Exhibit 10.3

 

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (the “Agreement”) is made and entered into as of October
3, 2003, by and between NEKTAR THERAPEUTICS, a Delaware corporation (the
“Company”) and the entities set forth on Appendix I hereto (each a “Holder” and
collectively the “Holders”).

 

RECITALS

 

WHEREAS, the Holders currently hold beneficial interests in an aggregate of
$22,500,000 in principal amount of the Company’s 3.5% Convertible Subordinated
Notes due October 2007 (the “Prior Notes”);

 

WHEREAS, the Company has agreed to issue 3% Convertible Subordinated Notes due
June 2010 (the “New Notes”) in substantially the form set forth in the Indenture
(as defined below) to be dated as of the Closing Date (as defined below) by and
between the Company and J.P. Morgan Trust Company, National Association, as
trustee (the “Trustee”); and

 

WHEREAS, the Company and the Holders desire to exchange and cancel the Holders’
entire beneficial interest in the Prior Notes in consideration for the issuance
by the Company to the Holder of the New Notes (the “Exchange”).

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises, representations and warranties hereinafter set forth and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

1.             EXCHANGE.

 

1.1          Cancellation of Beneficial Interest in Prior Notes.  Upon and
subject to the terms of this Agreement, each Holder, severally and not jointly
hereby agrees, at the Closing (as defined below), to exchange, transfer, cancel
and assign all of its right, title, interest and beneficial interest in and to
that portion of the Prior Notes set forth opposite the name of such Holder on
Appendix I to the Company in exchange for the issuance of New Notes in the
principal amount set forth opposite the name of such Holder on Appendix I hereto
which in the aggregate amount as issued to all Holders shall equal $15,119,000. 
After the cancellation, the Holders shall have no further right, title, interest
or beneficial interest in the Prior Notes.

 

1.2          Purchase of New Notes.  Upon and subject to the terms of this
Agreement and in reliance of the representations and warranties set forth
herein, the Company hereby agrees to issue to the Holders, and the Holders
agree, severally and not jointly, to acquire from the Company, at the Closing,
New Notes in the aggregate principal amount of $15,119,000 in exchange for the
cancellation of the Holders’ beneficial interests in the Prior Notes as
described in Section 1.1 above.

 

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2.                                      CLOSING AND DELIVERY.

 

2.1          Closing.  Subject to the terms and conditions set forth herein, the
closing of the Exchange (the “Closing”) shall take place at 10:00 a.m. Pacific
Time on the date which is four (4) business days following the date of this
Agreement (the “Scheduled Closing Time”) at the offices of Cooley Godward LLP,
3175 Hanover Street, Palo Alto, CA 94304, or at such other time or place as
agreed to by the Company and the Holder (the “Closing Date”).

 

2.2          Delivery.

 

(a)           At the Closing, subject to the terms and conditions set forth
herein, the Company will deliver to the Trustee, against evidence of
cancellation of the Holders’ beneficial interests in the Prior Notes, one or
more permanent global securities (the “Global Notes”), registered in the name of
Cede & Co., as nominee for The Depository Trust Company (“DTC”).  The Holders’
beneficial interests in the New Notes will be shown on records maintained in
book-entry form by DTC and its participants.

 

(b)           At the Closing, subject to the terms and conditions hereof, each
Holder will cancel its beneficial interest in the Prior Notes and deliver to the
Company evidence that the such beneficial interest has been cancelled on records
maintained in book-entry form by DTC and its participants.

 

3.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  The Company
hereby represents and warrants to the Holders as of the date of this Agreement
and as of the Closing Date, as follows:

 

3.1          Organization, Good Standing and Qualification.  The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware.  The Company has all requisite corporate power
and authority to execute and deliver this Agreement, the Indenture, to be dated
as of the Closing Date, by and between the Company and the Trustee in
substantially the form set forth as Exhibit A hereto (the “Indenture”), the
Pledge Agreement, to be dated as of the Closing Date, by and between the Company
and J.P. Morgan Trust Company, National Association, as collateral agent (the
“Collateral Agent”) in the form set forth as Exhibit B hereto (the “Pledge
Agreement”), and the Resale Registration Rights Agreement, to be dated as of the
Closing Date, by and between the Company and the Holder in substantially the
form set forth as Exhibit C hereto (the “Rights Agreement”) (collectively, with
this Agreement and the New Notes, the “Operative Documents”), to issue the New
Notes in consideration for the exchange and cancellation of the Holders’
beneficial interests in the Prior Notes and the shares of common stock, par
value $0.0001 per share, of the Company (the “Common Stock”) issuable upon
conversion of the New Notes (the “Conversion Shares”) and to carry out the
provisions of the Operative Documents.

 

3.2          Concerning the Conversion Shares.  The Conversion Shares, which are
authorized on the date hereof, have been duly and validly authorized and
reserved for issuance upon conversion of the New Notes by all necessary
corporate action and are free of preemptive rights; all Conversion Shares, when
so issued and delivered upon such conversion in accordance with the terms of the
Indenture, will be duly and validly authorized and issued, fully paid and

 

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nonassessable and free and clear of all liens, encumbrances, equities or claims;
and the issuance of such Conversion Shares upon such conversion will not be
subject to the preemptive or other similar rights of any securityholder of the
Company.  The Company knows of no reason that the Conversion Shares will not be
eligible for listing on The Nasdaq National Market.

 

3.3          Compliance with Other Instruments.  The execution and delivery of
the Operative Documents by the Company and the issuance of the New Notes and the
proposed issuance of the Conversion Shares and the consummation of the
transactions contemplated hereby will not (x) conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
material default under, any indenture, mortgage, deed of trust, loan agreement
or other agreement or instrument to which the Company or any of its subsidiaries
is a party or by which it or any of them are bound or to which any of the
properties or assets of the Company or any subsidiary is subject, (y) result in
any violation of the provisions of the certificate of incorporation or bylaws of
the Company or any of its subsidiaries or (z) result in any violation of any
statute or any order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Company or any subsidiary or any of their
properties or assets and except (i) with respect to the transactions
contemplated by the Registration Rights Agreement or the Pledge Agreement, as
may be required under the Securities Act and the rules and regulations
promulgated thereunder and (ii) as required by the state securities or “blue
sky” laws, no consent, approval, authorization or order of, or filing or
registration with, any such court or governmental agency or body or the
stockholders of the Company is required for the execution, delivery and
performance of the Operative Documents by the Company, and the consummation of
the transactions contemplated hereby and thereby.

 

3.4          Authorization and Binding Obligations of the Agreement.  This
Agreement has been duly authorized, executed and delivered by the Company and
(assuming due authorization, execution and delivery by the Holders) constitutes
a legally valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, subject to general principles of equity and to limitations on
availability of equitable relief, including specific performance (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.

 

3.5          Authorization and Binding Obligation of the Indenture.  The
Indenture has been duly authorized by the Company, and when the Indenture is
duly executed and delivered by the Company (assuming due authorization,
execution and delivery of the Indenture by the Trustee) will constitute a
legally valid and binding agreement of the Company enforceable against the
Company in accordance with its terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other similar laws relating to or affecting creditors’ rights
generally, subject to general principles of equity and to limitations on
availability of equitable relief, including specific performance (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.

 

3.6          Authorization and Binding Obligation of the Pledge Agreement.  The
Pledge Agreement and the transactions contemplated thereby have been duly
authorized by the

 

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Company, and when the Pledge Agreement is duly executed and delivered by the
Company (assuming due authorization, execution and delivery of the Pledge
Agreement by the Collateral Agent) will constitute a legally valid and binding
agreement of the Company enforceable against the Company in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and other similar
laws relating to or affecting creditors’ rights generally, subject to general
principles of equity and to limitations on availability of equitable relief,
including specific performance (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing.

 

3.7          Authorization and Binding Obligation of the Rights Agreement.  The
Rights Agreement and the transactions contemplated thereby have been duly
authorized by the Company, and when the Rights Agreement is duly executed and
delivered by the Company (assuming due authorization, execution and delivery by
the Holders), it will constitute a legally valid and binding agreement of the
Company enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, subject to general principles of equity
and to limitations on availability of equitable relief, including specific
performance (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing, and except with respect to the
rights of indemnification and contribution thereunder, where enforcement thereof
may be limited by federal or state securities laws or the policies underlying
such laws.

 

3.8          Authorization and Binding Obligation of the New Notes.  The New
Notes have been duly authorized by the Company, and when the New Notes are
executed, authenticated and issued in accordance with the terms of the Indenture
and subject to the terms and conditions set forth herein delivered pursuant to
this Agreement at the Closing (assuming due authentication of the New Notes by
the Trustee), such New Notes will constitute legally valid and binding
obligations of the Company, entitled to the benefits of the Indenture and
enforceable against the Company in accordance with their terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other similar laws relating to or
affecting creditors’ rights generally, subject to general principles of equity
and to limitations on availability of equitable relief, including specific
performance (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.

 

3.9          Certain Securities Law Matters.  Assuming the accuracy of the
representations and warranties of the Holders contained in Section 4 hereof, the
issuance of the New Notes and the Conversion Shares in accordance with the terms
of the New Notes (collectively, the “Securities”) will be exempt from the
registration requirements of the Securities Act of 1933, as amended (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.

 

3.10        Absence of Certain Proceedings.  Except as disclosed in the reports
(the “SEC Reports”) filed by the Company with the Securities and Exchange
Commission (the “SEC”) pursuant to the Securities Exchange Act of 1934 (the
“Exchange Act”) there are no legal or governmental proceedings pending to which
the Company or any of its subsidiaries is a party or

 

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of which any of their respective properties or assets is the subject which, if
determined adversely to the Company might reasonably be expected to materially
and adversely affect the consummation of the transactions contemplated by the
Operative Documents or the performance by the Company of its obligations under
the Operative Documents and to the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities or, except as set forth
or contemplated in the SEC Reports, threatened by others.

 

3.11        No Event of Default.  No event has occurred nor has any circumstance
arisen which, had the New Notes been outstanding as of June 30, 2003, would
constitute a default or an Event of Default (as such term is defined in the
Indenture).

 

4.             REPRESENTATIONS AND WARRANTIES OF THE HOLDER.  Each Holder hereby
represents and warrants to the Company 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):

 

4.1          Requisite Power and Authority.  The Holder has all necessary power
and authority to to execute and deliver this Agreement carry out its
provisions.  All action on the Holder’s part required for the lawful execution
and delivery of this Agreement has been taken.  Upon execution and delivery,
this Agreement will be valid and binding obligations of the Holder, 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.

 

4.2          Investment Representations.  The Holder understands that the
Securities have not been registered under the Securities Act.  The Holder also
understands that the Securities are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
the Holder’s representations contained in the Agreement.  Each Holder, hereby
represents and warrants as follows:

 

(a)           The Holder Bears Economic Risk.  The Holder 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.  The Holder must bear the economic risk
of this investment indefinitely unless the Securities are registered pursuant to
the Securities Act, or an exemption from registration is available.  The Holder
understands that, except as provided in the Rights Agreement, the Company has no
intention of registering the Securities.  The Holder 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 the
Holder to transfer all or any portion of the Securities under the circumstances,
in the amounts or at the times the Holder might propose.

 

(b)           Acquisition for Own Account.  The Holder is acquiring the
Securities for the Holder’s own account for investment only, and not with a view
towards their distribution.

 

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

 

(d)           Qualified Institutional Buyer.  The Holder represents that it is a
qualified institutional buyer as defined in Rule 144A under the Securities Act.

 

(e)           Company Information.  The Holder 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.  The Holder 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.  The Holder acknowledges and agrees that the Securities
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.  The Holder 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 certain volume limitations.

 

(g)           Residence.  The office or offices of the Holder in which its
investment decision was made is located at the address or addresses of the
Holder set forth on the signature page.

 

(h)           Foreign Investors.  If the Holder is not a United States person
(as defined by Section 7701(a)(30) of the Internal Revenue Code of 1986, as
amended), the Holder hereby represents that it has satisfied itself as to the
full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the Securities or any use of this Agreement,
including (i) the legal requirements within its jurisdiction for the exchange of
the Securities for the Prior Notes, (ii) any foreign exchange restrictions
applicable to such exchange, (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 Securities.  The Exchange and the continued ownership by the Holder of the
Securities will not violate any applicable securities or other laws of the
Holder’s jurisdiction.

 

(i)            Transfer Restrictions.  The Holder acknowledges and agrees that
the Securities shall be subject to restrictions on transfer as set forth in the
Indenture.

 

4.3          Sole Ownership.  The Holder has all right, title and interest in
its beneficial interest in the Prior Notes, and has not endorsed, assigned,
sold, transferred, deposited under any agreement, hypothecated, pledged for any
bank or brokerage loan, or otherwise in any manner disposed of the Holder’s
beneficial interest in the Prior Notes or any interest therein.  No person

 

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or entity other than the Holder has any interest in the Holder’s beneficial
interest in the Prior Notes.

 

4.4          Non-Affiliate Status.  The Holder is not an “affiliate” (as that
term is defined under Rule 144(a) of the Securities Act and Rule 13e-3 of the
Exchange Act of the Company.  To the best of the Holder’s knowledge, the Holder
did not acquire its beneficial interest in the Prior Notes from an “affiliate”
of the Company.

 

4.5          Tax Advice.  The Holder has had the opportunity to review with its
own tax advisors the U.S. Federal, state, local and foreign tax consequences of
the Exchange and the transactions contemplated by this Agreement.  With respect
to such tax matters, the Holder has relied and relies solely on such advisors
and not on any statements or representations of the Company or any of its
agents, written or oral.  The Holder understands that it (and not the Company or
any of its agents) shall be responsible for its own tax liability that may arise
as a result of the Exchange and the transactions contemplated by this Agreement.

 

5.                                      CONDITIONS TO CLOSING.

 

5.1          Conditions to the Holder’s Obligations at the Closing.  Each
Holder’s obligations to exchange and cancel its beneficial interest in the Prior
Notes in exchange for the New Notes at the Closing are subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:

 

(a)           Representations and Warranties True; Performance of Obligations. 
The representations and warranties made by the Company contained in this
Agreement shall have been true and correct on the date of this Agreement and
shall be true and correct as of the Closing Date with the same force and effect
as if they had been made as of the Closing Date, and on or before the Closing
Date the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing.

 

(b)           No Legal Action.  On the Closing Date, no legal action, suit or
proceeding shall be pending or overtly threatened which seeks to restrain or
prohibit the transactions contemplated by this Agreement.

 

(c)           No Event of Default.  No event which, if the New Notes were
outstanding, would constitute an Event of Default under and as defined in the
Indenture or which, with the giving of notice or the passage of time, or both,
would constitute an Event of Default under and as defined in the Indenture shall
have occurred and be continuing.

 

(d)           Compliance Certificate.  The Company shall have delivered to the
Holders a Compliance Certificate, executed by an executive officer of the
Company, dated the Closing Date, to the effect that the conditions specified in
subsection (a), (b) and (c) of this Section 5.1 have been satisfied.

 

(e)           No Suspension of Trading. On the Closing Date (i) trading in
securities on the New York Stock Exchange, Inc., the American Stock Exchange,
Inc. or The Nasdaq National Market shall not have been suspended or materially
limited and (ii) a general

 

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moratorium on commercial banking activities in the State of New York shall not
have been declared by either federal or state authorities.

 

(f)            Legal Investment.  On the Closing Date, the issuance of the New
Notes and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which the Holders and the Company are
subject.

 

(g)           Indenture.  The Indenture shall have been duly executed and
delivered by the Company and the Trustee and the New Notes shall have been duly
executed and delivered by the Company and duly authenticated by the Trustee.

 

(h)           Pledge Agreement.  The Company and the Collateral Agent shall have
executed and delivered the Pledge Agreement and the Pledge Agreement shall be in
full force and effect.

 

(i)            Rights Agreement.  The Company shall have executed and delivered
the Rights Agreement and the Rights Agreement shall be in full force and effect.

 

5.2          Conditions to the Company’s Obligations at the Closing.  The
Company’s obligations to issue the New Notes at the Closing is subject to the
satisfaction, at or prior to the Closing Date, of the following conditions:

 

(a)           Representations and Warranties True; Performance of Obligations. 
The representations and warranties of each Holder contained in this Agreement
shall have been true and correct on the date of this Agreement and shall be true
and correct as of the Closing Date with the same force and effect as if they had
been made as of the Closing Date, and on or before the Closing Date each Holder
shall have performed all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing.

 

(b)           Evidence of Cancellation of Beneficial Interest in the Prior
Notes.  The Company shall have received confirmation to its reasonable
satisfaction that each Holder’s beneficial interest in the Prior Notes has been
cancelled.

 

(c)           No Legal Action.  On the Closing Date, no legal action, suit or
proceeding shall be pending or overtly threatened which seeks to restrain or
prohibit the transactions contemplated by this Agreement.

 

(d)           Legal Investment.  On the Closing Date, the issuance of the New
Notes and the proposed issuance of the Conversion Shares shall be legally
permitted by all laws and regulations to which the Holders and the Company are
subject.

 

(e)           Indenture and New Notes.  The Trustee shall have duly executed and
delivered the Indenture, and duly authenticated the New Notes.

 

(f)            Pledge Agreement.  The Collateral Agent shall have executed and
delivered the Pledge Agreement and the Pledge Agreement shall be in full force
and effect.

 

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(g)           Rights Agreement.  Each Holder shall have executed and delivered
the Rights Agreement and the Rights Agreement shall be in full force and effect.

 

(h)           No Suspension of Trading. On the Closing Date (i) trading in
securities on the New York Stock Exchange, Inc., the American Stock Exchange,
Inc. or The Nasdaq National Market shall not have been suspended or materially
limited and (ii) a general moratorium on commercial banking activities in the
State of New York shall not have been declared by either federal or state
authorities.

 

6.                                      COVENANTS OF THE PARTIES

 

6.1          Rule 144.  The parties agree that pursuant to Rule 144 promulgated
under the Securities Act (“Rule 144”), interpretations thereof by the SEC and
“no-action” letters from the staff of the SEC, the Holders should be entitled to
relate back (i.e., tack) the holding period of the New Notes and the Conversion
Shares to the holding period of the Prior Notes and, so long as (x) the
aggregate period during which the Prior Notes and the New Notes and the
Conversion Shares are held is at least two years and (y) at the time of
determination such Holder is not and has not for the preceding three months been
an “affiliate” (as such term is defined in Rule 144) of the Company, the New
Notes and the Conversion Shares may be sold pursuant to Rule 144(k) (the “Rule
144 Interpretation”).  The Company shall not, directly or indirectly, dispute or
otherwise interfere with any claim by the Holders that the holding period of the
New Notes and the Conversion Shares for purposes of Rule 144  tacks to the
holding period for the Prior Notes; provided, however, that nothing contained in
this Section 6.1 shall obligate the Company or its legal counsel to take a
position that is inconsistent with the provisions of applicable law or
regulations and the administrative and judicial interpretations thereof in
effect from time to time (collectively, the “Applicable Law”); nor shall the
covenants set forth in this Section 6.1 be construed as any representation or
warranty by the Company or to limit any Holder’s representations or warranties
to the effect that (A) the Rule 144 Interpretation is consistent with or does
not conflict with the Applicable Law, or (B) any Holder has demonstrated that
the Securities have been acquired with investment intent and not with a view
towards their distribution.  The parties agree and acknowledge that the
foregoing covenants shall in no way (A) limit the transfer restrictions to which
the Securities are subject as set forth in the Indenture; or (B) require the
Company to take any action to authorize the transfer of any Securities if a
Holder has not demonstrated to the Company’s reasonable satisfaction that the
Securities have been acquired with investment intent and not with a view towards
their distribution.

 

6.2          Best Efforts.  Each of the parties shall use its best efforts
timely to satisfy each of the conditions to the other party’s obligations set
forth in Section 5.1 or 5.2, as the case may be, of this Agreement on or before
the Closing Date.

 

6.3          Settlement of Interest on the Prior Notes.  Each of the parties
agree and acknowledge that the Holders are Holders of record of the Prior Notes
as of October 2, 2003 and consequently will receive a payment of interest due on
October 17, 2003 (the “Interest Payment Date”) with respect to the Prior Notes
held by such Holders (the “Interest Payment”).  The parties hereby agree that
the payment of the Interest Payment shall be in lieu of and deemed to satisfy
and obligation by the Company to pay accrued and unpaid interest on the Prior
Notes at the Closing and that the Company may deduct from any Interest Payment
paid to the Holders an

 

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amount equal to any interest on the Prior Notes deemed to accrue on the Prior
Notes or after the Closing Date.  In the event that any Holder shall receive an
Interest Payment which includes the payment of interest accrued on or after the
Closing Date (an “Excess Interest Payment”), such Holder shall immediately remit
to the Company in immediately available funds an amount equal to such Excess
Interest Payment.

 

7.                                      MISCELLANEOUS.

 

7.1          Governing Law.  This Agreement shall be governed by and construed
under the laws of the State of New York.

 

7.2          Survival.  The representations, warranties, covenants and
agreements made herein shall survive the closing of the transactions
contemplated hereby.  The representations, warranties, covenants and obligations
of the Company, and the rights and remedies that may be exercised by the
Holders, 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, the
Holders or any of their representatives.

 

7.3          Successors and Assigns.  Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding upon
the parties hereto and their respective successors, assigns, heirs, executors
and administrators.

 

7.4          Entire Agreement.  This Agreement and the other Operative Documents
delivered pursuant 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 oral or written
representations, warranties, covenants and agreements except as specifically set
forth herein and therein.  Each party expressly represents and warrants that it
is not relying on any oral or written representations, warranties, covenants or
agreements outside of the Operative Documents.

 

7.5          Severability.  In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

7.6          Amendment and Waiver.  This Agreement may be amended or modified
only upon the written consent of the Company and the Holders holding a majority
in interest of the Prior Notes.

 

7.7          Delays or Omissions.  It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance  by another party under this Agreement shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring.  It is
further agreed that any waiver, permit, consent or approval of any kind or
character on any party’s part of any breach, default or noncompliance under this
Agreement or any waiver on such party’s part of any provisions or conditions of
the Agreement must be in writing and shall be

 

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effective only to the extent specifically set forth in such writing.  All
remedies, either under this Agreement, by law, or otherwise afforded to any
party, shall be cumulative and not alternative.

 

7.8          Notices.  All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed electronic mail, telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt.  All communications shall be
sent to the Company at the address as set forth on the signature page hereof and
to the Holder at the address set forth on the signature page or at such other
address or electronic mail address as the Company or the Holder may designate by
ten (10) days advance written notice to the other parties hereto.

 

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

 

7.10        Attorneys’ Fees.  In the event that any suit or action is instituted
under or in relation to this Agreement, including, without limitation, to
enforce any provision in this Agreement, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.

 

7.11        Titles and Subtitles.  The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be considered
in construing this Agreement.

 

7.12        Counterparts.  This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

 

7.13        Broker’s Fees.  Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker’s or
finder’s fee or any other commission directly or indirectly in connection with
the transactions contemplated herein.  Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.13 being untrue.

 

7.14        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.

 

7.15        Further Assurances.  Each party to this Agreement will perform any
and all acts and execute any and all documents as may be necessary and proper
under the circumstances in order to accomplish the intents and purposes of this
Agreement and to carry out its provisions.

 

11

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7.16        Termination.

 

(a)           Termination Events.  This Agreement may be terminated prior to the
Closing:

 

(i)            By Holders holding a majority in interest of the Prior Notes at
or after the Scheduled Closing Time if any condition set forth in Section 5.1
has not been satisfied by the Scheduled Closing Time (other than as a result of
any failure on the part of any Holder to comply with or perform any covenant or
obligation of the Holders set forth in this Agreement);

 

(ii)           By the Company at or after the Scheduled Closing Time if any
condition  set forth in Section 5.2 has not been satisfied by the Scheduled
Closing Time (other than as a result of any failure on the part of the Company
to comply with or perform any covenant or obligation of the Company set forth in
this Agreement);

 

(iii)         By Holders holding a majority in interest in of the Prior Notes or
the Company if the Closing has not taken place on or before October 13, 2003
(other than as a result of any failure on the part of the party seeking to
terminate this Agreement to comply with or perform any covenant or obligation of
such party set forth in this Agreement);

 

(iv)          By mutual consent of Holders holding a majority in interest of the
Prior Notes and the Company

 

(b)           Termination Procedures.  If the Holders wishe to terminate this
Agreement pursuant to Section 7.16(a)(i) or Section 7.16(iii), the Holders shall
deliver to the Company a written notice stating that the Holders are terminating
this Agreement and setting forth a brief description of the basis on which the
Holders are terminating this Agreement.  If the Company wishes to terminate this
Agreement pursuant to Section 7.16(a)(ii) or Section 7.16(iii), the Company
shall deliver to the Holders a written notice stating that the Company is
terminating this Agreement and setting forth a brief description of the basis on
which the Company is terminating this Agreement.

 

(c)           Effect of Termination.  If this Agreement is terminated pursuant
to Section 7.16(a), this Agreement shall be of no further force or effect (and,
except as provided in this Section 7.16(c), there shall be no liability or
obligation hereunder on the part of any of the parties hereto or their
respective officers, directors, stockholders or affiliates); provided, however,
that Section 7, including without limitation, this Section 7.16, shall survive
the termination of this Agreement and shall remain in full force and effect, and
the termination of this Agreement shall not relieve any party from any liability
for any willful breach of any representation, warranty or covenant contained in
this Agreement.

 

7.17        Public Statements, Press Releases, Etc.  The Company and the Holders
holding a majority in interest of the New Notes shall have the right to approve
before issuance any press releases or any other public statements with respect
to the transactions contemplated hereby; provided, however, that the Company
shall be entitled, without the prior approval of the Holders, to make any press
release or other public disclosure with respect to such transactions that it
deems appropriate pursuant to applicable law and regulations, including the
Exchange Act and the rules and regulations promulgated thereunder.

 

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IN WITNESS WHEREOF, the parties hereto have executed this EXCHANGE AGREEMENT as
of the date set forth in the first paragraph hereof.

 

COMPANY:

 

 

 

NEKTAR THERAPEUTICS

 

 

 

 

Signature:

 

/s/ Ajit S. Gill

 

 

Ajit S. Gill

 

President, Chief Executive
Officer and Director

 

 

Address:

150 Industrial Road

 

San Carlos, CA 94070

 

Exchange Agreement

Signature Page

 

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HOLDERS:

 

ALEXANDRA GLOBAL MASTER FUND LTD.

 

By:

ALEXANDRA INVESTMENT MANAGEMENT, LLC,

 

as Investment Advisor

 

Signature:

/s/ Mikhail Filimonov

 

 

 

 

Print Name:

Mikhail Filimonov

 

 

 

 

Title:

Chairman, CEO & Chief Invesment Officer

 

 

 

 

Address:

 

 

 

 

 

c/o Alexandra Investment Management, LLC
767 Third Avenue
39th Floor
New York, New York  10017
Facsimile No.:  (212) 301-1810

 

 

 

Exchange Agreement

Signature Page

 

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APPENDIX I

 

HOLDERS

 

PRIOR NOTES

 

NEW NOTES

 

 

 

 

 

 

 

ALEXANDRA GLOBAL MASTER FUND LTD.

 

$

22,500,000

 

$

15,119,000

 

 

 

 

 

 

 

TOTAL:

 

$

22,500,000

 

$

15,119,000

 

 

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