EXCHANGE AGREEMENT
___________________
(including any other persons or entities exchanging Notes hereunder for whom the
undersigned Holder holds contractual and investment authority, the “Holder”) enters into this
Exchange Agreement (the “Agreement”) with PDL
BioPharma, Inc. (the “Company”) on ___________, 2010
whereby the Holder will exchange (the “Exchange”) the Company’s 2.75%
Convertible Subordinated Notes due 2023 (the “Notes”) for shares of the
Company’s common stock, par value $.01 per share (the “Common Stock”) and a cash
payment.
In order
to induce the Holder to cancel Notes it holds as payment for its acquisition of
shares of the Company’s Common Stock, the Company has agreed to offer the
Holder, per $1,000 principal amount of Notes, shares of Common Stock in addition
to the number of shares into which the Notes are convertible by their terms,
thus reflecting a price per share of Common Stock lower than the current
conversion price of the Notes.
On and
subject to the terms hereof, the parties hereto agree as follows:
Article
I: Exchange of the Notes for Common Stock
Subject to the terms set forth in this
Agreement, at the Closing, the Holder hereby agrees to exchange and
deliver to the Company the following Notes, and in exchange therefor the Company
hereby agrees to issue to the Holder the number of shares of Common Stock
described below and to pay in cash the following amount for accrued but unpaid interest on such
Notes:
Principal
Amount of Notes to be Exchanged: $______________________________
(the
“Exchanged
Notes”).
Number of
Shares of Common Stock to be issued in Exchange: ______________________
shares
(the
“Shares”).
Cash Payment for Accrued Interest on Exchanged
Notes:
$_____________________
(the “Cash
Payment”).
The
closing of the Exchange (the “Closing”) shall occur on a
date (the “Closing
Date”) no later than three business days after the date of this
Agreement. At the Closing, (a) the Holder shall deliver or cause
to be delivered to the Company all right, title and interest in and to the
Exchanged Notes free and clear of any mortgage, lien, pledge, charge, security
interest, encumbrance, title retention agreement, option, equity or other
adverse claim thereto (collectively, “Liens”), together with any
documents of conveyance or transfer that the Company may deem necessary or
desirable to transfer to and confirm in the Company all right, title and
interest in and to the Exchanged Notes free and clear of any Liens, and (b) the Company shall issue to the
Holder the Shares and shall deliver to the Holder the Cash Payment; provided,
however, that the parties acknowledge that the issuance of the Shares to the Holder may be delayed due to
procedures and mechanics within the system of the Depository Trust Company and
that such delay will not be a default under this Agreement so long as
(i) the Company is using its best efforts to effect the issuance of the
Shares, and (ii) such delay is no longer than
three business days.
Article
II: Covenants, Representations and Warranties of the
Holder
The
Holder hereby covenants as follows, and makes the following representations and
warranties, each of which is and shall be true and correct on the date hereof
and at the Closing Date, to the Company, Lazard Frères & Co. LLC and Lazard
Capital Markets LLC, and all such covenants, representations and warranties
shall survive the Closing.
Section
2.1 Power and
Authorization. The Holder is duly organized, validly existing
and in good standing, and has the power, authority and capacity to execute and
deliver this Agreement, to perform its obligations hereunder, and to consummate
the Exchange contemplated hereby. If the Holder that is signatory
hereto is executing this Agreement to effect the exchange of Exchanged Notes
beneficially owned by one or more other persons or entities (who are thus
included in the definition of “Holder” hereunder), (a) such signatory
Holder has all requisite discretionary authority to enter into this Agreement on
behalf of, and bind, each such other person or entity that is a beneficial owner
of Exchanged Notes, and (b) Schedule A
hereto is a true, correct and complete list of (i) the name of each party
delivering (as beneficial owner) Exchanged Notes hereunder, (ii) the
principal amount of such Holder’s Exchanged Notes, (iii) the number of
shares of Common Stock to be issued to such Holder in respect of its Exchanged
Notes, and (iv) the amount of the cash payment to be made to such Holder in
respect of the accrued interest on its Exchanged Notes.
Section
2.2 Valid and
Enforceable Agreement; No Violations. This Agreement has been
duly executed and delivered by the Holder and constitutes a legal, valid and
binding obligation of the Holder, enforceable against the Holder in accordance
with its terms, except that such enforcement may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting or relating to enforcement of creditors’ rights generally, and
(b) general principles of equity, whether such enforceability is considered
in a proceeding at law or in equity (the “Enforceability
Exceptions”). This Agreement and consummation of the Exchange
will not violate, conflict with or result in a breach of or default under
(i) the Holder’s organizational documents, (ii) any agreement or
instrument to which the Holder is a party or by which the Holder or any of its
assets are bound, or (iii) any laws, regulations or governmental or
judicial decrees, injunctions or orders applicable to the Holder.
Section
2.3 Title to
the Exchanged Notes. The Holder is the sole legal and
beneficial owner of the Exchanged Notes, and the Holder has good, valid and
marketable title to the Exchanged Notes, free and clear of any Liens (other than
pledges or security interests that the Holder may have created in favor of a
prime broker under and in accordance with its prime brokerage agreement with
such broker). The Holder has not, in whole or in part, except as
described in the preceding sentence, (a) assigned, transferred,
hypothecated, pledged or otherwise disposed of any of the Exchanged Notes or its
rights in the Exchanged Notes, or (b) given any person or entity any
transfer order, power of attorney or other authority of any nature whatsoever
with respect to the Exchanged Notes. Upon the Holder’s delivery of
the Exchanged Notes to the Company pursuant to the Exchange, the Exchanged Notes
shall be free and clear of all Liens created by the Holder.
Section
2.4 Accredited
Investor. The
Holder is an “accredited investor” within the meaning of Rule 501 of Regulation
D promulgated under the Securities Act of 1933, as amended (the “Securities
Act”).
Section
2.5 No
Affiliate or 5% Stockholder Status. The Holder is not, and has
not been during the consecutive three month period preceding the date hereof, an
“affiliate” within the meaning of Rule 144 promulgated under the Securities Act
(an “Affiliate”) of the
Company. To its knowledge, the Holder did not acquire any of the Exchanged Notes, directly or indirectly, from an
Affiliate of the Company. The Holder and its Affiliates
collectively beneficially own and will beneficially own as of the Closing Date
(but without giving effect to the Exchange) less than 5% of the outstanding
shares of Common Stock.
Section
2.6 No
Illegal Transactions. The Holder has not, directly or
indirectly, and no person acting on behalf of or pursuant to any understanding
with the Holder has, engaged in any transactions in the securities of the
Company (including, without limitation, any Short Sales (as defined below)
involving any of the Company’s securities) since the time that such Holder was
first contacted by either the Company, Lazard Frères & Co. LLC or Lazard
Capital Markets LLC or any other person regarding an investment in the Common
Stock or the Company. Such Holder covenants that neither it nor any
person acting on its behalf or pursuant to any understanding with such Holder
will engage, directly or indirectly, in any transactions in the securities of
the Company (including Short Sales) prior to the time the transactions
contemplated by this Agreement are publicly disclosed. “Short Sales” include, without
limitation, all “short sales” as defined in Rule 200 of Regulation SHO
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and all types
of direct and indirect stock pledges, forward sale contracts, options, puts,
calls, short sales, swaps, derivatives and similar arrangements (including on a
total return basis), and sales and other transactions through non-U.S.
broker-dealers or foreign regulated brokers. Solely for purposes of
this Section 2.6, subject to the Holder's compliance with its obligations
under the U.S. federal securities laws and the Holder's internal policies,
“Holder” shall not be deemed to include any subsidiaries or affiliates of the
Holder that are effectively walled off by appropriate “Chinese Wall” information
barriers approved by the Holder's legal or compliance department (and thus have
not been privy to any information concerning the Exchange).
Section
2.7 Adequate
Information; No Reliance. The Holder acknowledges
and agrees that (a) the Holder has been furnished with all materials it
considers relevant to making an investment decision to enter into the Exchange
and has had the opportunity to review: (i) the Company’s filings with the
Securities and Exchange Commission (the “SEC”), including, without
limitation, all filings made pursuant to the Exchange Act and (ii) a draft press
release or form of Current Report on Form 8-K (the “Anticipated Disclosure”)
disclosing all material terms of the Exchange and certain other matters
concerning the Company, the substance of which will be publicly issued or filed
with the SEC in accordance with Section 3.5 below, (b) the Holder has
had a full opportunity to ask questions of the Company concerning the Company,
its business, operations, financial performance, financial condition and
prospects, and the terms and conditions of the Exchange, (c) the Holder has
had the opportunity to consult with its accounting, tax, financial and legal
advisors to be able to evaluate the risks involved in the Exchange and to make
an informed investment decision with respect to such Exchange, and (d) the
Holder is not relying, and has not relied, upon any statement, advice (whether
legal, tax, financial, accounting or other), representation or warranty made by
the Company or any of its affiliates or representatives including, without
limitation, Lazard Frères & Co. LLC and Lazard Capital Markets LLC,
except for (A) the publicly available filings made by the Company with the
SEC under the Exchange Act, (B) the Anticipated Disclosure, and
(C) the representations and warranties made by the Company in this
Agreement.
Article
III: Covenants, Representations and Warranties of the
Company
The
Company hereby covenants as follows, and makes the following representations and
warranties, each of which is and shall be true and correct on the date hereof
and at the Closing Date, to the Holder, Lazard Frères & Co. LLC and Lazard
Capital Markets LLC, and all such covenants, representations and warranties
shall survive the Closing.
Section
3.1 Power and
Authorization. The Company is duly incorporated, validly
existing and in good standing under the laws of its state of incorporation, and
has the power, authority and capacity to execute and deliver this Agreement, to
perform its obligations hereunder, and to consummate the Exchange contemplated
hereby.
Section
3.2 Valid and
Enforceable Agreement; No Violations. This Agreement has been
duly executed and delivered by the Company and constitutes a legal, valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except that such enforcement may be subject to the
Enforceability Exceptions. This Agreement and consummation of the
Exchange will not violate, conflict with or result in a breach of or default
under (i) the Company’s charter, bylaws or other organizational documents,
(ii) any agreement or instrument to which the Company is a party or by
which the Company or any of its assets are bound, or (iii) any laws,
regulations or governmental or judicial decrees, injunctions or orders
applicable to the Company.
Section
3.3 Valid
Issuance of the Common Stock. The Shares (a) are
duly authorized and, upon their issuance pursuant to the Exchange against
delivery of the Exchanged Notes, will be validly issued, fully paid and
non-assessable, (b) will be issued in compliance with all pre-emptive,
participation, rights of first refusal and other similar rights applicable to
the Shares, and (c) assuming the accuracy of the Holder’s representations
and warranties hereunder, (i) will be issued in the Exchange exempt from
the registration requirements of the Securities Act pursuant to
Section 4(2) of the Securities Act and Rule 506 of Regulation D,
(ii) will be free of any restrictions on resale by the Holder pursuant to
Rule 144 promulgated under the Securities Act, and (iii) will be
issued in compliance with all applicable state and federal laws concerning the
issuance of the Shares. Subject to the accuracy of the
representations and warranties of the Holder hereunder, the Company will take
all actions, including, without limitation, the issuance by legal counsel of any
reasonably necessary legal opinions, necessary to issue Shares that are freely
tradable on each national securities exchange on which the Common Stock is then
listed without restriction and without restrictive legends.
Section
3.4 Listing. When issued in the
Exchange, the Shares shall be listed on each national securities exchange upon
which the Common Stock is then listed.
Section
3.5 Disclosure. On
or before the first business day following the date of this Agreement, the
Company shall issue a publicly available press release or file with the SEC a
Current Report on Form 8-K disclosing all material terms of the Exchange
and certain other matters concerning the Company (to the extent not previously
publicly disclosed).
Article
IV: Miscellaneous
Section
4.1 Entire
Agreement. This Agreement and any documents and agreements
executed in connection with the Exchange embody the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersede all prior and contemporaneous oral or written agreements,
representations, warranties, contracts, correspondence, conversations, memoranda
and understandings between or among the parties or any of their agents,
representatives or affiliates relative to such subject matter, including,
without limitation, any term sheets, emails or draft documents.
Section
4.2 Construction. References
in the singular shall include the plural, and vice versa, unless the context
otherwise requires. References in the masculine shall include the
feminine and neuter, and vice versa, unless the context otherwise
requires. Headings in
this Agreement are for convenience of reference only and shall not limit
or otherwise affect the meanings of the provisions hereof. Neither party, nor its
respective counsel, shall be deemed the drafter of this Agreement for purposes
of construing the provisions of this Agreement, and all language in all parts of
this Agreement shall be construed in accordance with its fair meaning, and not
strictly for or against either party.
Section
4.3 Governing
Law. This Agreement shall in all respects be construed in
accordance with and governed by the substantive laws of the State of New York,
without reference to its choice of law rules.
Section
4.4 Counterparts. This
Agreement may be executed in counterparts, each of which shall be deemed an
original, but all of which taken together shall constitute one and the same
instrument. Any counterpart or other signature hereon delivered by
facsimile shall be deemed for all purposes as constituting good and valid
execution and delivery of this Agreement by such party.
[Signature
Page Follows]
IN
WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed as of the date first above written.
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“HOLDER”:
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“Company”:
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By:
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By:
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Name:
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Name:
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Title:
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Title:
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Signature
Page to Exchange Agreement
[Name of
Holder]
SCHEDULE
A
Exchanging
Beneficial Owners
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Name
of
Beneficial
Owner
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Principal
Amount of
Exchanged Notes |
Number
of Shares of
Common Stock |
Cash
Payment
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