Document:

Exhibit 10.1

 

Execution Copy

 

STOCKHOLDERS AGREEMENT

 

This STOCKHOLDERS AGREEMENT, dated as of December 16,
2009, is between Facet Biotech Corporation, a Delaware corporation (the “Company”), and The Baupost Group,
L.L.C., Baupost Value Partners, L.P.-IV, SAK Corporation and Seth A. Klarman
(collectively, the “Baupost Entities”).

 

RECITALS:

 

WHEREAS, as of the date hereof, the Baupost Entities
Beneficially Own (as defined below) an aggregate of 3,506,875 shares of common
stock, par value $0.01 per share, of the Company (“Common Stock”),
including the associated rights to purchase shares of Series A Preferred
Stock of the Company (“Rights”) issued pursuant to the Rights Agreement
(as defined below), which represents approximately 14.0% of the shares of
Common Stock outstanding as of the date hereof;

 

WHEREAS, pursuant to the terms of the Rights
Agreement, the Rights will become exercisable under certain circumstances,
including if a person becomes an Acquiring Person (as defined in the Rights
Agreement) by acquiring Beneficial Ownership (as defined below) of 15% or more
of the outstanding shares of Common Stock; and

 

WHEREAS, the Baupost Entities desire to have the
ability to purchase additional shares of Common Stock and have requested that
the Company amend the terms of the Rights Agreement so as to permit the Baupost
Entities to purchase such shares without causing the Rights to become
exercisable, and the Board has determined that it is in the best interest of
the Company’s stockholders to enter into such an amendment;

 

NOW, THEREFORE, in consideration of the foregoing
premises and of the mutual covenants and obligations hereinafter set forth, the
parties hereto hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1.   Certain Defined Terms.  As used herein, the following terms shall
have the following meanings:

 

“Acquiring Person” shall have the
meaning set forth in the Rights Agreement.

 

“Affiliate” and “Associate”
shall have the meaning set forth in the Rights Agreement.

 

“Agreement”
shall mean this Stockholders Agreement as it may be amended, supplemented,
restated or modified from time to time in accordance with the terms hereof.

 

“Beneficial Owner”, “Beneficially
Own” and “Beneficial Ownership” shall have the meaning set forth in
the Rights Agreement.

 

“Board” shall mean the Company’s board
of directors.

 

 

“Business
Day” shall mean any day that is not a Saturday, a Sunday or other
day on which banks are required or authorized by law to be closed in New York,
New York or San Francisco, California.

 

“Baupost Group” shall mean the Baupost
Entities, and all Affiliates and Associates of the Baupost Entities.

 

“Baupost Ownership Percentage” shall mean, at any time, the percentage of the
outstanding shares of Common Stock Beneficially Owned by the Baupost Group.

 

“Common Stock” shall have the meaning
set forth in the Recitals.

 

“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder from time to time.

 

“Effective Date” shall have the meaning
set forth in Section 2.1.

 

“Exempted Shares” shall have the
meaning set forth in Section 2.2.

 

A Person shall be deemed the “Full Owner”
of, shall be deemed to “Fully Own” and shall be deemed to have “Full
Ownership” of, any securities if such Person not only Beneficially Owns
such securities but also owns all economic and pecuniary interest in such
securities and retains all voting rights (other than the proxy granted to the
Company pursuant to this Agreement), with there being no hedging transaction,
derivative transaction or other transaction resulting in any form of synthetic
ownership of such securities by any other Person (other than broad-based index
options, broad-based index futures and broad-based publicly traded market
baskets of stock approved for trading by the appropriate federal government
authority).

 

“Grantee” shall have the meaning set
forth in Section 3.2.

 

“Person”
shall mean any individual, corporation, limited liability company, limited or
general partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, other entity, government or any agency or
political subdivision thereof or any group pursuant to Section 13(d)(3) of
the Exchange Act comprised of two or more of the foregoing.

 

“Proportionate Voting” shall have the
meaning set forth in Section 3.1.

 

“Recommended Voting” shall have the
meaning set forth in Section 3.1.

 

“Rights” shall have the meaning set
forth in the Recitals.

 

“Rights Agreement” shall mean the
Rights Agreement, dated as of September 7, 2009, between the Company and
Mellon Investor Services LLC, as Rights Agent, as it may be amended,
supplemented, restated or modified from time to time in accordance with the
terms hereof and thereof, or any successor rights agreement adopted substantially
concurrently with the termination thereof or with the redemption of the Rights.

 

“Rights Amendment” shall have the
meaning set forth in Section 2.1.

 

2

 

“Subject
Shares” shall mean as of a given date that number of shares of
Common Stock, if any, by which the aggregate Beneficial Ownership by the
Baupost Group of shares of Common Stock exceeds fifteen percent (15%) of the
outstanding shares of Common Stock on such date.

 

“Transfer”
shall mean, directly or indirectly, to sell, transfer, assign, pledge,
encumber, hypothecate or similarly dispose of (by operation of law or
otherwise), either voluntarily or involuntarily, or to enter into any contract,
option or other arrangement or understanding with respect to the sale,
transfer, assignment, pledge, encumbrance, hypothecation or similar disposition
of (by operation of law or otherwise), any Common Stock or any interest in any
Common Stock, including by tendering (or announcing an intention to tender)
into any tender offer, regardless of whether such Common Stock or interest is
purchased pursuant to such tender offer. 
For purposes of this Agreement, the term Transfer shall include the sale
of an Affiliate or Associate of any Baupost Entity or the Baupost Entity’s
interest in an Affiliate or Associate that Beneficially Owns shares of Common
Stock.

 

Section 1.2.  
Methodology for Calculations.  For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock outstanding at any particular time, including any calculation for
purposes of determining the particular percentage of such outstanding shares of
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) under the
Exchange Act as in effect on the date hereof.

 

ARTICLE II

ACQUISITION OF EXEMPTED SHARES

 

Section 2.1.  
Amendment of Rights Agreement.  If
the Rights are still then redeemable pursuant to Section 23 of the Rights
Agreement, the Company agrees to adopt an amendment to the Rights Agreement in
the form attached as Exhibit A hereto (the “Rights Amendment”) as
soon as practicable after execution hereof, and in any event within one (1) Business
Day of the date of this Agreement (the date of effectiveness of such Rights
Amendment, the “Effective Date”), which Rights Amendment will provide
that the acquisition by the Baupost Entities of the Exempted Shares, subject to
the terms and conditions provided herein and in the Rights Amendment, will not
result in any Baupost Entity becoming an Acquiring Person.

 

Section 2.2.  
Exempted Shares Definition.  The “Exempted
Shares” (a) shall consist of one share less than such number as would
result in a Baupost Ownership Percentage of twenty percent (20%) and (b) must
(i) consist solely of shares of Common Stock, and not include any common
stock equivalents or derivative securities and (ii) be Fully-Owned by the
Baupost Entities.

 

ARTICLE III

VOTING

 

Section 3.1.  
Voting .  Each of the Baupost
Entities hereby irrevocably and unconditionally agrees that during the term of
this Agreement, so long as the Baupost Ownership Percentage is equal to or
greater than fifteen percent (15%), at any meeting of the stockholders of 

 

3

 

the
Company, however called, including any adjournment or postponement thereof, and
in connection with any written consent of the stockholders of the Company, each
Baupost Entity shall, and shall cause all Affiliates and Associates which
Beneficially Own any Subject Shares to, in each case to the fullest extent that
such matters are submitted for the vote or written consent of the Stockholder
and that the Subject Shares are entitled to vote thereon or consent thereto,
vote (or cause to be voted), in person or by proxy, or deliver (or cause to be
delivered) a written consent covering, all of the Subject Shares as to which
such Baupost Entity controls the right to vote either (i) in the same
proportion as the stockholders of the Company other than the Baupost Group vote
with respect to such matter (voting in such manner, “Proportionate Voting”)
or (ii) in accordance with the recommendation of the Board to the
stockholders of the Company with respect to such matter (voting in such manner,
“Recommended Voting”).  All
Subject Shares must be voted in Proportionate Voting or Recommended Voting as
provided in this Section 3.1, with the Baupost Entities having the right
to make the election between Proportionate Voting and Recommended Voting,
provided that if no such election is made by the Baupost Entities,
Proportionate Voting shall apply.  The
obligations of the Baupost Entities specified in this Section 3.1 shall
apply whether or not any action is recommended by the Board.

 

Section 3.2.  
Irrevocable Proxy.  Each of the
Baupost Entities hereby irrevocably appoints as its proxy, Andrew Guggenhime
and Francis Sarena, in their respective capacities as officers of the Company,
and any individual who shall hereafter succeed to any such officer of the
Company, and any other Person designated in writing by the Company  (collectively, the “Grantees”), each
of them individually, with full power of substitution, to vote or execute
written consents solely with respect to the Subject Shares in accordance with Section 3.1
hereof and, in the discretion of the Grantees, with respect to any proposed
adjournments of any annual or special meetings of the stockholders of the
Company.  This proxy is coupled with an interest and shall be irrevocable,
and each of the Baupost Entities will take such further action or execute such
other instruments as may be necessary to effectuate the intent of this proxy
and hereby revokes any proxy previously granted by any Baupost Entity with
respect to the Subject Shares that would otherwise conflict with the proxy
granted by this Section 3.2. The Company may terminate this proxy with
respect to the Stockholder at any time at its sole election by written notice
provided to the Baupost Entities.  Notwithstanding anything to the
contrary in this Agreement, the proxy granted by this Section 3.2 shall
terminate and be of no further force and effect upon valid termination of this
Agreement in accordance with Section 4.2 hereof.  Each Baupost Entity hereby ratifies and
confirms all that such irrevocable proxy may lawfully do or cause to be done by
virtue hereof.  Any Baupost Entity that
is not the record owner of the Subject Shares of which it is the Beneficial
Owner shall use reasonable efforts to cause the record owner of such Subject
Shares to execute and deliver an irrevocable proxy conforming to the provisions
of this Section 3.2.

 

Section 3.3.  
Quorum.  The Baupost Entities
shall be under no obligation with respect to any shares of Common Stock that it
Beneficially Owns, other than the Subject Shares as provided in Section 3.1,
to be present in person or represented by proxy at any meetings of
securityholders of the Company or to vote such shares of Common Stock.

 

4

 

ARTICLE IV

MISCELLANEOUS

 

Section 4.1.  
Conflicting Agreements.  Each
party represents and warrants that it has not granted and is not a party to any
proxy, voting trust or other agreement that is inconsistent with or conflicts
with any provision of this Agreement.

 

Section 4.2.  
Termination.

 

(a)   This Agreement shall automatically terminate
upon the earlier of (i) expiration of the Rights Agreement or (ii) redemption
of the Rights by the Company except in connection with the substantially
concurrent adoption of a successor rights agreement.

 

(b)   Nothing in this Section 4.2 shall be
deemed to release any party from any liability for any willful and material
breach of this Agreement or to impair the right of any party to compel specific
performance by any other party of its obligations under this Agreement.

 

Section 4.3.  
Ownership Information.  The
Baupost Entities shall deliver to the Company promptly (but in no event more
than two (2) Business Days) after any Transfer of shares of Common Stock,
an accurate written report specifying the shares of Common Stock Transferred in
such transaction and the number of shares of Common Stock owned by the Baupost
Group after giving effect to such transaction; provided, however,
that no such report need be delivered with respect to any Transfer of shares of
Common Stock by the Baupost Group that is reported in a statement on Schedule
13D or a Form 4 filed with the Securities and Exchange Commission and
delivered to the Company by the Baupost Entities in accordance with Section 13(d) or
Section 16 of the Exchange Act, as applicable.  The Company shall be entitled to rely on the
most recently delivered report, statement on Schedule 13D, Form 4 or other
notice for all purposes of this Agreement, unless the Baupost Entities shall
have updated such information by delivery of a subsequent report, statement on
Schedule 13D, Form 4 or notice.

 

Section 4.4.  
Amendment and Waiver.  This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. 
The failure of any party to enforce any of the provisions of this
Agreement shall in no way be construed as a waiver of such provisions and shall
not affect the right of such party thereafter to enforce each and every
provision of this Agreement in accordance with its terms.

 

Section 4.5.  
Severability.  If any provision of
this Agreement shall be declared by any court of competent jurisdiction to be
illegal, void or unenforceable, all other provisions of this Agreement shall
not be affected and shall remain in full force and effect.

 

Section 4.6.  
Entire Agreement.  Except as
otherwise expressly set forth herein, this Agreement, the Rights Amendment and
the Rights Agreement embody the complete agreement and understanding among the
parties hereto with respect to the subject matter hereof and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, that may have related to the subject matter hereof in
any way.  Without limiting the generality
of the foregoing, to the extent that any of the terms hereof are inconsistent
with the rights or obligations of the Baupost Entities under any other
agreement with the Company, the terms of this Agreement shall govern.

 

5

 

Section 4.7.  
Successors and Assigns.  Neither
this Agreement nor any of the rights or obligations of any party under this
Agreement shall be assigned, in whole or in part (except by operation of law
pursuant to a merger whose purpose is not to avoid the provisions of this
Agreement), by any party without the prior written consent of the other
party.  Subject to the foregoing, this
Agreement shall bind and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns.

 

Section 4.8.  
Counterparts.  This Agreement may
be executed in separate counterparts each of which shall be an original and all
of which taken together shall constitute one and the same agreement.

 

Section 4.9.  
Remedies.  Each party hereto
acknowledges that money damages would not be an adequate remedy in the event
that each and every one of the covenants or agreements in this Agreement are
not performed in accordance with their terms, and it is therefore agreed that,
in addition to and without limiting any other remedy or right it may have, the
non-breaching party will have the right to an injunction, temporary restraining
order or other equitable relief in any court of competent jurisdiction
enjoining any such breach and enforcing specifically each and every one of the
terms and provisions hereof.  Each party
hereto agrees not to oppose the granting of such relief in the event a court
determines that such a breach has occurred, and to waive any requirement for
the securing or posting of any bond in connection with such remedy.  All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning
of the exercise of any thereof by any party shall not preclude the simultaneous
or later exercise of any other such right, power or remedy by such party.

 

Section 4.10.  
Notices.  Any notice, request,
claim, demand or other communication under this Agreement shall be in writing,
shall be either personally delivered, sent by reputable overnight courier
service (charges prepaid), sent by facsimile to the address for such Person set
forth below or such other address as the recipient party has specified by prior
written notice to the other parties hereto and shall be deemed to have been
given hereunder on (i) the date of delivery if sent by messenger, (ii) on
the Business Day following the Business Day on which delivered to a recognized
courier service if sent by overnight courier or (iii) upon confirmation of
receipt, if sent by fax.

 

If to the Company:

 

Facet
Biotech Corporation

1500
Seaport Boulevard

Redwood
City, CA 94063

Attention:
General Counsel

Fax: 650-454-2000

 

with a copy (which shall not constitute
notice) to:

 

Simpson
Thacher & Bartlett LLP

2550 Hanover Street

Palo Alto, CA 94304

Attention:                 Richard Capelouto

Kirsten Jensen

Fax: 650-251-5002

 

6

 

If to the Baupost Entities:

 

The
Baupost Group, L.L.C.

10 St. James Avenue, Suite 1700

Boston, Massachusetts 02116

Attention: Scott A. Stone

Fax: 617-451-7337

 

with a copy (which shall not constitute
notice) to:

 

Ropes &
Gray LLP

One International Place 

Boston, Massachusetts 02110

Attention: Gregory D. Sheehan, Esq.

Facsimile:  617-951-7050

 

Section 4.11.  
Governing Law; Consent to Jurisdiction. 
This Agreement shall be governed in all respects by the laws of the
State of Delaware.  Any disagreement,
issue, dispute, claim, demand or controversy arising out of or relating to this
Agreement (each, a “Dispute”) shall be brought only in the Court of
Chancery of the State of Delaware.  Each
of the parties hereby irrevocably consents to the jurisdiction of such court
(and of the appropriate appellate court therefrom) in any such Dispute and irrevocably
waives, to the fullest extent permitted by law, any objection that it may now
or hereafter have to the laying of the venue of any such Dispute in such court
and that any such Dispute which is brought in such court has been brought in an
inconvenient forum.  Process in any such
Dispute may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court. 
Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 4.10 shall be deemed
effective service of process on such party. 
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

Section 4.12.  
Change in Law, Etc.  In the event any law, rule or
regulation comes into force or effect (including by amendment) which conflicts
with the terms and conditions of this Agreement, or any court of competent
jurisdiction shall issue a final, non-appealable order invalidating or
enjoining the performance of any provision hereof, the parties shall negotiate
in good faith to revise this Agreement to achieve the parties’ intention set
forth herein.

 

Section 4.13.  
Interpretation.  The headings
contained in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include”, “includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without
limitation”.  The words “hereof “, “herein”
and “hereunder” and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement, and Article, Section and Exhibit references are to this
Agreement unless otherwise specified. 
The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.

 

7

 

IN WITNESS WHEREOF, the parties hereto have
executed this Stockholders Agreement as of the date first written above.

 

	
  FACET
  BIOTECH CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Andrew Guggenhime

  	
   

  
	
  Name:

  	
  Andrew
  Guggenhime

  	
   

  
	
  Title:

  	
  Senior
  Vice President and

  	
   

  
	
   

  	
  Chief
  Financial Officer

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  THE BAUPOST GROUP, L.L.C.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Seth A. Klarman

  	
   

  
	
  Name:

  	
  Seth
  A. Klarman

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  BAUPOST VALUE PARTNERS,
  L.P. —IV

  	
   

  
	
  By: The Baupost Group,
  L.L.C., its managing general partner

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Seth A. Klarman

  	
   

  
	
  Name:

  	
  Seth
  A. Klarman

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  SAK CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/
  Seth A. Klarman

  	
   

  
	
  Name:

  	
  Seth
  A. Klarman

  	
   

  
	
  Title:

  	
  President

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/
  Seth A. Klarman

  	
   

  
	
  Seth A. Klarman

  	
   

  

 

8

 

EXHIBIT A

 

AMENDMENT NO. 2 TO RIGHTS AGREEMENT

 

This Amendment No. 2
to Rights Agreement (this “Amendment”) is entered into as of December 16,
2009 by and between Facet Biotech Corporation, a Delaware corporation (the “Company”),
and Mellon Investor Services LLC, a New Jersey limited liability company, as
Right Agent (the “Rights Agent”).

 

RECITALS:

 

WHEREAS, the Company and the Rights Agent have
previously entered into a Rights Agreement dated as of September 7, 2009,
as amended on December 15, 2009 (the “Agreement”; capitalized terms
used but not defined herein shall have the meaning set forth in the Agreement);

 

WHEREAS, pursuant to Section 27
of the Agreement, for so long as the Rights are redeemable, the Company may in
its sole and absolute discretion amend any provision of the Agreement in any
respect without the approval of any holders of the Rights, as evidenced by a
writing signed by the Company and the Rights Agent;

 

WHEREAS, as of the date
hereof, the Rights are redeemable; and

 

WHEREAS, the Board of
Directors has deemed it fair, desirable and in the best interests of the
Company and its stockholders to allow the acquisition by certain existing
Company stockholders of additional shares of Common Stock without any such
stockholder becoming an Acquiring Person, and to amend the Agreement
accordingly as set forth below to permit such transaction, and has duly
authorized any officer of the Company to execute and deliver this Amendment.

 

NOW, THEREFORE, in consideration of the premises and
mutual agreements hereinafter set out and of other consideration (the receipt
and sufficiency of which are acknowledged), the parties hereto agree as
follows:

 

1.     Amendment
of Section 1(a) of the Agreement. 
The definition of “Acquiring Person” in Section 1(a) of the Agreement
is hereby amended and supplemented by amending and restating the last two
sentences thereof in their entirety and replacing them with the following three
sentences:

 

“Notwithstanding
anything contained in this Section 1(a) to the contrary, solely in
the case of any Person who is one of the BVF Entities (as defined below) and
with respect to no other Person: (A) a reference to “20%” shall be
substituted for each reference to “15%” in the foregoing provisions of this Section 1(a),
so as to permit the Beneficial Ownership of up to 20% of the Common Stock of
the Company by such BVF Entities pursuant to, and only if the BVF Entities are
acting in compliance with, the terms of the Stockholders Agreement, dated as of
December 15, 2009 between the Company and the BVF Entities and (B) in
the event that the BVF Ownership Percentage is greater than 15% and less than
20%, in the event of any Transfer (as defined below) by a BVF Entity, upon the
occurrence of any such Transfer such references shall automatically be deemed
replaced by references to the then-current BVF Ownership Percentage plus one
share of Common Stock, solely to the extent such then-current BVF Ownership
Percentage is both

 

 

lower than the
previously applicable BVF Ownership Percentage and less than 20%, unless and
until such then-current BVF Ownership Percentage is less than 15%, at which
time all such references shall revert to “15%” and no additional changes shall
be made pursuant to this clause (B). 
Notwithstanding anything contained in this Section 1(a) to the
contrary, solely in the case of any Person who is one of the Baupost Entities
(as defined below) and with respect to no other Person: (A) a reference to
“20%” shall be substituted for each reference to “15%” in the foregoing
provisions of this Section 1(a), so as to permit the Beneficial Ownership
of up to 20% of the Common Stock of the Company by such Baupost Entities
pursuant to, and only if the Baupost Entities are acting in compliance with,
the terms of the Stockholders Agreement, dated as of December [16], 2009
between the Company and the Baupost Entities and (B) in the event that the
Baupost Ownership Percentage is greater than 15% and less than 20%, in the
event of any Transfer (as defined below) by a Baupost Entity, upon the occurrence
of any such Transfer such references shall automatically be deemed replaced by
references to the then-current Baupost Ownership Percentage plus one share of
Common Stock, solely to the extent such then-current Baupost Ownership
Percentage is both lower than the previously applicable Baupost Ownership
Percentage and less than 20%, unless and until such then-current Baupost
Ownership Percentage is less than 15%, at which time all such references shall
revert to “15%” and no additional changes shall be made pursuant to this clause
(B).  For purposes of this
definition:  “BVF Entities” shall
mean Biotechnology Value Fund, L.P., Biotechnology Value Fund II, L.P., BVF
Investments, L.L.C., Investment 10, L.L.C., BVF Partners L.P., BVF Inc. and
Mark N. Lampert; “BVF Ownership Percentage” means, at any time, the
percentage of the outstanding Common Stock Beneficially Owned in the aggregate
by the BVF Entities and all Affiliates and Associates thereof as of such time; “Baupost
Entities” shall mean [The Baupost Group, L.L.C., Baupost Value Partners,
L.P.-IV, SAK Corporation and Seth A. Klarman]; “Baupost  Ownership
Percentage” means, at any time, the percentage of the outstanding Common
Stock Beneficially Owned in the aggregate by the Baupost Entities and all Affiliates
and Associates thereof as of such time; and solely as used in this Section 1(a),
“Transfer” shall mean, directly or indirectly, to sell, transfer,
assign, pledge, encumber, hypothecate or similarly dispose of (by operation of
law or otherwise), either voluntarily or involuntarily, or to enter into any
contract, option or other arrangement or understanding with respect to the
sale, transfer, assignment, pledge, encumbrance, hypothecation or similar
disposition of (by operation of law or otherwise), any Common Stock or any
interest in any Common Stock, including by tendering (or announcing an
intention to tender) into any tender offer, regardless of whether such Common
Stock or interest is purchased pursuant to such tender offer, and for such
purpose the term “Transfer” shall include (1) in the case of any BVF
Entity, the sale of an Affiliate or Associate of any BVF Entity or the BVF
Entity’s interest in an Affiliate or Associate that Beneficially Owns shares of
Common Stock and (2) in the case of any Baupost Entity, the sale of an
Affiliate or Associate of any Baupost Entity or the Baupost Entity’s interest
in an Affiliate or Associate that Beneficially Owns shares of Common Stock.”

 

2.     Governing Law.  This
Amendment and the Agreement, as amended hereby, shall be governed by and
construed in accordance with the laws of the State of Delaware, provided, however, that all provisions regarding
the rights, duties, obligations and liabilities of the Rights Agent shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed entirely within such state.

 

A-2

 

3.     Effect
of Amendment.  Except as expressly
modified hereby, the Agreement remains in full force and effect.  Upon the execution and delivery hereof, as of
the day and year first above written, the Agreement shall thereupon be deemed
to be amended and supplemented as hereinabove set forth as fully and with the
same effect as if the amendments and supplements made hereby were originally
set forth in the Agreement, and this Amendment and the Agreement shall
henceforth be read, taken and construed as one and the same instrument, but
such amendments and supplements shall not operate so as to render invalid or
improper any action heretofore taken under the Agreement.

 

4.     Descriptive
Headings.  Section headings in
this Amendment are included herein for convenience of reference only and shall
not constitute a part of this Amendment for any other purpose.

 

5.     Counterparts.  This Amendment may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Amendment and all of which, when taken together, will be deemed to constitute
one and the same agreement.  The exchange
of copies of this Amendment and of signature pages by facsimile or
electronic transmission shall constitute effective execution and delivery of
this Amendment as to the parties hereto and may be used in lieu of the original
Amendment for all purposes.  Signatures
of the parties hereto transmitted electronically or by facsimile shall be
deemed to be their original signatures for all purposes.

 

6.     Severability.  If any term, provision or restriction of this
Amendment is held by a court of competent jurisdiction or other authority to be
invalid, void or unenforceable, the remainder of the terms, provisions or
restriction of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.

 

[Signature Page Follows]

 

A-3

 

IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be executed as of the day and year first above
written.

 

	
   

  	
  FACET BIOTECH CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  MELLON INVESTOR SERVICES LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name: 

  	
  Asa Drew

  
	
   

  	
  Title:

  	
  Vice President &
  Senior Relationship Manager

  

 

A-4ex10one.htm

 

 

 

 

EXCHANGE AGREEMENT

 

This Exchange Agreement (this “Agreement”) is dated as of December 16, 2009, by and among Jpak Group, Inc., a Nevada corporation (the “Company”), and each of the holders of certain warrants
issued by the Company whose signatures appear on the signature page attached hereto (individually, a “Holder” and collectively, the “Holders”).

 

 

Recitals:

 

WHEREAS, each Holder currently holds the aggregate number of warrants (the “Warrants”) to purchase shares of the Company’s common stock, par value $.001 per share (the “Common Stock”),
as set forth on Exhibit A attached hereto that were issued by the Company to such Holder pursuant to various preferred stock financings of the Company consummated in 2007 and 2009 (the “Preferred Stock Financings”).  Capitalized terms used but not otherwise defined herein shall have the meanings assigned to such terms in the financing documents entered into by
the parties pursuant to the Preferred Stock Financings.

 

WHEREAS, subject to the terms and conditions set forth herein, the Company and the Holders desire to exchange the Warrants for newly issued shares of the Company’s common stock, par value $0.001 per share (the “Flush Securities”), at the exchange rate set
forth herein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby agreed and acknowledged, the parties hereto hereby agree as follows:

 

 

AGREEMENT:

 

 

1.           Exchange of Warrants for Common Stock.

 

(a)                   In consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Holders and the Company agree to: (i) the exchange of the Holders’ Warrants to
purchase an aggregate of 11,363,334 shares of Common Stock, as listed on Exhibit A, for shares of Flush Securities of the Company in an amount determined by the following formula:

 

 

X = Y - (A)(Y)

              B

	
Where
	
X =
	
the number of shares of Common Stock to be issued to the Holder.

	
  
	
Y =
	
the number of shares of Common Stock purchasable upon exercise of all of the Holders’ Warrants.

 

 

 

 

 

 

 

	
  
	
A =
	
the Warrant Price.

 

	
  
	
B =
	
$1.00 per share of Common Stock.

 

 

(b)           The closing under this Agreement (the “Closing”) shall take place at the offices of Leser Hunter Taubman & Taubman, upon the satisfaction of each of the conditions set forth in Sections 4
and 5 hereof (the “Closing Date”).  At the Closing, the Company shall issue to each of the Holders its respective share of the shares of Flush Securities and the Holders shall deliver to the Company for cancellation the Warrants.

 

2.           Representations, Warranties and Covenants of the Holders.  Each
Holder hereby makes the following representations and warranties to the Company, and covenants for the benefit of the Company:

 

(a)           If such Holder is a corporation, limited liability company or partnership duly incorporated or organized, such Holder is validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization.

 

(b)           This Agreement has been duly authorized, validly executed and delivered by such Holder and is a valid and binding agreement and obligation of such Holder enforceable against such Holder in accordance with its terms, subject to limitations on enforcement by general principles
of equity and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and such Holder has full power and authority to execute and deliver the Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder.

 

(c)           Such Holder understands that the shares of Flush Securities are being offered and sold to it in reliance on specific provisions of Federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings of such Holder set forth herein for purposes of qualifying for exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”) and applicable state securities laws.  Such Holder understands that no United States federal or state agency or any government or governmental agency has passed upon or made any recommendation or endorsement of the Flush Securities.

 

(d)           Such Holder is an “accredited investor” (as defined in Rule 501 of Regulation D), and such Holder has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities.  Such
Holder is not required to be registered as a broker-dealer under Section 15 of the Securities Exchange Act of 1934, as amended, and such Holder is not a broker-dealer.  Such Holder acknowledges that an investment in the Flush Securities is speculative and involves a high degree of risk.

 

 

 

 

2

 

 

(e)           Such Holder is acquiring the Flush Securities solely for its own account and not with a view to or for sale in connection with distribution.  Such Holder does not have a present intention to sell any of the Flush Securities, nor a present arrangement (whether
or not legally binding) or intention to effect any distribution of any of the Flush Securities to or through any person or entity; provided, however, that by making the representations herein, such Holder does not agree to hold the Flush Securities for any minimum or other specific term and reserves the right to dispose of the Flush Securities at any time in accordance with Federal
and state securities laws applicable to such disposition.  Such Holder acknowledges that it (i) has such knowledge and experience in financial and business matters such that such Holder is capable of evaluating the merits and risks of such Holder's investment in the Company, (ii) is able to bear the financial risks associated with an investment in the Flush Securities and (iii) has been given full access to such records of the Company and its subsidiaries and to the officers of the Company and the subsidiaries
as it has deemed necessary or appropriate to conduct its due diligence investigation.

 

(f)           The offer and sale of the Flush Securities is intended to be exempt from registration under the Securities Act, by virtue of Sections 3(a)(9) and 4(2) thereof.  Such Holder understands that the Flush Securities purchased hereunder have not been, and may never
be, registered under the Securities Act and that none of the Flush Securities can be sold or transferred unless they are first registered under the Securities Act and such state and other securities laws as may be applicable or the Company receives an opinion of counsel reasonably acceptable to the Company that an exemption from registration under the Securities Act is available (and then the Flush Securities may be sold or transferred only in compliance with such exemption and all applicable state and other
securities laws).  Such Holder acknowledges that it is familiar with Rule 144 of the rules and regulations of the Commission, as amended, promulgated pursuant to the Securities Act ("Rule 144"), and that such Holder has been advised that Rule 144 permits resales only under certain circumstances.  Such Holder understands that to the extent that Rule 144 is not available, such Holder will be unable to sell any Flush Securities
without either registration under the Securities Act or the existence of another exemption from such registration requirement.

 

(g)           Such Holder has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with any of the transactions contemplated
by this Agreement.

 

(h)           Such Holder acknowledges that the Flush Securities were not offered to such Holder by means of any form of general or public solicitation or general advertising, or publicly disseminated advertisements or sales literature, including (i) any advertisement, article, notice
or other communication published in any newspaper, magazine, or similar media, or broadcast over television or radio, or (ii) any seminar or meeting to which such Holder was invited by any of the foregoing means of communications.  Such Holder, in making the decision to purchase the Flush Securities, has relied upon independent investigation made by it and the representations, warranties and agreements set forth in this Agreement and the other transaction documents and has not relied on any information
or representations made by third parties.

 

 

 

 

3

 

 

3.           Representations, Warranties and Covenants of the Company.  The
Company represents and warrants to each of the Holders, and covenants for the benefit of each Holder, as follows:

 

(a)           The Company has been duly incorporated and is validly existing and in good standing under the laws of the State of Nevada, with full corporate power and authority to own, lease and operate its properties and to conduct its business as currently conducted.  The
Company is duly registered and qualified to conduct its business and is in good standing in each jurisdiction or place where the nature of its properties or the conduct of its business requires such registration or qualification, except where the failure to register or qualify has not had and would not reasonably be expected to have a Material Adverse Effect.  For purposes of this Agreement, “Material Adverse Effect” shall
mean (i) any event affecting the business, results of operations, prospects, assets or financial condition of the Company or its subsidiaries that is material and adverse to the Company and its consolidated subsidiaries, when taken as a whole, and/or (ii) any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company from entering into and performing any of its obligations under this Agreement in any material respect.

 

(b)           The Flush Securities have been duly authorized by all necessary corporate action and, when paid for or issued in accordance with the terms hereof, the Flush Securities shall be validly issued and outstanding, fully paid and nonassessable, free and clear of all liens,
encumbrances and rights of refusal of any kind.

 

(c)           This Agreement has been duly authorized, validly executed and delivered on behalf of the Company and is a valid and binding agreement and obligation of the Company enforceable against the Company in accordance with its terms, subject to limitations on enforcement by general
principles of equity and by bankruptcy or other laws affecting the enforcement of creditors’ rights generally, and the Company has full power and authority to execute and deliver the Agreement and the other agreements and documents contemplated hereby and to perform its obligations hereunder and thereunder.

 

(d)           The execution and delivery of the Agreement and the consummation of the transactions contemplated by this Agreement by the Company, will not (i) conflict with or result in a breach of or a default under any of the terms or provisions of, (A) the Company’s articles
of incorporation or by-laws, or (B) of any provision of any indenture, mortgage, deed of trust or other agreement or instrument to which the Company is a party or by which it or any of its properties or assets is bound, (ii) result in a violation of any provision of any law, statute, rule, regulation, or any existing applicable decree, judgment or order by any court, Federal or state regulatory body, administrative agency, or other governmental body having jurisdiction over the Company, or any of its material
properties or assets or (iii) result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to the terms of any agreement or instrument to which any of them is a party or by which any of them may be bound or to which any of their property or any of them is subject except in the case of clauses (i)(B) or (iii) of this Section 3(d) for any such conflicts, breaches, or defaults or any liens, charges, or encumbrances which would
not reasonably be expected to have a Material Adverse Effect.

 

 

 

 

4

 

 

(e)           The delivery and issuance of the Flush Securities in accordance with the terms of and in reliance on the accuracy of each Holder’s representations and warranties set forth in this Agreement will be exempt from the registration requirements of the Securities Act.

 

(f)           No consent, approval or authorization of or designation, declaration or filing with any governmental authority on the part of the Company is required in connection with the valid execution and delivery of this Agreement or the offer, sale or issuance of the Flush Securities
or the consummation of any other transaction contemplated by this Agreement (other than any filings which may be required to be made by the Company with the Securities and Exchange Commission (the “Commission”) or pursuant to any state or “blue sky” securities laws subsequent to the Closing).

 

(g)           There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened against the Company which questions the validity of this Agreement or the transactions contemplated hereby or any action taken or to be taken pursuant
thereto.  There is no action, suit, claim, investigation or proceeding pending or, to the knowledge of the Company, threatened, against or involving the Company or any subsidiary, or any of their respective properties or assets which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.

 

(h)           The Company has complied and will comply with all applicable federal and state securities laws in connection with the offer, issuance and delivery of the Flush Securities hereunder.  Neither the Company nor anyone acting on its behalf, directly or indirectly,
has or will sell, offer to sell or solicit offers to buy any of the Flush Securities, or similar securities to, or solicit offers with respect thereto from, or enter into any preliminary conversations or negotiations relating thereto with, any person, or has taken or will take any action so as to bring the issuance and sale of any of the Flush Securities under the registration provisions of the Securities Act and applicable state securities laws.  Neither the Company nor any of its affiliates, nor any
person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with the offer or sale of any of the Flush Securities.

 

(i)           The Company has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with any of the transactions contemplated
by this Agreement, with the exception of any such fees that may be paid to TriPoint Global Equities, LLC, or its affiliates.

 

(j)           Immediately following the closing, the Company’s capitalization shall be as set forth on Schedule B attached hereto.

 

(k)           The Company agrees that the Flush Securities shall be treated as “Registrable Securities” as defined in the Registration Rights agreement dated August 9, 2007, between the Holders and the Company; provided, however, that no penalties or other liquidated damages
shall apply retroactively with regard to the registration of the securities.

 

 

 

 

5

 

 

(l)           Within 90 days following the closing, the Company agrees that it will restructure its Board of Directors so that it will be comprised of either 5 or 7 members and that a majority of the members of the Board will be “independent” as defined in the NYSE-Amex
Company Guide.  Furthermore, at least one of the independent directors will be a person appointed by the Holders, subject to the reasonable agreement of the Company as to such person’s qualifications.

 

4.           Conditions Precedent to the Obligation of the Company to Issue the Flush Securities.  The obligation hereunder of the Company
to issue and deliver the Flush Securities to the Holders is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below.  These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

 

(a)           Each Holder shall have executed and delivered this Agreement.

 

(b)           The Warrants shall have been delivered to the Company for cancellation.

 

(c)           Each of the representations and warranties of each Holder in this Agreement shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct
in all respects) as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects (except for those representations and warranties that are qualified by materiality or Material Adverse Effect, which shall be true and correct in all respects) as of such date.

 

5.           Conditions Precedent to the Obligation of the Holders to Accept the Flush Securities. The obligation hereunder of the Holders to
accept the Flush Securities is subject to the satisfaction or waiver, at or before the Closing Date, of each of the conditions set forth below.  These conditions are for each Holder’s sole benefit and may be waived by such Holder at any time in its sole discretion.

 

(a)           The Company shall have executed and delivered this Agreement.

 

(b)           Each of the representations and warranties of the Company in this Agreement shall be true and correct in all material respects  as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are
expressly made as of a particular date, which shall be true and correct in all material respects  as of such date.

 

(c)           No statute, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by
this Agreement at or prior to the Closing Date.

 

 

 

 

6

 

 

(d)           No action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which questions the validity of the Agreement or the transactions contemplated thereby
or any action taken or to be taken pursuant thereto.  As of the Closing Date, no action, suit, claim or proceeding before or by any court or governmental agency or body, domestic or foreign, shall be pending against or affecting the Company, or any of its properties, which, if adversely determined, is reasonably likely to result in a Material Adverse Effect.

 

(e)           Each Holder shall have executed and delivered this Agreement.

 

(f)           The certificates representing the Flush Securities shall have been duly executed and delivered to the Holders.

 

(g)           The Company shall have delivered on the Closing Date to the Holders a certified copy of the resolutions of the board of directors of the Company authorizing the transactions contemplated by this Agreement.

 

(h)              At the Closing, the Holders shall have received an opinion of counsel to the Company, dated the date of the Closing, in the form of Exhibit C hereto.

 

(i)           The Company shall have received executed written consents and waivers from its security holders, if required, consenting to the transactions contemplated by this Agreement and waiving any price protection such security holders may be entitled as a result of the issuance
of the Flush Securities.

 

(j)           No Material Adverse Effect shall have occurred at or before the Closing Date.

 

6.           Fees and Expenses.  Each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts,
if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement, provided, however, that the Company shall pay all reasonable attorneys’ fees and expenses (inclusive of disbursements and out-of-pocket expenses) incurred by the Holders in connection with the preparation, negotiation, execution
and delivery of this Agreement, which shall not exceed $1,000 without the express written consent of the Company.

 

 

 

 

7

 

 

 

7.           Company Indemnification.  The Company hereby agrees to indemnify
and hold harmless the Holders and their respective officers, directors, shareholders, employees, agents and attorneys against any and all losses, claims, damages, liabilities and reasonable expenses (collectively “Claims”) incurred by each such person in connection with defending or investigating any such Claims, whether or not resulting in any liability to such person, to which any such indemnified party may become subject, insofar
as such Claims arise out of or are based upon any breach of any representation or warranty or agreement made by the Company in this Agreement.

 

8.           Governing Law; Consent to Jurisdiction.  This Agreement shall be
governed by and interpreted in accordance with the laws of the State of New York without giving effect to the rules governing the conflicts of laws.  Each of the parties consents to the exclusive jurisdiction of the Federal courts whose districts encompass any part of the County of New York located in the City of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum
non conveniens, to the bringing of any such proceeding in such jurisdictions.  Each party waives its right to a trial by jury.  Each party to this Agreement irrevocably consents to the service of process in any such proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to such party at its address set forth herein.  Nothing herein shall affect the right of any party to serve process in any other manner permitted by law.

 

9.           Notices.  All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, express overnight courier, registered first class mail, or telecopier (provided that any notice sent by telecopier shall be confirmed by other means pursuant to this Section 10), initially to the address set forth below, and thereafter at such other address, notice of which is given in accordance with the provisions of this Section.

 

 

(a)           if to the Company:

 

	 	
Jpak Group, Inc.

15 Xinghua Road, Qingdao

Shangdong Province, China, 266401

Attention: Yiyun Wang

Tel. No.: +86-532-84616387

Fax No.: +86-532-84630586

 

	 	
with a copy to:

 

 

 

 

 

8

 

 

 

	 	
Leser Hunter Taubman & Taubman

17 State Street, Suite 2000

New York, NY 10004

Attention:  Louis E. Taubman, Esq.

Tel. No.:  (917) 512-0827

Fax No.:  (212) 202-6380

 

 

 

(b)           if to a Holder:

 

 To the applicable address set forth on the signature page hereto

 

	
with a copy to:

 

All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; when receipt is acknowledged, if telecopied; or when actually received or refused if sent by other means.

 

10.           Entire Agreement.  This Agreement constitutes the entire understanding
and agreement of the parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous oral or written proposals or agreements relating thereto all of which are merged herein.  This Agreement may not be amended or any provision hereof waived in whole or in part, except by a written amendment signed by both of the parties.

 

11.           Counterparts.  This Agreement may be executed by facsimile signature
and in counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

 

12.           Language. This Agreement is in English only; the Chinese language herein is merely
for reference purpose. If there is any conflict between the English and Chinese language, English language prevails.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

 

  

9

  

IN WITNESS WHEREOF, this Agreement was duly executed on the date first written above.

JPAK GROUP, INC.

By:_____________________

Name:

Title:

VISION OPPORTUNITY MASTER FUND LP

By:_____________________

Name:

Title:

VISION CAPITAL ADVANTAGE FUND LP

By:_____________________

Name:

Title:

QVT FUND LP,

By its general partner, QVT Associates GP LLC

By:_____________________

Name:

Title:

QUINTESSENCE FUND LP,

By its general partner, QVT Associates GP LLC

By:_____________________

Name:

Title:

LEE WAH INVESTMENTS LIMITED

By:_____________________

Name:

Title:

  

10

  

EXHIBIT A

	  	
Series A 

Warrant

 
	
Strike Price

 
	
Cashless 

Exercise Price

 
	
New Common 

Shares

 

	  	  	  	  	  
	
Vision Opportunity Master
	
2,122,641
	
$0.56
	
$1.00
	
933,962

	
Vision Capital Advantage Fund LP
	
627,359
	
$0.56
	
$1.00
	
276,038

	
QVT Fund LP
	
2,475,000
	
$0.56
	
$1.00
	
1,089,000

	
Quintessence Fund LP
	
275,000
	
$0.56
	
$1.00
	
121,000

	  	  	  	  	  
	
Totals
	
5,500,000
	  	  	
2,420,000

	  	  	  	  	  
	  	
Series B 

Warrant

 
	  	  	  
	  	  	  	  	  
	
Vision Opportunity Master
	
2,122,641
	
$0.63
	
$1.00
	
785,377

	
Vision Capital Advantage Fund LP
	
627,359
	
$0.63
	
$1.00
	
232,123

	
QVT Fund LP
	
2,475,000
	
$0.63
	
$1.00
	
915,750

	
Quintessence Fund LP
	
275,000
	
$0.63
	
$1.00
	
101,750

	  	  	  	  	  
	
Totals
	
5,500,000
	  	  	
2,035,000

	  	  	  	  	  
	  	
Series C 

Warrant

 
	  	  	  
	  	  	  	  	  
	
Vision Opportunity Master
	
1,608,061
	
$0.64
	
$1.00
	
578,902

	
Vision Capital Advantage Fund LP
	
475,272
	
$0.64
	
$1.00
	
171,098

	
QVT Fund LP
	
1,875,001
	
$0.64
	
$1.00
	
675,000

	
Quintessence Fund LP
	
208,333
	
$0.64
	
$1.00
	
75,000

	  	  	  	  	  
	
Totals
	
4,166,667
	  	  	
1,500,000

	  	  	  	  	  
	  	
Series D 

Warrant

 
	  	  	  
	  	  	  	  	  
	
Vision Opportunity Master
	
1,608,061
	
$0.71
	
$1.00
	
466,338

	
Vision Capital Advantage Fund LP
	
475,272
	
$0.71
	
$1.00
	
137,829

  

11

  

 

 

	
QVT Fund LP
	
1,875,001
	
$0.71
	
$1.00
	
543,750

	
Quintessence Fund LP
	
208,333
	
$0.71
	
$1.00
	
60,417

	  	  	  	  	  
	
Totals
	
4,166,667
	  	  	
1,208,334

	  	  	  	  	  
	  	
Series E 

Warrant

 
	  	  	  
	  	  	  	  	  
	
Lee Wah Investments Ltd.
	
6,000,000
	
$0.60
	
$1.00
	
2,400,000

	  	  	  	  	  
	  	
Series F 

Warrant

 
	  	  	  
	  	  	  	  	  
	
Lee Wah Investments Ltd.
	
6,000,000
	
$0.70
	
$1.00
	
1,800,000

 

 

 

 

 

 

 

 

 

 

12

 

EXHIBIT B

	  	
Preferred Stock
	  	  	  
	  	
 Series A
	
Series B
	
Series C
	
  Common Stock
	  
	  	
 Number
	
 Common Share Equivalent
	
 Number
	
 Common Share Equivalent
	
 Number
	
 Common Share Equivalent
	
 Number
	
 Common Share Equivalent
	
Fully Diluted Common Shares

	
Post Flush Balance
	
     5,608,564
	
    11,217,128
	
     5,000,000
	
     8,333,333
	
    12,000,000
	
    12,000,000
	
    36,368,334
	
    36,368,333
	
67,918,795

	  	  	  	  	  	  	  	  	  	  
	
Totals
	
     5,608,564
	
    11,217,128
	
     5,000,000
	
     8,333,333
	
    12,000,000
	
    12,000,000
	
    36,368,334
	
    36,368,333
	
67,918,795

	  	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  
	
Investor Holdings
	  	  	  	  	  	  	  	  	  
	  	  	  	  	  	  	  	  	  	  
	
Vision Opportunity Master
	
2,164,540
	
4,329,080
	
1,929,674
	
3,216,123
	
0
	
0
	
2,764,579
	
2,764,579
	
10,309,782

	
Vision Capital Advantage Fund LP
	
639,742
	
1,279,484
	
570,326
	
950,543
	
0
	
0
	
817,088
	
817,088
	
3,047,115

	
OVT Fund LP
	
2,523,854
	
5,047,708
	
2,250,000
	
3,750,000
	
0
	
0
	
3,223,500
	
3,223,500
	
12,021,208

	
Quintessnece Fund LP
	
280,428
	
560,856
	
250,000
	
416,667
	
0
	
0
	
358,167
	
358,167
	
1,335,690

	
Leh Wah Investments Ltd.
	
0
	
0
	
0
	
0
	
12,000,000
	
12,000,000
	
4,200,000
	
4,200,000
	
16,200,000

 

 

 

 

13

 

 

 

 

 

 

 

EXHIBIT C

FORM OF OPINION

1.           The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has the requisite corporate power to own, lease and operate its properties and assets, and to carry on its business as presently conducted.

 

2.           The Company has the requisite corporate power and authority to enter into and perform its obligations under the Exchange Agreement.  The execution, delivery and performance of each of the transaction documents contemplated by the Exchange Agreement by the Company
and the consummation by it of the transactions contemplated thereby have been duly and validly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required.

3.           The shares of Common Stock issuable in exchange for the Warrants have been duly authorized and issued and when delivered will be validly issued, fully paid and nonassessable.

4.           The offer, issuance and sale of the shares of Common Stock pursuant to the Exchange Agreement are exempt from the registration requirements of the Securities Act.

 

  

14

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