
Northwest Biotherapeutics, Inc.
April 26, 2004
Issuer: Northwest Biotherapeutics, Inc. (the "Company"), a
Delaware corporation.
--------------------------------------------------------------------------------
Purchasers: Toucan Capital Fund II, L.P and/or its designee(s)
(collectively, "Investor"), and such other investors
as may subsequently be identified (the "Other
Investors").
--------------------------------------------------------------------------------
Election to lead equity At Investor's election on or before the end of the
financing: Bridge Funding Period, Investor shall have the right
to lead the equity financing and assemble the
syndicate of Other Investors.
--------------------------------------------------------------------------------
Securities to be 10% Cumulative Convertible Preferred Stock
Issued: ("Convertible Preferred" or "Convertible Preferred
Stock"), convertible into common stock of the Company
("Common" or "Common Stock").
--------------------------------------------------------------------------------
Share price: The price per share shall be the lesser of $0.10 per
share or 35% discount to the average closing price
during the twenty trading days prior to closing;
provided, however, that in no event will the price
per share be less than $.04. The share price provided
herein is subject to adjustment for dividends,
splits, etc.
--------------------------------------------------------------------------------
Amount of Issuance: Up to $40 million (including any shares issuable upon
conversion of Bridge Funding, but not including any
shares issuable upon exercise of warrants, options,
and similar instruments or obligations) (the "Maximum
Issuance"), in one or more tranches.
--------------------------------------------------------------------------------
Minimum Issuance: The Company's obligation to issue the Convertible
Preferred Stock shall be subject to the requirements
set forth in Section 3.5 of the Recapitalization
Agreement.
--------------------------------------------------------------------------------
First Closing: First closing ("First Closing") to occur upon
completion of Bridge Period, documentation and
fulfillment of conditions to closing.
Subsequent Closings:
Additional closings of the Convertible Preferred
Stock after the First Closing ("Subsequent Closings")
may take place at any time on or before 12 months
after the First Closing (the "Equity Financing
Period"), so long as the aggregate amount raised does
not exceed the Maximum Issuance. All subsequent
closings of the Convertible Preferred Stock shall be
on the same terms and conditions as in the First
Closing and shall use the same documentation as in
the First Closing.
--------------------------------------------------------------------------------
Warrants: The Company shall issue $8 million in warrant
coverage on the first $8 million
--------------------------------------------------------------------------------
EXECUTION VERSION
Convertible Preferred Stock purchased for cash (the
"Preferred Stock Warrants"). Preferred Stock Warrants
shall not be issued upon conversion of notes,
exercise of warrants, or other conversion or
exercise. The number of warrants to be so issued
shall be determined on the basis of $0.10 per share.
If the total of $8 million is invested in Convertible
Preferred Stock, the number of warrants issued shall
be exercisable for 80 million shares of Convertible
Preferred Stock. The exercise price of such Preferred
Stock Warrants shall be the lesser of $0.10 per share
(subject to adjustment for stock splits, stock
dividends and the like) and 35% discount to the
average closing price during the twenty trading days
prior to the First Closing; provided, however, that
in no event will the exercise price be less than $.04
per share (subject to adjustment for stock splits,
stock dividends and the like). The exercise period
shall commence upon issuance of the Preferred Stock
Warrants, and shall continue for a period of seven
(7) years after their respective issuance dates.
--------------------------------------------------------------------------------
Tax Treatment of The Company and the purchasers of the Convertible
Warrants: Preferred Stock shall agree upon the fair market
value of the Preferred Stock Warrants, and the
Company shall make all of its tax filings on this
basis, and instruct its accountants and other
tax-preparation professionals to prepare all tax
filings and returns on the basis of the foregoing.
--------------------------------------------------------------------------------
Right of First Investor shall have a right of first refusal to
Refusal: purchase up to $15 million of the Convertible
Preferred Stock. This right of first refusal shall
apply at each closing during the Equity Financing
Period, until the $15 million amount is reached. Such
purchases shall be determined in addition to, and
shall not be deemed to include, any purchases of
Convertible Preferred Stock by Investor (including
its designees) through conversion of Bridge Funding,
or exercise of any warrants or similar instruments.
Such right of first refusal shall apply regardless of
whether or not Investor leads the financing during
any part of the Equity Financing Period.
--------------------------------------------------------------------------------
Conditions to The following conditions shall apply to each
Closings: closing for the purchase and sale of Convertible
Preferred Stock. Each such condition must be
satisfied or waived, and such satisfaction
and/or waiver of each such condition shall be
determined by Investor and, as applicable, Other
Investors in their respective sole discretion,
individually and not jointly.
o The Company shall have in all material respects
performed, and be in compliance with, all
obligations, agreements, covenants, closing
conditions and other provisions contained in the
Recapitalization Agreement, the Notes evidencing
Bridge Funding (to the extent any such notes
remain outstanding), and the other Related
Recapitalization Documents including, without
limitation, the financing documents associated
with the issuance of the Convertible Preferred
Stock (the "Financing Documents"), required to
be performed or fulfilled on or before the
applicable closing date.
--------------------------------------------------------------------------------
EXECUTION VERSION
o All representations and warranties set forth in
the Recapitalization Agreement, the Notes
evidencing Bridge Funding (to the extent any
such notes remain outstanding), and the other
Related Recapitalization Documents shall be true
and complete as of each closing.
o There shall have been no change that has had or
is reasonably likely to have a material adverse
effect on the business, affairs, prospects,
operations, properties, assets, liabilities,
structure or condition, financial or otherwise,
of the Company (as such business is presently
conducted and/or as it is proposed to be
conducted) between the date of the
Recapitalization Agreement and each closing of
purchases of Convertible Preferred Stock.
o All corporate and other proceedings, and all
documents relating to the issuance and sale of
Convertible Preferred Stock pursuant to the
Recapitalization Agreement shall be satisfactory
in substance and form to Investor and Other
Investors, as applicable. Investor's counsel and
each Other Investors' counsel (if applicable)
shall have received all such counterpart
originals or certified or other copies of such
documents as they may have requested including,
without limitation:
o The resolutions of the Board of
Directors of the Company, authorizing
and approving all matters in connection
with the sale of the Convertible
Preferred Stock certified by the
Secretary of the Company as of the
Closing Date.
o All stockholder consents, votes or other
approval required by applicable state or
federal law (including any and all SEC
rules and regulations) and any consents
required by applicable securities
exchanges or markets or corporate
partners required to authorize and
approve all matters in connection with
the sale of Convertible Preferred Stock
as contemplated by this term sheet.
o The Company shall have executed, delivered and
maintained in force (i) a Convertible Preferred
Stock purchase agreement, (ii) an Investors'
Rights Agreement, (iii) an amended and restated
certificate of incorporation (or if appropriate,
a certificate of designation), (iv) a voting
agreement, if applicable, and (v) such other
documents as . may be necessary or desirable in
the determination of Investor and Other
Investors, as applicable.
o The Investor and Other Investors shall have
received from counsel to the Company an opinion
letter containing opinions customary for
transactions similar to the Proposed Equity
Financing in the form reasonably acceptable to
Investor and Other Investors (including, but not
limited to, an opinion that the issuance of the
Convertible Preferred Stock, the Preferred Stock
Warrants and the securities issuable upon
conversion and/or exercise thereof pursuant to
the Proposed Equity Financing are
--------------------------------------------------------------------------------
exempt from the registration provisions of the
federal and state securities laws).
o The Company shall have taken all necessary steps
to set the number of directors on the Company's
board of directors at seven (7) and elect
directors according to the "Board of Directors"
section below, including, without limitation,
execution of a Voting Agreement if necessary or
desirable in the determination of Investor and
Other Investors, as applicable.
(a)
o The Company shall have delivered a certificate
of its Chief Executive Officer, or other
authorized and responsible officer of the
Company acceptable to Investor and Other
Investors, as applicable, in their respective
sole discretion, certifying that all closing
conditions have been fulfilled and that all
representations and warranties are applicable
and true as of the date of such closing.
o The Company shall have provided prior to the
applicable closing date all due diligence
information requested by any investor, and/or
necessary to enable such investor to complete a
thorough due diligence review and obtain a
complete and accurate understanding of the
business, operations, prospects, assets,
liabilities, structure, legal aspects and
condition, financial or otherwise, of the
Company.
o Within the six month period prior to any closing
of Convertible Preferred Stock, the Company
shall not have entered into, increased,
expanded, extended, renewed or reinstated (or
agreed, promised, committed or undertaken to do
so), any severance, separation, retention,
change of control or similar agreement with any
employee, other than such agreements entered
into with the prior written approval of Investor
and Other Investors, as applicable.
o Within the six month period prior to any closing
of Convertible Preferred Stock, the Company
shall not have hired, or agreed to hire, any
employee or engaged, or agreed to engage, any
consultant, independent contractor or any other
non-employee personnel, except in accordance
with the Company's budget that has been approved
by the Company's board of directors and the
Investor and Other Investors, as applicable;
o Within the six month period prior to any closing
of Convertible Preferred Stock, the Company
shall not have purchased, leased, hired, rented
or otherwise acquired directly or indirectly any
rights in or to any asset or facility in an
amount in excess of $10,000, or agreed, promised
or committed to do so, except in accordance with
the Company's budget that has been approved by
the Company's board of directors and the
Investor and Other Investors, as applicable.
--------------------------------------------------------------------------------
o [ * * * ]
o All Intellectual Property licenses, agreements,
patent applications and filings shall be current
and in good standing.
o The Company shall have obtained the approval of
the required number of its stockholders (the
Company shall be obligated to use its best
efforts in good faith comply with these terms
and conditions to obtain stockholder consent
and, in the event that it uses its best efforts
in good faith to do so and fails to achieve
stockholder approval, the Company shall not be
required to sell the Convertible Preferred
Stock).
o The satisfaction of other customary conditions
of transactions of this sort that Investor may
reasonably require.
--------------------------------------------------------------------------------
Conversion: The Convertible Preferred Stock shall be
convertible at any time, in whole or in part, at
the option of the holder (without any further
payment by the holder) into Common Stock of the
Company. The initial conversion ratio shall be one
share of Common Stock for each share of Convertible
Preferred Stock (the "Conversion Ratio"). The
Conversion Ratio shall be subject to appropriate
adjustment in the event of (i) any subdivision or
combination of the Company's outstanding Common
Stock, (ii) any distribution by the Company of a
stock dividend or assets, (iii) any capital
reorganization or reclassification of the Company
affecting the conversion price, or other similar
transactions, as applicable. The Conversion Ratio
shall also be subject to adjustment pursuant to the
anti-dilution provisions (below).
--------------------------------------------------------------------------------
* Confidential Treatment Requested
EXECUTION VERSION
Rights, (1) Dividends: A cumulative dividend shall accrue
Preferences, at the rate of 10% per annum, compounding quarterly
Privileges and on the Convertible Preferred Stock. No dividends
Restrictions: shall be paid on the Common or any other securities
issued by the Company other than the Convertible
Preferred Stock. Dividends shall be payable as and
when determined by the Board of Directors, and upon
the occurrence of a liquidation. A liquidation
shall be deemed to include, without limitation, a
merger resulting in a change in control of the
Company, sale of all or substantially all of the
assets of the Company, or transfer of control (not
including any transfer of control that is the
result of the sale and issuance of the Convertible
Preferred Stock contemplated hereunder, the
conversion of any of the Bridge Funding or exercise
of any Bridge Warrants or Preferred Stock
Warrants).
(2) Liquidation Preference: In the event of
liquidation or winding up of the Company, the
holders of shares of Convertible Preferred shall be
entitled (at such holders' option) to convert such
shares to Common Stock or to receive, in preference
to the holders of Common, (i) an amount equal to
the original purchase price with respect to such
Convertible Preferred Stock, plus (ii) (to the
extent of current and/or retained earnings) any
dividends accrued but not paid on such Convertible
Preferred Stock, or such lesser amount as is the
maximum amount acceptable under applicable SBA and
SEC rules and regulations. Thereafter, all
remaining assets shall be distributed pro-rata to
the holders of Common Stock and all Convertible
Preferred Stock on an as converted basis. A
liquidation shall be deemed to include, without
limitation, a merger resulting in a change in
control of the Company, sale of all or
substantially all of the assets of the Company, or
transfer of control (not including any transfer of
control that is the result of the sale and issuance
of the Convertible Preferred Stock contemplated
hereunder, the conversion of any of the Bridge
Funding or exercise of any Bridge Warrants or
Preferred Stock Warrants).
(3) Anti-dilution: Except for issuances to
management, employees and consultants, which must
be approved by the Board pursuant to written
benefit plans, and except for issuances relating to
the Bridge Funding under the Recapitalization
Agreement, if the Company issues (or, directly or
indirectly promises, commits, or undertakes to
issue) any additional securities or instruments at
a nominal or effective purchase price less than the
price resulting from the application of the
Conversion Ratio, calculated on a fully diluted
basis with respect to the Convertible Preferred
Stock, then the Conversion Ratio of such
Convertible Preferred Stock shall be reduced on a
full ratchet basis to eliminate the effect of such
dilutive issuance on such Convertible Preferred
Stock.
(4) Protective Provisions: Until fewer than
1,000,000 shares of Convertible Preferred Stock are
outstanding (as adjusted for stock splits, stock
dividends and the like), the Company shall not,
without the approval of the Board of Directors and
the affirmative vote or written consent of the
holders of a majority of the then outstanding
shares of Convertible Preferred Stock: (i)
authorize or issue
--------------------------------------------------------------------------------
EXECUTION VERSION
(including, without limitation, by way of
recapitalization), or obligate itself to authorize
or issue, any equity security of the Corporation,
or any other security exercisable for or
convertible into an equity security of the
Corporation, that has redemption rights or that is
senior to or on parity with the Convertible
Preferred Stock as to dividend rights, voting
rights, liquidation preferences or any other
rights, preferences or privileges; (ii) increase or
decrease (other than by conversion) the total
number of authorized shares of Convertible
Preferred Stock or Common Stock; (iii) effect any
sale, lease, assignment, transfer or other
conveyance or encumbrance of all or substantially
all of the assets of the Corporation or any of its
subsidiaries in one or more related transactions,
or any consolidation or merger resulting in a
change in control of the Company, or any
reclassification, recapitalization or other change
of any capital stock of the Corporation; (iv)
change the authorized number of directors of the
Corporation; (v) amend or repeal the Certificate
(including by way of any Certificate of
Designation) or the Corporation's Bylaws; (vi)
redeem, purchase or otherwise acquire (or pay into
or set aside for a sinking fund for such purpose)
any of the Common Stock or common stock
equivalents; provided, however, that this
restriction shall not apply to the repurchase of up
to a maximum of $100,000 of Common Stock per year
from employees, officers, directors, consultants,
advisors or other persons performing services for
the Corporation, pursuant to agreements under which
the Corporation has the option to repurchase such
shares at cost upon the occurrence of certain
events, such as the termination of employment;
(vii) effect the liquidation, dissolution or
winding up of the Corporation; or (viii) agree,
promise, commit or undertake to do any of the
foregoing.
(5) Voting Rights: The holders of Convertible
Preferred will have the right to that number of
votes equal to the number of shares of Common Stock
issuable upon conversion of such Preferred Stock.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Private Placement: The Convertible Preferred Stock shall not be
registered under the Securities Act of 1933, as
amended (the "Act") and may not be resold without
such registration or an exemption under the
provisions of the Act. The Convertible Preferred
Stock shall be sold only to "accredited investors,"
as defined in Regulation D under the Act.
--------------------------------------------------------------------------------
Registration Rights At the request of Investor, the Company will use
its best efforts to prepare and file, within 60
days following the First Closing and each
Subsequent Closing, a registration statement on
FormSB-2 or Form S-1 (or if Form S-3 is available,
on Form S-3) (the "Registration Statement") for the
resale of the shares of Common Stock issuable to
theInvestor and Other Investors upon conversion of
the Convertible Preferred Stock and upon exercise
of the Warrants, and use its commercially
reasonable efforts to cause the Registration
Statement to become effective within 120 days after
such closing. The Company agrees to make such
filings as are necessary to keep the Registration
Statement effective until the earlier of (A) the
date that the investors have completed the
distribution related to
--------------------------------------------------------------------------------
EXECUTION VERSION
the Common Stock, or (B) such time that all Common
Stock then held by the investors (including shares
of Common Stock issuable upon conversion of
Preferred Stock held by the investors) can be sold
without compliance with the registration
requirements of the Securities Act pursuant to Rule
144(k) under the Securities Act.
Liquidated Damages: In the event that the Company
shall fail to cause the Registration Statement to
be timely filed, timely declared effective, or to
be kept effective (other than pursuant to customary
permissible suspension periods), the Company shall
pay as liquidated damages the amount of 1% per
month of the aggregate purchase price for the
securities remaining to be sold pursuant to the
Registration Statement or such lesser amount that
is the maximum permitted under applicable SBA rules
and regulations.
In the event that the Company's Common Stock is no
longer registered under the Securities Exchange Act
of 1934, as amended following completion of the
First Closing, or for any reason the Company does
not register for resale all shares of Common into
which the Convertible Preferred converts, as
provided for above, Investor and each Other
Investor shall have the following registration
rights with respect to the Common Stock into which
such investor's Convertible Preferred converts:
(1) Demand Registration Rights. If, at any
time after the initial purchase of the
Convertible Preferred Stock, holders of at
least 20% of the Common Stock issued or
issuable upon conversion of the
Convertible Preferred Stock request that
the Company file a Registration Statement
covering at least 10% of the Common issued
or issuable upon conversion of the
Convertible Preferred (or any lesser
percentage if the anticipated aggregate
offering price would exceed $2,000,000),
the Company shall cause the shares
attributable to the Convertible Preferred
Stock to be registered. The Company shall
not be obligated to effect more than two
registrations per year under these demand
right provisions.
(2) Registration on Form S-3: Holders of
Common issued or issuable upon conversion
of the Convertible Preferred Stock shall
have the right to require the Company to
file unlimited Registration Statements on
Form S-3 (or any equivalent successor
form), provided the Company is otherwise
eligible to use Form S-3 for such a
registration and the anticipated aggregate
offering price in each registration on
Form S-3 exceeds $1,000,000.
(3) Piggy-Back Registration: Holders of Common
issued or issuable upon conversion of the
Convertible Preferred Stock shall be
entitled to unlimited "piggy-back"
registration rights on all registrations
of the Company.
(4) Transfer of Registration Rights: The
registration rights may be transferred
--------------------------------------------------------------------------------
EXECUTION VERSION
to any transferee permitted under
applicable Federal and state securities
laws, provided that the Company is given
written notice thereof and provided that
the transferee agrees in writing to be
bound by the terms of the stock purchase
agreement and other agreements relating
to this transaction.
(5) Costs: The Company shall bear all expenses
relating to all such preparation and
filings.
(6) Indemnification: The Company shall
provide the Investors with the maximum
indemnification allowed under applicable
law with regard to the registration
rights.
--------------------------------------------------------------------------------
Regulatory Costs The Company shall be responsible for completing and
shall bear all costs associated with all regulatory
filings that are necessary in connection with the
transactions described herein, including, without
limitation, U.S. Securities and Exchange Commission
filings (whether these filings are made by the
Company, the purchasers of the Convertible
Preferred Stock or their affiliates), blue sky
filings and/or other necessary filings under
applicable securities market or exchange rules and
regulations.
--------------------------------------------------------------------------------
Board of Directors: The authorized number of directors shall be seven
(7). Four (4) of the seven directors shall be
designated by the holders of a majority of the
Convertible Preferred Stock, two (2) of the
directors shall be outsiders with significant
industry experience who are reasonably acceptable
to the holders of a majority of the Convertible
Preferred Stock, and one (1) of the directors shall
be the CEO of the Company.
--------------------------------------------------------------------------------
D&O Insurance: As promptly as practicable after the First Closing,
the Company shall use best efforts to obtain and
maintain in force $10 million in director and
officer liability insurance coverage.
--------------------------------------------------------------------------------
SBA Provisions: The Company shall make such representations,
warranties and covenants, and shall provide such
documentation and information rights as may be
necessary (e.g., certification that at the time of
Investor's investment the Company is a "small"
business, has the majority of its operations in the
US, and is not engaged in oil and gas exploration,
movie production or certain other prohibited
activities), to satisfy the requirements of the SBA
in regard to investment by Investor in the Company.
--------------------------------------------------------------------------------
Documentation: The purchase of the Convertible Preferred Stock
shall be made pursuant to a Stock Purchase
Agreement, Investor Rights Agreement, Voting
Agreement (if applicable) and Amended and Restated
Certificate of Incorporation (or if appropriate,
certificate of designation) to be drafted by
counsel to the Investor. Such agreements and other
documents shall contain, among other things,
appropriate representations and warranties
(including, without limitation, reps and
--------------------------------------------------------------------------------
EXECUTION VERSION
warranties concerning the Intellectual Property,
the financial condition of the Company, the absence
of litigation or threats thereof, and full
disclosure of all material information), covenants,
protective provisions, and conditions of closing
including those noted above.
--------------------------------------------------------------------------------
Miscellaneous: Customary provisions, including applicable law
(Delaware), severability, assignment (except as
provided under the rights of first refusal above,
holders of Convertible Preferred Stock shall be
free to assign or transfer their Convertible
Preferred Stock or rights hereunder to any party
permitted under applicable federal and state
securities laws, as long as transferee agrees to
the terms and obligations of the Convertible
Preferred Stock, respectively), etc.
--------------------------------------------------------------------------------
Transaction Expenses: The Company shall pay, reimburse or otherwise
satisfy, upon demand of Investor, all fees, costs
and expenses incurred and/or undertaken by Investor
relating to the preparation for, development of and
implementation of the Recapitalization Plan set
forth in the Recapitalization Agreement, including,
without limitation, all due diligence expenses and
all expenses relating to the Bridge Funding and the
Anticipated Equity Financing and the transactions
contemplated hereby and by the Recapitalization
Agreement and the documentation of all of the
foregoing (including, without limitation all legal
fees and expenses). This obligation shall apply
regardless of whether or not all of the
transactions contemplated in the Recapitalization
Agreement close. At each closing of the Anticipated
Equity Financing, at Investor's sole discretion,
and with respect to any or all of such fees, costs
and expenses accrued through such closing, the
Company shall (a) pay Investor in cash concurrently
with such closing (or at Investor's sole
discretion, Investor may withhold such amount from
the wire of investments proceeds), (b) issue a
promissory note in the form of the Notes in
principal amount equal to such fees, costs and
expenses; or (c) treat such fees, costs and
expenses as an unsecured payable. At any time
following such closing, Investor may require any
amounts that it elected to have the Company treat
as unsecured amounts payable to be paid in cash or
satisfied by issuance of a Note in the principal
amount of some or all of such unsecured obligation.
--------------------------------------------------------------------------------
Cross-default: The Company acknowledges that the financing
contemplated by this term sheet is part of an
integrated Recapitalization Plan, as set forth in
the Recapitalization Agreement. The Company further
acknowledges and agrees that this term sheet is
subject to all terms and conditions set forth in
the Recapitalization Agreement and the other
Related Recapitalization Documents and that the
Recapitalization Agreement and the other Related
Recapitalization Documents are subject to all terms
and conditions set forth in this Term Sheet. The
Company agrees that any default by the Company
under any provision of this Term Sheet, the
Recapitalization Agreement or any of the other
Related Recapitalization Documents will constitute
a default under this Term Sheet, each other Related
Recapitalization Document and the Recapitalization
Agreement.
--------------------------------------------------------------------------------
Standstill/exclusivity: The standstill/exclusivity provision in the
Recapitalization Agreement shall remain
--------------------------------------------------------------------------------
EXECUTION VERSION
in full force and effect during the Equity
Financing Period.
--------------------------------------------------------------------------------
Termination The Company's obligations to issue any securities
in connection with the Anticipated Equity Financing
may terminate only in accordance with Sections 3.2
and/or 3.5 of the Recapitalization Agreement;
however, such termination shall not have any impact
on the other rights and obligations of the parties
under the Recapitalization Agreement or the Related
Recapitalization Documents, except as explicitly
set forth in the Section 3.2 or 3.5, as applicable,
of the Recapitalization Agreement.
--------------------------------------------------------------------------------
No Offer For purposes of applicable securities laws,
this Term Sheet does not constitute an offer to
sell or the solicitation of an offer to buy any of
the securities described herein.
--------------------------------------------------------------------------------
Binding Agreement This Term Sheet constitutes a binding commitment on
the part of the Company. The obligations of
Investor and Other Investors under this Term Sheet
are subject to the conditions contained herein and
in the Related Recapitalization Documents.
--------------------------------------------------------------------------------
EXECUTION VERSION
Agreed and Accepted:
TOUCAN CAPITAL FUND II, LP NORTHWEST BIOTHERAPEUTICS, INC.
By:_________________________ By:____________________________
Name: Name:
Title: Title:
Date:________________________ Date:__________________________
EXECUTION VERSION
EXHIBIT C
THIS WARRANT AND THE UNDERLYING 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 AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR IF SUCH TRANSACTION IS IN
COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
NORTHWEST BIOTHERAPEUTICS, INC.
FORM OF WARRANT
NO. BW-__ APRIL 26, 2004
THIS CERTIFIES THAT, for value received, TOUCAN CAPITAL FUND II, L.P.,
with its principal office at 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX
00000, and/or its designees or assigns (collectively, the "HOLDER"), is entitled
to subscribe for and purchase from NORTHWEST BIOTHERAPEUTICS, INC., a Delaware
corporation, with its principal office at 00000 00xx Xxxxxx XX, Xxxxx 000,
Xxxxxxx, Xxxxxxxxxx 00000 (the "COMPANY"), such number of Exercise Shares as
provided herein at the Exercise Price (each subject to adjustment as provided
herein). This Warrant is being issued pursuant to the terms of the
Recapitalization Agreement, dated April 26, 2004, by and among the Company and
the Holder (the "RECAPITALIZATION AGREEMENT").
1. DEFINITIONS. Capitalized terms used but not defined herein shall have
the meanings set forth in the Recapitalization Agreement or Related
Recapitalization Document, as applicable. As used herein, the following terms
shall have the following respective meanings:
(A) "CAPITAL STOCK" shall mean the securities for which this Warrant
is exercisable as provided in Section 2.2 hereof.
(B) "DENOMINATOR SHARE PRICE" shall mean $0.05.
(C) "EXERCISE PERIOD" shall mean the period (a) commencing with the
earliest of: (i) the date that the Company has raised at least $2 million
through the issuance of any class or series of Equity Security, Debt Security
and/or combinations thereof (including, without limitation, any conversion of
any Notes and/or other convertible or exercisable securities and/or instruments
other than the Bridge Warrants); (ii) the date that the Company breaches any
provision of the Recapitalization Agreement or any Related Recapitalization
Document (as defined in the Recapitalization Agreement); (iii) the date that the
Company accepts an Unsolicited Proposal (as defined in the Recapitalization
Agreement); or (iv) sixty one (61) days after notice from Investor; and (b)
ending seven (7) years after the date of issuance of this Warrant.
(D) "EXERCISE PRICE" shall mean $0.01 per Exercise Share, subject to
adjustment pursuant to the terms herein.
1.
EXECUTION VERSION
(E) "EXERCISE SHARES" shall mean a number of shares of Capital Stock
equal to the quotient of (i) 300% (i.e., 3.0) multiplied by the Note Amount,
divided by (ii) the Denominator Share Price, subject to adjustment pursuant to
the terms herein.
(F) "NOTE AMOUNT" shall mean the aggregate principal amount loaned by
the Holder to the Company pursuant to all Notes issued as contemplated under the
Recapitalization Agreement.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time or times during the Exercise Period,
by delivery of the following to the Company at its address set forth above (or
at such other address as it may designate by notice in writing to the Holder):
(A) An executed Notice of Exercise in the form attached hereto;
(B) Payment of the Exercise Price either (i) in cash or by check, or
(ii) by cancellation of indebtedness; and
(C) This Warrant.
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised. In
the event that this Warrant is being exercised for less than all of the
then-current number of Exercise Shares purchasable hereunder, the Company shall,
concurrently with the issuance by the Company of the number of Exercise Shares
for which this Warrant is then being exercised, issue a new Warrant exercisable
for the remaining number of Exercise Shares purchasable hereunder.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.1 NET EXERCISE. Notwithstanding any provisions herein to the contrary,
if the fair market value of one Exercise Share is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Warrant by payment of cash, the Holder may elect to receive shares equal to
the value (as determined below) of this Warrant (or the portion thereof being
canceled) by surrender of this Warrant at the principal office of the Company
together with the properly endorsed Notice of Exercise in which event the
Company shall issue to the Holder a number of Exercise Shares computed using the
following formula:
X = Y (A-B)
-------
A
2.
EXECUTION VERSION
Where X = the number of Exercise Shares to be issued to the Holder
Y = the number of Exercise Shares purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, that portion of the Warrant being canceled (at
the date of such calculation)
A = the fair market value of one Exercise Share (at the date
of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one
Exercise Share shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event that this Warrant is exercised
pursuant to this Section 2.1 in connection with the Company's initial public
offering of its Common Stock, the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company's
initial public offering, and (ii) the number of shares of Common Stock into
which each Exercise Share is convertible at the time of such exercise.
2.2 SECURITIES FOR WHICH WARRANT IS EXERCISABLE. In the event the
Convertible Preferred Stock is approved and authorized as provided herein, and
Other Investors have closed on the purchase in cash (and not by conversion of
debt, exercise of warrants or options, or conversion or exercise of other
securities or instruments) of a minimum of $15 million of such Convertible
Preferred Stock, on the terms and conditions set forth in the Recapitalization
Agreement, this Warrant shall be exercisable for such Convertible Preferred
Stock. However, if, for any reason, such Convertible Preferred Stock is not
approved or authorized, and/or if Other Investors have not closed on the
purchase in cash (and not by conversion of debt, exercise of warrants or
options, or conversion or exercise of other securities or instruments) of a
minimum of $15 million of such Convertible Preferred Stock, on the terms and
conditions set forth in the Recapitalization Agreement, this Warrant shall be
exercisable for any Equity Security and/or Debt Security and/or any combination
thereof, in each case that the Holder shall designate in the Holder's sole
discretion.
3. COVENANTS OF THE COMPANY.
3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and agrees
that all Exercise Shares that may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of the series of equity securities comprising the Exercise Shares and the
Company's Common Stock to provide for the exercise of the rights represented by
this Warrant and the subsequent conversion of the Exercise Shares. If at any
time during the Exercise Period the number of authorized but unissued shares of
such series of the Company's Common Stock shall not be sufficient to permit
exercise of this Warrant or the subsequent conversion of the Exercise Shares,
the Company will take such corporate action as shall be necessary to increase
its authorized but unissued shares of such series of the Company's equity
securities or
3.
EXECUTION VERSION
the Company's Common Stock, as appropriate, to such number of shares as shall be
sufficient for such purposes.
3.2 NOTICES OF RECORD DATE. In the event of any taking by the Company
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 or
other distribution, the Company shall mail to the Holder, at least ten (10) days
prior to the date specified herein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or distribution.
3.3 NO IMPAIRMENT. The Company shall not, by amendment of its Charter
or through a reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities, or any other voluntary action,
omission or agreement, avoid or seek to avoid the observance or performance of
any of the terms to be observed or performed by the Company under and/or in
connection with this Warrant, but shall at all times in good faith use best
efforts to assist in carrying out of all the provisions of and/or relating to
this Warrant and in taking all such action as may be necessary or appropriate to
protect Holder's rights, preferences and privileges under and/or in connection
with this Warrant against impairment. The Holder's rights, preferences and
privileges granted under and/or in connection with this Warrant may not be
amended, modified or waived without the Holder's prior written consent, and the
documentation providing for such rights, preferences and privileges will
specifically provide as such.
3.4 REGISTRATION RIGHTS. The Company agrees that the Underlying Shares
(as defined below) shall be "registrable securities" (or terms of similar
impact) under any agreement executed by the Company as part of the Anticipated
Equity Financing, or any other agreement executed by the Company in lieu of,
and/or in addition to, the Anticipated Equity Financing, in each case, for
purposes of providing registration rights under the Act to holders of shares of
Capital Stock, and the Company shall ensure that any such agreement conforms
with the requirements of this Section 3.4. Such registration rights may not be
amended, modified or waived without the prior written consent of the Holder.
4. REPRESENTATIONS OF HOLDER.
4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder represents
and warrants that it is acquiring the Warrant, the Exercise Shares and the
shares of Common Stock issuable upon conversion of the Exercise Shares (the
"UNDERLYING SHARES") solely for its account for investment and not with a view
to or for sale or distribution of said Warrant, Exercise Shares or Underlying
Shares, or any part thereof except in compliance with applicable federal and
state securities laws. The Holder also represents that the entire legal and
beneficial interests of the Warrant, the Exercise Shares and the Underlying
Shares the Holder is acquiring is being acquired for, and will be held for, its
account only.
4.2 SECURITIES ARE NOT REGISTERED.
(A) The Holder understands that the Warrant, the Exercise Shares
and the Underlying Shares have not been registered under the Securities Act of
1933, as amended (the "Act") on the basis that no distribution or public
offering of the stock of the Company is to be effected by the Holder. The Holder
realizes that the basis for the exemption may not be present
4.
EXECUTION VERSION
if, notwithstanding its representations, the Holder has a present intention of
acquiring the securities for a fixed or determinable period in the future,
selling (in connection with a distribution or otherwise), granting any
participation in, or otherwise distributing the securities. The Holder has no
such present intention.
(B) The Holder recognizes that the Warrant, the Exercise Shares
and the Underlying Shares must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available;
provided, however, the parties acknowledge and agree that the Company has an
obligation to register the Underlying Shares as provided in the Recapitalization
Agreement and the Convertible Preferred Stock Term Sheet.
(C) The Holder is aware that neither the Warrant, the Exercise
Shares nor the Underlying Shares may be sold pursuant to Rule 144 adopted under
the Act unless certain conditions are met, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale following the required holding
period under Rule 144 and the number of shares being sold during any three month
period not exceeding specified limitations.
4.3 DISPOSITION OF WARRANT, EXERCISE SHARES AND UNDERLYING SHARES.
(A) The Holder further agrees not to make any disposition of or
any part of the Warrant, the Exercise Shares or the Underlying Shares in any
event unless and until:
(i) The Company shall have received a letter secured by the
Holder from the Securities and Exchange Commission stating that no action will
be recommended to the Commission with respect to the proposed disposition;
(ii) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(iii) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and such
disposition shall not be contrary to any applicable federal and/or state
securities laws.
(B) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:
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 AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER THE ACT OR IF SUCH TRANSACTION IS
IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
5.
EXECUTION VERSION
4.4 ACCREDITED INVESTOR STATUS. The Holder is an "accredited investor"
as defined in Regulation D promulgated under the Act.
5. ADJUSTMENT OF EXERCISE PRICE AND EXERCISE SHARES.
5.1 CHANGES IN SECURITIES. In the event of changes in the series of
equity securities of the Company comprising the Exercise Shares by reason of
stock dividends, splits, recapitalizations, reclassifications, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of Exercise Shares available under the Warrant in the
aggregate and the Exercise Price shall be correspondingly adjusted to give the
Holder of the Warrant, on exercise for the same aggregate Exercise Price, the
total number, class, and kind of shares as the Holder would have owned had the
Warrant been exercised prior to the event and had the Holder continued to hold
such shares until after the event requiring adjustment. For purposes of this
Section 5, the "AGGREGATE EXERCISE PRICE" shall mean the aggregate Exercise
Price payable in connection with the exercise in full of this Warrant. The form
of this Warrant need not be changed because of any adjustment in the number of
Exercise Shares subject to this Warrant.
5.2 AUTOMATIC CONVERSION. Upon the automatic conversion of all
outstanding shares of the series of equity securities comprising the Exercise
Shares into Common Stock, if applicable, this Warrant shall become exercisable
for that number of shares of Common Stock of the Company into which the Exercise
Shares would then be convertible, so long as such shares, if this Warrant had
been exercised prior to such offering, would have been converted into shares of
the Company's Common Stock pursuant to the Company's Certificate of
Incorporation. In such case, all references to "Exercise Shares" shall mean
shares of the Company's Common Stock issuable upon exercise of this Warrant, as
appropriate.
5.3 DILUTIVE ISSUANCES. If at any time prior to exercise of this
Warrant, the Company issues or sells, or is deemed to have issued or sold,
additional shares of Capital Stock for a nominal or effective price less than
the then effective Exercise Price (a "DILUTIVE ISSUANCE"), then and in each such
case, the then existing Exercise Price shall be reduced, as of the opening of
business on the date of such issue or sale, to the price at which such shares
are issued or sold, or deemed to be issued or sold. For purposes of this Section
5.3, the Company will be deemed to have issued or sold additional shares of
Capital Stock if it issues any security or instrument convertible, exercisable
or exchangeable for Capital Stock, or if it promises, undertakes, commits,
agrees or enters into any letter of intent to do so.
5.4 CERTIFICATE OF ADJUSTMENTS. Upon each adjustment of the Exercise
Price and/or Exercise Shares, the Company shall promptly notify the Holder in
writing and furnish the Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) to be issued upon exercise of this Warrant
shall be aggregated for purposes of determining whether the exercise would
result in the issuance of any fractional share. If, after aggregation, the
exercise would result in the issuance of a fractional share, the Company shall,
in
6.
EXECUTION VERSION
lieu of issuance of any fractional share, pay the Holder otherwise entitled to
such fraction a sum in cash equal to the product resulting from multiplying the
then current fair market value of one Exercise Share by such fraction.
7. TRANSFER OF WARRANT. Subject to applicable laws, this Warrant and
all rights hereunder are transferable, in whole or in part, at any time or times
by the Holder, upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance satisfactory to the Company.
8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
9. AMENDMENT. Any term of this Warrant may be amended or waived only
with the written consent of the Company and the Holder.
10. NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given upon actual delivery to the
recipient. All communications shall be sent to the Company and to the Holder at
the addresses listed on the signature page hereof or at such other address as
the Company or Holder may designate by ten (10) days advance written notice to
the other parties hereto.
11. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by and construed under the laws of the
State of Delaware as applied to agreements among Delaware residents, made and to
be performed entirely within the State of Delaware without giving effect to
conflicts of laws principles.
[SIGNATURE PAGE FOLLOWS]
7.
EXECUTION VERSION
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first written above.
NORTHWEST BIOTHERAPEUTICS, INC.
By ____________________________________________
Name: _________________________________________
Title: ________________________________________
Address: 00000 00xx Xxxxxx XX
Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
ACKNOWLEDGED AND AGREED:
TOUCAN CAPITAL FUND II, L.P.
By _________________________________________
Name: ______________________________________
Title: _____________________________________
Address: 0000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO WARRANT]
EXECUTION VERSION
NOTICE OF EXERCISE
TO: NORTHWEST BIOTHERAPEUTICS, INC.
(1) [ ] The undersigned hereby elects to purchase ________ shares of
___________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shares
of __________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
Exercise Shares in the name of the undersigned or in such other name as is
specified below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid Exercise Shares
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares, except in accordance with applicable federal and state securities laws;
(ii) the undersigned is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision regarding its investment in the Company;
(iii) the undersigned is experienced in making investments of this type and has
such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that Exercise Shares issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
by reason of a specific exemption from the registration provisions of the
Securities Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent as expressed herein, and, because such
securities have not been registered under the Securities Act, they must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available; (v) the undersigned is aware that
the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under
the Securities Act unless certain conditions are met and until the undersigned
has held the shares for the number of years prescribed by Rule 144, that among
the conditions for use of the Rule is the availability of current information to
the public about the Company; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Exercise Shares unless
and until there is then in effect a
1.
EXECUTION VERSION
registration statement under the Securities Act covering such proposed
disposition or if such transaction is in compliance with applicable federal and
state securities laws.
________________________________________ ______________________________________
Date (Signature)
______________________________________
(Print Name
2.
EXECUTION VERSION
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name: ________________________________________________________________
(Please Print)
Address: ______________________________________________________________
(Please Print)
Dated: __________, 20__
Holder's
Signature: _______________________________
Holder's
Address: _________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
3.
FINAL VERSION
EXHIBIT D
THIS WARRANT AND THE UNDERLYING 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 AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR IF SUCH TRANSACTION IS IN
COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.
NORTHWEST BIOTHERAPEUTICS, INC.
FORM OF WARRANT
NO. PW-__ JULY __, 2004
THIS CERTIFIES THAT, for value received, TOUCAN CAPITAL FUND II, L.P.,
with its principal office at 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxx, XX
00000, and/or its designees or assigns (collectively, the "HOLDER"), is entitled
to subscribe for and purchase from NORTHWEST BIOTHERAPEUTICS, INC., a Delaware
corporation, with its principal office at 00000 00xx Xxxxxx XX, Xxxxx 000,
Xxxxxxx, Xxxxxxxxxx 00000 (the "COMPANY"), such number of Exercise Shares as
provided herein at the Exercise Price (each subject to adjustment as provided
herein). This Warrant is being issued pursuant to the terms of the
Recapitalization Agreement, dated April 26, 2004, by and among the Company and
the Holder (the "RECAPITALIZATION AGREEMENT").
1. DEFINITIONS. Capitalized terms used but not defined herein shall
have the meanings set forth in the Recapitalization Agreement or the Related
Recapitalization Documents, as applicable. As used herein, the following terms
shall have the following respective meanings:
(a) "PREFERRED STOCK" shall mean the Convertible Preferred Stock,
par value, $0.001 per share of the Company.
(b) "DENOMINATOR SHARE PRICE" shall mean $0.10.
(c) "EXERCISE PERIOD" shall mean the period commencing on the date
of issuance of this Warrant and ending seven (7) years after the date of
issuance of this Warrant.
(d) "EXERCISE PRICE" shall mean the lesser of $0.10 per share
(subject to adjustment as provided in Section 5) or, 35% discount to the average
closing price during the twenty trading days prior to the first closing of the
sale by the Company of Preferred Stock as contemplated by the Recapitalization
Agreement; provided, however, that in no event will the Exercise Price be less
than $.04 per share (subject to adjustment pursuant to Section 5).
(e) "EXERCISE SHARES" shall mean a number of shares of Preferred
Stock equal to the quotient of (i) the Preferred Stock Amount, divided by (ii)
the Denominator Share Price, subject to adjustment pursuant to the terms herein.
1.
FINAL VERSION
(f) "PREFERRED STOCK AMOUNT" shall mean the aggregate purchase
price of Convertible Preferred Stock purchased by the Holder pursuant to the
Preferred Stock Purchase Agreement.
2. EXERCISE OF WARRANT. The rights represented by this Warrant may be
exercised in whole or in part at any time or times during the Exercise Period,
by delivery of the following to the Company at its address set forth above (or
at such other address as it may designate by notice in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the Exercise Price either (i) in cash or by check,
or (ii) by cancellation of indebtedness; and
(c) This Warrant.
Upon the exercise of the rights represented by this Warrant, a
certificate or certificates for the Exercise Shares so purchased, registered in
the name of the Holder or persons affiliated with the Holder, if the Holder so
designates, shall be issued and delivered to the Holder within a reasonable time
after the rights represented by this Warrant shall have been so exercised. In
the event that this Warrant is being exercised for less than all of the
then-current number of Exercise Shares purchasable hereunder, the Company shall,
concurrently with the issuance by the Company of the number of Exercise Shares
for which this Warrant is then being exercised, issue a new Warrant exercisable
for the remaining number of Exercise Shares purchasable hereunder.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Company are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
2.1 NET EXERCISE. Notwithstanding any provisions herein to the
contrary, if the fair market value of one Exercise Share is greater than the
Exercise Price (at the date of calculation as set forth below), in lieu of
exercising this Warrant by payment of cash, the Holder may elect to receive
shares equal to the value (as determined below) of this Warrant (or the portion
thereof being canceled) by surrender of this Warrant at the principal office of
the Company together with the properly endorsed Notice of Exercise in which
event the Company shall issue to the Holder a number of Exercise Shares computed
using the following formula:
X = Y (A-B)
-------
A
Where X = the number of Exercise Shares to be issued to the Holder
Y = the number of Exercise Shares purchasable under the
Warrant or, if only a portion of the Warrant is being
exercised, that portion of the Warrant being canceled (at
the date of such calculation)
2.
FINAL VERSION
A = the fair market value of one Exercise Share (at the date
of such calculation)
B = Exercise Price (as adjusted to the date of such
calculation)
For purposes of the above calculation, the fair market value of one
Exercise Share shall be determined by the Company's Board of Directors in good
faith; provided, however, that in the event that this Warrant is exercised
pursuant to this Section 2.1 in connection with the Company's initial public
offering of its Common Stock, the fair market value per share shall be the
product of (i) the per share offering price to the public of the Company's
initial public offering, and (ii) the number of shares of Common Stock into
which each Exercise Share is convertible at the time of such exercise.
3. COVENANTS OF THE COMPANY.
3.1 COVENANTS AS TO EXERCISE SHARES. The Company covenants and
agrees that all Exercise Shares that may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued and
outstanding, fully paid and nonassessable, and free from all taxes, liens and
charges with respect to the issuance thereof. The Company further covenants and
agrees that the Company will at all times during the Exercise Period, have
authorized and reserved, free from preemptive rights, a sufficient number of
shares of the series of equity securities comprising the Exercise Shares and the
Company's Common Stock to provide for the exercise of the rights represented by
this Warrant and the subsequent conversion of the Exercise Shares. If at any
time during the Exercise Period the number of authorized but unissued shares of
such series of the Company's equity securities or the Company's Common Stock
shall not be sufficient to permit exercise of this Warrant or the subsequent
conversion of the Exercise Shares, the Company will take such corporate action
as shall be necessary to increase its authorized but unissued shares of such
series of the Company's equity securities or the Company's Common Stock, as
appropriate, to such number of shares as shall be sufficient for such purposes.
3.2 NOTICES OF RECORD DATE. In the event of any taking by the
Company 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 or
other distribution, the Company shall mail to the Holder, at least ten (10) days
prior to the date specified herein, a notice specifying the date on which any
such record is to be taken for the purpose of such dividend or distribution.
3.3 NO IMPAIRMENT. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, omission or agreement, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed by the Company
under and/or in connection with this Warrant, but shall at all times in good
faith use best efforts to assist in carrying out of all the provisions of and/or
relating to this Warrant and in taking all such action as may be necessary or
appropriate to protect Holder's rights, preferences and privileges under and/or
in connection with this Warrant against impairment. The Holder's rights,
preferences and privileges granted under and/or in connection with this Warrant
may not be amended, modified or waived without the Holder's prior written
3.
FINAL VERSION
consent, and the documentation providing for such rights, preferences and
privileges will specifically provide as such.
3.4 REGISTRATION RIGHTS. The Company agrees that the Underlying
Shares (as defined below) shall be "registrable securities" (or terms of similar
impact) under any agreement executed by the Company as part of the Anticipated
Equity Financing, or any other agreement executed by the Company in lieu of,
and/or in addition to, the Anticipated Equity Financing, in each case, for
purposes of providing registration rights under the Act to holders of shares of
capital stock of the Company, and the Company shall ensure that any such
agreement conforms with the requirements of this Section 3.4. Such registration
rights may not be amended, modified or waived without the prior written consent
of the Holder.
4. REPRESENTATIONS OF HOLDER.
4.1 ACQUISITION OF WARRANT FOR PERSONAL ACCOUNT. The Holder
represents and warrants that it is acquiring the Warrant, the Exercise Shares
and the shares of Common Stock issuable upon conversion of the Exercise Shares
(the "Underlying Shares") solely for its account for investment and not with a
view to or for sale or distribution of said Warrant, Exercise Shares or
Underlying Shares or any part thereof except in compliance with applicable
federal and state securities laws. The Holder also represents that the entire
legal and beneficial interests of the Warrant, the Exercise Shares and the
Underlying Shares the Holder is acquiring is being acquired for, and will be
held for, its account only.
4.2 SECURITIES ARE NOT REGISTERED.
(a) The Holder understands that the Warrant, the Exercise
Shares and the Underlying Shares have not been registered under the Securities
Act of 1933, as amended (the "Act") on the basis that no distribution or public
offering of the stock of the Company is to be effected by the Holder. The Holder
realizes that the basis for the exemption may not be present if, notwithstanding
its representations, the Holder has a present intention of acquiring the
securities for a fixed or determinable period in the future, selling (in
connection with a distribution or otherwise), granting any participation in, or
otherwise distributing the securities. The Holder has no such present intention.
(b) The Holder recognizes that the Warrant, the Exercise Shares
and the Underlying Shares must be held indefinitely unless they are subsequently
registered under the Act or an exemption from such registration is available;
provided, however, the parties acknowledge and agree that the Company has an
obligation to register the Underlying Shares as provided in the Recapitalization
Agreement and Related Recapitalization Documents.
(c) The Holder is aware that neither the Warrant, the Exercise
Shares nor the Underlying Shares may be sold pursuant to Rule 144 adopted under
the Act unless certain conditions are met, including, among other things, the
existence of a public market for the shares, the availability of certain current
public information about the Company, the resale following the required holding
period under Rule 144 and the number of shares being sold during any three month
period not exceeding specified limitations.
4.3 DISPOSITION OF WARRANT, EXERCISE SHARES AND UNDERLYING SHARES.
4.
FINAL VERSION
(a) The Holder further agrees not to make any disposition of
all or any part of the Warrant, Exercise Shares or Underlying Shares in any
event unless and until:
(i) The Company shall have received a letter secured by the
Holder from the Securities and Exchange Commission stating that no action will
be recommended to the Commission with respect to the proposed disposition;
(ii) There is then in effect a registration statement under
the Act covering such proposed disposition and such disposition is made in
accordance with said registration statement; or
(iii) The Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and such
disposition shall not be contrary to any applicable federal and/or state
securities laws.
(b) The Holder understands and agrees that all certificates
evidencing the shares to be issued to the Holder may bear the following legend:
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 AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE
ACT OR IF SUCH TRANSACTION IS IN COMPLIANCE WITH APPLICABLE
FEDERAL AND STATE SECURITIES LAWS.
4.4 ACCREDITED INVESTOR STATUS. The Holder is an "accredited
investor" as defined in Regulation D promulgated under the Act.
5. ADJUSTMENT OF EXERCISE PRICE AND EXERCISE SHARES.
5.1 CHANGES IN SECURITIES. In the event of changes in the
series of equity securities of the Company comprising the Exercise Shares by
reason of stock dividends, splits, recapitalizations, reclassifications,
combinations or exchanges of shares, separations, reorganizations, liquidations,
or the like, the number and class of Exercise Shares available under the Warrant
in the aggregate and the Exercise Price shall be correspondingly adjusted to
give the Holder of the Warrant, on exercise for the same aggregate Exercise
Price, the total number, class, and kind of shares as the Holder would have
owned had the Warrant been exercised prior to the event and had the Holder
continued to hold such shares until after the event requiring adjustment. For
purposes of this Section 5, the "AGGREGATE EXERCISE PRICE" shall mean the
aggregate Exercise Price payable in connection with the exercise in full of this
Warrant. The form of this Warrant need not be changed because of any adjustment
in the number of Exercise Shares subject to this Warrant.
5.2 AUTOMATIC CONVERSION. Upon the automatic conversion of all
outstanding shares of the series of equity securities comprising the Exercise
Shares into Common Stock, if
5.
FINAL VERSION
applicable, this Warrant shall become exercisable for that number of shares of
Common Stock of the Company into which the Exercise Shares would then be
convertible, so long as such shares, if this Warrant had been exercised prior to
such offering, would have been converted into shares of the Company's Common
Stock pursuant to the Company's Certificate of Incorporation. In such case, all
references to "Exercise Shares" shall mean shares of the Company's Common Stock
issuable upon exercise of this Warrant, as appropriate.
5.3 CERTIFICATE OF ADJUSTMENTS. Upon each adjustment of the
Exercise Price and/or Exercise Shares, the Company shall promptly notify the
Holder in writing and furnish the Holder with a certificate of its Chief
Financial Officer setting forth such adjustment and the facts upon which such
adjustment is based.
6. FRACTIONAL SHARES. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant hereto. All
Exercise Shares (including fractions) to be issued upon exercise of this Warrant
shall be aggregated for purposes of determining whether the exercise would
result in the issuance of any fractional share. If, after aggregation, the
exercise would result in the issuance of a fractional share, the Company shall,
in lieu of issuance of any fractional share, pay the Holder otherwise entitled
to such fraction a sum in cash equal to the product resulting from multiplying
the then current fair market value of one Exercise Share by such fraction.
7. TRANSFER OF WARRANT. Subject to applicable laws, this Warrant and
all rights hereunder are transferable, in whole or in part, at any time or times
by the Holder upon delivery of this Warrant and the form of assignment attached
hereto to any transferee designated by Holder. The transferee shall sign an
investment letter in form and substance satisfactory to the Company.
8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may reasonably impose (which shall, in the case of
a mutilated Warrant, include the surrender thereof), issue a new Warrant of like
denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual obligation of the
Company, whether or not the allegedly lost, stolen, mutilated or destroyed
Warrant shall be at any time enforceable by anyone.
9. AMENDMENT. Any term of this Warrant may be amended or waived only
with the written consent of the Company and the Holder.
10. NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be deemed effectively given upon actual delivery to the
recipient. All communications shall be sent to the Company and to the Holder at
the addresses listed on the signature page hereof or at such other address as
the Company or Holder may designate by ten (10) days advance written notice to
the other parties hereto.
11. GOVERNING LAW. This Warrant and all rights, obligations and
liabilities hereunder shall be governed by and construed under the laws of the
State of Delaware as applied
6.
FINAL VERSION
to agreements among Delaware residents, made and to be performed entirely within
the State of Delaware without giving effect to conflicts of laws principles.
[SIGNATURE PAGE FOLLOWS]
7.
FINAL VERSION
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by its duly authorized officer as of the date first written above.
NORTHWEST BIOTHERAPEUTICS, INC.
By ____________________________________________
Name: _________________________________________
Title: ________________________________________
Address: 00000 00xx Xxxxxx XX
Xxxxx 000
Xxxxxxx, XX 00000
Fax: (000) 000-0000
ACKNOWLEDGED AND AGREED:
TOUCAN CAPITAL FUND II, L.P.
By ______________________________________
Name: ___________________________________
Title: __________________________________
Address: 0000 Xxxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Fax: (000) 000-0000
[SIGNATURE PAGE TO WARRANT]
FINAL VERSION
NOTICE OF EXERCISE
TO: NORTHWEST BIOTHERAPEUTICS, INC.
(1) [ ] The undersigned hereby elects to purchase ________ shares of
___________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the attached Warrant, and tenders herewith
payment of the exercise price in full, together with all applicable transfer
taxes, if any.
[ ] The undersigned hereby elects to purchase ________ shares
of __________ (the "EXERCISE SHARES") of NORTHWEST BIOTHERAPEUTICS, INC. (the
"COMPANY") pursuant to the terms of the net exercise provisions set forth in
Section 2.1 of the attached Warrant, and shall tender payment of all applicable
transfer taxes, if any.
(2) Please issue a certificate or certificates representing said
Exercise Shares in the name of the undersigned or in such other name as is
specified below:
------------------------
(Name)
------------------------
------------------------
(Address)
(3) The undersigned represents that (i) the aforesaid Exercise Shares
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof and
that the undersigned has no present intention of distributing or reselling such
shares except in accordance with applicable federal and state securities laws;
(ii) the undersigned is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision regarding its investment in the Company;
(iii) the undersigned is experienced in making investments of this type and has
such knowledge and background in financial and business matters that the
undersigned is capable of evaluating the merits and risks of this investment and
protecting the undersigned's own interests; (iv) the undersigned understands
that Exercise Shares issuable upon exercise of this Warrant have not been
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
by reason of a specific exemption from the registration provisions of the
Securities Act, which exemption depends upon, among other things, the bona fide
nature of the investment intent as expressed herein, and, because such
securities have not been registered under the Securities Act, they must be held
indefinitely unless subsequently registered under the Securities Act or an
exemption from such registration is available; (v) the undersigned is aware that
the aforesaid Exercise Shares may not be sold pursuant to Rule 144 adopted under
the Securities Act unless certain conditions are met and until the undersigned
has held the shares for the number of years prescribed by Rule 144, that among
the conditions for use of the Rule is the availability of current information to
the public about the Company; and (vi) the undersigned agrees not to make any
disposition of all or any part of the aforesaid shares of Exercise Shares unless
and until there is then in effect a registration statement under the Securities
Act covering such proposed disposition and such
1.
FINAL VERSION
disposition is made in accordance with said registration statement or if such
transaction is in compliance with applicable federal and state securities laws.
________________________________________ _____________________________________
Date (Signature)
_____________________________________
(Print Name)
2.
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and
supply required information. Do not use this form to
purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced
thereby are hereby assigned to
Name: ________________________________________________________________
(Please Print)
Address: _____________________________________________________________
(Please Print)
Dated: __________, 20__
Holder's
Signature: ___________________________________________________________
Holder's
Address: _____________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever. Officers of corporations and those acting in a fiduciary or
other representative capacity should file proper evidence of authority to assign
the foregoing Warrant.
3.
EXECUTION VERSION
EXHIBIT E
FORM OF SUBORDINATION AGREEMENT
This Subordination Agreement (this "AGREEMENT") dated April 26, 2004,
is between _______________ ("JUNIOR CREDITOR"), TOUCAN CAPITAL FUND II, L.P.
("SENIOR CREDITOR") and Northwest Biotherapeutics, Inc., a Delaware corporation
("BORROWER").
RECITALS
A. Borrower has requested and/or obtained credit from Senior Creditor
which may be secured by its assets and property.
B. Junior Creditor has previously extended credit to Borrower and/or
may later extend other credit to Borrower.
C. To induce Senior Creditor to extend credit to Borrower and make
further extensions of credit to or for Borrower, or to purchase or extend credit
pursuant to any instrument or writing on which Borrower is liable or to grant
renewals or extensions of any loan, extension of credit, purchase, or other
accommodation Junior Creditor is willing to subordinate: (i) all of Borrower's
indebtedness and obligations to Junior Creditor, existing now or later (the
"SUBORDINATED DEBT") to all of Borrower's indebtedness and obligations to Senior
Creditor; and (ii) all of Junior Creditor's security interests, to all of Senior
Creditor's security interests in the Borrower's property.
THE PARTIES AGREE AS FOLLOWS:
1. Junior Creditor subordinates to Senior Creditor any security
interest, lien or encumbrance that it has in any Collateral of Borrower (as
defined in the Loan Agreement, Security Agreement and 10% Convertible, Secured
Promissory Note dated April 26, 2004 between Borrower and Senior Creditor, the
"LOAN AGREEMENT"). Despite attachment or perfection dates of Junior Creditor's
security interest and Senior Creditor's security interest, Senior Creditor's
security interest in the Collateral is prior to and senior to Junior Creditor's
security interest.
2. All Subordinated Debt payments are subordinated to all of
Borrower's obligations to Senior Creditor existing now or later, together with
collection costs of the Obligations (including attorneys' fees) including, but
not limited to, interest accruing after any bankruptcy, reorganization, or
similar proceeding and all obligations under the Loan Agreement (the "SENIOR
DEBT").
3. Junior Creditor will not:
(A) demand or receive from Borrower (and Borrower will not pay) any
part of the Subordinated Debt, by payment, prepayment, or otherwise,
(B) exercise any remedy against Borrower or the Collateral, or
1.
EXECUTION VERSION
(C) accelerate the Subordinated Debt, or begin or participate in
any action against Borrower, until all the Senior Debt is paid. This does not
prohibit Junior Creditor from converting any Subordinated Debt into equity
securities of Borrower, whether voluntarily or automatically pursuant to the
provisions of the Subordinated Debt.
4. Junior Creditor must deliver to Senior Creditor in the form
received (except for endorsement or assignment by Junior Creditor) any payment,
distribution, security or proceeds it receives on the Subordinated Debt other
than according to this Agreement.
5. These provisions remain in full force and effect, despite
Borrower's bankruptcy, insolvency, reorganization, assignment for the benefit of
creditors, or any case or proceeding under any bankruptcy, insolvency or similar
law, and Senior Creditor's claims against Borrower and Borrower's estate will be
fully paid before any payment is made to Junior Creditor.
6. Until the Senior Debt is paid, Junior Creditor irrevocably appoints
Senior Creditor as its attorney-in-fact, with power of attorney with power of
substitution, in Junior Creditor's name or in Senior Creditor's name, for Senior
Creditor's use and benefit without notice to Junior Creditor, to do, if the
Senior Creditor so desires at its sole discretion, the following in any
bankruptcy, insolvency or similar proceeding involving Borrower:
(A) file any claims for the Subordinated Debt for Junior Creditor
if Junior Creditor does not do so at least 30 days before the time to file
claims expires, and
(B) accept or reject any plan of reorganization or arrangement for
Junior Creditor and vote Junior Creditor's claims in respect of the Subordinated
Debt in any way it chooses.
7. Junior Creditor will immediately put a legend on the Subordinated
Debt instruments that the instruments are subject to this Agreement. Other than
as provided in that certain First Amendment to Convertible Secured Promissory
Note dated of even date herewith by and between Junior Creditor and Borrower, no
amendment of the Subordinated Debt documents will modify this Agreement in any
way that terminates or impairs the subordination of the Subordinated Debt or the
subordination of the security interest or lien that Senior Creditor has in
Borrower's property. For example, instruments may not be amended to (a) increase
the interest rate of the Subordinated Debt, or (b) accelerate payment of
principal or interest or any other portion of the Subordinated Debt.
8. This Agreement is effective for so long as Borrower owes any
amounts to Senior Creditor. If, after full payment of the Senior Debt, Senior
Creditor must disgorge any payments made on the Senior Debt, this Agreement, and
the relative rights and priorities provided in it, will be reinstated as to all
disgorged payments as though the payments had not been made, and Junior Creditor
will immediately pay Senior Creditor all payments received under the
Subordinated Debt to the extent the payments would have been prohibited under
this Agreement. At any time, without notice to Junior Creditor, Senior Creditor
may take actions it considers appropriate on the Senior Debt such as terminating
advances, increasing the principal, extending the time of payment, increasing
interest rates, renewing, compromising or otherwise amending any documents
affecting the Senior Debt and any collateral securing the Senior Debt, and
2.
EXECUTION VERSION
enforcing or failing to enforce any rights against Borrower or any other person.
No action or inaction will impair or otherwise affect Senior Creditor's rights
under this Agreement. Junior Creditor waives any benefits that it has that
permit a subordinating creditor to assert suretyship and/or similar defenses or
that give the subordinating creditor rights to require a senior creditor to
marshal assets. Junior Creditor will not assert any such defense or right.
9. This Agreement binds Junior Creditor, its successors and assigns,
and benefits Senior Creditor's successors and assigns. This Agreement is for
Junior Creditor's and Senior Creditor's benefit and not for the benefit of
Borrower or any other party. If Borrower is refinancing any of the Senior Debt
with a new lender, upon Senior Creditor's request of Junior Creditor, Junior
Creditor will enter into a new subordination agreement with the new lender on
substantially the terms of this Agreement.
10. This Agreement may be executed in two or more counterparts, each
of which is an original and all of which together constitute one instrument.
11. Delaware law governs this Agreement without regard to principles
of conflicts of law. Junior Creditor and Senior Creditor each submit to the
exclusive jurisdiction of the State and Federal courts in Delaware. JUNIOR
CREDITOR AND SENIOR CREDITOR EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION ARISING OUT OF THIS AGREEMENT OR ANY CONTEMPLATED
TRANSACTION, INCLUDING, WITHOUT LIMITATION, CONTRACT, TORT, BREACH OF DUTY AND
ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER
INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. This Agreement is the entire agreement about this subject matter,
and supersedes all prior or other negotiations or agreements. Junior Creditor is
not relying on any representations by Senior Creditor or Borrower in entering
into this Agreement. Junior Creditor will keep itself informed of Borrower's
financial and other condition. This Agreement may be amended only by written
instrument signed by Junior Creditor and Senior Creditor.
"Junior Creditor" "Senior Creditor"
TOUCAN CAPITAL FUND II, L.P.
__________________________________________
Name By: _____________________________
Title: __________________________
"Borrower"
NORTHWEST BIOTHERAPEUTICS, INC.
By: _____________________________
Title: __________________________
3.
EXECUTION VERSION
EXHIBIT F
FORM OF CONSENT TO LOAN AND AMENDMENT OF
SECURITY AGREEMENT
This Agreement is made by Northwest Biotherapeutics, Inc. (the
"Company") and the undersigned, a holder of one of a series of secured
convertible promissory notes issued by the Company dated November 13, 2003 in
the aggregate principal amount of $335,000 (the "Notes") and a party to a
Security Agreement dated November 13, 2003 among the Company, the undersigned
and other holders of the Notes (the "Security Agreement").
The Company has previously borrowed the principal amount of $50,000
from Toucan Capital Fund II, L.P. ("Toucan"), in accordance with the terms of a
10% Convertible Promissory Note dated February 2, 2004, which loan was made on
an unsecured basis to the Company (the "First Toucan Note"). The Company
borrowed an additional $50,000 from Toucan in accordance with the terms of a 10%
Convertible Secured Promissory Noted dated March 1, 2004 (the "Second Toucan
Note"), which was secured by security interest in all the Company's assets in
favor of Toucan and which security interest was pari passu with and of equal
priority to the security interest granted by the Company to the undersigned and
the other holders of the Notes (collectively the "Noteholders") pursuant to the
Security Agreement to secure the Notes.
The undersigned consented to both the First Toucan Note and the Second
Toucan Note pursuant to a Consent dated on or about February 2, 2004 and a
Consent to Loan and Amendment of Security Agreement dated on or about March 1,
2004 (the "Consent and Amendment").
Pursuant to a Recapitalization Agreement between the Company and
Toucan, the Company desires to borrow an additional $500,000 from Toucan and to
consolidate the aggregate $100,000 principal balance and accrued interest of the
First Toucan Note and the Second Toucan Note in a new Loan Agreement, Security
Agreement and 10% Convertible Secured Promissory Note (the "Third Toucan Note",
a copy of which is attached hereto as Exhibit A), and to grant a security
interest in all the Company's assets in favor of Toucan, in accordance with the
terms of the Third Toucan Note.
Pursuant to the Recapitalization Agreement, Toucan and/or its designees
("Toucan Designees") may in their discretion loan additional amounts beyond the
Third Toucan Note to the Company on such terms as the Company and Toucan and/or
Toucan Designees may agree including a security interest in all the Company's
assets. The Third Toucan Note together with any additional amounts that may be
borrowed by the Company from Toucan and/or Toucan Designees are herein referred
to as the "Bridge Financing." The Company will issue warrants to acquire Company
securities in connection with the issuance of the Third Toucan Note, any further
Bridge Financing and certain equity financing as contemplated in the
Recapitalization Agreement (collectively the "Warrants") to Toucan and/or Toucan
Designees (collectively "Investor").
In connection with the Third Toucan Note, the undersigned will either
enter into a Subordination Agreement with Toucan pursuant to which the
undersigned will subordinate its
EXECUTION VERSION
security interest securing the undersigned's Note or an Intercreditor Agreement
pursuant to which the undersigned will retain a security interest that will be
pari passu with and of equal priority to, the security interest granted by the
Company to Toucan pursuant to the Third Toucan Note and with respect to any
other indebtedness of the Company to Toucan.
Section 4.4 of the Security Agreement states that the Company (x) will
not incur, create or permit to exist any Lien on any of the Collateral and will
defend, at its own expense, the Collateral against, and will take such other
action as is necessary to remove any Lien or claim on or to the Collateral, and
(y) will defend the right, title and interest of the Lenders in and to any of
the Collateral against the claims and demands of all persons whomsoever.
In addition, Section 4.12 of the Security Agreement states, among other
things, that the Company shall not create, incur, assume or suffer to exist any
indebtedness (exclusive of trade debt) whether secured or unsecured other than
the Company's indebtedness to Lenders.
Section 6 of the Security Agreement states the Security Interest
granted hereunder upon the Collateral shall be senior to and have priority over
all debt of the Company.
In connection with the Bridge Financing and the grant of a security
interest by the Company to Toucan and/or Toucan Designees to secure the Third
Toucan Note and any further Bridge Financing and the issuance of the Warrants,
the undersigned consents and agrees to the following:
(1) Pursuant to Section 9.4 of the Security Agreement, the undersigned
hereby consents to and approves of the amendment, modification, termination or
waiver of any provision of the Security Agreement or Notes as may be necessary
to permit and authorize:
(a) the Third Toucan Note, all further Bridge Financing and the
Warrants and the Company's issuance and performance of its obligations under the
Third Toucan Note and any further notes or agreements related to any other
Bridge Financing and the Warrants; and
(b) the Company's grant to Toucan and/or to Toucan Designees of a
security interest in "Collateral" (as defined in the Third Toucan Note) to
secure payment of the Third Toucan Note and any further Bridge Financing;
(2) The waiver of any event of default under the Security Agreement or
the Note which might otherwise arise with respect to the matters described in
paragraph (1) above, including, without limitation, as a result of a violation
of Sections 4.4, 4.5, 4.12, 4.14, Section 5.1 or Section 6 of the Security
Agreement; and acknowledges that the Bridge Financing, the issuance of the Third
Toucan Note, any further notes or agreements related to the Bridge Financing and
the Warrants and the grant of a security interest in the Collateral to Toucan
and/or Toucan Designees will not constitute an event of default under the
Security Agreement or the Notes.
(3) The undersigned's obligations under the Subordination Agreement or
the Intercreditor Agreement, as the case may be, supercede the undersigned's
agreement in paragraphs 3 and 4 of the Consent and Amendment.
2.
EXECUTION VERSION
(4) The undersigned has been advised by the Company to seek advice from
the undersigned legal counsel concerning this Agreement and has been given
copies of the Recapitalization Agreement and the Third Toucan Note and has
received from the Company all information with respect to this Agreement the
undersigned has requested.
Dated this ____ day of April, 2004.
APPROVED:
NORTHWEST BIOTHERAPEUTICS, INC. NOTE HOLDER:
By ____________________________________ ______________________________________
Signature
Its __________________________
______________________________________
Please print name
3.
EXECUTION VERSION
EXHIBIT G
FORM OF FIRST AMENDMENT TO
CONVERTIBLE SECURED PROMISSORY NOTE
THIS FIRST AMENDMENT TO CONVERTIBLE SECURED PROMISSORY NOTE (the
"AMENDMENT") is made and entered into as of April 26, 2004, by and among
NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "MAKER") and
____________ (the "HOLDER"). This Amendment amends the Note (as defined below).
RECITALS
A. Section 10 of that certain Convertible Secured Promissory Note, dated as of
November 12, 2003, by and between the Maker and the Holder (the "NOTE"), states
that any provision of such note may be amended or waived in writing by the
Holder and the Maker; and
B. The Maker and the Holder wish to amend the Note as provided below.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Section 1 of the Note is hereby amended and restated in its entirety as
follows:
"1. Maturity Date. The aggregate principal amount of this Note and accrued
interest thereon shall be due and payable on: (i) November 12, 2004 if a Stage 2
Qualifying Financing has occurred on or before November 12, 2004: or (ii) May
12, 2005 if a Stage 2 Qualifying Financing has not occurred on or before
November 12, 2004 (such date, the "Maturity Date")."
2. Section 4 of the Note is hereby amended and restated in its entirety as
follows:
"4. Prepayment. The Maker may prepay this Note and all interest accrued
hereon in whole or in part, upon not less than five business days' prior written
notice to the Holder; provided, however that, prior to the occurrence of a Stage
2 Qualifying Financing, any such prepayment shall only be made upon Maker's
receipt of a request to do so from Investor and, as applicable, Other Investors,
collectively holding a majority of the Convertible Preferred Stock outstanding
at the time of such request (as each such term is defined in that certain
Recapitalization Agreement (the "Recapitalization Agreement") dated as of April
26, 2004 by and between the Maker and Toucan Capital Fund II, L.P.)."
3. Section 5 of the Note is hereby amended and restated in its entirety as
follows:
"5. Conversion
(a) At any time prior to the earlier to occur of a Stage 1 Qualifying Financing
or the Maturity Date, the principal of and accrued interest on this Note shall
be convertible at the election of the Maker (which shall occur only upon Maker's
receipt of a request to do so from Investor and, as applicable, Other Investors,
collectively holding a majority of the Convertible Preferred Stock outstanding
at the time of such request) into a number (rounded down in the case of any
fractional shares) of fully paid and non-assessable shares of Common Stock, par
value $.001 per
EXECUTION VERSION
share, of the Maker equal to the amount being converted divided by the
Conversion Price (as defined herein).
(b) At any time following the occurrence of a Stage 1 Qualifying Financing and
prior to the earlier to occur of a Stage 2 Qualifying Financing or the Maturity
Date, the principal of and accrued interest on this Note shall be convertible at
the election of Holder into a number (rounded down in the case of any fractional
shares) of fully paid and non-assessable shares of Common Stock, par value $.001
per share, of the Maker equal to the amount being converted divided by the
Conversion Price.
(c) At any time following the occurrence of a Stage 2 Qualifying Financing and
prior to the Maturity Date, the principal of and accrued interest on this Note
shall be convertible at the election of the Maker (which shall occur only upon
Maker's receipt of a request to do so from Investor and, as applicable, Other
Investors, collectively holding a majority of the Convertible Preferred Stock
outstanding at the time of such request) into a number (rounded down in the case
of any fractional shares) of fully paid and non-assessable shares of Common
Stock, par value $.001 per share, of the Maker equal to the amount being
converted divided by the Conversion Price.
(d) To effect the conversion of this Note, a written notice of conversion
specifying the date on which such conversion is to be effected (the "Conversion
Date") shall be delivered: (i) in the case of a conversion pursuant to Section
5(a) or 5(c), by the Maker to the Holder; and (ii) in the case of a conversion
pursuant to Section 5(b), by the Holder to the Maker. The Holder shall surrender
this Note to the Maker and deliver a representation letter to the Maker
containing customary private placement representations and warranties so that
the issuance of the shares of Common Stock upon conversion of this Note shall be
exempt from registration under the Securities Act of 1933, as amended. Promptly
following the Conversion Date, the Maker shall issue to the Holder the shares of
Common Stock into which this Note has been converted, registered on the books of
the Maker in the name of the Holder or its nominee and shall deliver the
certificate(s) representing such shares to the Holder at the address specified
by the Holder. From and after the Conversion Date, the Holder shall be treated
for all purposes as the owner of the shares of Common Stock into which this Note
has been converted and the certificate(s) for such shares shall be issued as of
the Conversion Date.
(e) The Maker shall, prior to any conversion of this Note, have reserved a
sufficient number of duly authorized shares of Common Stock to satisfy the
conversion of this Note.
(f) As used herein, "Conversion Price" means $0.10 per share, as appropriately
adjusted for stock splits, reverse stock splits, reclassifications, or other
similar occurrences affecting the number of shares of Common Stock outstanding
after April 26, 2004.
(g) As used herein, "Stage 1 Qualifying Financing" means the receipt by Maker,
after April 26, 2004, of gross proceeds aggregating at least $8 million
resulting from (i) any combination of issuances of any class or series of Equity
Security, Debt Security (each as defined in the Recapitalization Agreement)
and/or combinations thereof (including, without limitation, any conversion of
any convertible promissory notes, and/or other convertible securities or
instruments of any kind), and (ii) conversion of any convertible security or
instrument and exercise of exercisable security or instrument.
2.
EXECUTION VERSION
(h) As used herein, "Stage 2 Qualifying Financing" means the receipt by Maker,
after April 26, 2004, of gross proceeds aggregating at least $15 million
resulting from any combination of issuances of any class or series of Equity
Security, Debt Security (each as defined in the Recapitalization Agreement)
and/or combinations thereof for cash only, and not including any conversion of
any convertible security or instrument or exercise of any exercisable security
or instrument."
4. All other terms and conditions of the Note shall be unaffected hereby and
remain in full force and effect.
5. This Amendment shall be shall be governed by and construed under the laws of
the State of Washington as applied to agreements among Washington residents
entered into and to be performed entirely within the State of Washington.
6. This Amendment may be executed in one or more counterparts, each of which
will be deemed an original but all of which together shall constitute one and
the same agreement.
[SIGNATURE PAGE FOLLOWS]
3.
EXECUTION VERSION
IN WITNESS WHEREOF, the parties hereto have executed this FIRST
AMENDMENT TO CONVERTIBLE SECURED PROMISSORY NOTE as of the date first above
written.
COMPANY:
NORTHWEST BIOTHERAPEUTICS, INC.,
a Delaware corporation
By: ____________________________________
Name: __________________________________
Title: _________________________________
HOLDER:
_______________________________________
Name:
4.
EXECUTION VERSION
EXHIBIT H
FORM OF FIRST AMENDMENT TO
WARRANTS TO PURCHASE COMMON SHARES
THIS FIRST AMENDMENT TO WARRANTS TO PURCHASE COMMON SHARES (the
"AMENDMENT") is made and entered into as of April 25, 2004, by and among
NORTHWEST BIOTHERAPEUTICS, INC., a Delaware corporation (the "COMPANY"), and the
undersigned holders of Warrants (as defined below) to acquire shares of the
Company's common stock (each a "WARRANTHOLDER" and, collectively, the
"WARRANTHOLDERS"). When signed by the holders of at least 50% of the common
stock subject to Warrants (as defined below) this Amendment will amend each of
the Warrants.
RECITALS
WHEREAS, the Company and the undersigned Warrantholder(s) desire to
amend all of the Company Warrants to Purchase Common Shares, of series Nos. BR-1
through BR-5, each dated as of November 13, 2003 (each, a "WARRANT" and,
collectively, the "WARRANTS"), as provided herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties agree as follows:
1. Section 8(a) of each Warrant is hereby amended and restated in its
entirety as follows:
"(a) In the event of changes in the Common Stock by reason of
stock dividends, splits, recapitalizations, reclassifications,
combinations or exchanges of shares, separations, reorganizations,
liquidations, or the like, the number and class of Warrant Shares
available under this Warrant in the aggregate and the Warrant Price
shall be correspondingly adjusted to give the Warrantholder, on
exercise for the same Aggregate Warrant Price, the total number, class,
and kind of shares as the Warrantholder would have owned had this
Warrant been exercised prior to the event and had the Warrantolder
continued to hold such shares until after the event requiring
adjustment. Notwithstanding the foregoing, no adjustment to the number
of Warrant Shares or the Warrant Price shall be made in the event of an
issuance or deemed issuance of securities for consideration below the
then current Warrant Price pursuant to this Section 8(a). For purposes
of this Section 8(a), the "AGGREGATE WARRANT PRICE" shall mean the
aggregate Warrant Price payable in connection with the exercise in full
of this Warrant. The form of this Warrant need not be changed because
of any adjustment in the number of Warrant Shares subject to this
Warrant."
2. The first paragraph of Section 8(d) of each Warrant is hereby amended
and restated in its entirety to read as follows:
EXECUTION VERSION
"Except as provided in subsections (e) and (f) of this
Section 8, if and whenever the Company shall issue or sell, or is, in
accordance with any of subsections (d)(l) through (d)(6) hereof, deemed
to have issued or sold, any shares of Common Stock for no consideration
or for a consideration per share less than the Warrant Price in effect
immediately prior to the time of such issue or sale, then and in each
such case (a "Trigger Issuance") the then-existing Warrant Price, shall
be reduced, as of the close of business on the effective date of the
Trigger Issuance, to the lowest price per share at which any share of
Common Stock was issued or sold or deemed to be issued or sold, but in
no event shall the Warrant Price be reduced to less than the lesser of
$0.10 per share (subject to adjustment as provided in Section 8(a)) or
35% discount to the average closing price during the twenty trading
days prior to the first closing of the sale by the Company of
Convertible Preferred Stock, par value $0.001 per share as contemplated
by that certain Recapitalization Agreement dated as of April 26, 2004
between the Company and Toucan Capital Fund II, L.P.; provided,
however, that in no event will the Warrant Price be less than $.04 per
share (subject to adjustment as provided in Section 8(a))"
3. Section 8(f) of each Warrant is hereby amended and restated in its
entirety to read as follows:
"Anything to the contrary herein notwithstanding, in no event
shall the then existing Warrant Price be reduced to less than the
lesser of $0.10 per share (subject to adjustment as provided in Section
8(a)) or 35% discount to the average closing price during the twenty
trading days prior to the first closing of the sale by the Company of
Convertible Preferred Stock, par value $0.001 per share as contemplated
by that certain Recapitalization Agreement dated as of April 26, 2004
between the Company and Toucan Capital Fund II, L.P.; provided,
however, that in no event will the Warrant Price be less than $.04 per
share (subject to adjustment as provided in Section 8(a)) pursuant to
the adjustments provided for in Section 8(d)."
4. Sections 8(b) and 8(c) of each Warrant are hereby deleted in their
entirety.
5. Section 18 of each Warrant is hereby deleted in its entirety.
6. All other terms and conditions of the Warrants shall be unaffected
hereby and remain in full force and effect.
7. This Amendment shall be governed by and construed under the laws of the
State of Washington as applied to agreements among Washington residents
entered into and to be performed entirely within the State of
Washington.
8. This Amendment may be executed in one or more counterparts, each of
which will be deemed an original but all of which together shall
constitute one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
2.
EXECUTION VERSION
IN WITNESS WHEREOF, the parties hereto have executed this FIRST
AMENDMENT TO WARRANT TO PURCHASE COMMON SHARES as of the date first above
written.
COMPANY:
NORTHWEST BIOTHERAPEUTICS, INC.,
a Delaware corporation
By: ________________________________________
Name:
Title:
WARRANTHOLDERS:
____________________________________________
Xxxxx X. Xxxxxxx
____________________________________________
Xxxxxx X. Xxxxx
____________________________________________
Xxxx X. Xxxxxx
____________________________________________
Xxxxx Xxxxxxxx
FIRST AMENDMENT TO WARRANT TO PURCHASE COMMON SHARES
EXECUTION VERSION
EXHIBIT I
SCHEDULE OF EXCEPTIONS
