NOTE EXCHANGE AGREEMENT
This
Note
Exchange Agreement (this “Agreement”), dated as of ●, 2007, is made by
and among PharmAthene, Inc., a Delaware corporation previously known as
Healthcare Acquisition Corp. (the “Company”) and the holders identified
on Annex I (together with their respective successors and assigns, the
“Holders”; the Holders are each individually referred to herein as
a
“Holder”).
WHEREAS,
Healthcare Acquisition Corp. (“HAQ”),
PAI
Acquisition Corp., a wholly owned subsidiary of HAQ (“Merger
Sub”),
and
PharmAthene, Inc. (“Old
PharmAthene”),
entered into an Agreement and Plan of Merger, dated January ●, 2007 (the
“Merger
Agreement”)
pursuant to which Old PharmAthene merged with Merger Sub and Old PharmAthene
was
the surviving entity (the “Merger”),
and
HAQ simultaneously changed its name to “PharmAthene, Inc.” upon the consummation
of the Merger.
WHEREAS,
Old
PharmAthene and the Holders (other than Canadian Medical Discoveries Fund
Inc.
(“CMDF”))entered
into a Note Purchase Agreement dated May 5, 2006 (the “U.S.
Note Purchase Agreement”)
pursuant to which Old PharmAthene issued an aggregate initial principal amount
of $9,768,089 of its 8% Senior Secured Convertible Notes (the “Old
U.S. Notes”)
to the
Holders (other than CMDF), as set forth in Annex
II.
WHEREAS,
PharmAthene Canada, Inc. (“PharmAthene
Canada”),
a
wholly owned subsidiary of Old PharmAthene, Old PharmAthene and CMDF entered
into a Note Purchase Agreement dated July 24, 2006 (the “Canadian
Note Purchase Agreement”)
and,
collectively with the U.S. Note Purchase Agreement, the “Note
Purchase Agreements”)
pursuant to which PharmAthene Canada issued an 8% Senior Secured Convertible
Note with a principal amount of $2,000,000 (the “Old
Canadian Note”
and,
collectively with the Old U.S. Notes, the “Old
Notes”)
to
CMDF as set forth in Annex
II.
WHEREAS,
Sections 6.2(i) and 6.3(iv) of the Merger Agreement contemplate
as a condition to the Merger Closing that the Company issue senior unsecured
convertible notes in the initial principal amount of $12,500,000 on the terms
described herein (the “New
Notes”),
in
exchange for the Old Notes (principal and interest) outstanding immediately
prior to the closing of the Merger (“Merger
Closing”).
NOW,
THEREFORE,
in
consideration of the mutual promises, representations, warranties and covenants
herein contained, and for other good and valuable consideration, the receipt
and
sufficiency of which are
hereby
acknowledged, the Company and the Holders mutually agree as follows. Capitalized
terms used and not otherwise defined herein shall have the meanings given
such
terms in the Merger Agreement or Note.
ARTICLE
1
EXCHANGE
OF NOTES
1.1 Issuance
of New Notes in Exchange for Old Notes.
In
full
satisfaction of Old PharmAthene’s obligations (all outstanding principal and
accrued interest thereon) under the outstanding Old Notes, the Company shall
issue New Notes on the terms and in the form set forth in Annex
III in
the
initial aggregate principal amount of $12,500,000 (the “Exchange”).
As of
a result the Exchange, the Old Notes shall cease to be outstanding obligations
of Old PharmAthene and the Old Canadian Note shall cease to be an outstanding
obligation of PharmAthene Canada.
(a) and
all
rights of the Holders under the Note Purchase Agreements and related obligations
and agreements referred to therein shall be terminated in full.
(b) Subject
to the satisfaction or waiver of the conditions set forth in Article 3, the
closing of the Exchange shall simultaneously with the Merger Closing or such
other time as the parties may mutually agree (the “Closing
Date”).
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company and Old PharmAthene represent and warrant to each of the Holders
that,
except as set forth on the Schedule of Exceptions attached hereto as
Schedule ● (the “Schedule
of Exceptions”),
the
statements contained in this Article II are true and correct as of the Closing
Date as though made as of the Closing Date, except to the extent such
representations and warranties are specifically made as of a particular date
(in
which case such representations and warranties are true and correct as of
such
date). The Schedule of Exceptions shall be arranged in sections and subsections
corresponding to the numbered and lettered sections and subsections contained
in
this Article II, but any information disclosed under any section or subsection
of the Schedule of Exceptions shall be deemed to be disclosed into any other
section or subsection where such disclosure would be reasonably
apparent.
2.1 Organization,
Qualifications and Corporate Power
(a) The
Company and Old PharmAthene are each corporations duly incorporated,
validly existing and in good
standing
under the laws
of the
State of Delaware and are each duly
licensed
or qualified to transact business as a foreign corporation and is in good
standing in each jurisdiction in which the nature of the business transacted
by
it or the character of the properties owned or leased by it requires such
licensing or qualification. Pharmathene Canada, Inc., a Canadian corporation
(“Pharmathene
Canada”)
is a
corporation duly incorporated, validly existing and in good standing under
the
laws of Canada and is duly licensed or qualified to transact business and
is in
good standing, in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification. The Company and Old PharmAthene
and
each of its Subsidiaries has the corporate power and authority to own and
hold
its properties and to carry on its business as now conducted and as proposed
to
be conducted, and in the case of the Company, to execute, deliver and perform
the Transaction Documents to which it is a party. The Company and Old
PharmAthene have the corporate power and authority to issue, sell and deliver
the New Notes and to issue and deliver the shares of common stock issuable
upon
conversions of the Notes (the “Conversion
Shares”).
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2.2 Authorization
of Agreements, Etc.
(a) The
execution and delivery by the Company of the Transaction
Documents to which it is a party, the
performance by the Company of its obligations thereunder, the issuance, sale
and
delivery of the New Notes by the Company and the reservation of
the
Conversion Shares by the Company have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of
any
court or other agency of government, the Certificate of Incorporation of
the
Company, as amended to date (the “Charter”)
or the
By-laws of the Company, as amended to date (the “By-laws”),
or
any provision of any indenture, agreement or other instrument to which the
Company or any of its Subsidiaries or any of its properties or assets is
bound,
or conflict with, result in a breach of or constitute (with due notice or
lapse
of time or both) a default under any such indenture, agreement or other
instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company or any of its Subsidiaries.
(b) The
New
Notes have been duly authorized and, when issued and delivered pursuant to
this
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Company, enforceable
in
accordance with its terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization and other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles.
(c) The
Company has an authorized capitalization and outstanding shares of capital
stock
as set forth in Schedule ●, and all of the issued shares of capital stock of the
Company been duly authorized and validly issued and are fully paid and
non-assessable; the Conversion Shares initially issuable upon conversion
of the
New Notes have been duly authorized and reserved for issuance and, when issued
and delivered in accordance with the provisions of the New Notes, will be
validly issued, fully paid and non-assessable; the issuance of Conversion
Shares
upon conversion of the New Notes will not be subject to any preemptive or
similar rights; and all of the outstanding securities of the Company were
issued
in compliance with all applicable federal and state securities
laws.
(d) The
designations, powers, preferences, rights, qualifications, limitations and
restrictions in respect of each class and series of authorized capital stock
of
the Company are as set forth in the Company’s Charter, and all such
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Except as set forth in Schedule ●, (x) no Person owns of record
or is known to the Company to own beneficially any share of Common Stock,
(y) no
subscription, warrant, option, convertible security, or other right (contingent
or other) to purchase or otherwise acquire equity securities of the Company
or
any of its Subsidiaries is authorized or outstanding and (z) there is no
commitment by the Company or any of its Subsidiaries to issue 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 provided for in the Company ‘s
Charter
or as set forth in the attached Schedule ●, neither the Company nor any of
its Subsidiaries has any obligation (contingent or other) 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. Except as
set
forth in the attached Schedule ●, to the best of the Company ‘s
knowledge there are no voting trusts or agreements, stockholders’
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company or
any of
its Subsidiaries (whether or not the Company or such Subsidiaries is a party
thereto). All of the outstanding securities of the Company were issued in
compliance with all applicable Federal and state securities laws.
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(e) The
outstanding shares of Common Stock are listed on the American Stock Exchange
and
the Conversion Shares into which the New Notes are convertible will have
been
approved for listing on the American Stock Exchange, subject to notice of
issuance, on or before the Closing Date.
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE HOLDERS
Each
Holder, severally and not jointly, represents and warrants to the Company,
Old
PharmAthene and PharmaAthene Canada that, the statements contained in this
Article III are true and correct as of the Closing Date as though made as
of the
Closing Date, except to the extent such representations and warranties are
specifically made as of a particular date (in which case such representations
and warranties are true and correct as of such date).
3.1 Holder
is
an “accredited investor” as defined by Rule 501 of Regulation D (“Regulation D”)
promulgated under the Securities Act of 1933, as amended (the “Act”), and Holder
is capable of evaluating the merits and risks of Holder’s investment in the New
Notes and has the ability and capacity to protect Holder’s interests. If the
Holder is a resident of Canada or otherwise subject to the provincial securities
laws of Canada, such Holder is an “accredited investor” (as that term is defined
in National Instrument 45-106), was not formed for the specific purpose of
and
is not being used primarily for the purpose of purchasing and holding a New
Note
on the underlying Common Stock, and is neither a “Limited States Person” (as
that term is defined in Rule 902 of Regulation S under the Act) nor purchasing
the New Note for the account of a Limited States Person or for resale to
a
United States person or to a person in the United States.
3.2 Holder
understands that, except as provided in the Registration Rights Agreement
the
New Notes and the underlying shares of Common Stock, have not been registered
under the Act on the ground that the issuance thereof is exempt under Section
4(2) of the Act and/or Regulation D promulgated thereunder as a transaction
by
an issuer not involving any public offering and that, in the view of the
United
States Securities and Exchange Commission (the “Commission”),
the
statutory basis for the exception claimed would not be present if any of
the
representations and warranties of Holder contained in this Agreement are
untrue
or, notwithstanding the Holder’s representations and warranties, the Holder
currently has in mind acquiring any of the New Notes for resale upon the
occurrence or non-occurrence of some predetermined event.
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3.3 Holder
is
purchasing the New Notes and, in the event that the Holder should acquire
any
underlying Common Stock, will be acquiring such Common Stock, as principal
for
its own account, and not for the benefit of any other person, for investment
purposes and not with a view to distribution or resale, nor with the intention
of selling, transferring or otherwise disposing of all or any part thereof
for
any particular price, or at any particular time, or upon the happening of
any
particular event or circumstance, except selling, transferring, or disposing
the
New Notes and the underlying Common Stock as applicable, in full compliance
with
all applicable provisions of the Act, the rules and regulations promulgated
by
the Commission thereunder, and applicable state securities laws; and that
an
investment in the New Notes (and underlying shares of Common Stock) is not
a
liquid investment.
3.4 Holder
confirms that Holder has had the opportunity to ask questions of, and receive
answers from, the Company or any authorized person acting on its behalf
concerning the Company and its business and to obtain any additional
information, to the extent possessed by the Company (or to the extent it
could
have been acquired by the Company without unreasonable effort or expense)
necessary to verify the accuracy of the information received by Holder. In
connection therewith, Holder acknowledges that Holder has had the opportunity
to
discuss the Company’s business, management and financial affairs with the
Company’s management or any authorized person acting on its behalf. Holder has
received and reviewed the Company’s Proxy Statement as filed with the Commission
and all the information concerning the Company and the New Notes, both written
and oral, that Holder desires. Without limiting the generality of the foregoing,
Holder has been furnished with or has had the opportunity to acquire, and
to
review: all information, both written and oral, that Holder desires with
respect
to the Company’s business, management, financial affairs and prospects. In
determining whether to make this investment, Holder has relied solely on
Holder’s own knowledge and understanding of the Company and its business based
upon Holder’s own due diligence investigations and the Company’s filings with
the Commission.
3.5 If
the
Holder is a resident of Canada or otherwise subject to the provincial securities
laws of Canada, such Holder understands and acknowledges that (i) the New
Notes
have not been, and that the underlying Common Stock will not be, qualified
for
distribution under provincial securities laws, (ii) the New Note will be
distributed to such Holder pursuant to exemptions from the registration and
prospectus filing requirements of applicable provincial securities laws,
and
(iii) the New Note and if acquired, the underlying Common Stock, must be
held by
such Holder indefinitely unless a subsequent distribution thereof is qualified
for distribution under the applicable provincial securities laws, or is exempt
from the prospectus registration requirements thereof.
3.6 Holder
has all requisite legal and other power and authority to execute and deliver
this Agreement and to carry out and perform Holder’s obligations under the terms
of this Agreement. This Agreement constitutes a valid and legally binding
obligation of Holder enforceable in accordance with its terms, subject as
to
enforcement, to bankruptcy, insolvency, reorganization and other laws of
general
applicability relating to or affecting creditors’ rights and to general equity
principles.
5
3.7 Holder
has carefully considered and has discussed with the Holder’s legal, tax,
accounting and financial advisors, to the extent the Holder has deemed
necessary, the suitability of this investment and the transactions contemplated
by this Agreement for the Holder’s particular federal, state, provincial, local
and foreign tax and financial situation and has independently determined
that
this investment and the transactions contemplated by this Agreement are a
suitable investment for the Holder. Holder understands that Holder (and not
the
Company) shall be responsible for Holder’s own tax liability that may arise as a
result of the investment in the New Notes or the transactions contemplated
by
this Agreement, except as provided in Section 6.1(b).
3.8 Holder
acknowledges that an investment in the New Notes is speculative and involves
a
high degree of risk and that Holder can bear the economic risk of the acceptance
of the New Notes, including a total loss of his/her/its investment. Holder
recognizes and understands that no federal, state, provinical or foreign
agency
has recommended or endorsed the purchase of the New Notes. Holder acknowledges
that Holder has such knowledge and experience in financial and business matters
that Holder is capable of evaluating the merits and risks of an investment
in
the New Notes and of making an informed investment decision with respect
thereto.
3.9 Because
of the legal restrictions imposed on resale or transfer of the New Notes,
Holder
understands that the Company shall have the right to note stop-transfer
instructions in its records, and Holder has been informed of the Company’s
intention to do so. Any sales, transfers, or other dispositions of the New
Notes
by Holder, if any, will be made in compliance with the Act and any other
applicable securities laws, and all applicable rules and regulations promulgated
thereunder and the terms of this Agreement.
ARTICLE
4
CONDITIONS
RELATING TO THE CLOSING
4.1 Conditions
to the Obligations of the Holders at the Closing.
The
several obligations of each Holder to consummate the transactions to be
performed by it in connection with the Closing Date are, unless otherwise
indicated, subject to the satisfaction of the following conditions as of
the
Closing Date, unless such conditions are waived by such Holder with respect
to
the Closing Date:
(a) Consents,
Permits, and Waivers.
The
Company shall have obtained any and all approvals, consents, permits and
waivers
necessary or appropriate for consummation of the transactions contemplated
by
this Agreement and the other Transaction Documents.
(b) Authorizations.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body that are required in connection with the lawful issuance
and
sale of the New Notes pursuant to this Agreement shall have been duly obtained
and shall be effective on and as of the Closing Date.
6
(c) Representations,
Warranties and Covenants.
The
representations and warranties made by the Company, Old PharmAthene and
Pharmathene
Canada
in
Article II hereof and in the other Transaction Documents shall be true and
correct when made, and shall be true and correct as of such Closing Date
with
the same force and effect as if they had been made on and as of that date.
Company shall have performed and complied in all material respects with all
covenants and agreements required by this Agreement to be performed or complied
with by it on or prior to the Closing Date. As of the Closing Date, Company
shall have delivered a certificate to the foregoing effect to the
Holders.
ARTICLE
5
COVENANTS
5.1 Board
of Directors and Committee Designation Rights; Voting Agreement.
(a) The
Company shall maintain a Board of Directors consisting of no more than seven
(7)
individuals and each of the Compensation Committee and Nominating Committee
(or
other committees serving similar functions) shall have no more than three
(3)
members. The Noteholder Directors (as defined below) shall have the right,
but
not the obligation, to collectively designate up to two (2) Noteholder Directors
who shall serve as members of each such committee of the Company’s Board of
Directors. All subsidiaries of the Company shall maintain a Board of Directors
whose composition is identical to that of the Company’s Board of
Directors.
(b) Each
Holder agrees to vote all of his, her or its voting securities (including,
but
not limited to, the New Notes and Conversion Shares) in the Company, whether
now
owned or hereafter acquired or which such Holder may be empowered to vote
(together the “Voting
Securities”),
from
time to time and at all times, in whatever manner shall be necessary to ensure
that at each meeting of Holders at which an election of directors is held
or
pursuant to any written consent of Holders, the following persons (each a
“Noteholder
Director”)
shall
be elected to the Company’s Board of Directors pursuant to Section ● of the
Company’s Certificate of Incorporation:
(i) one
individual designated by Bear Xxxxxx Health Innoventures L.P. (or any recipient
of all of the Notes held by Bear Xxxxxx Health Innoventures L.P. as of the
date
hereof), which individual shall initially be Xxxxxxxxx Xxxxxxxx;
(ii) one
individual designated by HealthCare Ventures VII, L.P. (or any recipient
of all
of the Notes held by HealthCare Ventures VII, L.P. as of the date hereof),
which
individual shall initially be Xxxxx Xxxxxxxxx; and
(iii) one
individual designated by MPM BioVentures III, L.P. (or any recipient of all
of
the Notes held by MPM BioVentures III, L.P. as of the date hereof), which
individual shall initially be Xxxxxx St. Xxxxx.
(c) The
Board
of Directors of the Company shall nominate such Noteholder Directors and
recommend that the Holders vote to elect such Noteholder Directors as directors
of the Company and shall fill any vacancies that may arise upon the resignation
of any of the Noteholder Directors with a new Noteholder Director designated
in
accordance with the foregoing Section 4.1.
7
(d) The
Company shall provide at least thirty (30) days’ prior written notice of all
intended mailings of notices to the Holders for a meeting at which directors
are
to be elected (or an action by written consent pursuant to which directors
are
to be elected) to each party entitled to elect a director pursuant to Section
4.1 (the “Designator”),
and
each Designator shall notify the Company in writing, at least ten (10) days
prior to such mailing, of the person(s) so designated as nominees for election
as directors in accordance with Section 4.1. If any Designator shall fail
to
give notice to the Company as provided above, it shall be deemed that such
Designator’s Noteholder Director then serving as director shall be such
Designator’s nominee for reelection.
(e) Each
Holder also agrees to vote all of his, her or its Voting Securities from
time to
time and at all times in whatever manner as shall be necessary to ensure
that
(i) no director elected pursuant to Section 4.1 of this Agreement may be
removed from office other than for cause unless (A) such removal is directed
or
approved by the Designator entitled under Section 4.1 to designate that
director or (B) the Designator originally entitled to designate such director
pursuant to Section 4.1 is no longer so entitled to designate such director;
and
(ii) any vacancies created by the resignation, removal or death of a
Noteholder Director shall be filled pursuant to the provisions of
Section 4.1. All Holders agree to execute any written consents required to
effectuate the obligations of this Agreement, and the Company agrees at the
request of any Designator to call a special meeting of stockholders for the
purpose of electing directors.
(f) The
Company shall take such action as is necessary to convene meetings of its
Board
of Directors and meetings of the Holders for the election of the directors
(or
to act by written consent) in order to elect and re-elect the Noteholder
Directors in accordance with Section 4.1.
(g) The
Company hereby represents and warrants that as of the date hereof the
transactions contemplated hereby are not inconsistent with the Company’s
Certificate of Incorporation or By-laws and agrees that until such time as
the
obligations under this Section 4.1 have expired, the Company will not take
any
action or amend its Certificate of Incorporation or By-laws in a manner
inconsistent with or in derogation of this Agreement.
(h) The
New
Notes shall not be transferred unless the recipient of such New Notes agrees
in
writing to be bound by the terms hereof.
(i) Each
Holder hereby grants to the Secretary of the Company, in the event that such
Holder fails to vote its Voting Securities as required by this Agreement,
a
proxy coupled with an interest in all Voting Securities beneficially owned
by
such Holder to vote such Voting Securities in accordance with this Section
4.1,
which proxy is irrevocable until this Agreement terminates pursuant to its
terms
or is amended to remove such grant of proxy in accordance with Section 4.1
of
this Agreement.
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(j) The
provisions of this Section 5.1 shall remain in effect at all times while
at
least thirty percent (30%) of the aggregate Principal amount of the New Notes
outstanding on the date hereof remain outstanding. Upon the date that this
Section 5.1 ceases to be in force or effect, the Company shall have the right,
without further action or consent by the Holders, to amend its Certificate
of
Incorporation to remove any and all such provisions related to the subject
matter of this Section 5.1.
5.2 Restrictions
on Sale or Hedging of the Underlying Common Stock.
Each
Holder agrees that, during the period commencing on the Issuance Date and
ending
on the 180th day following such date (the “Lock-Up
Period”),
such
Holder will not, without the prior written consent of the Company (i) directly
or indirectly, offer, pledge, sell, contract to sell, sell any option or
contract to purchase, purchase any option or contract to sell, grant any
option,
right or warrant to purchase or otherwise transfer or dispose of any shares
of
Common Stock underlying the New Notes or (ii) enter into any swap or any
other
agreement or any transaction that xxxxxx or transfers, in whole or in part,
directly or indirectly, the economic consequence of ownership of the Common
Stock underlying the New Notes, whether any such transaction or swap described
in clause (i) or (ii) above is to be settled by delivery of Common Stock,
in
cash or otherwise. The foregoing shall in no way restrict the ability of
the
Holder to freely transfer the New Notes in accordance with applicable
law.
Notwithstanding
the foregoing, each Holder may transfer the Common Stock underlying the New
Notes (i) as a bona fide gift or gifts, (ii) to any trust for the direct
or
indirect benefit of the undersigned or the immediate family of the undersigned,
(iii) by will or intestate succession, (iv) to any affiliate (as defined
in
Regulation C under the Securities Act) of the undersigned, (v) if such Holder
is
a corporation or similar entity, to any wholly-owned subsidiaries of such
corporation or similar entity, (vi) if such Holder is a partnership, limited
liability company or similar entity, to any partners or members of such
partnership, limited liability company or similar entity provided, however,
that
it shall be a condition to such transfer that the transferee (or trustee
in the
case of clause (ii) above) execute an agreement stating that such transferee
(or
trustee) is receiving and holding such Common Stock subject to the provisions
of
this Section 5.2 and there shall be no further transfer of such Common Stock
except in accordance with this Section 5.2, and provided further that any
such
transfer pursuant to clause (ii) and (iii) above shall not involve a disposition
for value. For purposes of this Section 5.2, “immediate family” shall mean any
relationship by blood, marriage or adoption, not more remote than first cousin.
Notwithstanding anything to the contrary in this Agreement, any Holder who
is a
resident of Canada or otherwise subject to the provincial securities laws
of
Canada, acknowledges and agrees that it will transfer or resell the New Note
issued to it and the underlying Common Stock only in accordance with the
requirements of all applicable securities laws. This Section 5.2 shall in
no way
restrict the ability of each Holder to convert at any time the New Notes
into
Common Stock pursuant to Section 3 of the New Notes; provided,
however,
that
such Common Stock issued upon conversion of the New Notes shall remain subject
to the restrictions contained in this Section 5.2.
In
the
event the securities held by the officers, directors and/or 1% or greater
securityholders of the Company are released from the restrictions set forth
in
agreements similar to this Agreement, the same percentage of the securities
held
by the undersigned shall be immediately and fully released from any remaining
restrictions under this Agreement concurrently therewith. In the event that
the
undersigned is released early pursuant to the terms of the this paragraph,
the
Company shall notify the undersigned concurrently with notification to such
other released party.
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5.3 Registration
Rights.
The
Company agrees that the Holders from time to time of Registrable Securities
(as
defined in the Registration Rights Agreement, dated the date hereof, by and
among investor signatories thereto (the “Registration
Rights Agreement”))
are
entitled to the benefits of the Registration Rights Agreement. Further, if
(i)
the Registration Statement (as defined in Registration Rights Agreement),
covering all of the Registrable Securities required to be covered thereby
is (A)
not filed with the SEC on or before sixty (60) days after the Closing Date
(as
defined in Registration Rights Agreement) (a “Filing
Failure”)
or (B)
not declared effective by the SEC on or before the date that is six (6) months
after the Closing Date (an “Effectiveness
Failure”)
or
(ii) after the effective date of such Registration Statement, after the second
(2nd) consecutive Business Day (other than during an allowable blackout period
pursuant to Section 3(g) of the Registration Rights Agreement (“Blackout
Period”))
on
which sales of all of the Registrable Securities required to be included
on such
Shelf Registration Statement cannot be made pursuant to such Registration
Statement or otherwise (including, without limitation, because of a failure
to
keep such Registration Statement effective, to disclose such information
as is
necessary for sales to be made pursuant to such Registration Statement or
to
maintain the listing of the Common Stock) (a “Maintenance
Failure”),
then,
as relief for the damages to any Holder by reason of any such delay in or
reduction of its ability to sell the Registrable Securities, the Company
shall
pay to each Holder of Registrable Securities relating to such Registration
Statement an amount in cash equal to (A) one percent (1.0%) of the aggregate
principal amount of such Holder’s Notes relating to the Registrable Securities
included in such Registration Statement on each of the following dates: (i)
the
day of a Filing Failure; (ii) the day of an Effectiveness Failure; and (iii)
the
initial day of a Maintenance Failure, and (B) one percent (1.0%) of the
aggregate principal amount of such Holder’s Notes relating to the Registrable
Securities included in such Registration Statement on each of the following
dates: (i) on every thirtieth (30th) day after the initial day of a Filing
Failure and thereafter (prorated for periods totaling less than thirty (30)
days) until such Filing Failure is cured; (ii) on every thirtieth (30th)
day
after the initial day of an Effectiveness Failure and thereafter (prorated
for
periods totaling less than thirty (30) days) until such Effectiveness Failure
is
cured; (iii) on every thirtieth (30th) day after the initial day of a
Maintenance Failure and thereafter (prorated for periods totaling less than
thirty (30) days) until such Maintenance Failure is cured. The payments to
which
a Holder shall be entitled pursuant to this Section 5.3 are referred to herein
as “Registration
Default Payments.”
Registration Default Payments shall be paid on the earlier of (I) the last
day
of the calendar month during which such Registration Default Payments are
incurred and (II) the third (3rd) Business Day after the event or failure
giving
rise to the Registration Default Payments is cured. In the event the Company
fails to make Registration Default Payments in a timely manner, such
Registration Default Payments shall bear interest at the rate of one and
one-half percent (1.5%) per month (prorated for partial months) until paid
in
full. If the Company has declared a Blackout Period, a Maintenance Failure
shall
be deemed not to have occurred and be continuing in relation to the Registration
Statement during the period specified in Section 3(g) of the Registration
Rights
Agreement. Registration Default Payments shall be payable from the first
day any
Blackout Period exceeds the period specified in Section 3(g) of the Registration
Rights Agreement. Registration Default Payments shall cease to accrue at
the end
of the Effectiveness Period (as defined in Registration Rights Agreement);
provided
that the
foregoing shall not affect the Company’s obligation to make Registration Default
Payments for any period prior to such time.
10
5.4 Reservation
of Conversion Shares.
The
Company shall initially reserve out of its authorize and unissued shares
of
Common Stock a number of shares of Common Stock for each of the New Notes
equal
to 120% of the Conversion Rate with respect to the Conversion Amount of each
such New Note as of the applicable Issuance Date. So long as any of the New
Notes are outstanding, the Company shall take all action necessary to reserve
and keep available out of its authorized and unissued shares of Common Stock,
solely for the purpose of effecting the conversion of the New Notes, 120%
of the
number of shares of Common Stock as shall from time to time be necessary
to
effect the conversion of all of the New Notes then outstanding; provided
that at
no time shall the number of shares of Common Stock so reserved be less than
the
number of shares required to be reserved by the previous sentence (without
regard to any limitations on conversions) (the “Required
Reserve Amount”).
The
initial number of shares of Common Stock reserved for conversions of the
New
Notes and each increase in the number of shares so reserved shall be allocated
pro rata among the holders of the New Notes based on the Principal amount
of the
New Notes held by each holder at the Closing (as defined in the Note Exchange
Agreement) or increase in the number of reserved shares, as the case may
be (the
“Authorized
Share Allocation”).
In
the event that a Holder shall sell or otherwise transfer any of such Holder’s
New Notes, each transferee shall be allocated a pro rata portion of such
Holder’s Authorized Share Allocation. Any shares of Common Stock reserved and
allocated to any Person which ceases to hold any New Notes shall be allocated
to
the remaining holders of New Notes, pro rata based on the outstanding Principal
amount of the New Notes then held by such holders.
5.5 Insufficient
Authorized Shares.
If at
any time while any of the New Notes remain outstanding the Company does not
have
a sufficient number of authorized and unreserved shares of Common Stock to
satisfy its obligation to reserve for issuance upon conversion of the New
Notes
at least a number of shares of Common Stock equal to the Required Reserve
Amount
(an “Authorized
Share Failure”),
then
the Company shall take all action necessary to increase the Company’s authorized
shares of Common Stock to an amount sufficient to allow the Company to reserve
the Required Reserve Amount for the New Notes then outstanding. Without limiting
the generality of the foregoing sentence, as soon as practicable after the
date
of the occurrence of an Authorized Share Failure, but in no event later than
seventy-five (75) days after the occurrence of such Authorized Share Failure,
the Company shall hold a meeting of its stockholders for the approval of
an
increase in the number of authorized shares of Common Stock. In connection
with
such meeting, the Company shall provide each stockholder with a proxy statement
and shall use its commercially reasonable efforts to solicit its stockholders’
approval of such increase in authorized shares of Common Stock and to cause
its
board of directors to recommend to the stockholders that they approve such
proposal.
5.6 Listing.
Immediately prior to or on the Closing Date, the Company shall secure the
listing of all of the Registrable Securities (as defined in the Registration
Rights Agreement) upon each national securities exchange and automated quotation
system, if any, upon which the Common Stock is then listed (subject to official
notice of issuance) and shall maintain such listing of all Registrable
Securities from time to time issuable under the terms of the Transaction
Documents. The Company shall maintain the Common Stock’s authorization for
quotation on the principal exchange or market in which it is listed. Neither
the
Company nor any of its Subsidiaries shall take any action which would be
reasonably expected to result in the delisting or suspension of the Common
Stock
on the principal market in which it is listed. The Company shall pay all
fees
and expenses in connection with satisfying its obligations under this Section
4.6.
11
ARTICLE
6
MISCELLANEOUS
6.1 Expenses.
(a) The
Company will pay, and save the Holders harmless against all liability for
the
payment of the reasonable costs and expenses, including without limitation
the
reasonable fees and expenses of one counsel selected by the Required Holders,
incurred by the Holders in connection with the ownership of the Notes including,
without limitation, any amendment or waiver of, or enforcement of, any
Transaction Document relating to the transactions contemplated hereby.
(b) The
Company further agrees that they will pay, and will save each Holder harmless
from, any and all Liabilities with respect to any stamp or similar taxes
which
may be determined to be payable in connection with the execution and delivery
and performance of the Transaction Documents or any modification, amendment
or
alteration of the terms or provisions of the Transaction Documents (excluding
any taxes on the income or gain of the Holder).
6.2 Further
Assurances.
The
Company shall duly execute and deliver, or cause to be duly executed and
delivered, at its own cost and expense, such further instruments and documents
and to take all such action, in each case as may be necessary or proper in
the
reasonable judgment of the Holders to carry out the provisions and purposes
of
this Agreement and the other Transaction Documents.
6.3 Remedies.
In
case
any one or more of the representations, warranties, covenants and/or agreements
set forth in this Agreement or any other Transaction Documents (as shall
have
been breached by a party, the other parties may proceed to protect and enforce
its rights either by suit in equity and/or by action at law, including an
action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement
or any
of the other Transaction Documents, and may exercise all remedies under the
New
Notes.
6.4 Survival.
The
representations, warranties, covenants and agreements made herein shall survive
any investigation made by any party hereto, the execution and delivery of
this
Agreement and the closing of the transactions contemplated hereby.
12
6.5 Successors
and Assigns.
This
Agreement shall bind and inure to the benefit of the Company and the Holders
and
their respective successors and permitted assigns. Subject to applicable
federal, state and provincial securities laws and regulations, the Holders
may
freely assign either this Agreement or any of their rights, interests, or
obligations hereunder without the prior written approval of the other parties,
except (x) to a Competitor as defined in the New Notes and (y) subject to
the
provisions set forth in Section 17 thereof, and (2) in the case of an assignment
of an Old Canadian Note, such Old Canadian Note may not be assigned to a
nonresident of Canada for purpose of the Income Tax Act (Canada) or to a
partnership other than a Canadian partnership within the meaning of the Income
Tax Act (Canada).
6.6 Entire
Agreement.
This
Agreement and the other writings referred to herein or delivered pursuant
hereto
(including the other Transaction Documents) which form a part hereof contain
the
entire agreement among the parties with respect to the subject matter hereof
and
thereof and supersede all prior and contemporaneous arrangements or
understandings with respect thereto.
6.7 Notices.
All
notices, requests, demands, claims, consents and other communications delivered
hereunder (whether or not required to be delivered hereunder) shall be deemed
to
be sufficient and duly given if contained in a written instrument (a) personally
delivered, (b) sent by fax, (c) sent by nationally-recognized overnight courier
guaranteeing next business day delivery or (d) sent by first class registered
or
certified mail, postage prepaid, return receipt requested, in each case
addressed as follows:
(a) if
to the
Company, to:
PharmAthene,
Inc.
000
Xxxxxxx Xxxxxxxx Xxxxx
Xxxxx
000
Xxxxxxxxx,
XX 00000
Attention:
Xxxxx X. Xxxxxx
Fax:
(000) 000-0000
with
a
copy to:
Xxxxxxx
X. Xxxxxx, Esq.
XxXxxxxx
& English, LLP
000
Xxxxxxxx Xxxxxx
Xxxxxx,
XX 00000
Fax:
(000) 000-0000; and
(b) if
to a
Holder, to him, her or it at his, her or its address set forth on such Holder’s
signature block hereto
with
a
copy to:
Xxxxx
X.
Xxxxxxx, Esq.
Xxxxxxx
Xxxxxx Xxxxxx & Dodge LLP
000
Xxxxxxxxxx Xxxxxx
Xxxxxx,
XX 00000-0000
Fax:
(000) 000-0000
13
or
to
such other address as the party to whom such notice or other communication
is to
be given may have furnished to each other party in writing in accordance
herewith. Any such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) when sent, if sent by telecopy
on a business day (or, if not sent on a business day, on the next business
day
after the date sent by telecopy), (iii) on the next business day after dispatch,
if sent by nationally recognized, overnight courier guaranteeing next business
day delivery, and (iv) on the fifth business day following the date on which
the
piece of mail containing such communication is posted, if sent by
mail.
6.8 Amendments,
Modifications and Waivers.
The
terms
and provisions of this Agreement and the New Notes may not be modified or
amended, nor may any of the provisions hereof be waived, temporarily or
permanently, except pursuant to a written instrument executed by the Company
and
the Required Holders.
6.9 Governing
Law; Waiver of Jury Trial.
(a) All
questions concerning the construction, interpretation and validity of this
Agreement shall be governed by and construed and enforced in accordance with
the
domestic laws of the the State of Delaware without giving effect to any choice
or conflict of law provision or rule (whether in the State of Delaware or
any
other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware. In furtherance of the foregoing,
the internal law of the State of Delaware will control the interpretation
and
construction of this Agreement, even if under such jurisdiction’s choice of law
or conflict of law analysis, the substantive law of some other jurisdiction
would ordinarily or necessarily apply.
(b) BECAUSE
DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND
THE
PARTIES WISH APPLICABLE LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE
PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH
APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS
OF
THE JUDICIAL SYSTEM AND OF ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT
TO
TRIAL BY JURY IN ANY ACTION, SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND
ANY
RIGHTS OR REMEDIES UNDER THIS AGREEMENT OR ANY DOCUMENTS RELATED
HERETO.
14
6.10 No
Third Party Reliance.
Anything
contained herein to the contrary notwithstanding, the representations and
warranties of the Company contained in this Agreement (a) are being given
by the
Company as an inducement to the Holders to enter into this Agreement and
the
other Transaction Documents (and the Company acknowledges that the Holders
have
expressly relied thereon) and (b) are solely for the benefit of the Holders.
Accordingly, no third party (including, without limitation, any holder of
capital stock of the Company) or anyone acting on behalf of any holder thereof
other than the Holders, and each of them, shall be a third party or other
beneficiary of such representations and warranties and no such third party
shall
have any rights of contribution against the Holders or the Company with respect
to such representations or warranties or any matter subject to or resulting
in
indemnification under this Agreement or otherwise.
6.11 Publicity.
Neither
the Holders nor the Company shall issue any press release or make any public
disclosure regarding the transactions contemplated hereby unless such press
release or public disclosure is approved by the Required Holders and those
parties mentioned in such press release or public disclosure in advance.
Notwithstanding the foregoing, each of the parties hereto may, in documents
required to be filed by it with the Commission or other regulatory bodies,
make
such statements with respect to the transactions contemplated hereby as each
may
be advised by counsel is legally necessary or advisable.
6.12 Severability.
It
is the
desire and intent of the parties that the provisions of this Agreement be
enforced to the fullest extent permissible under the law and public policies
applied in each jurisdiction in which enforcement is sought. Accordingly,
in the
event that any provision of this Agreement would be held in any jurisdiction
to
be invalid, prohibited or unenforceable for any reason, such provision, as
to
such jurisdiction, shall be ineffective, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability
of such
provision in any jurisdiction. Notwithstanding the foregoing, if such provision
could be more narrowly drawn so as to not be invalid, prohibited or
unenforceable in such jurisdiction, it shall, as to such jurisdiction, be
so
narrowly drawn, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
6.13 Independence
of Agreements, Covenants, Representations and Warranties.
All
agreements and covenants hereunder shall be given independent effect so that
if
a certain action or condition constitutes a default under a certain agreement
or
covenant, the fact that such action or condition is permitted by another
agreement or covenant shall not affect the occurrence of such default, unless
expressly permitted under an exception to such covenant. In addition, all
representations and warranties hereunder shall be given independent effect
so
that if a particular representation or warranty proves to be incorrect or
is
breached, the fact that another representation or warranty concerning the
same
or similar subject matter is correct or is not breached will not affect the
incorrectness of or a breach of a representation and warranty hereunder.
The
exhibits and schedules attached hereto are hereby made part of this Agreement
in
all respects.
15
6.14 Counterparts;
Facsimile Signatures.
This
Agreement may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all
such
counterparts together shall constitute but one agreement. Facsimile counterpart
signatures to this Agreement shall be acceptable and binding.
6.15 Headings.
The
section and paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation
of
this Agreement.
*
* * *
*
16
IN
WITNESS WHEREOF,
each of
the undersigned has duly executed this Note Exchange Agreement as of the
date
first written above.
|
PHARMATHENE,
INC.
|
|||
| By: | |||
|
|
|||
| Name: | |||
| Title: | |||
|
PHARMATHENE,
INC.
|
|||
| By: | |||
|
|
|||
| Name: | |||
| Title: | |||
|
PHARMATHENE
CANADA, INC.
|
|||
| By: | |||
|
|
|||
| Name: | |||
| Title: | |||
| HOLDERS | |||
|
[INSERT
NAMES OF NOTEHOLDERS]
|
|||
ANNEX
I
[INSERT
NAMES OF HOLDERS]
ANNEX
II
[INSERT
LIST OF OLD U.S. NOTES AND HOLDERS]
ANNEX
III
[INSERT
LIST OF NEWS NOTES AND HOLDERS]
