The Investment Syndicate (TIS)

 

 

 

23rd April 2014

 

Mr. Andrew L. Tussing

President and Chief Operation Officer and Vaccinogen Board of Directors

5300 Westview Drive, Suite 406

Frederick, MD 21703, USA

 

Re: Definitive Conditions to Closing

  

 

Dear Mr. Tussing and Vaccinogen’s Board of Directors:

 

We at TIS are grateful to Mr. Tussing for his cooperation with our due diligence
on Vaccinogen. With critical mass of funds in place we can now follow through
with the Vaccinogen investment. Based on recent due diligence, this binding
document is serving to state the final terms for investment.

 

Article 1. Investment Structure

 

The total investment of $80 million US dollars will take place in the following
steps:

 

1st Closing – Within twenty one (21) business days of Vaccinogen’s authorized
execution of this document, TIS will make sure an investment will be delivered
of $10 million out of the amount that will be available in the series C round
using the Series C investment subscription documents. Vaccinogen agrees to
immediately pay off existing undisputed past due payables, initiate Article 4
and implement Articles 2, 3 and 5.

 

2nd Closing – Within another twenty one (21) business days after 1st Closing TIS
will make sure an investment will be ready taking the remaining available amount
in the series C (up to $10 million) using the Series C investment subscription
documents. Upon the completion of proper legal investment documents for
investments subsequent to the Series C, prepared by Vaccinogen’s counsel and
approved by TIS, this 2nd Closing can first happen.

 

3rd Closing - $20 million investment at $5.50/share of common stock to take
place when the first patient has been given the first three doses of OncoVAX,
with positive result, in the next phase IIIb clinical trial.

 

4th Closing - $20 million investment at $5.50/share of common stock to take
place when the new corporate structure has been implemented as outlined in
Article 6.

 

5th Closing - $20 million investment at $5.50/share of common stock to take
place upon successful up-list to either NYSE or NASDAQ. Article 3 takes effect
upon this closing.

 

We reserve the option that expires six months after the first closing to invest
up to an additional $30 million under the same terms.

 

 

 

The Investment Syndicate

C/o Malchor AB

Sollentunavägen 80

SE-191 40 Sollentuna, Sweden 

 

 

 

The Investment Syndicate (TIS)

 

 

Article 2. Management

 

We are very impressed with Dr. Hanna’s outstanding accomplishments and his
superior role in his great effort to develop and preserve OncoVAX through to
this time. Mr. Tussing helped us appreciate that, without Dr. Hanna there never
would have been an OncoVAX or Vaccinogen. Understanding this background and his
consideration of potentially retiring in the near future, we require an updated
employment agreement for Dr. Hanna that shows a respectful transition to
Chairman Emeritus, Medical Advisory Board Member and Special Advisor to the CEO.
For continuing of the knowledge, it is important that Dr. Hanna agrees to
completely transport his knowledge to those who would join the company in the
research and development areas and advises with the advancement of opportunities
for OncoVAX and the promising human antibody field. These arrangements for Dr.
Hanna must be handled with the utmost respect and recognition he deserves and
that he has a new enriching role of again being an explorer of new paths in the
human monoclonal antibody effort.

 

After working closely with Mr. Tussing over the last months and independently
investigating his accomplishments, reputation, ethics, impressive knowledge of
your business and science, we have strong confidence in him as a company leader
and at this time of important transformation. We therefore urge that Mr. Tussing
to be appointed CEO/President and a member of the board of directors effective
upon the 1st closing and be given full authority to operate and build the
business. An updated 3-year employment agreement consistent for this role must
be created for Mr. Tussing and reviewed/approved by the soon to be formed
compensation committee. As of the date of this letter and until after the 1st
closing, we insist that no new binding agreement or the hiring of new employees
can take place without our knowledge and approval.

 

Article 3. Intracel License Agreements and Letter of Intent

 

Our due diligence discovered three important documents:

 

1.2007 License Agreement between Intracel and Vaccinogen

 

2.2010 Amendment to the 2007 License Agreement

 

3.December 2010 “Letter of Intent” by Intracel as it affects the 2010 Amendment

  

Our analysis of the documents followed how Intracel moved from 10% of Vaccinogen
stock in 2007 to 50% in 2010 in exchange for its transfer of the OncoVAX assets.
To our surprise and discontent, we also discovered an everlasting and more
expanded license agreement amendment that still remains in place. It is our
strong view and those of experts that this license agreement and amendment as it
is written is unusual for this situation. We also conclude that it will have a
severe and unfavorable impact on the company’s value and hold back the stock
price from reaching its full potential. We further conclude that these license
documents are self-defeating and will certainly create opposing agendas among
the shareholders. All the shareholders’ interests must become aligned and this
impediment to maximum investment return potential be removed.

 

 

 

The Investment Syndicate

C/o Malchor AB

Sollentunavägen 80

SE-191 40 Sollentuna, Sweden

 

 

 

 

The Investment Syndicate (TIS)

 

 

We require a termination agreement be executed between Intracel and Vaccinogen
before the first closing that results in a complete elimination of any such
license agreement with Intracel to automatically take effect upon the deposit of
all $80 million and without further financial or equity consideration to
Intracel.

 

Article 4. Board Constitution

 

We require that the nominating committee appoint a new chairman and that
in-person physical quarterly board meetings be properly planned, scheduled and
held. Upon 1st closing, Dr. Benjamin S. Carson, assuming he is willing, will
become Chairman in a transitional capacity until the nominating committee is
formed and the nominating process produces a replacement Chairman. If Dr. Carson
is unwilling or unable to be the Chairman, Mr. Halldin will serve that role as a
backup. Also upon 1st closing, Mr. Halldin will serve as Nominating Committee
Chairman and initiate the nominating process for board reconstitution.

 

As Vaccinogen transforms with our capital investment, it is important that a
future Vaccinogen board be comprised of most distinguished health care
industry/business leaders possible that can attract many institutional
investors. As of the date of this letter and until after the 1st closing, we
insist that no new board or committee appointments be made without our approval.

 

Board re-constitution needs to take place in the following manner with a maximum
total of seven directors:

 

Upon 1st Closing

 

1.Mr. Nicolis (representing new investors since 2007)

 

2.A TIS nominee (as vice chairman and chair of nominating committee)

 

3.An Intracel nominee (representing pre-Vaccinogen investors)

 

4.A 2nd Intracel nominee

 

5.Mr. Tussing

 

6.Dr. Hanna (chairman emeritus, director)

 

7.Dr. Carson (as Chairman, if willing)

  

Upon 2nd Closing

 

1.Mr. Nicolis

 

 

 The Investment Syndicate

C/o Malchor AB

Sollentunavägen 80

SE-191 40 Sollentuna, Sweden

 

 

 

 

The Investment Syndicate (TIS)

 

 

2.A TIS nominee

 

3.An Intracel nominee

 

4.Mr. Tussing

 

5.Dr. Hanna

 

6.Dr. Carson

 

 Between the 1st and 2nd closing

 

The TIS nominee will begin forming the nominating committee of independent
directors and will lead the effort to identify, interview, evaluate and
recommend for appointment of additional independent directors, potential board
chairman and committee chairman candidates. The board would activate the
compensation committee and appoint one of these new independent directors as
chairman of it. The board would appoint additional independent directors to the
audit committee.

 

Prior to the 5th Closing

 

1.Mr. Nicolis

 

2.A TIS nominee

 

3.An Intracel nominee

 

4.Mr. Tussing

 

5.Dr. Carson

 

6.A new independent director

 

7.A 2nd new independent director (Dr. Hanna retires from the board but maintains
chairman emeritus status upon appointment of 2nd independent director)

  

Also well in time for 5th Closing, the board must establish term-limit
guidelines for directors and be in keeping with best practices for a US public
company. When Intracel’s holdings are distributed among its own shareholders,
the Intracel nominee will resign to open up the board position for another
independent director.

 

Article 5. Abell Foundation $5 Million Equity Investment

 

We understand that Abell Foundation had originally committed to invest $5
million when Vaccinogen raises at least $35 million. We require that an updated
agreement be executed between Vaccinogen and The Abell Foundation clarifying
Abell’s commitment to invest at $5.50 per share before the 3rd closing or
surrender its investment option.

  

 

The Investment Syndicate

C/o Malchor AB

Sollentunavägen 80

SE-191 40 Sollentuna, Sweden 

 

 

 

 

The Investment Syndicate (TIS)

 

 

Article 6. Implementation of a new Corporate Structure

 

We understand that the existing corporate set up is not as efficient as
possible. We require this to be taken care of urgently so a new set up can be
implementedbefore the 4th closing.

 

Article 7. Ongoing Public Listing and Capitalization Efforts

 

We are supportive of Vaccinogen’s goal to do a carefully planned transition to a
national exchange like NASDAQ or NYSE. We encourage committing adequate
resources towards investor relations and public relations activities to build
and support investor interest in the Vaccinogen stock while steps toward big
accomplishments are started. We only support the idea of engaging a large
investment bank to manage a proper follow-on underwriting to be considered after
the 5th closing. Lastly, we encourage pursuing revenue opportunities at the
earliest possible moment through speedy completion of the phase IIIb trial,
opening up other markets and the human monoclonal antibodies effort.

 

______________________________________

 

  

On behalf of TIS, this binding commitment to invest, which expires in five
business days from the delivery of this letter unless countersigned by
Vaccinogen, under the above stated definitive conditions to closing, is
authorized by:

 

 

/s/ Anders Halldin   April 23, 2014           Anders Halldin, TIS leader   Date
 

 

On behalf of Vaccinogen, Inc. as authorized by its board we accept the above
stated binding definitive conditions to closing:

 

/s/ Andrew L. Tussing   April 24, 2014           Andrew L. Tussing, President  
Date  

 

 

 

The Investment Syndicate

C/o Malchor AB

Sollentunavägen 80

SE-191 40 Sollentuna, Sweden