EXHIBIT 10.2
SECOND AMENDMENT
TO
LOAN AND SECURITY AGREEMENT
     This Second Amendment to Loan and Security Agreement (this “Amendment”) is
made as of October 30, 2007, by and among ABT HOLDING COMPANY (formerly
ATHERSYS, INC.), a Delaware corporation (“ABTH”), ADVANCED BIOTHERAPEUTICS,
INC., a Delaware corporation (“ABI,” and collectively with ABTH, the
“Borrowers”), and VENTURE LENDING & LEASING IV, INC. (“VLL4”), and COSTELLA
KIRSCH IV, L.P. (“CK,” and collectively with VLL4, the “Lenders”).
     A. Borrowers and Lenders are parties to that certain Loan and Security
Agreement dated as of November 2, 2004 (the “Loan and Security Agreement”),
together with a Supplement (the “Supplement”) thereto of even date therewith, as
amended by an Amendment to Loan and Security Agreement dated as of September 29,
2006 (as the same have been and may be amended from time to time, referred to
together as the “Loan Agreement”).
     B. Athersys, Inc. (formerly BTHC VI, Inc.), a Delaware corporation (“New
Athersys”), entered into a Guaranty Agreement with Lenders on June 12, 2007.
     C. Borrower and Lenders desire to amend the Loan Agreement on the terms and
subject to the conditions set forth herein.
     D. Except where the context otherwise requires, or unless this Amendment
otherwise provides, all capitalized terms used in this Amendment and not
otherwise defined herein have the meanings ascribed to them in Article 11 of the
Loan and Security Agreement and in the Supplement.
     NOW, THEREFORE, in consideration of the mutual obligations in this
Amendment and the Loan Agreement, and for other good consideration, the receipt
and sufficiency of which are acknowledged, the parties agree as follows:
     1. Amendments to Supplement. Section 10 of Part 2 of the Supplement is
hereby amended and restated in its entirety as follows:
          10. Milestone Payments; Payments due upon Cumulative Equity Financing
Event.
               (a) Milestone Payments. Upon the occurrence and simultaneous with
the closing of the Milestone Event, Borrowers shall be obligated to pay and
shall tender to each Lender its Pro Rata Share of Two Million Two Hundred Fifty
Thousand Dollars ($2,250,000) (each, a “Milestone Payment”). Each Milestone
Payment shall be tendered to Lenders in cash.
               (b) Cumulative Equity Financing Payments. After the date

 

--------------------------------------------------------------------------------

 

of this Amendment and such time as New Athersys has received cumulative gross
proceeds of at least Five Million Dollars ($5,000,000) (the “Cumulative Equity
Financing Threshold”) from the offer and sale of shares of New Athersys’ equity
securities (including equity securities and convertible debt securities, but
excluding stock issued upon exercise of any rights, warrants, options, or other
exercisable securities, stock issued upon conversion of convertible securities,
and the issuance of warrants or options to purchase equity securities) to one or
more financial or strategic investors (each such transaction being a “Cumulative
Equity Financing Event”), Borrowers shall be obligated to pay and shall tender
to each Lender its Pro Rata Share of an amount equal to ten percent (10%) of the
amount(s) New Athersys receives from each such Cumulative Equity Financing Event
that occurs after the Cumulative Equity Financing Threshold has been achieved
(each, a “Cumulative Equity Financing Payment”). Each Cumulative Equity
Financing Payment shall be tendered to Lenders in cash, except that ABTH may
(subject to the 25% limitation in the proviso below) elect, by written notice to
Lenders at least 10 days prior to the closing of a Cumulative Equity Financing
Event, to tender to each Lender in lieu of cash that number of shares of common
stock of New Athersys having an aggregate value based on the per share offering
price of New Athersys’ common stock in the Cumulative Equity Financing Event
equal to the amount of the applicable Cumulative Equity Financing Payment (in
which case such shares shall be tendered no later than five days after the
effective date of the Cumulative Equity Financing Event, and such shares shall
be subject to no transfer restrictions (other than those imposed by federal and
state securities laws, except for any customary lock-up agreement that has also
been executed by executive officers of New Athersys and holders of 1% or more of
New Athersys’ common stock, not to exceed 180 days after the effective date of
the Cumulative Equity Financing Event (unless such period is extended to enable
the underwriters to comply with NASD Rule 2711(f)); provided, however, that
notwithstanding such election by ABTH, at least twenty-five percent (25%) of
each Cumulative Equity Financing Payment shall be paid by Borrowers in the form
of cash. Borrowers and Lenders acknowledge and agree that: (i) Lenders shall not
be entitled to receive any payments pursuant to this Section 10(b) until after
such time as the Cumulative Equity Financing Threshold has been achieved; and
(ii) if any portion of the proceeds New Athersys receives in a Cumulative Equity
Financing Event is intended by the investor(s) and New Athersys to be used by
Borrowers for a Collaboration Activity (hereinafter defined), then such portion
of the proceeds shall not be included in calculating the amount to which Lenders
are entitled to receive pursuant to this Section 10(b). As used herein,
“Collaboration Activity” means, individually and collectively, research,
technology development and validation, clinical studies, manufacturing, market
planning, commercialization, product promotion, sales and related activities
directly related to a defined business arrangement between Borrowers and a
strategic investor
               (c) Effect of Payments. Any payments Lenders actually

2

--------------------------------------------------------------------------------

 

receive pursuant to Section 10(b) shall reduce on a dollar-for-dollar basis the
payments to which Lenders are entitled to receive pursuant to Section 10(a). By
way of illustration only, and for the avoidance of doubt as to the manner in
which any payments to which Lenders are entitled to receive pursuant to Section
10(a) and Section 10(b) shall be calculated, the parties have set forth on
Exhibit “A” to this Amendment examples of the application of the provisions of
this Section 10. For the further avoidance of doubt, Lenders shall receive no
more than $2,250,000 in total, aggregate payments pursuant to Sections 10(a) and
10(b).
               (d) Survival. The Lenders’ right to receive payments pursuant to
Section 10(a) and Section 10(b) above shall survive the payment and satisfaction
of all of Borrowers’ other Obligations to Agent and Lenders; provided, however,
that after such other Obligations have been paid and satisfied in accordance
with Section 8.9 of the Loan and Security Agreement, the security interest
granted under Section 2.16(a) thereof shall terminate and all rights to the
Collateral shall revert to Borrowers. After such termination, Lenders rights to
receive payments pursuant to Section 10(a) and Section 10(b) shall constitute
unsecured obligations of Borrowers.
     2. Effectiveness of Amendment; Continued Effect of Original Agreement.
          2.1 Continued Effect of Original Agreement. All provisions of the Loan
Agreement and other Loan Documents, except as modified by this Amendment, shall
remain in full force and effect. This Amendment shall not operate as a waiver of
any condition or obligation imposed on the parties under the Loan Agreement.
          2.2 Interpretation of Amendment. In the event of any conflict,
inconsistency, or incongruity between any provision of this Amendment and any
provision of the Loan Documents, the provisions of this Amendment shall govern
and control.
          2.3 Conditions to Effectiveness. This Amendment shall not be effective
until each of the following conditions precedent has been fulfilled to the
satisfaction of Lenders:
          (a) This Amendment shall have been duly executed and delivered by the
respective parties hereto and, shall be in full force and effect and shall be in
form and substance reasonably satisfactory to Lenders.
          (b) All action on the part of Borrowers necessary for the valid
execution, delivery and performance by Borrowers of this Amendment shall have
been duly and effectively taken and evidence thereof shall have been provided to
Agent or any Lender following its request.
          2.4 Borrowers’ Representations. Each Borrower hereby represents and
warrants to Lenders that: such Borrower has full corporate power and authority
to execute and deliver this Amendment and to perform the obligations of its part
to be performed hereunder and under the Loan Agreement as amended hereby; such
Borrower has taken all necessary action,

3

--------------------------------------------------------------------------------

 

corporate or otherwise, to authorize the execution and delivery of this
Amendment; no consent or approval of any person, no waiver of any lien or
similar right, and no consent, license, approval or authorization of any
governmental authority or agency is or will be required in connection with the
execution or delivery by such Borrower of this Amendment or the performance by
such Borrower of the Loan Documents as amended hereby; and this Amendment and
the Loan Documents as amended hereby are, or upon delivery thereof to Lenders
will be, the legal, valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization or
similar laws affecting creditors’ rights generally.
     3. Miscellaneous.
          3.1 Successors and Assigns. The terms and conditions of this Amendment
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties.
          3.2 Governing Law. This Amendment shall be governed by and construed
under the internal laws of the State of California.
          3.3 Amendments and Waivers. Any term of this Amendment may be amended
and the observance of any term of this Amendment may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of Borrowers and Lenders.
          3.4 Severability. If one or more provisions of this Amendment are held
to be unenforceable under applicable law, such provision shall be excluded from
this Amendment and the balance of the Amendment shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
          3.5 Entire Agreement. This Amendment and the Loan Documents and the
exhibits and schedules hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
          3.6 Fees and Costs. All reasonable legal fees and costs incurred by
Lenders in connection with the preparation, negotiation and execution of this
Amendment shall be reimbursed by Borrowers on demand.
          5.7 Counterparts. This Amendment may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same agreement.
[Remainder of this page intentionally left blank.]

4

--------------------------------------------------------------------------------

 

[Signature Page to Second Amendment to Loan Agreement]
     IN WITNESS WHEREOF, the parties have caused this Second Amendment to Loan
and Security Agreement to be duly executed as of the date and year first written
above.

            BORROWERS:

ABT HOLDING COMPANY
      By:   /s/ Gil Van Bokkelen       Name:    Gil Van Bokkelen     
Title: Chief Executive Officer     

            ADVANCED BIOTHERAPEUTICS, INC.
      By:   /s/ William O. Lehmann, Jr.       Name:    William O. Lehmann, Jr.  
    Title:  President     

            LENDERS:

VENTURE LENDING & LEASING IV, INC., as a
Lender and in its capacity as Agent
      By:   /s/ Jay L. Cohan       Name:    Jay L. Cohan      Title: Vice
President     

            COSTELLA KIRSCH IV, L.P.,
as a Lender
      By:   /s/ William Kirsch       Name:     William Kirsch      Title: 
General Partner     

            ACKNOWLEDGED BY, AS GUARANTOR:

ATHERSYS, INC.
      By:   /s/ Gil Van Bokkelen       Name:    Gil Van Bokkelen     
Title: Chief Executive Officer   

5

--------------------------------------------------------------------------------

 

         

Exhibit “A”
Illustrations of Payments to be made to Lenders pursuant to Section 10 of Part 2
of the Supplement
Example A:
After the Cumulative Equity Financing Threshold has been satisfied, Company X
invests $10,000,000 in New Athersys by purchasing convertible subordinated notes
(this transaction constitutes a “Cumulative Equity Financing Event” for purposes
of Section 10(b) of Part 2 of the Supplement1). New Athersys agrees with Company
X to fund all pre-clinical and manufacturing activity to get to the phase I
trial, which constitutes a Collaboration Activity. New Athersys develops a
budget with Company X regarding these efforts, with estimated costs of
approximately $5,000,000. There is no requirement that the other $5,000,000 be
used in connection with such Collaboration Activity, i.e. New Athersys can use
the proceeds for any corporate purpose even if this purpose is outside of
collaboration. For purposes of Section 10(b), the amount to which Lenders are
entitled to receive is calculated as follows:
$10,000,000 — $5,000,000 (to be used for Collaboration Activity) = $5,000,000;
$5,000,000 * 10% = $500,000, which represents the aggregate amount payable by
Borrowers to Lenders pursuant to Section 10(b); and
such amount, i.e., $500,000, would offset the Milestone Payment (due under
Section 10(a)), and result in remaining Milestone Payment being reduced to
$1,750,000 ($2,250,000 (due pursuant to Section 10(a)) minus $500,000 (paid
pursuant to Section 10(b)).
Example B:
After the Cumulative Equity Financing Threshold has been satisfied, New Athersys
consummates a transaction in which they receive an equity investment in the
amount of $10,000,000, plus an additional $5,000,000 of sponsored research to
fund a Collaborative Activity. The $10,000,000 portion of such investment would
be used to calculate the amount due to Lenders under Section 10(b) as follows:
$10,000,000 * 10% = $1,000,000, which represents the aggregate amount payable by
Borrowers to Lenders pursuant to Section 10(b); and
 

1   All references to “Sections” in this Exhibit A refer to Section 10 of Part 2
of the Supplement.

 

--------------------------------------------------------------------------------

 

such amount, i.e., $1,000,000, would offset the Milestone Payment (due under
Section 10(a)), and result in remaining Milestone Payment being reduced to
$1,250,000 ($2,250,000 (due pursuant to Section 10(a)) minus $1,000,000 (paid
pursuant to Section 10(b)).
Example C:
If a strategic investor (e.g., GE Healthcare) made an investment in New Athersys
calling it a “strategic investment,” but there was no bona fide Collaboration
Activity intended in connection with such investment, the entire amount New
Athersys received in this Cumulative Equity Financing Event would be included
for purposes of calculating the amounts payable by Borrowers to Lenders under
Section 10(b).

2