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Exhibit 4.3
NEITHER THIS NOTE NOR ANY SECURITIES THAT
MAY BE ISSUED UPON CONVERSION HEREOF
HAVE BEEN REGISTERED OR QUALIFIED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED,
OR APPLICABLE STATE SECURITIES LAWS. SUCH
SECURITIES MAY NOT BE TRANSFERRED OR
OTHERWISE DISPOSED OF UNLESS THEY HAVE BEEN
SO REGISTERED AND QUALIFIED OR
EVIDENCE IS FURNISHED TO THE COMPANY TO THE
EFFECT THAT REGISTRATION AND
QUALIFICATION IS NOT REQUIRED.
FOURTH AMENDED AND RESTATED CONVERTIBLE TERM NOTE
DUE APRIL 30, 2005
Englewood Cliffs, New Jersey
$___________
As of November 4, 2002
For value
received, EpiCept Corporation, a Delaware corporation (the
"Company"), hereby promises to pay to the
order of ________________________
(hereinafter referred to as the "Payee")
the principal sum of $_______________
(the "Maximum Principal Amount"), or so
much thereof as shall have been advanced
by Payee to the Company, with interest from
the date hereof on the unpaid
balance at the rate of 8% per annum, such
interest to accrue on a daily basis
from time to time from the date hereof
until the date on which this Fourth
Amended and Restated Convertible Term Note
(this "Note") is paid in full. This
Note is one of a series of notes being
issued on the date hereof or that
hereafter may be issued to certain
investors in the aggregate maximum principal
amount of $5,000,000 (this Note, together
with such other notes shall be
collectively referenced to as the
"Convertible Notes"). As additional
consideration for the Payee's loan to the
Company of up to the Maximum Principal
Amount, the Company issued to the Payee a
certain Preferred Stock Purchase
Warrant of even date herewith (as amended
and/or restated, the "Stock Purchase
Warrant," and collectively with all other
Stock Purchase Warrants issued to
other holders of Convertible Notes, the
"Stock Purchase Warrants"). Subject to
the conversion provisions set forth in
Section 5 and Section 6, all outstanding
principal and accrued interest under this
Note shall become due and payable on
April 30, 2005.
1. Further
Advances. On the date hereof, the Payee has advanced to the
Company only a portion of the Maximum
Principal Amount. The Company may from
time to time request additional advances
under the Convertible Notes. Such
requests shall be made in writing by the
Chief Executive Officer of the Company
and shall be directed to TVM IV GmbH &
Co. KG ("TVM"), Merlin General Partner II
Limited as general partner of the Merlin
Biosciences Fund L.P. and as managing
partner of the Merlin Biosciences Fund GbR
("Merlin") and Private Equity US
Direct Finance ("Private Equity Holding").
Each such request for an additional
advance shall also contain a detailed
explanation of the reasons the additional
advance is required and a certification by
the Company's Chief Executive Officer
that no Event of Default (as defined below)
has occurred. Each such request
shall be made no later than 5 business days
prior to the date on which the
Company requires the requested amount.
Should TVM and Merlin each agree that an
additional advance should be made, TVM and
Merlin shall together send a notice
to each holder of a Convertible Note
indicating that portion of the Maximum
Principal Amount of their
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Convertible Notes that TVM and Merlin have
agreed shall be advanced to the
Company, which, for the avoidance of doubt,
may be for a lesser amount than that
originally requested by the Company (it
being understood that each holder will
thereby become obligated to advance an
equal proportion of the maximum principal
amount of his Convertible Note). Upon such
notices from time to time transmitted
by TVM and Merlin in accordance with the
terms of this Note, the Payee agrees to
make additional advances to the Company,
provided, that the aggregate amount of
all advances by the Payee shall not exceed
the Maximum Principal Amount.
Notwithstanding the foregoing, the Payee,
at any time and from time to time,
upon 5 business days notice (delivered in
the manner prescribed in the
Subscription Agreement pursuant to which
the Note was purchased) to the Company
and each other person or entity that holds
one or more of the Convertible Notes,
may advance to the Company any amount up to
that amount that, together with all
amounts previously advanced to the Company
by the Payee, equals the Maximum
Principal Amount. Each such advance shall
be made by wire transfer to the
Company's account within three business
days after receipt by the Payee of the
notice from TVM and Merlin specified above.
Notwithstanding anything in the
foregoing to the contrary, no additional
advances shall be made under the
Convertible Notes unless on or before
November 30, 2002, the date of maturity of
that certain loan from IKB Private Equity
GmbH f/k/a IKB Venture Capital GmbH
("IKB") to EpiCept GmbH (formerly known as
Pharmed Labs GmbH) dated on or about
April 13, 1998 has been extended to April
30, 2004, unless TVM, Merlin and
Private Equity Holding shall unanimously
waive or extend the period for
compliance with this provision.
2. Payments.
Principal and interest shall be payable in lawful money of the
United States of America, by wire transfer
to a bank account designated by the
Payee or by bank check delivered to the
principal office of the Payee or at such
other place as the Payee may designate from
time to time in writing to the
Company.
3.
Prepayment.
(a) The Company shall have the right at its option at any time
to
prepay this Note without premium or
penalty, provided, that the Company notifies
the Payee of the date that it intends to
make payment on this Note not less than
twenty (20) days prior to such date so as
to provide the Payee the opportunity
to convert this Note into capital stock of
the Company and, provided, further,
that the Company may not prepay this Note
in anticipation of an Extraordinary
Event (as defined below). Any prepayment of
this Note shall be accompanied by
the interest accrued on the prepaid
principal amount.
(b) Notwithstanding anything in this Note to the contrary, if
not
sooner prepaid or converted in accordance
with the terms hereof, upon the
consummation of a Qualified Public Offering
(as such term is defined in the
Current Charter (defined in Section 6
below)), the entire principal amount of
this Note and all accrued and unpaid
interest thereon shall be prepaid by the
Company, without notice to or the consent
of the Payee, with proceeds from such
offering.
4. Principal
Amount; Grid Notation. The unpaid principal balance of this
Note at any time shall be the total amount
advanced by the Payee to the Company,
less the total amount of principal payments
made hereon by the Company. The date
and amount of each such advance and each
payment on account of the principal of
this Note may be endorsed by the Payee on
the
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grid attached to and made part of this
Note, and when so stated shall represent
evidence thereof in the absence of manifest
error. Any failure by the Payee to
so endorse shall in no way mitigate or
discharge the obligation of the Company
to repay any advances actually made.
5. Next Round
Conversion. If the Company consummates a convertible
preferred stock financing with gross
proceeds to the Company of at least
$10,000,000 (including the principal and
accrued interest under the Convertible
Notes) and pursuant to which investors in
such financing receive securities
representing a percentage of the Company's
capital stock on a fully-diluted
basis immediately after the consummation of
such financing equal to no more than
the Maximum Percentage of the Company (as
defined below) (assuming for the
purpose of such calculation the exercise
and/or conversion of all options,
warrants, preferred stock and other
convertible securities) (a "Qualifying
Financing"), then, simultaneously with the
closing of such Qualifying Financing,
the outstanding principal and accrued
interest on this Note shall be converted
into shares of the new series of
convertible preferred stock of the Company (the
"Next Round Preferred Stock") which is
authorized by the Company in connection
with the Qualifying Financing. The terms of
the Next Round Preferred Stock shall
be subject to negotiation by the Company
and the purchasers of Next Round
Preferred Stock in the Qualifying
Financing, including the Payee, and shall be
subject to the unanimous approval of each
of TVM, Merlin and Private Equity
Holding. Such conversion shall occur at the
lower of (i) the lowest price per
share paid by any purchaser in the
Qualifying Financing and (ii) the price per
share calculated so as to assure that,
immediately following such conversion of
each such Convertible Note, the shares of
the Company's common stock, $0.0001
par value per share (the "Common Stock"),
issuable upon conversion of the Next
Round Preferred Stock bears a proportion to
the total number of shares of the
Common Stock outstanding or issuable upon
exercise and/or conversion of all
options, warrants, preferred stock
(including the Next Round Preferred Stock)
and other convertible securities then
outstanding equal to the outstanding
principal and accrued interest on all of
the Convertible Notes divided by the
sum of the outstanding principal and
accrued interest on all of the Convertible
Notes and $20,000,000.00. To effect such
conversion, the Payee shall on or
before the closing of the Qualifying
Financing become a party to all agreements
between the Company and the purchasers of
the Next Round Preferred Stock which
set forth the terms and conditions of such
purchase and the Payee shall be
entitled to all the rights granted to the
purchasers thereunder and subject to
any restrictions or obligations imposed
generally on such purchasers. As used in
this Note, the term "Maximum Percentage of
the Company" shall mean the quotient
(expressed as a percentage) obtained by
dividing the aggregate consideration
paid for Next Round Preferred Stock
(including the aggregate outstanding
principal and accrued interest of the
Convertible Notes (the "Next Round
Consideration"), by the sum of (a) the Next
Round Consideration and (b)
$15,000,000.00.
6. Optional
Conversion. So long as the Company does not consummate a
Qualifying Financing prior thereto, at any
time hereinafter upon the unanimous
written election (the "Optional Conversion
Election") of TVM, Merlin and Private
Equity Holding to effect the conversion of
all of the Convertible Notes, the
outstanding principal and accrued interest
on this Note shall be converted into
shares of a new series of the convertible
preferred stock of the Company (the
"Optional Conversion Preferred Stock"), at
a price per share calculated so as to
assure that, immediately following such
conversion of the Convertible Notes, the
shares of the Common Stock issuable upon
conversion of the Optional Conversion
Preferred Stock bears a
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proportion to the total number of shares of
the Company's Common Stock
outstanding or issuable upon exercise
and/or conversion of all options, warrants
(excluding all Stock Purchase Warrants),
preferred stock (including the Optional
Conversion Preferred Stock) and other
convertible securities then outstanding
equal to the outstanding principal and
accrued interest on all of the
Convertible Notes divided by the sum of the
outstanding principal and accrued
interest on all of the Convertible Notes
and $20,000,000.00. Such conversion
shall occur as soon as reasonably
practicable after the delivery of the Optional
Conversion Election. The terms of the
Optional Conversion Preferred Stock shall
be subject to negotiation by the Company
and the holders of the Convertible
Notes, including the Payee, but in any
event shall (a) provide that (1)upon any
liquidation or deemed liquidation event (as
described in Section 1 of Article
FOURTH of the Company's Certificate of
Incorporation as amended and/or restated
from time to time (the "Current Charter"))
holders of Optional Convertible
Preferred Stock shall be entitled to
receive on account of each of their shares
of Optional Convertible Preferred Stock
first out of the assets of the Company
available to holders of the Company's
capital stock, an amount not less than
three (3) times the amount per share at
which the Convertible Notes are
converted into Optional Conversion
Preferred Stock and (2) provide the Optional
Convertible Preferred Stock with so-called
"full ratc
