Document:

exv10w2

 

Exhibit 10.2

CONSULTING AGREEMENT

     This Consulting Agreement (the “Agreement”) dated November 5, 2007 is entered into by and
between LEGACY BANCORP, INC. (the “Company”), LEGACY BANKS (the “Bank”) and MICHAEL A. CHRISTOPHER
(the “Executive” or “Consultant”).

RECITALS:

     WHEREAS, the Executive intends to retire as Chief Operating Officer, President and Director of
the Company and the Bank and as a Director of The Legacy Banks Foundation effective January 1,
2008; and

     WHEREAS, the Company, the Bank and the Executive have entered into that certain Separation
Agreement and General Release dated as of the date hereof (the “Separation Agreement”); and

     WHEREAS, the Company and the Bank desire to retain the services of the Executive as a
consultant following his retirement upon the terms and subject to the conditions set forth in this
Consulting Agreement; and

     WHEREAS, Executive desires to be hired as a consultant to the Company and the Bank to provide
the consulting services set forth below upon the terms and subject to the conditions set forth in
this Consulting Agreement.

     NOW, THEREFORE, in consideration of the premises, the mutual promises, covenants and
conditions herein contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto intending to be legally bound
hereby agree as follows:

     1. Post-Employment Consulting Services. Upon his termination of employment
with the Company and the Bank, the Executive agrees to provide consulting services to the Boards of
Directors of the Company and the Bank (the “Board of Directors”) and the Chief Executive Officer
(the “CEO”) of the Company and the Bank until January 1, 2012, unless terminated sooner hereunder
(the “Consulting Period”). The consulting services will consist of general strategic and tactical
advice in regard to senior management issues within the scope of Executive’s current management
responsibilities and transitional matters relating to the Bank’s commercial lending operations and
investment and fiduciary services, which shall be provided in accordance with a work schedule
reasonably acceptable to Executive and the CEO (the “Consulting Services”). Consultations shall
occur at mutually convenient times, and may occur by telephone, in person, or in any other manner
acceptable to Executive and the CEO.

     2. Consideration. Executive shall receive no compensation for the Consulting Services
other than the continuation of the vesting of the 49,500 shares of the Company Common Stock (the
“Restricted Stock”) awarded to Executive pursuant to that

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certain Restricted Stock Award Agreement dated as of November 29, 2006 (the “Restricted Stock
Agreement”). As determined by the Compensation Committee of the Board of Directors, the Restricted
Stock Agreement shall continue in effect, in accordance with the Legacy Bancorp, Inc. 2006 Equity
Incentive Plan (the “Plan”) and this Agreement, subject to the additional condition that Executive
shall be compliance with Paragraphs 5 and 7 of the Separation Agreement.

     3. Reimbursement of Expenses. The Company and the Bank shall reimburse the
Consultant for his actual, reasonable, out-of-pocket expenses incurred in connection with the
provision of the Consulting Services, subject to the condition that such expenses shall be (a)
approved in advance by the CEO or (b) specified in a budget submitted by Executive and approved by
the CEO or the Board of Directors. The Consultant shall submit accurate and complete supporting
documents for reimbursement of such expenses and shall follow and Company and Bank policies
relating thereto as in effect from time to time.

     4. Post-Employment Noncompetition, Nonsolicitation and Confidentiality.
In exchange for the consideration from the Company and the Bank under Section 2 hereof, the
Consultant, the Company and the Bank agree that Consultant shall not compete with the Company or
the Bank for a period ending on January 1, 2012, in any city, town or county in which the Company
or the Bank has an office or has filed an application for regulatory approval to establish an
office, except as agreed to pursuant to a resolution duly adopted by the Board of Directors.
Consultant agrees that during such period and within said cities, towns and counties, Consultant
shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity
whose business materially competes with the depository, lending or other business activities of the
Company or the Bank. The parties hereto, recognizing that irreparable injury will result to the
Company or the Bank, their businesses and properties in the event of Consultant’s breach of this
Section 3, agree that in the event of any such breach or threatened breach by Consultant, the
Company or the Bank will be entitled, in addition to any other remedies and damages available, to
an injunction to restrain the violation hereof by Consultant, Consultant’s partners, agents,
servants, employees and all persons acting for or under the direction of Consultant. Nothing
herein will be construed as prohibiting the Company or the Bank from pursuing any other remedies
available to the Company or the Bank for such breach or threatened breach, including the recovery
of damages from Consultant.

     In addition, the Consultant shall comply with the following provisions of this Agreement until
January 1, 2012: Consultant will not, directly or indirectly:

               i) Solicit, induce, or attempt to induce employees of any Company Entity to terminate their
employment with, or otherwise cease their relationship with the Company Entity, or

               ii) Solicit, induce, hire or attempt to solicit, induce or hire any employee of any Company
Entity to work or provide services to any third party; or

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               iii) Solicit to divert or take away or attempt to divert or to take away, the business or
patronage of any Company Entities’ clients, customers or accounts, or prospective clients,
customers or accounts.

     Consultant recognizes, acknowledges and agrees that, prior to his retirement Executive had,
and during the Consulting Period Consultant may have, access to highly confidential and proprietary
information relating to the Company, the Bank and all subsidiaries and affiliates of each (the
“Company Entities”) and trade secrets (“Proprietary Information,” as described herein) and the use,
misappropriation or disclosure of Proprietary Information would cause irreparable injury to the
Company Entities; and it is essential to the protection of the Company Entities’ good will and to
the maintenance of the Company Entities’ competitive position that Proprietary Information be kept
secret and that Consultant not disclose Proprietary Information to others, or use any Proprietary
Information to Consultant’s own advantage or the advantage of any third parties. For purposes of
this Separation Agreement, the term “Proprietary Information” shall include any and all material
non-public information, and shall include and not be limited to non-public information relating to
any Company Entities’ past, present or planned or considered business activities; any Company
Entities’ depositors, borrowers and investors; techniques; processes; tools; market research, data
and strategy; strategic initiatives including mergers, acquisitions, sales and branch openings and
closings; and, information relating to sales and pricing, including customer-specific information,
pricing policies and strategies. Proprietary Information shall include information in any form
whatsoever, including but not limited to, hard copy, computer floppy diskette, CD, CD-ROM drive,
information retained in electronic storage, or other information storage means. Consultant
acknowledges and agrees that his obligations under this paragraph shall survive the termination of
this Agreement. Notwithstanding anything contained herein to the contrary, Consultant may disclose
any knowledge of banking, financial and/or economic principles, concepts or ideas which are not
derived from the business plans or activities of the Company Entities. Further, Consultant may
disclose information regarding the business activities of the Bank to the OTS, Massachusetts
Department of Banking or the FDIC pursuant to a formal regulatory request.

     5. Breach by Consultant. In the event the Company or the Bank believes Consultant has
breached Paragraph 5 or Paragraph 7 of the Separation Agreement, or Paragraph 4 hereof, it must
give Consultant written notice and opportunity to cure within fifteen (15) days of Consultant’s
receipt of the notice. This notice does not affect the ability of the Company or of the Bank to
seek a protective order against Consultant. If Consultant shall fail to cure such breach of
Paragraph 5 or Paragraph 7 of the Separation Agreement, or Paragraph 4 hereof, the Company shall be
entitled to terminate this Agreement in which event Consultant shall only be entitled to the shares
of Restricted Stock vested through the date of termination pursuant Restricted Stock Agreement and
the Plan.

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     6. Independent Contractor. The Company, the Bank and the Consultant intend that the
Consultant perform the consulting services as an independent contractor and not as an employee.
Accordingly, with respect to all services covered by this Agreement, the Consultant, the Company
and the Bank each acknowledge and agree that the Consultant will not be treated as an employee for
purposes of the Federal Insurance Contributions Act, the Social Security Act, the Federal
Unemployment Tax Act, federal and state income tax withholding, state unemployment taxes, State
Workmen’s Compensation Insurance and similar laws covering the employer-employee relationship. The
Consultant further acknowledges that he is responsible for the payment of any state or federal
income tax or self-employment tax with respect to the payments made to the Consultant under this
Agreement.

     7. Review by Counsel. The Company and the Bank have advised Consultant to consult
with an attorney of his choosing regarding the legal and tax effects of this Agreement prior to
signing this Agreement. The Consultant represents that he understands and agrees that Consultant
has the right and has been given the opportunity to review this Agreement with an attorney.

     WITNESS the following signatures:

SIGNATURES

	 	 	 	 	 	 
	 	 	 	 
	 	 	
 	 
	Date 	 	Michael A. Christopher 	 
	 	 	 	 
	 
	 	 	 	 
	 	 	
 	 
	 	 	LEGACY BANKS 	 
	Date 	 	 	 
	 
	 	 	 	 
	 	 	By  	
 	 
	 	 	 	J. Williar Dunlaevy 	 
	 	 	 	Title:  	 	 
	 
	 	 	LEGACY BANCORP, INC.

 	 
	 	 	By:  	 	 
	Date 	 	 	J. Williar Dunlaevy 	 
	 	 	 	Title:  	 	 
	 

Page 4Exhibit 4.1

FORM OF COMMON STOCK PURCHASE WARRANT

To Purchase __________ Shares of Common Stock of

BIONOVO, INC.

THIS COMMON STOCK PURCHASE WARRANT (this “Warrant”) CERTIFIES that, for value received, _________________________ (the “Holder”), is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after the date of issuance of this Warrant set forth below (the “Initial Exercise Date”) and on or prior to the five year anniversary of the Initial Exercise Date (the “Termination Date”) but not thereafter, to subscribe for and purchase from Bionovo, Inc., a Delaware
corporation (the “Company”), up to _______________ shares (the “Warrant Shares”) of Common Stock, par value $0.0001 per share, of the Company (the “Common Stock”). The purchase price of one share of Common Stock (the “Exercise Price”) under this Warrant shall be $3.50 subject to adjustment hereunder.

In addition to the terms defined elsewhere in this Warrant the following capitalized terms shall have the following meanings:

“Business Day” means any day other than a Saturday, Sunday or legal holiday in the State of California.

“Exempt Issuance” shall mean any of the following: (i) the offer and sale of the Common Stock and warrants to purchase Common Stock as contemplated by that certain Underwriting Agreement, dated October 30, 2007, by and among the Company, BMO Capital Markets Corp. and Canaccord Adams Inc.; (ii) issuances of Common Stock upon the exercise of options or warrants disclosed as outstanding in the Company’s filings made prior to the date hereof pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act Filings”); and (iii) the issuance of employee stock options pursuant to stock option plans described in the Exchange Act Filings.

“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or any other entity of any kind.

“Trading Day” means (i) a day on which the Common Stock is traded or quoted on a Trading Market, or (ii) if the Common Stock is not traded or quoted on a Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting price); provided, that in the event that the Common Stock is not traded or quoted as set forth in (i), and (ii) hereof, that Trading Day shall mean a Business Day.

 

 

“Trading Market” means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NASDAQ Capital Market, the American Stock Exchange, the New York Stock Exchange or the NASDAQ Global Market. 

1. Title to Warrant. Prior to the Termination Date and subject to compliance with applicable laws and Section 9 of this Warrant, this Warrant and all rights hereunder are transferable, in whole or in part, to up to three (3) Persons in any 12 month period, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto properly endorsed. 

2. Authorization of Shares. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of such purchase rights in accordance with the terms and conditions of this Warrant, including, without limitation, payment of the Exercise Price, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

3. Exercise of Warrant.

(a) Exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company of a duly executed facsimile copy of the Notice of Exercise Form annexed hereto, at the office of the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company); provided, however, the Holder shall also have surrendered this Warrant to the Company and the Company shall have received payment of the aggregate Exercise Price of the Warrant
Shares thereby purchased by wire transfer or cashier’s check drawn on a United States bank. Certificates for shares purchased hereunder shall be delivered to the Holder promptly following the exercise of this Warrant, but in no event later than three (3) Trading Days after the exercise date (the “Warrant Share Delivery Date”), and shall be free of restrictive legends. This Warrant shall be deemed to have been exercised and the Warrant Shares (to which the exercise relates) shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date of the latest to occur of (i) delivery to the Company of the Notice of Exercise Form, (ii) surrender of this Warrant and (iii) payment of the aggregate Exercise Price as set forth above and all taxes
required to be paid by the Holder, if any, pursuant to Section 7 (“Exercise Date”). 

(b) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

 

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(c) At any time during the Exercise Period when (a) a Restrictive Legend Event (as defined below) has occurred, the Holder may only exercise this Warrant (or the portion thereof being canceled) (a) if the “fair market value” (as calculated below) of one Share is greater than the Exercise Price and (b) in accordance with the next sentence. The Holder may exercise this Warrant by delivery of this Warrant at the principal office of the Company, together with the properly endorsed Notice of Exercise, in which event the Company shall issue to the Holder a number of Warrant Shares computed using the following formula (such exercise pursuant to this Section 3(c), a “Cashless Exercise”):

X = Y (A-B)

A

Where:

X = the number of Shares to be issued to the Holders;

Y = the number of Shares purchasable under this Warrant or, if only a portion of this Warrant is being exercised, the portion of this Warrant being canceled (at the date of such calculation); 

A = the fair market value of one share of the Company’s Common Stock (at the date of such calculation); and

B = Exercise Price (as adjusted to the date of such calculation).

For purposes of the above calculation, the “fair market value” of one share of Common Stock shall mean (i) the volume-weighted average sales price for the Shares on the Trading Market as reported by Bloomberg Financial Markets (or a comparable reporting service of national reputation selected by the Company and reasonably acceptable to the Holder if Bloomberg Financial Markets is not then reporting sales prices of such security) (collectively, “Bloomberg”) for the ten (10) consecutive Trading Days immediately preceding (but not including) the Exercise Date, or (ii) if the foregoing does not apply, the volume-weighted average sales price of the Shares during the same period in the over-the-counter market on the pink sheets or bulletin board for such security as reported by
Bloomberg, or if no sales price is so reported for the Shares, the last bid price of the Shares as reported by Bloomberg or (iii) if none of the foregoing applies, the fair market value shall be as determined by the Board of Directors of the Company in the exercise of its good faith judgment.

(d) The Company shall provide to the Holder prompt written notice of any time that the Company is unable to issue the Warrant Shares via DWAC transfer (or otherwise without restrictive legend), because (a) the Securities and Exchange Commission (the “SEC”) has issued a stop order with respect to the registration statement covering the resale of the Warrant Shares, (b) the Commission otherwise has suspended or withdrawn the effectiveness of such registration statement, either temporarily or permanently, (c) the Company has suspended or withdrawn the 

 

 

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effectiveness of such registration statement, either temporarily or permanently, or (d) otherwise (each a “Restrictive Legend Event”). To the extent that a Restrictive Legend Event occurs after the Holder has exercised this Warrant in accordance with Section 3 but prior to the delivery of the Warrant Shares, the Company shall (i) if the fair market value (as calculated above) of the Warrant Shares is greater than the Exercise Price, deliver that number of Warrant Shares to the Holder as should be delivered in a Cashless Exercise in accordance with this Section 3, and return to the Holder all consideration paid to the Company in
connection with the Holder’s attempted exercise of this Warrant pursuant to Section 3, or (ii) if the fair market value (as calculated above) of the Warrant Shares is less than the Exercise Price, rescind the previously submitted Notice of Exercise and shall return all consideration paid by Holder for such shares upon such rescission. The Company shall give prompt written notice to the Holder of any cessation of a Restrictive Legend Event.

(e) If a Restrictive Legend Event has occurred and no exemption from the registration requirements is available (including, without limitation, under Section 3(a)(9) of the Securities Act by virtue of a Cashless Exercise), this Warrant shall not be exercisable. Notwithstanding anything herein to the contrary, the Company shall not be required to make any cash payments to the Holder in lieu of issuance of the Warrant Shares. For purposes of Rule 144(d) promulgated under the Securities Act, as in effect on the date hereof, it is intended that the Warrant Shares issued in a Cashless Exercise shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.

4. Limitations on Exercise of Warrant. The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person’s affiliates) would beneficially own in excess of 4.99% of the shares of Common Stock outstanding immediately after giving effect to such exercise (the “Maximum Percentage”). For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such
sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein. Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended. For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (1) the Company’s most recent Form 10-KSB, Form 10-QSB, Current Report on Form 8-K or other public filing with the SEC, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the 

 

 

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Transfer Agent setting forth the number of shares of Common Stock outstanding. For any reason at any time, upon the written or oral request of the Holder, the Company shall within one Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.

5. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder a certificate or certificates representing the Warrant Shares pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay
in cash to the Holder the amount by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

6. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price.

7. Charges, Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event 

 

 

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certificates for Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

8. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.

9. Transfer, Division and Combination.

(a) Subject to compliance with any applicable securities laws and the conditions set forth in Sections 1 and 9(e) hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denomination or denominations specified in
such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. 

(b) This Warrant may be divided or combined with other Warrants (if such other Warrants are upon the same terms, other than number of Warrant Shares, as this Warrant) upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 9(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice.

(c) The Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 9.

(d) The Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants.

(e) If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer of this Warrant shall not be registered pursuant to an effective registration statement under the Securities Act and under applicable state securities or blue sky laws, the Company may require, as a condition of allowing such transfer (i) that the Holder or transferee of this Warrant, as the case may be, furnish to the Company a written opinion of counsel reasonably acceptable to the Company (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that such transfer may be made without registration 

 

 

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under the Securities Act and under applicable state securities or blue sky laws, (ii) that the holder or transferee execute and deliver to the Company an investment letter in form and substance acceptable to the Company and (iii) that the transferee be an “accredited investor” as defined in Rule 501 promulgated under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under the Securities Act.

10. No Rights as Shareholder until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder of the Company prior to the exercise hereof. Upon the exercise of this Warrant, the Warrant Shares so purchased shall be, and be deemed to be, issued to such Holder as the record owner of such shares as of the close of business on the Exercise Date with respect to such exercise.

11. Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it, and upon surrender and cancellation of such Warrant, if mutilated, the Company will make and deliver a new Warrant of like tenor and dated as of such cancellation, in lieu of such Warrant.

12. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a Saturday, Sunday or legal holiday.

13. Adjustments of Exercise Price and Number of Warrant Shares; Stock Splits, etc. The number and kind of securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall (i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately
prior thereto shall be adjusted so that the Holder shall be entitled to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment and dividing by the number of Warrant Shares or other securities of the Company that are purchasable pursuant hereto immediately after such adjustment. An adjustment made pursuant to this paragraph shall become effective
immediately after the effective date of such event retroactive to the record date, if any, for such event. For example, if the Company declared a 1-for-4 reverse stock split and 400 Warrant Shares were purchasable hereunder, then immediately 

 

 

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after such 1-for-4 reverse stock split the Warrant Shares purchasable hereunder would become 100 and the Exercise Price would become $14.00 per share. Such Exercise Price is obtained by multiplying the current $3.50 Exercise Price by 400 Warrant Shares purchasable under this example and dividing the product by 100 Warrant Shares purchasable after the 1-for-4 reverse stock split.

14. Fundamental Transaction. If, at any time while this Warrant is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”), then, upon any subsequent
exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable as a result of such merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section 14 and
insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Securities Exchange Act of 1934, as amended, or (3) a Fundamental Transaction involving a person or entity not traded on a Trading Market, the Company or any successor entity shall pay at the Holder’s option, exercisable at any time concurrently with or within 30 days after the consummation of the Fundamental Transaction, an amount of cash equal to the value of this Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV” function on Bloomberg using (i) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day immediately preceding the date
of consummation of the applicable Fundamental 

 

 

8

 

Transaction, (ii) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of the date of consummation of the applicable Fundamental Transaction and (iii) an expected volatility equal to the 100 day volatility obtained from the “HVT” function on Bloomberg determined as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction.

15. Subsequent Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder of the Common Stock
or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of the Dilutive Issuance), then the Exercise Price shall be reduced and only reduced to equal the greater of: (i) the Base Share Price or (ii) $2.50, and the number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents
are issued. Notwithstanding the foregoing, no adjustments shall be made, paid or issued under this Section 15 in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject to this Section 15, indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice the “Dilutive Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 15, upon the occurrence of any Dilutive Issuance,
after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise.

16. Voluntary Adjustment by the Company. The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

17. Notice of Adjustment. Whenever the number of Warrant Shares or number or kind of securities or other property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

 

 

9

 

18. Notice of Corporate Action. If at any time:

(a) the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or other distribution, or any right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or

(b) there shall be any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger of the Company with (other than a consolidation or merger in which the Company is the surviving corporation), or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation, or

(c) there shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at least fifteen (15) days’ prior written notice of the date on which a record date shall be selected for such dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least fifteen (15) days’ prior written notice of the date when the same shall take place. Such notice in accordance with the foregoing clause also shall specify (i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Each such written notice shall be sufficiently given if addressed to Holder at the last address of Holder appearing on the books of the Company and delivered in accordance with Section 20(d).

19. Authorized Shares. The Company covenants that during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant (the “Required Minimum”). If, on any date, the number of authorized but unissued (and otherwise unreserved) shares of Common Stock is less than the Required Minimum on such date, then the Board of Directors of the Company shall use commercially reasonable efforts to amend the Company’s certificate or articles of incorporation to increase the number of authorized but unissued shares of Common Stock to at least the 

 

 

10

 

number of shares of Common Stock that would result from the full exercise of the Warrant Shares at such time, as soon as practicable. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed.

 Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

 Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

20. Miscellaneous.

(a) Governing Law. This Warrant shall be governed by and construed in accordance with the internal laws of the State of California without regard to the conflicts of laws principles thereof. The parties hereto hereby irrevocably agree that any suit or proceeding arising directly and/or indirectly pursuant to or under this Warrant, shall be brought solely in a federal or state courts located in the State of California. By its execution hereof, the parties hereby covenant and irrevocably submit to the in personam jurisdiction of the federal and state courts located in the State of California and agree that any process in any
such action may be served upon any of them personally, or by certified mail or registered mail upon them or their agent, return receipt requested, with the same full force and effect as if personally served upon them in the State of California. The parties hereto waive any claim that any such jurisdiction is not a convenient forum for any such suit or proceeding and any defense or lack of in personam jurisdiction with respect thereto.

(b) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions upon resale imposed by state and federal securities laws.

 

 

11

 

(c) Nonwaiver and Attorneys’ Fees. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights hereunder terminate on the Termination Date. If any action, suit, arbitration or other proceeding for the enforcement of this Warrant is brought with respect to or because of an alleged dispute, breach, default or misrepresentation in connection with any of the provisions hereof, the successful or prevailing party shall be entitled to recover reasonable attorneys’ fees and other costs incurred in that proceeding, in addition to any other relief to which it or
he may be entitled. 

(d) Notices. All notices that are required or may be given pursuant to this Warrant must be in writing and delivered personally, by a recognized courier service, by a recognized overnight delivery service, or by registered or certified mail, postage prepaid, to the parties at the following addresses (or to the attention of such other Person or such other address as any party may provide to the other parties by notice in accordance with this section):

 

  	 
	If to the Holder:
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	Attention:
	 
	 

	 
	Telephone:
	 
	 

	 
	 
	 

	 
	With a copy to:
	 

	 
	 
	 

	 
	 
	 

	 
	 
	 

	 
	Attention:
	 
	 

	 
	Telephone:
	 
	 

	 
	 
	 

	 
	If to the Company:
	 

	 
	 
	 

	 
	5858 Horton Street, Suite 375

          Emeryville, CA 94608

          Attention: Isaac Cohen

          Telephone: (510) 601-2000
	 

	 
	 
	 

	 
	With a copy to:
	 

	 
	 
	 

	 
	Greenberg Traurig, LLP

          Met Life Building

          200 Park Avenue
	 

 

 

12

 

 

  	 
	New York, NY 10166

          Attention: Robert H. Cohen, Esq.

          Telephone: (212) 801-9200
	 

Any such notice or other communication will be deemed to have been given and received (whether actually received or not) on the day it is personally delivered or delivered by courier or overnight delivery service or, if mailed, when actually received.

(e) Remedies. Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate.

(f) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder.

(g) Amendment. This Warrant may be modified or amended only with the written consent of the Company and the Holder. Waiver of any provision of this Warrant shall be in writing.

(h) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.

(i) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.

********************

 

 

13

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized.

Dated: ___________ ___, 2007

 

  	 
	 
	BIONOVO, INC.

	 
	 
	 

	 
	 
	By: 
	  

	 
	 
	 
	Name:

          Title:

 

 

14

 

NOTICE OF EXERCISE

  	To:
	Bionovo, Inc.

(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

(2) Payment shall take the form of lawful money of the United States.

(3) Please issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below:

_______________________________

The Warrant Shares shall be delivered to the following:

 

  	  
	 
	 

	  
	 
	 

 

  	 
	 
	[PURCHASER]

	 
	 
	 

	 
	 
	By: 
	  

	 
	 
	Name:

          Title:

	 
	 
	 

	 
	 
	Dated: 
	 

					

 

 

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to 

_______________________________________________ whose address is

_______________________________________________________________.

 

_______________________________________________________________

Dated: ______________, _______

 

  	 

         
	Holder’s Signature: 
	 
	 

	  
	Holder’s Address: 
	 
	 

	  
	 
	 
	 

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.

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