Document:

Exhibit 10.3

 

EXCHANGE
AGREEMENT

 

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

 

RECITALS

 

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

 

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

 

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

 

AGREEMENT

 

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

 

1.             EXCHANGE.

 

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

 

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

 

 

2.                                      CLOSING
AND DELIVERY.

 

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

 

2.2          Delivery.

 

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

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.9          Certain
Securities Law Matters.  Assuming
the accuracy of the representations and warranties of the Holders contained in
Section 4 hereof, the issuance of the New Notes and the Conversion Shares
in accordance with the terms of the New Notes (collectively, the “Securities”) will be
exempt from the registration requirements of the Securities Act of 1933, as
amended (the “Securities Act”),
and will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements of
all applicable state securities laws.

 

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

 

4

 

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

 

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

 

4.             REPRESENTATIONS
AND WARRANTIES OF THE HOLDER.  Each
Holder hereby represents and warrants to the Company as follows (provided that
such representations and warranties do not lessen or obviate the
representations and warranties of the Company set forth in this Agreement):

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

(e)           Company
Information.  The Holder has had an
opportunity to discuss the Company’s business, management and financial affairs
with directors, officers and management of the Company and has had the
opportunity to review the Company’s operations and facilities.  The Holder has also had the opportunity to
ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.

 

(f)            Rule
144.  The Holder acknowledges and
agrees that the Securities are “restricted securities” as defined in Rule 144
promulgated under the Securities Act as in effect from time to time and must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available.  The Holder has been advised or is aware of
the provisions of Rule 144, which permits limited resale of shares purchased in
a private placement subject to the satisfaction of certain conditions,
including, among other things:  the
availability of certain current public information about the Company, the
resale occurring following the required holding period under Rule 144 and
certain volume limitations.

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

5.                                      CONDITIONS
TO CLOSING.

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

8

 

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

 

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

 

6.                                      COVENANTS
OF THE PARTIES

 

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

 

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

 

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

 

9

 

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

 

7.                                      MISCELLANEOUS.

 

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

 

7.2          Survival.  The representations, warranties, covenants
and agreements made herein shall survive the closing of the transactions
contemplated hereby.  The
representations, warranties, covenants and obligations of the Company, and the rights
and remedies that may be exercised by the Holders, shall not be limited or
otherwise affected by or as a result of any information furnished to, or any
investigation made by or knowledge of, the Holders or any of their
representatives.

 

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

 

7.4          Entire
Agreement.  This Agreement and the
other Operative Documents delivered pursuant hereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any
manner by any oral or written representations, warranties, covenants and
agreements except as specifically set forth herein and therein.  Each party expressly represents and warrants
that it is not relying on any oral or written representations, warranties, covenants
or agreements outside of the Operative Documents.

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

11

 

7.16        Termination.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

12

 

[Remainder of this
page is intentionally left blank]

 

13

 

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

 

	
  COMPANY:

  	
   

  
	
   

  	
   

  
	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  
	
   

  	
   

  
	
  Signature:

  	
   

  	
  /s/ Ajit S. Gill

  	
   

  
	
   

  	
  Ajit S. Gill

  
	
   

  	
  President, Chief Executive

  Officer and Director

  
	
   

  	
   

  
	
  Address:

  	
  150 Industrial Road

  
	
   

  	
  San Carlos, CA 94070

  
				

 

Exchange Agreement

Signature Page

 

 

HOLDERS:

 

ALEXANDRA GLOBAL
MASTER FUND LTD.

 

	
  By:

  	
  ALEXANDRA
  INVESTMENT MANAGEMENT, LLC,

  
	
   

  	
  as Investment
  Advisor

  
	
   

  
	
  Signature:

  	
  /s/ Mikhail Filimonov

  	
   

  
	
   

  	
   

  	
   

  
	
  Print Name:

  	
  Mikhail Filimonov

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
  Chairman, CEO & Chief Invesment Officer

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  c/o Alexandra Investment Management, LLC

  767 Third Avenue

  39th Floor

  New York, New York  10017

  Facsimile No.:  (212) 301-1810

  	
   

  
						

 

 

Exchange Agreement

Signature Page

 

 

APPENDIX I

 

	
  HOLDERS

  	
   

  	
  PRIOR
  NOTES

  	
   

  	
  NEW NOTES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ALEXANDRA GLOBAL MASTER FUND LTD.

  	
   

  	
  $

  	
  22,500,000

  	
   

  	
  $

  	
  15,119,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  22,500,000

  	
   

  	
  $

  	
  15,119,000Exhibit 10.4

 

AMENDMENT NO. 1 TO

EXCHANGE AGREEMENT

 

This Amendment Number 1 (the “Amendment”) is made and entered into as
of October 9, 2003, by and between Nektar Therapeutics, a Delaware corporation (the “Company”) and the
entities set forth on Appendix I hereto (each a “Holder” and collectively the “Holders”).

 

RECITALS

 

Whereas,
the Company and the Holders entered into an Exchange Agreement dated October 3,
2003 (the “Agreement”)
pursuant to which the Holders shall exchange and cancel the Holders’ entire
beneficial interest in the Company’s 3.5% Convertible Subordinated Notes due
2007 (the “Prior Notes”)
in consideration for the issuance by the Company to the Holders of the
Company’s 3% Convertible Subordinated Notes due 2010 (the “New Notes”) (the “Exchange”); and

 

Whereas,
the Company and the Holders desire to enter into this Amendment to amend the
Agreement.

 

AGREEMENT

 

Now, Therefore,
in consideration of the mutual agreements, covenants and considerations
contained herein, the receipt of which are hereby acknowledged, the undersigned
hereby agree as follows:

 

1.             Section 2.2.  Section 2.2 is hereby amended, restated and
replaced with the following:

 

(a)           At
the Closing, subject to the terms and conditions set forth herein, the Company
shall issue and deliver to each Holder, against evidence of cancellation of
such Holder’s beneficial interests in the Prior Notes, a note (the “Note”) in favor of
such Holder, payable in the principal amount set forth opposite such Holder’s
name in Appendix I.

 

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

 

2.             Section 6.4.  A new Section 6.4 shall be added to the
Agreement as follows:

 

Section 6.4             The
Depository Trust Company Eligibility.  The Company covenants that it shall use its commercially reasonable
efforts to cause the New Notes to be deposited with DTC and the Holders’
ownership to be reflected in book entry-form as soon as reasonably practicable
in accordance with DTC policies and procedures, following the effective date of
a registration statement covering the resale of the New Notes by the Holder.

 

 

 

3.             Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be an original, and all of which shall
constitute one instrument.

 

4.             Full Force and
Effect.  The provisions of
the Agreement shall remain in full force and effect, except as set forth
herein.

 

2

 

In Witness Whereof,
the parties hereto have executed this Amendment as
of the date set forth in the first paragraph hereof.

 

	
  COMPANY:

  
	
   

  
	
  Nektar Therapeutics

  
	
   

  
	
  Signature:

  	
   

  	
  /s/ Ajit S. Gill

  	
   

  
	
   

  	
   

  	
  Ajit S. Gill

  
	
   

  	
   

  	
  President, Chief Executive

  Officer and Director

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  150 Industrial Road

  
	
   

  	
   

  	
  San Carlos, CA 94070

  

 

3

 

HOLDERS:

 

Salomon
Brothers Qualified Investor Portfolios Multi-Strategy Arbitrage Portfolio

Salomon
Brothers Diversified Arbitrage Strategies Fund Ltd.

Salomon
Brothers Enhanced Arbitrage Strategies Fund

CEBT
– Comingled Employee Benefit Trust – Capital Structure Arbitrage

General
Motors Employees Global Group Pension Trust

General
Motors Welfare Benefits Trust

Salomon Brothers Market Neutral Arbitrage
Fund L.P.

 

	
  By:

  	
  Salomon Brothers Asset Management, Inc.,

  the investment manager of each of the above listed Holders.

  	 

	
   

  	 

	
   

  	 

	
  Signature:

  	
   

  	
   

  	
  /s/ Kenneth Lee

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  Print Name:

  	
   

  	
  Kenneth Lee

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  Title:

  	
   

  	
   

  	
  Director/Portfolio Manager

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  Address:

  	
   

  	
  399 Park Avenue, 7th Floor

  	 

	
   

  	
   

  	
  New York, NY 10022

  	 

	
   

  	
   

  	
   

  	 

	
  Copies to:

  	
   

  	
  Salomon Brothers Asset Management

  	 

	
   

  	
   

  	
  P.O. Box 1080

  
	
   

  	
   

  	
  Church Street Station

  
	
   

  	
   

  	
  New York, NY 10008-1080

  
	
   

  	
   

  	
  ATTN: SBAM/Citigroup LIBRA

  
								

 

4

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