Document:

Exhibit 10.1

 

PLEDGE AGREEMENT

 

This PLEDGE
AGREEMENT (this “Agreement”) is made and entered into as of October 9,
2003 by and among NEKTAR THERAPEUTICS, a Delaware corporation (the “Grantor”),
having its principal executive offices at 150 Industrial Road, San Carlos,
California 94070 and J.P. MORGAN TRUST COMPANY, NATIONAL ASSOCIATION (“J.P.
Morgan”), having an office at 560 Mission Street, 13th Floor, San Francisco,
California 94105, (i) in its capacity as trustee (the “Trustee”) for the
holders (the “Holders”) of the Notes (as hereinafter defined) issued by the
Grantor under the Indenture referred to below and (ii) in its individual
capacity, as securities intermediary (in such capacity, the “Pledged Securities
Intermediary”) at its office in New York c/o: J.P. Morgan Chase Bank,
Institutional Trust Services, 4 New York Plaza, 15th Floor, New York, New York
10004 (the “Account Office”) with respect to the Pledge Account (as hereinafter
defined).  Capitalized terms used herein
and not otherwise defined herein shall have the meanings given to such terms in
the Indenture.

 

W I T N E S S E T H

 

WHEREAS, the
Grantor and the Trustee have entered into that certain Indenture dated as of
the date hereof (as amended, restated, supplemented or otherwise modified from time
to time, the “Indenture”), pursuant to which the Grantor is issuing in one or
more series from time to time its 3% Convertible Subordinated Notes due 2010
(the “Notes”); and

 

WHEREAS,
subject to the terms of this Agreement, the Pledged Securities Intermediary has
established for the Grantor, as beneficial owner, a securities account (the
“Pledge Account”) at the Account Office, registered in the name of the Trustee,
as entitlement holder, and designated as Account No. 10206353.1, Reference:
“J.P. Morgan Trust Company, National Association as Pledged Securities
Intermediary, Nektar Therapeutics Convertible Bond Collateral A/C”; and

 

WHEREAS, the
Grantor has agreed to purchase or cause the purchase of security entitlements
with respect to the U. S. Government Securities identified by CUSIP number
in Schedule I hereto (such security entitlements being, collectively, the
“Pledged Securities”), for the account of the Pledged Securities Intermediary
for credit to the Pledge Account, in an amount that will be sufficient, upon
receipt of the scheduled interest and principal payments in respect thereof, to
provide for the payment of the first six scheduled interest payments due on the
Notes; and

 

WHEREAS, to
secure the obligations of the Grantor under the Indenture and the Notes to pay
in full each of the first six scheduled interest payments on the Notes and to
pay in full all of the principal, premium (if any) and interest on the Notes
and all other amounts payable by the Grantor under the Indenture in the event that
the Notes or any principal thereof or premium, if any, thereon becomes due and
payable prior to such time as the first six scheduled interest payments thereon
shall have been paid in full (collectively, the “Obligations”), the Grantor has

 

 

agreed (i) to grant to the
Trustee, for its benefit and the ratable benefit of the Holders of the Notes, a
security interest in the Pledge Account and all cash, Pledged Securities and
other Collateral (as hereinafter defined) from time to time deposited therein or
credited thereto and (ii) to execute and deliver this Agreement in order
to secure the payment and performance by the Grantor of all the Obligations;
and

 

WHEREAS, it is
a condition precedent to the purchase of the Notes by the initial Holders
thereof that the Grantor shall have granted the security interests contemplated
by this Agreement; and

 

WHEREAS,
unless otherwise defined herein or in the Indenture, terms used herein that are
defined in Article 8 or 9 of the Uniform Commercial Code as in effect in the
State of New York (the “UCC”) are used herein as therein defined:

 

NOW,
THEREFORE, in consideration of the mutual promises herein contained, and in
order to induce the initial Holders to purchase the Notes, the Grantor hereby
agrees with the Trustee, for the benefit of the Trustee and for the ratable
benefit of the Holders of the Notes, and with the Pledged Securities
Intermediary as follows:

 

SECTION
1.  Grant of Security Interest.  The Grantor hereby grants to the Trustee,
for its benefit and for the ratable benefit of the Holders of the Notes, a
security interest in and to all of the Grantor’s right, title and interest in,
to and under the following, in each case whether now owned or hereafter
acquired, wherever located and whether now or hereafter existing (hereinafter
collectively referred to as the “Collateral”):

 

(a)                                  the
Pledge Account;

 

(b)                                 all
cash or credit balances from time to time deposited in or credited to the
Pledge Account;

 

(c)                                  the
Pledged Securities and all other financial assets (including certificated and
uncertificated securities) and security entitlements from time to time
deposited in, credited to, or created or otherwise carried in the Pledge
Account;

 

(d)                                 all
interest, dividends, cash, instruments and other property from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Collateral;

 

(e)                                  all
securities (whether certificated or uncertificated) or other financial assets,
security entitlements, securities accounts, accounts, general intangibles,
instruments, documents, cash or deposit accounts representing or evidencing any
or all of the Collateral; and

 

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(f)                                    to
the extent not covered by clauses (a) through (e) above, all proceeds of any
and all of the foregoing Collateral (including, without limitation, proceeds
that constitute property of the types described in clauses (a) through (e)
above).

 

SECTION
2.  Secured Obligations.  This Agreement and the grant of a security
interest in the Collateral secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration, upon
redemption or otherwise) of all Obligations now or hereafter existing, whether
for principal, premium, interest, fees, indemnities or otherwise, and all
obligations of the Grantor now or hereafter existing under this Agreement (all
such Obligations and such other obligations being, collectively, the “Secured
Obligations”).  Without limiting the
generality of the foregoing, this Agreement and the grant of a security
interest in the Collateral hereunder secure, to the fullest extent permitted by
applicable law, the payment of all amounts that constitute part of the Secured
Obligations and that would be owed by the Grantor to the Trustee or the Holders
under the Notes or the Indenture but for the fact that they are unenforceable
or not allowable due to the existence of a bankruptcy, reorganization or
similar proceeding involving the Grantor.

 

SECTION
3.  Maintaining the Pledge Account.  Prior to or concurrently with the execution
and delivery hereof and for so long as any Secured Obligation shall remain
outstanding,

 

(a)                                  the
Trustee shall establish and maintain (and the Pledged Securities Intermediary
shall maintain and administer in accordance with this Agreement) the Pledge
Account with the Pledged Securities Intermediary at the Account Office in
accordance with the terms of this Agreement. The Pledge Account shall at all
times be under the sole dominion and control of, and shall at all times be
segregated from any other custodial, collateral or other accounts maintained
by, or under the dominion and control of, the Trustee;

 

(b)                                 it
shall be a term and condition of the Pledge Account, notwithstanding any term
or condition to the contrary in any other agreement relating to the Pledge
Account, and except as otherwise provided by the provisions of Section 5
and Section 15.9 of this Agreement, that no Collateral (including proceeds
thereof) shall be paid or released from the Pledge Account to or for the
account of, or withdrawn by or for the account of, and no entitlement orders
with respect to any of the Collateral shall be given to the Pledged Securities
Intermediary by, the Grantor or any other Person other than the Trustee as provided
herein;

 

(c)                                  subject
to the provisions of this Agreement, the Pledge Account shall be registered in
the name of the Trustee on the books and records of the Pledged Securities
Intermediary, the Trustee shall be identified on such books and records as the
entitlement holder with respect to all security entitlements in all financial
assets from time to time held in or credited to the Pledge Account, and the
Trustee shall have the sole right to (i) deliver entitlement orders with
respect to the Pledge Account and any Collateral from time to time credited
thereto, deposited therein or represented thereby or (ii) make withdrawals from
the Pledge Account or

 

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otherwise exercise any other
rights with respect to any Collateral from time to time credited thereto or on
deposit therein; and

 

(d)                                 the
Pledge Account shall be subject to such applicable laws, and such applicable
regulations of any appropriate banking or governmental authority, as may now or
hereafter be in effect, including without limitation any applicable regulations
of the Board of Governors of the Federal Reserve System.

 

SECTION
4.  Acquisition of Pledged Securities
for Credit to the Pledge Account.

 

(a)                                  On
or prior to the date hereof, the Grantor shall purchase or cause the purchase
of the Pledged Securities for the account of the Pledged Securities
Intermediary for credit to the Pledge Account.

 

(b)                                 Upon
transfer or credit of the Pledged Securities to the Pledged Securities
Intermediary, as confirmed to the Pledged Securities Intermediary by the
Federal Reserve Bank of New York or another securities intermediary at which
the Pledged Securities Intermediary maintains a securities account, the Pledged
Securities Intermediary shall make appropriate book entries indicating that the
Pledged Securities have been credited to and are held in the Pledge Account.

 

SECTION
5.  Disbursements From the Pledge
Account; Transfers of Additional Amounts to the Pledge Account.

 

(a)                                  At
least three Business Days prior to the due date of any of the first six
scheduled interest payments on the Notes, the Grantor may, pursuant to written
instructions given by the Grantor to the Trustee (each an “Issuer Order”),
instruct the Trustee to direct the Pledged Securities Intermediary to release
from the Pledge Account, and pay to the Holders of the Notes as of the
applicable Regular Record Date, proceeds of the Pledged Securities sufficient
to provide for payment in full of such interest then due on the Notes.  Upon receipt of an Issuer Order, the Trustee
will direct the Pledged Securities Intermediary to release funds from (and to
the extent of) proceeds of the Pledged Securities in the Pledge Account in an
amount sufficient to provide for the payment in full of such interest then due
on the Notes, as instructed in such Issuer Order, and to transfer such funds to
the Holders of the Notes in accordance with the payment provisions of the
Indenture.  Nothing in this
Section 5 shall affect the Trustee’s rights to direct the application of
the Collateral to the payment of amounts due on the Notes upon acceleration
thereof in accordance with the terms of the Indenture.

 

(b)                                 If
the Grantor makes all or any portion of any interest payment for which the
Collateral is security from a source of funds other than the Pledge Account
(“Grantor Funds”), the Grantor may, after payment in full of such interest
payment, instruct the Trustee, pursuant to an Issuer Order, to direct the
Pledged Securities Intermediary to release to the Grantor, or to another party
designated by the Grantor in such Issuer Order (the “Grantor’s Designee”),
proceeds from the Pledge Account in an amount that, in the discretion of the
Grantor, is less than

 

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or equal to the amount of
Grantor Funds applied to such interest payment; provided that, after giving
effect to such release, the scheduled interest and principal payments in
respect of the Pledged Securities remaining in the Pledge Account, together
with any cash remaining in the Pledge Account, equal or exceed the amount
necessary to provide for the timely payment in full of interest on the Notes
for as many of the first six scheduled interest payments as shall then
remain.  Upon (i) receipt by the Trustee
of such Issuer Order and (ii) confirmation by the Trustee of the payment in
full of such interest payment (from such Grantor Funds and, if necessary,
additional funds released from the Pledge Account in accordance with
Section 5(a)), the Trustee shall direct the Pledged Securities
Intermediary to release funds from (and to the extent of) proceeds of the
Pledged Securities in the Pledge Account and to transfer such funds to the
Grantor or the Grantor’s Designee, as the case may be, as instructed in such
Issuer Order as soon as practicable after such conditions are satisfied.

 

(c)                                  If
at any time the scheduled interest and principal payments in respect of the
Pledged Securities then credited to the Pledge Account, together with any cash
then held in the Pledge Account, exceed 100% of the amount necessary (which
shall be certified in writing by an Officer of the Company or, if such amount,
together with all other amounts disbursed from the Pledge Account in the
preceding 12 month period, equals or exceeds $100,000, by a nationally
recognized firm of independent accountants selected by the Grantor and
delivered to the Trustee) to provide for the payment in full, when due, of the
first six scheduled interest payments on the Notes (or such number of the first
six scheduled interest payments on the Notes as shall then remain, as the case
may be), the Grantor may instruct the Trustee, pursuant to an Issuer Order, to
direct the Pledged Securities Intermediary to release any such excess amount to
the Grantor or to the Grantor’s Designee. 
Upon receipt of such Issuer Order (which shall be accompanied by a
certificate in accordance with, and meeting the requirements of, the provisions
of Section 314(d) of the TIA or, if the amount to be released from the
pledge, together with all other amounts disbursed from the Pledge Account in
the preceding 12 month period, equals or exceeds $100,000, by a certificate of
such nationally recognized firm of independent accountants stating that the
scheduled interest and principal payments in respect of the Pledged Securities
credited to the Pledge Account, together with any cash held in the Pledge
Account, in each case after giving effect to such release, equal or exceed 100%
of the amount necessary to provide for the payment in full, when due, of such
remaining scheduled interest payments on the Notes), the Trustee shall instruct
the Pledged Securities Intermediary to release funds from (and to the extent
of) proceeds of such Pledged Securities in accordance with such Issuer Order
and the accompanying certificate and to transfer such funds to the Grantor or
the Grantor’s Designee, as the case may be.

 

(d)                                 Upon
the release of any Collateral from the Pledge Account in accordance with the
terms of this Section 5, whether upon release of proceeds of Collateral to
the Holders as payment of interest or upon release of proceeds of Collateral to
the Grantor or the Grantor’s Designee as provided in Section 5(b) or
Section 5(c), the security interest evidenced by this Agreement in such
released Collateral will automatically terminate and be of no further force and
effect.

 

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(e)                                  At
least three Business Days prior to the due date of each of the first six
scheduled interest payments on the Notes, the Grantor shall give the Trustee
notice (by Issuer Order) as to whether such interest payment will be made
pursuant to Section 5(a) or 5(b) above and the respective amounts of
interest that will be paid from the Pledge Account and from Grantor Funds (it
being understood that the failure by the Grantor to provide an Issuer Order
shall not constitute an Event of Default). Any Grantor Funds to be used to make
any interest payment (or portion thereof) shall be delivered to the Trustee, in
immediately available funds, prior to 12:00 p.m. (New York City time) on such
interest payment date. If no such notice is given or such Grantor Funds have
not been so delivered, the Trustee will act pursuant to Section 5(a) above
as if it had received an Issuer Order pursuant thereto for the payment in full
of the interest then due from the proceeds of Pledged Securities in the Pledge
Account.

 

(f)                                    If
on any interest payment date there are insufficient proceeds of Pledged
Securities in the Pledge Account to make the scheduled payment of interest due
on such date (after taking into account any Grantor Funds delivered to the
Trustee as provided in Section 5(b) above), the Trustee shall direct the
Pledged Securities Intermediary to liquidate Collateral in the Pledge Account
to the extent necessary to pay, in full, such scheduled payment of interest.

 

(g)                                 Nothing
contained in this Agreement (including without limitation the provisions hereof
regarding the delivery of Issuer Orders by the Grantor to the Trustee) shall
(i) afford the Grantor any right to issue entitlement orders to the Pledged
Securities Intermediary or any other Person with respect to the Pledge Account
or any security entitlement in respect of the Pledged Securities, or otherwise
afford the Grantor control of the Pledge Account or any such security
entitlement, or (ii) otherwise give rise to any rights of the Grantor with
respect to the Pledge Account, the Pledged Securities, or any security
entitlement thereto, other than the Grantor’s rights under this Agreement as
the beneficial owner of Collateral pledged to and subject to the exclusive
dominion and control (subject to the Trustee’s obligations to comply with
Sections 5(a) through (f) and Section 15.9 hereof) of the Trustee in its
capacity as such (and not as a securities intermediary).  The Grantor acknowledges, confirms and
agrees that the Trustee holds a security interest in the Pledged Securities
solely as Trustee for the Holders of the Notes and not as a securities
intermediary.

 

(h)                                 Anything
contained herein to the contrary notwithstanding, prior to any release of any
Collateral to the Grantor or the Grantor’s Designee, the Grantor shall deliver
to the Trustee such certificates, opinions or other documents as may be
required by the Indenture or the TIA in connection with such release and shall
otherwise comply with the requirements of the Indenture and the TIA applicable
thereto.

 

(i)                                     If
at any time the Grantor is obligated to pay any amount to the Trustee pursuant
to the terms of this Agreement and the Trustee charges such amount against the
Pledge Account with the result that the scheduled interest and principal
payments in respect of the Pledged Securities then credited to the Pledge
Account, together with any cash then held in the Pledge Account, are less than
100% of the amount necessary to provide for the payment in full, when

 

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due, of the first six scheduled
interest payments on the Notes (or such number of the first six scheduled
interest payments on the Notes as shall then remain, as the case may be), the
Grantor shall deposit cash into the Pledge Account in the amount of such
deficiency and shall deliver to the Trustee a certificate signed by one of its
Officers (as defined in the Indenture) stating that the scheduled interest and
principal payments in respect of the Pledged Securities credited to the Pledge
Account, together with any cash held in the Pledge Account, in each case after
giving effect to such deposit by the Grantor, equal or exceed 100% of the
amount necessary to provide for the payment in full, when due, of such
remaining scheduled interest payments on the Notes.

 

(j)                                     Neither
the Trustee nor the Pledged Securities Intermediary shall be liable for any
disbursement made or other action taken in accordance with an Issuer Order. In
no event shall either of the Pledged Securities Intermediary or the Trustee in
its role hereunder be liable for any special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost profits),
except as a result of its gross negligence or willful misconduct.

 

SECTION
6.  Securities Intermediary.  (a) J.P. Morgan, as Pledged Securities
Intermediary, hereby represents and warrants to, and agrees with the Grantor
and the Trustee, as follows:

 

(a)                                  It
is a securities intermediary as of the date hereof and, for so long as this
Agreement remains in effect and J.P. Morgan is acting as the Pledged Securities
Intermediary hereunder, it shall remain a securities intermediary and shall at
all times act in such capacity with respect to the Trustee, the Pledge Account
and all other Collateral.

 

(b)                                 The
Pledge Account is and will be maintained as a securities account.

 

(c)                                  Each
item of property (whether cash, certificated or uncertificated securities,
security certificates, security entitlements or any other property whatsoever)
credited to the Pledge Account shall be treated as a financial asset.

 

(d)                                 All
financial assets in registered form or payable to, or to the order of, any
Person and credited to the Pledge Account shall be registered in the name of,
payable to or to the order of, or endorsed to, the Pledged Securities
Intermediary, and in no case during the term of this Agreement will any
financial asset credited to the Pledge Account be registered in the name of, payable
to or to the order of, or endorsed to, the Grantor, except to the extent the
foregoing have been subsequently endorsed by the Grantor to the Pledged
Securities Intermediary or in blank.

 

(e)                                  It
(i) shall, upon written direction from the Trustee, as entitlement holder with
respect to the Pledge Account, the Pledged Securities and all other Collateral,
and without further consent from the Grantor, comply with all instructions,
entitlement orders and directions of any kind originated by the Trustee concerning
the Collateral, including without limitation directions to liquidate or
otherwise dispose of the Collateral as and to the extent directed by the
Trustee and to pay over to the Trustee, or as otherwise directed by the
Trustee, all proceeds and other value therefrom or otherwise distributed with
respect thereto, without any set-off or deduction, and (ii)

 

7

 

shall not, except as otherwise
directed in writing by the Trustee, as entitlement holder with respect to the
Pledge Account, the Pledged Securities and all other Collateral, comply or
agree to comply with any instructions, entitlement orders or directions of any
kind that are originated by the Grantor or any other Person with respect to any
of the Collateral.

 

(f)                                    Except
for the claims and interests of the Trustee under this Agreement and the rights
of the Grantor vis-à-vis the Trustee hereunder, it does not know of any claim
to or security interest or other interest in the Collateral.

 

(g)                                 It
hereby waives its rights to set off any obligations of the Grantor to it
against any or all of the Collateral, and hereby agrees that any and all liens,
encumbrances, claims or security interests which it may have against the
Collateral, either now or in the future, are and shall be subordinate and
junior in right of payment to the prior payment in full of all Secured
Obligations.

 

SECTION
7.  Representations and Warranties.  The Grantor hereby represents and warrants
that:

 

(a)                                  The
execution and delivery by the Grantor of, and the performance by the Grantor of
its obligations under, this Agreement will not contravene any provision of
applicable law or the articles of incorporation or by-laws of the Grantor or
any material agreement or other material instrument binding upon the Grantor or
any judgment, order or decree of any governmental body, agency or court having
jurisdiction over the Grantor, or result in the creation or imposition of any
lien on any assets of the Grantor, except for the security interests granted under
this Agreement.

 

(b)                                 No
consent of any other Person and no approval, authorization or order of, action
by or qualification with, any governmental authority, regulatory body, agency
or other third party is required (i) for the execution, delivery or performance
by the Grantor of its obligations under this Agreement or (ii) for the grant by
the Grantor of the security interests created by this Agreement.  To the best of Grantor’s knowledge, no
consent of any other Person and no approval, authorization or order of, action
by or qualification with, any governmental authority, regulatory body, agency
or other third party is required for the exercise by the Trustee of the rights
provided for in this Agreement or the remedies in respect of the Collateral pursuant
to this Agreement.

 

(c)                                  The
Grantor is the beneficial owner of the Collateral, free and clear of any lien
or claim of any Person (except for the security interests created by this
Agreement and any lien arising under the Indenture in favor of the Trustee).  The Grantor has not at any time transferred
any of the Collateral to any Person other than the Trustee or encumbered any of
the Collateral with a lien in favor of any other Person.  No financing statement or instrument similar
in effect covering all or any part of the Grantor’s interest in any of the
Collateral is on file in any public or

 

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recording office, other than
the financing statements filed pursuant to this Agreement.  Other than the Grantor’s previous name,
Inhale Therapeutics, Inc., the Grantor has no trade names.

 

(d)                                 This
Agreement has been duly authorized, executed and delivered by the Grantor and
constitutes a valid and binding agreement of the Grantor, enforceable against
the Grantor in accordance with its terms, except as the enforceability hereof
may be limited by applicable bankruptcy, insolvency or similar laws affecting
creditors’ rights generally or by equitable principles of general
applicability.

 

(e)                                  Upon
the transfer to the Pledged Securities Intermediary of the Pledged Securities,
the crediting thereof to the Pledge Account in accordance with Section 4
above and the execution and delivery of this Agreement by all of the parties
hereto, the grant of a security interest in the Collateral pursuant to this
Agreement for the benefit of the Trustee and the Holders of the Notes will
create a valid and perfected first priority security interest in such
Collateral securing the payment of the Secured Obligations.

 

(f)                                    There
are no legal or governmental proceedings pending or, to the best of the
Grantor’s knowledge, threatened to which the Grantor is a party or to which any
of the properties of the Grantor is subject that would adversely affect in any
material respect the power or ability of the Grantor to perform its obligations
under this Agreement or to consummate the transactions contemplated hereby.

 

(g)                                 The
pledge of the Collateral pursuant to this Agreement is not prohibited by any
law or governmental regulation (including, without limitation, Regulations U
and X of the Board of Governors of the Federal Reserve System) applicable to
the Grantor.

 

(h)                                 To
the best of Grantor’s knowledge, no Default or Event of Default exists.

 

(i)                                     The
Grantor’s exact legal name is that indicated on the signature page hereof.

 

(j)                                     The
Grantor is a corporation organized in the State of Delaware.

 

(k)                                  The
Grantor’s organizational identification number is 943134940.

 

(l)                                     The
Grantor’s place of business or, if more than one, its chief executive office as
well as the Grantor’s mailing address is as is set forth in Section 15.1.

 

SECTION
8.  Further Assurances.

 

(a)                                  The
Grantor agrees that from time to time, it will, at its own expense, promptly
upon reasonable request by the Trustee, execute and deliver or cause to be
executed and delivered, or use its commercially reasonable efforts to procure,
all assignments, instruments and other documents, all in form and substance
reasonably satisfactory to the Trustee, deliver any instruments to the Trustee
and take any other actions that may be necessary or, in the reasonable

 

9

 

opinion of the Trustee,
desirable to perfect, continue the perfection of, or protect the first priority
of the Trustee’s security interest in and to the Collateral, to protect the
Collateral against the rights, claims, or interests of third Persons (other
than any such rights, claims or interests created by or arising through the
Trustee) or to effect the purposes of this Agreement.

 

(b)                                 The
Grantor hereby authorizes the Trustee to file any financing or continuation
statements with respect to the Collateral without the signature of the Grantor
(to the extent permitted by applicable law); provided, however, that the
Grantor shall not be relieved of any of its obligations under Section 8(a)
or 8(d) hereof.  A photocopy or other
reproduction of this Agreement or any financing statement covering the
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.

 

(c)                                  The
Grantor will furnish to the Trustee from time to time statements and schedules
further identifying and describing the Collateral and such other reports in
connection with the Collateral as the Trustee may reasonably request, all in
reasonable detail.

 

(d)                                 The
Grantor will promptly pay all costs and expenses reasonably incurred in
connection with any of the foregoing within 30 days of receipt of an invoice
therefor. The Grantor also agrees, whether or not requested by the Trustee, to
take all actions that are necessary to perfect and to continue the perfection
of, and to protect the first priority of, the Trustee’s security interest in
and to the Collateral, including the filing of all necessary financing and
continuation statements, and to protect the Collateral against the rights,
claims or interests of third Persons (other than any such rights, claims or
interests created by or arising through the Trustee).

 

(e)                                  The
Grantor hereby irrevocably authorizes the Trustee at any time and from time to
time to file in any Uniform Commercial Code jurisdiction any initial financing
statements and amendments thereto that (x) indicate the Collateral as being of
an equal or lesser scope or with greater detail, and (y) contain any other
information required by part 5 of Article 9 of the Uniform Commercial Code
of the appropriate jurisdiction for the sufficiency or filing office acceptance
of any financing statement or amendment; provided that the Trustee shall have no
obligation to perform any of the foregoing actions other than those expressly
provided herein or in the Indenture.

 

(f)                                    The
Pledged Securities Intermediary covenants and agrees with the Grantor and the
Trustee that for so long as the Pledged Securities Intermediary holds assets in
the Pledge Account, the Pledged Securities Intermediary will, as soon as
reasonably practicable, certify in writing the aggregate dollar value of the
assets held in such Pledge Account on a monthly basis, as of the Grantor’s
fiscal month end or at such other time as the parties may mutually agree.  The Grantor will provide the Pledged
Securities Intermediary with a schedule of its fiscal months as soon as such
schedule becomes reasonably available.

 

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SECTION
9.  Covenants.  The Grantor covenants and agrees with the
Trustee and the Holders of the Notes that from and after the date of this
Agreement until the earlier of (x) payment in full in cash of each of the first
six scheduled interest payments due on the Notes under the terms of the
Indenture or (y) payment in full in cash of all Secured Obligations due and
owing under the Indenture and the Notes in the event such Secured Obligations
become due and payable prior to the payment in full of the first six scheduled
interest payments on the Notes:

 

(a)                                  it
will not (and will not purport to) sell or otherwise dispose of, or grant any
option, right or warrant with respect to, any of the Collateral or its
beneficial interest therein, and it will not create or permit to exist any lien
or other adverse interest in or with respect to its beneficial interest in any
of the Collateral (except for the security interests granted under this
Agreement and any lien arising under the Indenture in favor of the Trustee);

 

(b)                                 it
will not (i) enter into any agreement or understanding that restricts or
inhibits or purports to restrict or inhibit the Trustee’s rights or remedies
hereunder, including without limitation the Trustee’s right to sell or
otherwise dispose of the Collateral, or (ii) fail to pay or discharge when due
any tax, assessment or levy of any nature with respect to its beneficial
interest in the Collateral not later than five days prior to the date of any
proposed sale under any judgment, writ or warrant of attachment with respect to
such beneficial interest; and

 

(c)                                  it
will not, without providing at least five days prior written notice to the
Trustee, change its name, its place of business or, if more than one, chief
executive office, or its mailing address or organizational identification number
and will not change its type of organization, jurisdiction of organization or
other legal structure.

 

SECTION
10.  Power of Attorney.  In addition to all of the powers granted to
the Trustee pursuant to the Indenture, the Grantor hereby appoints and constitutes
the Trustee as the Grantor’s attorney-in-fact (with full power of
substitution), with full authority in the place and stead of the Grantor and in
the name of the Grantor or otherwise, from time to time in the Trustee’s
reasonable discretion to take any action and to execute any instrument that the
Trustee may deem necessary or advisable to accomplish the purposes of this
Agreement, including, without limitation:

 

(a)                                  to
ask for, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipt for moneys due and to become due under or in respect of any of the
Collateral,

 

(b)                                 to
receive, indorse and collect any drafts or other instruments, documents and
chattel paper,

 

(c)                                  to
file any claims or take any action or institute any proceedings that the
Trustee may reasonably deem necessary or desirable for the collection of any of
the Collateral or otherwise to enforce the rights of the Trustee with respect
to any of the Collateral, and

 

11

 

(d)                                 to
pay or discharge any taxes or liens levied or placed upon the Collateral, the
legality or validity thereof and the amounts necessary to discharge the same
all as determined by the Trustee in its sole discretion, it being understood
that any such payments made by the Trustee shall become part of the Secured
Obligations of the Grantor to the Trustee, and shall be due and payable
immediately upon demand;

 

provided, however,
that the Trustee shall have no obligation to perform any of the foregoing
actions. The Trustee’s authority under this Section 10 shall include,
without limitation, the authority to endorse and negotiate any checks or
instruments representing proceeds of Collateral in the name of the Grantor,
execute and give receipt for any certificate of ownership or any document
constituting Collateral, transfer title to any item of Collateral, authorize
the filing of any financing statements (to the extent permitted by applicable
law) or any other documents reasonably deemed necessary or appropriate by the
Trustee to preserve, protect or perfect the security interest in the Collateral
and to file the same, prepare, file and sign the Grantor’s name on any notice
of lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Agreement. This power of attorney is coupled
with an interest and is irrevocable by the Grantor.

 

SECTION
11.  No Assumption of Duties;
Reasonable Care.  The rights and
powers conferred on the Trustee hereunder are solely to preserve and protect
the security interest of the Trustee and the Holders of the Notes in and to the
Collateral granted hereby and shall not be interpreted to, and shall not,
impose any duties on the Trustee in connection therewith other than those
expressly provided herein or in the Indenture or imposed under applicable law.
Except as provided by herein, by applicable law or by the Indenture, the
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of any Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which the Trustee accords similar
property held by itself for its own account, it being understood that the
Trustee, in its capacity as such, shall not have any responsibility for (a)
ascertaining or taking action with respect to calls, conversions, exchanges,
maturities or other matters relative to any Collateral, whether or not the
Trustee has or is deemed to have knowledge of such matters, (b) taking any
necessary steps to preserve rights against any parties with respect to any
Collateral or (c) investing or reinvesting any of the Collateral or any loss on
any investment. Without limiting any rights of the Trustee hereunder, the
rights and limitations upon the liability of the Trustee set forth in
Article 5 of the Indenture are expressly incorporated herein and made a
part hereof and shall extend to the role of the Trustee as Pledged Securities
Intermediary.

 

SECTION
12.  Indemnity.  The Grantor shall indemnify, hold harmless
and defend the Trustee, the Pledged Securities Intermediary and each of their
respective directors, officers, agents and employees, from and against any and
all claims, actions, obligations, liabilities and expenses, including defense
costs, investigative fees and costs, and legal fees and damages arising from
their execution of or performance under this Agreement, except to the extent
that such claim, action, obligation, liability or expense is directly
attributable to the bad faith, gross

 

12

 

negligence or willful
misconduct of such indemnified person. This indemnification shall survive the
termination of this Agreement.

 

SECTION
13.  Remedies Upon Event of Default.  If any Event of Default shall have occurred
and be continuing:

 

(a)                                  The
Trustee may exercise, in addition to all other rights given by law or by this
Agreement or the Indenture, all of the rights and remedies with respect to the
Collateral of a secured party under the Uniform Commercial Code as in effect
from time to time in any relevant jurisdiction and also may, without notice
except as specified below, (i) sell, redeem or liquidate any of the Collateral,
(ii) transfer any or all of the Collateral to any account designated by the
Trustee, including an account or accounts established in the Trustee’s name,
(iii) register title to any Collateral in any name specified by the Trustee,
including the name of the Trustee or any of its nominees or agents, without
reference to any interest of the Grantor, or (iv) sell the Collateral or any
part thereof in one or more parcels at any broker’s board or at public or
private sale, in one or more sales or lots, at any of the Trustee’s offices or
elsewhere, for cash, on credit or for future delivery, and upon such other
terms as the Trustee may deem commercially reasonable.  The Grantor agrees that the Collateral is of
a type customarily sold on recognized markets and, accordingly, that no notice
to any Person is required before any sale of any of the Collateral pursuant to
the terms of this Agreement; provided, however that, without prejudice
to the foregoing, to the extent notice of any such sale shall be required by
law, the Grantor agrees that at least ten days’ notice to the Grantor of the
time and place of any public sale or the time after which any private sale is
to be made shall constitute reasonable notification. The Trustee shall not be
obligated to make any sale of Collateral regardless of notice of sale having
been given. The Trustee may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. The purchaser of any or all Collateral so sold shall thereafter hold
the same absolutely free from any claim, encumbrance or right of any kind
whatsoever created by or through the Grantor. Any sale of the Collateral
conducted in conformity with reasonable commercial practices of banks,
insurance companies, commercial finance companies, or other financial
institutions disposing of property similar to the Collateral shall be deemed to
be commercially reasonable. The Trustee or any Holder of Notes may, in its own
name or in the name of a designee or nominee, buy any of the Collateral at any
public sale and, if permitted by applicable law, at any private sale. All
expenses (including court costs and reasonable attorneys’ fees, expenses and
disbursements) of, or incident to, the enforcement of any of the provisions
hereof shall be recoverable from the proceeds of the sale or other disposition
of the Collateral.  If there are
insufficient Pledged Securities together with proceeds of Pledged Securities
and other Collateral in the Pledge Account to make any required payment on the
Secured Obligations, the Grantor shall be liable to the Trustee for any
deficiency.

 

(b)                                 All
cash proceeds received by or on behalf of the Trustee in respect of any sale
of, collection from, or other realization upon all or any part of the
Collateral may, following the payment of the reasonable fees and expenses of
the Trustee, be held by the Trustee (or by the

 

13

 

Pledged Securities Intermediary
on its behalf) as collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Trustee pursuant to
Section 14) in whole or in part by the Trustee as provided in clause
SECOND of Section 4.13 of the Indenture. 
Any surplus of such cash or cash proceeds held by or on behalf of the
Trustee and remaining after payment in full of all the Secured Obligations
shall be paid over as provided in clause THIRD of Section 4.13 of the
Indenture.

 

(c)                                  The
Trustee may, without notice to the Grantor except as required by law and at any
time or from time to time, charge, set-off and otherwise apply all or any part
of the Secured Obligations against the Pledge Account or any part thereof.

 

(d)                                 The
Grantor further agrees to use its commercially reasonable efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Collateral pursuant to this Section 13
valid and binding and in compliance with any and all other applicable
requirements of law. The Grantor further agrees that a breach of any of the
covenants contained in this Section 13 will cause irreparable injury to
the Trustee and the Holders of the Notes, that the Trustee and the Holders of
the Notes have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 13
shall be specifically enforceable against the Grantor and, to the fullest
extent permitted by law, the Grantor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants except
for a defense that no Event of Default has occurred and is continuing.

 

SECTION
14.  Expenses.  The Grantor will promptly upon demand pay to
the Trustee and the Pledged Securities Intermediary the amount of any and all
reasonable expenses, including, without limitation, the reasonable fees,
expenses and disbursements of counsel, experts and agents retained by the
Trustee or the Pledged Securities Intermediary, as the case may be, that the
Trustee or the Pledged Securities Intermediary, as the case may be, may incur
in connection with (a) the review, negotiation and administration of this
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Grantor to perform or observe any of the
provisions hereof.

 

SECTION
15.  Miscellaneous Provisions.

 

Section 15.1.  Notices.  Any notice or other communication given hereunder shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:

 

14

 

IF TO THE GRANTOR:

 

Nektar Therapeutics

150 Industrial Road

San Carlos, California 94070

Attention:  Chief Financial Officer

Fax: 650-631-3150

 

IF TO THE TRUSTEE OR PLEDGED SECURITIES INTERMEDIARY:

 

J.P. Morgan Trust Company, National Association

560 Mission Street

13th Floor

San Francisco, California 94105

Attention:  Institutional Trust Services

Fax: 415-315-7585

 

All such
notices and other communications shall, when mailed, delivered or telecopied,
respectively, be effective when deposited in the mails, delivered or
telecopied, respectively, addressed as aforesaid.

 

Section 15.2.  No
Adverse Interpretation of Other Agreements.  This Agreement may not be used to interpret another pledge,
security or debt agreement of the Grantor or any subsidiary thereof. No such
pledge, security or debt agreement (other than the Indenture) may be used to
interpret this Agreement.

 

Section 15.3.  Severability.  The provisions of this Agreement are
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then, to the fullest
extent permitted by law, such invalidity or unenforceability shall affect in
that jurisdiction only such clause or provision, or part thereof, and shall not
in any manner affect such clause or provision in any other jurisdiction or any
other clause or provision of this Agreement in any jurisdiction.

 

Section 15.4.  Headings.  The headings in this Agreement have been
inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.

 

Section 15.5.  Counterpart
Originals.  This Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.

 

Section 15.6.  Benefits
of Agreement.  Nothing in this
Agreement, express or implied, shall give to any Person, other than the parties
hereto and their successors hereunder, and the

 

15

 

Holders of the Notes, any benefit or any legal or equitable right,
remedy or claim under this Agreement.

 

Section 15.7.  Amendments,
Waivers and Consents.  Any amendment
or waiver of any provision of this Agreement and any consent to any departure
by the Grantor from any provision of this Agreement shall be effective only if
made or duly given in compliance with all of the terms and provisions of the
Indenture, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given, provided
that an amendment or supplement to this Agreement for the purpose
contemplated by Section 16 may be entered into by the Grantor, the Trustee
and the Pledged Securities Intermediary without the consent of any Holder, so
long as such amendment or supplement is reasonably satisfactory in form and
substance to the Grantor, the Trustee and the Pledged Securities
Intermediary.  Neither the Trustee nor
any Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced
in any Event of Default or in any breach of any of the terms and conditions
hereof.  Failure of the Trustee or any
Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege.  A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder would otherwise have on any
future occasion.  The rights and
remedies herein provided are cumulative, may be exercised singly or
concurrently and are not exclusive of any rights or remedies provided by law.

 

Section 15.8.  Interpretation
of Agreement.  To the fullest extent
permitted by applicable law, acceptance of or acquiescence in a course of
performance rendered under this Agreement shall not be relevant to determine
the meaning of this Agreement even though the accepting or acquiescing party
had knowledge of the nature of the performance and opportunity for objection.

 

Section 15.9.  Continuing
Security Interest; Termination.

 

(a)                                  This
Agreement shall create a continuing security interest in and to the Collateral
and shall, unless otherwise provided in this Agreement, remain in full force
and effect until the payment in full in cash of the Secured Obligations. This
Agreement shall be binding upon the Grantor, its transferees, successors and
assigns, and shall inure, together with the rights and remedies of the Trustee
hereunder, to the benefit of the Trustee, the Holders of the Notes, the Pledged
Securities Intermediary and their respective successors, transferees and
assigns.

 

(b)                                 This
Agreement (other than Grantor’s obligations under Sections 12 and 14) shall
terminate upon the earlier of (i) the payment in full in cash of the Secured
Obligations and (ii) the payment in full in cash of the first six scheduled
interest payments on all of the Notes. 
At such time, the Trustee shall, pursuant to an Issuer Order, direct the
Pledged Securities Intermediary to promptly transfer to the Grantor all of the
Collateral hereunder that has not been sold, disposed of, retained or applied
by or on behalf of the Trustee in accordance with the terms

 

16

 

of this Agreement and the Indenture and take all other actions that are
necessary to release the security interest created by this Agreement in and to
the Collateral, including the execution and delivery of all termination
statements necessary to terminate any financing or continuation statements
filed with respect to the Collateral. 
Such transfer shall be without warranty by or recourse to the Trustee in
its capacity as such, except as to the absence of any liens on the Collateral
created by or arising through the Trustee, and shall be at the expense of the
Grantor.

 

Section 15.10.  Survival
of Representations and Covenants. 
All representations, warranties and covenants of the Grantor contained
herein shall survive the execution and delivery of this Agreement and the
termination of this Agreement.

 

Section 15.11.  Waivers.  The Grantor, to the fullest extent permitted
by applicable law, waives presentment and demand for payment of any of the
Obligations, protest and notice of dishonor or default with respect to any of
the Obligations, and all other notices to which the Grantor might otherwise be
entitled, except as otherwise expressly provided herein or in the Indenture.

 

Section 15.12.  Authority
of the Trustee.

 

(a)                                  The
Trustee shall have and be entitled to exercise all powers hereunder that are
specifically granted to it by the terms hereof, together with such powers as
are reasonably incident thereto. The Trustee may perform any of its duties
hereunder or in connection with the Collateral by or through agents or
employees and shall be entitled to retain counsel and to act in reliance upon the
advice of counsel concerning all such matters. Except as otherwise expressly
provided in this Agreement or the Indenture, neither the Trustee nor any
director, officer, employee, attorney or agent of the Trustee shall be liable
to the Grantor for any action taken or omitted to be taken by the Trustee, in
its capacity as Trustee, hereunder, except for its own bad faith, gross
negligence or willful misconduct, and the Trustee shall not be responsible for
the validity, effectiveness or sufficiency hereof or of any document or
security furnished pursuant hereto. The Trustee and its directors, officers,
employees, attorneys and agents shall be entitled to rely on any communication,
instrument or document reasonably believed by it or them to be genuine and correct
and to have been signed or sent by the proper person or persons.

 

(b)                                 The
Grantor acknowledges that the rights and responsibilities of the Trustee under
this Agreement with respect to any action taken by the Trustee or the exercise
or non-exercise by the Trustee of any option, right, request, judgment or other
right or remedy provided for herein or resulting or arising out of this
Agreement shall, as between the Trustee and the Holders of the Notes, be
governed by the Indenture and by such other agreements with respect thereto as
may exist from time to time among them, but, as between the Trustee and the
Grantor, the Trustee shall be conclusively presumed to be acting as agent for
the Holders of the Notes with full and valid authority so to act or refrain
from acting, and the Grantor shall not be obligated or entitled to make any
inquiry respecting such authority.

 

17

 

Section 15.13.  Final
Expression.  This Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Agreement
and is intended as a complete and exclusive statement of the terms and
conditions thereof.

 

Section 15.14.  Rights
of Holders of the Notes. No Holder of Notes shall have any independent
rights hereunder other than those rights granted to individual Holders of the
Notes pursuant to the Indenture; provided that nothing in this
subsection shall limit any rights granted to the Trustee under the Notes
or the Indenture.

 

Section 15.15.  Governing
Law; Submission to Jurisdiction; Waiver of Jury Trial; Waiver of Damages.

 

(a)                                  THIS
AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF
NEW YORK.

 

(b)                                 ANYTHING
CONTAINED IN THIS AGREEMENT OR IN ANY OTHER AGREEMENT BETWEEN THE TRUSTEE AND
THE PLEDGED SECURITIES INTERMEDIARY TO THE CONTRARY NOTWITHSTANDING, THE
“PLEDGED SECURITIES INTERMEDIARY’S JURISDICTION” WITH RESPECT TO THE PLEDGED
SECURITIES FOR PURPOSES OF SECTIONS 8-110(e), 9-305(a)(3) AND 9-304(b)(1) OF
THE UCC SHALL BE THE STATE OF NEW YORK.

 

(c)                                  FOR
ANY SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT, THE GRANTOR
HEREBY AGREES TO SUBMIT TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT
LOCATED IN THE CITY OF NEW YORK.

 

(d)                                 THE
GRANTOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS TRUSTEE OR IN THE
NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO THE FULLEST
EXTENT PERMITTED BY APPLICABLE LAW (AND TO THE EXTENT THE TRUSTEE HAS RECEIVED
INDEMNITY DEEMED SATISFACTORY TO IT AND HAS AGREED TO DO SO), TO PROCEED
AGAINST THE GRANTOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY
SELECTED IN GOOD FAITH (AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE
GRANTOR OR THE COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO
REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER
ENTERED IN FAVOR OF THE TRUSTEE. THE GRANTOR AGREES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS
OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH
PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE,
EXCEPT FOR SUCH COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN
ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR

 

18

 

ASSERTED.  THE GRANTOR WAIVES,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT
MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK IN THE
BOROUGH OF MANHATTAN ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN
THIS PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS.

 

(e)                                  THE
GRANTOR AGREES THAT NONE OF ANY HOLDER OF NOTES, (EXCEPT AS OTHERWISE PROVIDED
IN THIS AGREEMENT OR THE INDENTURE) THE TRUSTEE IN ITS CAPACITY AS TRUSTEE, OR
J.P. MORGAN IN ITS CAPACITY AS PLEDGED SECURITIES INTERMEDIARY SHALL HAVE ANY
LIABILITY TO THE GRANTOR (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR
LOSSES SUFFERED BY THE GRANTOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY
WAY RELATED TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED
BY THIS AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD
FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

 

(f)                                    TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE GRANTOR WAIVES THE POSTING
OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES IN
CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER PERTAINING TO THIS AGREEMENT OR ANY RELATED AGREEMENT OR
DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR TO ENFORCE
BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR
PERMANENT INJUNCTION, THIS AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT
BETWEEN THE GRANTOR ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS OF THE
NOTES ON THE OTHER HAND.

 

SECTION 16.  Provisions
Relating to Additional Notes.  The
Grantor and the Trustee, on behalf of the Holders of the Notes originally
issued on the date hereof (the “Initial Notes”) and on behalf of the Holders of
any additional Notes issued in one or more series from time to time after the
date hereof in accordance with the provisions of the Indenture (the “Additional
Notes”), hereby acknowledge that the Grantor may issue Additional Notes from
time to time after the date hereof and that, pursuant to the terms of the
Indenture, the Initial Notes and any Additional Notes will be treated as part
of a single class for all purposes under the Indenture.  Accordingly, anything contained herein to
the contrary notwithstanding, (a) upon the issuance of any Additional Notes (i)
for all purposes under this Agreement the term “Notes” shall thereafter include
such Additional Notes; provided that any references herein to the
first six scheduled interest payments due on the Notes shall mean, with respect
to such Additional Notes, only such

 

19

 

number, if any, of the first six scheduled interest payments on the
Notes as shall then remain at the time such Additional Notes are originally
issued (such number, if any, of the first six scheduled interest payments on
the Notes that shall remain at such time being the “Covered Interest Payments”
in respect of such Additional Notes), (ii) in the event that any Additional
Notes are issued prior to such time as the first six scheduled interest
payments on the Notes shall have been paid in full, the Grantor shall purchase
or cause to be purchased, for the account of the Pledged Securities
Intermediary for credit to the Pledge Account, additional security entitlements
with respect to U. S. Government Securities (such security entitlements being,
collectively, the “Additional Pledged Securities”) in an amount that will be
sufficient, upon receipt of the scheduled interest and principal payments in
respect thereof, to provide for the payment of all Covered Interest Payments in
respect of such Additional Notes, and (iii) for all purposes under this
Agreement (including without limitation Section 4(b)) the term “Pledged
Securities” shall thereafter include any such Additional Pledged Securities,
and (b) as provided in Section 15.7, in connection with the issuance of
any Additional Notes, the parties hereto shall be permitted to enter into such
amendments or supplements to this Agreement as may be necessary or advisable in
order to give effect to the provisions of this Section 16 without the
consent of the Holders of the Initial Notes or the Holders of any Additional
Notes that are outstanding at the time of such issuance.  For the avoidance of doubt and without
limiting the generality of the foregoing, the Grantor and the Trustee, on
behalf of the Holders of the Notes, hereby acknowledge and agree that the
Holders of the Initial Notes and the Holders of any Additional Notes shall be
entitled to share ratably in the benefits of this Agreement.  In the event that the Grantor shall issue
Additional Notes on more than one occasion, then the provisions of this
Section 16 shall apply to such successive issuances of Additional Notes, mutatis
mutandis.

 

20

 

IN WITNESS
WHEREOF, the Grantor, the Trustee and the Pledged Securities Intermediary have
each caused this Agreement to be duly executed and delivered as of the date
first above written.

 

	
   

  	
  Grantor:

  
	
   

  	
   

  
	
   

  	
  NEKTAR THERAPEUTICS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Ajit S. Gill

  	
   

  
	
   

  	
   

  	
  Name: Ajit S. Gill

  
	
   

  	
   

  	
  Title: Chief Executive Officer and

  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Trustee:

  
	
   

  	
   

  
	
   

  	
  J.P. MORGAN TRUST COMPANY,

  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Nagy

  	
   

  
	
   

  	
   

  	
  Name:  James Nagy

  
	
   

  	
   

  	
  Title:  Assistant Vice
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Pledged Securities Intermediary:

  
	
   

  	
   

  
	
   

  	
  J.P. MORGAN TRUST COMPANY,

  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Nagy

  	
   

  
	
   

  	
   

  	
  Name:  James Nagy

  
	
   

  	
   

  	
  Title:  Assistant Vice
  President

  

 

21

 

SCHEDULE I

 

PLEDGED SECURITIES

 

	
  SECURITY

  	
   

  	
  CUSIP NO.

  	
   

  	
  MATURITY

  	
   

  	
  PRINCIPAL

  AMOUNT AT

  MATURITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  United States Treasury

  	
   

  	
  912820DJ3

  	
   

  	
  11/15/03

  	
   

  	
  227,000

  	
   

  
	
  United States Treasury

  	
   

  	
  912833FU9

  	
   

  	
  05/15/04

  	
   

  	
  504,000

  	
   

  
	
  United States Treasury

  	
   

  	
  912833FV7

  	
   

  	
  11/15/04

  	
   

  	
  504,000

  	
   

  
	
  United States Treasury

  	
   

  	
  912833FW5

  	
   

  	
  05/15/05

  	
   

  	
  504,000

  	
   

  
	
  United States Treasury

  	
   

  	
  912833FX3

  	
   

  	
  11/15/05

  	
   

  	
  504,000

  	
   

  
	
  United States Treasury

  	
   

  	
  912833FY1

  	
   

  	
  05/15/06

  	
   

  	
  504,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  2,747,000

  	
   

  

 

22Exhibit 10.2

 

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 $27,500,000 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 $18,472,000.  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 $18,472,000 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

 

3

 

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:

 

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

  

 

 

Exchange Agreement

Signature Page

 

 

APPENDIX I

 

	
  Holders

  	
   

  	
  Prior Notes

  	
   

  	
  New Notes

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salomon Brothers Qualified
  Investor Portfolios Multi-Strategy Arbitrage Portfolio

  	
   

  	
  $

  	
  17,946,000

  	
   

  	
  $

  	
  12,057,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salomon Brothers
  Diversified Arbitrage Strategies Fund Ltd.

  	
   

  	
  $

  	
  4,596,000

  	
   

  	
  $

  	
  3,087,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salomon Brothers Enhanced
  Arbitrage Strategies Fund

  	
   

  	
  $

  	
  907,000

  	
   

  	
  $

  	
  609,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CEBT - Comingled Employee
  Benefit Trust – Capital Structure Arbitrage

  	
   

  	
  $

  	
  884,000

  	
   

  	
  $

  	
  593,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Motors Employees
  Global Group Pension Trust

  	
   

  	
  $

  	
  458,000

  	
   

  	
  $

  	
  307,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  General Motors Welfare
  Benefits Trust

  	
   

  	
  $

  	
  1,380,000

  	
   

  	
  $

  	
  927,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Salomon Brothers Market
  Neutral Arbitrage Fund L.P.

  	
   

  	
  $

  	
  1,329,000

  	
   

  	
  $

  	
  892,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TOTAL:

  	
   

  	
  $

  	
  27,500,000.00

  	
   

  	
  $

  	
  18,472,000.00

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