NOTE AND WARRANT PURCHASE AGREEMENT

Exhibit 10.1

Execution Copy

NOTE AND WARRANT PURCHASE AGREEMENT

by and between

GTC Biotherapeutics, Inc.

and

LFB Biotechnologies S.A.S.U.

October 31, 2008

TABLE OF CONTENTS

 

 

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(continued)

 

 

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NOTE AND WARRANT PURCHASE AGREEMENT

This Note and Warrant Purchase Agreement (this “ Agreement ”) dated as of October 31, 2008 is made by and between GTC Biotherapeutics, Inc., a Massachusetts corporation, (the “ Company ”), and LFB Biotechnologies, a société par actions simplifiée unipersonnelle established under the laws of France (the “ Purchaser ”).

RECITALS

A. In accordance with the terms and conditions of this Agreement and pursuant to exemptions from registration under the Securities Act of 1933 (as amended from time to time, the “ Securities Act ”), which may include without limitation the exemption afforded by Regulation S promulgated thereunder, the Company has agreed to issue and sell, and the Purchaser has agreed to purchase (i) a convertible note with a principal amount of $15,000,000, which note shall be convertible in accordance with the terms thereof into shares of common stock, par value $0.01 per share (the “ Common Stock ”), of the Company and (ii) a warrant, which warrant shall be exercisable in accordance with the terms thereof for shares of Common Stock.

NOW THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchaser hereby agree as follows:

1. PURCHASE AND SALE

(a) Purchase of Note and Warrant . At the Closing (as defined in Section 3(a)), the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, upon the terms and subject to the conditions set forth herein, (i) a secured subordinated convertible note of the Company in the original principal amount of $15,000,000, which note shall be in the form attached hereto as Exhibit A (the “ Convertible Note ”) and (ii) a warrant to purchase up to 23,193,548 shares of Common Stock at an exercise price of $0.31 per share, which warrant shall be in the form attached hereto as Exhibit B (the “ Warrant ”).

2. SHAREHOLDER APPROVAL

As soon as practicable following the execution of this Agreement, but in any event within 30 calendar days thereof, provided that the Company received the consent of General Electric Capital Corporation (“ GE Capital ”), pursuant to the Amended and Restated Master Security Agreement dated December 29, 2006, with respect to the transactions contemplated herein, the Company shall cause to be prepared and filed with the Securities and Exchange Commission (the “ SEC ”) a preliminary proxy statement or consent solicitation statement (the “ Preliminary Proxy Statement ”) to obtain approval of the Company’s shareholders of (i) the issuance of shares of Common Stock issuable upon conversion of the Convertible Note and exercise of the Warrant, (ii) an increase in the number of shares of Common Stock available for issuance under the Company’s Amended and Restated 2002 Equity Incentive Plan by 2,000,000 ¹ shares and (iii) an amendment of the Company’s articles of organization to increase the number of authorized

1	Includes 1,000,000 shares of Common Stock that have been excluded from the Warrant to be issued to Purchaser under this Agreement.

shares of Common Stock to 210,000,000 shares, but with respect to this clause (iii), only if the Company has not declared prior to final adjournment of the related shareholder meeting a reverse stock split (the “ Reverse Stock Split ”) pursuant to the authority previously granted by shareholders at the Company’s 2008 annual meeting of shareholders (collectively, the “ Shareholder Approval ”). If the Company has not obtained the consent of GE Capital within 30 days after the date of this Agreement, either party may terminate this Agreement upon notice to the other party.

Upon approval by the SEC of such preliminary proxy or consent solicitation statement or, if the SEC has not reviewed such, at the expiration of 10 calendar days from the filing of the preliminary proxy statement or consent solicitation statement, the Company shall file a definitive proxy statement or consent solicitation statement and call and hold a shareholder meeting within 30 calendar days of the filing of such definitive proxy statement to obtain the Shareholder Approval.

If the Shareholder Approval is not received on or before (a) January 15, 2009, if the SEC does not review the Preliminary Proxy Statement or (b) 30 calendar days after the filing of the definitive proxy statement, if the SEC reviews the Preliminary Proxy Statement (whichever date is applicable being the “ Shareholder Approval Deadline ”), then the obligation of the Purchaser to purchase the Convertible Note and the Warrant shall terminate.

Purchaser agrees to vote all shares of Common Stock and shares of Series D Preferred Stock that it holds and is entitled to vote in favor of the Shareholder Approval.

3. CLOSING

(a) Closing Date . If the Company receives the Shareholder Approvals on or before the Shareholder Approval Deadline, the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, the Convertible Note and the Warrant (the “ Closing ”) on the third Business Day following the date of receipt of Shareholder Approval, or such other date as may be mutually agreed by the Purchaser and the Company (the “ Closing Date ”). Subject to the satisfaction of the closing conditions contained herein, at the Closing, the Purchaser shall pay the Company $15,000,000 (the “ Purchase Price ”), by wire transfer of immediately available funds in accordance with the Company’s written wire instructions, and the Company shall deliver to the Purchaser the Convertible Note and the Warrant duly executed and completed and dated the Closing Date.

(b) Conditions to the Company’s Obligation . The Company’s obligation to issue and sell the Convertible Note and the Warrant shall be subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion:

 

(i)

receipt of Shareholder Approval, provided that if shareholder approval of the amendment of the Company’s articles of organization to increase the number of authorized shares of Common Stock to 210,000,000 shares is not received, the Reverse Stock Split has been effected;

 

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(ii)

receipt of the Purchase Price;

 

(iii)

the representations and warranties of the Purchaser in this Agreement shall be true, correct and complete as of the date of this Agreement and the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true, correct and complete as of such date) and the Purchaser shall have performed, satisfied and complied with in all material respects the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchaser at or prior to the Closing and receipt of a certificate, dated the Closing Date, executed by the President and Chief Financial Officer of the Purchaser certifying as to such;

 

(iv)

no temporary restraining order, preliminary or permanent injunction or other order or decree, and no other legal restraint or prohibition shall exist which questions the validity of this Agreement, the Convertible Note, the Warrant or the Security Agreement (collectively, the “ Transaction Documents ”) or the right of the Company or the Purchaser, as the case may be, to enter into any Transaction Document to which any of them is a party or prevents or arguably prevents the consummation of the transactions contemplated by this Agreement, nor shall any proceeding have been commenced or threatened with respect to the foregoing and receipt of a certificate, dated the Closing Date, executed by the President and Chief Financial Officer of the Purchaser certifying to their knowledge as to such; and

 

(v)

receipt of such other information, certificates and documents as the Company may reasonably request.

(c) Conditions to the Purchaser’s Obligation . The Purchaser’s obligation to purchase the Convertible Note and the Warrant shall be subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Purchaser’s sole benefit and may be waived by the Purchaser at any time in its sole discretion:

 

(i)

receipt by the Company of Shareholder Approval, provided that if shareholder approval of the amendment of the Company’s articles of organization to increase the number of authorized shares of Common Stock to 210,000,000 shares is not received, the Reverse Stock Split has been effected;

 

(ii)

receipt of the Convertible Note in the principal amount of the Purchase Price, executed by the Company;

 

(iii)

receipt of the Warrant in the form of Exhibit B executed by the Company;

 

(iv)

receipt of the Security Agreement in the form of Exhibit C executed by the Company (the “ Security Agreement ”);

 

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(v)

receipt of an intercreditor agreement by and between the Purchaser and GE Capital, in form and substance reasonably satisfactory to the Purchaser, executed by GE Capital (the “ Intercreditor Agreement ”);

 

(vi)

receipt of subordination agreements, in form and substance reasonably satisfactory to the Purchaser, executed by all holders of the Company’s indebtedness other than GE Capital;

 

(vii)

receipt of evidence that the Rights Agreement (as defined in Section 8(e)) has been waived in connection with the issuance of the Note and Warrant and the issuance of the Shares issuable upon conversion or exercise thereunder;

 

(viii)

the representations and warranties of the Company in this Agreement shall be true, correct and complete as of the date of this Agreement and the Closing Date (except for representations and warranties that speak as of a specific date, which shall be true, correct and complete as of such date) and the Company shall have performed, satisfied and complied with in all material respects the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing and receipt of a certificate, dated the Closing Date, executed by the principal executive officer and principal accounting officer of the Company certifying as to such;

 

(ix)

since the date of the most recent financial statements set forth in the Company’s SEC Documents (as defined in Section 5(h)), there shall have been no material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business (“ Material Adverse Effect ”) and receipt of a certificate, dated the Closing Date, executed by the principal executive officer and principal accounting officer of the Company certifying as to such;

 

(x)

receipt by the Purchaser of a legal opinion, dated the Closing Date, from counsel to the Company, in form and substance reasonably acceptable to the Purchaser’s counsel;

 

(xi)

no temporary restraining order, preliminary or permanent injunction or other order or decree, and no other legal restraint or prohibition shall exist which questions the validity of the Transaction Documents or the right of the Company or the Purchaser, as the case may be, to enter into any Transaction Document to which any of them is a party or prevents or arguably prevents the consummation of the transactions contemplated by this Agreement, nor shall any proceeding have been commenced or threatened with respect to the foregoing and receipt of a certificate, dated the Closing Date, executed by the principal executive officer and principal accounting officer of the Company certifying to their knowledge as to such; and

 

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(xii)

receipt of such other information, certificates and documents, including Intellectual Property Security Agreements, as the Purchaser may reasonably request.

4. RIGHTS OF PARTICIPATION/FIRST REFUSAL

(a) Right to Participate . At any time after the date of this Agreement, the Purchaser shall have the right to purchase up to its then pro rata share of New Securities (as defined in Section 4(d)) which the Company may propose to sell and issue. In the event the Company proposes to undertake an issuance of New Securities during such period, it shall give the Purchaser written notice of its intention, describing the type of New Securities, their price, the number of New Securities to be offered, and the general terms upon which the Company proposes to issue the same. The Purchaser shall have ten (10) calendar days after any such notice is delivered to agree to purchase at the same price (which shall be the public purchase price, if applicable) and upon the same terms, including closing date, such New Securities in an amount up to the Purchaser’s pro rata share of such New Securities.

(b) Right of First Refusal/Negotiation . In the event the Company proposes to undertake an issuance of New Securities after June 1, 2009, it shall first give the Purchaser written notice of its intention, describing the type of New Securities, their proposed price, the number of New Securities to be offered, and the general terms upon which the Company proposes to issue the same. The Purchaser shall have the right to purchase or not purchase such New Securities on the proposed terms (the “ Right of First Refusal ”), and if it chooses not to purchase the New Securities on the proposed terms, it shall have the right to negotiate with Company alternative terms on which to purchase all of such New Securities (the “ Right of First Negotiation ”). The Purchaser shall have ten (10) calendar days after notice by the Company is delivered to either purchase the New Securities in accordance with the Company’s proposed terms pursuant to its Right of First Refusal or to negotiate with the Company alternative terms to purchase all such New Securities pursuant to its Right of First Negotiation. If the Purchaser timely notifies the Company of its desire to exercise its Right of First Negotiation, then the parties shall negotiate exclusively and in good faith with each other to finalize terms and definitive documentation, for a period of up to twenty (20) days. If the Parties fail to finalize terms and execute and deliver definitive documentation in such twenty (20) day period, the Company shall have ninety (90) days thereafter to sell or enter into an agreement to sell New Securities, at a price and upon terms, economic and otherwise, which are no more favorable to the purchasers than those offered by the Purchaser. In the event the Purchaser elects not to purchase the New Securities pursuant to its Right of First Refusal and not to exercise its Right of First Negotiation, the Company shall have ninety (90) days thereafter to sell or enter into an agreement to sell New Securities, at a price and upon terms no more favorable to the purchasers thereof than specified in the written notice delivered to the Purchaser pursuant to this Section 4(b). In the event the Company has not sold such New Securities or entered into an agreement to sell such New Securities within such ninety (90) day periods, the Company shall not thereafter issue or sell any New Securities without first again complying with this Section 4(b). Notwithstanding, anything contained herein to the contrary, in the event the Purchaser does not exercise the Right of First Refusal or exercises the Right of First Negotiation but fails to reach an

 

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agreement with the Company with respect to the purchase of such New Securities, the Purchaser shall have the right to purchase up to its pro rata share of any such New Securities sold in accordance with Section 4(a) above.

(c) Pro Rata Share . For purposes of this Section 4, the Purchaser’s pro rata share is equal to the ratio of (A) the number of shares of Common Stock owned by the Purchaser (including any affiliate thereof) assuming full conversion or exercise of any outstanding convertible securities (including the Convertible Note and the Warrant), rights, options and warrants held by the Purchaser (or any affiliate thereof) into Common Stock to (B) the total number of shares of Common Stock outstanding (assuming full conversion or exercise of any outstanding convertible securities (including the Convertible Note and the Warrant), rights, options and warrants held by the Purchaser (or any affiliate thereof) into Common Stock).

(d) New Securities . “ New Securities ” shall mean any capital stock of the Company whether now authorized or not, and rights, convertible securities, options or warrants to purchase such capital stock, and securities of any type whatsoever, including debt, that are, or may become, exercisable or convertible into capital stock; provided that the term New Securities does not include:

 

(i)

securities issued in connection with any stock dividend, stock split, split-up or other distribution on shares of Common Stock;

 

(ii)

securities issued upon the conversion or exercise of any outstanding convertible or exercisable securities as of the date of this Agreement;

 

(iii)

securities issued upon exercise or grant of options or other equity awards with respect to shares of Common Stock, subject in either case to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization affecting such shares, issued or issuable to employees or directors of, or consultants to, the Company pursuant to an equity plan of the Company or other arrangement approved by the Board of Directors of the Company;

 

(iv)

securities issued or issuable pursuant to the bona fide acquisition of another corporation by the Company by merger, purchase of substantially all of the assets or other reorganization, which acquisition is approved by a majority vote of the Board of Directors of the Company, including a majority of the Purchaser’s representatives on the Board of Directors;

 

(v)

securities issued or issuable to banks, equipment lessors or other financial institutions pursuant to a debt financing, equipment lease, bank credit arrangement or commercial leasing transaction entered into for primarily non-equity financing purposes;

 

(vi)

securities of the Company which the Board of Directors of the Company unanimously determines shall be excluded from the definition of New Securities; and

 

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(vii)

securities issued pursuant to the terms of this Agreement.

(e) Standstill Agreement . The Purchaser covenants and agrees that, if the Company provides notice to the Purchaser pursuant to this Section 4 of any planned issuance of New Securities, then until the earlier of (i) the date that is the second full trading day after the Company’s public announcement of its planned issuance of New Securities, (ii) the date that is the ninetieth (90th) calendar day after the Company has first delivered to the Purchaser a notice of a planned issuance of New Securities and (iii) the date that the Company notifies the Purchaser that it has abandoned plans to issue New Securities, the Purchaser shall maintain the confidentiality of all information provided to the Purchaser relating to any planned issuance of New Securities and shall not sell, agree to sell, buy or agree to buy, otherwise engage in any short selling of the Company’s securities, or establish or increase any “put equivalent position” as defined in Rule 16(a)-1(h) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), with respect to any of the Company’s securities other than buying securities from the Company in accordance with the terms offered for the New Securities and the purchase of shares pursuant to the rights set forth in this Section 4. Notwithstanding the foregoing, the Purchaser agrees that, so long as the Purchaser is an affiliate (as defined by Rule 144(a)(1) of the Securities Act) of the Company, if requested by the Company and the managing underwriter or lead placement agent of an offering of securities by the Company, the Purchaser will enter into an agreement for the benefit of such underwriter or placement agent, not to sell, transfer or dispose of any shares for a specified period of time (not to exceed 90 days plus any extension of such period imposed pursuant to NASD Rule 2711(f)(4) not to exceed 36 days) provided that all executive officers and directors of the Company enter into similar agreements.

5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY

The Company represents and warrants to the Purchaser, subject to such exceptions as are set forth in the SEC Documents (as defined below) or as otherwise disclosed in the Company’s disclosure letter previously delivered to the Purchaser, as follows:

(a) Organization and Qualification . The Company is a corporation, duly organized, validly existing and in good standing under the laws of the Commonwealth of Massachusetts, and has the requisite corporate power and authority to own its properties and to carry on its business as now being conducted and as described in the SEC Documents. Copies of the Company’s Articles of Organization and Bylaws, and all amendments thereto, have been filed as exhibits to the Company’s SEC Documents and have not been further modified, and the Company has no present intention to modify the Articles of Organization and Bylaws. The Company is duly qualified as a foreign corporation to do business, and is in good standing, in every jurisdiction in which its ownership of property or the nature of the business conducted and proposed to be conducted by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

(b) Subsidiaries . Each of the Company’s Subsidiaries has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of organization, is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, and has all power

 

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and authority necessary to own or hold its properties and to conduct the business in which it is engaged, except where the failure to so qualify or have such power or authority would not have, singularly or in the aggregate, a Material Adverse Effect. All the outstanding shares of capital stock of each Subsidiary have been duly authorized and validly issued, are fully paid and nonassessable and are owned by the Company directly or indirectly through one or more wholly-owned subsidiaries, free and clear of any claim, lien, encumbrance, security interest, restriction upon voting or transfer or any other claim of any third party. No Subsidiary is currently prohibited, directly or indirectly, under any agreement to which it is a party, from paying any dividends to the Company, from making any other distribution on such Subsidiary’s capital stock, from repaying to the Company any loans or advances to such Subsidiary from the Company or from transferring any of such Subsidiary’s properties or assets to the Company or any other subsidiary of the Company. For purposes of this Agreement, “ Subsidiaries ” means those entities that are “significant subsidiaries” of the Company as determined in accordance with Regulation S-X.

(c) Authorization; Enforcement; Validity . The Company has the requisite corporate power and authority to enter into and perform its obligations under the Transaction Documents, and to issue the Convertible Note and the Warrant and any shares of Common Stock issuable upon conversion or exercise of the Convertible Note or Warrant (the “ Shares ” and together with the Convertible Note and the Warrant, the “ Securities ”) in accordance with the terms thereof. The execution and delivery of the Transaction Documents by the Company and the consummation and performance by the Company of the transactions contemplated thereby, including, without limitation, the issuance of the Securities, have been duly authorized by all requisite corporate action. The Transaction Documents have been duly executed and delivered by the Company. The Transaction Documents constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors’ rights and remedies.

(d) Capitalization . The capitalization of the Company is as described in the Company’s most recent periodic report filed with the SEC as updated by any current report filed with the SEC thereafter, and all of the issued shares of capital stock of the Company have been duly and validly authorized and issued, are fully paid and non-assessable, and have been issued in compliance with federal and state securities laws. The Company has not issued any capital stock since such filings other than pursuant to the exercise of stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plan (such issuances and any such stock options, whenever issued or granted, being collectively “ Employee Equity Transactions ”), pursuant to the conversion or exercise of outstanding securities that are convertible into or exercisable for Common Stock, or pursuant to publicly disclosed equity financings. The Company’s Common Stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (the “ Exchange Act ”), and is listed for trading on the Nasdaq Capital Market (“ Nasdaq ”). Except with respect to the minimum bid price requirement as disclosed in the SEC Documents, the Company is in compliance with the continued listing criteria of Nasdaq and all Nasdaq corporate governance requirements that are applicable to the Company. Except for Employee Equity Transactions and

 

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as set forth in the SEC Documents, (i) no shares of the Company’s capital stock are subject to preemptive rights or any other similar rights or any liens or encumbrances; (ii) there are no outstanding options, warrants, rights to subscribe to, calls or commitments relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries, or contracts, commitments, understandings or arrangements by which the Company is or may become bound to issue additional shares of capital stock of the Company or any of its Subsidiaries or options, warrants, rights to subscribe to, calls or commitments relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its Subsidiaries.

(e) Issuance of Securities . Except for the Shareholder Approval required by Section 2 and, if shareholder approval of an amendment of the Company’s articles of organization to increase the number of authorized shares of Common Stock to 210,000,000 shares is not received, the Reverse Stock Split, in each case which shall be obtained or effected, as applicable, prior to the Closing, (i) the Convertible Note has been duly authorized and, upon issuance in accordance with the terms hereof, will be a legal, valid and binding obligation of the Company in accordance with its terms and (ii) the Shares are duly authorized and, upon issuance in accordance with the terms of the Convertible Note, will be (A) validly issued, fully paid and non-assessable and (B) free from all taxes, liens and charges in the United States of America with respect to the issuance thereof, other than any liens or encumbrances created by or imposed by the Purchaser, and not subject to preemptive rights or other similar rights of stockholders of the Company. Except for the filing of any notice prior or subsequent to the Closing that may be required under applicable state and/or Federal securities laws (or comparable laws of any other jurisdiction) or the rules of Nasdaq, no authorization, consent, approval, license, exemption of or filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, is or will be necessary for, or in connection with, the execution and delivery by the Company of the Transaction Documents, for the offer, issue, sale, execution or delivery of the Securities, or for the performance by the Company of its obligations under the Transaction Documents.

(f) No Conflicts . The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) result in a violation of the Company’s Articles of Organization or Bylaws; (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party; (iii) result in a violation of any law, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries; or (iv) result in the imposition of a mortgage, pledge, security interest, encumbrance, charge or other lien on any asset of the Company or its Subsidiaries, except for such conflicts, defaults, terminations, amendments, accelerations, cancellations, violations and impositions as described in clauses (ii), (iii) or (iv) of this sentence as would not, individually or in the aggregate, have or result in a Material Adverse Effect.

(g) No Violation or Default . Neither the Company nor any of its Subsidiaries is (i) in violation of its Articles of Organization or Bylaws or other organizational documents; (ii) in default (or subject to an event which with notice or lapse of time or both would become a default) under any agreement, indenture or instrument to which the Company or any of its Subsidiaries is a party; or (iii) in

 

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violation of any law, rule, regulation, order, judgment or decree applicable to the Company or any of its Subsidiaries; except for such violations or defaults, as described in clauses (ii) or (iii) of this sentence as are set forth in the SEC Documents or as would not, individually or in the aggregate, have or result in a Material Adverse Effect.

(h) SEC Documents . The Company has filed all reports, schedules, forms, statements, exhibits (including certifications of the Company’s of the Company’s principal executive and financial officers pursuant to Section 302 and 906 of Sarbanes-Oxley (as defined in Section 5(s))) and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Exchange Act for the twelve (12) months preceding the date hereof (all of the foregoing filed prior to or on the date hereof, or prior to or on the Closing Date, and all exhibits included therein and financial statements and schedules thereto and documents incorporated by reference therein being referred to in this Agreement as the “ SEC Documents ”). As of the date of filing of each such SEC Document, such SEC Document, as it may have been subsequently amended by filings made by the Company with the SEC prior to the date hereof, complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder applicable to such SEC Document. None of the SEC Documents, as of the date filed and as they may have been subsequently amended by filings made by the Company with the SEC prior to the date hereof, 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.

(i) Financial Statements . The financial statements and the related notes thereto of the Company and its consolidated subsidiaries included or incorporated by reference in the SEC Documents comply in all material respects with the applicable requirements of the Exchange Act, as applicable, and present fairly the financial position of the Company and its subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified. Such financial statements have been prepared in conformity with United States generally accepted accounting principles (“ GAAP ”) applied on a consistent basis throughout the periods covered thereby, except as specifically stated therein, and the supporting schedules included or incorporated by reference in the SEC Documents present fairly the information required to be stated therein.

(j) No Material Adverse Change . Since the date of the most recent financial statements of the Company included or incorporated by reference in the SEC Documents, (i) there has not been any change in the capital stock (other than pursuant to Employee Equity Transactions, pursuant to the conversion or exercise of outstanding securities that are convertible into or exercisable for Common Stock, or pursuant to publicly disclosed equity financings) or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or any material adverse change in or affecting the business, properties, management, financial condition or operations of the Company and its subsidiaries taken as a whole; (ii) neither the Company nor any of its subsidiaries has entered into any transaction or agreement that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole and (iii) neither the Company nor any of its subsidiaries has sustained any material loss or interference with its business from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority.

 

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(k) Independent Accountants . PricewaterhouseCoopers LLP, who have certified certain financial statements of the Company and its subsidiaries, and have audited the Company’s internal control over financial reporting and managements’ assessment thereof, are to the Company’s knowledge, independent registered public accountants with respect to the Company and its subsidiaries as required by the Securities Act.

(l) Clinical Trials . The clinical, pre-clinical and other studies and tests conducted by or on behalf of or sponsored by the Company were and, if still pending, are being conducted in accordance with all statutes, laws, rules and regulations, as applicable (including, without limitation, those administered by the FDA or by any foreign, federal, state or local government or regulatory authority performing functions similar to those performed by the FDA) except where the failure to comply with such statutes, laws, rules or regulations would not result, individually or in the aggregate, in a Material Adverse Effect.

(m) Title to Intellectual Property . The Company and its subsidiaries own or possess adequate rights to use all material patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses and know-how (including trade secrets and other unpatented or unpatentable proprietary or confidential compounds, genes, information, systems or procedures) (collectively, the “ Intellectual Property ”) generally described in the SEC Documents (except as otherwise noted therein), which to the Company’s knowledge is all the Intellectual Property necessary for the conduct of the Company’s business. Except as set forth in the SEC Documents, (i) to the Company’s knowledge, there are no rights of third parties to any such Intellectual Property except through licensing or cross-licensing agreements or where the exercise of such rights would not result, individually or in the aggregate, in a Material Adverse Effect; (ii) to the Company’s knowledge, there is no infringement by third parties of any such Intellectual Property that is necessary and material to the Company’s business as it is presently being conducted except where such infringement would not result, individually or in the aggregate, in a Material Adverse Effect; (iii) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the Company’s ownership or licensing rights in or to any such Intellectual Property; (iv) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, other than ordinary patent, trademark, service mark and copyright prosecution; (v) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes or otherwise violates any patent, trademark, copyright, trade secret or other proprietary rights of others, and the Company is unaware of any reasonable basis for any such claim; and (vi) the Company has taken all steps reasonably determined by the Company to be necessary to perfect its ownership of and interest in such Intellectual Property.

(n) Licenses and Permits . The Company and its subsidiaries possess all licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate Federal, state, local or foreign governmental or regulatory

 

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authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in the SEC Documents, except where the failure to possess or make the same would not, individually or in the aggregate, have a Material Adverse Effect. Neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, certificate, permit or authorization or has any reason to believe that any such license, certificate, permit or authorization will not be renewed in the ordinary course.

(o) Environmental Matters . The Company and each of its subsidiaries is in compliance with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their businesses, except where the failure to comply would not, singularly or in the aggregate, have a Material Adverse Effect. To the Company’s knowledge, there has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company or any of its subsidiaries (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company is or may be liable) upon any of the property now or previously owned or leased by the Company or any of its subsidiaries, or upon any other property, in violation of any statute or any ordinance, rule, regulation, order, judgment, decree or permit or which would, under any statute or any ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability, except for any violation or liability which would not have, singularly or in the aggregate with all such violations and liabilities, a Material Adverse Effect. There has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge, except for any such disposal, discharge, emission, or other release of any kind which would not have, singularly or in the aggregate with all such discharges and other releases, a Material Adverse Effect.

(p) Tax Matters . The Company and each of its subsidiaries (i) has filed all necessary federal, state and foreign income and franchise tax returns, (ii) has paid all federal state, local and foreign taxes due and payable for which it is liable, and (iii) does not have any tax deficiency or claims outstanding or assessed or, to the best of the Company’s knowledge, proposed against it, except where the failure to file, failure to pay or the deficiency or claim would not have a Material Adverse Effect.

(q) Internal Control over Financial Reporting . The Company maintains a system of internal control over financial reporting (as such is defined in Rule 13a-15(f) of the Exchange Act) that complies with the requirements of the Exchange Act and has been designed by the Company’s principal executive officer and principal financial officer, or under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company does not have any material weaknesses in its internal control over financial reporting. Since the date of the latest audited financial statements included in the SEC Documents, there has been no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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(r) Disclosure Controls and Procedures . The Company and its subsidiaries maintain disclosure controls and procedures (as such term is defined in Rule 13a-15(e) of the Exchange Act that comply with the requirements of the Exchange Act. Such disclosure controls and procedures have been designed to ensure that material information relating to the Company and its subsidiaries is accumulated and communicated to the Company’s management, including the Company’s principal executive officer and principal financial officer, by others within those entities.

(s) Sarbanes-Oxley Compliance . The Company and the Company’s directors or officers, in their capacities as such, are in compliance with any provision of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in connection therewith (“ Sarbanes-Oxley ”), including Section 402 related to loans and Sections 302 and 906 related to certifications.

(t) Absence of Litigation . Except as disclosed in the section titled “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended January 1, 2007, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company, threatened in writing against the Company or any of its subsidiaries which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) would reasonably be expected to result in a Material Adverse Effect.

(u) Investment Company Act . The Company is not, nor, after giving effect to the sale of the Securities and the application of the proceeds therefrom, will it become, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the SEC thereunder.

(v) Board Approval . The Board has (i) determined that the transactions contemplated by this Agreement, are fair to, and in the best interests of, the holders of Common Stock of the Company, and (ii) approved the Purchaser and its affiliates becoming a holder of 15% or more of the Company’s outstanding voting stock for purposes of Chapter 110F of the Massachusetts General Laws.

6. PURCHASER’S REPRESENTATIONS AND WARRANTIES

The Purchaser represents and warrants to the Company that:

(a) Transfer or Resale . The Purchaser understands that the Securities have not been registered under the Securities Act or any state securities laws, and may not be offered for sale, sold, assigned or transferred without registration under the Securities Act or an exemption therefrom and that, in the absence of an effective registration statement under the Securities Act, such Securities may only be sold under certain circumstances as set forth in the Securities Act.

(b) Investment Purpose . The Purchaser is acquiring the Securities for its own account for investment only and not with a view towards, or for resale in connection with, the public sale or distribution thereof. The Purchaser does not have any agreement or understanding, directly or indirectly, with any person to distribute any of the Securities.

 

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(c) Offshore Transaction . The Purchaser is not organized under the laws of any jurisdiction within the United States of America, its territories or possessions, was not formed for the purpose of investing in Regulation S securities and is not a “U.S. person” as that term is defined in Rule 902(k) of Regulation S under the Securities Act. At the time of execution of this Agreement, the Purchaser is physically outside the United States of America. The Purchaser is not purchasing the Securities on behalf of or for the benefit of any U.S. person and the sale of the Securities has not been prearranged with any buyer in the United States of America.

(d) General Solicitation . The Purchaser is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

(e) Information . The Purchaser (directly or through its advisors, if any) (i) has been furnished with or has had full access to all of the publicly available information that it considers necessary or appropriate for deciding whether to purchase the Securities, (ii) has had an opportunity to ask questions and receive answers from the Company regarding the terms and conditions of the offering of the Securities, (iii) can bear the economic risk of a total loss of its investment in the Securities and (iv) has such knowledge and experience in business and financial matters so as to enable it to understand the risks of and form an investment decision with respect to its investment in the Securities.

(f) Reliance on Exemptions . The Purchaser understands that the Securities are being offered and sold to it in reliance on specific exemptions from the registration requirements of the Securities Act and that the Company is relying upon the truth and accuracy of, and the Purchaser’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Purchaser set forth in this Agreement in order to determine the availability of such exemptions and the eligibility of the Purchaser to acquire the Securities.

(g) No Governmental Review . The Purchaser understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities nor have such authorities passed upon or endorsed the merits of the offering of the Securities.

(h) No Antitrust Filings or Approvals . Neither the Purchaser nor LFB is required to make any filing or obtain any authorization, consent, approval, license, exemption or registration under the United States Hart-Scott-Rodino Antitrust Improvements Act of 1976, or under the antitrust or similar laws or regulations of any other jurisdiction, in connection with the execution, delivery or performance of the Agreements.

(i) Authorization; Enforcement; Validity . The Purchaser is an entity duly organized and validly existing under the laws of the jurisdiction of its organization with full right, corporate or partnership power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations thereunder. The execution, delivery and performance by the Purchaser of the transactions contemplated by this Agreement has been duly authorized by all necessary corporate action on the part of the Purchaser and any other governmental action with respect to the Purchaser. This Agreement has been duly

 

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executed by the Purchaser, and when delivered by the Purchaser in accordance with terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms.

(j) No Conflicts . The execution and performance of this Agreement do not conflict with any agreement to which the Purchaser is a party or is otherwise bound, any law, rule regulation, governmental practice or other requirement, court order or judgment applicable to the Purchaser or, if applicable, the constituent documents of the Purchaser, except for such conflicts as would not, individually or in the aggregate, have or result in a material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Purchaser and its subsidiaries, taken as a whole.

(k) Short Position Prior to the Date Hereof . From the date one hundred eighty (180) days prior to the date hereof, neither the Purchaser nor any affiliate has directly or indirectly established or agreed to establish any hedge, “put equivalent position” (as defined in Rule 16a-1 under the Exchange Act) or other position in the Common Stock that is outstanding on the Closing Date and that is designed to or could reasonably be expected to lead to or result in a disposition by the Purchaser or any other person or entity. For purposes hereof, a “ hedge or other position ” includes, without limitation, effecting any short sale or having in effect any short position (whether or not such sale or position is against the box and regardless of when such position was entered into) or any purchase, sale or grant of any right (including, without limitation, any put or call option) with respect to the Common Stock or with respect to any security (other than a broad-based market basket or index) that includes, relates to or derives any significant part of its value from the Common Stock. The Purchaser acknowledges that this representation is made for the benefit of the Company.

(l) Short Sales and Confidentiality After the Date Hereof . The Purchaser understands and acknowledges that the transactions contemplated by this Agreement constitute “material non-public information” within the meaning of the rules and regulation promulgated by the SEC under Regulation FD and that until such time as such the transactions have been publicly disclosed in accordance with Section 12 or otherwise, the Purchaser represents, warrants and covenants that neither it nor any of its affiliates acting on its behalf or pursuant to any understanding with it have executed or will execute any short sales of the Company’s Common Stock and that it will maintain the confidentiality of all disclosures made to it in connection with the Offering (including the existence and terms of this Agreement and the Development Agreement and the transactions contemplated hereby and thereby).

(m) Ownership . The Purchasers current beneficial ownership of the Company’s common stock is accurately reported in the Purchaser’s most recent Schedule 13D filed with the SEC.

7. BOARD REPRESENTATIVES

(a) Appointment of Purchaser Designees . Upon Conversion of the Convertible Note in full or in part from time to time by the Purchaser in accordance with its terms, the Purchaser shall be entitled to designate one or more Purchaser Designees (as defined below) to the Company’s Board, as provided herein. Within five (5) business days of receipt by the Company of a written designation

 

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by the Purchaser of the Purchaser Designees, including the designees’ Company stock ownership, Company relationships and biographical information as provided by current members of the Board, the Company’s Board of Directors shall by written consent or meeting appoint the Purchaser Designees (as defined below) to the Company’s Board of Directors. If the Convertible Note is converted in part, the Purchaser shall have the right to have a pro rata portion of the Purchaser Designees appointed. Purchaser Designees shall be appointed across the three classes of directors in as equal proportion as possible. For purposes of this Section 7, “ Purchaser Designees ” shall mean the maximum number of directors that may be appointed under the rules of Nasdaq in connection with this Agreement and the transactions contemplated hereby. The Company shall within five (5) business days of the date of this Agreement send to Nasdaq a request for a written determination (on an expedited basis) of the maximum number of directors that may be appointed by Purchaser under this Section 9 (the “ Nasdaq Determination ”), the costs of which shall be borne solely by the Company. If, and only if, required pursuant to the Nasdaq Determination, if the Purchaser’s ownership decreases, the number of Purchaser Designees would decrease ratably such that the percentage of the Board represented by the Purchaser Designees would not exceed the Purchaser’s percentage equity ownership in the Company.

(b) Nomination of Purchaser Designees . For so long as Purchaser’s ownership of Common Stock of the Company is at least twenty-one percent (21%) on an as-converted basis, any Purchaser Designee (including any successor pursuant to Subsection 7(d) below) shall be nominated by the Board of Directors (or a committee thereof) for election at the annual meeting of stockholders at which such Purchaser Designee’s term will expire. At least ninety (90) days prior to any such annual meeting at or by which directors are to be elected, the Purchaser shall notify the Company in writing of the Purchaser Designee(s) to be nominated for election as a director. The Company shall disclose in its proxy the nominated Purchaser Designee(s). In the absence of any such notification, it shall be presumed that the Purchaser’s then incumbent Purchaser Designee(s) has been renominated as its Purchaser Designee(s). The rights provided under this Section 7 are the exclusive rights of the Purchaser and are not transferable.

(c) Restrictions on Purchaser Designees . The Purchaser Designees (i) shall be bound by confidentiality obligations with respect to the Company and its business to the same extent as are other directors of the Company and as is the Purchaser pursuant to this Agreement; and (ii) if deemed necessary by a determination of the Chairman of the Board or a vote of the majority of the independent members of the Board, shall not participate in any Board deliberations or action (including, but not limited to, Board presentations or discussions), or receive Board information, relating to any matter to which the Purchaser is either directly or indirectly involved or has any interest that is competing or inconsistent with the interests of the Company. The Purchaser agrees to cause the Purchaser Designees (and each successor) to comply with the obligations in clause (i) of the preceding sentence for the benefit of the Company and its successors.

(d) Successor Designees . If a Purchaser Designee shall cease to serve as a director for any reason, the Company’s Board of Directors shall appoint and elect a replacement director to serve out the remaining term of the existing director upon written notice to the Company by the Purchaser.

 

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(e) Indemnification Agreement . The Company shall enter into an Indemnification Agreement with each Purchaser Designee or Successor Designee prior to the commencement of his or her service on the Board, which agreement shall be in such form and substance as has been executed by the current members of the Board.

(f) No Increase to Size of Board of Directors . The Company hereby covenants and agrees that after the date of this Agreement, unless the Convertible Note is prepaid in full on or prior to June 1, 2009 in accordance with Section 1.4 thereof, the Company will not, without the prior written consent of the Purchaser, which consent can be withheld in the Purchaser’s sole discretion, increase the size of the Board of Directors, except in connection with the appointment of one or more Purchaser Designees in accordance with this Section 7.

8. RESTRICTIONS ON TRANSFER

(a) Resales . The Purchaser agrees that the Securities, including the Shares, may only be sold or transferred (i) pursuant to an effective Registration Statement under the Securities Act, or (ii) pursuant to an exemption from registration under the Securities Act.

(b) Rule 144 . The Purchaser is aware of Rule 144 under the Securities Act and the restrictions imposed thereby and further understands and agrees that so long as the Purchaser beneficially owns 10% or more of the Company’s then outstanding securities or has a Purchaser Designee serving on the Board, the Company will deem the Purchaser to be an “affiliate” as defined in Rule 144(a)(1) and any transfers of the Shares by the Purchaser shall be subject to the limitations applicable to affiliates set forth in the Securities Act and the rules promulgated thereunder, including without limitation Rule 144.

(c) Legends . The Convertible Note and the Warrant shall bear legends in the form set forth on Exhibit A and Exhibit B , respectively. The certificate(s) evidencing the Shares shall bear legends in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON THE TRANSFER THEREOF PURSUANT TO THE TERMS OF A NOTE AND WARRANT PURCHASE AGREEMENT BETWEEN THE HOLDER AND THE COMPANY AND SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR HYPOTHECATED UNTIL SUCH RESTRICTIONS HAVE LAPSED OR HAVE BEEN WAIVED BY THE WRITTEN CONSENT OF THE COMPANY. THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT (A) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH REGULATION S OF THE SECURITIES ACT, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR (C) PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION

 

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REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

(d) Agreement to be Bound . Subject to the other restrictions on transfer set forth or referenced in this Agreement (including those set forth in Section 11(h)), the Convertible Note or the Warrant, the Purchaser may assign all of its rights and obligations hereunder with respect to the Convertible Note, the Warrant and some or all of the Shares, provided that the transferee has agreed in writing to be bound by the applicable provisions of this Agreement.

(e) Security Ownership . The Purchaser is aware that the Company is a party to a Shareholder Rights Agreement, dated as of May 31, 2001, between the Company and American Stock Transfer and Trust Company (the “ Rights Agreement ”), which provides that in the event the Purchaser at any time beneficially owns 15% or more of the Company’s then outstanding capital stock, the Purchaser may be deemed an “ Acquiring Person ” as defined in the Rights Agreement. The Purchaser understands that, in connection with the Purchaser’s acquisition of the Securities and the Shares and with respect to the Purchaser’s equity position in the Company, the Company has exempted the Purchaser from being deemed an Acquiring Person as a result of such acquisition or any subsequent transaction so long as the Purchaser acquires its beneficial ownership of shares of capital stock of the Company in a transaction whereby the Purchaser is acquiring such beneficial ownership directly from the Company. Notwithstanding the foregoing, the Purchaser will also not be deemed an Acquiring Person if the percentage of outstanding capital stock owned by the Purchaser increases solely due to the repurchase by the Company of shares of its outstanding capital stock.

9. GUARANTEES AND OTHER OBLIGATIONS AND COVENANTS OF THE COMPANY

(a) Financial Information . From the date of this Agreement through the Closing, and after the Closing, for so long as any portion of the Convertible Note is outstanding and the Purchaser’s ownership of Common Stock of the Company is at least twenty percent (20%) on an as-converted basis, the Company shall provide the Purchaser (i) as soon as practicable after the end of each month, and in any event within thirty (30) days thereafter, unaudited monthly income, balance sheet and cash flow statements and a monthly cash flow budget, (ii) as soon as practicable after the end of each quarter, and in any event within forty-five (45) days thereafter, a consolidated balance sheet of the Company and its subsidiaries as of the end of each such period, consolidated statements of income, consolidated statements of changes in financial condition, a consolidated statement of cash flow of the Company and its subsidiaries and a statement of stockholders’ equity for such period and for the current fiscal year to date, (iii) as soon as practicable, but in any event forty-five (45) days prior to the end of each fiscal year, a projected operating budget and business plan for the next fiscal year, prepared on a monthly basis, including balance sheets and sources and applications of funds statements for such months and, as soon as prepared, any other budgets or revised budgets prepared by the Company, and (iv) such other financial reports that may be reasonably requested by the Purchaser.

 

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(b) Trade Debt . At no time during the period from the date of this Agreement through the Closing, and after the Closing, for so long as any portion of the Convertible Notes is outstanding, shall the Company’s past due and unpaid obligations to third parties in respect of goods or services furnished by such third parties to the Company exceed $5,000,000 in the aggregate.

(c) Right of First Negotiation on Partnership/Licensing Opportunities . The Company hereby covenants and agrees that in the event that after June 1, 2009 the Company decides to grant a license, sublicense or similar rights to a third party or to enter into a partnership, collaboration or other arrangement to participate in, or lead, the effort to develop or commercialize any Invention or therapeutic product developed by the Company (including the Company’s interest in any Joint Inventions) pursuant to the terms of the Amended and Restated Joint Development and Commercialization Agreement entered into by the Company, the Purchaser and the other parties named therein as of June 30, 2008 (the “ JDA ”), the Company shall give written notice of such decision to the Purchaser, which notice shall include a detailed description of the terms and conditions with respect to such proposed license or other arrangement. Upon receipt of such notice, the Purchaser shall have a period of thirty (30) days to indicate by written notice to the Company that it desires to exercise a right of first negotiation with respect to such proposed license, sublicense or other arrangement. If the Purchaser timely notifies the Company of its desire to exercise its right of first negotiation, then the parties shall negotiate exclusively and in go