---

---

---

---

 

---

General – BioTime, Inc. is a clinical-stage biotechnology company focused on developing and commercializing novel therapies developed from two of its core technology platforms. The foundation of its core therapeutic technology platform is pluripotent stem cells that are capable of becoming any of the cell types in the human body. Cell types derived from pluripotent stem cells have potential application in many areas of medicine with large unmet patient needs, including various age-related degenerative diseases and degenerative conditions for which there presently are no cures. Unlike pharmaceuticals, which almost always require a molecular target, therapeutic strategies based on the use of cell types derived from pluripotent stem cells are generally aimed at regenerating or replacing affected cells and tissues, and therefore, may have broader applicability than pharmaceutical products. BioTime’s pluripotent stem cell technology is complemented by its HyStem^® technology for the delivery and engraftment of cells, whether derived from pluripotent stem cells or the patient’s own somatic stem cells, at the desired location.

---

Principles of consolidation – All material intercompany accounts and transactions have been eliminated in consolidation. BioTime consolidated Asterias, ReCyte Therapeutics, Inc. (“ReCyte”), OncoCyte Corporation (“OncoCyte”), OrthoCyte Corporation (“OrthoCyte”), ES Cell International, Pte Ltd (“ESI”), Cell Cure Neurosciences, Ltd (“Cell Cure Neurosciences”) BioTime Asia, Limited (“BioTime Asia”), LifeMap Sciences, Inc. (“LifeMap Sciences”) LifeMap Sciences, Ltd., and LifeMap Solutions, Inc., as BioTime has the ability to control their operating and financial decisions and policies through its ownership, and the non-controlling interest is reflected as a separate element of shareholders' equity on BioTime’s condensed consolidated balance sheets.

 

Liquidity – Since inception, BioTime has incurred significant operating losses and has funded its operations primarily through the issuance of equity securities, payments from research grants, royalties from product sales and sales of research products and services. At March 31, 2016, BioTime had an accumulated deficit of approximately $246 million, working capital of $19.2 million and shareholders’ equity of $59.6 million. BioTime has evaluated its projected cash flows for it and its subsidiaries and believes that its cash and cash equivalents, available for sale securities and landlord receivable of $28.9 million as of March 31, 2016, will be sufficient to fund its operations through 2016 (see Note 12). However, clinical trials being conducted by BioTime’s subsidiaries, Asterias and Cell Cure Neurosciences will be funded in part with funds from grants and not from cash on hand. If either Asterias or Cell Cure Neurosciences were to lose its grant funding, it may be required to delay, postpone, or cancel its clinical trials or limit the number of clinical trial sites, or otherwise reduce or curtail its operations unless it is able to obtain adequate financing from another source that could be used for its clinical trial. Also, OncoCyte will need to raise additional capital during 2016 if, based on the results of its research and development efforts, it determines to establish a CLIA certified laboratory and commence marketing its first cancer diagnostic test.

---

In August 2014, the FASB issued ASU No. 2014-15, "Presentation of Financial Statements-Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern". ASU No. 2014-15 defines management's responsibility to assess an entity's ability to continue as a going concern, and to provide related footnote disclosures in certain circumstances. It is effective for annual reporting periods ending after December 15, 2016, and for annual and interim reporting periods thereafter. Early adoption is permitted. BioTime has not elected early adoption and believes the impact of the adoption of ASU No. 2014-15 could have a material adverse impact on BioTime’s consolidated financial statements.

 

---

---

BioTime currently pays $5,050 per month for the use of approximately 900 square feet of office space in New York City, which is made available to BioTime on a month-by-month basis by one of its directors at an amount that approximates his cost.

In April and November 2015, Cell Cure Neurosciences issued certain convertible notes (the “Convertible Notes”) to a Cell Cure Neurosciences shareholder other than BioTime in the principal amount of $188,000 and $66,000, respectively. In July and September 2014, Cell Cure Neurosciences issued Convertible Notes to two Cell Cure Neurosciences shareholders other than BioTime in the principal amount of $471,000. One of the Cell Cure Neurosciences shareholders who acquired Convertible Notes is considered a related party. The functional currency of Cell Cure Neurosciences is the Israeli New Shekel, however the Convertible Notes are payable in United States dollars. The Convertible Notes bear a stated interest rate of 3% per annum. The total outstanding principal balance of the Convertible Notes, with accrued interest, is due and payable on various maturity dates in July and September 2017. The outstanding principal balance of the Convertible Notes with accrued interest is convertible into Cell Cure Neurosciences ordinary shares at a fixed conversion price of $20 per share, at the election of the holder, at any time prior to maturity. Any conversion of the Convertible Notes must be settled with Cell Cure Neurosciences ordinary shares and not with cash.

At March 31, 2016, the carrying value of the Convertible Notes was $394,000, comprised of principal and accrued interest of $753,000, net of unamortized debt discount of $359,000. As of December 31, 2015, the carrying value of the Convertible Notes was $324,000, comprised of principal and accrued interest of $748,000, net of unamortized debt discount of $424,000.

In January 2016 and December 2015, certain BioTime board members invested in Ascendance as individual investors concurrently with BioTime’s investment in Ascendance as discussed in Note 5.

 

BioTime is authorized to issue 2,000,000 preferred shares. The preferred shares may be issued in one or more series as the board of directors may by resolution determine. The board of directors is authorized to fix the number of shares of any series of preferred shares and to determine or alter the rights, preferences, privileges, and restrictions granted to or imposed on the preferred shares as a class, or upon any wholly unissued series of any preferred shares. The board of directors may, by resolution, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series of preferred shares subsequent to the issue of shares of that series. There are no preferred shares issued and outstanding.

On March 30, 2016, Asterias’ board of directors declared a distribution of Asterias common stock purchase warrants to all Asterias shareholders other than BioTime, as mutually agreed upon by BioTime and Asterias, in the ratio of one warrant for every five shares of Asterias common stock owned of record as of the close of business on April 11, 2016. On April 25, 2016, Asterias distributed 3,331,229 warrants. The distribution of the warrants is treated as a non-pro rata distribution because warrants were not distributed to BioTime. The warrants are classified as equity, have an exercise price of $5.00 per share, and expire on September 30, 2016. Asterias recorded the warrants at a fair value of approximately $3.1 million with a noncash charge to shareholder expense included in general and administrative expenses and a corresponding increase to equity in non-controlling interests of Asterias as of March 30, 2016 as the warrants were deemed to be issued for financial reporting purposes on that date.

 

---

BioTime has adopted a 2012 Equity Incentive Plan (the “2012 Plan”) under which BioTime has reserved 10,000,000 common shares for the grant of stock options, restricted stock, restricted stock units and stock appreciation rights.

---

On December 10, 2015, BioTime entered into a lease for approximately 30,795 square feet of rentable space in two buildings located in an office park in Alameda, California (the “New Alameda Lease”). The term of the New Alameda Lease is seven years and BioTime has an option to renew the term for an additional five years. BioTime moved into the administrative areas of the facility and the term of the New Alameda Lease commenced effective February 1, 2016.

The landlord will provide BioTime with an initial tenant improvement allowance of $1.4 million (the “Initial Allowance”) to be applied to the construction of improvements for the leased premises, primarily for the research and development facilities. The allowance may be increased by an additional amount of approximately $308,000 (the “Additional Allowance”), if BioTime so chooses (subject to landlord pre-approval of the costs). If BioTime does use any of the Additional Allowance, that amount will be amortized and repaid to the landlord with interest at a rate of 10% per annum, amortized on a monthly basis over the seven year term of the lease. Any unused balance of the Initial Allowance cannot be used against rent reduction and will expire unused. BioTime expects to complete the leasehold improvements by the end of 2016.

BioTime is considered the owner of the tenant improvements under construction under ASC 840-40-55 as BioTime, among other things, has the primary obligation to pay for construction costs and BioTime will retain exclusive use of the building for its office and research facility requirements after construction is completed. In accordance with this guidance, amounts expended by BioTime for construction are reported as construction in progress, and the proceeds received from the landlord are reported as a liability. Upon the property being placed in service, BioTime will depreciate the property and the lease payments allocated to the landlord liability will be accounted for as debt service payments on that liability.

 

As of March 31, 2016, $1.1 million of construction costs qualified for reimbursement and approximately $0.3 million of the Initial Allowance was available for use on additional eligible construction costs. The remaining cost of construction in progress, estimated at $200,000 as of March 31, 2016, is related to tenant improvements and construction costs that are not reimbursable by the landlord.

In connection with the New Alameda lease, BioTime may elect to maintain a letter of credit with its bank in lieu of the landlord holding a cash security deposit of approximately $847,000, which BioTime had initially paid at the inception of the lease. BioTime satisfied the letter of credit requirement by depositing $847,000 in a certificate of deposit with its bank as of March 31, 2016. The cash in the certificate of deposit is included in deposits and other long-term assets as of March 31, 2016 because BioTime is restricted from using the cash for working capital purposes. Accordingly, BioTime will receive a reimbursement from the landlord of the initial $847,000 security deposit paid included in landlord receivable as of March 31, 2016.

 

Base rent increased to $105,000 per month on January 1, 2016, and will increase by approximately 3% annually on every October 1 thereafter during the lease term.

---

On May 10, 2016, Asterias finalized the pricing of an underwritten public offering of 5,147,059 units at a public offering price of $3.40 per unit. Each unit consists of one share of common stock and 0.5 of a warrant to purchase a share of common stock at an exercise price of $4.37 per share. The warrants are immediately exercisable and expire on the fifth anniversary of the date of issuance. The offering is expected to close on May 13, 2016, subject to customary closing conditions. If completed, Asterias would receive net proceeds of $16,275,000 after underwriting discounts but before paying other costs of the offering. Asterias has granted the underwriters a 30-day option to purchase up to an additional 772,059 shares of common stock and/or additional warrants to purchase up to 386,029 shares of common stock to cover over-allotments, if any. Asterias will use the proceeds for general corporate purposes, including for clinical trials, research and development, capital expenditures and working capital. Neither BioTime, nor any other subsidiary of BioTime, may use Asterias’ proceeds for their working capital needs.

 

---

---

General and administrative expenses – General and administrative expenses increased to $11.9 million for the three months ended March 31, 2016 from $5.2 million for the three months ended March 31, 2015. The increase is primarily attributable to the following increases in expense: $3.1 million non-cash expense for the estimated fair value of the distribution of 3,331,229 warrants to purchase Asterias common stock declared by the Asterias board of directors during March 2016; $2.3 million in employee compensation, including employee bonus accruals, stock-based compensation and related costs allocated to general and administrative expenses; $351,000 in cash and stock-based compensation to outside directors; $320,000 in legal fees; $261,000 in accounting, audit and tax related expense; $156,000 in investor and public relations related expenses and $97,000 in Cell Cure related expenses. These increases are in part offset by decreases of $186,000 related to disposal of our ESI-BIO division in December 2015 pursuant to our Ascendance investment and $108,000 in general consultant expenses.

 

---

Loss on equity method investment – During the three months ended March 31, 2016, we recognized $235,000 in our share of losses from our equity method investment in Ascendance, including $44,000 in dilution loss due our decreased ownership percentage of Ascendance.

Other income/(expense), net – Other income, net in 2016 consists primarily of net foreign currency transaction gains recognized by ESI and by Cell Cure Neurosciences.

At March 31, 2016, we had $27.1 million of cash and cash equivalents on hand of which $16.4 million was held by subsidiaries.

 

 

---

We have outstanding warrants to purchase 9,394,862 of our common shares at an exercise price of $4.55 per share that will expire on dates ranging from June 5, 2018 through September 30, 2018. We will receive $42.7 million if all of the warrants are exercised. There can be no assurance that the warrants will be exercised.

Asterias was awarded a $14.3 million Strategic Partnership III grant by CIRM to help fund its clinical development of AST-OPC1 in 2014. The grant will provide funding for Asterias to conduct a Phase I/IIa clinical trial of AST-OPC1 in subjects with complete cervical spinal cord injury, and for product development efforts to refine and scale manufacturing methods to support eventual commercialization. CIRM will disburse the grant funds to Asterias through July 1, 2018 upon Asterias attaining certain progress milestones. Asterias received approximately $7.8 million in installment payments from CIRM from 2014 through March 31, 2016. As the distribution of the balance of the CIRM grant is subject to meeting certain progress milestones, there can be no assurance that Asterias will receive the entire amount granted.

---

---

---

On May 10, 2016, our subsidiary Asterias entered into an Underwriting Agreement (the “Underwriting Agreement”) with Raymond James & Associates, Inc., as representative of the several underwriters listed therein (collectively, the “Underwriters”), with respect to the issuance and sale in an underwritten public offering (the “Offering”) by Asterias of an aggregate of 5,147,059 shares of its common stock ("Asterias Common Stock"), and warrants to purchase up to an aggregate of 2,573,530 shares of Asterias Common Stock at an exercise price of $4.37 per whole share of Asterias Common Stock. The shares of Asterias Common Stock and warrants will be sold in units, with each unit consisting of one share of Asterias Common Stock and 0.5 of a warrant; each full warrant entitling the holder to purchase one share of Asterias Common Stock. The units will be sold at a price of $3.40 per unit. The shares of Asterias Common Stock and warrants will be mandatorily separable immediately upon issuance, and the warrants will expire five (5) years from the date of issuance which is expected to be May 13, 2016. The warrants will not be listed on the NYSE MKT or any other securities exchange.

The Underwriters will purchase the units from Asterias at a price of $3.162 per unit, representing a 7.0% discount from the public offering price. Raymond James & Associates, Inc. is acting as the sole book-running manager for the Offering. Pursuant to the Underwriting Agreement, Asterias also granted the Underwriters a 30-day option to purchase up to an additional 772,059 shares of Asterias Common Stock at a price of $3.1527 per share and/or additional warrants to purchase up to 386,029 shares of Asterias Common Stock at a price of $0.0093 per warrant to cover over-allotments, if any.

The warrants will be exercisable, at the option of each holder, in whole or in part by delivering to Asterias a duly executed exercise notice and payment in full of the exercise price within two trading days in available funds for the number of shares of common stock purchased upon such exercise. If a registration statement registering the issuance or the resale of the shares of common stock underlying the warrants under the Securities Act of 1933, as amended, is not effective or available, the holder may, in its sole discretion, elect to exercise the warrant through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of Asterias Common Stock determined according to the formula set forth in the warrant. No fractional shares of Asterias Common Stock will be issued in connection with the exercise of a warrant. In the event of a fundamental transaction, as described in the warrants and generally including any reorganization, recapitalization or reclassification of Asterias Common Stock, the sale, transfer or other disposition of all or substantially all of Asterias’ properties or assets, a consolidation or merger with or into another person, the acquisition of more than 50% of the outstanding Asterias Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by the outstanding Asterias Common Stock, the holders of the warrants will be entitled to receive upon exercise of the warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction. In addition, in the event of a fundamental transaction, Asterias or any successor entity will be required to purchase at a holder’s option, exercisable at any time concurrently with or within thirty (30) days after the consummation of the fundamental transaction, such holder’s warrants for cash in an amount equal to the value of the unexercised portion of such holder’s warrants, determined in accordance with the Black Scholes option pricing model as specified in the warrants. The warrants will be issued pursuant to a warrant agreement to be entered into by and between Asterias and American Stock Transfer & Trust Company, as warrant agent.

The Offering is expected to close on May13, 2016, subject to the satisfaction of customary closing conditions. Asterias expects to receive approximately $16,275,000 after underwriting discounts but before paying other costs of the Offering, or approximately $18,716,250 after underwriting discounts but before paying other costs of the Offering if the Underwriter’s over-allotment option is exercised in full, not including any proceeds that Asterias may receive from the exercise of warrants. Asterias currently intends to use the estimated net proceeds from the Offering for general corporate purposes, including for clinical trials, research and development, capital expenditures and working capital.

The Offering is being made pursuant to Asterias’ existing shelf registration statement on Form S-3 (File No. 333-200745) initially filed with the Securities and Exchange Commission (the “SEC”) on December 4, 2014, and declared effective on January 22, 2015. A preliminary prospectus supplement relating to the Offering was filed with the Commission on May 9, 2016 and a final prospectus supplement will be filed with the SEC on or about May 10, 2016.

The Underwriting Agreement contains customary representations and warranties, conditions to closing, indemnification obligations of Asterias and the Underwriters, including for liabilities under the Securities Act of 1933, as amended, other obligations of the parties, and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, Asterias and each director and executive officer of Asterias has agreed, subject to certain exceptions, not to sell, transfer or otherwise dispose of securities of Asterias during the 90-day period following the date of the Underwriting Agreement, subject to extension in certain circumstances.

The representations, warranties and covenants contained in the Underwriting Agreement were made only for purposes of such agreement and as of specific dates, were solely for the benefit of the parties to the Underwriting Agreement, and may be subject to limitations agreed upon by the parties, including being qualified by confidential disclosures exchanged between the parties in connection with the execution of the Underwriting Agreement.

The foregoing description of the terms of the Underwriting Agreement and the warrants does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Underwriting Agreement and the form of Warrant Agreement, including the form of warrant

---

---

6300 Dumbarton Circle, Fremont, CA 94555

Tel: (510) 456-3800

---

---

---

---

---

 

 

 

---

SERIES A WARRANT AGREEMENT

 

Asterias Biotherapeutics, Inc.

 

and

 

American Stock Transfer & Trust Company, LLC, as Warrant Agent

 

SERIES A WARRANT AGREEMENT

 

THIS SERIES A WARRANT AGREEMENT (this “Agreement”), dated as of  March 31, 2016 is by and between Asterias Biotherapeutics, Inc., a Delaware corporation (the “Company”), and American Stock Transfer & Trust Company, LLC, a New York limited liability trust company, as Warrant Agent (the “Warrant Agent”).

 

WHEREAS, the Company is engaged in a public offering (the “Offering”) of warrants to purchase shares of Series A Common Stock (“Common Stock”) of the Company (“Warrants”) on a pro-rata basis to its shareholders, except the Company's majority shareholder, BioTime, Inc., which has irrevocably waived its right to receive the Warrants, and, in connection therewith, has determined to issue and deliver up to 3,331,483 of Warrants, each such Warrant evidencing the right of the holder thereof to purchase one share of Common Stock for $5.00 per share on or before September 30, 2016, as further described herein and subject to adjustments as described herein; and

 

WHEREAS, the Company has filed with the Securities and Exchange Commission (the “Commission”) a registration statement, as amended, on Form S-3, No. 333-200475 (the “Registration Statement”) and prospectus and any prospectus supplement thereto (the “Prospectus”), for the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of Warrants to be issued in the Offering, and the shares of Common Stock underlying the Warrants; and

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants; and

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants (each a “Holder”); and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties hereto agree as follows:

1.	Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company for the Warrants, and the Warrant Agent hereby accepts such appointment and agrees to perform the same in accordance with the terms and conditions set forth in this Agreement.

2.

Warrants.

2.1

Form of Warrant. Each Warrant shall be issued in registered form only and shall be in substantially the form of Exhibit A hereto, the provisions of which are incorporated herein. Each Warrant shall be signed by, or bear the facsimile signature of, the Chairman of the Board, President, Chief Executive Officer, Secretary or other principal officer of the Company. In the event the person whose facsimile signature has been placed upon any Warrant shall have ceased to serve in the capacity in which such person signed the Warrant before such Warrant is issued, it may be issued with the same effect as if he or she had not ceased to be such at the date of issuance.

2.2

Effect of Countersignature. Unless and until countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall be invalid and of no effect and may not be exercised by the holder thereof.

2.3

Registration.

2.3.1

Warrant Register. The Warrant Agent shall maintain books (the “Warrant Register”), for the registration of original issuance and the registration of transfer of the Warrants. Upon the initial issuance of the Warrants, the Warrant Agent shall issue and register the Warrants in the names of the respective holders thereof in such denominations and otherwise in accordance with instructions delivered to the Warrant Agent by the Company.

 

2.3.2

Registered Holder. Prior to due presentment for registration of transfer of any Warrant, the Company and the Warrant Agent may deem and treat the person in whose name such Warrant is registered in the Warrant Register (the “Registered Holder”) as the absolute owner of such Warrant and of each Warrant represented thereby (notwithstanding any notation of ownership or other writing on the Warrant Certificate (as defined below) made by anyone other than the Company or the Warrant Agent), for the purpose of any exercise thereof, and for all other purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

3.	Terms and Exercise of Warrants.

3.1

Exercise Price. Each Warrant shall, when countersigned by the Warrant Agent, entitle the Registered Holder thereof, subject to the provisions of such Warrant and of this Warrant Agreement, to purchase from the Company the number of shares of Common Stock stated therein, at the price of $5.00 per share if exercised on or before the Expiration Date (as defined below), subject to the adjustments provided herein ( “Exercise Price”).

3.2

Duration of Warrants. A Warrant may be exercised only during the period (the “Exercise Period”) commencing on the date of issuance thereof and ending on September 30, 2016 (the “Expiration Date”); provided, however, that the exercise of any Warrant shall be subject to the satisfaction of any applicable conditions. Each Warrant not exercised on or before the Expiration Date shall become void, and all rights thereunder and all rights in respect thereof under this Agreement shall cease at 5:00 p.m. New York City time on the Expiration Date.

3.3

Exercise of Warrants.

 

3.3.1

Payment. Subject to the provisions of the Warrant and this Warrant Agreement, a Warrant, when countersigned by the Warrant Agent, may be exercised by the Registered Holder thereof by submitting a duly executed election to purchase attached to the applicable Warrant, at the office of the Warrant Agent in the Borough of Brooklyn, City and State of New York or at the office of its successor as Warrant Agent, in the Borough of Manhattan, City and State of New York, which may be done by fax or email delivery, and by paying, within two days of the date of exercise, in full the Exercise Price for each full share of Common Stock as to which the Warrant is exercised, in lawful money of the United States, by wire transfer or in good certified check or good bank draft payable to the order of the Warrant Agent. The Registered Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder. Upon delivery of an exercise notice, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which a Warrant has been exercised, irrespective of the the date of delivery of the certificates evidencing such Warrant Shares.

 

***Checks should be payable to the Warrant Agent. Notice of cash exercise should be made by e-mail (not fax) to fruggiero@amstock.com. Originals need to be mailed to the Warrant Agent, Attention: Reorg Dept. Wired funds for exercise should be wired to:

 

JP MORGAN CHASE BANK

ABA # 021 000 021

ACCT # 530-354616

ACCT NAME: AMERICAN STOCK TRANSFER & TRUST CO

AS AGENT FOR SERIES A WARRANTS

ATTN: FRANK RUGGIERO – REORG DEPT.

3.3.2

Issuance of Common Stock on Exercise. Assuming funds for exercise are paid on or before the second trading day following the date of receipt by the Company of an exercise notice, then on or before the third trading day following the date upon which the Company has received an exercise notice for a Warrant, the Company shall cause its transfer agent to (i) provided that the transfer agent is participating in The Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with DTC through its Deposit/Withdrawal at Custodian System, or (ii) if the transfer agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the Holder, or at the Holder’s instruction pursuant to the delivered exercise notice, the Holder’s agent or designee, in each case pursuant to this clause (ii), sent by reputable overnight courier to the address specified in the applicable exercise notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee (as indicated in the applicable exercise notice), for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise.

3.3.3

Valid Issuance. All Common Stock issued or issuable upon the proper exercise of a Warrant in conformity with this Agreement shall be validly issued, fully paid and nonassessable.

 

 

4.1.2

Dividends and Other Distributions. If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction), except to the extent an adjustment was already made pursuant to Section 4.1.1 or 4.2 (a “Distribution”), at any time after the issuance of this Warrant, then, in each such case, the Company shall reserve and put aside the maximum Distribution amount the Holder would have been entitled to receive if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the participation in such Distribution. Upon exercise of this Warrant, in whole or in part, the Company shall, contemporaneously with the delivery of the Warrant Shares, distribute to the Holder a pro rata portion of such Distribution based on the portion of the Warrant that has been exercised (provided, however, to the extent that the Holder’s right to participate in any such Distributions would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Distribution at such time and to such extent (or the beneficial ownership of any such Common Stock as a result of such Distribution to such extent) and such Distribution to such extent shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage, at which time or times the Holder shall be granted such Distribution (and any Distributions declared or made on such initial Distribution or on any subsequent Distribution to be held similarly in abeyance) to the same extent as if there had been no such limitation).

4.2

Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 4.5 hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock and the Exercise Price shall be proportionally increased such that the aggregate Exercise Price, after such adjustments, remains the same for each Warrant.

4.3

Purchase Rights. If at any time the Company grants, issues or sells any options, convertible securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Maximum Percentage) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Maximum Percentage, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Maximum Percentage, at which time or times the Holder shall be granted such right (and any Purchase Right granted, issued or sold on such initial Purchase Right or on any subsequent Purchase Right to be held similarly in abeyance) to the same extent as if there had been no such limitation).

 

 

4.6

Notices of Changes in Warrant. Upon every adjustment of the Exercise Price or the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the Exercise Price resulting from such adjustment and the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon occurrence of any event specified in Sections 4.1, 4.2 or 4.3, the Company shall give written notice of the occurrence of such event to each Warrant holder, at the last address set forth for such holder in the Warrant Register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

4.7

No Fractional Shares. Notwithstanding any provision contained in this Warrant Agreement to the contrary, the Company shall not issue fractional shares upon exercise of Warrants. If, by reason of any adjustment made pursuant to this Section 4, the holder of any Warrant would be entitled, upon the exercise of such Warrant, to receive a fractional interest in a share, the Company shall, upon such exercise, round to the nearest whole number, the number of the shares of Common Stock to be issued to such holder.

4.8

Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 4, and Warrants issued after such adjustment may state the same Exercise Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Agreement.

4.9

Other Events. In case any event shall occur affecting the Company as to which none of the provisions of preceding subsections of this Section 4 are strictly applicable, but which would require an adjustment to the terms of the Warrants in order to (i) avoid an adverse impact on the Warrants and (ii) effectuate the intent and purpose of this Section 4, then, in each such case, the Company shall appoint a firm of independent public accountants, investment banking or other appraisal firm of recognized national standing, which shall give its opinion as to whether or not any adjustment to the rights represented by the Warrants is necessary to effectuate the intent and purpose of this Section 4 and, if they determine that an adjustment is necessary, the terms of such adjustment. The Company shall adjust the terms of the Warrants in a manner that is consistent with any adjustment recommended in such opinion.

5.	Transfer and Exchange of Warrants.

5.1

Registration of Transfer. The Warrant Agent shall register the transfer, from time to time, of any outstanding Warrant upon the Warrant Register, upon surrender of such Warrant for transfer, properly endorsed with signatures properly guaranteed and accompanied by appropriate instructions for transfer. Upon any such transfer, a new Warrant representing an equal aggregate number of Warrants shall be issued and the old Warrant shall be cancelled by the Warrant Agent. The Warrants so cancelled shall be delivered by the Warrant Agent to the Company from time to time upon request.

5.2

Procedure for Surrender of Warrants. Warrants may be surrendered to the Warrant Agent, together with a written request for exchange or transfer, and thereupon the Warrant Agent shall issue in exchange therefor one or more new Warrants as requested by the Registered Holder of the Warrants so surrendered, representing an equal aggregate number of Warrants.

5.3

Fractional Warrants. The Warrant Agent shall not be required to effect any registration of transfer or exchange which shall result in the issuance of a warrant certificate for a fraction of a warrant.

 

 

6.3

Reservation of Common Stock. The Company shall at all times reserve and keep available a number of its authorized but unissued shares of Common Stock that shall be sufficient to permit the exercise in full of all outstanding Warrants issued pursuant to this Agreement.

6.4

Registration of Common Stock. The Company registered the Warrants and shares of Common Stock underlying the Warrants in the Registration Statement. The Company will use its reasonable best efforts to maintain the effectiveness of such Registration Statement and the current status of the Prospectus or to file and maintain the effectiveness of another registration statement and another current prospectus covering the shares of Common Stock issuable upon exercise of the Warrants at any time that the Warrants are exercisable.

7.	Concerning the Warrant Agent and Other Matters.

7.1

Payment of Taxes. The Company shall from time to time promptly pay all taxes and charges that may be imposed upon the Company or the Warrant Agent in respect of the issuance or delivery of shares of Common Stock upon the exercise of the Warrants, but the Company shall not be obligated to pay any transfer taxes in respect of the Warrants or such shares.

7.2

Resignation, Consolidation, or Merger of Warrant Agent.

7.2.1

Appointment of Successor Warrant Agent. The Warrant Agent, or any successor hereafter appointed, may resign its duties and be discharged from all further duties and liabilities hereunder after giving sixty (60) days’ notice in writing to the Company. If the office of the Warrant Agent becomes vacant by resignation or incapacity to act or otherwise, the Company shall appoint in writing a successor Warrant Agent in place of the Warrant Agent. If the Company shall fail to make such appointment within a period of thirty (30) days after it has been notified in writing of such resignation or incapacity by the Warrant Agent or by the holder of a Warrant (who shall, with such notice, submit his Warrant for inspection by the Company), then the holder of any Warrant may apply to the Supreme Court of the State of New York for the County of New York for the appointment of a successor Warrant Agent at the Company’s cost. Any successor Warrant Agent, whether appointed by the Company or by such court, shall be a corporation in good standing in the State of New York and having its principal office in the Borough of Manhattan, City and State of New York, and authorized under such laws to exercise corporate trust powers and subject to supervision or examination by federal or state authority. After appointment, any successor Warrant Agent shall be vested with all the authority, powers, rights, immunities, duties, and obligations of its predecessor Warrant Agent with like effect as if originally named as Warrant Agent hereunder, without any further act or deed; but if for any reason it becomes necessary or appropriate, the predecessor Warrant Agent shall execute and deliver, at the expense of the Company, an instrument transferring to such successor Warrant Agent all the authority, powers, and rights of such predecessor Warrant Agent hereunder; and upon request of any successor Warrant Agent the Company shall make, execute, acknowledge, and deliver any and all instruments in writing for more fully and effectually vesting in and confirming to such successor Warrant Agent all such authority, powers, rights, immunities, duties, and obligations.

7.2.2

Notice of Successor Warrant Agent. In the event a successor Warrant Agent shall be appointed, the Company shall give notice thereof to the predecessor Warrant Agent and the transfer agent for the Common Stock not later than the effective date of any such appointment.

 

 

7.4.2

Indemnity. The Warrant Agent shall be liable hereunder only for its own gross negligence, willful misconduct or bad faith. The Company agrees to indemnify the Warrant Agent and save it harmless against any and all liabilities, including judgments, costs and reasonable counsel fees, for anything done or omitted by the Warrant Agent in the execution of this Agreement, except as a result of the Warrant Agent’s gross negligence, willful misconduct or bad faith.

7.4.3

Exclusions. The Warrant Agent shall have no responsibility with respect to the validity of this Agreement or with respect to the validity or execution of any Warrant (except its countersignature thereof). The Warrant Agent shall not be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Warrant. The Warrant Agent shall not be responsible to make any adjustments required under the provisions of Section 4 hereof or responsible for the manner, method, or amount of any such adjustment or the ascertaining of the existence of facts that would require any such adjustment; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock to be issued pursuant to this Agreement or any Warrant or as to whether any shares of Common Stock shall, when issued, be valid and fully paid and nonassessable.

7.5

Acceptance of Agency. The Warrant Agent hereby accepts the agency established by this Agreement and agrees to perform the same upon the terms and conditions herein set forth and among other things, shall account promptly to the Company with respect to Warrants exercised and concurrently account for, and pay to the Company, all monies received by the Warrant Agent for the purchase of shares of Common Stock through the exercise of the Warrants.

8.	Miscellaneous Provisions.

8.1

Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns.

8.2

Notices. Any notice, statement or demand authorized by this Warrant Agreement to be given or made by the Warrant Agent or by the holder of any Warrant to or on the Company shall be sufficiently given (i) when so delivered if by hand or overnight delivery, (ii) when sent, if delivered by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) or by electronic mail, or (iii) if sent by certified mail or private courier service within five (5) days after deposit of such notice, postage prepaid, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

Asterias Biotherapeutics, Inc.

6300 Dumbarton Circle

Fremont, CA 94555

Attn: Chief Executive Officer

By Email (which constitutes notice): scartt@asteriasbio.com

---

 

8.3

Applicable Law. The validity, interpretation, and performance of this Agreement and of the Warrants shall be governed in all respects by the laws of the State of New York, without giving effect to conflicts of law principles that would result in the application of the substantive laws of another jurisdiction. The Company hereby agrees that any action, proceeding or claim against it arising out of or relating in any way to this Agreement shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.

8.4

Persons Having Rights under this Agreement. Nothing in this Agreement shall be construed to confer upon, or give to, any person or corporation other than the parties hereto and the Registered Holders of the Warrants any right, remedy, or claim under or by reason of this Warrant Agreement or of any covenant, condition, stipulation, promise, or agreement hereof. All covenants, conditions, stipulations, promises, and agreements contained in this Warrant Agreement shall be for the sole and exclusive benefit of the parties hereto and their successors and assigns and of the Registered Holders of the Warrants.

8.5

Examination of the Warrant Agreement. A copy of this Agreement shall be available at all reasonable times at the office of the Warrant Agent in the Borough of Manhattan, City of New York and State of New York, for inspection by the Registered Holder of any Warrant. The Warrant Agent may require any such holder to submit his Warrant for inspection by it.

8.6

Counterparts. This Agreement may be executed in any number of original or facsimile counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

8.7

Effect of Headings. The section headings herein are for convenience only and are not part of this Warrant Agreement and shall not affect the interpretation thereof.

8.8

Amendments. This Agreement may be amended by the parties hereto without the consent of any Registered Holder for the purpose of curing any ambiguity, or curing, correcting or supplementing any defective provision contained herein or adding or changing any other provisions with respect to matters arising under this Agreement as the parties may deem necessary or desirable and that the parties deem shall not adversely affect the interest of the Registered Holders. All other modifications or amendments shall require the written consent of the Company and the Registered Holders holding Warrants to purchase at least 65% of the shares of Common Stock underlying the then outstanding Warrants. No consideration shall be offered by the Company to any Registered Holder in connection with a modification, amendment or waiver of this Warrant Agreement or any Warrant without also offering the same consideration to all Registered Holders.

8.9

Severability. This Warrant Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Warrant Agreement or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Warrant Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.

 

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

 

 

---

---

---