Exhibit 10.13

ARCA BIOPHARMA, INC.

 

 

NOTE AND WARRANT PURCHASE AGREEMENT

SEPTEMBER 24, 2008

 

 

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EXECUTION VERSION

ARCA BIOPHARMA, INC.

NOTE AND WARRANT PURCHASE AGREEMENT

THIS NOTE AND WARRANT PURCHASE AGREEMENT (this “Agreement”) is made as of
September 24, 2008 (the “Effective Date”) by and between ARCA biopharma, Inc., a
Delaware corporation (the “Company”), and the persons and entities named on the
Schedule of Purchasers attached hereto (individually, a “Purchaser” and
collectively, the “Purchasers”).

RECITALS

A. The Company has entered into that certain Agreement and Plan of Merger and
Reorganization dated September 24, 2008, (the “Merger Agreement”) with Nuvelo,
Inc., a Delaware corporation (“Parent”), and Nuvelo Acquisition Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of Parent (the “Merger
Sub”), pursuant to which Merger Sub will merge with and into the Company and the
stockholders of the Company will receive shares of the capital stock of Parent
in exchange for their capital stock of the Company (the “Merger”).

B. The Company has authorized the sale of up to $8,750,000 in principal amount
of its 6% convertible promissory notes due March 31, 2009 and warrants to
purchase shares of the Company’s capital stock.

C. Each Purchaser wishes to purchase a Note (as defined below) in the principal
amount set forth opposite such Purchaser’s name on the Schedule of Purchasers
attached hereto and a Warrant (as defined below) to purchase a number of shares
of the Company’s capital stock as determined pursuant to the Warrant, on the
terms and subject to the conditions set forth herein.

D. The parties desire to make Parent a third party beneficiary of certain rights
and obligations under this Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the above recitals and the mutual covenants
contained herein, the parties hereby agree as follows:

 

1. AMOUNT AND TERMS OF THE LOAN; PURCHASE AND SALE OF THE WARRANTS.

1.1 The Loans. Subject to the terms of this Agreement, each Purchaser agrees to
lend to the Company up to the total amount (the “Loan Amount”) set forth
opposite such Purchaser’s name on the Schedule of Purchasers attached hereto
under the heading “Loan Amount” against the issuance and delivery by the Company
of a convertible promissory note for such Loan Amount in substantially the form
attached hereto as Exhibit A (each, a “Note” and collectively, the “Notes”).
Each Note issued pursuant to this Section 1.1 shall be convertible into capital
stock of the Company as provided in such Note.

 

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1.2 Issuance of Warrants. Subject to the terms of this Agreement, and in
consideration for the purchase by the Purchasers of the Notes and for other good
and valuable consideration, the Company shall issue to each Purchaser a warrant
to purchase shares of Common Stock of the Company. Subject to certain
adjustments provided in the warrant, each warrant issuable pursuant to this
Section 1.2 shall entitle the Purchaser to acquire the number of shares equal to
the quotient of (a) one-fifth ( 1/5th) of such Purchaser’s Loan Amount divided
by (b) the exercise price of each warrant, rounded up to the nearest share. The
warrants shall be in substantially the form attached hereto as Exhibit B (each,
a “Warrant” and collectively, the “Warrants”).

1.3 The Closing. The closing of the purchase and sale of the Notes and the
Warrants (the “Closing”) shall be held on or before October 14, 2008, or at such
earlier time as the Company and the Purchasers shall agree (the “Closing Date”),
provided, however if the Merger Agreement is terminated prior to the Closing
Date, then the Company and the Purchaser shall have no further rights or
obligations under this Agreement following such termination and this Agreement
shall be terminated without any further action by any of the parties. At the
Closing, each Purchaser shall loan the Company the Loan Amount set forth
opposite such Purchaser’s name on the Schedule of Purchasers under the heading
“Loan Amount.”

1.4 Delivery. At the Closing: (a) each Purchaser will deliver to the Company a
check or wire transfer funds in the amount of such Purchaser’s Loan Amount,
(b) the Company shall issue and deliver to each Purchaser a Note in favor of
such Purchaser payable in the principal amount of such Purchaser’s Loan Amount
and a Warrant as described in Section 1.2 hereof, and (c) the Company shall
execute and deliver such other documents as the Purchasers shall reasonably
require in order to consummate the transactions contemplated herein. In
connection with the Closing, the Company shall have filed with the Delaware
Secretary of State the Certificate of Amendment to the Restated Charter (as
defined below) in substantially the form attached hereto as Exhibit C (the
“Charter Amendment”).

 

2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

Except as set forth on a Schedule of Exceptions delivered by the Company to
Purchasers on the Effective Date, the Company represents and warrants to each
Purchaser as of the Effective Date as set forth below.

2.1 Organization, Good Standing and Qualification. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. The Company has all requisite corporate power and authority
to own and operate its properties and assets, to execute and deliver this
Agreement, the Notes and the Warrants (including the reservation of the shares
of capital stock issuable upon conversion of the Notes and the exercise of the
Warrants), to carry out the provisions of this Agreement, the Notes and the
Warrants, and to carry on its business as presently conducted and as presently
proposed to be conducted. The Company is duly qualified to do business and is in
good standing as a foreign corporation in all jurisdictions in which the nature
of its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the Company or its business.

 

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2.2 Subsidiaries. The Company does not own or control any equity security or
other interest of any other corporation, partnership, limited liability company
or other business entity. The Company is not a participant in any joint venture,
partnership, limited liability company or similar arrangement. Since its
inception, the Company has not consolidated or merged with, acquired all or
substantially all of the assets of, or acquired the stock of or any interest in
any corporation, partnership, limited liability company or other business
entity.

2.3 Capitalization; Voting Rights.

(a) The authorized capital stock of the Company, immediately prior to the
Effective Date, consists of (i) 26,000,000 shares of Common Stock, par value
$0.001 per share, 5,713,818 shares of which are issued and outstanding, and
(ii) 15,734,218 shares of Preferred Stock, par value $0.001 per share,
(1) 9,222,257 shares of which are designated Series A Preferred Stock, all of
which are issued and outstanding, (2) 3,720,692 shares of which are designated
as Series B-1 Preferred Stock, 3,688,902 of which are issued and outstanding,
and (3) 2,791,269 shares of which are designated as Series B-2 Preferred Stock
(together with the Series A Preferred Stock, the “Preferred Stock”), 2,766,677
of which are issued and outstanding.

(b) Under the Company’s 2004 Stock Incentive Plan (as heretofore amended, the
“Plan”), immediately prior to the Effective Date, (i) 600,000 shares of Common
Stock have been issued pursuant to restricted stock purchase agreements and
1,665,296 shares of Common Stock have been issued pursuant to the exercise of
outstanding options, (ii) options to purchase 3,385,351 shares of Common Stock
have been granted and are currently outstanding as listed on Exhibit D, and
(iii) 705,903 shares of Common Stock remain available for future issuance to
officers, directors, employees and consultants of the Company.

(c) Other than the shares reserved for issuance under the Plan, and except as
may be granted pursuant to this Agreement, the Notes and the Warrants, and as
set forth on the Schedule of Exceptions, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or agreements of any kind for the
purchase or acquisition from the Company of any of its securities.

(d) All issued and outstanding shares of the Company’s Common Stock and
Preferred Stock (i) have been duly authorized and validly issued to the persons
listed on Exhibit D hereto and are fully paid and nonassessable, (ii) were
issued in compliance with all applicable state and federal laws concerning the
issuance of securities, and (iii) are subject to a right of first refusal in
favor of the Company upon transfer.

(e) The shares of capital stock issuable upon conversion of the Notes and
exercise of the Warrants have been duly and validly reserved for issuance. When
issued in compliance with the provisions of the Notes or the Warrants and the
Company’s Second Amended and Restated Certificate of Incorporation, as amended
to date (the “Restated Charter”), the shares of capital stock issuable upon
conversion of the Notes or exercise of the Warrants, as applicable, will be
validly issued, fully paid and nonassessable, and will be free of any liens or

 

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encumbrances other than (i) liens and encumbrances created by or imposed upon
the Purchasers or (ii) as otherwise set forth in the Amended and Restated
Investor Rights Agreement dated May 31, 2007 among the Company and certain
stockholders of the Company (the “Investor Rights Agreement”), the Amended and
Restated Right of First Refusal and Co-Sale Agreement dated May 31, 2007 among
the Company and certain stockholders of the Company (the “ROFR and Co-Sale
Agreement”), and the Amended and Restated Voting Agreement dated May 31, 2007
among the Company and certain stockholders of the Company (the “Voting
Agreement”, and together with the Investor Rights Agreement and the ROFR and
Co-Sale Agreement, the “Company Agreements”); provided, however, that such
shares of capital stock may be subject to restrictions on transfer under state
and/or federal securities laws. The sale of the Notes and the Warrants and the
subsequent conversion of the Notes and exercise of the Warrants into shares of
capital stock of the Company are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.

(f) Except as otherwise noted on the Schedule of Exceptions, all options granted
as of the Effective Date vest as follows: 25% of the shares vest one year
following the vesting commencement date, with the remaining 75% vesting in equal
quarterly installments over the next three years. Except as set forth on the
Schedule of Exceptions, no stock plan, stock purchase, stock option or other
agreement or understanding between the Company and any holder of any equity
securities or rights to purchase equity securities provides for acceleration or
other changes in the vesting provisions or other terms of such agreement or
understanding as the result of (i) termination of employment or consulting
services (whether actual or constructive); (ii) any merger, consolidated sale of
stock or assets, change in control or any other transaction(s) by the Company;
or (iii) the occurrence of any other event or combination of events.

(g) All outstanding shares of Common Stock and Preferred Stock, and all shares
of Common Stock and Preferred Stock issuable upon the exercise or conversion of
outstanding options, warrants or other exercisable or convertible securities are
subject to a market standoff or “lockup” agreement of not less than 180 days
following the Company’s initial public offering.

2.4 Authorization; Binding Obligations. All corporate action on the part of the
Company, its officers, directors and stockholders necessary for the
authorization of this Agreement and the Notes, the performance of all
obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Notes and the Warrants
pursuant hereto (and the reservation of the shares of capital stock issuable
upon conversion of the Notes and exercise of the Warrants) pursuant to the
Restated Charter has been taken. The Agreement, the Notes and the Warrants, when
executed and delivered, will be valid and binding obligations of the Company
enforceable in accordance with their terms, except (a) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application affecting enforcement of creditors’ rights, and (b) general
principles of equity that restrict the availability of equitable remedies.

2.5 Financial Statements. The Company has made available to each Purchaser its
audited balance sheet as of December 31, 2007, an audited statement of income
and cash flows for the twelve months ending December 31, 2007, an unaudited
balance sheet as of June 30, 2008

 

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and an unaudited statement of income and cash flows for the year to date ending
June 30, 2008 (collectively, the “Financial Statements”). The Financial
Statements present fairly the financial condition and position of the Company as
of their respective dates.

2.6 Liabilities. The Company has no material liabilities and, to the best of its
knowledge no material contingent liabilities, not disclosed in the Financial
Statements, except current liabilities incurred in the ordinary course of
business which have not been, either in any individual case or in the aggregate,
materially adverse.

2.7 Agreements; Action.

(a) Except for agreements explicitly contemplated hereby and agreements between
the Company and its employees with respect to the sale of the Company’s
outstanding Common Stock, there are no agreements, understandings or proposed
transactions between the Company and any of its officers, directors, employees,
affiliates or any affiliate thereof.

(b) There are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which the Company is a
party or to its knowledge by which it is bound which may involve (i) future
obligations (contingent or otherwise) of, or payments to, the Company in excess
of $50,000, or (ii) the transfer or license of any patent, copyright, trade
secret or other proprietary right to or from the Company (other than licenses by
the Company of “off the shelf” or other standard products), or (iii) provisions
restricting the development, manufacture or distribution of the Company’s
products or services, or (iv) indemnification by the Company with respect to
infringements of proprietary rights.

(c) The Company has not (i) accrued, declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred or guaranteed any indebtedness for money
borrowed or any other liabilities (other than trade payables incurred in the
ordinary course of business or as disclosed in the Financial Statements)
individually in excess of $10,000 or, in the case of indebtedness and/or
liabilities individually less than $10,000, in excess of $25,000 in the
aggregate, (iii) made any loans or advances to any person, other than ordinary
advances for travel expenses, or (iv) sold, exchanged or otherwise disposed of
any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.

(d) For the purposes of subsections (b) and (c) above, all indebtedness,
liabilities, agreements, understandings, instruments, contracts and proposed
transactions involving the same person or entity (including persons or entities
the Company has reason to believe are affiliated therewith) shall be aggregated
for the purpose of meeting the individual minimum dollar amounts of such
subsections.

(e) The Company has not engaged in the past three months in any discussion
(i) with any representative of any other business or businesses regarding the
consolidation or merger of the Company with or into any such other business or
businesses, (ii) with any corporation, partnership, limited liability company,
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the

 

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Company, or a transaction or series of related transactions in which more than
50% of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up, of the
Company.

2.8 Obligations to Related Parties. There are no obligations of the Company to
officers, directors, stockholders, or employees of the Company other than
(a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). None of the officers, directors or, to the best of
the Company’s knowledge, key employees or stockholders of the Company, or any
members of their immediate families, is indebted to the Company or has any
direct or indirect ownership interest in any firm or corporation with which the
Company is affiliated or with which the Company has a business relationship, or
any firm or corporation that competes with the Company, other than (i) passive
investments in publicly traded companies (representing less than 1% of such
company) which may compete with the Company and (ii) investments by venture
capital funds with which directors of the Company may be affiliated and service
as a board member of a company in connection therewith due to a person’s
affiliation with a venture capital fund or similar institutional investor in
such company. No officer, director or stockholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company (other than such contracts as relate to any such
person’s ownership of capital stock or other securities of the Company).

2.9 Changes. Since June 30, 2008, there has not been to the Company’s knowledge:

(a) Any change in the assets, liabilities, financial condition, prospects or
operations of the Company from that reflected in the Financial Statements, other
than changes in the ordinary course of business, none of which individually or
in the aggregate has had or would reasonably be expected to have a material
adverse effect on such assets, liabilities, financial condition, prospects or
operations of the Company;

(b) Any resignation or termination of any officer, key employee or group of
employees of the Company;

(c) Any material change, except in the ordinary course of business, in the
contingent obligations of the Company by way of guaranty, endorsement,
indemnity, warranty or otherwise;

(d) Any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the properties, business or prospects or
financial condition of the Company;

(e) Any waiver by the Company of a valuable right or of a material debt owed to
it;

(f) Any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;

 

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(g) Any labor organization activity related to the Company;

(h) Any sale, assignment, or exclusive license or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;

(i) Any change in any material agreement to which the Company is a party or by
which it is bound which materially and adversely affects the business, assets,
liabilities, financial condition, operations or prospects of the Company;

(j) Any other event or condition of any character that, either individually or
cumulatively, has materially and adversely affected the business, assets,
liabilities, financial condition, prospects or operations of the Company; or

(k) Any arrangement or commitment by the Company to do any of the acts described
in subsection (a) through (j) above.

2.10 Title to Properties and Assets; Liens, Etc. The Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, and good title to its leasehold estates, in each case subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and
(c) those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties owned,
leased or used by the Company are in good operating condition and repair and are
reasonably fit and usable for the purposes for which they are being used.

2.11 Intellectual Property.

(a) The Company owns or possesses sufficient legal rights to all trademarks,
service marks, trade names, copyrights, licenses, information and other
proprietary rights and processes necessary for its business as now conducted and
as presently proposed to be conducted, without any infringement of the rights of
others. To the Company’s knowledge, the Company owns or possesses sufficient
legal rights to all patents and trade secrets necessary for its business as now
conducted and as presently proposed to be conducted, without any infringement of
the rights of others. There are no outstanding options, licenses or agreements
of any kind relating to the foregoing proprietary rights, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of “off the shelf” or standard products. To the Company’s
knowledge, no claims are currently being asserted against the Company, nor are
there any claims threatened in writing, by any third party challenging or
questioning the Company’s right to use any of the patents, trademarks, service
marks, trade names, copyrights, trade secrets, information or other proprietary
rights and processes owned or used by the Company or the validity or
effectiveness of any license or similar agreement with respect thereto.

 

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(b) No product or service marketed or sold (or proposed to be marketed or sold)
by the Company violates or will violate any license or infringe any trademarks,
service marks, trade names, copyrights or other proprietary rights of any other
person or entity. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as presently proposed to
be conducted, would violate any of the trademarks, service marks, trade names,
copyrights or other proprietary rights of any other person or entity. To the
Company’s knowledge, no product or service marketed or sold (or proposed to be
marketed or sold) by the Company violates or will violate any patents or trade
secrets of any other person or entity. The Company has not received any
communications alleging that the Company has violated or, by conducting its
business as presently proposed to be conducted, would violate any of the patents
or trade secrets of any other person or entity.

(c) The Company is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company’s business as proposed to be conducted.
Each former and current employee, officer and consultant of the Company has
executed a proprietary information and inventions agreement in the forms
delivered to the Purchasers’ counsel. No former and current employee, officer or
consultant of the Company has excluded works or inventions made prior to his or
her employment with the Company from his or her assignment of inventions
pursuant to such employee, officer or consultant’s proprietary information and
inventions agreement. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been assigned to the Company.

2.12 Compliance with Other Instruments. The Company is not in violation or
default of any term of its Restated Charter or its bylaws, each as amended. The
Company is not in violation of any provision of any mortgage, indenture,
contract, lease, agreement, instrument or contract to which it is party or by
which it is bound or of any judgment, decree, order or writ, other than any such
violation that would not have a material adverse effect on the Company. The
execution, delivery, and performance of and compliance with this Agreement, the
Notes and the Warrants, and the issuance and sale of the Notes, the Warrants and
the shares of capital stock issuable upon conversion of the Notes and the
exercise of the Warrants pursuant hereto and the Restated Charter, will not,
with or without the passage of time or giving of notice, result in any such
violations, or be in conflict with or constitute a default under any such term
or provision, or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company or the
suspension, revocation, impairment, forfeiture or nonrenewal of any permit,
license, authorization or approval applicable to the Company, its business or
operations or any of its assets or properties. To the Company’s knowledge, the
Company has avoided every condition, and has not performed any act, the
occurrence of which would result in the Company’s loss of any right granted
under any license, distribution agreement or other agreement required to be
disclosed on the Schedule of Exceptions.

2.13 Litigation. There is no action, suit, proceeding or investigation pending
or, to the Company’s knowledge, currently threatened against the Company that
would reasonably be

 

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expected to result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of the
Company or that questions the validity of this Agreement, the Notes or the
Warrants or the right of the Company to enter into this Agreement, the Notes or
the Warrants, or to consummate the transactions contemplated hereby or thereby,
nor is the Company aware that there is any basis for any of the foregoing. The
foregoing includes, without limitation, actions pending or, to the Company’s
knowledge, threatened or any basis therefor known by the Company involving the
prior employment of any of the Company’s employees, their use in connection with
the Company’s business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party to, or to the Company’s knowledge
subject to, the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.

2.14 Tax Returns and Payments. The Company is and always has been a subchapter C
corporation. The Company has timely filed all tax returns (federal, state and
local) required to be filed by it. All taxes shown to be due and payable on such
returns, any assessments imposed, and to the Company’s knowledge all other taxes
due and payable by the Company on or before the Effective Date, have been paid
or will be paid prior to the time they become delinquent. The Company has not
been advised (a) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (b) of any deficiency in assessment
or proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.

2.15 Employees. The Company has no collective bargaining agreements with any of
its employees. There is no labor union organizing activity pending or, to the
Company’s knowledge, threatened with respect to the Company. The Company is not
a party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement. No
employee of the Company has been granted the right to continued employment by
the Company or to any material compensation following termination of employment
with the Company. To the Company’s knowledge, no employee of the Company, nor
any consultant with whom the Company has contracted, is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company; and to the Company’s knowledge the continued
employment by the Company of its present employees, and the performance of the
Company’s contracts with its independent contractors, will not result in any
such violation. The Company has not received any notice alleging that any such
violation has occurred. The Company is not aware that any officer, key employee
or group of employees intends to terminate his, her or their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any officer, key employee or group of employees. Each former
employee of the Company whose employment was terminated by the Company has
entered into an agreement with the Company providing for the full release of any
claims against the Company or any related party arising out of such employment.
There are no actions pending, or to the Company’s knowledge, threatened, by any
former or current employee concerning such person’s employment by the Company.

 

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2.16 Obligations of Management. Each officer and key employee of the Company is
currently devoting substantially all of his or her business time to the conduct
of the business of the Company. The Company is not aware that any officer or key
employee of the Company is planning to work less than full time at the Company
in the future. No officer or key employee is currently working or, to the
Company’s knowledge, plans to work for a competitive enterprise, whether or not
such officer or key employee is or will be compensated by such enterprise.

2.17 Registration Rights and Voting Rights. Except as required pursuant to the
Investor Rights Agreement, the Company is presently not under any obligation,
and has not granted any rights, to register under the Securities Act of 1933, as
amended (the “Securities Act”), any of the Company’s presently outstanding
securities or any of its securities that may hereafter be issued. To the
Company’s knowledge, except the Voting Agreement, no stockholder of the Company
has entered into any agreement with respect to the voting of equity securities
of the Company.

2.18 Compliance with Laws; Permits. To its knowledge, the Company is not in
violation of any applicable statute, rule, regulation, order or restriction of
any domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties, which
violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement or the
issuance of the Notes or the shares of capital stock issuable upon conversion of
the Notes, except such as have been duly and validly obtained or filed, or with
respect to any filings that must be made after the Effective Date, as will be
filed in a timely manner. The Company has all franchises, permits, licenses and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, assets, properties, prospects or financial condition of the Company
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted.

2.19 Environmental and Safety Laws. To its knowledge, the Company is not in
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and to its knowledge, no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation. No Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Company or, to the Company’s
knowledge, by any other person or entity on any property owned, leased or used
by the Company. For the purposes of the preceding sentence, “Hazardous
Materials” shall mean (a) materials which are listed or otherwise defined as
“hazardous” or “toxic” under any applicable local, state, federal and/or foreign
laws and regulations that govern the existence and/or remedy of contamination on
property, the protection of the environment from contamination, the control of
hazardous wastes, or other activities involving hazardous substances, including
building materials, or (b) any petroleum products or nuclear materials.

 

10

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2.20 Offering Valid. Assuming the accuracy of the representations and warranties
of Purchasers contained in Section 3.2 hereof, the offer, sale and issuance of
the Notes, the Warrants and the shares of the Company’s capital stock issuable
upon conversion of the Notes and exercise of the Warrants will be exempt from
the registration requirements of the Securities Act, and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws. Neither the Company nor any agent on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Notes or Warrants to any person or persons
so as to bring the sale of such Notes or Warrants by the Company within the
registration provisions of the Securities Act or any state securities laws.

2.21 Full Disclosure. The Company has provided Purchasers with all information
requested by the Purchasers in connection with their decision to purchase the
Notes and the Warrants. To the Company’s knowledge after due inquiry, neither
this Agreement, the exhibits hereto, the Notes, the Warrants nor any other
document delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or with the transactions contemplated hereby, contain any
untrue statement of a material fact nor, to the Company’s knowledge after due
inquiry, omit to state a material fact necessary in order to make the statements
contained herein or therein not misleading. Notwithstanding the foregoing, the
documents provided to the Purchasers describing the Company’s business were
prepared by the management of the Company in a good faith effort to describe the
Company’s presently proposed business and products and the markets therefore.
The assumptions applied in preparing these documents appeared reasonable to
management as of the date thereof; however, there is no assurance that these
assumptions will prove to be valid or that the objectives set forth in these
documents will be achieved.

2.22 Minute Books. The minute books of the Company made available to Purchasers
document all meetings of directors and stockholders since the time of
incorporation.

2.23 Section 83(b) Elections. To the Company’s knowledge, all elections and
notices permitted by Section 83(b) of the Internal Revenue Code of 1986, as
amended, (the “Code”) and any analogous provisions of applicable state tax laws
have been timely filed by all employees who have purchased shares of the
Company’s Common Stock under agreements that provide for the vesting of such
shares.

2.24 Insurance. The Company has or will obtain promptly following the Effective
Date general commercial, product liability, fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.

2.25 Executive Officers. To the Company’s knowledge, no executive officer or
person nominated to become an executive officer of the Company (a) has been
convicted in a criminal proceeding or is a named subject of a pending criminal
proceeding (excluding minor traffic violations) or (b) is or has been subject to
any judgment or order of, the subject of any pending civil or administrative
action by the Securities and Exchange Commission or any self-regulatory
organization.

 

11

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2.26 Qualified Small Business. The Company is a “qualified small business”
within the meaning of Section 1202(d) of the Code and of the date hereof and the
shares of the Company’s capital stock issuable upon conversion of the Notes and
exercise of the Warrants should qualify as “qualified small business stock” as
defined in Section 1202(c) of the Code as of the date hereof. As of the date
hereof, the Company meets the “active business requirement” of Section 1202(e)
of the Code, and it has made no “significant redemptions” within the meaning of
Section 1202(c)(3)(B) of the Code.

2.27 Sudanese Investments. The Company and each of its subsidiaries does not,
directly or indirectly, own or control any property or assets located in the
Republic of the Sudan or transact any commercial business in the Republic of the
Sudan.

 

3. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.

Each Purchaser hereby represents and warrants to the Company, severally and not
jointly, as follows (provided that such representations and warranties do not
lessen or obviate the representations and warranties of the Company set forth in
this Agreement):

3.1 Requisite Power and Authority. Purchaser has all necessary power and
authority to execute and deliver this Agreement and to carry out its provisions.
All action on Purchaser’s part required for the lawful execution and delivery of
this Agreement has been taken. Upon its execution and delivery, this Agreement
will be a valid and binding obligation of Purchaser, enforceable in accordance
with its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors’ rights, and (b) as limited by general principles of
equity that restrict the availability of equitable remedies.

3.2 Investment Representations. Purchaser understands that none of the Notes,
the Warrants or the shares of capital stock issuable upon conversion of the
Notes or exercise of the Warrants have been registered under the Securities Act.
Purchaser also understands that the Notes and Warrants are being offered and
sold pursuant to an exemption from registration contained in the Securities Act
based in part upon Purchaser’s representations contained in the Agreement.
Purchaser hereby represents and warrants as follows:

(a) Purchaser Bears Economic Risk. Purchaser has substantial experience in
evaluating and investing in private placement transactions of securities in
companies similar to the Company so that it is capable of evaluating the merits
and risks of its investment in the Company and has the capacity to protect its
own interests. Purchaser must bear the economic risk of this investment
indefinitely unless the Notes, the Warrants or the shares of capital stock
issuable upon conversion of the Notes or exercise of the Warrants are registered
pursuant to the Securities Act, or an exemption from registration is available.
Purchaser understands that the Company has no present intention of registering
the Notes, the Warrants, the shares of capital stock issuable upon conversion of
the Notes or exercise of the Warrants or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Notes, the Warrants or shares of capital stock issuable upon conversion
of the Notes or exercise of the Warrants under the circumstances, in the amounts
or at the times Purchaser might propose.

 

12

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(b) Acquisition for Own Account. Purchaser is acquiring the Notes, the Warrants
and (and, if issued, the shares of capital stock issuable upon conversion of the
Notes or exercise of the Warrants) for Purchaser’s own account for investment
only, and not with a view towards their distribution.

(c) Purchaser Can Protect Its Interest. Purchaser represents that by reason of
its, or of its management’s, business or financial experience, Purchaser has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement. Further, Purchaser is aware of no publication of
any advertisement in connection with the transactions contemplated in the
Agreement.

(d) Accredited Investor. Purchaser represents that it is an accredited investor
within the meaning of Regulation D under the Securities Act.

(e) Company Information. Purchaser has received and read the Financial
Statements and other documents provided by Company concerning its business, and
has had an opportunity to discuss the Company’s business, management and
financial affairs with directors, officers and management of the Company and has
had the opportunity to review the Company’s operations and facilities. Purchaser
has also had the opportunity to ask questions of and receive answers from, the
Company and its management regarding the terms and conditions of this
investment.

(f) Rule 144. Purchaser acknowledges and agrees that the Notes, the Warrants and
the shares of capital stock issuable upon conversion of the Notes and exercise
of the Warrants, if issued, are “restricted securities” as defined in Rule 144
promulgated under the Securities Act as in effect from time to time and must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Purchaser has been
advised or is aware of the provisions of Rule 144, which permits limited resale
of shares purchased in a private placement subject to the satisfaction of
certain conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring following the
required holding period under Rule 144 and the number of shares being sold
during any three month period not exceeding specified limitations.

(g) Residence. If Purchaser is an individual, then Purchaser resides in the
state or province identified in the address of Purchaser set forth on Exhibit A;
if Purchaser is a partnership, corporation, limited liability company or other
entity, then the office or offices of Purchaser in which its investment decision
was made is located at the address or addresses of Purchaser set forth on
Exhibit A (except as any Purchaser shall otherwise notify the Company in writing
prior to the Closing).

(h) Foreign Investors. If Purchaser is not a United States person (as defined by
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended), Purchaser
hereby represents that it has satisfied itself as to the full observance of the
laws of its jurisdiction in

 

13

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connection with any invitation to subscribe for the Notes or the Warrants or any
use of this Agreement, including (i) the legal requirements within its
jurisdiction for the purchase of the Notes and the Warrants, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any government or other
consents that may need to be obtained, and (iv) the income tax and other tax
consequences, if any, that may be relevant to the purchase, holding, redemption,
sale or transfer of the Notes, the Warrants and the shares of capital stock
issuable upon conversion of the Notes or exercise of the Warrants. The Company’s
offer and sale and Purchaser’s subscription and payment for and continued
beneficial ownership of the Notes, the Warrants and if issued, the shares of
capital stock issuable upon conversion of the Notes or exercise of the Warrants,
will not violate any applicable securities or other laws of Purchaser’s
jurisdiction.

3.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that, if
issued, the shares of capital stock issuable upon conversion of the Notes and
exercise of the Warrants are subject to restrictions on transfer as set forth in
the Company Agreements.

 

4. COVENANTS.

4.1 Waiver of Right of First Refusal. The Company is required to provide each
Investor (as defined in the Investor Rights Agreement) with fifteen (15) days
prior written notice before it sells its Equity Securities (as defined in the
Investor Rights Agreement) in accordance with Section 4 of the Investor Rights
Agreement. Each Purchaser hereby waives its right to purchase its pro rata share
of the Notes and the Warrants, and, in connection with such waiver, hereby
waives the fifteen (15) day notice period to exercise such right on behalf of
itself and all of the other Investors. The waiver contained in this Section 4.1
shall be in connection with (a) the issuance and sale of the Notes and Warrants
pursuant to this Agreement, and (b) the issuance of any shares of capital stock
upon the conversion of the Notes and exercise of the Warrants, but not with
respect to any future issuances of securities by the Company.

 

5. MISCELLANEOUS.

5.1 Binding Agreement. The terms and conditions of this Agreement shall inure to
the benefit of and be binding upon the respective successors and assigns of the
parties. Nothing in this Agreement, express or implied, is intended to confer
upon any third party any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

5.2 Governing Law. This Agreement shall be governed by and construed under the
laws of the State of Colorado in all respects as such laws are applied to
agreements among Colorado residents entered into and performed entirely within
Colorado, without giving effect to conflict of law principles thereof. The
parties agree that any action brought by any party under or in relation to this
Agreement, including without limitation to interpret or enforce any provision of
this Agreement, shall be brought in, and each party agrees to and does hereby
submit to the jurisdiction and venue of, any state or federal court located in
the County of Denver, Colorado.

5.3 Survival. The representations, warranties, covenants and agreements made
herein shall survive the closing of the transactions contemplated hereby. All
statements as to factual

 

14

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matters contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument. The
representations, warranties, covenants and obligations of the Company, and the
rights and remedies that may be exercised by the Purchasers, shall not be
limited or otherwise affected by or as a result of any information furnished to,
or any investigation made by or knowledge of, any of the Purchasers or any of
their representatives.

5.4 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

5.5 Titles and Subtitles. The titles and subtitles used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.

5.6 Notices. Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given upon personal delivery or
upon deposit with the United States Post Office or Federal Express, postage
prepaid, addressed (a) to the Company at ARCA biopharma, Inc., 8001 Arista
Place, Suite 200, Broomfield, CO 80021, Attention: Chief Executive Officer and
General Counsel, or (b) to a Purchaser at its address shown on the Schedule of
Purchasers, or at such other address as such party may designate by ten
(10) days advance written notice to the other party.

5.7 Modification; Waiver. No modification or waiver of any provision of this
Agreement or consent to departure therefrom shall be effective unless in writing
and approved by the Company, a majority of the Principal Series Preferred
Stockholders (as such term is defined in the Company’s Second Amended and
Restated Certificate of Incorporation) and, for so long as the Merger Agreement
remains in full force and effect, Parent.

5.8 Entire Agreement. This Agreement and the Schedules and Exhibits hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein.

5.9 Expenses. Each party shall pay all costs and expenses that it incurs with
respect to the negotiation, execution, delivery and performance of the
Agreement.

5.10 Exculpation Among Purchasers. Each Purchaser acknowledges that it is not
relying upon any person, firm, or corporation, other than the Company and its
officers and directors, in making its investment or decision to invest in the
Company. Each Purchaser agrees that no Purchaser nor the respective controlling
persons, officers, directors, partners, agents, or employees of any Purchaser
shall be liable to any other Purchaser for any action heretofore taken or
omitted to be taken by any of them in connection with the purchase of the Notes
and the Warrants.

5.11 Third Party Beneficiary Rights. No provisions of this Agreement are
intended, nor shall be interpreted, to provide or create any third party
beneficiary rights or any other rights

 

15

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of any kind in any client, customer, employee, affiliate, stockholder, partner
or any party hereto or any other person unless specifically provided otherwise
herein and, except as so provided, all provisions hereof shall be personal
solely between the parties to this Agreement; except that for so long as the
Merger Agreement remains in full force and effect, this Agreement is intended to
benefit Parent and Parent shall have the right to enforce as a third party
beneficiary the rights of the Company and obligations of the Purchasers under
this Agreement.

5.12 Pronouns. All pronouns contained herein, and any variations thereof, shall
be deemed to refer to the masculine, feminine or neutral, singular or plural, as
to the identity of the parties hereto may require.

5.13 Remedies. The Company and the Purchasers acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the Company shall be entitled
to an injunction or injunctions to prevent or cure breaches of the provisions of
this Agreement by any Purchaser and to enforce specifically the terms and
provisions hereof, this being in addition to any other remedy to which the
Company may be entitled by law or equity.

[Signature pages follow]

 

16

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IN WITNESS WHEREOF, the parties have executed this NOTE AND WARRANT PURCHASE
AGREEMENT as of the date first written above.

 

COMPANY:     PURCHASERS: ARCA BIOPHARMA, INC.     SKYLINE VENTURE PARTNERS
QUALIFIED PURCHASER FUND IV, L.P. Signature:  

/s/ Richard B. Brewer

    By:   Skyline Venture Management IV, LLC         Its General Partner
Print Name:   Richard B. Brewer       Title:   President and Chief Executive
Officer             By:  

/s/ John G. Freund

        John G Freund, Managing Director       INTERWEST PARTNERS IX, LP      
By:   InterWest Management Partners IX, LLC       By:  

/s/ Linda Grais

        Linda Grais, Venture Member       ATLAS VENTURE FUND VII, L.P.       By:
 

Atlas Venture Associates VII, L.P.

its General Partner

      By:  

Atlas Venture Associates VII, Inc.

its General Partner

      Signature:  

/s/ Jeanne Henry Larkin

      Print Name:  

Jeanne Henry Larkin

      Title:  

Vice President

NOTE AND WARRANT PURCHASE AGREEMENT

SIGNATURE PAGE

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

      BOULDER VENTURES IV, L.P.       By:    BV Partners IV, L.L.C., its General
Partner       Signature:  

/s/ Kyle Lefkoff

      Print Name:  

Kyle Lefkoff

      Title:  

Managing Member

      BOULDER VENTURES IV (ANNEX), L.P.       By:    BV Partners IV, L.L.C., its
General Partner       Signature:  

/s/ Kyle Lefkoff

      Print Name:  

Kyle Lefkoff

      Title:  

Managing Member

      THE PEIERLS FOUNDATION, INC.       By:  

The Peierls Foundation, Inc.

      Signature:  

/s/ E. Jeffrey Peierls

      Print Name:  

E. Jeffrey Peierls

      Title:  

President

NOTE AND WARRANT PURCHASE AGREEMENT

SIGNATURE PAGE

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

SCHEDULE OF PURCHASERS

 

NAME AND ADDRESS

   LOAN AMOUNT

SKYLINE VENTURE PARTNERS QUALIFIED

PURCHASER FUND IV, L.P.

525 University Ave

Suite 520

Palo Alto, CA 94301

Attention: Kerry Kenny

Facsimile: (650) 329-1090

   $ 1,825,696

INTERWEST PARTNERS IX, LP

2710 Sand Hill Road

Second Floor

Menlo Park, CA 94025

Attention: Linda Grais

Facsimile: (650) 854-4706

   $ 1,461,872

ATLAS VENTURE FUND VII, L.P.

890 Winter Street, Suite 320

Waltham, MA 02451

Attention: General Counsel

Facsimile: (781) 622-1701

   $ 3,674,630

BOULDER VENTURES IV, L.P.

1900 Ninth Street, Suite 200

Boulder, CO 80302

Attention: Kyle Lefkoff

Facsimile: (303) 444-0267

   $ 92,393

BOULDER VENTURES IV (ANNEX), L.P.

1900 Ninth Street, Suite 200

Boulder, CO 80302

Attention: Kyle Lefkoff

Facsimile: (303) 444-0267

   $ 1,395,409

THE PEIERLS FOUNDATION, INC.

c/o U.S. Trust Company of N.Y.

114 West 47th Street

New York, NY 10036

Attention: Mr. John Kennedy

   $ 300,000

TOTAL

   $ 8,750,000.00

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

EXHIBIT A

FORM OF CONVERTIBLE PROMISSORY NOTE

[Omitted]

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

EXHIBIT B

FORM OF WARRANT

[Omitted]

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

EXHIBIT C

CHARTER AMENDMENT

[Omitted]

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

EXHIBIT D

CAPITALIZATION

[Omitted]