UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

 

Date of report (Date of earliest event reported): August 28, 2016

 

Northwest Biotherapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware 0-35737 94-3306718
(State or other jurisdiction (Commission (IRS Employer
of incorporation or organization) File Number) Identification No.)

  

4800 Montgomery Lane, Suite 800

Bethesda, Maryland 20814

(Address of Principal Executive Offices)

 

(240) 497-9024

(Registrant’s telephone number, including area code)

 

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2 below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

On April 26, 2016, Northwest Biotherapeutics, Inc. (the “Company”) received a letter (the “Letter”) from the staff of The NASDAQ Stock Market LLC (“Nasdaq”) indicating that the Nasdaq Staff had reviewed certain stock issuances by the Company to Cognate BioServices, Inc. (“Cognate”), and had determined that those issuances did not comply with Nasdaq Rules 5635(c) and (d), as described more fully in the Company’s Current Report on Form 8-K filed on May 2, 2016. The Letter allowed the Company to submit a remediation plan (the “Remediation Plan”) to regain compliance with Nasdaq’s Rule 5635.

 

On August 30, 2016, Nasdaq notified the Company that the Company’s Remediation Plan was accepted. As a result of the executed agreements described below, Nasdaq confirmed that the Company had regained compliance with Rule 5635 and that the Nasdaq staff considers the matter closed.

 

As the Company has previously disclosed in ongoing periodic filings with the Securities and Exchange Commission (“SEC”), on January 17, 2014, the Company entered into contracts (the “2014 Agreements”) with Cognate for manufacturing and related services which provided that, for a limited period of time (18 months), the Company would be permitted to pay half of Cognate’s invoices in stock and half in cash. In July 2013, the Company had also entered into a conversion agreement with Cognate (the “2013 Agreement”), under which $11.9 million of unpaid manufacturing invoices were paid in the form of stock rather than cash. Pursuant to these 2014 and 2013 Agreements (collectively, the “Contracts”), during peak enrollment and expense periods in both the Company’s Phase III clinical trial of DCVax®-L and the Company’s Phase I/II trial of DCVax®-Direct, the Company paid substantial portions of Cognate’s invoices in restricted stock rather than cash, in accordance with the Contracts, in order to conserve Company resources. This enabled both trials to proceed at full speed during 2013-2015, without suspension or reduction of the trials such as had occurred during the 2008-2011 financial crisis years, which would not otherwise have been possible.

 

In order to prevent concerns about Cognate disposing of large numbers of shares that it received as invoice payments, and potentially affecting the market price of the Company’s stock, the Contracts further provided that Cognate would receive unregistered, restricted shares, and that these shares would also be subject to multi-year vesting and multi-year lock-up restrictions which prevented Cognate’s shares from coming into the market.

 

Since the Contracts precluded Cognate for years from monetizing any of the shares it received in lieu of cash payment of its invoices, the Contracts also included most favored nation anti-dilution provisions such that if the Company entered into transactions with unrelated investors or creditors involving a lower price per share while Cognate was locked up, then the terms of Cognate’s shares would be conformed to the terms of the unrelated investors or creditors.

 

Although the 2014 Agreements permitted the Company to pay half of Cognate invoices in stock for a period of up to 18 months, the Company only made use of this provision during the first 12 months of the 18-month period. By the end of 2014, the Company was able to raise sufficient funding to increase the Company’s ability to pay invoices in cash (although the Company did not keep current on the Cognate invoices), and cease making such invoice payments in stock.

 

In November 2014, the Company approved the issuance of adjustment shares under the most favored nation anti-dilution provision, as a result of transactions done with unrelated investors on terms more favorable to those investors than the terms that had been provided to Cognate. The approval and the plan to issue the adjustment shares was reported in the Company’s SEC filings at that time and subsequently, but the shares were not actually issued until October 2015, when completion of that issuance was required as a pre-condition of a $30 million financing the Company entered into.

 

 

 

 

Nasdaq rule 5635(d) requires that a company not make issuances, in transactions not involving a public offering, of common shares or securities exercisable for common shares equal to 20% or more of the common shares outstanding before the issuance for less than the greater of book or market value without obtaining shareholder approval. Where there are a number of separate issuances, each of which does not exceed the 20% limit but which exceed the 20% in aggregate, certain factors are used to determine whether such issuances will be aggregated for purposes of applying the 20% rule.

 

On April 26, 2016, the Nasdaq Staff notified the Company that it had reviewed certain stock issuances by the Company to Cognate during 2014 and 2015, and that the Staff had determined that those issuances should be aggregated for purposes of applying Nasdaq rules. Under Nasdaq rules, for purposes of measuring against the limit of 20% of total shares outstanding, all of the stock issuances made by the Company to Cognate during 2014 and 2015 were aggregated, and they were measured against only the shares outstanding in January 2014.

 

The Letter further indicated that when the stock issuances made throughout 2014 and 2015 were aggregated and measured against the stock outstanding in January 2014, the issuances exceeded the 20% limit. Although the shares issued to Cognate were unregistered, non-tradable shares, were subject to multi-year vesting and multi-year lock-up restrictions and, as determined by an independent economic analysis, had an actual value substantially below the value of publicly tradable shares, Nasdaq concluded that the applicable “market price” of these shares for purposes of determining compliance with the Nasdaq rules is the market price of tradable shares. Measured on this basis, some of the Company’s issuances to Cognate to conform to terms provided to unrelated investors were considered to be below the market prices. In addition, under Nasdaq’s rules, the existence of most favored nation adjustments also resulted in the issuances being deemed to have been made at below market prices. Based on these factors, the Nasdaq Staff determined that the aggregated issuances by the Company to Cognate were not in compliance with Rule 5635(d).

 

The Nasdaq Staff also interpreted an additional rule to apply to the Company’s issuances to Cognate, and determined that the stock issuances to Cognate under the 2014 and 2013 Agreements did not comply with this additional rule. The Company reports all of its stock issuances to Cognate as equity compensation in its ongoing SEC filings because, under U.S. GAAP accounting, a payment in the form of stock to any party is considered equity compensation, regardless of whether that party is an affiliate or unrelated.

 

As reported in the Company’s ongoing SEC filings, Cognate is an affiliate of the Company, and the Company’s CEO, Linda Powers, serves on the Board of Cognate. Cognate is owned by Toucan Capital Fund III (“Fund III”), a passive holding entity that holds portfolio company shares of a predecessor fund which invested in both the Company and Cognate, as well as in other companies. Fund III has no employees and no active operations; it is continuing to passively hold the portfolio company shares of the predecessor fund until those portfolio companies reach an exit or cease operations. Ms. Powers serves as the Managing Director of Fund III and as such is considered to have voting and dispositive control over the portfolio company shares held by Fund III, including the shares of Cognate.

 

Nasdaq rule 5635(c) requires that a company obtain shareholder approval prior to the issuance of shares or securities exercisable for common shares for officers, directors, employees or consultants of the Company. Although the shares were not issued to Ms. Powers and Ms. Powers never received any of the shares issued by the Company to Cognate, the Nasdaq Staff determined that because the Company recorded its issuances of common stock to Cognate as equity compensation under U.S. GAAP, and because of Ms. Powers’ role in regard to Cognate, this rule should apply to the stock issuances made by the Company to Cognate. As result, the Nasdaq Staff determined that those issuances were not in compliance with Rule 5635(c).

 

The Company’s remediation plan proposed that Cognate would surrender certain shares and warrants it had received in connection with the Contracts, Cognate would accept an increase in the exercise price of certain warrants received in connection with the Contracts, and the most favored nation anti-dilution provisions would be deleted from the Contracts. The Company’s proposed remediation plan was set forth in an exchange agreement (the “Exchange Agreement”) subject to Nasdaq’s review and acceptance.

 

 

 

 

By letter on August 30, 2016, the Nasdaq staff notified the Company that Nasdaq has accepted the proposed remediation plan. The transactions to implement the remediation plan are expected to close during the week of September 6, 2016. At the closing:

 

(a) Cognate will return and the Company will cancel 8,052,092 restricted shares previously issued to Cognate under the most favored nation anti-dilution provisions of the Contracts, and the most favored nation provisions will be deleted from the Contracts;

 

(b) Cognate will return and the Company will cancel warrants for 6,880,574 shares issued under the 2014 Agreements and the Company will issue to Cognate new warrants for 4,305,772 shares at a higher exercise price (resulting in a net reduction of 2,574,802 warrants held by Cognate); and

 

(c) Cognate will return and the Company will cancel 731,980 of the total of 5,101,330 restricted shares initially issued under the 2014 Agreements, so that the effective issuance price of the remaining shares will be adjusted to the market price on the date of those Agreements, as measured using Nasdaq’s criteria.

 

The Company will proceed with the registration of all shares and warrants held by Cognate, as was already required under the 2014 and 2013 Agreements for all securities issued thereunder.

 

The remaining portions of the multi-year lock-up periods relating to shares and warrants held by Cognate will be cancelled. Most of the lock-up periods have already taken place, with Cognate having been locked up during those times.

 

As a result of the foregoing, overall Cognate will return and the Company will cancel a total of 8,784,072 shares, and the warrants held by Cognate will be reduced by 2,574,802 .

 

The Nasdaq settlement does not affect other obligations of the Company to Cognate, including for existing unpaid invoices.

 

Copies of the Exchange Agreement and the form of Replacement Warrants are attached hereto as Exhibits 10.1 and 99.1, respectively, the descriptions of such documents is qualified by reference to the full text of such exhibits.

 

A copy of the Company’s Press Release regarding the Remediation Plan is attached hereto as Exhibit 99.2

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits

 

Exhibit No. Description
   
Exhibit 10.1 Exchange Agreement, dated as of August 29, 2016, between Cognate BioServices, Inc. and Northwest Biotherapeutics, Inc.
   

Exhibit 99.1

 

Exhibit 99.2

 

Form of Warrant to Purchase Common Stock

 

Press Release dated September 6, 2016

 

 

 

 

 

SIGNATURE

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  NORTHWEST BIOTHERAPEUTICS, INC.
   
   
Date:  September 6, 2016 By: /s/  Linda Powers
 

Name: Linda Powers

Title: Chief Executive Officer and Chairman

 

 

 

 

Exhibit Index

 

Exhibit No. Description
   
Exhibit 10.1 Exchange Agreement, dated as of August 29, 2016, between Cognate BioServices, Inc. and Northwest Biotherapeutics, Inc.
   

Exhibit 99.1

 

Exhibit 99.2

 

Form of Warrant to Purchase Common Stock

 

Press Release dated September 6, 2016

 

 

 

Exhibit 10.1

 

EXECUTION COPY

 

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT, dated as of August 29, 2016 (this “ Agreement ”), is made between Cognate Bioservices, Inc., a Delaware corporation (“ Cognate ”) and Northwest Biotherapeutics, Inc., a Delaware corporation (the " Company ").

 

RECITALS

 

A.           The Nasdaq Stock Market (“ Nasdaq ”) has reviewed certain stock and warrant issuances made by the Company to Cognate, including issuances pursuant to the July 30, 2013 Conversion and Lock-Up Agreements (the “ July 2013 Agreement ”) and the four January 17, 2014 agreements between Cognate and the Company (the “ January 2014 Agreements ”), and has determined that Nasdaq’s rules required shareholder approval of such issuances prior to issuance.

 

B.           The Company has submitted a remediation plan to regain compliance with Nasdaq’s rules, and the transactions contemplated by this Agreement are an integral part of such remediation plan.

 

C.           As set forth herein, the Company and Cognate wish to provide for the issuance of certain shares of the Company’s convertible preferred stock and Company warrants, in exchange for shares of the Company’s common stock, par value $0.001 per share (the “ Common Stock ”) and Company warrants currently held by Cognate.

 

AGREEMENT

 

In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.            Exchange of Securities . The Company and Cognate shall, pursuant to Section 3(a)(9) of the Securities Act of 1933, as amended (the “ Securities Act ”), exchange securities as set forth herein. Subject to the conditions set forth herein, the closing (the “ Closing ”) of the transactions set forth herein shall occur on a date agreed between the parties, which shall be no later than the 10th business day after the later of the date of this Agreement and the date on which the conditions in Section 2(a) are satisfied or waived.

 

(a)           At the Closing, subject to the conditions set forth herein:

 

(i)           the Company shall issue to Cognate warrants (the “ New Warrants ”) with substantially the terms set forth in Exhibit A for the purchase of 4,305,772 shares of Common Stock (the “ Warrant Shares ”); and

 

(ii)           Cognate shall return, transfer and deliver to the Company for retirement (and in the case of warrants, cancellation) the following (collectively, the “ Returned Securities ”): (i) 731,980 shares of Common Stock and 6,880,574 warrants issued to Cognate pursuant to the January 2014 Agreements; and (ii) 3,495,438 and 4,556,654 shares of Common Stock issued to Cognate in October 2015 pursuant to the most favored nations provisions of the July 2013 Agreement and January 2014 Agreements, respectively.

 

 

 

 

(b)           The Company and Cognate also agree hereby that the terms of the July 2013 Agreements and the January 2014 Agreements with respect to the issuance of the Company’s securities are amended hereby, effective at the Closing, to delete and remove any most favored nations rights provided for therein.

 

2.            Conditions Precedent to the Closing .

 

(a)            Conditions to the Obligations of the Company and Cognate . The obligations of the Company and Cognate to consummate the Closing shall be subject to the satisfaction (or waiver by the Company or Cognate, as applicable) on or prior to the Closing of the following conditions: (a) Nasdaq shall not have raised any objections to the transaction contemplated hereby and shall have confirmed to the Company that the Company’s remediation plan has been accepted and that, upon the Closing, the remediation plan shall be deemed complete; (b) the consummation of the transactions hereby shall not have been enjoined or prohibited by applicable law; and (c) no proceeding by any governmental authority challenging such transactions in any material respect shall have been initiated or threatened.

 

(b)            Conditions to the Obligations of Cognate . The obligations of Cognate to consummate the Closing shall be subject to the satisfaction (or waiver by Cognate) on or prior to Closing of the following conditions:

 

(i)            Representations and Warranties . Each of the representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects both when made and as of such Closing (or in the case of representations and warranties that are made as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date).

 

(ii)            Covenants . The Company shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at such Closing.

 

(iii)            Deliveries . Prior to or at the Closing, the Company shall deliver to Cognate a duly executed counterpart of the New Warrants and any other documents or instruments reasonably requested prior to such Closing by Cognate in connection with the consummation of the transactions contemplated by this Agreement.

 

(iv)            Authorization of New Warrants . The Company’s board of directors shall have duly authorized the New Warrants.

 

(c)            Conditions to the Obligations of the Company . The obligations of the Company to consummate the Closing shall be subject to the satisfaction (or waiver by the Company) on or prior to Closing of the following conditions:

 

(i)            Representations and Warranties . Each of the representations and warranties of Cognate contained in this Agreement shall be true and correct in all material respects both when made and as of such Closing (or in the case of representations and warranties that are made as of a specified date, which representations and warranties shall be true and correct in all material respects as of such specified date).

 

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(ii)            Covenants . Cognate shall have performed and complied in all material respects with all agreements and conditions required by this Agreement to be performed or complied with by it prior to or at such Closing.

 

(iii)            Deliveries . Prior to or at the Closing, Cognate shall surrender to the Company for retirement all shares of Common Stock constituting Returned Securities, the warrants constituting Returned Securities to the extent previously delivered to Cognate, a duly executed counterpart of the New Warrants and any other documents or instruments reasonably requested prior to such Closing by the Company in connection with the consummation of the transactions contemplated by this Agreement.

 

3.            Representations and Warranties .

 

(a)            Representations and Warranties by Cognate . In connection with the exchange of securities pursuant to this Agreement, Cognate hereby represents and warrants to the Company as of the date hereof and as of the Closing that:

 

(i)           Cognate has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed by Cognate and, assuming the due authorization, execution and delivery by the Company, this Agreement constitutes the legal, valid and binding obligation of Cognate, enforceable in accordance with its terms, subject to the effect of any bankruptcy or similar laws affecting the rights and remedies of creditors’ generally and general principles of equity. The execution, delivery and performance of this Agreement by Cognate does not and will not conflict with, violate or cause a breach of Cognate’s certificate of incorporation or bylaws, applicable law or any material agreement, contract or instrument to which Cognate is a party or any judgment, order or decree to which Cognate is subject.

 

(ii)           The execution and delivery of this Agreement by Cognate does not, and the performance of this Agreement by Cognate shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental entity except for applicable requirements, if any, of the Exchange Act and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by Cognate of its obligations under this Agreement.

 

(iii)           The New Warrants will be received by Cognate for Cognate’s own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act of 1933, as amended, or any applicable state securities laws. Cognate has had the opportunity to ask questions of the Company and its officers and employees and to receive to its satisfaction such information about the business and financial condition of the Company as Cognate considers necessary or appropriate for deciding whether to receive the New Warrants, and Cognate is fully capable of understanding and evaluating the risks associated with the ownership of the New Warrants and of bearing the loss of value of the New Warrants. Except as set forth herein, Cognate is not relying on and has not relied on any representation by the Company or its representatives with respect to the New Warrants.

 

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(iv)           Cognate is the sole legal and beneficial owner of the Returned Securities and will transfer and deliver to the Company at the closing of the transactions contemplated hereunder valid title to the Returned Securities, free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, preemptive or similar rights, agreements, limitations on Cognate’s voting rights, charges and other encumbrances of any nature whatsoever (collectively, “ Encumbrances ”).

 

(b)            Representations and Warranties by the Company . In connection with the exchange of securities pursuant to this Agreement, the Company hereby represents and warrants to Cognate, as of the date hereof and as of the Closing, that:

 

(i)           The Company has all necessary power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed by the Company and, assuming the due authorization, execution and delivery by Cognate, this Agreement constitutes the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to the effect of any bankruptcy or similar laws affecting the rights and remedies of creditors’ generally and general principles of equity. The execution, delivery and performance of this Agreement by the Company does not and will not conflict with, violate or cause a breach of the Company’s certificate of incorporation or bylaws, applicable law or any material agreement, contract or instrument to which the Company is a party or any judgment, order or decree to which the Company is subject.

 

(ii)           The execution and delivery of this Agreement by the Company does not, and the performance of this Agreement by the Company shall not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental entity except for applicable requirements, if any, of the Exchange Act and the filing of the Certificate of Designations with the Secretary of State of the State of Delaware and except where the failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay the performance by the Company of its obligations under this Agreement.

 

(iii)           The New Warrants will be duly authorized by the Company on or before the Closing and, when issued and delivered to Cognate in accordance with the terms of this Agreement and upon delivery of the Returned Securities to the Company, assuming the due authorization, execution and delivery by Cognate, the New Warrants will constitute the legal, valid and binding obligation of the Company, enforceable in accordance with its terms, subject to the effect of any bankruptcy or similar laws affecting the rights and remedies of creditors’ generally and general principles of equity. The Warrant Shares will be duly authorized by the Company on or before the Closing and, upon due and proper exercise of the New Warrants (in whole or in part), the Warrant Shares will be validly issued, fully paid and nonassessable, free and clear of any and all Encumbrances

 

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4.            Registration.

 

(a)           The Company agrees to file with the U.S. Securities and Exchange Commission (the “ SEC ”) a registration statement on Form S-3 (or such other form of registration statement as may be appropriate in the event Form S-3 is not then available to the Company) pursuant to which the Company shall register for resale by Cognate the remaining shares of Common Stock in the 2014 Issuances and the shares of Common Stock issuable upon exercise of the New Warrants. The Company shall take all commercially reasonable efforts to file such registration statement no later than 90 days following the Closing or as soon thereafter as practical. The Company agrees to use commercially reasonable best efforts to cause such resale registration statement to become effective as soon as practicable following the filing thereof with the SEC.

 

(b)           Subject to Section 4(a), Cognate understands that the New Warrants will not initially be registered and all stock or warrant certificates or uncertificated book entry provisions evidencing the New Warrants may bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR UNLESS SUCH TRANSACTION IS IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

5.            Miscellaneous.

 

(a)            Further Assurances . The parties hereto agree to execute and deliver any such additional documents or instruments of assignment, transfer or conveyance, and to take any other action, as may be necessary or appropriate to effectuate the transactions described in this Agreement.

 

(b)            Specific Performance . The parties hereto acknowledge and agree that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto will have the right to injunctive relief, in addition to all of its other rights and remedies at law or in equity, to enforce the provisions of this Agreement.

 

(c)            Entire Agreement . This Agreement embodies the complete agreement and understanding among the parties to this Agreement with respect to the subject matter of this Agreement and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter of this Agreement in any way.

 

(d)            Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule or law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereby shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable law in a mutually acceptable manner in order that the terms of this Agreement remain as originally contemplated.

 

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(e)            Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles thereof.

 

(f)            MUTUAL WAIVER OF JURY TRIAL . BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(g)            Consent to Jurisdiction . Each party (i) hereby irrevocably submits to the exclusive jurisdiction of the United States courts and New York State courts sitting in Manhattan, New York City, State of New York, for the purposes of any suit, action or proceeding arising out of or related to this Agreement and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such courts, that the suit action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Nothing in this Section 4(g) shall affect or limit any right to serve process in any other manner permitted by law.

 

(h)            Counterparts; Delivery by Facsimile or Electronic Mail . This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. This Agreement and each other agreement or instrument entered into in connection with this Agreement, to the extent signed and delivered by means of facsimile machine or electronic mail, shall be treated for all purposes as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version delivered in person.

 

(i)            Survival of Representations, Warranties and Covenants . The representations and warranties contained in or made pursuant to this Agreement shall survive the closing of the transactions contemplated hereunder.

 

(j)            Modification; Amendment . This Agreement may be modified only by written instrument or agreement executed by the each of the parties hereto.

 

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(k)            Termination . This Agreement may be terminated at any time prior to the Closing by: (i) mutual written agreement of the Company and Cognate or (ii) by the Company, by written notice to Cognate, if Nasdaq rejects the Company’s remediation plan or notifies the Company that, upon the Closing, the remediation plan shall not be deemed complete.

 

[The remainder of this page has been intentionally left blank.]

 

 

 

 

 

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

 

 

  NORTHWEST BIOTHERAPEUTICS, INC.
   
   
  By:        
  Name:
  Title:
   
   
  COGNATE BIOSERVICES, INC.
   
   
  By:         
  Name:
  Title:

 

 

 

 

 

 

  8  

Exhibit 99.1

 

 

THIS WARRANT AND THE UNDERLYING SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO SUCH SECURITIES UNDER THE ACT OR UNLESS SUCH TRANSACTION IS IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

 

I. WARRANT TO PURCHASE COMMON STOCK

II. of
NORTHWEST BIOTHERAPEUTICS, INC.

 

No. BW-2016-1 [•], 2016

Aggregate Exercise Amount: $18,385,646.44

 

THIS CERTIFIES THAT , for value received, Cognate BioServices Inc. , and/or its assigns (the “ Holder ”), is entitled to subscribe for and purchase from NORTHWEST BIOTHERAPEUTICS, INC. , a Delaware corporation, with its principal office in Bethesda, Maryland (the “ Company ”), such number of Exercise Shares as provided herein at the Exercise Price as provided herein. This Warrant is being issued pursuant to the terms of that certain Stock Conversion Agreement, of even date herewith, by and among the Company and Holder (the “ Agreement ”).

 

1. Definitions . Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement, as applicable. As used herein, the following terms shall have the following respective meanings:

 

(a)           “ Common Stock ” shall mean the common stock of the Company, par value $0.001 per share.

 

(b)           “ Exercise Period ” shall mean the period commencing on the date of issuance of this Warrant and ending five (5) years after the date of issuance of this Warrant.

 

(c)           “ Exercise Price ” of this Warrant shall be Four Dollars ($4.27) per share.

 

(d)           “ Exercise Share ” shall mean each of the fully paid and non-assessable shares of Common Stock for which this Warrant is exercisable. The number of Exercise Shares shall initially be 4,305,772.

 

2. Exercise of Warrant .

 

2.1 Vesting and Exercise . This Warrant will be fully vested and exercisable upon issuance. The rights represented by this Warrant may be exercised in whole or in part at any time or times during the Exercise Period, by delivery of the following to the Company at its address set forth above (or at such other address as it may designate by notice in writing to the Holder):

 

(a)           an executed Notice of Exercise in the form attached hereto;

 

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(b)           payment of the Exercise Price by wire transfer of immediately available funds, subject to Paragraph 2.2 below; and

 

(c)           this Warrant.

 

2.2 Net (Cashless) Exercise . Notwithstanding any provisions herein to the contrary, if the fair market value of one Exercise Share is greater than the Exercise Price (at the date of calculation as set forth below), in lieu of exercising this Warrant by payment of cash, the Holder may elect to receive shares equal to the value (as determined below) of this Warrant (or the portion thereof being canceled) by surrender of this Warrant at the principal office of the Company together with the properly endorsed Notice of Exercise in which event the Company shall issue to the Holder a number of Exercise Shares computed using the following formula:

 

X = Y (A-B)

           A

 

Where X = the number of Exercise Shares to be issued to the Holder

 

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

 

A = the fair market value of one Exercise Share (at the date of such calculation)

 

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

 

For purposes of the above calculation, the fair market value of one Exercise Share shall be determined by the Company’s Board of Directors in good faith; provided, however, that in the event that this Warrant is exercised pursuant to this Section 2.2 in connection with a public offering of Common Stock, the fair market value per share shall be the per share offering price to the public in such public offering.

 

2.3 Delivery of Exercise Shares .

 

(a)           Upon the exercise of the rights represented by this Warrant, a certificate or certificates for the Exercise Shares so purchased, registered in the name of the Holder or Holder’s designee(s), shall be issued and delivered to the Holder within a reasonable time after the rights represented by this Warrant shall have been so exercised. In the event that this Warrant is being exercised for less than all of the then-current number of Exercise Shares purchasable hereunder, the Company shall, concurrently with the issuance by the Company of the number of Exercise Shares for which this Warrant is then being exercised, issue a new Warrant exercisable for the remaining number of Exercise Shares purchasable hereunder.

 

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(b)           The person in whose name any certificate or certificates for Exercise Shares are to be issued upon exercise of this Warrant shall be deemed to have become the holder of record of such shares on the date on which this Warrant was surrendered and payment of the Exercise Price was made, irrespective of the date of delivery of such certificate or certificates, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the close of business on the next succeeding date on which the stock transfer books are open.

 

3. Covenants of the Company

 

3.1 Covenants as to Exercise Shares . The Company covenants and agrees that all Exercise Shares that may be issued upon the exercise of the rights represented by this Warrant will, upon issuance, be validly issued and outstanding, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issuance thereof. The Company further covenants and agrees that the Company will at all times during the Exercise Period, have authorized and reserved, free from preemptive rights, a sufficient number of shares of Common Stock to provide for the exercise of the rights represented by this Warrant. If at any time during the Exercise Period the number of authorized but unissued shares of Common Stock shall not be sufficient to permit exercise of this Warrant, then, in addition to such other remedies as may be available to Holder, the Company will take such corporate action as shall be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.

 

3.2 Notices of Record Date . In the event of any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, the Company shall mail to the Holder, at least ten (10) days prior to the applicable date, a notice specifying the date on which any such record is to be taken for the purpose of such dividend or distribution.

 

3.3 No Impairment . The Holder’s rights, preferences and privileges granted under and/or in connection with this Warrant may not be amended, modified or waived without the Holder’s prior written consent.

 

3.4 Piggyback Registration Rights . The Holder will be entitled to “piggy-back” registration rights with respect to the Exercise Shares that are issued pursuant to any exercise of this Warrant, to the extent that capacity is available in a registration as determined by the Company in its commercially reasonable discretion.

 

4. Representations of Holder.

 

4.1 Acquisition of Warrant for Personal Account . The Holder represents and warrants, as of the date hereof, that it is acquiring the Warrant and the Exercise Shares solely for its account for investment and not with a view to or for sale or distribution of said Warrant or Exercise Shares, or any part thereof, except in compliance with applicable federal and state securities laws. The Holder also represents and warrants that the all legal and beneficial interests in the Warrant and the Exercise Shares which the Holder is acquiring are being acquired for, and will be held for, its account only.

 

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4.2 Securities Are Not Registered .

 

(a)           The Holder understands that the Warrant and the Exercise Shares have not been registered under the Act on the basis that no distribution or public offering of the stock of the Company is to be effected by the Holder. The Holder realizes that the basis for the exemption may not be present if, notwithstanding its representations, the Holder has a present intention of acquiring the securities for a fixed or determinable period in the future, selling (in connection with a distribution or otherwise), granting any participation in, or otherwise distributing the securities. The Holder represents and warrants that it has no such present intention.

 

(b)           The Holder recognizes that the Warrant and the Exercise Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available.

 

(c)           The Holder is aware that neither the Warrant nor the Exercise Shares may be sold pursuant to Rule 144 adopted under the Act unless certain conditions are met, including, among other things, the availability of certain current public information about the Company, the resale following the required holding period under Rule 144 and the number of shares being sold during any three month period not exceeding specified limitations.

 

4.3 Disposition of Warrant and Exercise Shares. The Holder understands and agrees that any Exercise Shares issued pursuant to exercise of this Warrant will not be registered at the time of issuance, and all certificates evidencing the Shares to be issued to the Holder may bear the following legend:

 

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER THE ACT OR UNLESS SUCH TRANSACTION IS IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS.

 

4.4 Accredited Investor Status . The Holder is an “accredited investor” as defined in Regulation D promulgated under the Act.

 

5. Adjustment of Exercise Price and Exercise Shares. In the event of changes in the Common Stock by reason of stock dividends, splits, recapitalizations, reclassifications, combinations or exchanges of shares, separations, reorganizations, liquidations, or the like, except in each case for transactions to which the next paragraph applies, the aggregate number of Exercise Shares then available under the Warrant and the Exercise Price thereof shall be correspondingly adjusted to give the Holder of the Warrant, on exercise for the same aggregate Exercise Price, the same shares as the Holder would have owned had the Warrant been exercised prior to the event and had the Holder continued to hold such shares until after the event requiring adjustment.

 

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In case of the sale, conveyance or disposal of all or substantially all of the Company’s property or business or the Company’s merger with or into or consolidation with any other organization where the Company is not the surviving corporation (other than a wholly-owned subsidiary of the Company) or any other transaction to which the Company is a party in which more than 50% of the Company’s voting power to elect directors is disposed of, then, and in each such case, as a part of such transaction, lawful provision shall be made so that the Holder shall thereafter be entitled to receive upon the due exercise of this Warrant, the number of shares of stock or other securities or property of the successor organization resulting from such transaction that a holder of the securities deliverable upon exercise of this Warrant would have been entitled to receive in such transaction if this Warrant had been exercised immediately before such transaction. The foregoing provisions of this Section 5 shall similarly apply to successive transactions and to the stock or securities of any other organizations that are at the time receivable upon the exercise of this Warrant.

 

The form of this Warrant need not be changed because of any adjustment in the number of Exercise Shares subject to this Warrant or the type of securities receivable upon exercise of this Warrant. Notwithstanding the foregoing, no adjustment shall cause the Exercise Price to be less than the par value of an Exercise Share.

 

6. Notice to Holder Prior to Certain Actions . In case of any action by the Company that would require an adjustment pursuant to Section 5, then (unless notice of such event is otherwise required pursuant to another provision of this Agreement) the Company shall deliver to the Holder a notice stating the date on which a record is to be taken for the purpose of such action by the Company or, if a record is not to be taken, the date as of which the holders of Common Stock of record are to be determined for the purposes of such action by the Company, which notice shall be provided to the Holder as promptly as possible but in any event at least five days prior to such record date or determination date, as applicable. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such action by the Company.

 

7. Fractional Shares . No fractional shares shall be issued upon the exercise of this Warrant as a consequence of any adjustment pursuant hereto. All Exercise Shares (including fractions) to be issued upon exercise of this Warrant shall be aggregated for purposes of determining whether the exercise would result in the issuance of any fractional share. If, after aggregation, the exercise would result in the issuance of a fractional share, the Company shall, at its election, issue a fractional share or, in lieu of issuance of any fractional share, pay the Holder otherwise entitled to such fraction a sum in cash equal to the product resulting from multiplying the then current fair market value of one Exercise Share by such fraction.

 

8. Transfer of Warrant . Subject to applicable laws, this Warrant and all rights hereunder are transferable, in whole or in part, at any time or times by the Holder, upon delivery of this Warrant and the form of assignment attached hereto to any transferee designated by Holder and permitted under applicable securities laws. The transferee shall sign a customary investment letter in form and substance reasonably satisfactory to the Company.

 

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9. Lost, Stolen, Mutilated or Destroyed Warrant . If this Warrant is lost, stolen, mutilated or destroyed, the Company may, on such terms as to indemnification by the Holder or otherwise as it may reasonably impose (which shall, in the case of a mutilated Warrant, include the surrender thereof), issue a replacement Warrant of the same denomination and tenor as the Warrant so lost, stolen, mutilated or destroyed. Upon the issuance of any such replacement Warrant, the original Warrant shall become null and void without the necessity of any further action on the part of the Company.

 

10. Amendment . Any term of this Warrant may be amended or waived only with the advance written consent of the Company and the Holder.

 

11. Notices . All notices required or permitted hereunder shall be in writing and shall be effective upon delivery to the recipient. All communications shall be sent to the Company and to the Holder at the addresses listed on the signature page hereof or at such other address as the Company or Holder may designate by written notice to the other parties hereto.

 

12. Governing Law . This Warrant and all rights, obligations and liabilities hereunder shall be governed by and construed under the laws of the State of Delaware without giving effect to conflicts of laws principles.

 

III.[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its duly authorized officer as of the date first written above.

 

  NORTHWEST BIOTHERAPEUTICS, INC.
     
     
     
     
  By:         
    Name:
    Title:

 

  Address: 4800 Montgomery Lane, Suite 800
    Bethesda, MD 20814

 

 

 

ACKNOWLEDGE AND AGREED:

 

COGNATE BIOSERVICES, INC.

 

 

 

By:    
Name:
Title:

 

 

  7  

Exhibit 99.2  

 

4800 Montgomery Lane

Suite 800

Bethesda, MD 20814

t (240) 497-9024

f (240) 627-4121

 

www.nwbio.com
NASDAQ: NWBO

 

 

Embargoed for release at 8:45 am, Tuesday, September 6, 2016

 

 

NASDAQ Accepts NW Bio Remediation Plan For

 

Shares and Warrants Previously Issued to Cognate BioServices

 

Shares and Warrants To Be Cancelled and Reduced; MFN To Be Removed from Contracts

 

BETHESDA, Md., September 6, 2016 - Northwest Biotherapeutics (NASDAQ: NWBO) (“NW Bio” or the “Company”), a biotechnology company developing DCVax® personalized immune therapies for solid tumor cancers, today announced that Nasdaq has accepted NW Bio’s proposed remediation plan to resolve Nasdaq’s finding, previously disclosed by the Company, that NW Bio failed to comply with certain Nasdaq listing rules with regard to certain securities issuances to Cognate BioServices, Inc. (“Cognate”) As a result of this acceptance, Nasdaq has notified the Company that it has regained compliance with these rules, and this matter is now closed.

 

During peak enrollment and expense periods in both the Company’s Phase III clinical trial of DCVax®-L for GBM brain cancer and the Company’s Phase I/II clinical trial of DCVax®-Direct for all types of inoperable solid tumors, the Company paid substantial portions of Cognate’s invoices in restricted stock rather than cash, in order to conserve Company resources, pursuant to agreements entered into in July, 2013 (the “2013 Agreement”), and January, 2014 (the “2014 Agreements). These payments in stock in lieu of cash enabled both of the clinical trials to proceed at full speed during 2013-2015, without suspension or reduction of the trials such as had occurred during the 2008-2011 financial crisis years, which would not otherwise have been possible.

 

The issuances to Cognate were unregistered restricted shares, were not thereafter registered despite contractual obligations for the Company to register them, and were subject to multi-year vesting and multi-year lock-up periods which prevented Cognate’s shares from coming into the market. Since the Contracts precluded Cognate for years from monetizing any of the shares it received in lieu of cash payment of its invoices, the Contracts also included most favored nation anti-dilution provisions such that if the Company entered into transactions with unrelated investors or creditors at a lower price per share while Cognate was locked up, then the terms of Cognate’s securities would be conformed to the terms of the unrelated investors or creditors.

 

On April 26, 2016, NW Bio received a letter from Nasdaq stating that, in Nasdaq’s view, the Company’s issuance of unregistered restricted stock and warrants to Cognate under the 2014 Agreements violated Nasdaq’s listing rules. The violation resulted from the combined effects of several factors, including the fact that, under Nasdaq’s rules, all of the issuances in 2014 and 2015 under the 2014 Agreements are aggregated for purposes applying the rules, the fact that the stock issuances to Cognate were deemed to have been ”below market” under Nasdaq’s criteria (which do not permit recognition of the fact that the securities were unregistered and were subject to a multi-year lock-up), and the fact that the 2014 Agreements included most favored nation anti-dilution (“MFN”) provisions (as did the 2013 Agreement).

 

 

 

 

These factors, the circumstances involved, and the Nasdaq determinations are described in detail in the Company’s filing on Form 8-K with the SEC today.

 

After lengthy discussions with Nasdaq and extensive negotiations with Cognate, the matter has been resolved with Nasdaq’s acceptance of a remediation plan under which:

 

(a) Cognate will return and the Company will cancel 8,052,092 restricted shares previously issued to Cognate under the MFN provisions of the 2014 and 2013 Agreements, and the MFN provisions will be deleted from those Agreements;

 

(b) Cognate will return and the Company will cancel warrants for 6,880,574 shares issued under the 2014 Agreements and the Company will issue to Cognate new warrants for 4,305,772 shares at a higher exercise price (resulting in a net reduction of 2,574,802 warrants held by Cognate); and

 

(c) Cognate will return and the Company will cancel 731,980 of the total of 5,101,330 restricted shares initially issued under the 2014 Agreements, so that the effective issuance price of the remaining shares will be adjusted to the market price on the date of those Agreements, as measured using Nasdaq’s criteria.

 

The Company will proceed with the registration of all shares and warrants held by Cognate, as was already required under the 2014 and 2013 Agreements for all securities issued thereunder.

 

The remaining portions of the multi-year lock-up periods relating to shares and warrants held by Cognate will be cancelled. Most of the lock-up periods have already taken place, with Cognate having been locked up during those times.

 

As a result of the foregoing, overall Cognate will return and the Company will cancel a total of 8,784,072 shares, and the warrants held by Cognate will be reduced by 2,574,802 .

 

The Nasdaq settlement does not affect other obligations of the Company to Cognate, including for existing unpaid invoices.

 

About Northwest Biotherapeutics

 

Northwest Biotherapeutics is a biotechnology company focused on developing personalized immunotherapy products designed to treat cancers more effectively than current treatments, without toxicities of the kind associated with chemotherapies, and on a cost-effective basis, in both the United States and Europe.  The Company has a broad platform technology for DCVax dendritic cell-based vaccines.  The Company’s lead program is a 348-patient Phase III trial in newly diagnosed Glioblastoma multiforme (GBM), which is on a partial clinical hold in regard to new screening of patients. GBM is the most aggressive and lethal form of brain cancer, and is an “orphan disease.”  The Company is under way with a 60-patient Phase I/II trial with DCVax-Direct for all types of inoperable solid tumor cancers.  It has completed enrollment in the Phase I portion of the trial. The Company previously conducted a Phase I/II trial with DCVax-L for metastatic ovarian cancer together with the University of Pennsylvania.  The Company previously received clearance from the FDA for a 612-patient Phase III trial in prostate cancer.  In Germany, the Company has received approval of a 5-year Hospital Exemption for the treatment of all gliomas (primary brain cancers) outside the clinical trial.

 

 

 

 

Disclaimer

 

Statements made in this news release that are not historical facts, including statements concerning future treatment of patients using DCVax and future clinical trials, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  Words such as “expect,” “believe,” “intend,” “design,” “plan,” “continue,” “may,” “will,” “anticipate,” and similar expressions are intended to identify forward-looking statements.  Actual results may differ materially from those projected in any forward-looking statement.  Specifically, there are a number of important factors that could cause actual results to differ materially from those anticipated, such as risks and uncertainties related to the actions and decisions of Nasdaq and Cognate, the Company’s ongoing ability to raise additional capital, risks related to the Company’s ability to enroll patients in its clinical trials and complete the trials on a timely basis, uncertainties about the clinical trials process, uncertainties about the timely performance of third parties, risks related to whether the Company’s products will demonstrate safety and efficacy, risks related to the Company’s and Cognate’s abilities to carry out the intended manufacturing and expansions contemplated in the Cognate Agreements, risks related to the Company’s ability to carry out the Hospital Exemption program and risks related to possible reimbursement and pricing.  Additional information on these and other factors, including Risk Factors, which could affect the Company’s results, is included in its Securities and Exchange Commission (“SEC”) filings.  Finally, there may be other factors not mentioned above or included in the Company’s SEC filings that may cause actual results to differ materially from those projected in any forward-looking statement.  You should not place undue reliance on any forward-looking statements.  The Company assumes no obligation to update any forward-looking statements as a result of new information, future events or developments, except as required by securities laws.

 

 

CONTACT

 

Les Goldman

202-841-7909

lgoldman@nwbio.com